<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
( X ) Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended June 30, 1999
( ) 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 000-23277
CITIZENS BANCORP/OR
(Exact name of registrant as specified in its charter)
Oregon 91-1841688
(State of Incorporation) (I.R.S. Employer Identification Number)
275 Southwest Third Street
Corvallis, Oregon 97339
(Address of principal executive offices)
(541) 752-5161
(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 [ ]
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
4,124,091 shares as of July 30, 1999, no par value.
<PAGE> 2
CITIZENS BANCORP
FORM 10-Q
JUNE 30,1999
INDEX
<TABLE>
<CAPTION>
Page
PART I. Reference
<S> <C>
ITEM 1. - FINANCIAL INFORMATION - UNAUDITED
Consolidated Balance Sheets as of June 30, 1999 and December 31, 1998 1
Consolidated Statements of Income and Comprehensive Income for the three
months and six months ended June 30, 1999 and 1998 2
Consolidated Statements of Changes in Shareholders' Equity 3
Consolidated Statements of Cash Flows for six months ended June 30, 1999 and 1998 4
Notes to Consolidated Financial Statements 5
ITEM 2. - Management's Discussion and Analysis of Financial Condition
and Results of Operations 6
ITEM 3. - Quantitative and Qualitative Disclosure about Market Risk 12
PART II. - OTHER INFORMATION
ITEM 1. - Legal Proceedings 13
ITEM 2. - Changes in Securities 13
ITEM 3. - Defaults Upon Senior Securities 13
ITEM 4. - Submission of Matters to a Vote of Security Holders 13
ITEM 5. - Other Information 14
ITEM 6. - Exhibits and Reports on Form 8-K 14
SIGNATURES 15
</TABLE>
<PAGE> 3
PART I FINANCIAL INFORMATION
ITEM 1
CITIZENS BANCORP AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(Dollars in Thousands)
<TABLE>
<CAPTION>
JUNE 30, 1999 DECEMBER 31, 1998
<S> <C> <C>
ASSETS
Cash and due from banks $ 9,637 $ 12,771
Interest bearing deposits in banks 23,132 23,406
Securities available for sale 59,873 50,855
Securities held to maturity 10,666 9,733
Loans, net of unearned discount and prepaid fees 133,916 132,126
Allowance for credit losses (1,447) (1,419)
--------- ---------
NET LOANS $ 132,469 $ 130,707
Premises and equipment 4,716 3,435
Accrued interest receivable 2,282 1,853
Other assets 1,531 1,218
TOTAL ASSETS $ 244,306 $ 233,978
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
Deposits:
Demand $ 33,744 $ 42,025
Savings and interest bearing demand 94,538 81,015
Time 63,625 65,195
--------- ---------
TOTAL DEPOSITS $ 191,907 $ 188,235
Repurchase agreements 18,124 16,299
Other borrowings 9,369 4,556
Accrued interest and other liabilities 576 2,303
TOTAL LIABILITIES $ 219,976 $ 211,393
--------- ---------
SHAREHOLDERS' EQUITY
Common stock (no par value); authorized 10,000,000 shares;
issued and outstanding: 1999 - 4,124,091 shares;
1998 - 3,891,137 shares 19,868 16,069
Retained Earnings 4,770 6,271
Accumulated other comprehensive income (308) 245
TOTAL SHAREHOLDERS' EQUITY $ 24,330 $ 22,585
--------- ---------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 244,306 $ 233,978
========= =========
</TABLE>
See accompanying notes
1
<PAGE> 4
CITIZENS BANCORP AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
(Unaudited)
(Dollars in thousand, except per share amounts)
<TABLE>
<CAPTION>
SIX MONTHS ENDED THREE MONTHS ENDED
JUNE 30, JUNE 30,
1999 1998 1999 1998
<S> <C> <C> <C> <C>
INTEREST INCOME:
Loans 6,198 6,535 3,125 3,380
Interest on deposits and federal funds sold 487 401 247 145
Securities available for sale 1,410 1,118 719 568
Securities held to maturity 232 239 140 120
---------- ---------- ---------- ----------
TOTAL INTEREST INCOME 8,327 8,293 4,231 4,213
INTEREST EXPENSE:
Deposits 2,574 2,493 1,278 1,269
Borrowed funds 150 48 78 32
Repurchase agreements 234 269 120 129
---------- ---------- ---------- ----------
TOTAL INTEREST EXPENSE 2,958 2,810 1,476 1,430
NET INTEREST INCOME 5,369 5,483 2,755 2,783
PROVISIONS FOR CREDIT LOSSES (132) (104) (66) (59)
NET INTEREST INCOME AFTER PROVISION FOR CREDIT LOSSES 5,237 5,379 2,689 2,724
NON-INTEREST INCOME:
Service charges on deposit accounts 537 431 264 227
Origination fees and gains on loans sold 25 29 25 12
Gain(loss) on sales of securities available for sale 0 20 0 1
Other 615 612 318 365
---------- ---------- ---------- ----------
TOTAL NON-INTEREST INCOME 1,177 1,092 607 605
NON-INTEREST EXPENSE:
Salaries and employee benefits 2,067 1,834 1,012 911
Occupancy and equipment 519 481 271 252
Other 1,265 1,197 669 631
---------- ---------- ---------- ----------
TOTAL NON-INTEREST EXPENSE 3,851 3,512 1,952 1,794
INCOME BEFORE INCOME TAXES 2,563 2,959 1,344 1,535
---------- ---------- ---------- ----------
INCOME TAXES (873) (1,058) (448) (575)
NET INCOME 1,690 1,901 896 960
========== ========== ========== ==========
Per share data:
Basic earnings per share $ 0.41 $ 0.47 $ 0.22 $ 0.23
Weighted average number of common
shares outstanding 4,122,829 4,085,693 4,124,091 4,120,676
</TABLE>
2
<PAGE> 5
CITIZENS BANCORP AND SUBSIDIARY
CONSOLIDATED STATEMENTS
OF CHANGES IN SHAREHOLDERS' EQUITY
(Unaudited)
(Dollars in Thousands)
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30, 1999 AND 1998
NUMBER OF ACCUMULATED
COMMON COMMON OTHER
SHARES STOCK RETAINED COMPREHENSIVE
OUTSTANDING AMOUNT EARNINGS INCOME TOTAL
<S> <C> <C> <C> <C> <C>
BALANCE, AT DECEMBER 31, 1997 1,922,321 $ 15,517 $ 3,832 $ 62 $ 19,411
COMPREHENSIVE INCOME:
Net Income -- -- 1,901 -- 1,901
Other comprehensive income, net of tax:
Unrealized gain on securities, net of
reclassification adjustment -- -- -- (14) (14)
COMPREHENSIVE INCOME -- -- 1,901 (14) 1,887
Issuance of common stock 23,247 552 -- -- 552
2 for 1 stock split (April 21, 1998) 1,945,569 -- -- -- --
----------------------------------------------------------------------------
BALANCE, AT JUNE 30, 1998 3,891,137 $ 16,069 $ 5,733 $ (14) $ 21,850
BALANCE, AT DECEMBER 31, 1998 3,891,137 $ 16,069 $ 6,271 $ 245 $ 22,585
COMPREHENSIVE INCOME:
