FORM 10-Q
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, 1995
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission file number 0-9785
TRI CITY BANKSHARES CORPORATION
(Exact name of registrant as specified in its charter)
Wisconsin 39-1158740
(State or other jurisdiction of (IRS Employer ID Number)
incorporation or organization)
6400 S. 27th Street, Oak Creek, WI 53154
(Address of principal executive offices)
(414) 761-1610
(Registrant's phone number, including area code)
Indicate by check mark whether the registrant (1) has filed all documents and
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
----- -----
The number of shares outstanding of $1.00 par value common stock, as of June 30,
1995: 2,464,164
<PAGE>
FORM 10-Q
TRI CITY BANKSHARES CORPORATION
INDEX
PART I - FINANCIAL INFORMATION
Page #
Item 1 Financial Statements (Unaudited)
Consolidated Balance Sheets as of
June 30, 1995 and December 31, 1994 3
Consolidated Statements of Income
for the Three Months ended June 30,
1995 and 1994 4
Consolidated Statements of Income
for Six Months ended June 30, 1995
and 1994 5
Consolidated Statements of Cash Flows
for the Six Months ended June 30,
1995 and 1994 6
Notes to Consolidated Financial Statements 7
Item 2 Management's Discussion and Analysis of
Financial Condition and Results of Operations 9
PART II - OTHER INFORMATION
Items 1 - 6 15
Signatures 18
2
<PAGE>
TRI CITY BANKSHARES CORPORATION
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
ASSETS June 30, December 31,
1995 1994
Cash and due from banks $ 24,083,435 $ 28,042,066
Federal funds sold 14,800,000 0
Investment securities (market
value: 1995 - $89,652,451;
1994 - $87,698,918) 89,727,143 93,277,595
Loans 224,714,182 213,287,740
Allowance for loan losses (3,482,410) (3,395,101)
------------ ------------
NET LOANS 221,231,772 209,892,639
Premises and equipment 19,549,092 19,857,706
Other assets 5,234,699 6,259,987
------------ ------------
$ 374,626,141 $ 357,329,993
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Non-interest bearing $ 87,425,381 $ 83,072,574
Interest bearing
(over $100,000) 11,320,000 9,691,000
Interest bearing 228,707,810 207,312,921
------------ ------------
TOTAL DEPOSITS 327,453,191 300,076,495
Short-term borrowings:
Federal funds purchased and
securities sold under agree-
ments to repurchase 0 13,900,000
Notes Payable 4,438,122 0
Other 0 2,406,970
------------ ------------
TOTAL BORROWINGS 4,438,122 16,306,970
Other Liabilities 808,275 1,153,632
------------ ------------
TOTAL LIABILITIES 332,699,588 317,537,097
Stockholders' equity:
Cumulative preferred stock, par
value - $1 per share
Authorized - 200,000 shares
Issued and outstanding - none
Common stock, par value - $1 per
share
Authorized - 5,000,000 shares
Issued and outstanding: 1995 -
2,464,164 shares; 1994 -
2,457,489 2,464,164 2,457,489
Additional paid in capital 8,232,498 8,091,712
Retained earnings 31,229,891 29,243,695
------------ ------------
TOTAL STOCKHOLDERS' EQUITY 41,926,553 39,792,896
------------ ------------
$ 374,626,141 $ 357,329,993
============ ============
See Notes to Unaudited Consolidated Financial Statements.
