<PAGE> 1
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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 MARCH 31, 2000
COMMISSION FILE NUMBER: 0-29598
------------------------
MIDWEST BANC HOLDINGS, INC.
(Exact name of Registrant as specified in its charter.)
<TABLE>
<S> <C>
DELAWARE 36-3252484
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
501 W. NORTH AVE., MELROSE PARK, IL 60160
(Address of principal executive
offices) (ZIP code)
</TABLE>
(708) 865-1053
(Registrant's telephone number, including area code)
Indicate by checkmark 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 close of the period covered by this report.
<TABLE>
<S> <C>
CLASS OUTSTANDING MAY 3, 2000
Common, par value $.01 10,750,792
</TABLE>
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MIDWEST BANC HOLDINGS, INC.
FORM 10-Q
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE NUMBER
-----------
<S> <C> <C>
PART I
Item 1. Financial Statements........................................ 3
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. 9
Item 3. Quantitative and Qualitative Disclosures about Market
Risk...................................................... 17
PART II
Item 1. Legal Proceedings........................................... 19
Item 2. Changes in Securities and Use of Proceeds................... 19
Item 3. Defaults Upon Senior Securities............................. 19
Item 4. Submission of Matters to a Vote of Security Holders......... 19
Item 5. Other Information........................................... 19
Item 6. Exhibits and Reports on Form 8-K............................ 19
Form 10-Q Signature Page.............................................. 20
</TABLE>
2
<PAGE> 3
PART I -- FINANCIAL INFORMATION
MIDWEST BANC HOLDINGS, INC.
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
2000 1999
--------- ------------
<S> <C> <C>
ASSETS
Cash and cash equivalents................................... $ 35,972 $ 36,151
Securities available-for-sale............................... 532,422 503,442
Securities held-to-maturity................................. 29,576 29,626
Loans....................................................... 690,880 646,455
Allowance for loan losses................................... (7,444) (7,567)
---------- ----------
Net loans.............................................. 683,436 638,888
Premises and equipment, net................................. 22,599 21,668
Other real estate........................................... 2,972 2,651
Goodwill.................................................... 4,237 4,426
Other assets................................................ 20,681 19,610
---------- ----------
Total assets........................................... $1,331,895 $1,256,462
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Deposits
Noninterest-bearing....................................... $ 111,868 $ 118,553
Interest-bearing.......................................... 874,045 852,401
---------- ----------
Total deposits......................................... 985,913 970,954
Securities sold under agreements to repurchase and federal
funds purchased........................................... 46,607 18,925
Advances from the Federal Home Loan Bank.................... 210,000 169,500
Notes payable and other borrowings.......................... 12,400 7,650
Other liabilities........................................... 8,428 21,739
---------- ----------
Total liabilities...................................... 1,263,348 1,188,768
STOCKHOLDERS' EQUITY
Preferred stock............................................. -- --
Common stock................................................ 114 114
Surplus..................................................... 29,704 29,704
Retained earnings........................................... 58,901 56,848
Accumulated other comprehensive loss........................ (11,414) (11,942)
Treasury stock, at cost (612,000 shares in 2000 and 494,346
shares in 1999)........................................... (8,758) (7,030)
---------- ----------
Total stockholders' equity............................. 68,547 67,694
---------- ----------
Total liabilities and stockholders' equity............. $1,331,895 $1,256,462
========== ==========
</TABLE>
3
<PAGE> 4
MIDWEST BANC HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
THREE MONTHS ENDED MARCH 31, 2000 AND 1999
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
2000 1999
---- ----
<S> <C> <C>
INTEREST INCOME
Loans....................................................... $15,325 $11,639
Securities
Taxable................................................... 8,955 6,847
Exempt from federal income taxes.......................... 449 340
Trading account securities.................................. 3 7
Federal funds sold and other................................ 92 78
------- -------
Total interest income.................................. 24,824 18,911
INTEREST EXPENSE
Deposits.................................................... 10,338 8,725
Advances from the Federal Home Loan Bank.................... 2,607 1,268
Notes payable and other borrowings.......................... 670 214
------- -------
Total interest expense................................. 13,615 10,207
------- -------
Net interest income......................................... 11,209 8,704
Provision for loan losses................................... 355 474
------- -------
Net interest income after provision for loan losses......... 10,854 8,230
OTHER INCOME
Service charges on deposits................................. 797 763
Net gains on securities transactions........................ 52 192
Net trading account profits................................. 135 14
Mortgage loan origination fees.............................. 51 185
Trust income................................................ 165 159
Insurance and brokerage commissions......................... 191 130
Other income................................................ 186 457
------- -------
Total other income..................................... 1,577 1,900
OTHER EXPENSE
Salaries and employee benefits.............................. 4,087 3,609
Occupancy expense, net...................................... 1,186 1,055
Professional services....................................... 443 377
Marketing................................................... 248 166
Other expenses.............................................. 1,246 1,002
------- -------
Total other expenses................................... 7,210 6,209
------- -------
Income before income taxes.................................. 5,221 3,921
Provision for income taxes.................................. 1,818 1,399
------- -------
NET INCOME.................................................. $ 3,403 $ 2,522
======= =======
Basic earnings per share.................................... $ 0.31 $ 0.23
======= =======
Diluted earnings per share.................................. $ 0.31 $ 0.23
======= =======
</TABLE>
4
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MIDWEST BANC HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (UNAUDITED)
THREE MONTHS ENDED MARCH 31, 2000 AND 1999
<TABLE>
<CAPTION>
ACCUMULATED
OTHER TOTAL
COMMON RETAINED COMPREHENSIVE TREASURY STOCKHOLDERS'
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA) STOCK SURPLUS EARNINGS LOSS STOCK EQUITY