Net Income -- -- 1,690 -- 1,690
Other comprehensive income, net of tax:
Unrealized gain on securities, net of
reclassification adjustment -- -- -- (553) (553)
COMPREHENSIVE INCOME -- -- 1,690 (553) 1,137
Issuance of common stock 36,569 607 -- -- 607
5% stock dividend (June 1, 1999) 196,385 3,192 (3,191) -- --
----------------------------------------------------------------------------
BALANCE, AT JUNE 30, 1999 $4,124,091 $ 19,868 $ 4,770 $ (308) $ 24,330
</TABLE>
3
<PAGE> 6
CITIZENS BANCORP AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Dollars in thousands)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 31,
1999 1998
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 1,690 $ 1,901
Adjustments to reconcile net income to net
cash provided by operating activities:
Provision for credit losses 132 104
Depreciation and amortization 550 215
Stock dividends received (26) (24)
Increase in accrued interest receivable (429) (121)
Decrease in accrued interest payable (34) (6)
Other (534) (135)
-----------------------
NET CASH PROVIDED BY OPERATING ACTIVITIES $ 1,349 $ 1,934
CASH FLOWS FROM INVESTING ACTIVITIES
Net decrease in interest bearing deposits in banks 274 685
Net decrease in federal funds sold 0 1,800
Proceeds from maturities of available for sale securities 17,630 1,000
Proceeds from sales of available for sale securities 0 11,520
Proceeds from maturities of securities held to maturity 100 2,974
Purchases of securities available for sale (27,579) (15,126)
Purchases of securities held to maturity (1,048) (1,770)
Increase in loans made to customers, net of principal collections (1,872) (13,266)
Purchases of premises and equipment and other (1,505) 95
-----------------------
NET CASH PROVIDED BY INVESTING ACTIVITIES $(14,000) $(12,088)
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase decrease in deposits 3,672 6,351
Net increase decrease in repurchase agreements and other borrowings 6,638 3,766
Payment of dividends (793) (755)
-----------------------
NET CASH USED IN FINANCING ACTIVITIES $ 9,517 $ 9,362
NET DECREASE IN CASH AND DUE FROM BANKS (3,134) (792)
CASH AND DUE FROM BANKS
Beginning of period 12,771 9,268
END OF PERIOD $ 9,637 $ 8,476
=======================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Interest paid 2,993 2,816
Income taxes paid 840 1,100
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES
Fair value adjustment of available for sale, net of tax (553) (14)
Issuance of common stock through dividend reinvestment plan 607 553
Stock Dividend 3,191 0
</TABLE>
4
<PAGE> 7
CITIZENS BANCORP
Notes to Consolidated Financial Statements (unaudited)
1. BASIS OF PRESENTATION
The interim condensed consolidated financial statements include the
accounts of Citizens Bancorp ("Bancorp"), a bank holding company and its
wholly owned subsidiary, Citizens Bank ("Bank") after elimination of
intercompany transactions and balances. Substantially all activity of
Citizens Bancorp is conducted through its subsidiary bank.
The interim financial statements are unaudited but have been prepared in
accordance with generally accepted accounting principles for interim
condensed financial statements. Accordingly, the condensed interim
financial statements do not include all of the information and footnotes
required by generally accepted financial statements. In the opinion of
management, all adjustments consisting of normal recurring accruals
considered necessary for a fair presentation of the interim periods
included herein have been made.
The interim condensed consolidated financial statements should be read in
conjunction with the December 31, 1998 consolidated financial statements,
including notes there to, included in Bancorp's 1998 Annual Report to
shareholders.
2. USE OF ESTIMATES IN THE PREPARATION OF FINANCIALS
The preparation of financial statements, in conformity with general
accounting principles, requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
3. SHAREHOLDERS EQUITY AND NET INCOME PER COMMON SHARE
The Board of Directors declared a $.36 per share dividend on December 15,
1998, to Bancorp shareholders of record on that date payable on January
11, 1999. Through the Dividend Reinvestment Plan (DRIP) 36,569 shares were
purchased at a price of $16.60 per share. The DRIP resulted in an increase
of shares outstanding from 3,891,137 to 3,927,706.
At the April 20, 1999 shareholders meeting the shareholders approved an
increase of 5,000,000 shares bringing the total authorized shares to
10,000,000 of which 4,124,091 are issued and outstanding.
The Board of Directors declared a 5% stock dividend to Bancorp
shareholders of record on May 10, 1999, payable June 1, 1999. The dividend
resulted in an increase of shares outstanding from 3,927,706 to 4,124,091,
an increase of 196,385 shares. The per share basis for the dividend was
$16.25 resulting in a transfer from retained earnings of $3,191,000 to
common stock.
All per share amounts have been restated to retroactively reflect stock
dividends, stock purchased and stock splits previously reported.
4. CONTINGENCIES
Unfunded loan commitments totaled $18.6 million as of June 30, 1999 and
$19.0 million as of December 31, 1998.
5
<PAGE> 8
ITEM 2
MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Certain statements in this report may constitute forward-looking
statements within the definition of the "safe-harbor" provisions of the Private
Securities Reform Act of 1995. Such forward-looking statements are based on
reasonable assumptions by the Company's management within its current knowledge
of the Company's business and operations. These forward-looking statements are
subject to significant uncertainties which could cause actual results to differ
materially from those set forth in such statements. Forward-looking statements
can be identified by words such as "believe," "estimate," "anticipate,"
"expect," "intend," "will," may," "should," or other similar phrases or words.