3
<PAGE>
TRI CITY BANKSHARES CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
FOR THREE MONTHS ENDED JUNE 30, 1995 AND 1994
(UNAUDITED)
1995 1994
Interest income:
Loans, including fees $ 5,304,919 $4,513,263
Investment securities:
Taxable 1,002,264 1,184,229
Exempt from federal income tax 379,172 364,013
Federal funds sold 123,888 11,045
---------- ----------
TOTAL INTEREST INCOME 6,810,243 6,072,550
Interest expense:
Deposits 2,310,037 1,587,874
Short-term borrowings 25,553 82,400
---------- ----------
TOTAL INTEREST EXPENSE 2,335,590 1,670,274
---------- ----------
NET INTEREST INCOME 4,474,653 4,402,276
Provision for loan losses (23,139) (150,000)
---------- ----------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 4,451,514 4,252,276
Other income:
Service charge income 798,443 690,894
Rental income 202,443 200,987
Investment securities gains 0 0
Other 274,637 323,223
---------- ----------
TOTAL OTHER INCOME 1,275,523 1,215,104
Other expense:
Salaries and employee benefits 2,118,072 2,031,740
Net occupancy 531,069 602,720
Equipment 316,620 300,927
Data processing 126,440 153,001
Advertising 127,049 79,250
Regulatory Agency Assessments 186,696 181,037
Office Supplies 136,841 78,305
Other 628,848 505,467
---------- ----------
TOTAL OTHER EXPENSE 4,171,635 3,932,447
Income before income taxes 1,555,402 1,534,933
Provision for income taxes 437,700 413,300
---------- ----------
NET INCOME $ 1,117,702 $ 1,121,633
========== ==========
Per share data:
Net income $ 0.45 $ 0.47
Average shares outstanding 2,463,161 2,370,865
See Notes to Unaudited Consolidated Financial Statements.
4
<PAGE>
TRI CITY BANKSHARES CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
FOR SIX MONTHS ENDED JUNE 30, 1995 AND 1994
(UNAUDITED)
1995 1994
----- -----
Interest income:
Loans, including fees $ 10,408,967 $ 8,963,389
Investment securities:
Taxable 2,051,224 2,271,049
Exempt from federal income tax 760,720 805,379
Federal funds sold 167,266 32,515
----------- -----------
TOTAL INTEREST INCOME 13,388,177 12,072,332
Interest expense:
Deposits 4,262,602 3,126,023
Short-term borrowings 140,305 210,652
----------- -----------
TOTAL INTEREST EXPENSE 4,402,907 3,336,675
----------- -----------
NET INTEREST INCOME 8,985,270 8,735,657
Provision for loan losses (98,139) (300,000)
----------- -----------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 8,887,131 8,435,657
Other income:
Service charge income 1,537,674 1,339,831
Rental income 411,573 406,538
Investment securities gains 0 2,000
Other 1,056,251 695,450
----------- -----------
TOTAL OTHER INCOME 3,005,498 2,443,819
Other expense:
Salaries and employee benefits 4,224,884 4,011,153
Net occupancy 1,133,466 1,235,560
Equipment 623,239 592,926
Data processing 249,287 308,247
Advertising 220,946 164,273
Regulatory Agency Assessments 373,397 362,074
Office Supplies 234,183 172,402
Other 1,195,190 1,032,963
----------- -----------
TOTAL OTHER EXPENSE 8,254,592 7,879,598
Income before income taxes 3,638,037 2,999,878
Provision for income taxes 1,079,341 777,000
----------- -----------
NET INCOME $ 2,558,696 $ 2,222,878
========== ==========
Per share data:
Net income $ 1.04 $ 0.94
Common stock investment $ 17.03 $ 15.14
Dividends $ 0.250 $ 0.200
Average shares outstanding 2,461,733 2,370,865
See Notes to Unaudited Consolidated Financial Statements.