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance, January 1, 1999........................ $114 $29,704 $48,795 $ (522) $ (462) $77,629
Cash dividends declared ($0.075 per share)...... -- -- (829) -- -- (829)
Purchase of 181,596 shares of treasury stock.... -- -- (2,910) (2,910)
Comprehensive Income
Net income...................................... -- -- 2,522 -- -- 2,522
Net decrease in fair value of securities
classified as available-for-sale, net of
income taxes and reclassification
adjustments................................. -- -- -- (564) -- (564)
-------
Total comprehensive income................ 1,958
---- ------- ------- -------- ------- -------
Balance, March 31, 1999......................... $114 $29,704 $50,488 $ (1,086) $(3,372) $75,848
==== ======= ======= ======== ======= =======
Balance, January 1, 2000........................ $114 $29,704 $56,848 $(11,942) $(7,030) $67,694
Cash dividends declared ($0.125 per share)...... -- -- (1,350) -- -- (1,350)
Purchase of 117,654 shares of treasury stock.... -- -- -- -- (1,728) (1,728)
Comprehensive Income
Net income.................................... -- -- 3,403 -- -- 3,403
Net decrease in fair value of securities
classified as available-for-sale, net of
income taxes and reclassification
adjustments................................. -- -- -- 528 -- 528
-------
Total comprehensive income................ 3,931
---- ------- ------- -------- ------- -------
Balance, March 31, 2000......................... $114 $29,704 $58,901 $(11,414) $(8,758) $68,547
==== ======= ======= ======== ======= =======
</TABLE>
5
<PAGE> 6
MIDWEST BANC HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
THREE MONTHS ENDED MARCH 31, 2000 AND 1999
(IN THOUSANDS)
<TABLE>
<CAPTION>
2000 1999
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income................................................ $ 3,403 $ 2,522
Adjustments to reconcile net income to net cash provided
by operating activities
Depreciation......................................... 650 547
Provision for loan losses............................ 355 474
Proceeds from sales of trading account securities,
net................................................. 135 (1,944)
Net gain on sale of securities....................... (52) (192)
Net trading account profits.......................... (135) (14)
Net proceeds from sales of real estate loans
originated for sale................................. (182) 1,900
Gain on sale of other real estate.................... -- (300)
Increase in other assets............................. (952) (207)
Increase in other liabilities........................ 1,123 1,735
-------- ---------
Net cash provided by operating activities......... 4,345 4,521
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sales and maturities of securities
available-for-sale..................................... 13,538 79,086
Principal payments on securities available-for-sale....... 12,421 37,788
Purchase of securities available-for-sale................. (68,545) (118,715)
Purchase of securities held-to-maturity................... (870) (1,128)
Maturities of securities held-to-maturity................. 770 100
Net increase in loans..................................... (45,060) (18,375)
Proceeds from sale of other real estate................... -- 1,019
Property and equipment expenditures, net.................. (1,581) (716)
-------- ---------
Net cash used in investing activities............. (89,327) (20,941)
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in deposits.................................. 14,959 26,073
Net bank borrowings....................................... 45,250 (900)
Dividends paid............................................ (1,360) (829)
Securities sold under agreements to repurchase and federal
funds purchased........................................ 27,682 (6,825)
Treasury stock purchases.................................. (1,728) (2,910)
-------- ---------
Net cash provided by financing activities......... 84,803 14,609
-------- ---------
Decrease in cash and cash equivalents....................... (179) (1,811)
Cash and cash equivalents at beginning of period............ 36,151 40,253
-------- ---------
Cash and cash equivalents at end of period.................. $ 35,972 $ 38,442
======== =========
</TABLE>
6
<PAGE> 7
NOTE 1 -- BASIS OF PRESENTATION
The financial information of Midwest Banc Holdings, Inc. (the "Company")
included herein is unaudited; however, such information reflects all adjustments
(consisting only of normal recurring adjustments) which are, in the opinion of
management, necessary for a fair presentation for the interim periods. The
financial statements have been prepared in accordance with generally accepted
accounting principles for interim financial information and with the
instructions to Form 10-Q and Article 10 of Regulations S-X.
The annualized results of operations for the three months ended March 31,
2000 are not necessarily indicative of the results expected for the full year
ending December 31, 2000.
NOTE 2 -- EARNINGS PER SHARE
For purposes of share calculations, the Company had 10,767,392 shares of
common stock outstanding at March 31, 2000, 10,885,046 shares outstanding at
December 31, 1999, and 11,097,796 shares outstanding at March 31, 1999. Basic
earnings per share for the three months ended March 31, 2000 and 1999 were
computed by dividing net income by the weighted average number of shares
outstanding. Diluted earnings per share for the three months ended March 31,
2000 and 1999 were computed by dividing net income by the weighted average
number of shares outstanding, adjusted for the dilutive effect of the stock
options. Computations for basic and diluted earnings per share are provided
below:
<TABLE>
<CAPTION>
IN THOUSANDS: 2000 YTD 1999 YTD
------------- -------- --------
<S> <C> <C>
Basic
Net Income................................................ $ 3,403 $ 2,522
======= =======
Weighted average common shares outstanding................ 10,839 11,180
======= =======
Basic earnings per common share........................... $ 0.31 $ 0.23
======= =======
Diluted
Net income................................................ $ 3,403 $ 2,522
======= =======
Weighted average common shares outstanding................ 10,839 11,180
Dilutive effect of stock options.......................... 36 41
------- -------
Dilutive average common shares............................ 10,875 11,221
Diluted earnings per common share......................... $ 0.31 $ 0.23
======= =======
</TABLE>
Options to purchase 141,500 shares at $17.88, 47,488 shares at $15.88 and
65,044 shares at $16.13 were outstanding at March 31, 2000. These options were
not included in the computation of diluted earnings per share because the
options' exercise price was greater than the average market price of the common
stock and were, therefore, antidilutive.
NOTE 3 -- STOCK OPTIONS
During the first quarter of 2000, 100,276 options were granted at an
exercise price of $13.63. There were no options exercised. The total stock
options outstanding were 465,308 at varying exercise prices ranging between
$8.13 and $17.88 with expiration dates between 2006 and 2010.
NOTE 4 -- NEW ACCOUNTING STANDARDS
Beginning January 1, 2001, Statement on Financial Accounting Standards No.
