<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20052
__________________________________________________________
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 1998
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 0-23751
-------
________________________________________________________________________
SouthBanc Shares, Inc.
(Exact Name of Registrant as Specified in its Charter)
Delaware 58-2361245
------------- ----------
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
907 N. Main Street
Anderson, South Carolina 29621
------------------------------
(Address of Principal Executive Offices)
(Zip Code)
(8 6 4 ) 2 2 5 - 0 2 4 1
------------------------
(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.
(1) Yes __X__ No ______
$0.01 par value of common stock 3,553,951
- - ------------------------------- ---------
(Class) (Outstanding at December 31, 1998)
<PAGE>
SouthBanc Shares, Inc. and Subsidiary
FORM 10-Q
FOR THE QUARTER ENDED DECEMBER 31, 1998
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
Item 1. Financial Statements
Consolidated Balance Sheets as of December 31, 1998 and
September 30, 1998 (unaudited)................................... 3
Consolidated Statements of Income for the Three Months Ended
December 31, 1998, and the Three Months Ended December 31, 1997
(unaudited)...................................................... 4
Consolidated Statements of Stockholders' Equity
for the Year Ended September 30, 1998 and
the Three Months Ended December 31, 1998 (unaudited)............. 5
Consolidated Statements of Cash Flows for the Three Months
Ended December 31, 1998 and 1997 (unaudited)..................... 6
Notes to Consolidated Financial Statements (unaudited).............. 8
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations for the Three Months Ended
December 31, 1998 and 1997...................................... 10
Liquidity and Capital Resources................................. 12
Capital Compliance.............................................. 13
Impact of New Accounting Pronouncements......................... 14
Effect of Inflation and Changing Prices......................... 15
Year 2000 Considerations........................................ 15
Item 3. Market Risk Disclosure.............................................. 17
Part II Other Information
Items:
1. Legal Proceedings............................................... 18
2. Changes in Securities and Use of Proceeds....................... 18
3. Defaults Upon Senior Securities................................. 18
4. Submission of Matters to a Vote of Senior Holders............... 18
5. Other Materially Important Events............................... 18
Signatures.......................................................... 19
</TABLE>
2
<PAGE>
SouthBanc Shares, Inc. and Subsidiary
Consolidated Balance Sheets (Unaudited)
<TABLE>
<CAPTION>
Item I - Financial Statements
December 31, September 30,
- - -------------------------------------------------------------------------------------------------------------
1998 1998
- - -------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Assets
Cash and cash equivalents $13,793,361 $21,197,419
Investment securities available for sale (amortized
cost of $25,177,902 at December 31, 1998,
$23,242,091 at September 30, 1998 25,270,889 23,300,684
Federal Home Loan Bank stock, at cost 3,450,000 3,289,200
Mortgage-backed securities available for sale
(amortized cost of $70,430,886 at
December 31, 1998, and $73,719,144 at
September 30, 1998 70,591,893 73,933,292
Loans receivable, (net of allowance for loan losses of
$2,446,824 at December 31, 1998, and
$2,374,044 at September 30, 1998) 234,387,263 219,896,116
Investment in limited partnership 825,373 825,373
Real estate acquired in settlement of loans 169,901 88,965
Real estate held for development 1,775,091 1,909,394
Premises and equipment, net 6,182,733 6,350,491
Accrued interest receivable
Loans receivable 1,769,782 1,697,058
Mortgage-backed and other securities 528,301 527,823
Cash surrender value of life insurance 7,569,649 7,473,136
Other 4,342,477 2,039,982
-------------- --------------
Total Assets $370,656,713 $362,528,933
============== ==============
Liabilities and Stockholders' Equity
Deposits $217,378,595 $207,790,775
Advances from the Federal Home Loan Bank ("FHLB") 61,000,000 56,000,000
Securities sold under agreements to repurchase 20,173,992 20,173,933
Other borrowings 7,000,000 -
Advance payments by borrowers for property taxes and
insurance 117,137 333,681
Accrued interest payable 1,388,791 1,418,770
Accrued expenses and other liabilities 2,869,090 2,404,448
-------------- --------------
Total Liabilities 309,927,605 288,121,607
-------------- --------------
Commitments and contingencies - Note 17
Stockholders' Equity
- - --------------------
Common stock ($0.01 par value; authorized 7,500,000
shares; issued and outstanding 3,553,951 shares at
December 31, 1998. $1.00 par value; authorized
7,500,000 shares; issued and outstanding 4,306,410
shares at September 30, 1998) 43,077 43,064
Additional paid-in capital 57,505,597 57,470,324
Retained earnings, restricted 19,295,962 18,154,380
Treasury stock - at cost (753,710 shares) (14,921,186) -
Accumulated other comprehensive income, net 171,798 180,009
Indirect guarantee of ESOP debt (688,917) (711,140)
Deferred compensation for Management
Recognition Plan (MRP) (677,223) (729,311)
-------------- --------------
Total stockholders' equity 60,729,108 74,407,326
-------------- --------------
Total liabilities and stockholders' equity $370,656,713 $362,528,933
============== ==============
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE>
SouthBanc Shares, Inc. and Subsidiary
Consolidated Statements of Income (Unaudited)
<TABLE>
<CAPTION>
For the Three Months Ended
December 31,
- - -----------------------------------------------------------------------------------
1998 1997
- - -----------------------------------------------------------------------------------
<S> <C> <C>
Interest Income:
Loans $4,713,164 $4,037,418
Mortgage-backed securities 1,171,238 673,518
Other investments 634,745 361,674
---------- ----------
Total interest income 6,519,147 5,072,610
