SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________ to _______________
Commission file number 0-9477
FIRST COMMERCIAL BANCORP, INC.
------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 94-2693725
-------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) identification No.)
865 Howe Avenue, Sacramento, California 95825
---------------------------------------------
(address of principal executive offices) (Zip Code)
(916) 641-3288
--------------
(Registrant's telephone number, including area code)
(Former name, former address, and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant: (1) has filed all
reports required to be filed by Section 13 or 15 (d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
--- ---
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Outstanding at
Class July 31, 1996
----- -------------
Common Stock, $.01 par value 105,765,932
<PAGE>
FIRST COMMERCIAL BANCORP, INC.
INDEX
Page
PART I FINANCIAL INFORMATION
Item 1. Financial Statements:
Consolidated Balance Sheets as of June 30, 1996
and December 31, 1995 -2-
Consolidated Statements of Income for the three and
six month periods ended June 30, 1996 and 1995 -4-
Consolidated Statements of Cash Flows for the six
month periods ended June 30, 1996 and 1995 -5-
Notes to Consolidated Financial Statements -6-
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations -10 -
PART II OTHER INFORMATION
Item 6. Exhibits -18-
Signatures -19-
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1 Financial Statements
First Commercial Bancorp, Inc.
Consolidated Balance Sheets (unaudited)
(dollars expressed in thousands, except per share data)
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
---- ----
ASSETS
------
Cash and cash equivalents:
<S> <C> <C>
Cash and due from banks ................................ $ 8,664 9,768
Federal funds sold ..................................... 9,800 9,000
--------- ---------
Total cash and cash equivalents .................. 18,464 18,768
--------- ---------
Investment securities:
Available for sale, at fair value ....................... 36,297 63,291
Held to maturity, at amortized cost (estimated fair
value of $7,033 and $11,005 at June 30, 1996
and December 31, 1995, respectively) ................... 7,009 10,958
--------- ---------
Total investment securities ...................... 43,306 74,249
--------- ---------
Loans:
Commercial .............................................. 28,037 33,764
Real estate construction and development ................ 5,418 4,094
Real estate mortgage:
Residential ........................................... 20,078 17,824
Commercial ............................................ 22,273 15,021
Consumer and installment ................................ 12,167 3,508
--------- ---------
Total loans ...................................... 87,973 74,211
Unearned discount ........................................ (169) (196)
Allowance for possible loan losses ....................... (5,303) (5,388)
--------- ---------
Net loans ........................................ 82,501 68,627
--------- ---------
Lease receivable, net ...................................... 964 991
Bank premises and equipment, net of accumulated depreciation 2,105 2,247
Accrued interest receivable ................................ 1,446 1,429
Other real estate owned .................................... 1,022 1,380
Other assets ............................................... 2,006 1,844
--------- ---------
Total assets ..................................... $ 151,814 169,535
========= =========
</TABLE>
<PAGE>
FIRST COMMERCIAL BANCORP, INC.
Consolidated Balance Sheets (unaudited)
(dollars expressed in thousands, except per share data)
(continued)
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
---- ----
LIABILITIES
-----------
Deposits:
Demand:
<S> <C> <C>
Non-interest bearing .................................................... $ 24,321 27,517
Interest bearing ........................................................ 16,663 19,367
Savings ................................................................... 34,147 36,986
Time:
Time deposits of $100 or more ........................................... 12,219 18,764
Other time deposits ..................................................... 49,993 53,530
--------- ---------
Total deposits ....................................................... 137,343 156,164
--------- ---------
Accrued interest payable ....................................................... 605 487
Accrued and other liabilities .................................................. 1,736 2,805
12% convertible debentures ..................................................... 6,500 6,500
--------- ---------
Total liabilities .................................................... 146,184 165,956
--------- ---------
STOCKHOLDERS' EQUITY
--------------------
Preferred stock, $.01 par value, 5,000,000 shares authorized;
no shares issued and outstanding
Commonstock, $.01 par value, 250,000,000 shares authorized; 105,765,932 shares
issued and outstanding at June 30, 1996 and 69,675,110 shares issued and
outstanding at December 31, 1995 ......................................... 1,058 697
Capital surplus ................................................................ 36,126 33,251
Retained deficit ............................................................... (31,456) (30,311)
Net fair value adjustment for securities available for sale .................... (98) (58)
--------- ---------
Total stockholders' equity ........................................... 5,630 3,579
--------- ---------
Total liabilities and stockholders' equity ........................... $ 151,814 169,535
========= =========
</TABLE>
See accompanying notes to consolidated financial statements
<PAGE>
FIRST COMMERCIAL BANCORP, INC.
Consolidated Statements of Income (unaudited)
(dollars expressed in thousands, except per share data)
<TABLE>
<CAPTION>
Three months ended Six months ended
June 30, June 30,
1996 1995 1996 1995
---- ---- ---- ----
Interest income:
<S> <C> <C> <C> <C>
Interest and fees on loans .................................... $ 2,283 2,668 3,933 5,564
Investment securities ......................................... 707 457 1,668 716
Federal funds sold and other .................................. 139 502 264 1,123
-------- -------- -------- --------
Total interest income ................................... 3,129 3,627 5,865 7,403
-------- -------- -------- --------
Interest expense:
Deposits:
Interest-bearing demand .................................... 64 96 154 202
Savings .................................................... 486 284 731 637
Time deposits of $100 or more .............................. 142 297 353 576
Other time deposits ........................................ 418 936 1,191 1,638
Other borrowings ............................................... 214 47 452 59
-------- -------- -------- --------
Total interest expense .................................. 1,324 1,660 2,881 3,112
-------- -------- -------- --------
Net interest income ..................................... 1,805 1,967 2,984 4,291
Provision for possible loan losses ................................ 450 3,245 1,050 3,245
-------- -------- -------- --------
Net interest income after provision
for possible loan losses .............................. 1,355 (1,278) 1,934 1,046
-------- -------- -------- --------
Noninterest income:
Service charges on deposit accounts
and customer service fees ................................... 187 226 404 491
Loan servicing fees, net ....................................... 2 6 2 18
Other income ................................................... 63 198 83 345
-------- -------- -------- --------
Total noninterest income ................................ 252 430 489 854
-------- -------- -------- --------
Noninterest expense:
Salaries and employee benefits ................................. 551 988 1,234 2,212
Occupancy, net of rental income ................................ 306 674 485 1,013
Furniture and equipment ........................................ 116 163 232 323
Federal Deposit Insurance
Corporation premiums ........................................ 107 177 221 354
Postage, printing and supplies ................................. 132 67 260 139
Data processing fees ........................................... 86 27 207 44
Legal, examination and professional fees ....................... 27 206 305 432
Communications ................................................. 4 21 17 41
Losses and expenses on foreclosed
real estate, net of gains ................................... (35) 791 242 2,010
Other expenses ................................................. 548 277 945 610
-------- -------- -------- --------
Total noninterest expense ............................... 1,842 3,391 4,148 7,178
-------- -------- -------- --------
Income (loss) before benefit (provision) for income taxes (235) (4,239) (1,725) (5,278)
Benefit (provision) for income taxes .............................. 250 (2) 580 (2)
Net income (loss) ....................................... $ 15 (4,241) (1,145) (5,280)
======== ======== ======== ========
Income (loss) per common shares ................................... $ -- (0.91) (0.01) (1.13)
======== ======== ======== ========
Weighted average shares of common
stock and common stock equivalents
outstanding (in thousands) ....................................... 87,922 4,675 78,799 4,675
======== ======== ======== ========
</TABLE>
See accompanying notes to consolidated financial statements
<PAGE>
FIRST COMMERCIAL BANCORP, INC.