133 (the "Statement") on derivatives will require all derivatives to be recorded
at fair value in the balance sheet. Unless designated as hedges, changes in
these fair values will be recorded in the income statement. Fair value changes
involving hedges will generally be recorded by offsetting gains and losses on
the hedge and on the hedged item, even if the fair value of the hedged item is
not otherwise recorded. Since the Company has no significant derivative
instruments or hedging activities, adoption of the Statement is not expected to
have a material effect on the Company's financial statements, but the effect
will depend on derivative holdings when this standard applies.
7
<PAGE> 8
NOTE 5 -- RECENT REGULATORY DEVELOPMENTS
On November 12, 1999, the Gramm-Leach-Bliley Act (the "GLB Act") was
enacted. The GLB Act amended or repealed certain provisions of the
Glass-Steagall Act and other legislation that restricted the ability of bank
holding companies, securities firms and insurance companies from affiliating
with one another. Further, the GLB Act expanded the kinds of activities in which
bank holding companies may engage by allowing well managed and well capitalized
bank holding companies to be designated as "financial holding companies". In
addition, the GLB Act contains provisions intended to safeguard consumer
financial information in the hands of financial service providers. Among other
things, it will require such entities to disclose their privacy policies to
their customers and allow customers to "opt out" of having their financial
service providers disclose their confidential financial information to third
parties, subject to certain exceptions. As of March 31, 2000, the federal
regulatory agencies have issued certain final regulations under the GLB Act,
although other regulations remain in draft form. However, it is not anticipated
that the GLB Act will have a material adverse effect on the operations or
prospects of the Company and its subsidiaries.
ITEM 2 -- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS -- THREE MONTHS ENDED MARCH 31, 2000 AND 1999
Consolidated net income for the first quarter of 2000 was $3.4 million or $
0.31 cents per basic and diluted share ("per share"), a 34.9% increase compared
to $2.5 million or $ 0.23 cents per basic and diluted share earned in the first
quarter of 1999. Basic and diluted earnings per share for the three months ended
March 31, 2000 were 34.8% higher than for the comparable period in 1999.
Net interest income increased 28.8% to $11.2 million in the first quarter
of 2000 compared to $8.7 million in the first quarter of 1999. Excluding gains
on the sale of securities available-for-sale and net trading account profits,
other income decreased 17.9% to $1.4 million for the first quarter of 2000 as
compared to the similar period in 1999. Other expenses increased 16.1% to $7.2
million in the first quarter of 2000 compared to the similar period in 1999.
NET INTEREST INCOME
Net interest income was $11.2 million and $8.7 million during the three
months ended March 31, 2000 and 1999, respectively, an increase of 28.8%. The
Company's net interest margin (tax equivalent net interest income as a
percentage of earning assets) was 3.80% for the three months ended March 31,
2000 and 3.48% for the same period a year earlier. Net interest income increased
due to the growth in average earning assets from $1.03 billion during the first
quarter of 1999 to $1.21 billion during the first quarter of 2000.
The increase in the net interest margin for the first quarter of 2000 was
due to an increase in loans as a percentage of average earning assets and higher
loan and securities yields, partially offset by an increase in average deposit
and borrowing rates. However, if interest rates continue to increase, the
repricing of existing certificates of deposit at maturity may result in lower
net interest margins during the rest of 2000.
Loans represented 55.2% of average earning assets during the first quarter
of 2000 compared to 51.9% during the first quarter of 1999. The average loan
yield was 9.20% during the first quarter of 2000, an increase of 0.48% from the
average yield of 8.72% during the first quarter of 1999. Yields on investment
securities were 7.18% for the first quarter of 2000 compared to 6.10% for the
comparable period in 1999. Overall, the yield on earning assets was 8.28% for
the three months ended March 31, 2000 compared to 7.44% for the first quarter in
1999. The improvement in yield was due to increases in the Prime rate during the
past twelve months and a change in the earning asset mix with loans representing
a greater percentage of earning assets during the first quarter of 2000,
compared to the similar period in 1999. Based upon current economic conditions
and interest rate trends, it is anticipated that earning asset yields will
continue to increase during the second and third quarters of 2000.
Average rates on deposits increased .28% from 4.52% in the first quarter of
1999 to 4.80% for the three months ended March 31, 2000. Average rates on
borrowings were 5.48% and 5.08% for the first quarters of 2000 and 1999,
respectively. Based upon prevailing interest rates, average rates on deposits
are anticipated to continue to increase throughout the year.