Readers are cautioned not to place undue reliance on forward-looking statements.
The Company does not intend to publicly release any revisions to these
forward-looking statements to reflect events or circumstances after the date of
the report or to reflect the occurrence of unanticipated events other than in
its periodic filings with the SEC.
OVERVIEW
Citizens Bancorp ("Bancorp"), an Oregon corporation, is the parent corporation
and holding company of Citizens Bank ("the Bank"), which is its sole subsidiary.
The Bank is an Oregon State-chartered banking corporation headquartered in
Corvallis, Oregon. The Bank was incorporated in 1957, Bancorp in 1996.
The Bank recently opened two new full service branches located in the
communities of Albany, Oregon and McMinnville, Oregon.
The new West Albany branch is the second branch in Albany for the Bank. The new
branch opened February 1999 in a newly constructed building of approximately
4,000 square feet on leased land. The land lease is for a term of fifty years.
The manager for the new West Albany branch was the Bank's assistant manager at
its East Albany branch for three years. He has 17 years of lending experience
and has lived in the Albany community for many years.
The new McMinnville branch opened April 1999 in a temporary modular building
while a permanent facility is being constructed. The modular building is owned
by the Bank and will be used for future branch expansion projects or sold. The
McMinnville branch building is the same design as the new West Albany branch
with minor modifications to fit the property, saving the Bank costs relative to
plans and design. The Bank purchased the land for the branch, which is in a
prime location in the downtown area of McMinnville. The McMinnville branch
manager has over 25 years experience in the banking industry with long term ties
to the community.
Both Albany and McMinnville are fast growing markets for small to medium size
businesses. The Bank specializes in loans to small and medium sized businesses
and is well positioned to meet the needs for business loans in these
communities. The Bank's strategic focus is relationship banking. Management
anticipates substantial opportunity for both deposit and loan growth for these
new branches.
The Bank believes that expansion into these markets will enhance shareholder
value, contribute to its goal of strong financial performance, and provide
superior financial and customer service to these communities.
The Bank is in the final stages of installing a local and wide area network
("LAN/WAN") throughout its branch's and departments. An August 31, 1999
completion date is anticipated. Management believes that the system will enhance
productivity, efficiency, customer service, and communication as well as its
franchise value. The LAN/WAN will be the building block for future technological
enhancements and customer products.
Bancorp reported net income of $1,690,000, or $.41 per share for the six months
ending June 30, 1999, compared to net income of $1,901,000, or $.47 per share
for the same period in 1998. The net decrease is attributable to a decrease in
interest income from loans due to lower overall interest rates on loans and an
increase in expenses related to the opening of two new branches, improvements to
the technology infrastructure, and expenses related to Y2K readiness.
6
<PAGE> 9
LOAN PORTFOLIO
The composition of the loan portfolio was as follows (in thousands):
<TABLE>
<CAPTION>
June 30, 1999 December 31, 1998
------------- -----------------
<S> <C> <C>
Commercial $ 24,343 $ 26,234
Agriculture 13,854 12,402
Real Estate
Construction 9,001 $ 7,900
1-4 Family 30,588 31,390
Other 51,603 50,421
Consumer Loans 5,118 4,393
Less: unearned income and deferred fees (591) (614)
TOTAL LOANS $ 133,916 $ 132,126
Less: allowance for credit losses (1,447) (1,419)
--------- ---------
NET LOANS $ 132,469 $ 130,707
========= =========
</TABLE>
Transactions in the allowance for credit losses were as follows for the six
months ended June 30, 1999:
<TABLE>
<CAPTION>
1999 1998
------ ------
<S> <C> <C>
Balance at beginning of period $1,419 $1,201
Provision charged to operations 132 104
Loans recovered 1 0
Loans charged off 105 11
====== ======
$1,447 $1,294
====== ======
</TABLE>
It is the policy of the Bank to place loans on nonaccrual after they become 90
days past due unless waived by management when collectability is deemed eminent.
The Bank may place loans that are not contractually past due or that are deemed
fully collateralized on nonaccrual status as a management tool to actively
oversee specific loans.
Loans on nonaccrual status as of June 30, 1999 and December 31, 1998 were
approximately $223,000 and $173,000 respectively. Loans past due 90 days or more
on which the Bank continued to accrue interest were approximately $1,167,000 at
June 30, 1999 and $447,000 at December 31, 1998. Of the $1,167,000, $854,000 is
to one commercial borrower that the Bank is closely monitoring. A portion of the
loan is guaranteed and the balance collateralized with inventory, accounts
receivable and real estate. The Bank anticipates a loss on a portion of the loan
to be charged against the allowance for loan losses. The loss amount will not be
determined until the collateral has been valued. There were no loans with
modified terms as of June 30, 1999 and December 31, 1998.
7
<PAGE> 10
INVESTMENT SECURITIES
The amortized cost and estimated book value of the investment securities held by
the Bank, including unrealized gains and losses, at June 30, 1999 and December
31, 1998, are as follows (in thousands):
<TABLE>
<CAPTION>
Estimated Unrealized
Amortized Fair Gains
June 30, 1999 Cost Value (Losses), net
--------- --------- -------------
<S> <C> <C> <C>
AVAILABLE FOR SALE
U.S. Treasury Securities
(Including securities of government agencies
and corporations) $ 59,625 $ 51,158 $ (467)
Other 715 715 0
-------- -------- --------
$ 60,340 $ 59,873 $ (467)
</TABLE>
<TABLE>
<CAPTION>
Estimated Unrealized
Amortized Fair Gains
June 30, 1999 Cost Value (Losses), net
--------- --------- -------------
<S> <C> <C> <C>
HELD TO MATURITY
U.S. Treasury Securities
(Including securities of government agencies
and corporations) $ 2,005 $ 2,010 $ 5
Obligations of State and Political Subdivisions 8,661 8,557 (104)
-------- -------- --------
$ 10,666 $ 10,567 $ (99)
</TABLE>
<TABLE>
<CAPTION>
Estimated Unrealized
Amortized Fair Gains
December 31, 1998 Cost Value (Losses), net
--------- --------- -------------
<S> <C> <C> <C>
AVAILABLE FOR SALE
U.S. Treasury Securities
(Including securities of government agencies
and corporations) $ 49,816 $ 50,198 $ 382
Other 657 657 0
-------- -------- --------
$ 50,473 $ 50,855 $ 382
HELD TO MATURITY
U.S. Treasury Securities
(Including securities of government agencies
and corporations) $ 2,014 $ 2,036 $ 22
Obligations of State and Political Subdivisions 7,719 7,821 102
-------- -------- --------
$ 9,733 $ 9,857 $ 124
</TABLE>
MATERIAL CHANGES IN FINANCIAL CONDITION
Changes in the balance sheet for the six months ended June 30, 1999 include an
increase in total assets funded by deposit growth.