Consolidated Statements of Cash Flows (unaudited)
(dollars expressed in thousands)
<TABLE>
<CAPTION>
Six months ended
June 30,
--------
1996 1995
---- ----
Cash flows from operating activities:
<S> <C> <C>
Net income (loss) ............................................ $ (1,145) (5,280)
Adjustments to reconcile net income (loss) to net cash:
Depreciation and amortization of bank premises and equipment 171 266
Amortization, net of accretion ............................. (161) 89
Provision for possible loan losses ......................... 1,050 3,245
(Increase) decrease in accrued interest receivable ......... 17 29
Interest accrued on liabilities ............................ 2,881 3,112
Payments of interest on liabilities ........................ (2,763) (3,128)
Benefit for income taxes ................................... 580 --
Other ...................................................... (1,106) 1,324
-------- --------
Net cash provided by (used in) operating activities .... (476) (343)
-------- --------
Cash flows from investing activities:
Maturities of investment securities .......................... 59,870 2,296
Purchases of investment securities ........................... (28,805) (15,000)
Net (increase) decrease in loans ............................. (15,838) 27,015
Recoveries of loans previously charged off ................... 101 234
Purchases of bank premises and equipment ..................... (28) (58)
Proceeds from sale of other real estate owned ................ 1,410 2,901
Other investing activities ................................... (310) 250
-------- --------
Net cash provided by (used in) investing activities .... 16,400 17,638
-------- --------
Cash flows from financing activities:
Increase (decrease) in deposits .............................. (18,821) (55,183)
Proceeds from issuance of common stock ....................... 2,593 --
-------- --------
Net cash provided by (used in) financing activities .... (16,228) (55,183)
-------- --------
Net increase (decrease) in cash and cash equivalents ... (304) (37,888)
Cash and cash equivalents, beginning of period ................... 18,768 86,259
-------- --------
Cash and cash equivalents, end of period ......................... $ 18,464 48,371
Non cash investing and financing activities:
Loans transferred to foreclosed real estate .................. $ 894 3,899
Loans to facilitate sale of foreclosed real estate ........... 54 1,672
======== ========
</TABLE>
See accompanying notes to consolidated financial statements
<PAGE>
FIRST COMMERCIAL BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) Basis of Presentation
The accompanying consolidated financial statements of First Commercial
Bancorp, Inc. (FCB) are unaudited and should be read in conjunction with the
consolidated financial statements contained in the 1995 annual report on Form
10-K. In the opinion of management, all adjustments, consisting of normal
recurring accruals considered necessary for a fair presentation of the results
of operations for the interim periods presented herein, have been included.
Operating results for the three and six months ended June 30, 1996 are not
necessarily indicative of the results that may be expected for the year ending
December 31, 1996.
The consolidated financial statements include the accounts of FCB and
its sole subsidiary, First Commercial Bank (Bank). As more fully described in
Note 2, FCB executed an Amended and Restated Stock Purchase Agreement (Stock
Purchase Agreement) as of August 7, 1995, with First Banks, Inc., St. Louis,
Missouri (First Banks) and Mr. James F. Dierberg, Chairman, President and Chief
Executive Officer of First Banks, to provide for the recapitalization of FCB and
the Bank. As a result, First Banks owned 61.46% and 93.29% of the outstanding
voting stock of FCB at June 30, 1996 and December 31, 1995, respectively.
As more fully described in note 2, on February 16, 1996, the
Securities and Exchange Commission declared effective an Amended Registration
Statement of FCB for an offering to its existing shareholders other than First
Banks, of an aggregate of 50 million shares of newly-issued common stock. In
addition, 9.69 million shares of common stock were offered in exchange for
certain outstanding dividend obligations and accrued interest thereon of FCB.
The offering price was $0.10 per share and was completed during the second
quarter of 1996.
The net income (loss) per share has been computed using the weighted
average number of shares of common stock outstanding during the period. The
outstanding stock options and the conversion of the outstanding convertible
debentures have not been included in the computation as they are antidilutive.
(2) Recapitalization
On August 7, 1995, FCB and the Bank entered into the Stock Purchase
Agreement with James F. Dierberg, an individual, and First Banks, a Missouri
bank holding company, which provides for the recapitalization of FCB and the
Bank. The Stock Purchase Agreement amended a previous agreement under which Mr.
Dierberg had provided interim financing for the Bank in the form of a purchase
of $1.5 million of nonvoting preferred stock. The Stock Purchase Agreement, and
subsequent amendments entered into with First Banks, resulted in a series of
transactions as follows:
a. On August 22, 1995, First Banks acquired the Bank preferred stock from Mr.