---------- ----------
Interest expense:
Interest on deposits:
Transaction accounts 264,569 153,221
Passbook accounts 155,469 155,090
Certificate accounts 1,837,934 2,002,210
---------- ----------
Total interest on deposits 2,257,972 2,310,521
Interest on borrowings 1,075,078 430,858
---------- ----------
Total interest expense 3,333,050 2,741,379
---------- ----------
Net interest income 3,186,097 2,331,231
Provision for loan losses 80,000 88,000
---------- ----------
Net interest income after provision for
loan losses 3,106,097 2,243,231
---------- ----------
Other income:
Loan and deposit account service charges 878,783 469,296
Gain (Loss) on sale of investments 292,035 -
Gain (Loss) on sale of real estate acquired
in settlement of loans (1,794) (6,658)
Gain (Loss) on sale of loans, net 48,741 11,623
Gain (Loss) on sale of real estate held
for development 36,172 -
Other 250,587 244,667
---------- ----------
Total other income 1,504,524 718,928
---------- ----------
General and administrative expenses:
Salaries and employee benefits 1,150,068 1,094,055
Occupancy 119,522 114,026
Furniture and equipment expense 264,241 211,098
FDIC insurance premiums 29,188 30,265
Advertising 43,243 60,138
Data processing 109,457 96,718
Office supplies 46,783 67,090
Other 356,405 326,141
---------- ----------
Total general and administrative 2,118,907 1,999,531
---------- ----------
Income before income taxes 2,491,714 962,628
Income taxes 869,790 327,412
---------- ----------
Net income $1,621,924 $635,216
========== ==========
Basic earnings per share $0.40 $0.15
========== ==========
Diluted earnings per share $0.39 $0.14
========== ==========
Weighted average shares outstanding:
Basic 4,061,389 4,302,763
========== ==========
Diluted 4,154,804 4,404,320
========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
SouthBanc Shares, Inc. and Subsidiary
Consolidated Statements of Stockholder's Equity
Year Ended September 30, 1998, and Three Months Ended December 31, 1998
(Unaudited)
<TABLE>
<CAPTION>
Accumulated Indirect
Other Guarantee Deferred
Additional Retained Comprehensive of Compensation
Common Common Paid-in Earnings Income Treasury ESOP for Total
Shares Stock Capital Restricted Net of Taxes Stock Debt MRP
--------- --------- ----------- ----------- ------------ -------- --------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at September 30, 1997 1,508,873 $1,508,873 $11,651,917 $18,381,766 $188,423 $0 $(804,024) $(325,212)$30,601,743
Net income 1,262,043 1,262,043
Other comprehensive income
unrealized gain on
securities, net (8,414) (8,414)
-------- ---------
Total other comprehensive
income (8,414) (8,414)
Comprehensive income 1,253,629
Exercise of stock options 1,317 1,317 31,937 33,254
Reduction of ESOP debt 92,884 92,884
ESOP expense 187,592 187,592
Purchase of common stock
for MRP (616,558) (616,558)
Earned portion of MRP 212,459 212,459
Dividends on common stock (1,489,429) (1,489,429)
Sale of common stock (less
offering expenses of
$1,494,488) 2,281,312 22,813 44,108,939 44,131,752
Par Value 514,908(1,489,939) 1,489,939
Balance at September 30, 1998 4,306,410 43,064 57,470,324 18,154,380 180,009 $0 (711,140) (729,311) 74,407,326
========= ========= ========== ========== ======== ======== ========= ======== ==========
Net income 1,621,924 1,621,924
Other comprehensive income
unrealized gain on
securities, net (8,211) (8,211)
-------- ----------
Total other comprehensive
income (8,211)
Comprehensive income 1,613,713
Exercise of stock options 1,251 13 11,071 11,084
Reduction of ESOP debt 22,223 22,223
ESOP expense 39,871 39,871
Earned portion of MRP 52,088 52,088
Dividends on common stock (480,342) (480,342)
Offering expenses for the
sale of common stock (15,669) (15,669)
Purchase of Treasury Stock (753,710) (14,921,186) (14,921,186)
Balance at December 31, 1998 3,553,951 $43,077 $57,505,597 $19,295,962 $171,798 $(14,921,186) $(688,917) $(677,223)$60,729,108
========= ========= ========== ========== ======== =========== ========= ========= ==========
</TABLE>
5
<PAGE>
SouthBanc Shares, Inc. and Subsidiary
Consolidated Statements of Cash Flows
Three Months Ended December 31, 1998, and 1997 (Unaudited)
<TABLE>
<CAPTION>
- - -----------------------------------------------------------------------------------------
1998 1997
- - -----------------------------------------------------------------------------------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 1,621,924 $ 635,216
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 216,053 199,787
Amortization (accretion), net (242,280) (130,064)
Provision for loan losses 80,000 88,000
(Earnings) on investment in limited
partnership -- (64,770)
(Gain) on sale of investments, net (292,035) --
Loss on sale of real estate 1,794 6,658
(Gain) on sale of loans, net (48,741) (11,623)
(Gain) on sale of real estate held for
development (36,172) --
Deferred compensation 91,959 93,880
Increase in accrued interest
receivable and other assets (2,375,697) (658,336)
Increase (Decrease) in other liabilities 434,663 (81,780)
----------- ---------
Net cash provided by operating activities (548,532) 76,968
----------- ---------
Cash flows from investing activities:
Increase in loans receivable, net (536,209) (5,174,435)
Purchases of loans receivables (15,824,441) (10,165,000)
Purchases of morgage-backed securities (9,929,696) (27,866,667)
Purchases of investment securities (3,337,004) (6,090,000)
Purchases of FHLB stock (160,800) (213,500)
Purchases of premises and equipment (48,295) (507,503)
Sales of loans receivable 1,666,037 3,991,100
Proceeds from redemption of FHLB stock -- 163,500
Principal repayments on mortgage-backed
securities 13,150,723 1,567,960
Proceeds from maturities of investment securities -- 1,952,000
Proceeds from sale of investment securities,
available for sale 1,911,563 --
Proceeds from sale of real estate owned 83,055 99,731
Proceeds from sale of real estate held for
development 327,589 249,888
Capital improvements of real estate held for
development (134,409) (238,606)
----------- -----------
Net cash used in investing activities (12,831,887) (42,231,532)
----------- -----------
</TABLE>
Continued
6
<PAGE>
SouthBanc Shares, Inc. and Subsidiary