5
<PAGE>
TRI CITY BANKSHARES CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR SIX MONTHS ENDED JUNE 30, 1995 AND 1994
(UNAUDITED)
1995 1994
----- -----
OPERATING ACTIVITIES
Net income $ 2,558,696 $ 2,222,878
Adjustments to reconcile net
income to net cash provided
by operating activities:
Provision for loan losses 98,139 300,000
Provision for depreciation 767,850 795,501
Decrease in interest receivable 58,660 124,884
Increase in interest payable 251,712 17,645
Net increase (decrease) other 372,444 (162,032)
---------- -----------
NET CASH PROVIDED BY
OPERATING ACTIVITIES 4,107,501 3,298,876
INVESTING ACTIVITIES
Proceeds from maturities
and redemptions of
investment securities 6,611,642 2,875,363
Purchases of investment
securities (3,061,190) (2,853,465)
Net (increase) decrease in loans (11,437,272) 3,658,850
Purchases of premises and
equipment (419,911) (395,840)
----------- -----------
NET CASH (USED) PROVIDED
BY INVESTING ACTIVITIES (8,306,731) 3,284,908
FINANCING ACTIVITIES
Net increase in deposits 27,376,696 4,566,025
Net decrease in short-term
borrowings (11,868,848) (10,830,381)
Cash dividends (467,249) (216,890)
----------- -----------
NET CASH (USED) PROVIDED BY
FINANCING ACTIVITIES 15,040,599 (6,481,246)
----------- -----------
INCREASE IN CASH AND
CASH EQUIVALENTS 10,841,369 102,538
Cash and cash equivalents at the
beginning of the period 28,042,066 22,189,794
----------- -----------
CASH AND CASH EQUIVALENTS AT
THE END OF THE PERIOD $ 38,883,435 $ 22,292,332
=========== ===========
See Notes to Unaudited Consolidated Financial Statements.
6
<PAGE>
TRI CITY BANKSHARES CORPORATION
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(A) BASIS OF PRESENTATION
The unaudited consolidated financial statements included herein omit certain
information and footnote disclosures normally included in annual financial
statements prepared in accordance with generally accepted accounting principles.
Such condensation is permitted by generally accepted accounting principles
applicable to interim financial data and by rules and regulations of the
Securities and Exchange Commission. These financial statements should be read
in conjunction with the financial statements and the notes thereto included in
the latest Annual Report on Form 10-K of Tri City Bankshares Corporation (The
"Corporation") for the year ended December 31, 1994. The December 31, 1994
financial information included herein is derived from the December 31, 1994
Consolidated Balance Sheet of Tri City which is included in the aforesaid Annual
Report on Form 10-K.
In the opinion of the Corporation's management, the accompanying unaudited
consolidated financial statements contain all adjustments consisting of normal
recurring accruals considered necessary to present fairly The Corporation's
financial position as of June 30, 1995 and December 31, 1994 and the results of
its operations and cash flows for the three and six month periods ending
June 30, 1995 and 1994.
7
<PAGE>
(B) ACCOUNTING CHANGES
Effective January 1, 1995, the Corporation adopted Financial Accounting
Standards Board Statement No. 114, "Accounting by Creditors for Impairment of a
Loan." As a result of applying the new rules, certain impaired loans are
reported at the present value of expected future cash flows using the loan's
effective interest rate, or as a practical expedient, at the loan's observable
market price or the fair value of the collateral if the loan is collateral
dependent. The adoption of Statement 114 has not had, and is not expected to
have, a material impact on the Corporation's financial position or results of
operations.
8
<PAGE>
TRI CITY BANKSHARES CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
CHANGES IN FINANCIAL POSITION
Tri City Bankshares Corporation (the "Corporation") posted an increase in net
assets for the first six months of 1995 of $17.3 million (4.8%) compared to a
decrease of $4.3 million (1.2%) during the first six months of 1994. Federal
funds sold increased $14.8 million during the first six months of 1995 compared
to an increase of $3.8 million during the first six months of 1994. Since
deposits have increased and investment securities yields have not been very
attractive, management has kept excess funds in the Federal funds market. When
any investment security which carries an acceptable yield but will not
compromise the Corporation's investment portfolio becomes available, the
Corporation will consider investing funds in such a security. Until then, the
Corporation will try to promote and channel excess funds into the loan
portfolio. During the first six months of 1995, the Corporation increased loan
balances by $11.4 million (5.4%) compared to a decrease of $3.7 million (1.8%)
during the same period of 1994. Loan demand has increased during 1995 due to a
concerted effort by the Corporation to attract new customers through officer
call programs and trying to keep the Corporation's rates competitive with other
banking institutions.