Dierberg for $1.5 million.
b. On August 23, 1995, First Banks purchased 116,666,667 shares of Bank common
stock for an additional $3.5 million.
c. On October 31, 1995, First Banks purchased a convertible debenture of FCB
for $1.5 million.
d. Upon the completion of the Special Shareholders' Meeting on December 27,
1995, the shares of Bank preferred and common stock held by First Banks
were exchanged for 50,000,000 shares of FCB common stock. In addition,
First Banks purchased a convertible debenture of FCB for $5.0 million.
e. On December 28, 1995, First Banks purchased an additional 15,000,000 shares
of FCB common stock for $1.5 million.
<PAGE>
On February 16, 1996, after its Amended Registration Statement was
declared effective by the Securities and Exchange Commission, FCB commenced an
offering of an aggregate of 59.69 million shares of newly-issued common stock.
The offering was composed of: (a) an offering to its existing shareholders,
other than First Banks, of 50 million shares at $.10 per share (the Rights
Offering); (b) an offering to individuals who are not shareholders of FCB of a
maximum of 10 million of the shares available in the Rights Offering which are
not otherwise subscribed (the Public Offering); and (c) an offering of 9.69
million shares in exchange for certain outstanding dividend obligations and
accrued interest thereon of FCB (the Dividend Exchange Offering). The Rights
Offering and the Public Offering expired on May 10, 1996. The shares issued
pursuant to the offering was approximately 36.09 million in exchange for $2.97
million in cash and $643,000 of outstanding dividend obligations. The offering
provided $3.24 million of capital to FCB, net of underwriting expenditures of
$373,000. As a result of the offering, First Banks' ownership was reduced to
61.46% prior to the conversion of the debentures, or 76.72% if the debentures
had been converted as of June 30, 1996.
The proceeds from these transactions, with the exception of $690,000
retained by the parent company for corporate expenses and certain offering
expenses incurred in the above transactions, were used to increase the capital
of the Bank. As a result of these transactions, the capital ratios of FCB and
the Bank as of June 30, 1996 and December 31, 1995 were as follows:
<TABLE>
<CAPTION>
FCB Bank
--- ----
June 30, December 31, June 30, December 31,
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Total risk-based capital ratio 6.74% 4.99% 12.95% 12.66%
Tier I risk-based capital ratio 5.44 3.68 11.65 11.35
Leverage ratio 3.69 2.14 7.89 6.58
</TABLE>
(3) Regulatory Agreements
For each of the four years ended December 31, 1995, FCB and the Bank
have incurred substantial losses from operations. These losses were associated
primarily with the emphasis which the Bank had placed on real estate based
lending and the deterioration of the California economy during that period,
particularly as it related to the real estate sector. Because of the magnitude
of problem assets which arose and the reduction of the Bank's capital due to the
losses, FCB has been operating under the terms of a Memorandum of Understanding
with the Federal Reserve Bank of San Francisco (MOU), and the Bank has been
operating under the terms of a Cease and Desist Order issued by the Federal
Deposit Insurance Corporation, a Final Order issued by the State Banking
Department of California and several Capital Impairment Orders (collectively the
"Orders"). The MOU and the Orders have placed significant restrictions on FCB
and the Bank including restrictions on the payment of dividends, requirements of
specified capital levels and reductions of classified assets. As a result of the
recapitalization described in Note 2 and numerous actions taken by FCB,
management believes that FCB is in substantial compliance with the MOU and the
Orders. However, full compliance, with respect to levels of classified assets,
the attainment of consistent earnings and the requirements of the Capital
Impairment Orders has not yet been achieved.
As a result of the completion of the transactions pursuant to the Stock
Purchase Agreement with First Banks and Mr. James F. Dierberg, and the stock
offering, FCB and the Bank were substantially recapitalized. However, FCB has
incurred a net loss from operations through June 30, 1996. Furthermore, the
effect of the portfolio of problem assets and the substantial interest cost
associated with the convertible debentures issued to First Banks may impair
FCB's ability to generate sufficient future profitability to satisfy all of
FCB's regulatory agreements. Consequently, there can be no assurance that: (1)
FCB will not incur substantial additional losses in the liquidation of its
portfolio of problem assets; (2) continued losses will not adversely affect
FCB's ability to comply with the requirements of the MOU and the Orders; or (3)
because of the preceding, FCB and the Bank may not be required to raise
additional capital or have additional regulatory agreements imposed upon them in
the future.
<PAGE>
(4) Income Taxes
FCB and the Bank filed a consolidated federal income tax return for the
period prior to their respective acquisitions by First Banks. Due to the
structure of the transaction described in Note 2, current income tax regulations
prohibit the Bank from filing a consolidated income tax return with FCB for the
period after August 22, 1995, because the acquisition of the Bank stock by First
Banks caused its disaffiliation with FCB for tax purposes. The Bank will join in
filing a consolidated federal income tax return with First Banks for the period
from August 23, 1995 until the issuance of stock upon the completion of the
rights offering on May 17, 1996, when First Banks no longer owned 80% of the
Bank either directly or indirectly. Subsequent to the exchange of Bank stock and
the acquisition of additional FCB stock by First Banks, FCB will join in filing
a consolidated federal income tax return with First Banks for the period from
December 28, 1995 through May 17, 1996.
Neither FCB nor the Bank are permitted to be included in the
consolidated return of First Banks following their tax disaffiliation on May 18,
1996 for five years. Concurrently, the Bank, which was disaffiliated from FCB on
August 22, 1995, is not permitted to file a consolidated return with FCB for
five years. However, regulations allow FCB to request permission from the
Internal Revenue Service to join in filing a consolidated return with the Bank.
In order to receive this permission, FCB will request a waiver from the Internal
Revenue Service in the form of a private letter ruling, prior to the due date of
the consolidated return. There can be no assurance that a waiver to allow such a
reaffiliation will be granted.
(5) Transactions with Related Parties
The Bank has $18.6 million in whole loans and loan participations
outstanding at June 30, 1996, that were purchased from banks that are affiliated
with First Banks. There were no whole loans or loan participations from
affiliates outstanding at December 31, 1995. These loans and loan participations
were acquired at interest rates and terms prevailing at the dates of their
purchase and under credit standards and policies followed by the Bank.
The Bank has entered into a management services agreement with First
Banks and a cost sharing agreement with First Bank & Trust, Irvine, California,
a wholly owned subsidiary of First Banks. The management services agreement
provides that the Bank will compensate First Banks on an hourly basis for its
use of personnel for various functions, including internal auditing, loan
review, income tax return preparation and assistance, accounting and other
management and administrative services. Hourly rates for such services compare
favorably with those of similar services from unrelated sources, as well as the
internal costs of the Bank personnel which were used previously. It is estimated
that the aggregate cost for such services will be more economical than those
previously incurred separately by the Bank.