Consolidated Statements of Income (Unaudited)
Three Months Ended December 31, 1998, and 1997 (Unaudited)
<TABLE>
<CAPTION>
- - ----------------------------------------------------------------------------------------------
1998 1997
- - ----------------------------------------------------------------------------------------------
<S> <C> <C>
Cash flows from financing activities:
Increase in deposit accounts 9,587,820 1,556,454
Proceeds from FHLB Advances 38,000,000 30,000,000
Repayment of FHLB Advances (33,000,000) (11,000,000)
Proceeds from securities sold under agreements
to repurchase 59 20,000,000
Purchase of Treasury stock (14,921,186) --
Proceeds from other borrowings 7,000,000 --
Payment of stock offering costs (15,669) --
Purchase of stock for MRP -- (616,558)
Repayments of ESOP loan 22,223 24,219
Dividends paid on common stock (480,342) (248,212)
Decrease in advance payments by borrowers
for property taxes and insurance (216,544) (234,077)
--------- ----------
Net cash provided by financing activities 5,976,361 39,481,826
Net increase (decrease) in cash and cash equivalents (7,404,058) (2,672,738)
Cash and cash equivalents, beginning of year 21,197,419 13,499,332
----------- -----------
Cash and cash equivalents, end of year $13,793,361 $10,826,594
=========== ===========
Supplemental disclosures:
Cash paid during the year for
Interest $3,303,071 $2,470,283
========== ==========
Taxes $580,000 $9,000
========== ==========
Noncash investing activities:
Additions to real estate acquired in
settlement of loans $172,207 $83,932
========== ==========
Loans receivable exchanged for mortgage-backed
securities -- --
========== ==========
Change in unrealized net gain (loss) on
securities available for sale, net of tax $8,211 $119,207
========== ==========
Increase (decrease) in Employee Stock
Ownership Plan debt guaranteed by the Bank $22,223 $24,219
========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
7
<PAGE>
SouthBanc Shares, Inc. and Subsidiary
Notes to Consolidated Financial Statements (Unaudited)
1. Basis of Presentation
---------------------
The accompanying unaudited consolidated financial statements for
SouthBanc Shares, Inc. ("Company") were prepared in accordance with
instructions for Form 10-Q and, therefore, do not include all
disclosures necessary for a complete presentation of financial
condition, results of operations, and cash flows in conformity with
generally accepted accounting principles. All adjustments, consisting
only of normal recurring accruals, which are, in the opinion of
management, necessary for fair presentation of the interim consolidated
financial statements have been included. The results of operations for
the period ended December 31, 1998, are not necessarily indicative of
the results that may be expected for the entire year.
2. Principles of Consolidation
---------------------------
These consolidated financial statements do not include all disclosures
required by generally accepted accounting principles and should be read
in conjunction with the audited consolidated financial statements and
related notes for the year ended September 30, 1998, of SouthBanc
Shares, Inc. ("Company"). The accompanying unaudited consolidated
financial statements include the accounts of the Company, the Savings
Bank and the Savings Bank's wholly owned subsidiaries, Mortgage First
Service Corporation and United Service Corporation, and United Service
Corporation's wholly owned subsidiary, United Investment Services.
United Service Corporation is a wholly-owned subsidiary of the Savings
Bank. At December 31, 1998, United Service had assets of $2.4 million.
United Service is involved in two residential and two commercial real
estate development projects.
All significant intercompany items and transactions have been eliminated
in consolidation.
3. Payment of Dividends
--------------------
The payment of dividends by the Company depends primarily on the ability
of the Savings Bank to pay dividends to the Company. The payment of
dividends by the Savings Bank is subject to regulation by the Office of
Thrift Supervision ("OTS"). The Company may not declare or pay a cash
dividend or repurchase any of its capital stock if the effect thereof
would cause the capital of the Savings Bank to be reduced below
regulatory capital requirements imposed by the OTS or below the
liquidation account established by the Savings Bank in connection with
the conversion of the Savings Bank's former mutual holding company
(SouthBanc Shares, M.H.C.) from the mutual to stock form of
organization.
The Company's Board of Directors declared a cash dividend of $.12 per
share to its shareholders during the quarter ended December 31, 1998,
payable to shareholders of record as of January 4, 1999.
4. Earnings Per Share
------------------
In February 1997, the Financial Accounting Standards Board (FASB) issued
SFAS No. 128, "Earnings Per Share." SFAS No. 128 specifies the
computation, presentation and disclosure requirements for earnings per
share (EPS) for entities with publicly held common stock or potential
common stock such as options, warrants, convertible securities or
contingent stock agreements if those securities trade in a public
market. This standard specifies computation and presentation
requirements for both basic EPS and, for entities with complex capital
structures, diluted EPS. Basic earnings per share is computed by
dividing net income by the weighted average common shares outstanding.
Diluted earnings per share is similar to the computation of
8
<PAGE>
4. Earnings Per Share (Continued)
------------------------------
basic earnings per share except that the denominator is increased to
include the number of additional common shares that would have been
outstanding if the dilutive potential common shares had been issued. The
dilutive effect of options outstanding under the Company's stock option
plan is reflected in diluted earnings per share by application of the
treasury stock method. SFAS No. 128 is effective for reporting periods
ending after December 15, 1997. The Company adopted SFAS No. 128 during
the quarter ended December 31, 1997. Accordingly, all prior period
earnings per share have been restated for SFAS No. 128.