Investment securities decreased $3.5 million (3.8%) during the first six months
of 1995 compared to a decrease of $21.9 thousand (0.2%) in the first six months
of 1994. Since interest rates have remained fairly steady on investments, it
has become harder to find replacement securities for those which are maturing or
being called to issue lower rate bonds and other securities. For this reason,
management is remaining very selective in its choice of which securities to
invest in.
Since the Corporation has not invested heavily in new banking facilities, the
decrease in premises and equipment is due to the normal accrual of depreciation
on the Corporation's existing fixed assets. Other assets decreased $1.0 million
during the first six months of 1995 primarily due to the sale of other real
estate owned.
9
<PAGE>
During the first six months of 1995, deposits increased $27.4 million (9.1%)
compared to an increase of $4.6 million (1.6%) during the first six months of
1994. During the first four months of 1995, the Corporation offered an
attractive interest rate on fifteen month Certificates of Deposit which brought
the Corporation an additional $20.0 million of new deposit money. Total
borrowings for the Corporation decreased $11.9 million (72.3%) in the first half
of 1995 compared to a decrease of $10.8 million (60.4%) in the first half of
1994. This was primarily due to the increase of deposits which provided the
Corporation with enough funds to reduce its borrowings.
Stockholders Equity continues to grow due to increases in net income as well as
dividends re-invested by a majority of stockholders through the Corporation's
Dividend re-investment program.
LIQUIDITY
Management continues to monitor the Corporation's liquidity position and tries
to maintain an adequate balance of interest earning assets and interest bearing
liabilities. Since interest rates have remained stable, management has been
able to maintain an acceptable balance in the Corporation's portfolios.
Management feels comfortable that it has provided for any normal cash flows
which may occur during the normal course of business.
CAPITAL RESOURCES
During the first six months of 1995, two new full-service banking facilities
were opened at Pick'n Save food stores in Oak Creek and Milwaukee, Wisconsin.
Funding for these facilities was generated internally and considered to be
nominal.
The Corporation has plans to open a third full-service banking facility to be
located inside a Pick'n Save food store in Cudahy, WI sometime during the last
half of 1995. The cost of this facility is considered to be nominal. Funding
for this facility will be absorbed by the Corporation's banking subsidiary.
10
<PAGE>
There are no other major capital expenditures which are planned for the current
year. However, management reserves the right to pursue any opportunities which
may become available and which would help to enhance the operations of the
Corporation.
RESULTS OF OPERATIONS
During the second quarter of 1995 net income for the Corporation decreased
$3,900 (0.4%) compared to a decrease of $43,900 (3.8%) during the second quarter
of 1994. Interest income on loans, including fees, increased $792,000 (17.5%)
in the second quarter of 1995 compared to a decrease of $432,500 (8.7%) during
the same period in 1994. Loan demand increased in 1995, and while management
has been making new loans, it has attempted to do so without compromising the
quality of the Corporation's loan portfolio.
Since yields on securities have not been very attractive, management has not
been able to find enough suitable securities to replace maturing and called
securities. Therefore, interest income on investment securities has decreased
$166,800 (10.8%) during the second quarter of 1995 compared to an increase of
$384,900 (33.1%) during the second quarter of 1994. Management intends to
continue to seek investments which will provide a good yield without
compromising the Corporation's investment portfolio. Interest income on
Federal funds sold increased $112,800 (102.2%) during the second quarter of 1995
compared to a decrease of $27,100 (96.3%) during the second quarter of 1994.
Excess funds have been invested in Federal funds sold for short term investment
until needed for investment securities or loans.