8
<PAGE> 9
ITEM 2 -- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS -- (CONTINUED)
<TABLE>
<CAPTION>
INTEREST BEARING ASSETS AND LIABILITIES
FOR THE QUARTER ENDED MARCH 31,
--------------------------------------------------------------------
2000 1999
-------------------------------- --------------------------------
AVERAGE AVERAGE AVERAGE AVERAGE
BALANCE INTEREST RATE BALANCE INTEREST RATE
------- -------- ------- ------- -------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
INTEREST-EARNING ASSETS
Federal Funds Sold...................... 6,437 92 5.72% 6,424 78 4.86%
Securities Tax.......................... 497,519 8,958 7.20% 463,472 6,921 5.97%
Securities T/E.......................... 39,735 690 6.95% 23,956 515 8.60%
Commercial Loans........................ 188,897 4,356 9.22% 154,686 3,269 8.45%
Commercial R/E.......................... 321,642 7,599 9.45% 237,803 5,284 8.89%
Agriculture............................. 42,118 899 8.54% 32,770 698 8.52%
Consumer R/E............................ 96,424 2,128 8.83% 93,097 1,908 8.20%
Consumer Install........................ 20,182 411 8.15% 15,362 480 12.50%
--------- ------ ---- --------- ------ -----
1,212,954 25,133 8.28% 1,027,570 19,153 7.44%
========= ====== ==== ========= ====== =====
INTEREST-BEARING LIABILITIES
Interest Bearing DD..................... 108,234 882 3.26% 90,708 625 2.76%
MMDA/Savings............................ 245,048 2,564 4.19% 207,124 1,794 3.46%
CD's < 100.............................. 385,381 5,206 5.40% 383,052 5,164 5.39%
CD > 100................................ 67,998 938 5.52% 65,037 830 5.10%
Public Funds............................ 55,181 748 5.42% 26,224 312 4.76%
FF and Repos............................ 33,353 460 5.52% 11,005 132 4.80%
FHLB Advances........................... 195,022 2,607 5.35% 101,000 1,268 5.02%
Notes and mortgage...................... 11,064 210 7.59% 4,918 83 6.75%
--------- ------ ---- --------- ------ -----
1,101,281 13,615 4.96% 889,068 10,208 4.60%
========= ====== ==== ========= ====== =====
Net Interest/Spread..................... 11,518 3.32% 8,945 2.84%
====== ==== ====== =====
Margin.................................. 3.80% 3.48%
==== =====
</TABLE>
9
<PAGE> 10
ITEM 2 -- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS -- (CONTINUED)
<TABLE>
<CAPTION>
FOR THE QUARTER ENDED MARCH 31,
2000 COMPARED TO 1999
--------------------------------
CHANGE DUE TO:
NET VOLUME RATE
--- -------------- ----
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
INTEREST-EARNING ASSETS
Federal Funds Sold.......................................... 14 -- 14
Securities Tax.............................................. 2,037 536 1,501
Securities T/E.............................................. 175 289 (114)
Commercial Loans............................................ 1,087 770 317
Commercial R/E.............................................. 2,315 1,963 352
Agriculture................................................. 201 200 1
Consumer R/E................................................ 220 70 150
Consumer Install............................................ (69) 126 (195)
----- ----- -----
5,980 3,954 2,026
===== ===== =====
INTEREST-BEARING LIABILITIES
Interest Bearing DD......................................... 257 132 125
MMDA/Savings................................................ 770 360 410
CD's<100.................................................... 42 31 11
CD>100...................................................... 108 39 69
Public Funds................................................ 436 387 49
FF and Repos................................................ 328 305 23
FHLB Advances............................................... 1,339 1,252 87
Notes and mortgage.......................................... 127 115 12
----- ----- -----
3,407 2,621 786
===== ===== =====
2,573 1,333 1,240
===== ===== =====
</TABLE>
PROVISION FOR LOAN LOSSES
The Company's provision for loan losses was $355,000 for the first quarter
of 2000 compared to $474,000 for the similar period in 1999. This decrease was
primarily due to improvements in loan portfolio quality and a decline in
non-performing assets during the first quarter of 2000. The allowance for loan
losses as a percentage of total loans was 1.08% as of March 31, 2000 and 1.17%
as of December 31, 1999.
OTHER INCOME
Other income, excluding gains on securities available-for-sale and net
trading account profits, was $1.4 million for the three months ended March 31,
2000 and $1.7 million for the same period in 1999. The most significant factor
in the decrease in other income was a $300,000 gain on the sale of other real
estate, which was completed as part of a loan workout during the first quarter
of 1999. Excluding the sale of other real estate, other income was stable at
$1.4 million for both the three months ended March 31, 2000 and 1999,
respectively.
Service charges and fees increased 4.5% or $34,000 from $763,000 in the
first quarter of 1999 to $797,000 in the first quarter of 2000. Service charges
and fees include service charges on deposit accounts which are expected to
increase with future deposit growth.
Commissions on insurance and investment brokerage activities increased
$61,000 to $191,000 for the quarter ended March 31, 2000 compared to $130,000
for the quarter ended March 31, 1999. The increase in
10
<PAGE> 11
ITEM 2 -- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS -- (CONTINUED)
fees was primarily due to insurance activities of Porter Insurance Agency, Inc.,
and higher fees generated on investment brokerage activities.
Mortgage banking fee income decreased to $51,000 during the first quarter
of 2000 compared to $185,000 during the first quarter of 1999. Mortgage banking
income is sensitive to interest rate levels, and the increase in rates during
1999 reduced demand for refinancing existing mortgages.
Sales of securities available-for-sale resulted in a net gain of $52,000 in
the first quarter of 2000 compared to a net gain of $192,000 for the comparable
period in 1999. Securities available-for-sale are held for indefinite periods of
time and include securities that will be used as a part of the Company's
asset/liability management strategy. Such securities may be sold in response to
changes in interest rates, liquidity needs or significant prepayment risk. Net
trading account profits were $135,000 during the first quarter of 2000 compared
to a gain of $14,000 for the comparable period in 1999.
OTHER EXPENSES
Total other expenses increased 16.1% or $1.0 million from $6.2 million
during the three months ended March 31, 1999 to $7.2 million during the first
quarter of 2000.
Salary and benefit expenses increased 13.2% or $478,000 from $3.6 million
during the three months ended March 31, 1999 to $4.1 million for the first
quarter of 2000. The increase in the full time equivalent number of employees
(323 at March 31, 1999 and 337 at March 31, 2000), as well as salaries and
benefits, was primarily due to the initial staffing and related compensation
costs of a new banking center in Roselle, Illinois opened in February 2000, as
well as staffing costs for banking centers in McHenry County which opened in May
1999 and Aledo in Mercer County acquired in December 1999.
Based upon past experience, new banking centers may require 12-18 months to
achieve breakeven levels due to the substantial initial costs for staffing,
promotion and operations incurred during the first several months. As a result,
other expenses during the first quarter 2000 reflects a significant portion of
these expenses. It is anticipated that other expenses will not increase
materially on a quarterly basis during the rest of 2000.
Occupancy expenses increased $131,000 or 12.4% to $1.2 million during the
first quarter of 2000 compared to $1.1 million in the first quarter of 1999.
Increased depreciation and equipment expense related to new banking centers, as
well as the construction and opening of a new headquarters for Midwest Bank of
Western Illinois were primary factors in the higher occupancy expense levels in
2000.