Because of its affiliation through First Banks and the geographic
proximity of certain of their banking offices, the Bank and First Bank & Trust
share the cost of certain personnel and services which are used by both banks.
This includes the salaries and benefits of certain loan and administrative
personnel. The banks have entered into a cost sharing agreement for the purpose
of allocating these expenses between them. Expenses associated with loan
origination personnel are allocated based on the relative loan volume between
the banks.
Costs of other personnel are allocated on an hourly basis.
The Bank also entered into a data processing agreement with FirstServ,
Inc., a wholly owned data processing subsidiary of First Banks, beginning in
December 1995. The fees for such services are substantially less than the Bank
had incurred in connection with its previous data processing operation or that
it would incur with non-affiliated vendors.
The aggregate fees paid by the Bank in connection with the management
services agreement, the cost sharing agreement and the data processing agreement
were $672,000 for the six months ended June 30, 1996. No such fees were incurred
during the six months ended June 30, 1995.
<PAGE>
The Bank purchases certain services and supplies from or through First
Banks or one of its subsidiaries. This includes insurance policies, office
supplies and other commonly used banking products which can be acquired in this
manner more economically than had previously been possible for the Bank
separately. These items are purchased on a cost pass-through basis and the
amount of such purchases is not material to FCB's consolidated financial
position or results of operations.
As discussed in Note 2, in 1995, First Banks purchased convertible
debentures from FCB totaling $6.5 million which bear interest at 12% annually.
Interest is payable when, at the discretion of the Board of Directors, it is
prudent to do so, and it is permitted by regulatory authorities. Interest
expense accrued on these debentures was $216,000 and $432,000 for the three and
six month periods ended June 30, 1996.
<PAGE>
Item 2: Management's Discussion and Analysis of Financial
Condition and Results of Operations
FCB is a registered Sacramento, California-based bank holding company
which reincorporated in Delaware in 1990 and conducts business through the Bank,
a California state-chartered bank. The Bank commenced operations in 1979, and
operates a commercial banking business through its headquarters office and six
branch offices located in Sacramento (headquarters and one branch), Roseville
(two branches), San Francisco, Concord and Campbell, California. At June 30,
1996, FCB had approximately $151.8 million in total assets, $87.8 million in
total loans, net of unearned discount, $137.3 million in total deposits, and
$5.63 million in total stockholders' equity.
Through the Bank, FCB offers a broad range of commercial and personal
banking services including certificate of deposit accounts, individual
retirement and other time deposit accounts, checking and other demand deposit
accounts, interest checking accounts, savings accounts and money market
accounts. Loans include commercial, financial, agricultural, real estate
construction and development, residential real estate and consumer and
installment loans. Other financial services include credit-related insurance,
automatic teller machines and safe deposit boxes.
General
FCB has reported losses from operations for each of the four years
ended December 31, 1995, as well as the six months ended June 30, 1996. As a
result of these losses, FCB and the Bank have been operating under the terms of
a Memorandum of Understanding (MOU) and under certain regulatory orders (Orders)
which have placed significant restrictions on their operations, including
restrictions on the payment of dividends, requirements for the attainment of
specified capital levels and reductions of classified assets. Through the
recapitalization of FCB as described in Note 2 to the accompanying consolidated
financial statements, combined with numerous other actions which have been
taken, FCB and the Bank believe they are in substantial compliance with most of
the requirements of the MOU and the Orders. However, while the operating results
of FCB and the Bank have improved, there continues to be an excessive level of
problem assets. Based on this past performance, the Bank has been designated a
problem bank and considered "troubled" for all regulatory purposes.
In 1995, FCB and the Bank pursued a strategy of reducing the Bank's
size in order to decrease expenses and optimize its capital position, while
endeavoring to attract a substantial infusion of new capital. In August 1995,
FCB and the Bank entered into a Stock Purchase Agreement with First Banks and
Mr. James F. Dierberg, which ultimately resulted in the purchase of $6.5 million
of newly-issued common stock of FCB and $6.5 million of convertible debentures
by First Banks. These transactions, which were completed in December 1995,
recapitalized FCB, providing it with the opportunity to discontinue its strategy
of asset diminution. Consequently, in 1996, FCB has focused on the continued
reduction of its portfolio of classified assets and the rebuilding of its
banking franchise.
To facilitate accomplishing these objectives, the Bank strengthened its
allowance for possible loan losses by providing $600,000 and $450,000 for
possible loan losses during the first and second quarters of 1996, thereby
increasing the ratio of allowance for possible loan losses to nonperforming
loans to 231.27% at June 30, 1996 from 119.05% at December 31, 1995. At the same
time, the Bank pursued its problem borrowers to reduce its exposure to further
losses. This resulted in a decrease of its classified assets from $20.59 million
at December 31, 1995 to $17.36 million at June 30, 1996.
Financial Condition
FCB's total assets were $151.8 million and $169.5 million at June 30,
1996 and December 31, 1995, respectively, in comparison to $239.3 million at
December 31, 1994. As the Bank has endeavored to reduce its problem assets, it
has maintained a generally conservative environment in considering new credits.
<PAGE>
This, combined with attrition of marginal credits from the Bank, has contributed
to the reduction of the Bank's loan portfolio. Since loans typically carry
interest rates which are higher than alternative uses of the Bank's funds, such
as investment securities and federal funds sold, this has tended to reduce the
Bank's net interest income. To replenish its portfolio with high quality loans,
more effectively using a portion of the liquidity which had been increasing in
the Bank, and contribute toward improving the Bank's net interest income, in
March 1996, the Bank began purchasing whole loans and loan participations from
banks affiliated with First Banks. While this has contributed to improved
operating results for the three and six month periods ended June 30, 1996, it is
the primary reason that total loans, net of unearned discount, increased from
$74.0 million at December 31, 1995 to $87.8 million at June 30, 1996.