At June 30, 1999 total assets increased 4.41% or approximately $10.3 million
over total assets at December 31, 1998. Major components of the change in total
assets were:
- $1.3 million increase in premises and fixed assets
- $1.8 million increase in net loans
- $10 million increase in investments
- $3.4 million decrease in cash and cash equivalents
The increase in loans was primarily due to loan demand as a result of favorable
economic conditions, increased business development by the Bank's loan officers,
marketing of the Bank's personalized loan services and loans booked at the new
branches in West Albany and McMinnville. Net loans increased from $130.7 million
at December 31, 1998 to $132.4 million for the six-month period ending June 30,
1999. An increase of $1.8 million or 1.35 percent.
8
<PAGE> 11
The increase in investments was a result of management's decision to place
excess funds into the investment portfolio. The timing of the maturities are
determined by using the Bank's asset/liability model. The Bank increased its
investments in tax-exempt municipal bonds, US Treasuries, and US Government
Agencies.
At June 30, 1999 and December 31, 1998 the Bank kept its liquid funds in an
interest bearing demand account held at the Federal Home Loan Bank (FHLB) due to
a more favorable interest rate. The majority of the Bank's liquid funds are held
in its interest bearing account at the FHLB. The balance at the FHLB at June 30,
1999 was $23.1 million. This account balance can fluctuate widely on a day to
day basis.
The Bank experienced a net increase in total deposits to $191.9 million at June
30, 1999 from $188.2 million at December 31, 1998 which represents an increase
of $3.7 million or 1.95 percent. The net increase in total deposits was the
result of an overall increase in the number of account relationships and
increases in the balances in demand and interest bearing demand accounts. The
increase in new account relationships is a result of the Bank's business
development activities. Average total deposits for six months ending June 30,
1999 were $186.0 million compared to $169.3 million for the year ending December
31, 1998.
Additionally, the Bank reclassified a portion of its demand deposits under
regulatory guidelines to money market accounts for reserve purposes. This
represents a decrease in demand deposits from $42.0 million at December 31, 1998
to $33.7 million at June 30, 1999. This decrease is reflected in the increase in
savings and interest bearing demand from $81.0 at December 31, 1998 to $94.5 at
June 30, 1999, an increase of $13.5 million.
Long-term borrowings from the Federal Home Loan Bank were utilized to fund and
match large long-term commercial loans. Net long-term borrowings increased by
$3.0 million for the period ending June 30, 1999 as compared to year-end
December 31, 1998.
MATERIAL CHANGES IN RESULTS OF OPERATIONS
The Company reported net income of $1,690,000 or $.41 per share, for the six
months ended June 30, 1999, compared to net income of approximately $1,901,000,
or $.47 per share for the same period in 1998. This represents a decrease in net
income of $211,000 or 11.1 percent. The net decrease was attributable to a
decrease in interest income from loans, expenses relative to the opening of the
new West Albany Branch in February 1999 and the new McMinnville Branch in April
1999, the installation of a local and wide area computer network, and expenses
related to Y2K readiness.
Net income for the quarter ended June 30, 1999 was approximately $896,000 or
$.22 per share compared to net income of approximately $960,000 or $.23 per
share as compared to the same quarter in 1998.
Total interest income increased approximately $34,000 for the six months ended
June 30, 1999 as compared to the same 1998 period. This increase was primarily
due to increases in interest income on securities available for sale due to
volume increases.
Net interest income decreased $114,000 or 2.1 percent for the six months ending
June 30, 1999. Net interest income decreased for the quarter ending June 30,
1999 approximately $28,000 or 1.0% as compared to the same quarter in 1998. The
net decrease during this six-month period resulted from decreases in interest
income and an increase in interest expense. The decrease in interest income is
primarily from overall lower interest rates on loans compared to the same period
in 1998. The increase in interest expense is primarily due to growth in deposits
and repurchase agreements.
Non-interest income increased approximately $85,000 for the six months ended
June 30, 1999 as compared to the same six-month period in 1998. For the quarter
ending June 30, 1999 non-interest income had an increase of $2,000 as compared
to the same quarter in 1998. These increases are attributable to an increase in
service charge income as a result of deposit growth, service charge increases,
and increases in the volume of bankcard services over last year for the same
period.
Salaries and employee benefits increased approximately $233,000 for the
six-month period ending June 30, 1999 compared to the same six-month period in
1998. These increases were primarily due to routine
9
<PAGE> 12
adjustments in officer and staff salaries, staff increases due to the new West
Albany and McMinnville Branch's, and technical support staff.
Other non-interest expense excluding salaries and employee benefits increased
approximately $106,000 for the six months ended June 30, 1999 as compared to the
same six-month period in 1998. This increase was primarily due to increases in
expense relative to growth of the merchant bankcard and debit card products, an
increase in depreciation expense for the new branch buildings, furniture and
equipment, and the computer network.
CREDIT LOSS PROVISION
The Bank maintains an allowance for credit losses on loans that occur from time
to time as an incidental part of the business of banking. Loans are charged
against this allowance for credit losses which is adjusted periodically to
reflect changing loan volumes, risk potential in the portfolio and general
economic conditions. Additions to the allowance for credit losses are made
through a charge against income.
During the first six months ended June 30, 1999 the Bank funded the allowance
for credit losses $132,000 from operations and $104,000 for the same six month
period during 1998. The increase in the provision for credit losses was incurred
to match the increased loan growth. The Bank experienced $105,000 in credit
losses for the six months ended June 30, 1999 and $11,000 in credit losses for
the same period ended June 30, 1998. Historically, the Bank's loan charge-off
levels have been very low compared to its peers. The $11,000 in credit losses
for the 6 months ending June 30, 1998 was exceptionally low. Although the
year-over-year increase to $105,000 is large in percentage terms, management has
no present reason to believe the increase is significant. Management attributes
part of the increase to what would be expected as a result of growth in the
Bank's loan portfolio. In addition, more than half of the increase is
attributable to the charge-off of one particular real estate loan. The Bank's
management will continue to monitor and analyze charge-off levels closely.