Expenses, other than salary and employee benefits and occupancy, increased
$393,000 or 25.4% from $1.5 million in the first quarter of 1999 to $1.9 million
in the first quarter of 2000. The increase in expenses was due primarily to
start-up promotional expenses for new banking locations, outsourcing
arrangements and general operating costs. In addition, other expenses in the
first quarter of 2000 included an expense of $110,000 for the remaining
undepreciated amount related to the original headquarters of Midwest Bank of
Western Illinois donated to Monmouth, Illinois as a new City Hall in March 2000.
INCOME TAXES
The Company recorded income tax expense of $1.8 million and $1.4 million
for the quarters ended March 31, 2000 and 1999, respectively. The increase in
income taxes was primarily due to the growth in pre-tax income in 2000 compared
to 1999.
11
<PAGE> 12
ITEM 2 -- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS -- (CONTINUED)
FINANCIAL CONDITION
LOANS
Total loans increased $44.4 million or 6.9% from $646.5 million at December
31, 1999 to $690.9 million as of March 31, 2000. Commercial loans decreased $4.3
million or 2.3% from $187.8 million as of December 31, 1999 to $183.5 million as
of March 31, 2000. Commercial real estate loans increased 15.1% or $45.4 million
to $345.4 million as of March 31, 2000 from $300.1 million as of December 31,
1999. Agricultural loans increased 6.5% or $2.8 million from $41.7 million at
December 31, 1999 to $44.5 million as of March 31, 2000.
Residential real estate loans increased $850,000 or 0.8% to $104.5 million
as of March 31, 2000 from $103.7 million as of December 31, 1999. Consumer loans
remained at $13.9 million as of March 31, 2000.
Residential mortgage loans have previously been originated by the Company's
mortgage banking subsidiary, Midwest One Mortgage Services, Inc., ("Midwest One
Mortgage"). As of September 15, 1999, the operations and activities of Midwest
One Mortgage were transferred to the Company's bank subsidiaries which will now
handle all mortgage services. Most residential loans are sold in the secondary
market. At any point in time, loans will be at various stages of the mortgage
banking process. Included as part of residential real estate loans are loans
held for sale which were $449,000 as of December 31, 1999 and $631,000 at March
31, 2000. The carrying value of these loans approximated their market value at
that time.
Based upon the Company's business strategy to increase loans, it is
anticipated that commercial and commercial real estate loans will continue to
represent an increasing percentage of earning assets during the rest of 2000.
ALLOWANCE FOR LOAN LOSSES
An allowance for loan losses has been established to provide for those
loans that may not be repaid in their entirety. The allowance is maintained at a
level considered by management to be adequate to provide for potential loan
losses. The allowance is increased by provisions charged to earnings and is
reduced by charge-offs, net of recoveries. The provision for loan losses is
based upon past loan loss experience and management's evaluation of the loan
portfolio under current economic conditions. Loans are charged to the allowance
for loan losses when, and to the extent, they are deemed by management to be
uncollectible. The allowance for loan losses is composed of allocations for
specific loans and an unallocated portion for all other loans.
Following is a summary of changes in the allowance for loan losses for the
three months ended March 31:
<TABLE>
<CAPTION>
2000 1999
---- ----
(IN THOUSANDS)
<S> <C> <C>
Balance, January 1........................................ $7,567 $6,576
Provision charged to operations........................... 355 474
Loans charged-off......................................... (505) (462)
Recoveries................................................ 27 21
------ ------
Balance, March 31....................................... $7,444 $6,609
====== ======
</TABLE>
On a quarterly basis, management of each of the subsidiary banks, and the
board of directors of the Company on a consolidated basis, meet to review the
adequacy of the allowance for loan losses. The Company maintains an internal
loan review function, which reviews commercial and consumer credits with the
individual loan officers and assigns a risk rating grade. The grading system is
in compliance with regulatory classifications, and the allowance is allocated to
the loans based upon regulatory grading, except in instances where there are
known differences (i.e. collateral value is minimal, etc.). Once the specific
portion of the allocation is calculated, management then calculates a percentage
of each category based upon the past five
12
<PAGE> 13
ITEM 2 -- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS -- (CONTINUED)
years of loan loss history. The unallocated portion of the allowance is
determined based upon current economic conditions, trends in the portfolio,
including delinquencies and impairments, as well as changes in the composition
of the portfolio.
The allowance for loan losses as a percentage of total loans was 1.08% as
of March 31, 2000 and 1.17% as of December 31, 1999. In management's judgment,
an adequate allowance for loan losses has been established.
NONACCRUAL AND NON-PERFORMING LOANS
Nonaccrual loans decreased to $1.2 million as of March 31, 2000 from $1.6
million as of December 31, 1999. Most of the nonaccrual loans are related to
several commercial loans which are being addressed by specific workout plans at
this time.
Non-performing loans include nonaccrual loans and accruing loans which are
ninety days or more delinquent. Typically, these loans have adequate collateral
protection or personal guaranties to provide a source of repayment to the bank.
Non-performing loans were $2.1 million as of March 31, 2000 compared to $2.4
million at December 31, 1999. Non-performing loans were .31% and .37%, of total
loans as of March 31, 2000 and December 31, 1999, respectively. Non-performing
loans were .16% and .19% of total assets as of March 31, 2000 and December 31,
1999, respectively.
Other real estate owned was $3.0 million and $2.7 million at March 31, 2000
and December 31, 1999, respectively. Other real estate owned was .22% and .21%
of total assets as of March 31, 2000 and December 31, 1999, respectively. It is
anticipated that other real estate owned will decrease in amount and as a
percentage of total assets during the second quarter of 2000 due to the sale of
specific properties.
SECURITIES
Securities are classified as available-for-sale if they may be sold as part
of the Company's asset/liability management strategy in response to changes in
interest rates, liquidity needs, or significant prepayment risk. Securities
available-for-sale are carried at fair value, with related unrealized net gains
or losses, net of deferred income taxes, reported in accumulated other
comprehensive income. As of March 31, 2000, net unrealized losses on securities
available-for-sale were $11.4 million compared to $11.9 million at December 31,
1999. The decrease in net unrealized losses on securities available-for-sale
resulted in a $528,000 increase in equity.