<TABLE>
<CAPTION>
QUARTERS ENDED
DECEMBER 31
--------------------
<S>
1998 1997
--------- ---------
<C> <C>
Basic weighted average shares outstanding 4,061,389 4,302,763
Plus stock option incremental shares considered
outstanding for diluted EPS calculations 93,415 101,557
--------- ---------
Diluted Weighted Average Shares Outstanding 4,154,804 4,404,320
</TABLE>
RECONCILIATION OF THE NUMERATORS AND DENOMINATORS OF THE BASIC AND DILUTED
EPS COMPUTATIONS:
FOR THE QUARTER ENDED DECEMBER 31, 1998
---------------------------------------
<TABLE>
<CAPTION>
INCOME SHARE PER SHARE
(NUMERATOR) (DENOMINATOR) AMOUNT
----------- ------------- ----------
<S> <C> <C> <C>
BASIC EPS $1,621,924 4,061,389 $0.40
Effect of Diluted Securities
Stock Options 0 93,415
---------- ---------
Diluted EPS $1,621,924 4,154,804 $0.39
</TABLE>
FOR THE QUARTER ENDED DECEMBER 31, 1997
---------------------------------------
<TABLE>
<CAPTION>
INCOME SHARE PER SHARE
(NUMERATOR) (DENOMINATOR) AMOUNT
----------- ------------- ---------
<S> <C> <C> <C>
BASIC EPS $635,216 4,302,763 $0.15
Effect of Diluted Securities
Stock Options 0 101,557
-------- ---------
Diluted EPS $635,216 4,404,320 $0.14
</TABLE>
9
<PAGE>
Item 2 - Management's Discussion and Analysis of Financial Condition and Results
of Operations
Comparison of Financial Condition at December 31, 1998 and September 30, 1998
Total assets increased 2.26% or $8.2 million to $370.7 million at December 31,
1998, from $362.5 million at September 30, 1998, as a result of an increase in
loans receivable and investment securities available for sale. Loans receivable
increased 6.59% or $14.5 million to $234.4 million at December 31, 1998, from
$219.9 million at September 30, 1998. The increase in loans receivable resulted
from growth in first mortgage residential which increased $9.4 million to
$140.5 million at December 31, 1998, from $131.1 million at September 30, 1998,
and commercial real estate which increased $5.6 million to $40.7 million at
December 31, 1998, from $35.1 million at September 30, 1998.
Cash and cash equivalents decreased 34.91% or $7.4 million to $13.8 at
December 31, 1998, from $21.2 million at September 30, 1998. These funds were
used to fund the common stock repurchase program. The Company received
regulatory approval to repurchase up to 26.53% (or 1,141,523 shares) of its
outstanding shares of common stock. The repurchases commenced on November 2,
1998, and are expected to be completed by April 14, 1999.
Investment securities available-for-sale increased 8.58% or $2.0 million to
$25.3 million at December 31, 1998, from $23.3 million at September 30, 1998.
The Company purchased $3.3 million of a Federal Home Loan Mortgage Corporation
note yielding 6.10%, callable in February 1999, maturing in November 2003, and
sold $1.9 million of an equity investment.
Mortgage-backed securities available-for-sale decreased 4.46% or $3.3 million to
$70.6 million at December 31, 1998, from $73.9 million at September 30, 1998.
The Company purchased $2.0 million of a collateralized mortgage obligations with
a fixed coupon of 7.00% and purchased $8.0 million of a Government National
Mortgage Association fixed rate mortgage-backed security with a coupon of 7.00%
maturing in thirty years.
Real estate held for development decreased $134,000 to $1.8 million at December
31, 1998, from $1.9 million at September 30, 1998. United Service Corporation
sold fifteen single-family residential lots in The Meadows Subdivision at a cost
of $262,000. Nine lots remain available for sale in Phase I in The Meadows
residential subdivision.
Other assets increased $2.3 million to $4.3 million at December 31, 1998, from
$2.0 million at September 30, 1998. The sale of the $1.9 million equity
security was settled in January 1999.
Deposits increased 4.62% or $9.6 million to $217.4 million at December 31, 1998,
from $207.8 million at September 30, 1998. Non interest bearing checking
accounts increased 4.61% or $700,000 to $15.9 million at December 31, 1998, from
$15.2 million at September 30, 1998. Interest bearing checking accounts
increased 21.79% or $7.8 million to $43.6 million at December 31, 1998, from
$35.8 million at September 30, 1998. Saving statement accounts decreased 3.17%
or $0.8 million to $24.4 million at December 31, 1998, from $25.2 million at
September 30, 1998. Certificates of deposits increased 1.44% or $1.9 million to
$133.5 million at December 31, 1998, from $131.6 million at September 30, 1998.
Advances from the Federal Home Loan Bank increased 8.93% or $5.0 million to
$61.0 million at December 31, 1998, from $56.0 million at September 30, 1998.
The advances were used to fund loan originations and loan purchases from
Mortgage First Service Corporation, a subsidiary of the Savings Bank.
Other borrowings were $7.0 million at December 31, 1998. The Company pledged
$7.0 million of investment securities available-for-sale as collateral for the
other borrowings. The proceeds of the other borrowings were used to fund the
common stock repurchase program.
10
<PAGE>
Stockholders equity decreased 18.41% or $13.7 million to $60.7 million at
December 31, 1998, from $74.4 million at September 30, 1998. Common stock
repurchased through the common stock repurchase program is recorded on the
Company's balance sheet as Treasury Stock, a contra-equity account, which was
$14.9 million at December 31, 1998. Through December 31, 1998, 753,710 shares
had been repurchased at a cost of $14.9 million. Retained income was offset by
dividends paid in the amount of $480,342.
Comparison of Operating Results for the Three Months Ended December 31, 1998,
and 1997
Net Income
- - ----------
Net income for the three months ended December 31, 1998, increased 155.43% to
$1,622,000 or $0.40 basic earnings per share and $0.39 diluted earnings per
share, compared to $635,000 or $0.15 basic earnings per share and $0.14 diluted
earnings per share for the same three months a year ago.
Net Interest Income
- - -------------------
Net interest income increased $855,000 to $3,186,000 for the three months ended
December 31, 1998, from $2,331,000 for the three months ended December 31, 1997.
Total interest income increased 28.50% or $1,446,000 to $6,519,000 for the three
months ended December 31, 1998, from $5,073,000 for the three months ended
December 31, 1997, due primarily to a higher average balance of outstanding
loans which increased $48.3 million or 25.80% to an average of $235.5 million
for the three months ended December 31, 1998, from $187.2 million for the three
months ended December 31, 1997. Interest income on mortgage-backed securities
increased 73.74% or $497,000 to $1,171,000 for the three months ended December
31, 1998, from $674,000 for the three months ended December 31, 1997, as the
average balance of mortgage-backed securities increased 78.43% or $32.3 million
and interest income on other investments increased 75.50% or $273,071 as the
average balance of investment securities and interest bearing deposits increased
81.96% or $17.6 million.