Management's assessment of the allowance for credit losses includes various
factors such as current delinquent and non-performing loans, historical analysis
of industry credit loss experience, knowledge of the present and anticipated
economic future of its market area and loan grades. Management believes that the
allowance for credit losses at June 30, 1999 of $1,447,000 or 1.08% of total
loans is adequate.
YEAR 2000 ISSUES
Bancorp first became aware of the Year 2000 (Y2K) problem through a combination
of industry contacts and the Federal Financial Institutions Examination Council
(FFIEC) statement "The Effect of Year 2000 on Computer Systems" issued in June
1996. The problem, as it is commonly defined, arose out of a shortage of disk
space in the early 1960's and 1970's. Instead of storing dates as four digits
(1997), they were shortened to two digits (97). However, when the clock rolls
over to 2000, many systems will think "00" is 1900, rather than 2000. Hardware
or software that runs on a time schedule or involves calculations based on dates
can be seriously affected. Without correction, the expanded date formats of the
new millennium will cause many operating systems to produce incorrect data or
cause them to fail completely.
Bancorp recognizes this problem as one of more than just a
technological/mechanical risk. We see the Y2K problem representing a regulatory
and ongoing business operations challenge not only to our business but to those
that we interact with as well.
The Y2K challenge is a particular problem for financial institutions, since many
financial transactions, such as interest accruals and payments, are date
sensitive. It also may affect the operations of third parties with whom Bancorp
and its subsidiary Citizens Bank (collectively, the "Company") do business,
including the Company's vendors, suppliers, utility companies, and customers.
The Company is committed to addressing these Y2K challenges in a prompt and
responsible manner. The Company's year 2000 readiness plan ("Y2K Plan") follows
the five-step approach outlined by the FFIEC of Awareness, Assessment,
Renovation, Validation, and Implementation in mitigating this risk on all
fronts. The Company has substantially completed the awareness, assessment, and
testing phases, although appropriate
10
<PAGE> 13
follow-up activities are continuing to occur. Validation has taken place after
each piece of testing was completed and renovation done on an "as needed" basis.
The Company has assigned primary responsibility for the Y2K project to its Chief
Operating Officer. The Company has also formed a Y2K committee, consisting of
appropriate representatives from its critical operational areas. In addition,
the Company regularly reports to its Board of Directors in order to assist them
in overseeing the Company's Y2K Readiness.
During the Assessment phase of our Y2K preparation, an individual analysis of
each hardware, software and time sensitive environmental application used by the
Company was completed. This assessment included a risk evaluation, which
measured the criticality of the application, a rating of confidence of the
Company to achieve a ready status, and a determination of the level of control
the Company has in effecting change in the readiness process. The designation
"Mission Critical", meaning those systems that should they fail would have a
significant adverse impact on the Company's operations and financial condition
as well as those of its customers, and "Non Mission Critical", meaning those
system which are less essential to functionality of the Company, were then
assigned to each application.
The Company has also requested and received documentation of readiness from the
vendor of each application. In addition, a primary solution for on site
readiness of each application as used was selected and a testing approach was
established. An individual contingency plan was then written for each
application should testing fail or functionality be effected after the date
change.
Well in advance of all federally mandated time frames, the Company has
internally established and completed each phase within the following tables:
<TABLE>
<S> <C>
Mission Critical testing completed 12/31/98
Mission Critical process validation completed 3/31/99
Mission Critical remediation as necessary completed 3/31/99
Non-Mission Critical testing complete 5/31/99
Non-Mission Critical process validation complete 6/30/99
Non-Mission Critical remediation as necessary complete 6/30/99
</TABLE>
The Company established a budget for extraordinary expenses related to Y2K of
approximately $300,000. The budget includes an estimation of both real costs and
lost opportunities relative to investments and loans. The Company incurred
approximately $6,000 in expenses in 1998. Approximately $42,000 has been
incurred year to date 1999. The Company expects the majority of the remaining
budget to be income lost on overnight invested federal funds as a result of an
increase in vault cash.
The Company has further developed a Y2K Business Resumption Contingency Plan.
This addresses the resumption of business by core business process. This plan is
separate from but related to the Company's testing and contingency plan. In
addition to outlining backup plans for each core business process, this plan
also speaks to the Company's plan for liquidity and communication outreach to
its customers.
The potential risk involved with issues brought about by the advent of Y2K are
extensive and could be serious in nature. The possible interruption of business
operations for the Company, its customers, and vendors has the potential to
impact financial condition, liquidity, and create a material loss of revenue.
Based on the Company's extensive investment of resources, both human and
financial, in preparing for the issues surrounding Y2K and the highly regulated
nature of the business, management anticipates that the Company will be well
prepared to avoid any significant detrimental effects. Since the Company has
drawn specific contingency plans for each application it uses that could be
impacted by Y2K, the worst case scenario is believed to stem from the potential
of environmental Y2K failures, such as power or telecommunications, the
preparation for which are generally out of the Company's control. The Company
continues to monitor the progress of these entities toward Y2K readiness and
believes those utilities to be Y2K ready to deliver service without
interruption. The Company also anticipates the possible scenario of several
borrowing customers experiencing short term Y2K cash flow problems and a pre-Y2K
increase in cash demand by all customers. If the Company has borrowers that
experience Y2K cash flow problems, they will be dealt with in the same routine
manner by which normal cash
11
<PAGE> 14
flow interruptions experienced by borrowers are addressed. Any increase in cash
demand will be funded by the Company's normal currency ordering procedures
funded by deposits held at the Federal Reserve Bank and investments maturing in
1999. The Company believes it has sufficient liquidity to cover anticipated
withdrawals. In summary, the Company believes it will be Y2K ready by its
internally established timelines which are well ahead of the actual century date
change and will have sufficient contingency plans in place to maintain a
satisfactory level of business operations.
LIQUIDITY AND CAPITAL RESOURCES
Bancorp's subsidiary, the Bank, has adopted policies to maintain a relatively
liquid position to enable it to respond to changes in the Bank's financial
environment. Generally, the Bank's major sources of liquidity are customer
deposits, sales and maturities of securities, the use of borrowing lines with
correspondent banks including Federal Home Loan bank borrowings, loan repayments
and net cash provided by operating activities.