Securities available-for-sale increased 5.8% to $532.4 million as of March
31, 2000, from $503.4 million as of December 31, 1999. U.S. Treasury and agency
securities decreased $980,000 from $1.9 million as of December 31 1999 to
$925,000 at March 31, 2000. Securities available-for-sale, representing
obligations of states and political subdivisions, increased $5.2 million to
$13.5 million at March 31, 2000. U.S. government agency mortgage-backed
securities and collateralized mortgage obligations increased 1.4% or $6.8
million from $475.1 million as of December 31, 1999 to $481.9 million as of
March 31, 2000. Equity securities were $36.1 million or 6.42% of securities at
March 31, 2000. Equity securities included capital securities of bond-rated or
credit equivalent community banks, Federal Home Loan Bank and Federal Reserve
Bank stock as of March 31, 2000.
Securities held-to-maturity were $29.6 million on an amortized cost basis
at both March 31, 2000 and December 31, 1999. These securities were municipal
bonds issued primarily by governmental agencies in the communities served by the
Company and its subsidiary banks.
No trading account securities were outstanding at March 31, 2000 or
December 31, 1999.
DEPOSITS AND BORROWED FUNDS
Total deposits of $985.9 million as of March 31, 2000 represented an
increase of $15.0 million or 1.5% from $971.0 million as of December 31, 1999.
Non-interest-bearing deposits were $111.9 million as of
13
<PAGE> 14
ITEM 2 -- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS -- (CONTINUED)
DEPOSITS AND BORROWED FUNDS -- (CONTINUED)
March 31, 2000, approximately $6.7 million lower than the $118.6 million in
non-interest-bearing deposits as of December 31, 1999. Over the same period,
interest-bearing deposits increased 2.5% or $21.6 million. The higher level of
interest-bearing deposits was primarily due to a $20.1 million increase in
certificates of deposits under $100,000.
The Company's membership in the Federal Home Loan Bank System gives it the
ability to borrow funds from the Federal Home Loan Bank of Chicago for short or
long-term purposes under a variety of programs. The loans were used to fund
growth and permit the bank subsidiaries to generally extend term maturities,
reduce funding costs and manage interest rate risk exposures more effectively.
Federal Home Loan Bank advances were $210 million and $169.5 million at
March 31, 2000 and December 31, 1999, respectively. The weighted average rate
for Federal Home Loan Bank advances was 5.35% during the three months ended
March 31, 2000 compared to 5.02% for the three months ended March 31, 1999.
Federal Home Loan Bank advances have a range of maturities between one and eight
years.
Borrowed funds at March 31, 2000 and December 31, 1999 are listed below:
<TABLE>
<CAPTION>
2000 1999
---- ----
(IN THOUSANDS)
<S> <C> <C>
Federal Home Loan Bank (FHLB) advances to bank
subsidiaries.............................................. $210,000 $169,500
Revolving line of credit to Midwest Banc Holdings, Inc.
($25,000,000 available)................................... 12,250 7,500
Mortgage payable............................................ 75 75
Note issued to acquire Porter Insurance Agency, Inc......... 75 75
-------- --------
Total notes payable.................................... $222,400 $177,150
======== ========
</TABLE>
The Company also utilizes securities sold under repurchase agreements as a
source of funds. Most local municipalities, and some other organizations, must
have funds insured or collateralized as a matter of their own policies.
Repurchase agreements provide a source of funds and do not increase the
Company's reserve requirement. Although the balance of repurchase agreements is
subject to variation, particularly seasonal variation, the account relationships
represented by these balances are principally local and have been maintained for
relatively long periods of time.
CAPITAL RESOURCES
Stockholders' equity increased $853,000 or 1.3% from $67.7 million at
December 31, 1999 to $68.5 million at March 31, 2000. First quarter earnings in
2000 were largely offset by dividends and amounts used to repurchase outstanding
common stock. In addition, the Company recorded a $528,000 decrease in
accumulated other comprehensive losses.
Under previously announced plans, the Company repurchased 117,654 shares of
common stock during the first quarter of 2000 at prevailing market prices. The
weighted average purchase price was $14.69 for stock repurchases in 2000. The
amount repurchased was approximately $1.7 million and represented less than 1.1%
of total shares outstanding and 2.5% of the total dollar amount of equity at
March 31, 2000.
The Company and its four subsidiary banks (the "Banks") are subject to
regulatory capital requirements administered by federal banking agencies.
Capital adequacy guidelines and prompt corrective action regulations involve
quantitative measures of assets, liabilities, and certain off-balance-sheet
items calculated under regulatory accounting practices. Capital amounts and
classifications are also subject to qualitative judgments by regulators about
components, risk weightings, and other factors, and the regulators can lower
14
<PAGE> 15
ITEM 2 -- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS -- (CONTINUED)
CAPITAL RESOURCES -- (CONTINUED)
classifications in certain areas. Failure to meet various capital requirements
may result in regulatory action that could have a direct material effect on the
financial statements.
The prompt corrective action regulations provide five classifications,
including well capitalized, adequately capitalized, undercapitalized,
significantly undercapitalized, and critically undercapitalized, although these
terms are not used to represent overall financial condition. If adequately
capitalized, regulatory approval is required to accept brokered deposits. If
undercapitalized, capital distributions are limited, as is asset growth and
expansion, and plans for capital restoration are required.
The Company and the Banks were categorized as well capitalized as of March
31, 2000. Management is not aware of any conditions or events since the most
recent regulatory notification that would change the Company's or the Banks'
categories.
