<PAGE>
FORM 10-Q
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1999
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________ to ________
For Quarter Ended June 30, 1999 Commission File Number:_________
FARMERS & MERCHANTS BANCORP
(Exact name of registrant as specified in its charter)
Delaware 94-3327828
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
121 W. Pine Street, Lodi, California 95240
(Address of principal Executive offices) (Zip Code)
Registrant's telephone number, including area code (209) 334-1101
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes [X] No [ ]
Number of shares of common stock of the registrant: Par value $0.01, authorized
2,000,000 shares; issued and outstanding 661,749 as of July 30, 1999.
This Form 10-Q contains 27 pages.
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FARMERS & MERCHANTS BANCORP
FORM 10-Q
TABLE OF CONTENTS
_________________________
<TABLE>
<CAPTION>
PART I. - FINANCIAL INFORMATION Page
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<S> <C>
Item 1 - Financial Statements
Consolidated Balance Sheets as of June 30, 1999
December 31, 1998 and June 30, 1998. 3
Consolidated Statements of Income for the Three Months
and Six Months Ended June 30, 1999 and 1998. 4
Consolidated Statements of Comprehensive Income for the
Three Months and Six Months Ended June 30, 1999 and 1998. 5
Statement of Changes in Shareholders' Equity as of
December 31, 1998 and June 30, 1999 6
Consolidated Statement of Cash Flows for the Six
Months Ended June 30, 1999 and 1998. 7
Notes to Consolidated Financial Statements 8
Item 2 - Management's Discussion and Analysis 9
PART II. - OTHER INFORMATION 22
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SIGNATURES 27
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</TABLE>
<PAGE>
PART I. - FINANCIAL INFORMATION
Item 1 - Financial Statements
<TABLE>
<CAPTION>
FARMERS & MERCHANTS BANCORP
Consolidated Balance Sheets
- ----------------------------------------------------------------------------------------------------------------------
(In Thousands) June 30, December 31, June 30,
1999 1998 1998
Assets (Unaudited) (Unaudited)
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<S> <C> <C> <C>
Cash and Cash Equivalents:
Cash and Due From $ 28,099 $ 27,572 $ 24,333
Federal Funds Sold - 12,140 800
- ----------------------------------------------------------------------------------------------------------------------
Total Cash and Cash Equivalents 28,099 39,712 25,133
Investment Securities:
Available-for Sale 297,678 312,305 245,712
Held-to-Maturity 53,612 60,152 84,733
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Total Investment Securities 351,290 372,457 330,445
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Loans 368,891 329,471 297,226
Less: Unearned Income (431) (293) (345)
Less: Reverse for Loan Losses (8,976) (8,589) (7,998)
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Loans, Net 359,484 320,589 288,883
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Land, Buildings & Equipment 11,839 11,714 11,613
Interest Receivable and Other Assets 14,007 14,327 15,261
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Total Assets $ 764,719 $ 758,799 $ 671,335
======================================================================================================================
Liabilities & Shareholders' Equity
Deposits:
Demand $ 141,667 $ 156,586 $ 121,269
Interest Bearing Transaction 60,791 75,575 51,218
Savings 181,934 166,495 173,902
Time Deposits Over $100,000 74,288 62,371 61,729
Time Deposits Under $100,000 168,938 166,360 151,962
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Total Deposits 627,618 627,387 560,080
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Fed Funds Purchased/Borrowings 49,579 43,093 28,000
Other Liabilities 7,787 8,914 5,190
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Total Liabilities 684,984 679,394 593,270
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Shareholders' Equity
Preferred Stock: No Par, 1,000,000 Shares Authorized,
None Issued or Outstanding - - -
Common Stock: Par Value $0.01, 2,000,000 Shares Authorized,
661,749, 663,295, 664,815 Issued and Outstanding at June 30, 1999,
December 31, 1998 and June 30, 1998, Respectively 7 6 7
Additional Paid In Capital 48,143 43,576 43,803
Retained Earnings 33,598 34,991 33,247
Accumulated Other Comprehensive Income (Loss) (2,013) 832 1,008
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Total Shareholders' Equity 79,735 79,405 78,065
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Total Liabilities & Shareholders' Equity $ 764,719 $ 758,799 $ 671,335
======================================================================================================================
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements
3
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FARMERS & MERCHANTS BANCORP
Consolidated Statements of Income (Unaudited)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
Three Months Six Months
Ended June 30, Ended June 30,
(In Thousands) 1999 1998 1999 1998
-----------------------------------------------
<S> <C> <C> <C> <C>
Interest Income:
Interest & Fees on Loans $ 8,402 $ 7,610 $ 15,822 $ 14,425
Federal Funds Sold 251 182 488 394
Securities:
Investments Available-for-Sale:
Taxable 4,171 3,828 8,384 7,801
Non-taxable 238 94 471 95
Investments Held-to-Maturity:
Taxable 138 440 268 1,006
Non-taxable 606 784 1,238 1,542
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Total Interest Income 13,804 12,938 26,672 25,262
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Interest Expense:
Interest Bearing Transaction 177 186 347 375
Savings 1,029 981 2,036 1,992
Time Deposits Over $100,000 767 764 1,515 1,583
Time Deposits Under $100,000 2,017 1,939 4,068 3,825
Interest on Borrowed Funds 574 358 1,147 594
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Total Interest Expense 4,564 4,229 9,113 8,370
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Net Interest Income 9,240 8,709 17,559 16,893
Provision for Loan Losses 600 300 900 600
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Net Interest Income After Provision for Loan Losses 8,640 8,409 16,659 16,293
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Non-Interest Income
Service Charges on Deposit Accounts 998 898 1,953 1,722
Net Gain on Sale of Investment Securities 52 131 142 234
Other 429 426 931 909
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Total Non-Interest Income 1,479 1,455 3,026 2,864
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Non-Interest Expense
Salaries & Employee Benefits 3,836 3,664 7,422 7,033
Occupancy 954 946 1,867 1,937
Other Operating 1,795 1,881 3,336 3,624
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Total Non-Interest Expense 6,584 6,491 12,625 12,594
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Income Before Taxes 3,535 3,373 7,060 6,563
Provision for Income Taxes 1,222 1,155 2,435 2,270
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Net Income $ 2,313 $ 2,217 $ 4,626 $ 4,293
=======================================================================================================================
Earning Per Share
Basic Earnings Per Common Share $ 3.49 $ 3.34 $ 6.98 $ 6.46