Interest expense on deposits increased $722,200 (45.5%) during the second
quarter of 1995 compared to a decrease of $30,400 (1.9%) during the same period
in 1994. Deposit balances increased substantially during 1995 due to the
special promotion offered by the Corporation. The increase in interest expense
on deposits is primarily due to the increase in deposit balances. Rate
increases have also contributed to the increase in deposit interest expense, but
not as significantly. Interest on short-term borrowings decreased in 1995 due
to the decrease in borrowed funds balances.
11
<PAGE>
Total other income for the second quarter of 1995 increased $60,400 (5.0%)
compared to a decrease of $28,500 (2.3%) in the second quarter of 1994. Service
charge income increased $107,500 (15.6%) during this period in 1995 compared to
an increase of $2,700 (0.3%) during the same period in 1994. An increase in the
number of deposit accounts serviced was the principal reason for this increase.
Total other expenses during the second quarter of 1995 increased $239,200 (6.1%)
compared to an increase of $8,000 (0.2%) during the second quarter of 1994 due
to postage increases as well as additional deposit and loan statement mailings.
A summarized change in income for the quarters appears below:
June 30, June 30, 1995
1995 1994 Over(Under)
Three Months Ended (Unaudited) (Unaudited) 1994
----------- ----------- -----------
Revenue and Expenses:(000's)
Interest Income $6,810 $6,072 $ 738
Less: Interest Expense 2,335 1,670 665
------ ------ ------
Net Interest Income 4,475 4,402 73
Less: Provision for Loan Loss 23 150 (127)
Other Operating Expense
Net of Other Operating
Revenues 2,896 2,717 179
------ ------ ------
Income Before Income Taxes 1,556 1,535 21
Tax Provision 438 413 25
------ ------ ------
NET INCOME $1,118 $1,122 $( 4)
====== ====== ======
During the first six months of 1995, net income increased $335,800 (15.1%)
compared to a decrease of $32,000 (1.4%) during the first six months of 1994.
This increase can be attributed entirely to a $400,000 gain realized on the sale
of other real estate owned.
Total interest income increased $1.3 million (10.9%) during the first six months
of 1995 compared to a decrease of $75,600 (0.6%) in the first six months of
1994. Loan balances increased $11.4 million (5.3%) during this same time period
in 1995 compared to a decrease of $3.7 million (1.8%) during this period in
1994. Total interest expense also increased $1.1 million (32.0%) in 1995
compared to a decrease of $100,500 (2.9%) in 1994 due to increased deposit
balances and rates paid on deposits.
12
<PAGE>
Total other income increased $561,700 (23.0%) during the first six months of
1995 compared to an increase of $67,400 (2.8%) during the first six months of
1994. This increase can be primarily attributed to the gain received from the
sale of other real estate owned. Total other expense increased $375,000 (4.8%)
in the first six months of 1995 compared to an increase of $323,200 (4.3%)
during the same period in 1994.
The gain from the sale of other real estate owned is primarily responsible for
the increases in other income and income tax expense during the first six months
of 1995. The provision for loan losses has decreased because management feels
that the reserve for loan losses is adequate to provide for any loan charge-offs
which may occur.
13
<PAGE>
CAPITAL ADEQUACY
Federal banking regulatory agencies have established capital adequacy rules
which take into account risk attributable to balance sheet assets and off-
balance-sheet activities. All banks and bank holding companies must meet a
minimum risk-based capital ratio of 8.0% of which 4.0% must be comprised of
tier 1 capital.
The federal banking agencies also have adopted leverage capital guidelines which
banking organizations must meet. Under these guidelines, the most highly rated
banking organizations must meet a minimum leverage ratio of at least 3.0% tier 1
capital to total assets, while lower rated banking organizations must maintain a
ratio of at least 4.0% to 5.0%.
The risk-based capital ratio for the Corporation is 17.4% and its leverage ratio
is 11.4%.