Capital levels and minimum required levels (dollars in thousands):
<TABLE>
<CAPTION>
MINIMUM MINIMUM
REQUIRED REQUIRED TO
FOR CAPITAL BE WELL
ACTUAL ADEQUACY CAPITALIZED
--------------- --------------- ---------------
AS OF MARCH 31, 2000 (IN THOUSANDS) AMOUNT RATIO AMOUNT RATIO AMOUNT RATIO
----------------------------------- ------ ----- ------ ----- ------ -----
<S> <C> <C> <C> <C> <C> <C>
Total capital to risk weighted assets
Company...................................... $82,684 10.9% $60,809 8.0% $76,011 10.0%
Midwest Bank and Trust Company............... 41,818 12.1% 27,682 8.0% 34,602 10.0%
Midwest Bank................................. 19,743 11.5% 13,770 8.0% 17,212 10.0%
Midwest Bank of McHenry County............... 19,032 13.7% 11,094 8.0% 13,868 10.0%
Midwest Bank of Western Illinois............. 11,088 10.8% 8,198 8.0% 10,248 10.0%
Tier I capital to risk weighted assets
Company...................................... 75,239 9.9% 30,404 4.0% 45,606 6.0%
Midwest Bank and Trust Company............... 38,337 11.1% 13,841 4.0% 20,761 6.0%
Midwest Bank................................. 18,266 10.6% 6,885 4.0% 10,327 6.0%
Midwest Bank of McHenry County............... 17,630 12.7% 5,547 4.0% 8,321 6.0%
Midwest Bank of Western Illinois............. 10,004 9.8% 4,099 4.0% 6,149 6.0%
Tier I capital to average assets
Company...................................... 75,239 5.9% 51,345 4.0% 64,181 5.0%
Midwest Bank and Trust Company............... 38,337 6.8% 22,594 4.0% 28,242 5.0%
Midwest Bank................................. 18,266 6.8% 10,706 4.0% 13,383 5.0%
Midwest Bank of McHenry County............... 17,630 6.8% 10,336 4.0% 12,920 5.0%
Midwest Bank of Western Illinois............. 10,004 5.3% 7,541 4.0% 9,426 5.0%
</TABLE>
15
<PAGE> 16
ITEM 2 -- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS -- (CONTINUED)
CAPITAL RESOURCES -- (CONTINUED)
<TABLE>
<CAPTION>
MINIMUM MINIMUM
REQUIRED REQUIRED TO
FOR CAPITAL BE WELL
ACTUAL ADEQUACY CAPITALIZED
--------------- --------------- ---------------
AS OF DECEMBER 31, 1999 (IN THOUSANDS) AMOUNT RATIO AMOUNT RATIO AMOUNT RATIO
-------------------------------------- ------ ----- ------ ----- ------ -----
<S> <C> <C> <C> <C> <C> <C>
Total capital to risk weighted assets
Company...................................... $84,829 12.2% $55,643 8.0% $69,553 10.0%
Midwest Bank and Trust Company............... 41,080 13.0% 25,292 8.0% 31,615 10.0%
Midwest Bank................................. 17,851 11.4% 12,573 8.0% 15,716 10.0%
Midwest Bank of McHenry County............... 17,581 14.2% 9,921 8.0% 12,401 10.0%
Midwest Bank of Western Illinois............. 12,952 13.5% 7,670 8.0% 9,588 10.0%
Tier I capital to risk weighted assets
Company...................................... 77,263 11.1% $27,821 4.0% $41,732 6.0%
Midwest Bank and Trust Company............... 37,487 11.9% 12,646 4.0% 18,969 6.0%
Midwest Bank................................. 16,297 10.4% 6,286 4.0% 9,430 6.0%
Midwest Bank of McHenry County............... 16,217 13.1% 4,960 4.0% 7,441 6.0%
Midwest Bank of Western Illinois............. 11,897 12.4% 3,835 4.0% 5,753 6.0%
Tier I capital to average assets
Company...................................... 77,263 6.7% $49,166 4.0% $61,457 5.0%
Midwest Bank and Trust Company............... 37,487 6.7% 22,432 4.0% 28,039 5.0%
Midwest Bank................................. 16,297 6.5% 10,005 4.0% 12,506 5.0%
Midwest Bank of McHenry County............... 16,217 6.6% 9,867 4.0% 12,232 5.0%
Midwest Bank of Western Illinois............. 11,897 7.1% 6,689 4.0% 8,362 5.0%
</TABLE>
LIQUIDITY
Liquidity measures the ability of the Company to meet maturing obligations
and its existing commitments, to withstand fluctuations in deposit levels, to
fund its operations and to provide for customers' credit needs. The liquidity of
the Company principally depends on cash flows from operating activities,
investment in and maturity of assets, changes in balances of deposits and
borrowings, and its ability to borrow funds in the money or capital markets.
Net cash inflows provided by operations were $4.3 million for the three
months ended March 31, 2000 compared to $4.5 million a year earlier. Net cash
outflows from investing activities were $89.3 million in the first three months
of 2000 compared to a net cash outflow of $20.9 million a year earlier. Cash
inflows from financing activities for the three months ended March 31, 2000 were
$84.8 million compared to a net inflow of $14.6 million in 1999.
In the event of short-term liquidity needs, the Banks may purchase federal
funds from correspondent banks. In addition, the Company has established
repurchase agreements and brokered certificates of deposit arrangements with
various financial sources. The Company's membership in the Federal Home Loan
Bank System gives it the ability to borrow funds from the Federal Home Loan Bank
of Chicago for short or long-term purposes under a variety of programs.
Interest received net of interest paid was a principal source of operating
cash inflows for the three months ended March 31, 2000 and March 31, 1999,
respectively. Management of investing and financing activities and market
conditions determine the level and the stability of net interest cash flows.
Management's policy is to mitigate the impact of changes in market interest
rates to the extent possible so that balance sheet growth is the principal
determinant of growth in net interest cash flows.
16
<PAGE> 17
ITEM 3 -- QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
INTEREST RATE SENSITIVITY ANALYSIS
The Company's overall interest rate sensitivity is demonstrated by net
interest income analysis. Net interest income analysis measures the change in
net interest income in the event of hypothetical changes in interest rates. This
analysis assesses the risk of change in net interest income in the event of
sudden and sustained 1.0% to 2.0% increases and decreases in market interest
rates. The table below presents the Company's projected changes in net interest
income for the various rate shock levels at March 31, 2000.