Interest Expense
- - ----------------
Interest expense on deposits increased 2.29% or $53,000 to $2,258,000 for the
three months ended December 31, 1998, from $2,311,000 for the three months ended
December 31, 1997, as the average cost of deposits decreased to 4.24% for the
three months ended December 31, 1998, from 4.59% for the three months ended
December 31, 1997, and the average outstanding balance increased 5.79% or
$11.7 million. Interest on borrowings increased 149.42% or $644,000 to
$1,075,000 for the three months ended December 31, 1998, from $431,000 for the
three months ended December 31, 1997, as the average borrowings increased
185.15% or $56.1 million to $86.4 million for the three months ended
December 31, 1998, from $30.3 million for the three months ended December 31,
1997.
Provisions for Loan Losses
- - --------------------------
Provisions for loan losses are charges to earnings to bring the total allowance
for loan losses to a level considered adequate by management to provide for
management's best estimate of inherent loan losses. In determining the adequacy
of the allowance for loan losses, management evaluates various factors including
the market value of the underlying collateral, growth, and composition of the
loan portfolio, the relationship of the allowance for loan losses to outstanding
loans, loss experience, delinquency trends and economic conditions. Management
evaluates the carrying value of loans periodically, and the allowance for loan
losses is adjusted accordingly.
The provision for loan losses decreased 9.09% or $8,000 to $80,000 for the three
months ended December 31, 1998, from $88,000 for the three months ended
December 31, 1997. At December 31, 1998, the allowance for loan losses was 1.03%
compared to 1.07% at September 30, 1998.
11
<PAGE>
Other Income
- - ------------
Total other income increased 109.32% or $786,000 to $1,505,000 for the three
months ended December 31, 1998, from $719,000 for the three months ended
December 31, 1997. Loan and deposit service charges increased $410,000 to
$879,000 from $469,000 for the three months ended December 31, 1997, as a result
of an increase in the number of checking accounts and changes to the fee
structure of deposit accounts. Gain on sale of investments was $292,000 for the
three months ended December 31, 1998, from the profit of the sale of an equity
investment compared to no gain or loss for the three months ended December 31,
1997. Gain or loss on sale of real estate acquired in settlement of loans was a
loss of $2,000 for the three months ended December 31, 1998, compared to a loss
of $7,000 for the three months ended December 31, 1997.
Gain on sale of loans was $49,000 for the three months ended December 31, 1998,
compared to $12,000 for the three months ended December 31, 1997. Gain on sale
of real estate held for development was $36,000 for the three months ended
December 31, 1998, as fifteen residential lots were sold by the United Service
Corporation in The Meadows residential subdivision compared to no sales for the
three months ended December 31, 1997. Other income increased $6,000 to $251,000
for the three months ended December 31, 1998, compared to $245,000 for the three
months ended December 31, 1997.
General and Administrative Expense
- - ----------------------------------
General and administrative expenses increased 5.95% or $119,000 to $2,119,000
for the three months ended December 31, 1998, from $2,000,000 for the three
months ended December 31, 1997. Salaries and employee benefits increased 5.12%
or $56,000 to $1,150,000 for the three months ended December 31, 1998, from
$1,094,000 for the three months ended December 31, 1997, due to incentives paid
for loan production. Office occupancy increased 5.26% or $6,000 to $120,000 for
the three months ended December 31, 1998, from $114,000 for the three months
ended December 31, 1997, due to increases in property taxes and building
insurance. Furniture and equipment expenses increased 25.12% or $53,000 to
$264,000 for the three months ended December 31, 1998, from $211,000 for the
three months ended December 31, 1997, due to upgrades in data processing
equipment and software resulting in an increase of depreciation expense of
$17,000 and service contracts of $32,000. Advertising decreased 28.33% or
$17,000 to $43,000 for the three months ended December 31, 1998, from $60,000
for the three months ended December 31, 1997, as a result of winding down the
Free Checking Advertising Campaign that began in October 1994. Data processing
increased 12.37% or $12,000 to $109,000 for the three months ended December 31,
1998, from $97,000 for the three months ended December 31, 1997, as a result of
increased volume and cost of ATM and debit card processing. Office supplies
decreased 29.85% or $20,000 to $47,000 for the three months ended December 31,
1998, from $67,000 for the three months ended December 31, 1997, due to a
decrease in the purchase of data processing supplies. Other operating expenses
increased 9.20% or $30,000 to $356,000 for the three months ended December 31,
1998, from $326,000 for the three months ended December 31, 1997, due to the
initial Delaware franchise tax expense of $39,000 paid by the Company.
Income Taxes
- - ------------
Income taxes increased 166.06% or $543,000 to $870,000 for the three months
ended December 31, 1998, from $327,000 for the three months ended December 31,
1997. This was due to an increase in income before taxes of 158.77% or
$1.5 million to $2.5 million from $1.0 million for the three months ended
December 31, 1998, and 1997, respectively.
Liquidity and Capital Resources
- - -------------------------------
The Company's primary sources of funds are deposits, repayment of loan
principal, and repayment of mortgage backed securities and collateralized
mortgage obligations, and, to a lesser extent, maturities of investment
securities, and short-term investments and operations. While scheduled loan
repayments and maturing investments are relatively predictable, deposit flows
and early loan repayments are more influenced by interest rates, general
economic conditions, and competition. The Company attempts to price its
deposits to meet its asset/liability objectives consistent with local market
conditions. Excess balances are invested in overnight funds. In addition, the
12
<PAGE>
Company is eligible to borrow funds from the FHLB of Atlanta. Under Office of
Thrift Supervision (OTS) regulations, a member thrift institution is required to
maintain an average daily balance of liquid assets (cash, certain time deposits
and savings accounts, bankers' acceptances, and specified U. S. government,
state or federal agency obligations and certain other investments) equal to a
monthly average of not less than a specified percentage of its net withdrawable
accounts plus short-term borrowings. This liquidity requirement, which is
currently 4.0%, may be changed from time to time by the OTS to any amount within
the range of 4.0% to 10.0%, depending upon economic conditions and the savings
flow of member associations. Monetary penalties may be imposed for failure to
meet liquidity requirements. The liquidity of the Company at December 31, 1998,
was 25.38%.