Because of the attrition occurring in the Bank's loan portfolio and the
substantial liquidity which was being generated, the Bank elected to
conservatively price its deposit products during the three and six month periods
ended June 30, 1996. Consequently, total deposits decreased from $156.2 million
at December 31, 1995 to $137.3 million at June 30, 1996, a decrease of $18.9
million. The most significant part of this was a decrease in the amount of time
deposits of $100,000 or more which decreased to $12.2 million at June 30, 1996
from $18.8 million at December 31, 1995. Since the interest rate differentials
between these time deposits and investment securities were not adequate to
provide for costs of operations and a reasonable profit, the Bank has not
aggressively pursued these deposits as a principal funding source.
The principal source of funds for the loan purchases and the deposit
attrition was provided by the investment securities portfolio which decreased
from $74.2 million at December 31, 1995 to $43.3 million at June 30, 1996.
Results of Operations
Net Income
The net income for the three months ended June 30, 1996 was $15,000,
in comparison to a net loss of $4.24 million for the same period in 1995. For
the six months ended June 30, 1996 and 1995, the net loss was $1.15 million and
$5.28 million, respectively. The improved operating results for 1996 are a
result of several factors including the recapitalization of FCB and the Bank and
reductions in the required levels of provisions for possible loan losses along
with continued decreases in noninterest expense. The reduction in noninterest
expense accelerated during January 1995 when the Bank sold its San Diego branch
office, and continued in April 1995, upon closure of its Santa Rosa branch
office. At the same time, the Bank was reducing its reliance on title and escrow
deposits, shrinking its loan portfolio and decreasing its staff and other
operating costs. Consequently, while total assets were $239.3 million at
December 31, 1994, they have been reduced to $151.8 million at June 30, 1996.
This reduction in the size of the Bank achieved the initial objective which was
to reduce assets in order to optimize the Bank's capital base and decrease
expenses. However, it also reduced the assets on which the Bank earned interest.
Consequently, the Bank's primary source of profitability, its net interest
income, was reduced to $1.81 million and $2.98 million for the three and six
month periods ended June 30, 1996 from $1.97 million and $4.29 million for the
same periods in 1995.
Recognizing the prospect of a significantly smaller income base, the
Bank also focused on expense reduction during 1995 and 1996. This included not
only the expenses associated with the closed branches, but significant staff
reductions in continuing branches and the home office. Headquarters office space
was subleased, data processing services were transferred to First Banks' system,
and a conscientious cost reduction process was enforced. This resulted in a
reduction of noninterest expense to $1.84 million and $4.15 million for the
three and six month periods ended June 30, 1996 from $3.39 million, and $7.18
million for the same periods in 1995.
Finally, FCB has benefited from its inclusion in the consolidated
income tax return of First Banks. For the three and six month periods ended June
30, 1995, no tax benefit of the losses was available, since any recognition of
benefits was dependent upon the ability of FCB and the Bank to generate
sufficient future taxable income. As more fully described in Note 4, FCB and the
<PAGE>
Bank were included in the consolidated return of First Banks from January 1,
1996 through May 17, 1996, allowing them to receive the benefit of any losses
incurred which were offset against the taxable income of First Banks. This
resulted in the recognition of a net tax benefit of $250,000 and $580,000 for
the three and six month periods ended June 30, 1996.
Net Interest Income
Net interest income was $1.81 million and $2.98 million, or 4.97% and
4.02% of average interest-earning assets, for the three month and six month
periods ended June 30, 1996, respectively, in comparison to $1.97 million and
$4.29 million, or 4.66% and 4.95% of average interest-earning assets,
respectively, for the same periods in 1995. Interest and fees earned on the loan
portfolio is the primary source of income of FCB. The reduction in interest
income from loans reflects the overall decrease in the amount of loans
outstanding, particularly in the commercial and real estate construction
portfolios. Total loans, net of unearned discount, were $87.8 million and $74.0
million at June 30, 1996 and December 31, 1995, respectively, in comparison to
$130.2 at December 31, 1994.
Loan income is critical to the profitability of the Bank. While loans
carry with them inherent credit risks, this can be controlled by effective loan
underwriting and loan approval procedures, a strong credit administration and
risk management system and periodic independent loan reviews. At the same time,
loans typically have interest rates and fees which are substantially higher than
alternative earning assets, such as investment securities and Federal funds
sold. For the three and six month periods ended June 30, 1996, the yield on the
Bank's loan portfolio was 10.41% and 9.73%, compared to 6.00% and 5.78% on its
investment portfolio, respectively.
While the reduction in the loan portfolio contributed to a substantial
decline in total interest income, the decrease in the cost of the Bank's funding
sources was less significant. Total interest expense was $1.32 million and $2.88
million for the three and six month periods ended June 30, 1996, or 4.30% and
4.53% of average interest-bearing liabilities, compared with $1.66 million and
$3.11 million, or 4.49% and 4.15% for the same periods in 1995. The decrease in
interest expense associated with the decline in deposit balances was offset by
increases in interest rates during 1995 that continued into 1996 and the
interest cost of the 12% convertible debentures issued in connection with the
recapitalization of FCB. Interest expense on the debentures totaled $216,000 and
$432,000 for the three and six month periods ended June 30, 1996. FCB's
recapitalization is more fully described in note 2 to the accompanying
consolidated financial statements.