=======================================================================================================================
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements
4
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FARMERS & MERCHANTS BANCORP
Consolidated Statements of Comprehensive Income (Unaudited)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
(in thousands) Three Months Ended Six Months Ended
June 30, June 30, June 30, June 30,
1999 1998 1999 1998
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net Income $ 2,313 $ 2,217 $ 4,626 $ 4,293
Other Comprehensive Income -
Unrealized Gain (Loss) on Securities: (2,520) 7 (2,845) 62
- ----------------------------------------------------------------------------------------------------------------------------
Total Other Comprehensive Income (2,520) 7 (2,845) 62
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Comprehensive Income $ (207) $ 2,224 $ 1,781 $ 4,355
============================================================================================================================
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements
5
<PAGE>
FARMERS & MERCHANTS BANCORP
Consolidated Statements of Changes in Shareholders' Equity (Unaudited)
<TABLE>
<CAPTION>
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(In Thousands)
Accumulated
Additional Other Total
Common Paid-In Retained Comprehensive Shareholders'
Stock Capital Earnings Income Equity
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<S> <C> <C> <C> <C> <C>
Balance, December 31, 1998 $ 6 $ 43,576 $ 34,991 $ 832 $ 79,405
================================================================================================================================
Net Income - - 4,626 - 4,626
Cash Dividends Declared on -
Common Stock - - (1,125) - (1,125)
5% Stock Dividend 1 4,822 (4,823) - -
Cash Paid in Lieu of Fractional
Shares Related to Stock Dividend - - (71) - (71)
Redemption of Stock - (255) - - (255)
Changes in Net Unrealized Gain (Loss) on
Securities Available for Sale - - - (2,845) (2,845)
- --------------------------------------------------------------------------------------------------------------------------------
Balance, June 30, 1999 $ 7 $ 48,143 $ 33,598 $ (2,013) $ 79,735
================================================================================================================================
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements
6
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<TABLE>
<CAPTION>
FARMERS & MERCHANTS BANCORP
Consolidated Statement of Cash Flows (Unaudited) For Six Months Ending
- -----------------------------------------------------------------------------------------------------------------
(in thousands) June 30, June 30,
1999 1998
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Operating Activities:
Net Income $ 4,626 $ 4,293
Adjustments to Reconcile Net Income to Net
Cash Provided by Operating Activities:
Provision for Possible Loan Losses 900 600
Depreciation and Amortization 875 808
Provision for Deferred Income Taxes (270) (51)
Accretion of Investment Security Discounts 475 (201)
Net (Gain) Loss on Sale of Investment Securities (142) (274)
Net Change in Operating Assets & Liabilities:
Decrease in Trading Account Assets - 40
(Increase) Decrease in Interest Receivable and Other Assets 2,581 1,965
(Decrease) in Interest Payable and Other Liabilities (1,127) (5,334)
- -----------------------------------------------------------------------------------------------------------------
Net Cash Provided by Operating Activities 7,918 1,846
Investing Activities:
Trading Securities:
Purchased (15,490) (20,013)
Sold or Matured 15,478 20,099
Securities Available-for-Sale:
Purchased (107,679) (42,158)
Sold or Matured 117,170 44,023
Securities Held-to-Maturity:
Purchased (1,142) (3,437)
Matured 7,661 17,707
Net Loans Originated or Acquired (40,123) (25,414)
Principal Collected on Loans Charged Off 328 348
Net Additions to Premises and Equipment (1,000) (812)
- -----------------------------------------------------------------------------------------------------------------
Net Cash Provided (Used) by Investing Activities (24,797) (9,657)
Financing Activities:
Net (Decrease) in Demand, Interest-Bearing Transaction,
and Savings Accounts (14,263) (22,748)
Increase (Decrease) in Time Deposits 14,494 794
Federal Funds Purchased/Borrowings 6,486 28,000
Cash Dividends (1,196) (1,112)
Stock Redemption (255) 0
- -----------------------------------------------------------------------------------------------------------------
Net Cash Provided (Used) by Financing Activities 5,266 4,934
Increase (Decrease) in Cash and Cash Equivalents (11,613) (2,877)
Cash and Cash Equivalents at Beginning of Year 39,712 28,010
- -----------------------------------------------------------------------------------------------------------------
Cash and Cash Equivalents as of June 30, 1999 and June 30, 1998 $ 28,099 $ 25,133
=================================================================================================================
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements
7
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Financial Statements
The foregoing financial statements are unaudited, however, in the opinion of
Management, all adjustments (comprised only of normal recurring accruals)
necessary for a fair presentation of the financial statements have been
included. A summary of the Corporations significant accounting policies is set
forth in Note 1 to the Consolidated Financial Statements in the Corporation's
Annual Report on Form 10-K for 1998.
2. Reclassifications
Certain reclassifications have been made in the 1998 financial information to
conform to the presentation used in 1999.
3. Interim Statements
The interim consolidated financial statements are unaudited and reflect all
adjustments and reclassifications which, in the opinion of management, are
necessary for a fair statement of the results of operations and financial
condition for the interim period. All adjustments and reclassifications are of a
normal and recurring nature. Results for the period ended June 30, 1999, are not
necessarily indicative of results which may be expected for any other interim
period or for the year as a whole.
4. Earnings per Share
The actual number of shares outstanding at June 30, 1999, were 661,749. Basic
earnings per share are calculated on the basis of the weighted average number of
shares outstanding during the period which were 663,035 and 664,815 for the
three months ending June 30, 1999 and 1998, respectively. For the six-month
periods ending June 30, 1999 and 1998, the weighted average number of shares
were 663,164 and 664,815. All 1999 per share information in the financial
statements and in Management's Discussion and Analysis has been restated to give
retroactive effect to the 5% stock dividend declared May 1, 1999.
5. Holding Company Formation
The accompanying financial statements include the accounts of Farmers &
Merchants Bancorp and the Bancorp's wholly owned subsidiary, Farmers & Merchants
Bank. Farmers & Merchants Bancorp was organized effective April 30, 1999.
Significant intercompany transactions have been eliminated in consolidation.
8
<PAGE>
ITEM 2.