The analysis of liquidity should also include a review of the changes that
appear in the consolidated statement of cash flows for the first six months of
1999. The statement of cash flows includes operating, investing and financing
categories. Operating activities include net income which is adjusted for
non-cash items and increases or decreases in cash due to certain changes in
assets and liabilities. Investing activities consisted primarily of both
proceeds from and purchases of securities, and the net growth in loans.
Financing activities present the cash flows associated with the Bank's deposit
accounts.
Management believes that the Bank's existing sources of liquidity will enable
the Bank to fund its requirements in the normal course of business.
As of June 30, 1999, shareholders' equity totaled $24,330,000 as compared to
$22,585,000 at December 31, 1998, an increase of 7.73%. This increase in equity
was primarily due to the Company's net income.
At the 1999 Annual Meeting of Shareholders, a majority of Bancorp shareholders
approved an Incentive Stock Option Plan authorizing Bancorp to issue incentive
compensation in the form of stock options, and a Stock Bonus Plan authorizing
Bancorp to issue incentive compensation in the form of stock bonuses.
The total number of shares of Bancorp's common stock that may be issued upon the
exercise of all options granted under the Incentive Stock Option Plan may not
exceed in the aggregate four percent (4%) of Bancorp's issued and outstanding
shares of common stock. As of July 30, 1999 Bancorp's issued and outstanding
shares totaled 4,124,091, so the maximum number of shares issuable under the
Incentive Stock Option Plan was 164,963 on that date. As of July 30, 1999 no
options had been granted or shares issued under this Plan.
The total number of shares of Bancorp's common stock that may be issued under
the Stock Bonus Plan may not exceed in the aggregate one percent (1%) of
Bancorp's issued and outstanding shares of common stock. As of July 30, 1999
Bancorp's issued and outstanding shares totaled 4,124,091, so the maximum number
of shares issuable under the Stock Bonus Plan was 41,241 on that date. As of
July 30, 1999 no stock had been issued under this Plan.
Capital ratios for the Company were as follows as of the dates indicated:
<TABLE>
<CAPTION>
Adequately Well
Capitalized Capitalized Bancorp
Standards Standards June 30, 1999 December 31, 1998
<S> <C> <C> <C> <C>
Tier 1 Leverage Ratio 4% 5% 10.35% 9.79%
Tier 1 Risk Based Capital Ratio 4% 6% 17.01% 15.53%
Total Risk Based Capital Ratio 8% 10% 18.02% 16.53%
</TABLE>
ITEM 3. QUANTITATIVE & QUALITATIVE ANALYSIS ABOUT MARKET RISK
No material changes have occurred in market risk since reported on December 31,
1998.
12
<PAGE> 15
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None
ITEM 2. CHANGES IN SECURITIES
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS
(a) April 20, 1999, Annual Meeting
(b) Need not be completed
(c) The following matters were voted upon at the Annual Meeting of
Shareholders on April 20, 1999
(1) The re-election of three (3) Directors for terms expiring in
2002 or until their successors have been elected and
qualified.
<TABLE>
<S> <C>
Director:
Rosetta C. Venell
Votes cast for: 2,777,334
Votes cast against: 79
Votes withheld: 42,866
Abstain: 51,109
Scott A. Fewel
Votes cast for: 2,764,098
Votes cast against: 13,314
Votes withheld: 42,866
Abstain: 51,109
Duane L. Sorensen
Votes cast for: 2,777,051
Votes cast against: 361
Votes withheld: 42,866
Abstain: 51,109
</TABLE>
Directors continuing in office are Gene N. Thompson (term
expires 2000), Jock Gibson (term expires 2000), James E.
Richards (term expires 2000), John Truax (term expires
2001), and William V. Humphreys (term expires 2001).
(2) At the 1999 Annual Meeting a majority of Bancorp
shareholders approved an amendment to Article II, Section
(1) of the Articles of Incorporation of Bancorp increasing
the authorized shares of its common stock from 5,000,000 to
10,000,000. Approval required a simple majority vote. Of the
3,927,706 issued and outstanding shares entitled to be voted
on the matter as of the record date of March 1, 1999,
2,807,698 were voted in favor, and 63,689 were voted against
(including abstentions of 4,686).
13
<PAGE> 16
Prior to the approval of the amendment, Article II,
Section (1) provided:
"The Corporation is authorized to issue 5,000,000
shares of Common Stock."
Following approval of the amendment, Article II, Section
(1) provides:
"The Corporation is authorized to issue 10,000,000
shares of Common Stock."
Bancorp was incorporated on September 18, 1996, the date
of filing of its Articles of Incorporation with the
Oregon Secretary of State. The amendment described above
is the only amendment made to Bancorp's Articles of
Incorporation since September 18, 1996. Articles of
Amendment reflecting this amendment were filed with the
Oregon Secretary of State on May 13, 1999. A complete
copy of the Articles of Incorporation, as amended, is
attached hereto as Exhibit 3(i).
(3) At the 1999 Annual Meeting a majority of Bancorp
shareholders approved an Incentive Stock Option Plan
authorizing Bancorp to issue incentive compensation in
the form of stock options. Approval required a simple
majority vote. Of the 3,927,706 issued and outstanding
shares entitled to be voted on the matter as of the
record date of March 1, 1999, 2,668,192 were voted in
favor and 203,196 were voted against (including
abstentions of 8,761). A complete copy of the Incentive
Stock Option Plan as approved by shareholders is
attached in Exhibit 99.1 to Bancorp's Form S-8 filed
with the Securities and Exchange Commission on June 23,
1999, and is incorporated herein by this reference.
(4) At the 1999 Annual Meeting a majority of Bancorp
shareholders approved a Stock Bonus Plan authorizing
Bancorp to issue incentive compensation in the form of
stock bonuses. Approval required a simple majority vote.
Of the 3,927,706 issued and outstanding shares entitled
to be voted on the matter as of the record date of March
1, 1999, 2,649,058 were voted in favor and 222,330 were
voted against (including abstentions of 11,847). A
complete copy of the Stock Bonus Plan as approved by
shareholders is attached as Exhibit 99.2 to Bancorp's
Form S-8 filed with the Securities and Exchange
Commission on June 23, 1999, and is incorporated herein
by this reference.
(d) None
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
The following exhibits are filed as part of this report.
3(i) Amended Articles of Incorporation
27.0 Financial Data Schedule for the six months ended June
30, 1999.