<PAGE>
The following table sets forth certain information relating to FCB's
average balance sheet, and reflects the average yield earned on interest-earning
assets, the average cost of interest-bearing liabilities and the resulting net
interest income for the three and six month periods ended June 30:
<TABLE>
<CAPTION>
Three months ended June 30, Six months ended June 30,
1996 1995 1996 1995
---------------------- ------------------------ --------------------- ----------------------
Interest Interest Interest Interest
Average income/ Yield Average income/ Yield/ Average Income/ Yield/ Average Income/ Yield/
balance expense rate balance expense rate balance expense rate balance expense rate
------- ------------ ------- ------- ----- ------- ------- ----- ------- ------- -----
(dollars expressed in thousands)
Assets
Interest-earning assets:
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Loans $88,223 2,283 10.41%$106,038 2,668 10.09% $ 81,323 3,933 9.73% $112,606 5,564 9.96%
Investment securities 47,357 707 6.00 29,992 457 6.11 58,062 1,668 5.78 23,891 716 6.04
Federal funds sold and other 10,402 139 5.37 33,113 502 6.08 9,916 264 5.35 38,188 1,123 5.93
------ --- ------ --- ----- --- ------ -----
Total interest-earning assets 145,982 3,129 8.62 169,143 3,627 8.60 149,301 5,865 7.90 174,685 7,403 8.55
----- ----- ----- -----
Nonearning assets 8,001 16,932 8,843 18,887
------- ------- ------- --------
Total assets $ 153,983 $186,075 $158,144 $193,572
========= ======== ======== ========
Liabilities and Stockholders' Equity
Interest-bearing liabilities:
Interest-bearing demand deposits $18,146 64 1.42%$ 21,743 96 1.77% $ 18,783 154 1.65% $ 22,906 202 1.78%
Savings deposits 34,339 486 5.69 44,119 284 2.58 35,858 731 4.10 49,342 637 2.60
Time deposits of $100 or more 10,991 142 5.20 21,474 297 5.55 12,962 353 5.48 22,137 576 5.25
Other time deposits 51,450 418 3.27 60,075 936 6.25 53,088 1,191 4.51 56,028 1,638 5.90
------ ----- ------ --- ------ ----- ------ -----
Total interest-bearing deposits 114,926 1,110 3.88 147,411 1,613 4.39 120,691 2,429 4.05 150,413 3,053 4.10
Notes payable and other 7,319 214 11.76 823 47 22.92 7,153 452 12.71 823 59 14.46
------- ----- ------- -- ------- ----- ------- -----
Total interest-bearing
liabilities 122,245 1,324 4.36 148,234 1,660 4.49 127,844 2,881 4.53 151,236 3,112 4.15
----- ----- ----- -----
Noninterest-bearing liabilities:
Demand deposits 24,082 33,806 24,563 37,819
Other liabilities 3,631 289 2,272 341
------- ------- ------- -------
Total liabilities 149,958 182,329 154,679 189,396
Stockholders' equity 4,025 3,746 3,465 4,176
------- ------- ------- -------
Total liabilities and
tockholders'equity $153,983 $186,075 $158,144 $193,572
======== ======== ======== ========
Net interest income 1,805 1,967 2,984 4,291
===== ===== ===== =====
Net interest margin 4.97% 4.66% 4.02% 4.95%
==== ==== ==== ====
</TABLE>
Provision for Possible Loan Losses
The provision for possible loan losses was $450,000 and $1.05 million
for the three and six month periods ended June 30, 1996, compared to $3.25
million for the same periods in 1995. The provision reflects the substantial
inventory of unresolved problem loans remaining which have the potential of
generating additional losses. Consequently, the Bank has undertaken to
continually strengthen the allowance for possible loan losses relative to these
problem loans until such time as they can be significantly reduced.
Net loan charge-offs were $951,000 and $1.14 million for the three and
six month periods ended June 30, 1996, in comparison to $5.25 million and $5.84
million for the same periods in 1995. The allowance for possible loan losses was
$5.30 million, or 6.04% of total loans, as of June 30, 1996, compared to $5.39
million, or 7.28% of total loans, as of December 31, 1995. Tables summarizing
nonperforming assets, past due loans and loan loss experience are presented in
the "Lending and Credit Management" section of this Form 10-Q.
<PAGE>
Noninterest Income
Noninterest income decreased to $252,000 and $489,000 for the three
and six month periods ended June 30, 1996, respectively, from $431,000 and
$854,000 for the same periods in 1995. Noninterest income consists primarily of
service charges on deposit accounts and other related fees, other non-yield
related fees and charges, and other income. Service charges on deposit accounts
decreased to $187,000 and $404,000 for the three and six month periods ended
June 30, 1996 from $226,000 and $491,000 for the same periods in 1995. This
decrease reflects the decrease in deposit accounts subject to service charges as
a result of the sale or closing of branches during 1995.
Noninterest Expense
Noninterest expense was $1.84 million and $4.15 million for the three
and six month periods ended June 30, 1996, respectively, in comparison to $3.39
million and $7.18 million for the same periods in 1995, representing a decrease
of $1.55 million and $3.03 million or 45.7% and 42.2%, respectively. The
decrease is primarily related to salaries and employee benefits, occupancy, net
of rental, and reduced losses and expenses on foreclosed property, net of gains.
Salaries and employee benefits decreased to $551,000 and $1.23 million
for the three and six month period ended June 30, 1996, respectively, in
comparison to $988,000 and $2.21 million for the same periods in 1995. The
decrease reflects the downsizing of the organization through the sale of one
branch in January 1995, the closure of a branch in April 1995 and the conversion
and centralization of FCB's data processing and various operating functions into
First Banks' systems in December 1995.
Costs of holding and disposing of foreclosed real estate, net of
gains, resulted in income of $35,000 for the three months ended June 30, 1996
and an expense of $242,000 for the six months ended June 30, 1996, compared to
an expense of $791,000 and $2.01 million for the same periods in 1995. This
decrease in expense from 1995 is primarily attributable to the overall reduction
of foreclosed property from $5.22 million at December 31, 1994 to $1.38 million
and $1.02 million at December 31, 1995 and June 30, 1996, respectively.
The Federal Deposit Insurance Corporation (FDIC) voted to reduce the
deposit insurance premiums paid by most members of the Bank Insurance Fund (BIF)
and to keep existing assessment rates intact for members of the Savings
Association Insurance Fund (SAIF). Under the reduced assessment rate schedule
for the BIF, the best-rated institutions will pay the statutory annual minimum
payment of $2,000, compared to the previous rate of 23 cents per $100.00 of
assessable deposits. The weakest BIF and SAIF institutions will continue to pay
27 cents and 31 cents per $100.00 of assessable deposits, respectively. The Bank
is a BIF depository institution and was assessed 27 cents per $100.00 of
assessable deposits for the three and six month periods ended June 30, 1996.
Lending and Credit Management
Interest earned on the loan portfolio is the primary source of income
of FCB. Total loans, net of unearned discount, represented 57.8%, 43.7% and
54.4% of total assets as of June 30, 1996, December 31, 1995 and December 31,
1994, respectively. FCB experienced a decrease in its loan portfolio during
1995, due to the Company's Capital Restoration plan which included the reduction
or shrinking of assets. The loan portfolio increased during the six month period
ended June 30, 1996 due to increased lending activity, primarily through the
purchase of loan participations from affiliated banks. Total loans, net of
unearned discount, were $87.8 million, $74.0 million and $130.2 million at June
30, 1996, December 31, 1995 and December 31, 1994, respectively.