Management's Discussion and Analysis
Forward-Looking Statements
This report contains various forward-looking statements, usually containing the
words "estimate," "project," "expect," "objective," "goal," or similar
expressions and includes assumptions concerning the Company's operations, future
results, and prospects. These forward-looking statements are based upon current
expectations and are subject to risk and uncertainties. In connection with the
"safe-harbor" provisions of the private Securities Litigation Reform Act of
1995, the company provides the following cautionary statement identifying
important factors which could cause the actual results of events to differ
materially from those set forth in or implied by the forward-looking statements
and related assumptions.
Such factors include the following: (i) the effect of changing regional and
national economic conditions; (ii) significant changes in interest rates and
prepayment speeds; (iii) credit risks of commercial, real estate, consumer, and
other lending activities; (iv) changes in federal and state Banking regulations;
(v) the year 2000, and; (vi) other external developments which could materially
impact the Company's operational and financial performance. Readers are
cautioned not to place undue reliance on these forward-looking statements, which
speak only as of the date hereof. The Company undertakes no obligation to update
any forward-looking statements to reflect events or circumstances arising after
the date on which they are made.
Introduction
The following discussion and analysis is intended to provide a better
understanding of the Company's performance during the first six month of 1999
and the material changes in financial condition, operating income and expense of
the Company and its subsidiaries as shown in the accompanying financial
statements. This section should be read in conjunction with the consolidated
financial statements and the notes thereto, along with other financial
information included in this report. Per share amounts have been restated for
the 5% stock dividend declared during 1999.
Overview
As of June 30, 1999, Farmers & Merchants Bancorp reported net income of
$4,626,000, earnings per share of $6.98, return on average assets of 1.23 and
return on average equity of 11.26%. For the six months ending June 30, 1998, net
income totaled $4,293,000, earnings per share was $6.46, return on average
assets was 1.28%, and the return on average shareholders' equity totaled 11.02%.
The Company's improved financial performance in 1999 was due to a combination of
increased revenue generated from its core business, which include improved
growth rates in both loans outstanding and deposit balances along with effective
capital management strategies.
9
<PAGE>
The following is a summary of the financial accomplishments achieved during the
six-month period ending June 30, 1999:
[ ] Net interest income increased 3.9% to $17.6 million from $16.9 million
reported at June 30, 1998.
[ ] The provision for loan losses increased to $900,000 from $600,000 at June
30, 1998.
[ ] Non-interest income increased 5.7% to $3.0 million during the first six
months of 1999, up from the $2.9 million reported for the first six months
of 1998.
[ ] Non-interest expense was limited to an increase of 0.2% and totaled $12.6
million during the first six months of 1999.
[ ] Total assets increased 13.9% to $764,719,000.
[ ] Total loans increased 24.1% to $368,891,000.
[ ] Total investment securities increased to $351,290,000 from $330,445,000 at
June 30, 1998.
[ ] Total Shareholders' Equity increased $1,670,000 to $79,735,000.
Net Interest Income
Net interest income is the amount by which the interest and fees on loans and
interest earned on earning assets exceeds the interest paid on interest bearing
sources of funds. For the purpose of analysis, the interest earned on tax-exempt
investments and municipal loans is adjusted to an amount comparable to interest
subject to normal income taxes. This adjustment is referred to as "taxable
equivalent" and is noted wherever applicable. Interest income and expense are
affected by changes in the volume and mix of average interest earning assets and
average interest bearing liabilities, as well as fluctuations in interest rates.
Therefore, increases or decreases in net interest income are analyzed as changes
in volume, changes in rate and changes in the mix of assets and liabilities.
Net interest income grew 3.9% to $17.6 million during the first six months of
1999, compared to $16.9 million at June 30, 1998. On a fully taxable equivalent
basis, net interest income increased 3.9% and totaled $18.4 million at June 30,
1999, compared to $17.8 million for the first six months of 1998. Net interest
income on a taxable equivalent basis, expressed as a percentage of average total
earning assets, is referred to as the net interest margin, which represents the
average net effective yield on earning assets. For June 30, 1999, the net
interest margin was 5.20% compared to 5.66% at June 30, 1998.
The predominant reasons for the growth in net interest income during 1999 was
the increase in average earning assets as well as the change in the mix of asset
totals and deposit balances. During the first six months of 1999, average
earning assets increased $82.3 million while average interest bearing
liabilities increased $57.9 million.
10
<PAGE>
Loans, the Company's highest earning asset, increased $71.7 million as of June
30, 1999 compared to June 30, 1998. On an average balance basis, loans have
increased by $58.9 million during the year. The yield on the loan portfolio
declined 100 basis points to 9.6% at June 30, 1999 compared to 10.6% at June 30,
1998. The decline in yield was offset by the growth in balances, which had a
positive effect on interest revenue in the amount of $1.4 million for the first
six months of 1999.
The investment portfolio represents the largest component of the Company's
earning assets. The Company's investment policy is conservative. The Company
primarily invests in mortgage-backed securities, U.S. Treasuries, U.S.
Government Agencies, and high-grade municipals. Since the risk factor for these
types of investments is significantly lower than that of loans, the yield earned
on investments is substantially less than that of loans.
Average investment securities increased $17.4 million during the first six
months of 1999. Although there was an increase in the average balance of
investment securities, interest income remained relatively unchanged and totaled
$11.3 million at June 30, 1999. The average yield, on a taxable equivalent
basis, in the investment portfolio was 6.28% in 1999 compared to 6.63% in 1998.
Securities that matured during 1998 were replaced with securities with yields at
the lower prevailing rates. Net interest income on the Average Balance Sheet is
shown on a taxable equivalent basis, which is higher than net interest income on
the Consolidated Statements of Income because of adjustments that relate to
income on certain securities that are exempt from federal income taxes.
Interest expense increased as a result of an increase in average deposits, which
grew 8.1%. The growth in interest expense was limited to 2.5% due to large
growth in non-interest bearing accounts as well as growth in interest bearing
transaction and savings accounts. Average interest cost on interest-bearing
deposits was 3.3% at June 30, 1999, with interest expense totaling $7.9 million.
At June 30, 1998, interest expense was $7.8 million and the average interest
cost on interest-bearing deposits was 3.5%.
The Company's earning assets and rate sensitive liabilities are subject to
repricing at different times, which exposes the Company to income fluctuations
when interest rates change. In order to minimize income fluctuations, the
Company attempts to match asset and liability maturities. However, some maturity
mismatch is inherent in the asset and liability mix.