14
<PAGE>
PART II - OTHER INFORMATION
Item 1 Legal Proceedings
None
Item 2 Changes in Securities
None
Item 3 Defaults Upon Senior Securities
None
Item 4 Submission of Matters to a Vote of Security Holders
On April 11, 1995, Tri City Bankshares Corporation held its annual
stockholders meeting. The only item held for a vote of stockholders
was for the election of Directors for the ensuing year. The number
of shares of common stock represented by proxy and in person was
2,102,640, which represented approximately 85.4% of the total
outstanding shares entitled to vote for directors. There was no
solicitation in opposition to management's nominees for directors and
such nominees were elected pursuant to the following vote:
Director's Name: Frank Bauer
For 2,102,640
Against 0
Withheld 0
Abstain 0
Broker Non-Vote 0
Director's Name: Sanford Fedderly
For 2,102,640
Against 0
Withheld 0
Abstain 0
Broker Non-Vote 0
Director's Name: Richard Fitzgerald
For 2,102,640
Against 0
Withheld 0
Abstain 0
Broker Non-Vote 0
Director's Name: William Gravitter
For 2,102,640
Against 0
Withheld 0
Abstain 0
Broker Non-Vote 0
Director's Name: Henry Karbiner, Jr.
For 2,102,640
Against 0
Withheld 0
Abstain 0
Broker Non-Vote 0
15
<PAGE>
Director's Name: Christ Krantz
For 2,102,640
Against 0
Withheld 0
Abstain 0
Broker Non-Vote 0
Director's Name: Rudie Lauterbach
For 2,102,640
Against 0
Withheld 0
Abstain 0
Broker Non-Vote 0
Director's Name: William McGovern
For 2,102,640
Against 0
Withheld 0
Abstain 0
Broker Non-Vote 0
Director's Name: Ronald Puetz
For 2,102,640
Against 0
Withheld 0
Abstain 0
Broker Non-Vote 0
Director's Name: John Rupcich
For 2,102,640
Against 0
Withheld 0
Abstain 0
Broker Non-Vote 0
Director's Name: David Ulrich
For 2,102,640
Against 0
Withheld 0
Abstain 0
Broker Non-Vote 0
Director's Name: Marilyn Ulrich-Graves
For 2,102,640
Against 0
Withheld 0
Abstain 0
Broker Non-Vote 0
Director's Name: William Werry
For 2,102,640
Against 0
Withheld 0
Abstain 0
Broker Non-Vote 0
Director's Name: Scott Wilson
For 2,102,640
Against 0
Withheld 0
Abstain 0
Broker Non-Vote 0
No other matters were voted on at the annual meeting.
16
<PAGE>
Item 5 Other Information
Beginning in 1996, the Annual Shareholders meeting will be held in
June instead of April.
Item 6 Exhibits and Reports on Form 8-K
Exhibits - None
The Corporation did not file any reports on Form 8-K during the three
month period ended June 30, 1995.
17
<PAGE>
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.
TRI CITY BANKSHARES CORPORATION
DATE: August 10, 1995 /s/Henry Karbiner
----------------- -------------------------
Henry Karbiner, Jr.
Executive Vice President,
Secretary/Treasurer
DATE: August 10, 1995 /s/Thomas W. Vierthaler
----------------- -------------------------
Thomas W. Vierthaler
Vice President and Comptroller
(Chief Accounting Officer)
18
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<ARTICLE> 9
<CIK> 0000313337
<NAME> TRI CITY BANKSHARES CORPORATION
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> JUN-30-1995
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<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 14,800
<TRADING-ASSETS> 0
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<LOANS> 224,714
<ALLOWANCE> 3,482
<TOTAL-ASSETS> 374,626
<DEPOSITS> 327,453
<SHORT-TERM> 4,438
<LIABILITIES-OTHER> 808
<LONG-TERM> 0
<COMMON> 2,464
0
0
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<NET-INCOME> 2,559
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<ALLOWANCE-OPEN> 3,395
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