FCB's nonperforming loans consist of loans on a nonaccrual status and
loans on which the original terms have been restructured. Impaired loans,
consisting of nonaccrual loans, were $2.3 million and $4.5 million at June 30,
1996 and December 31, 1995, respectively.
<PAGE>
<TABLE>
<CAPTION>
The following is a summary of nonperforming assets and past due loans
at the dates indicated:
June 30, December 31,
1996 1995
---- ----
(dollars expressed in thousands)
Nonperforming assets:
<S> <C> <C>
Nonperforming loans $ 2,293 4,526
Other real estate 1,022 1,380
----- -----
Total nonperforming assets $ 3,315 5,906
====== =====
Loans past due:
Over 30 days to 90 days $ 2,895 3,015
Over 90 days and still accruing 862 2,249
-- ------ -----
Total past due loans $ 3,757 5,264
====== =====
Loans, net of unearned discount $ 87,804 74,015
====== ======
Allowance for possible loan losses to loans 6.04% 7.28%
Nonperforming loans to loans 2.61 6.11
Allowance for possible loan losses to
nonperforming loans 231.27 119.05
Nonperforming assets to loans and foreclosed assets 3.73 7.83
==== ====
</TABLE>
The allowance for possible loan losses is based on past loan loss
experience, on management's evaluation of the quality of the loans in the
portfolio and on the anticipated effect of national and local economic
conditions relative to the ability of loan customers to repay. Each quarter, the
allowance for possible loan losses is reviewed relative to FCB's internal watch
list and other data utilized to determine its adequacy. The provision for
possible loan losses is management's estimate of the amount necessary to
maintain the allowance at a level consistent with this evaluation. As
adjustments to the allowance for possible loan losses are considered necessary,
they are reflected in the results of operations.
<TABLE>
<CAPTION>
The following is a summary of the loan loss experience for the three and six month periods ended June 30:
Three months ended Six months ended
June 30, June 30,
-------- --------
1996 1995 1996 1995
---- ---- ---- ----
(dollars expressed in thousands)
<S> <C> <C> <C> <C>
Allowance for possible loan losses, beginning of period $ 5,804 6,823 5,388 7,437
Loans charged-off (1,007) (5,332) (1,236) (6,072)
Recoveries of loans previously charged-off 56 81 101 234
------ ------ ------ ------
Net loan (charge-offs) recoveries (951) (5,251) (1,135) (5,838)
------ ------ ------ ------
Reduction in allowance for loans transferred
with branch sale - - (27)
Provision for possible loan losses 450 3,245 1,050 3,245
----- ----- ----- -----
Allowance for possible loan losses, end of period $ 5,303 4,817 5,303 4,817
===== ===== ===== =====
</TABLE>
Interest Rate Risk Management
Managing interest rate risk is fundamental to banking. Banking
institutions manage the inherently different maturity and repricing
characteristics of the lending and deposit-taking activities to achieve a
desired interest rate sensitivity position and to limit their exposure to
interest rate risk. The maturity and repricing characteristics inherent to the
lending and deposit-taking activities tend to create a naturally
liability-sensitive interest rate risk profile.
<PAGE>
FCB's objective regarding interest rate risk management is to position
FCB such that changes in interest rates do not have a material adverse impact
upon the net market value and net interest income of FCB. To measure the impact
from interest rate changes, FCB recalculates its net market value and net
interest income on a pro forma basis over a one year horizon assuming
instantaneous, permanent parallel shifts in the yield curve, of varying amounts
of increases and decreases in rates. Larger increases or decreases in FCB's net
market value and net interest income as a result of these assumed interest rate
changes indicate greater levels of interest rate sensitivity than do smaller
increases or decreases.
Liquidity
The liquidity of FCB and the Bank is the ability to maintain a cash
flow which is adequate to fund operations, service its debt obligations and meet
other commitments on a timely basis. The primary sources of funds for liquidity
are derived from customer deposits, loan payments, maturities, sales of
investments and operations. In addition, FCB and the Bank may avail themselves
of more volatile sources of funds through issuance of certificates of deposit in
denominations of $100,000 or more, federal funds borrowed and securities sold
under agreements to repurchase. The aggregate funds, which consisted solely of
certificates of deposit in denominations of $100,000 or more, were $12.2 million
at June 30, 1996 and $18.8 million at December 31, 1995.
At June 30, 1996, FCB's more volatile sources of funds mature as
follows:
(dollars expressed in thousands)
Three months or less $ 5,072
Over three months through six months 3,352
Over six months through twelve months 3,368
Over twelve months 427
-------
Total $12,219
=======
Capital
FCB and the Bank are subject to the capital guidelines of the Federal
Reserve Board and the FDIC, respectively, which establishes the parameters for
capital adequacy for bank holding companies and banks. These guidelines set
total capital requirements and define capital in terms of "core capital
elements", or Tier 1 capital, and "supplemental capital elements", or Tier 2
capital. Both bank holding companies and banks are required to maintain a
minimum ratio of qualifying total capital to risk-weighted assets of 8%, at
least one-half of which must be Tier 1 capital. Risk-weighted assets are
determined by applying risk weights assigned by the regulatory agencies to
various categories of assets and off-balance sheet exposures.
In addition to the minimum regulatory capital requirements set forth
above, the Federal Deposit Insurance Corporation Improvement Act of 1991
("FDICIA") required supervisory or other corrective action when a bank's capital
declines below certain minimum levels. In order to be well capitalized, an
institution must have a total risk-based capital ratio of at least 10%, a Tier 1
risk-based capital ratio of at least 6%, a leverage ratio of at least 5%, and
not be subject to any written agreement or order issued by the FDIC. An
adequately capitalized institution must have a total risk-based capital ratio of
at least 8%, a Tier 1 risk-based capital ratio of at least 4% and a leverage
ratio of at least 4%. An undercapitalized institution has a total risk-based
capital ratio which is less than 8%, a Tier 1 risk-based capital ratio which is
less than 4% or a leverage ratio of less than 4%. A significantly
undercapitalized institution has a total risk-based capital ratio of less than
6%,a Tier 1 risk-based capital ratio of less than 3% or a leverage ratio of less
than 3%. Finally, a critically undercapitalized institution has a ratio of
tangible equity to total assets that is 2% or less.