Provision and Reserve for Loan Losses
As a financial institution that assumes lending and credit risks as a principal
element of its business, the Company anticipates that credit losses will be
experienced in the normal course of business. The provision for loan losses
creates a reserve to absorb potential future losses. The reserve for loan losses
is maintained at a level considered by management to be adequate to provide for
risks inherent in the loan portfolio. In determining the adequacy of the reserve
for possible loan losses, management takes into consideration examinations of
Company supervisory authorities, results of internal credit reviews, financial
condition of borrowers, loan concentrations, prior loan loss experience, and
general economic conditions. The reserve is based on estimates and ultimate
future losses may vary from the current estimates.
11
<PAGE>
Management reviews these estimates periodically and, when adjustments are
necessary, they are reported in the period in which they become known.
The Company's written lending policies, along with applicable laws and
regulations governing the extension of credit, require risk analysis as well as
ongoing portfolio and credit management through loan product diversification,
lending limits, ongoing credit reviews and approval policies prior to funding of
any loan. The Company manages and controls credit risk through diversification,
dollar limits on loans to one borrower by primarily restricting loans made to
its principal market area. Loans that are performing but have shown some signs
of weakness are subjected to more stringent reporting and oversight. Fixed rate
real estate loans are comprised primarily of loans with maturities of less than
five years. Long-term residential loans are originated by the Company and sold
in the secondary market.
The provision as of June 30, 1999 equaled $900 thousand, an increase of $300
thousand from June 30, 1998. The increase in the provision was the result of
management's evaluation of the credit quality of the loan portfolio, the
prevailing economic climate, and its effect on borrowers' ability to repay loans
in accordance with the terms of the notes and current loan losses. After
reviewing all factors, management concluded that an increase in the provision
for loan losses was appropriate.
As of June 30, 1999, the reserve for loan losses was $8.9 million, which
represents 2.4% of the total loan balances. For the period ended June 30, 1998
the reserve balance was $8.0 million and 2.7% of total loans.
<TABLE>
Reserve for Loan Losses
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<S> <C>
Balance, January 1, 1998 7,188
Provision Charged to Expense 600
Recoveries of Loans Previously Charged Off 348
Loans Charged Off (139)
- ------------------------------------------------------------------------
Balance, June 30, 1998 $7,997
- ------------------------------------------------------------------------
Balance, January 1, 1999 8,589
Provision Charged to Expense 900
Recoveries of Loans Previously Charged Off 328
Loans Charged Off (841)
- ------------------------------------------------------------------------
Balance, June 30, 1999 $8,976
- ------------------------------------------------------------------------
</TABLE>
Non-Interest Income
Non-interest income increased 5.7% for the six months ending June 30, 1999,
compared to the same period of 1998. This increase was due to increases in
service charges on deposit accounts.
12
<PAGE>
Non-Interest Expense
Salaries and Employee Benefits increased $390 thousand or 5.5% from the prior
year due to merit increases and additional staffing requirements. Offsetting
this increase was a decrease in occupancy and other operating expense of $358
thousand or 6.4%. The net effect was no material change in non-interest expense
compared to the prior year.
Income Taxes
The provision for income taxes increased 7.3% to $2.4 million for the first six
months of 1999 as a result of improved earnings. At June 30, 1998, the provision
totaled $2.3 million.
Balance Sheet Analysis
Investment Securities
The Financial Accounting Standards Board statement, Accounting for Certain
Investments in Debt and Equity Securities, requires the Company to classify its
investments as held-to-maturity, trading or available- for-sale. Securities are
classified as held-to-maturity and accounted for at amortized cost when the
Company has the positive intent and ability to hold the securities to maturity.
Trading securities are securities acquired for short-term appreciation and are
carried at fair value, with unrealized gains and losses recorded in non-interest
income. As of June 30, there were no securities in the trading portfolio.
Securities the Company does not intend to hold to maturity are classified as
available-for-sale. This portion of the investment portfolio provides the
Company with liquidity that may be required to meet the needs of Company
borrowers and satisfy depositor's withdrawals.
The investment portfolio provides the Company with an income alternative to
loans. As of June 30, 1999 the investment portfolio represented 46% of the
Company's total assets. Total investment securities increased $20.8 million from
a year ago and now total $351.3 million. Not included in the investment
portfolio are overnight investments in Federal Funds Sold. At June 30, 1999,
average Federal Funds Sold was $0.0 compared to $800 thousand at June 30, 1998.
Loans
The Company's loan portfolio for the six months ending June 30, 1999 increased
$71.7 million compared to a year ago. The increase is the result of an
aggressive calling program implemented during 1998 and an improved economic
climate in the Company's market area. Additionally, on an average balance basis
loans have increased $58.9 million or 21.4%. The table following sets forth the
distribution of the loan portfolio by type as of the dates indicated. (Dollar
amounts in thousands)
13
<PAGE>
Loan Portfolio As Of:
- --------------------
June 30, 1999 June 30, 1998
- --------------------------------------------------------------------------------
Real Estate Construction $ 36,338 $ 25,160
Other Real Estate 196,255 158,784
Commercial 116,795 97,642
Consumer 19,503 15,640
- --------------------------------------------------------------------------------
Gross Loans 368,891 297,226
Less:
Unearned Income 431 345
Reserve for Loan Losses 8,976 7,998
- --------------------------------------------------------------------------------
Net Loans $ 359,484 $ 288,883
================================================================================
Non-Performing Assets
The Company's policy is to place loans on non-accrual status when, for any
reason, principal or interest is past due for ninety days or more unless it is
both well secured and in the process of collection. Any interest accrued, but
unpaid, is reversed against current income. Thereafter, interest is recognized
as income only as it is collected in cash.
As a result of events beyond the Company's control, problem loans can and do
occur. As of June 30, 1999, non-performing loans were $2.8 million compared to
$5.6 million at June 30, 1998. Reducing problem loans continues to be a
significant Company objective. The Company reported $440 thousand in foreclosed
loans as other real estate at June 30, 1999, compared to the $1.2 million as of
June 30, 1998. Accrued interest reversed from income on loans placed on a non-
accrual status totaled $268 thousand at June 30, 1999.