99.1 Citizens Bancorp Incentive Stock Option Plan
(incorporated by reference.)
99.2 Citizens Bancorp Stock Bonus Plan (incorporated by
reference.)
(b) Reports on Form 8-K
None
14
<PAGE> 17
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: August 4, 1999 /s/ William V. Humphreys
-----------------------------
By: William V. Humphreys
President and
Chief Executive Officer
Date: August 4, 1999 /s/ Lark E. Wysham
-----------------------------
By: Lark E. Wysham
Senior Vice President and
Chief Financial Officer
15
<PAGE> 1
EXHIBIT 3(i)
ARTICLES OF INCORPORATION
CITIZENS BANCORP
(As Amended Effective April 20, 1999)
ARTICLE I
The name of the Corporation is Citizens Bancorp.
ARTICLE II
(1) The Corporation is authorized to issue 10,000,000 shares of
Common Stock.
[Pror to the April 20, 1999 amendment, this Section provided:
"The Corporation is authorized to issue 5,000,000 shares of Common Stock."]
(2) Holders of Common Stock are entitled to one vote per share on
any matter submitted to the shareholders. On dissolution of the Corporation,
after any preferential amount with respect to Preferred Stock or other share
classes has been paid or set aside, the holders of Common Stock and the holders
of any series of other share classes entitled to participate in the distribution
of assets are entitled to receive the net assets of the Corporation.
(3) The Board of Directors (the "Board") is authorized, subject
to limitations prescribed by the Oregon Business Corporation Act, as amended
from time to time (the "Act"), and by the provisions of this Article, to provide
for the issuance of other classes of shares in series, including without
limitation Preferred Stock, to establish from time to time the number of shares
to be included in each series, and to determine the designations, relative
rights, preferences and limitations of the shares of each series. The authority
of the Board with respect to each series includes, without limitation,
determination of the following:
(a) The number of shares in and the distinguishing
designation of that series;
(b) Whether shares of that series shall have full,
special, conditional, limited or no voting rights, except to the extent
otherwise provided by the Act;
(c) Whether shares of that series shall be convertible and
the terms and conditions of the conversion, including provision for the
adjustment of the conversion rate in circumstances determined by the Board;
(d) Whether shares of that series shall be redeemable and
the terms and conditions of the redemption, including the date or dates upon or
after which they shall be redeemable and the amount per share payable in case of
redemption, which amount may vary under different conditions or at different
redemption dates;
(e) The dividend rate, if any, on shares of that series,
the manner of calculating any dividends, and the preferences of any dividends;
(f) The rights of shares of that series in the event of
voluntary or involuntary dissolution of the Corporation, and the rights of
priority of that series relative to the Common Stock and any other series of
Preferred Stock on the distribution of assets on dissolution; and
<PAGE> 2
(g) Any other rights, preferences and limitations of that
series that are permitted by law to vary.
ARTICLE III
(1) The Board shall supervise the business of the Corporation.
(2) The Board shall consist of not more than twelve (12) and not
less than eight (8) members. The exact number of directors at any given time
shall be fixed within these limits by approval of the directors.
(3) The Board shall be divided into three classes, none of which
shall have less than two (2) members, identified as class (A), class (B), and
class (C). The term of office of directors in class (A) shall expire at the
first annual meeting of shareholders after their election or when their
successors are qualified and elected. The term of office of directors in class
(B) shall expire at the second annual meeting of shareholders after their
election or when their successors are qualified and elected. The term of office
of directors in class (C) shall expire at the third annual meeting of
shareholders after their election or when their successors are qualified and
elected. At each meeting thereafter, the number of directors equal to the number
in the class whose term expires at the time of such meeting shall be elected to
hold office until the third succeeding annual meeting or until their successors
are qualified and elected.
(4) The shareholders of the Corporation may remove one or more
directors only for cause, and only by a vote of two-thirds of the shareholders
entitled to vote on the matter. If the director is elected by a voting group of
shareholders, only the shareholders of that voting group may participate in the
vote to remove the director. A director may be removed by the shareholders only
at a meeting called for the purpose of removing the director. The notice of such
meeting must state that the purpose, or one of the purposes, of the meeting is
the removal of the director. For the purposes of this Article, "cause" shall
mean (i) any breach of a director's duty of loyalty to the Corporation or its
shareholders, (ii) acts or omissions of a director which are not in good faith
or which involve intentional misconduct or a knowing violation of the law, (iii)
any distribution to a director which is unlawful under the provisions of ORS
60.367, or (iv) any transaction with the Corporation from which the director
derived an improper or illegal personal benefit.
(5) Any directorship to be filled by reason of a vacancy in the
Board or a vacancy resulting from an increase in the number of directors shall
be filled by the affirmative vote of a majority of all the directors remaining
in office. Such vacancy shall be filled by the Board for the unexpired term of
such vacancy at the first regular meeting of the Board after the vacancy occurs.
Shareholders may not fill vacancies.
(6) The directors of the Corporation may remove one or more
directors with or without cause by a two-thirds vote of the directors in office
at the time of the vote.
(7) Notwithstanding any other provisions of these Articles of
Incorporation or the bylaws of the Corporation, the provisions of this Article
III may not be amended or repealed, and no provisions inconsistent herewith may
be adopted by the Corporation, without the affirmative vote of two-thirds of all
of the votes entitled to be cast on the matter.
ARTICLE IV
(1) Any offer, proposal or plan to (a) merge, consolidate
or combine the Corporation and/or any of its subsidiaries in any way with any
other corporation, entity or affiliate thereof, or to (b) sell all or
substantially all of the Corporation and/or any of its subsidiaries or assets to
any other corporation, entity or affiliate thereof, which offer, proposal or
plan is not approved by a majority of the
<PAGE> 3
Board, must be approved by the affirmative vote of two-thirds of the shares of
each class of stock of the Corporation entitled to vote on the proposal.
(2) Notwithstanding any other provisions of these Articles of
Incorporation or the bylaws of the Corporation, the provisions of this Article
IV may not be amended or repealed, and no provisions inconsistent herewith may
be adopted by the Corporation, without the affirmative vote of two-thirds of all
of the votes entitled to be cast on the matter.