<PAGE>
At June 30, 1996 and December 31, 1995, FCB's and the Bank's capital
ratios were as follows:
Risk-Based Capital Ratios
-------------------------
Total Tier 1 Leverage Ratio
----- ------ --------------
1996 1995 1996 1995 1996 1995
---- ---- ---- ---- ---- ----
FCB 6.74% 4.99% 5.44% 3.68% 3.69% 2.14%
Bank 12.95 12.66 11.65 11.35 7.89 6.58
As a result of the above capital ratios, FCB is considered
"undercapitalized" and the Bank is considered "adequately capitalized" as of
June 30, 1996.
As more fully described in Note 2, FCB completed an offering to its
existing shareholders other than First Banks. Pursuant to the offering FCB
issued 36.09 million shares of newly issued common stock in exchange for $2.97
million in cash and $643,000 of outstanding dividend obligations. The offering
provided $3.24 million of capital to FCB net of underwriting expenditures of
$373,000.
Regulatory Agreements
Due to its operating losses and excessive levels of classified
assets, in 1993, the Bank consented to enter into an amended Cease and Desist
Order with the FDIC and a Final Order with the State Banking Department of the
State of California (SBD and the Orders). The Orders establish certain
restrictions and requirements relative to the operation of the Bank, including:
(a) maintaining management acceptable to the supervisory agencies; (b) receiving
prior notification before adding an individual to the Board of Directors; (c)
reducing assets classified in the examination; (d) developing and implementing a
profit plan and budget; (e) implementing a strategic plan to return the Bank to
profitability; (f) increasing tangible shareholders' equity to specified levels
as of certain dates; and (g) refraining from the payment of distributions to any
shareholder without the prior written consent of the FDIC and the SBD. The
Orders remain in effect. Management believes that the Bank is in substantial
compliance with the Orders.
The Bank continues to be designated as a problem bank and is
considered "troubled" for all regulatory purposes. Accordingly, the Bank is
required to provide prior notice to the FDIC of the employment of any senior
officer or appointment of a director. Failure to comply with the terms of the
Orders could result in various regulatory actions against the Bank, including
recapitalization, merger and/or acquisition of the Bank.
The California Financial Code deems the capital of a bank "impaired"
whenever it has a retained deficit in an amount exceeding 40% of its
"contributed capital". Contributed capital is defined as all capital other than
retained earnings or deficit. The Bank has received notices from the SBD that
its capital is impaired, most recently on March 15, 1996. The Bank has not
complied with the Capital Impairment Orders. As long as the Bank's contributed
capital remains impaired, the SBD is authorized to take possession of the
property and business of the Bank, to close the Bank or to order the Bank to
correct the capital impairment through a levy to FCB, the sole shareholder of
the Bank.
The Superintendent of the SBD has the authority to take certain
appropriate regulatory action with respect to a bank having impaired contributed
capital. Subject to the approval of its shareholders and the Superintendent, the
bank may readjust its accounts in a quasi-reorganization, which includes
eliminating its retained deficit. It is the policy of the Superintendent not to
authorize a quasi-reorganization unless a bank can establish that: (a) it has
adequate capital; (b) the problems that created past losses and the impairment
of capital have been corrected; and (c) it is currently operating on a
profitable basis and will continue to do so in the future. No assurance can be
given that the Bank's capital condition will not deteriorate further as a result
<PAGE>
of future operating losses prior to curing its capital impairment. Furthermore,
because a quasi-reorganization requires that a Bank reduce its assets and
liabilities to fair value at the time of the reorganization, the Bank's capital
could be further reduced from its present level as a result of such an
adjustment.
In addition to the Orders, FCB has entered into a Memorandum of
Understanding with the Federal Reserve Bank of San Francisco (MOU). Among other
requirements under the terms of the MOU: (a) FCB may not declare or pay any
dividends without the prior written approval of, and may not take dividends from
the Bank without providing prior written notice to, the Federal Reserve Bank;
(b) FCB must submit a written plan to improve and maintain adequate capital at
FCB and the Bank; and (c) certain transactions between FCB and the Bank are
restricted.
PART II - OTHER INFORMATION
Item 6 - Exhibit
The exhibit is numbered in accordance with the Exhibit Table of Item 601 of
Regulation S-K.
Exhibit
Number Description
27 Article 9 - Financial Data Schedule
(EDGAR only)
<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.
FIRST COMMERCIAL BANCORP, INC.
Registrant
Date: August 8, 1996 By: /s/Donald W. Williams
---------------------
Donald W. Williams
Chairman, President
and Chief Executive
Officer
Date: August 8, 1996 By: /s/Allen H. Blake
-----------------
Allen H. Blake
Chief Financial Officer
and Secretary
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-mos
<FISCAL-YEAR-END> Dec-31-1996
<PERIOD-START> Jan-01-1996
<PERIOD-END> Jun-30-1996
<CASH> 8,664
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 9,800
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 36,297
<INVESTMENTS-CARRYING> 7,009
<INVESTMENTS-MARKET> 0
<LOANS> 87,804
<ALLOWANCE> (5,303)
<TOTAL-ASSETS> 151,814
<DEPOSITS> 137,343
<SHORT-TERM> 0
<LIABILITIES-OTHER> 2,341
<LONG-TERM> 6,500
0
0
<COMMON> 1,058
<OTHER-SE> 4,572
<TOTAL-LIABILITIES-AND-EQUITY> 151,814
<INTEREST-LOAN> 2,283
<INTEREST-INVEST> 707
<INTEREST-OTHER> 139
<INTEREST-TOTAL> 3,129
<INTEREST-DEPOSIT> 1,110
<INTEREST-EXPENSE> 1,324
<INTEREST-INCOME-NET> 1,805
<LOAN-LOSSES> 450
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 1,842
<INCOME-PRETAX> (235)
<INCOME-PRE-EXTRAORDINARY> (235)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 15
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<YIELD-ACTUAL> 8.62
<LOANS-NON> 2,293
<LOANS-PAST> 862
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 12,922
<ALLOWANCE-OPEN> 5,388
<CHARGE-OFFS> (1,236)
<RECOVERIES> 101
<ALLOWANCE-CLOSE> 5,303
<ALLOWANCE-DOMESTIC> 5,303
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