Non-Performing Assets
- ---------------------
June 30, 1999 December 31, 1998 June 30, 1998
- --------------------------------------------------------------------------------
Nonperforming Loans $ 2,812 $ 4,624 $ 5,619
OREO 440 636 1,170
================================================================================
Total $ 3,252 $ 5,260 $ 6,789
================================================================================
% of Total Loans 0.9% 1.6% 2.3%
% of Reserve for Loan Loss 36.2% 61.2% 84.9%
Deposits
At June 30, 1999, deposits totaled $627.6 million. This represents an increase
of 12.1% or $67.5 million from June 30, 1998. The majority of the increase was
focused in demand and time deposits under $100,000, which increased $20.4
million and $16.9 million, respectively. The change in the mix of deposits
occurs as interest rates change. The expectations our customers have of future
interest rates, dictates their maturity and account selections. As rates
declined during 1999, some customers locked in rates in anticipation of further
declines while other customers placed their funds in demand accounts because
they anticipated rates would rise and were unwilling to commit their deposits to
long term investments at the current rates.
14
<PAGE>
The most volatile deposits in any financial institution are certificates of
deposit over $100,000. The Company has not found its certificates of deposit
over $100,000 to be as volatile as some other financial institutions as it does
not solicit these types of deposits from brokers nor does it offer interest rate
premiums. It has been the Company's experience that large depositors have placed
their funds with the Company due to its strong reputation for safety, security
and liquidity.
Capital
Much attention has been directed at the capital adequacy of the financial
institution industry. The Company relies on capital generated through the
retention of earnings to satisfy its capital requirements. The Company engages
in an ongoing assessment of its capital needs in order to support business
growth and to insure depositor protection. Shareholders' Equity totaled $79.7
million at June 30, 1999 and $78.1 million at June 30, 1998, which represents an
increase of $1.7 million or 2.1%.
The Board of Governors of the Federal Reserve System, and the Federal Deposit
Insurance Corporation have adopted risk-based capital guidelines. The guidelines
are designed to make capital requirements more sensitive to differences in risk
related assets among Banking organizations, to take into account off-balance
sheet exposures and to aid in making the definition of Bank capital uniform.
Company assets and off-balance sheet items are categorized by risk. The results
of these regulations are that assets with a higher degree of risk require a
larger amount of capital; assets, such as cash, with a low degree of risk have
little or no capital requirements. Under the guidelines the Company is currently
required to maintain regulatory risk based capital equal to at least 8.0%. As of
June 30, 1999, the Company meets all capital adequacy requirements to which it
is subject. The following table illustrates the relationship between regulatory
capital requirements and the Company's capital position.
Regulatory
Capital Adequacy
(in thousands) Company Capital Requirements
June 30, 1999 Amount Ratio Amount Ratio
- --------------------------------------------------------------------------------
Total Capital to Risk Weighted Assets $87,126 20.10% $34,678 8.0%
Tier I Capital to Risk Weighted Assets $81,664 18.84% $17,339 4.0%
Liquidity
Liquidity is the Company's ability to maintain a cash flow adequate to fund
operations, handle fluctuations in deposit levels, respond to the credit needs
of borrowers, and to take advantage of investment opportunities as they arise.
The principal sources of liquidity include interest and principal payments on
loans and investments, proceeds from the maturity or sale of investments, and
growth in deposits. The Company maintains overnight investments in Federal Funds
as a cushion for temporary liquidity needs. For the first six months of 1999,
Federal Funds averaged $20.1 million. In addition, the Company maintains Federal
Fund credit lines of $136 million with major correspondent Banks subject to the
customary terms and conditions for such arrangements.
15
<PAGE>
Asset / Liability Management - Interest Rate Risk
The mismatch between maturities of interest sensitive assets and liabilities
results in uncertainty in the Company's earnings and economic value and is
referred to as interest rate risk. Farmers & Merchants Bancorp's primary
objective in managing interest rate risk is to minimize the potential for
significant loss as a result of changes in interest rates.
The Company measures interest rate risk in terms of potential impact on both its
economic value and earnings. The methods for governing the amount of interest
rate risk include: analysis of asset and liability mismatches (GAP analysis),
the utilization of a simulation model and limits on maturities of investment,
loan and deposit products to relatively short periods which reduces the market
volatility of those instruments.
The gap analysis measures, at specific time intervals, the divergences between
earning assets and interest bearing liabilities for which repricing
opportunities will occur. A positive difference, or gap, indicates that earning
assets will reprice faster than interest bearing liabilities. This will
generally produce a greater net interest margin during periods of rising
interest rates and a lower net interest margin during periods of declining
interest rates. Conversely, a negative gap will generally produce a lower net
interest margin during periods of rising interest rates and a greater net
interest margin during periods of decreasing interest rates.
The interest rates paid on deposit accounts do not always move in unison with
the rates charged on loans. In addition, the magnitude of changes in the rates
charged on loans is not always proportionate to the magnitude of changes in the
rate paid for deposits. Consequently, changes in interest rates do not
necessarily result in an increase or decrease in the net interest margin solely
as a result of the differences between repricing opportunities of earning assets
or interest bearing liabilities.
The Company also utilizes the results of a dynamic simulation model to quantify
the estimated exposure of net interest income to sustained interest rate
changes. The sensitivity of the Company's net interest income is measured over a
rolling one-year horizon. The simulation model estimates the impact of changing
interest rates on the interest income from all interest earning assets and the
interest expense paid on all interest bearing liabilities reflected on the
Company's balance sheet. This sensitivity analysis is compared to policy limits
that specify a maximum tolerance level for net interest income exposure over a
one-year horizon assuming no balance sheet growth, given both a 200 basis point
upward and downward shift in interest rates. A parallel and pro rata shift in
rates over a 12-month period is assumed. Results that exceed policy limits, if
any, are analyzed for risk tolerance and reported to the Board with appropriate
recommendations. The following reflects the Company's net interest income
sensitivity over a one-year horizon as of June 30, 1999.
Estimated Net
Simulated Interest Income
Rate Changes Sensitivity
-----------------------------------------------------------
+200 Basis Points +3.86
-200 Basis Points -5.41
16
<PAGE>
The table indicates that net interest income would increase by approximately
3.86% over a 12-month period if there were an immediate sustained parallel
upward shift in interest rates. Net interest income would decrease approximately
5.41% over a 12-month period if there were an immediate sustained parallel 200
basis point downward shift in interest rates.