ARTICLE V
(1) No director of the Corporation shall be personally liable to
the Corporation or its shareholders for monetary damages for conduct as a
director, provided that this Article shall not eliminate the liability of a
director for (i) any breach of a director's duty of loyalty to the Corporation
or its shareholders, (ii) acts or omissions of a director which are not in good
faith or which involve intentional misconduct or a knowing violation of the law,
(iii) any distribution to a director which is unlawful under the provisions of
ORS 60.367, (iv) any transaction with the Corporation from which the director
derived an improper or illegal personal benefit, or (v) any act or omission for
which such elimination of liability is not permitted under the Act.
(2) No amendment to the Act that further limits the acts or
omissions for which elimination of liability is permitted shall affect the
liability of a director for any act or omission occurring prior to the effective
date of the amendment.
(3) If the Act or other Oregon law is amended to authorize the
elimination or limitation of the liability of directors, then the liability of a
director of the Corporation shall be so eliminated or limited to the fullest
extent permitted by the Act or by Oregon law as so amended.
ARTICLE VI
(1) The Corporation shall indemnify to the fullest extent not
prohibited by the Act or other law any current or former director of the
Corporation who is made, or threatened to be made, a party to an action, suit or
proceeding, whether civil, criminal, administrative, investigative or other,
including an action, suit or proceeding by or in the right of the Corporation,
by reason of the fact that such person was or is a director, employee or agent
of the Corporation or any of its subsidiaries, or was or is a fiduciary within
the meaning of the Employee Retirement Income Security Act of 1974 with respect
to any employee benefit plan of the Corporation or any of its subsidiaries, or
serves or served at the request of the Corporation as a director, officer,
employee or agent, or as a fiduciary of an employee benefit plan, of another
corporation, partnership, joint venture, trust or other enterprise.
(2) The Corporation shall reimburse or pay for the reasonable
expenses incurred by any such current or former director in any such action,
suit or proceeding in advance of the final disposition of the same if the
director sets forth in writing (i) the director's good faith belief of
entitlement to indemnification under this Article, and (ii) the director's
agreement to repay all advances if it is ultimately determined that the director
is not entitled to indemnification.
(3) No amendment to this Article that limits the Corporation's
obligation to indemnify any person shall have any effect on such obligation for
any act or omission that occurs prior to the later of the effective date of the
amendment or the date on which notice of the amendment is given to the person.
This Article shall not be deemed exclusive of any other provisions for
indemnification or advancement of expenses of directors, officers, employees,
agents and fiduciaries that may be part of or included in any statute, bylaw,
agreement, general or specific action of the Board, vote of shareholders or
other document or arrangement. The Corporation may enter into written agreements
of indemnification.
<PAGE> 4
ARTICLE VII
(1) Unless otherwise permitted by the Board, any business,
including without limitation nominations of directors, may be properly brought
before an annual shareholders meeting, or before any special meeting of
shareholders, by a shareholder only upon the shareholder's timely notice in
writing to the secretary of the Corporation. To be timely, a shareholder's
written notice must be physically received at the principal executive offices of
the Corporation not later than the close of business on the thirtieth (30th)
calendar day before the date of the meeting.
(2) A shareholder's notice under this Article VII shall set forth
(i) a brief description of each matter desired to be brought before the meeting
and the reason for conducting such business at the meeting, (ii) the name and
address of the proposing shareholder, (iii) the class and number of shares of
stock of the Corporation which are beneficially owned by the proposing
shareholder, (iv) any material interest of the shareholder in the business
proposed, and (v) as for each person whom the shareholder proposes to nominate
for election as a director (a) the name, age, business address, and residence
address of such person, (b) the principal occupation or employment of such
person, (c) the class and number or shares of stock, if any, of the Corporation
which are beneficially owned by such person, (d) the proposed nominee's written
consent, and (e) any other information relating to such person that is required
to be disclosed or is otherwise required by any applicable law.
(3) Notwithstanding any other provisions of these Articles of
Incorporation or the bylaws of the Corporation, the provisions of this Article
VII may not be amended or repealed, and no provisions inconsistent herewith may
be adopted by the Corporation, without the affirmative vote of two-thirds of all
of the votes entitled to be cast on the matter.
ARTICLE VIII
The street address and the mailing address of the initial
registered office of the Corporation is 275 South Third Street, Corvallis,
Oregon 97333 and the name of its initial registered agent is William V.
Humphreys.
ARTICLE IX
The name and address of the incorporator is Bennett H. Goldstein,
Attorney at Law, 2548 SW St. Helens Court, Portland, Oregon 97201.
ARTICLE X
The mailing address for notices to the Corporation is c/o Bennett
H. Goldstein, Attorney at Law, 2548 SW St. Helens Court, Portland, Oregon 97201.
Date: September 18, 1996.
/s/
------------------------------------
Bennett H. Goldstein, Incorporator
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
Financial Data Schedule - This exhibit is included only in the electronic EDGAR
filing version of this Form 10-K. The financial data schedule is not a separate
financial statement, but a schedule that summarizes certain standard financial
information extracted directly from the financial statements in this filing.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 9,637
<INT-BEARING-DEPOSITS> 23,132
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 59,873
<INVESTMENTS-CARRYING> 10,666
<INVESTMENTS-MARKET> 10,567
<LOANS> 133,916
<ALLOWANCE> 1,447
<TOTAL-ASSETS> 244,306
<DEPOSITS> 191,907
<SHORT-TERM> 20,239
<LIABILITIES-OTHER> 576
<LONG-TERM> 7,254
0
0
<COMMON> 19,868
<OTHER-SE> 4,770
<TOTAL-LIABILITIES-AND-EQUITY> 244,306
<INTEREST-LOAN> 6,198
<INTEREST-INVEST> 1,642
<INTEREST-OTHER> 487
<INTEREST-TOTAL> 8,328
<INTEREST-DEPOSIT> 2,574
<INTEREST-EXPENSE> 2,958
<INTEREST-INCOME-NET> 5,369
<LOAN-LOSSES> 132
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 3,851
<INCOME-PRETAX> 2,563
<INCOME-PRE-EXTRAORDINARY> 2,563
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,690
<EPS-BASIC> 0.41
<EPS-DILUTED> 0.41
<YIELD-ACTUAL> 0<F1>
<LOANS-NON> 223
<LOANS-PAST> 1,167
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 1,419
<CHARGE-OFFS> 105
<RECOVERIES> 1
<ALLOWANCE-CLOSE> 1,447
<ALLOWANCE-DOMESTIC> 1,447
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
<FN>
<F1>Information not calculated for interim reports.
</FN>
</TABLE>