The primary investing activity of the Company is lending. During the three
months ended December 31, 1998, the Company originated $36.9 million of loans,
$1.7 million of which were sold. The Company also purchased $15.8 million of
loans. The retained originations were primarily funded by increases in
deposits, principal repayments of loans and mortgage-backed securities and
collateralized mortgage obligations, Federal Home Loan Bank Advances, and
reverse repurchase agreements.
Liquidity management is both a short and long-term responsibility of management.
The Company adjusts its investments in liquid assets based upon management's
assessment of (i) expected loan demand, (ii) projected loan sales,
(iii) expected deposit flows, (iv) yields available on interest-bearing
deposits, and (v) liquidity of its asset/liability management program. Excess
liquidity is generally invested in interest-bearing overnight deposits and other
short-term government and agency obligations. If the Company requires funds
beyond its ability to generate them internally, it has additional borrowing
capacity with the FHLB and collateral eligible for repurchase agreements.
The Company anticipates that it will have sufficient funds available through
normal loan repayments to meet current loan commitments. At December 31, 1998,
the Company had outstanding commitments to originate loans of approximately
$45.7 million.
Certificates of deposit scheduled to mature in one year or less at December 31,
1998, totaled $100.9 million. Based upon management's experience and
familiarity with the customers involved and the Company's pricing policy
relative to that of its perceived competitors, management believes that a
significant portion of such deposits will remain with the Company.
The Company plans to repurchase up to 387,813 shares of its common stock before
April 14, 1999. At approximately $20.00 per share, up to $7.8 million may be
required to support the repurchase. The Company intends to fund the repurchase
program through cash on hand and/or liquidation of some of its other interest
earning assets.
Capital Compliance
- - ------------------
The Company is not subject to any regulatory capital requirements. The Savings
Bank's actual capital and ratios as required by the Savings Bank's primary
regulator, the Office of Thrift Supervision (OTS), as well as those required to
be considered well capitalized according to the Prompt Corrective Action
Provisions are presented in the following table. As of December 31, 1998, the
most recent notification from the OTS categorized the Savings Bank as well
capitalized under the regulatory framework for prompt corrective action. To be
categorized as well capitalized, the Savings Bank must maintain minimum total
risk-based, Tier I risked-based, and Tier I core ("leverage") ratios as set
forth in the table. There are no conditions or events since that notification
that management believes have changed the Savings Bank's category.
13
<PAGE>
Capital Compliance Continued
- - ----------------------------
<TABLE>
<CAPTION>
To Be Well
Capitalized Under
For Capital Adequacy Prompt Corrective
Actual Purposes Action Provisions
--------------- ----------------------- ------------------
Amount Ratio Amount Ratio Amount Ratio
------- ------ ----------- ---------- --------- -------
<S> <C> <C> <C> <C> <C> <C>
(Dollars in Thousands)
As of December 31, 1998:
- - -----------------------
Tangible Capital (To Total Assets) $51,346 14.48% $ 5,317 1.5% $ -- --%
Core Capital (To Total Assets) $51,346 14.48 14,179 4.0 17,724 5.00
Tier I Capital (To Risk-Based Assets) $51,346 23.36% -- -- $ 13,191 6.00
Risk-Based Capital (To Risk-Based
Assets) $51,824 23.57% 17,587 8.00 21,984 10.00
</TABLE>
If the Savings Bank were to fail to meet the minimum capital requirements, it
will be required to file a written capital restoration plan with regulatory
agencies and would be subject to various mandatory and discretionary
restrictions on its operations.
Impact of New Accounting Pronouncements
- - ---------------------------------------
Reporting Comprehensive Income
- - ------------------------------
The Financial Accounting Standards Board (FASB) issued SFAS No. 130, "Reporting
Comprehensive Income," in June 1997. The purpose of SFAS 130 is to address
concerns over the practice of reporting elements of comprehensive income
directly in equity. This SFAS requires all items that are required to be
recognized under accounting standards as components of comprehensive income be
reported in a financial statement that is displayed in equal prominence with the
other financial statements. This statement is effective for periods beginning
after December 15, 1997. Comparative financial statements are required to be
reclassified to reflect the provisions of this statement. The Company adopted
the provisions of this SFAS beginning with the quarter ending December 31, 1998,
and has included the appropriate components in the Company's Consolidated
Statement of Stockholders' Equity.
Disclosures about Segments of an Enterprise and Related Information
- - -------------------------------------------------------------------
The FASB issued SFAS No. 131, "Disclosures about Segments of an Enterprise and
Related Information," in June 1997. This statement applies to all public
entities. The provisions of SFAS 131 require certain disclosures regarding
material industry segments within an entity. Due to the Company's structure,
SFAS 131 is not expected to have a material impact. The Company plans to adopt
this SFAS for the period ending September 30, 1999.
Employers' Disclosures about Pensions and Other Postretirement Benefits
- - -----------------------------------------------------------------------
In February 1998, the FASB issued SFAS 132, "Employers' Disclosures about
Pensions and Other Postretirement Benefits". The new statement revises required
disclosures for employee benefit plans, but does not change the measurement or
recognition of such plans. While the new standard requires some additional
information about benefit plans, it helps preparers of financial statements by
eliminating certain disclosures and by standardizing the disclosures for
pensions and other Post-retirement benefits to the extent practicable. SFAS 132
supersedes the disclosure requirements in SFAS 87, "Employers' Accounting for
Pensions", SFAS 88, "Employers Accounting for Settlements and Curtailments of
Defined Benefit Pension Plans and for Termination Benefits", and SFAS 106
"Employers Accounting for Postretirement Benefits Other than Pensions". The new
disclosures are effective for fiscal years beginning after December 15, 1997.
The adoption of SFAS will not have a material impact on the financial statements
of the Company due to the disclosure only requirements.