The estimated sensitivity does not necessarily represent a Company forecast and
the results may not be indicative of actual changes to the Company's net
interest income. These estimates are based upon a number of assumptions
including: the nature and timing of interest rate levels including yield curve
shape, prepayments on loans and securities, pricing strategies on loans and
deposits, replacement of asset and liability cashflows, and other assumptions.
While the assumptions used are based on current economic and local market
conditions, there is no assurance as to the predictive nature of these
conditions including how customer preferences or competitor influences might
change.
Year 2000 Compliance
The Company has initiated a Company-wide program (Y2K) to prepare its computer
systems, applications and infrastructure for properly processing the dates after
December 31, 1999. Based on the Federal Financial Institutions Examination
Council guidelines, the Company's Y2K program consists of the following phases:
1. Awareness Phase - A strategic approach was developed to address the Year 2000
problem.
2. Assessment Phase - Detailed plans and target dates were developed.
3. Renovation Phase - This phase includes code enhancements, hardware and
software upgrades, system replacements, vendor certification, and other
associated changes.
4 Validation Phase - This phase includes testing and conversion of system
applications.
5. Implementation Phase - This phase includes certification of Y2K compliance
and employee training and acceptance.
Phases one through five have been completed. All mission critical issues and
systems have been implemented. Monitoring of all systems to ensure continued
compliance will be an on-going process. A few non-mission critical personal
computer software applications are currently being evaluated as to year 2000
compliance. The non-mission critical personal computer applications are
scheduled to be completed by November 1999.
In addition, an assessment of the Y2K readiness of external entities with which
the Company conducts its operations is ongoing. The Company is continuing to
communicate with all of its significant obligors, counterparties, other credit
clients and vendors to determine the likely extent to which the Company may be
affected by third parties' Y2K plans and target dates. In this regard, the
Company is developing contingency plans in the event that external parties fail
to achieve their Y2K plans and target dates.
17
<PAGE>
The Company estimates the total cost of the Y2K project to be approximately
$1,571,000, of which $1,203,000 has been incurred through 1998 and the remaining
$368,000 was incurred during the first quarter of 1999. No further significant
costs are anticipated. The costs of the Y2K program and the date on which the
Company plans to be Y2K compliant are based on management's best current
estimates, which were derived utilizing numerous assumptions of future events
including the availability of certain resources, third party vendors and other
factors. However, there can be no assurance that these estimates will be
achieved and actual results could differ from those plans.
Average Balance Sheets
The tables on the following pages reflect the Company's average balance sheets
and volume and rate analysis for the six-month periods ending June 30, 1999 and
1998. The average yields on earning assets and average rates paid on interest-
bearing liabilities have been computed on an annualized basis for purposes of
comparability with full year data. Average balance amounts for assets and
liabilities are the computed average of daily balances.
18
<PAGE>
FARMERS & MERCHANTS BANCORP
Year-to-Date Average Balances and Interest Rates
<TABLE>
<CAPTION>
(Rates on a Taxable Equivalent Basis)
(In Thousands) Six Months Ended June 30,
1999
Assets Balance Interest Rate
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Federal Funds Sold $ 20,148 $ 488 4.89%
Investment Securities:
U.S. Treasury 22,717 613 5.44%
U.S. Agencies 12,414 372 6.04%
Municipals 77,199 2,802 7.32%
Mortgage Backed Securities 243,557 7,300 6.04%
Other 5,288 164 6.23%
- ---------------------------------------------------------------------------------------------------------------
Total Investment Securities 361,175 11,251 6.28%
- ---------------------------------------------------------------------------------------------------------------
Loans:
Real Estate 212,462 10,195 9.68%
Commercial 103,706 4,732 9.20%
Installment 14,615 704 9.71%
Credit Card 2,846 183 12.96%
Municipal 225 8 6.82%
- ---------------------------------------------------------------------------------------------------------------
Total Loans 333,854 15,822 9.56%
- ---------------------------------------------------------------------------------------------------------------
Total Earning Assets 715,177 $ 27,561 7.77%
======================
Reserve for Loan Losses (8,685)
Cash and Due From Banks 22,993
All Other Assets 25,205
- ------------------------------------------------------------------------------------
Total Assets $754,690
====================================================================================
Liabilities & Shareholders' Equity
Interest Bearing Deposits:
Interest Bearing Transaction $ 60,502 $ 347 1.16%
Savings 184,466 2,036 2.23%
Time Deposits Over $100,000 65,175 1,515 4.69%
Time Deposits Under $100,000 172,907 4,068 4.74%
- ---------------------------------------------------------------------------------------------------------------
Total Interest Bearing Deposits 483,051 7,966 3.33%
Other Borrowed Funds 42,766 1,147 5.41%
- ---------------------------------------------------------------------------------------------------------------
Total Interest Bearing Liabilities 525,816 $ 9,113 3.49%
======================
Demand Deposits 140,826
All Other Liabilities 5,886
- ------------------------------------------------------------------------------------
Total Liabilities 672,528
Shareholders' Equity 82,161
- ------------------------------------------------------------------------------------
Total Liabilities & Shareholders' Equity $754,690
====================================================================================
Net Interest Margin 5.20%
===============================================================================================================
</TABLE>
19
<PAGE>
FARMERS & MERCHANTS BANCORP
Year-to-Date Average Balances and Interest Rates
<TABLE>
<CAPTION>
(Rates on a Taxable Equivalent Basis)
(In Thousands) Six Months Ended June 30,
1998
Assets Balance Interest Rate
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Federal Funds Sold $ 14,111 $ 394 5.63%
Investment Securities:
U.S. Treasury 16,194 480 5.97%
U.S. Agencies 61,140 1,835 6.05%
Municipals 67,885 2,685 7.97%
Mortgage Backed Securities 194,192 6,164 6.40%
Other 4,384 148 6.79%
- ---------------------------------------------------------------------------------------------------------------
Total Investment Securities 343,794 11,310 6.63%
- ---------------------------------------------------------------------------------------------------------------
Loans:
Real Estate 178,327 9,338 10.56%
Commercial 81,690 4,269 10.54%