<TABLE>
<CAPTION>
NET INTEREST INCOME
------------------------------
AMOUNT $ CHANGE % CHANGE
------ -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
- -200 bp..................................................... 43,693 1,575 3.74%
- -100 bp..................................................... 43,262 1,144 2.72
Base........................................................ 42,118 -- --
+100 bp..................................................... 40,819 (1,299) (3.08)
+200 bp..................................................... 39,366 (2,752) (6.53)
</TABLE>
As shown above, at March 31, 2000, the effect of an immediate 200 basis
point increase in interest rates would decrease the Company's net interest
income by 6.53% or $ 2.8 million. The effect of an immediate 200 basis point
reduction in rates would increase the Company's net interest income by 3.74% or
$1.6 million.
The projected changes in the Company's net interest income for the various
rate shock levels at March 31, 1999 were the following:
<TABLE>
<CAPTION>
NET INTEREST INCOME
------------------------------
AMOUNT $ CHANGE % CHANGE
------ -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
- -200 bp..................................................... 36,991 874 2.42%
- -100 bp..................................................... 36,634 517 1.43
Base........................................................ 36,117 -- --
+100 bp..................................................... 35,769 (348) (0.96)
+200 bp..................................................... 34,855 (1,262) (3.49)
</TABLE>
Changes in the mix of earning assets and interest-bearing liabilities
increased the Company's liability sensitivity during the past twelve months.
Computations of the prospective effects of hypothetical interest rate
changes are based on numerous assumptions, including relative levels of market
interest rates, loan prepayments and deposit decay rates, and should not be
relied upon as indicative of actual results. Actual values may differ from those
projections set forth above, should market conditions vary from assumptions used
in preparing the analyses. Further, the computations do not contemplate any
actions the Company may undertake in response to changes in interest rates.
17
<PAGE> 18
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES
LITIGATION REFORM ACT OF 1995
This report contains certain forward-looking statements within the meaning
of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. The Company intends such
forward-looking statements to be covered by the safe harbor provisions for
forward-looking statements contained in the Private Securities Litigation Reform
Act of 1995, and is including this statement for the purpose of invoking these
safe harbor provisions. Forward-looking statements, which are based on certain
assumptions and describe future plans, strategies, and expectations of the
Company, are generally identifiable by use of the words "believe," "expect,"
"intend," "anticipate," "estimate," "project," or similar expressions. The
Company's ability to predict results or the actual effect of future plans or
strategies is inherently uncertain. Important factors which could cause actual
events to differ from the company's expectations include, but are not limited
to, fluctuations in interest rates and loan and deposit pricing, which could
reduce the Company's net interest margins, asset valuations and expense
expectations; a deterioration in the economy or business conditions, either
nationally or in the Company's market areas that could increase credit-related
losses and expenses; increases in defaults by borrowers and other loan
delinquencies resulting in increases in the Company's provision for loan losses
and related expenses; higher than anticipated costs related to the Company's new
banking centers or slower than expected earning assets growth which could extend
anticipated breakeven periods at these locations; significant increases in
competition; legislative or regulatory changes applicable to bank holding
companies or the Company's banking or other subsidiaries; and possible changes
in tax rates, tax laws or tax law interpretation.
18
<PAGE> 19
PART II
MIDWEST BANC HOLDINGS, INC.
Item 1. LEGAL PROCEEDINGS
There are no material pending legal proceedings to which the Company or
its subsidiaries are a party other than ordinary routine litigation
incidental to their respective businesses.
Item 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
None
Item 3. DEFAULTS UPON SENIOR SECURITIES
None
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
Item 5. OTHER INFORMATION
None
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit 27 Financial Data Schedule
(b) Filings on Form 8-K
None
19
<PAGE> 20
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.
MIDWEST BANC HOLDINGS, INC.
(Registrant)
By: /s/ ROBERT L. WOODS
------------------------------------
Robert L. Woods,
President and
Chief Executive Officer
By: /s/ EDWARD H. SIBBALD
------------------------------------
Edward H. Sibbald
Senior Vice President and
Chief Financial Officer
Date: May 8, 2000
20
<PAGE> 21
EXHIBIT NO. EXHIBIT
- ---------- -------
27 Financial Data Schedule
25
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-END> MAR-31-2000
<CASH> 31,614
<INT-BEARING-DEPOSITS> 558
<FED-FUNDS-SOLD> 3,800
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 532,422
<INVESTMENTS-CARRYING> 561,998
<INVESTMENTS-MARKET> 561,775
<LOANS> 690,880
<ALLOWANCE> (7,444)
<TOTAL-ASSETS> 1,331,895
<DEPOSITS> 985,913
<SHORT-TERM> 46,607
<LIABILITIES-OTHER> 8,428
<LONG-TERM> 222,400
0
0
<COMMON> 114
<OTHER-SE> 68,432
<TOTAL-LIABILITIES-AND-EQUITY> 1,331,895
<INTEREST-LOAN> 15,325
<INTEREST-INVEST> 9,407
<INTEREST-OTHER> 92
<INTEREST-TOTAL> 0
<INTEREST-DEPOSIT> 10,338
<INTEREST-EXPENSE> 13,615
<INTEREST-INCOME-NET> 11,209
<LOAN-LOSSES> 355
<SECURITIES-GAINS> 187
<EXPENSE-OTHER> 7,210
<INCOME-PRETAX> 5,221
<INCOME-PRE-EXTRAORDINARY> 5,221
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,403
<EPS-BASIC> $0.31
<EPS-DILUTED> $0.31
<YIELD-ACTUAL> 3.80
<LOANS-NON> 1,210
<LOANS-PAST> 900
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 6,576
<CHARGE-OFFS> 505
<RECOVERIES> 27
<ALLOWANCE-CLOSE> 7,567
<ALLOWANCE-DOMESTIC> 7,444
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>