14
<PAGE>
Accounting for Derivative Instruments and Hedging Activities
- - ------------------------------------------------------------
In June 1998, the FASB issued Statement of Financial Accounting Standards
No. 133, "Accounting for Derivative Instruments and Hedging Activities". SFAS
133 establishes new accounting and reporting requirements for derivative
instruments, including certain derivative instruments embedded in other
contracts and hedging activities. The standard requires all derivatives to be
measured at fair value and recognized as either assets or liabilities in the
statement of condition. Under certain conditions, a derivative may be
specifically designated as a hedge. Accounting for the changes in fair value of
a derivative depends on the intended use of the derivative. Adoption of this
standard is required for all fiscal years and quarters beginning after June 15,
1999. Because the Company has a limited use of derivative transactions,
management does not expect that this standard would have a material effect on
the Company's financial statements.
Accounting for Mortgage-Backed Securities Retained after the Securitization of
- - ------------------------------------------------------------------------------
Mortgage Loans Held for Sale by a Mortgage Banking Enterprise
- - -------------------------------------------------------------
In October 1998, FASB issued SFAS No. 134 "Accounting for Mortgage-Backed
Securities Retained after the Securitization of Mortgage Loans Held for Sale by
a Mortgage Banking Enterprise" which is effective for the first fiscal quarter
beginning after December 15, 1998. This statement conforms the subsequent
accounting for securities retained after the securitization of mortgage loans by
a mortgage banking enterprise with the subsequent accounting for securities
retained after the securitization of other types of assets by a non-mortgage
banking enterprise. The adoption of this standard is not expected to have a
material effect on the Company's financial statements.
Accounting for Costs of Computer Software Developed or Obtained for Internal Use
- - --------------------------------------------------------------------------------
In March 1998, the Accounting Standards of the Executive Committee of the
American Institute of Certified Public Accountants issued Statement of Position
98-1, "Accounting for the Costs of Computer Software Developed or Obtained for
Internal Use" (SOP 98-1) provides guidance as to when it is or is not
appropriate not to capitalize the cost of software developed or obtained for
internal use. SOP 98-1 is effective for fiscal years beginning after December
15, 1998, with early adoption encouraged. The adoption of SOP 98-1 will not
have a material effect on the Company's financial statements.
Effect of Inflation and Changing Prices
- - ---------------------------------------
The Consolidated Financial Statements and related financial data presented
herein have been prepared in accordance with Generally Accepted Accounting
Principles ("GAAP") which require the measurement of financial position and
operating results in terms of historical dollars, without considering the
changes in relative purchasing power of money over time due to inflation. The
primary impact of inflation on operations of the Company is reflected in
increased operating costs. Unlike most industrial companies, virtually all the
assets and liabilities of a financial institution are monetary in nature. As a
result, interest rates generally have a more significant impact on a financial
institution's performance than do general levels of inflation. Interest rates
do not necessarily move in the same direction or to the same extent as the
prices of goods and services.
Year 2000 Considerations
- - ------------------------
The Company is a user of computers, computer software and equipment utilizing
embedded microprocessors that will be effected by the year 2000 issue. The year
2000 issue exists because many computer systems and applications use two-digit
date fields to designate a year. As the century date change occurs, date-
sensitive systems may recognize the year 2000 as 1900, or not at all. This
inability to recognize or properly treat the year 2000 may cause erroneous
results, ranging from system malfunctions to incorrect or incomplete processing.
The Company's Year 2000 Committee consists of the Information Services Steering
Committee, consisting of a representative of each user department. The
committee coordinator makes a quarterly or, as major events are
15
<PAGE>
completed, progress report to the Board of Directors. The committee has
developed and is implementing a comprehensive plan to make all information and
non-information technology assets Year 2000 compliant. The plan is comprised of
the following phases:
1. Awareness - Educational initiatives on Year 2000 issues and concerns.
This phase is ongoing, especially as it relates to informing customers of
the Company's Year 2000 preparedness.
2. Assessment - Inventory of all technology assets and identification of
third-party vendors and service providers. This phase was completed as of
September 30, 1997.
3. Renovation - Review of vendor and service providers responses to the
Company's Year 2000 inquiries and development of a follow-up plan and
timeline. This phase was completed as of December 31, 1998.
4. Validation - Testing all systems and third-party vendors for Year 2000
compliance. The Company is currently in this phase of its plan. Testing
was successfully completed on mission critical systems as of December 10,
1998. Baseline, future date and user acceptance tests were performed at a
test site, using six critical dates, covering all applications used by
the Company. The Company will test third party systems during the first
quarter of 1999 to prove compliance. In the event that testing reveals
that the third party systems are not Year 2000 compliant, the Company
will either transfer to other systems that are Year 2000 compliant or
provide additional resources to resolve the Year 2000 issues. Third party
vendors were identified by software inventory and department interviews
conducted by the Year 2000 coordinator. Other parties whose Year 2000
compliance may effect the Company include the Federal Home Loan Bank of
Atlanta, brokerage firms, the Company's ATM network provider, and the
Company's pension plan administrator. These third parties have indicated
their compliance or intended compliance. Where it is possible to do so,
the Company has scheduled testing with these third parties. Where testing
is not possible, the Company will rely on certifications from vendors and
service providers. The responses from third party vendors are monitored
and tracked daily using a computer tracking system.
5. Implementation - Replacement or repair of non-compliant technology. As
the Company progresses through the validation phase, the Company expects
to determine necessary remedial actions and provide for their
implementation. The Company has already upgraded to a Year 2000 compliant
teller system and has verified the Year 2000 compliance of its computer
hardware and other equipment. The Company's plan provides for Year 2000
readiness to be completed by June 30, 1999.
The Company estimates its total cost to replace computer equipment, software
programs or other equipment that were not Year 2000 compliant to be
approximately $150,000, of which $85,000 has been incurred as of December 31,
1998. System maintenance or modification costs are charged to expense as
incurred, while the cost of new hardware, software or other equipment is
capitalized and amortized over their estimated useful lives. The Company does
not separately track the internal costs and time that its own employees spend on
Year 2000 issues, which are principally payroll costs.