Installment 11,967 620 10.45%
Credit Card 2,876 192 13.50%
Municipal 122 5 8.49%
- ---------------------------------------------------------------------------------------------------------------
Total Loans 274,981 14,425 10.58%
- ---------------------------------------------------------------------------------------------------------------
Total Earning Assets 632,886 $ 26,129 8.33%
======================
Reserve for Loan Losses (7,438)
Cash and Due From Banks 22,339
All Other Assets 23,664
- ------------------------------------------------------------------------------------
Total Assets $671,451
====================================================================================
Liabilities & Shareholders' Equity
Interest Bearing Deposits:
Interest Bearing Transaction $ 55,305 $ 375 1.37%
Savings 180,360 1,992 2.23%
Time Deposits Over $100,000 61,988 1,583 5.15%
Time Deposits Under $100,000 149,162 3,824 5.17%
- ---------------------------------------------------------------------------------------------------------------
Total Interest Bearing Deposits 446,815 7,775 3.51%
Other Borrowed Funds 21,109 594 5.68%
- ---------------------------------------------------------------------------------------------------------------
Total Interest Bearing Liabilities 467,924 $ 8,370 3.61%
======================
Demand Deposits 120,573
All Other Liabilities 5,020
- ------------------------------------------------------------------------------------
Total Liabilities 593,517
Shareholders' Equity 77,934
- ------------------------------------------------------------------------------------
Total Liabilities & Shareholders' Equity $671,451
====================================================================================
Net Interest Margin 5.66%
===============================================================================================================
</TABLE>
20
<PAGE>
FARMERS & MERCHANTS BANCORP
Volume and Rate Analysis of Net Interest Revenue
<TABLE>
<CAPTION>
(Rates on a Taxable Equivalent Basis) June 30, 1999 vs June 30, 1998
(In Thousands) Amount of Increase
(Decrease) Due to Change in:
----------------------------------------
Average Average Net
Interest Earning Assets Balance Rate Change
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Federal Funds Sold $ 232 $ (137) $ 95
Investment Securities:
U.S. Treasury 250 (117) 133
U.S. Agencies (1,459) (3) (1,463)
Municipals 630 (513) 117
Mortgage Backed Securities 2,068 (931) 1,137
Other 46 (30) 16
- ------------------------------------------------------------------------------------------------------------------------
Total Investment Securities 1,534 (1,594) (60)
- ------------------------------------------------------------------------------------------------------------------------
Loans:
Real Estate 2,789 (1,932) 857
Commercial 1,800 (1,337) 463
Installment 198 (113) 84
Credit Card (2) (7) (10)
Municipal 5 (3) 2
- ------------------------------------------------------------------------------------------------------------------------
Total Loans 4,789 (3,392) 1,397
- ------------------------------------------------------------------------------------------------------------------------
Total Earning Assets 6,555 (5,124) 1,432
- ------------------------------------------------------------------------------------------------------------------------
Interest Bearing Liabilities
Interest Bearing Deposits:
Transaction 77 (105) (28)
Savings 49 (6) 43
Time Deposits Over $100,000 184 (253) (69)
Time Deposits Under $100,000 998 (754) 244
- ------------------------------------------------------------------------------------------------------------------------
Total Interest Bearing Deposits 1,308 (1,117) 191
Other Borrowed Funds 637 (85) 552
- ------------------------------------------------------------------------------------------------------------------------
Total Interest Bearing Liabilities 1,945 (1,202) 743
========================================================================================================================
Total Change $ 4,610 $ (3,922) $ 688
========================================================================================================================
</TABLE>
21
<PAGE>
PART II. OTHER INFORMATION
- ---------------------------
ITEM 1. Legal Proceedings
- -------------------------
None
ITEM 2. Changes in Securities
- -----------------------------
None
ITEM 3. Defaults Upon Senior Securities
- ---------------------------------------
Not applicable
ITEM 4. Submission of Matters to a Vote of Security Holders
- -----------------------------------------------------------
The Annual Meeting of Shareholders was held on April 19, 1999.
The business conducted at the meeting included election of directors,
ratification of Arthur Andersen LLP as the Company's independent auditors and
two additional proposals, which are briefly described below:
. Proposal to create s "Bank Holding Company". The Board of Directors of
Farmers & Merchants Bank of Central California proposes to create a "bank
holding company" to be called Farmers & Merchants Bancorp. Under this
proposal, Bank shares would be exchanged for shares in the Holding Company.
One share of Bank common stock would equal one share of Holding Company
stock.
This new corporate structure will give the Bank greater financial and
corporate flexibility to make acquisitions. In addition, the new structure
will allow the Bank to participate in activities through the Holding
Company, which are not permissible for the Bank to engage in directly. The
Holding Company will be permitted to engage in non-bank activities, such as
selling insurance and securities, and providing financial and investment
services. After the reorganization, the nature of the business conducted by
the Bank will not change.
. Renewal of Supermajority Vote Provisions in Article VIII of the Articles of
Incorporation. This provision in Article VIII is required to be reaffirmed
by the stockholders every two years or will cease to be effective. This
article both encourages potential acquirers to negotiate with the Bank and
protects stockholders from being unfairly treated in mergers or other
business combinations with persons who own a substantial amount of the
Bank's stock. The Supermajority Voting and Fair Price provision applies to
22
<PAGE>
mergers and certain other types of business combinations with persons
holding 20% or more of the voting stock of the Bank (an "Interested
Stockholder"). In general, the Supermajority Voting and Fair Price
provision requires, in a merger or certain other business combinations,
first that 66 2/3 % of the stockholders who are independent of the
Interested Stockholder approve the business combination, second that all
stockholders who are independent of the Interested Stockholder receive at
least a specified amount for his or her shares acquired during the
preceding two years and third that certain other requirements are met.
Following is the voting results from the 1999 annual meeting of shareholders,
April 19, 1999. As of April 19, 1999, 543,117 shares represented in person and
by proxy participated in this election and shares were voted on the several
measures before the shareholders as follows:
1. ELECTION OF DIRECTORS
<TABLE>
<CAPTION>
Directors % For % Withheld
--------- - --- - --------
<S> <C> <C> <C> <C>
Stewart C. Adams, Jr. 83.64 528,780 0.82 5,155
-------------- ------------------ --------------- ------------------
Ralph Burlington 84.15 531,997 0.39 2,485
-------------- ------------------ --------------- ------------------
Robert F. Hunnell 83.71 529,202 0.75 4,772
-------------- ------------------ --------------- ------------------
Ole R. Mettler 88.47 559,266 0.01 54
-------------- ------------------ --------------- ------------------
James E. Podesta 84.15 531,997 0.39 2,485
-------------- ------------------ --------------- ------------------
Harry C. Schumacher 83.96 530,787 0.57 3,585
-------------- ------------------ --------------- ------------------
George Scheideman 83.96 530,764 0.55 3,494
-------------- ------------------ --------------- ------------------
Hugh Steacy 84.11 531,753 0.43 2,701
-------------- ------------------ --------------- ------------------
Kent A. Steinwert 83.81 529,831 0.70 4,454
-------------- ------------------ --------------- ------------------
Calvin (Kelly) Suess 84.15 531,997 0.39 2,485
-------------- ------------------ --------------- ------------------
Carl A. Wishek, Jr. 83.96 530,764 0.55 3,494
-------------- ------------------ --------------- ------------------
</TABLE>
23
<PAGE>
2. PROPOSAL TO RATIFY THE APPOINTMENT OF ARTHUR ANDERSEN, LLP.
<TABLE>
<CAPTION>
No. of Shares %
<S> <C> <C>
For: 527,544 83.45
-------------------------------- ----------------------------------------
Against: 4,241 0.67
-------------------------------- ----------------------------------------
Abstain 3,645 0.58
-------------------------------- ----------------------------------------
</TABLE>
3. BANK HOLDING COMPANY REORGANIZATION
<TABLE>
<CAPTION>
No. of Shares %
<S> <C> <C>
For: 514,070 81.32
-------------------------------- ----------------------------------------
Against: 15,697 2.48
-------------------------------- ----------------------------------------
Abstain 7,235 1.14
-------------------------------- ----------------------------------------
</TABLE>
4. PROPOSAL TO RENEW SUPERMAJORITY VOTE PROVISIONS OF
ARTICLE VIII OF THE BANK'S ARTICLES OF INCORPORATION
<TABLE>
<CAPTION>
No. of Shares %
<S> <C> <C>
For: 468,329 74.08
-------------------------------- ----------------------------------------
Against: 58,509 9.26
-------------------------------- ----------------------------------------
Abstain 10,164 1.61
-------------------------------- ----------------------------------------
</TABLE>
ITEM 5. Other Information
- -------------------------
None
24
<PAGE>
ITEM 6. Exhibits and Reports on Form 8-K
- ----------------------------------------
Two Current Reports on Form 8-K were filed during the second quarter of 1999.
The first Current Report dated April 30, 1999, of Farmers & Merchants Bank of
Central California was filed with the Federal Reserve Board on May 14, 1999. The
item reported was a Press Release dated April 30, 1999.
The second Current Report on Form 8-K, dated April 30, 1999, of Farmers &
Merchants Bancorp was filed with the Securities and Exchange Commission on May
14, 1999. The following items were reported:
Amended and Restated Certificate of Incorporation of Farmers & Merchants
Bancorp.
By-Laws of Farmers & Merchants Bancorp.
Employment Agreement dated July 8, 1997, between Farmers & Merchants Bank of
Central California and Kent A. Steinwert.
Employment Agreement dated December 1, 1998, between Farmers & Merchants Bank of
Central California and Richard S. Erichson.
Deferred Bonus Plan of Farmers & Merchants Bank of Central California, adopted
as of March 2, 1999.
Amended and Restated Deferred Bonus Plan of Farmers & Merchants Bank of Central
California executed May 11, 1999.
Subsidiaries of Farmers & Merchants Bancorp.
Press Release dated April 30, 1999.
Annual Report on Form 10-K for the fiscal year ended December 31, 1998 of
Farmers & Merchants Bank of Central California, as filed with the Federal
Reserve Board.
Amendment No. 1 to Annual Report on Form 10-K for the fiscal year ended December
31, 1998 of Farmers & Merchants Bank of Central California, as filed with the
Federal Reserve Board.
Quarterly Report on Form 10-Q for the quarter ended March 31, 1999 of Farmers &
Merchants Bank of Central California, as filed with the Federal Reserve Board.
Current Report on Form 8-K dated April 30, 1999, of Farmers & Merchants Bank of
Central California, as filed with the Federal Reserve Board on May 14, 1999.
25
<PAGE>
Proxy Statement/Offering Circular of Farmers & Merchants Bank of Central
California and Farmers & Merchants Bancorp, respectively, dated March 12, 1999.
Permit and Certificate of Issuance of permit dated April 13, 1999, of the
California Department of Corporations approving the Reorganization.
26
<PAGE>
SIGNATURES
----------
Pursuant to the requirement 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.
FARMERS & MERCHANTS BANCORP
Date: August 11, 1999 /s/ Kent A. Steinwert
-----------------------------------
Kent A. Steinwert
President and
Chief Executive Officer
(Principal Executive Officer)
Date: August 11, 1999 /s/ John R. Olson
-----------------------------------
John R. Olson
Executive Vice President and
Chief Financial Officer
(Principal Accounting Officer)
27
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE 6/30/99
CONSOLIDATED BALANCE SHEETS AND THE 6/30/99 CONSOLIDATED STATEMENTS OF INCOME
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 28,099
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 297,678
<INVESTMENTS-CARRYING> 53,612
<INVESTMENTS-MARKET> 54,353
<LOANS> 368,891
<ALLOWANCE> 8,976
<TOTAL-ASSETS> 764,719
<DEPOSITS> 627,618
<SHORT-TERM> 8,500
<LIABILITIES-OTHER> 7,787
<LONG-TERM> 41,079
0
0
<COMMON> 7
<OTHER-SE> 79,728
<TOTAL-LIABILITIES-AND-EQUITY> 764,719
<INTEREST-LOAN> 15,822
<INTEREST-INVEST> 10,362
<INTEREST-OTHER> 488
<INTEREST-TOTAL> 26,672
<INTEREST-DEPOSIT> 7,966
<INTEREST-EXPENSE> 9,113
<INTEREST-INCOME-NET> 17,559
<LOAN-LOSSES> 900
<SECURITIES-GAINS> 142
<EXPENSE-OTHER> 12,625
<INCOME-PRETAX> 7,060
<INCOME-PRE-EXTRAORDINARY> 4,626
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,626
<EPS-BASIC> 6.98
<EPS-DILUTED> 0
<YIELD-ACTUAL> 7.77
<LOANS-NON> 2,793
<LOANS-PAST> 19
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 8,589
<CHARGE-OFFS> 841
<RECOVERIES> 328
<ALLOWANCE-CLOSE> 8,976
<ALLOWANCE-DOMESTIC> 8,976
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