Because the Company depends substantially on its computer systems and those of
third parties, the failure of these systems to be Year 2000 compliant could
cause substantial disruption of the Company's business and could have a material
adverse financial impact on the Company. Failure to resolve Year 2000 issues
presents the following risks to the Company:
1. The Company could lose customers to other financial institutions,
resulting in a loss of revenue, if the Company's in-house computer system
is unable to properly process customer transactions;
16
<PAGE>
2. Governmental agencies, such as the Federal Home Loan Bank, and
correspondent institutions could fail to provide funds to the Company,
which could materially impair the Company's liquidity and affect the
Company's ability to fund loans, and deposit withdrawals;
3. Concern on the part of depositors that Year 2000 issues could impair
access to their deposit account balances could result in the Company
experiencing deposit outflows prior to December 31, 1999; and
4. The Company could incur increased personnel costs if additional staff is
required to perform functions that inoperative systems would have
otherwise performed. Management believes that it is not possible to
estimate the potential lost revenue due to the Year 2000 issue, as the
extent and longevity of any potential problem cannot be predicted.
The Company is currently in the process of formulating and testing a company-
wide contingency plan, covering all possible scenarios. The contingency plan is
expected to be completed by March 31, 1999, and contingency testing is expected
to begin by March 1, 1999, and be completed by June 30, 1999. Since all mission
critical systems have passed testing, the worst case scenario would be the loss
of power to the building housing the mainframe computer. The leasing of a
generator to restore power is under consideration.
Because substantially the Company's entire loan portfolio consists of loans to
individuals rather than commercial enterprises, management believes that Year
2000 issues will not impair the ability of the Company's borrowers to repay
their debt. An evaluation of the Company's commercial portfolio has been made
and a determination made that in the event of losses from the commercial loans
that could possibly be affected by Year 2000 failure, it would not have a
significant impact on the Company's financial condition at this particular time.
Each commercial borrower must complete a Y2K work sheet and business plan
referencing their Year 2000 plan.
Currently, the Company has not contracted with an independent or outside firm to
conduct an analysis of its Year 2000 exposure. The Company's Year 2000 risk
analysis and exposure are currently being assessed by the internal auditor and
Year 2000 coordinator.
There can be no assurances that the Company's Year 2000 plan will effectively
address the Year 2000 issue, that the Company's estimates of the timing and
costs of completing the plan will ultimately be accurate or that the impact of
any failure of the Company or its third-party vendors and service providers to
be Year 2000 compliant will not have a material adverse effect on the Company's
business, financial condition or results of operations.
ITEM 3 - Market Risk Disclosure
- - -------------------------------
There have been no material changes to the market risk information set forth
under "Management's Discussion and Analysis of Financial Condition and Results
of Operations -- Market Risk and Asset Liability Management" in the Company's
Annual Report dated September 30, 1998.
17
<PAGE>
PART II
Item 1. Legal Proceedings
- - ------- -----------------
The Company is not a party to any legal proceedings at this time. The Savings
Bank from time to time and currently is involved as plaintiff or defendant in
various legal actions incident to its business. These actions are not believed
to be material, either individually or collectively, to the consolidated
financial condition or results of operations of the Savings Bank.
Item 2. Changes in Securities and Use of Proceeds
- - ------- -----------------------------------------
None
Item 3. Defaults Upon Senior Securities
- - ------- -------------------------------
Not applicable
Item 4. Submission of Matters to a Vote of Security Holders
- - ------- ---------------------------------------------------
None
Item 5. Other Information
- - --------- -----------------
None
Item 6. Exhibits and Reports on Form 8-K
- - ------- --------------------------------
A. Exhibits:
---------
3(a) Certificate of Incorporation of the Company *
3(b) Bylaws of the Company *
10(a) Employment Agreement with Robert W. Orr **
10(b) Employment Agreement with Thomas C. Hall **
10(c) Employment Agreement with Barry C. Visioli **
10(d) Company's 1998 Stock Option Plan ***
10(e) Company's Management Recognition and
Development Plan ***
27 Financial Data Schedule
* Incorporated by reference to the Company's Registration
Statement on Form S-1, as amended (File No. 333-42517).
** Incorporated by reference to the Company's Quarterly
Report on Form 10-Q for the quarter ended March 31, 1998.
*** Incorporated by reference to the Company's Definitive Proxy
Statement dated December 18, 1998.
B. Reports on Form 8-K
-------------------
The Company did not file any reports on Form 8-K during the quarter ended
December 31, 1998.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this amended report to be signed on its behalf by the
undersigned thereunto duly authorized.
SouthBanc Shares, Inc.
Date: /s/ Robert W. Orr
---------------------------------
February 12, 1999 Robert W. Orr
President and Managing Officer
(Duly Authorized Representative)
Date: /s/ Thomas C. Hall
---------------------------------
February 12, 1999 Thomas C. Hall
Chief Financial Officer
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<LEGEND>
This schedule contains financial information extracted from the consolidated
financial statements of SouthBanc Shares, Inc. for the three months ended
December 31, 1998, and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<CASH> $6,505,901
<INT-BEARING-DEPOSITS> 7,287,460
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 95,862,782
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 234,387,263
<ALLOWANCE> 2,446,824
<TOTAL-ASSETS> 370,656,713
<DEPOSITS> 217,378,595
<SHORT-TERM> 78,173,992
<LIABILITIES-OTHER> 4,375,018
<LONG-TERM> 10,000,000
0
0
<COMMON> 42,627,488
<OTHER-SE> 18,101,620
<TOTAL-LIABILITIES-AND-EQUITY> 370,656,713
<INTEREST-LOAN> 4,713,164
<INTEREST-INVEST> 1,805,983
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 6,519,147
<INTEREST-DEPOSIT> 2,257,972
<INTEREST-EXPENSE> 3,333,050
<INTEREST-INCOME-NET> 3,186,097
<LOAN-LOSSES> 80,000
<SECURITIES-GAINS> 292,035
<EXPENSE-OTHER> 2,118,907
<INCOME-PRETAX> 2,491,714
<INCOME-PRE-EXTRAORDINARY> 2,491,714
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,621,924
<EPS-PRIMARY> 0.40
<EPS-DILUTED> 0.39
<YIELD-ACTUAL> 7.49
<LOANS-NON> 1,201,651
<LOANS-PAST> 0
<LOANS-TROUBLED> 169,901
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 2,374,044
<CHARGE-OFFS> 33,318
<RECOVERIES> 11,099
<ALLOWANCE-CLOSE> 2,446,824
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 2,446,824
</TABLE>
