UNITED STATES
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, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number [ ]
FIRST DECATUR BANCSHARES, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 33-80333 37-1085161
(State or other jurisdiction (Commission File (I.R.S. Employer
of incorporation) Number) Identification No.)
130 NORTH WATER STREET, DECATUR, IL 62523
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 217-424-1111
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 twelve 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 ninety days.
Yes X No
2,883,175 shares of the Registrant's common stock, par value $.01 per share,
were outstanding at June 30, 1998.
<PAGE>
FIRST DECATUR BANCSHARES, INC.
FORM 10-Q FOR THREE AND SIX MONTHS ENDED JUNE 30, 1998
INDEX
PAGE
PART I - FINANCIAL INFORMATION 1
Item 1. Condensed Consolidated Financial Statements 1
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 11
Item 3. Quantitative and Qualitative Disclosures about
Market Risk 15
PART II - OTHER INFORMATION 18
Item 1. Legal Proceedings 18
Item 2. Changes in Securities 18
Item 3. Defaults upon Senior Securities 18
Item 4. Submission of Matters to a Vote of Security Holders 18
Item 5. Other Information 18
Item 6. Exhibits and Reports on Form 8-K 18
SIGNATURES 19
EXIBITS
Exhibit 11. Computation of Earnings per Share
<PAGE>
PART 1 - FINANCIAL INFORMATION
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FIRST DECATUR BANCSHARES, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
June 30, December 31,
1998 1997
---------------------- ----------------------
(Unaudited)
<S> <C> <C>
Assets
Cash and due from banks $ 29,067 $ 22,880
Federal funds sold 21,685 17,145
---------------------- ----------------------
Cash and cash equivalents 50,752 40,025
Securities available for sale 124,428 106,600
Securities held to maturity 27,619 31,759
Loans, net 203,753 196,522
Premises and equipment 8,902 9,271
Other assets 9,900 8,060
---------------------- ----------------------
Total assets $ 425,354 $ 392,237
====================== ======================
Liabilities
Deposits
Noninterest bearing $ 56,822 $ 53,436
Interest bearing 278,351 267,692
---------------------- ----------------------
Total Deposits 335,173 321,128
Federal funds purchased and securities sold under
repurchase agreements 10,848 8,448
Federal Home Loan Bank loans 17,929 2,954
U.S. Treasury demand notes 3,129 3,151
Other liabilities 3,890 4,257
---------------------- ----------------------
Total liabilities 370,969 339,938
Stockholders' Equity
Preferred stock, no par value. Authorized 200,000 shares,
none issued or outstanding
Common stock, $.01 par value. Authorized 5,000,000 shares;
Issued 2,909,397 shares of which 26,222 shares and
30,910 shares were held as treasury stock 29 29
Surplus 7,874 7,858
Paid-in-capital - phantom stock 192 167
Retained earnings 46,550 44,506
Net unrealized gain on securities available for sale 310 380
---------------------- ----------------------
54,955 52,940
Treasury stock, at cost (570) (641)
---------------------- ----------------------
Total stockholders' equity 54,385 52,299
---------------------- ----------------------
Total liabilities and stockholders' equity $ 425,354 $ 392,237
====================== ======================
</TABLE>
Page 1
<PAGE>
FIRST DECATUR BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30 June 30 June 30 June 30
1998 1997 1998 1997
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Interest Income
Interest on loans $ 4,307 $ 4,490 $ 8,514 $ 8,909
Interest on investments 2,200 1,938 4,354 3,952
Interest on federal funds sold 231 106 447 177
Other interest income 17 19 27 33
----------- ----------- ----------- -----------
Total interest income 6,755 6,553 13,342 13,071
----------- ----------- ----------- -----------
Interest Expense
Interest on deposits 2,873 2,754 5,651 5,403
Interest on borrowings 286 147 499 305
----------- ----------- ----------- -----------
Total interest expense 3,159 2,901 6,150 5,708
----------- ----------- ----------- -----------
Net Interest Income 3,596 3,652 7,192 7,363
Provision for loan losses 81 136 162 232
----------- ----------- ----------- -----------
Net Interest Income After Provision for
Loan Losses 3,515 3,516 7,030 7,131
----------- ----------- ----------- -----------
Other Income
Trust fees 424 379 824 748
Loan fee income 130 108 312 186
Remittance processing fees 1,121 974 2,314 2,091
Service charges on deposit accounts 248 278 497 534
Security transactions, net 4 14 24 29
Other 281 213 537 512
----------- ----------- ----------- -----------
Total other income 2,208 1,966 4,508 4,100
----------- ----------- ----------- -----------
Other Expenses
Salaries and employee benefits 1,999 1,964 4,064 3,926
Net occupancy 275 280 544 561
Equipment expenses 490 497 964 1,181
Professional fees 96 96 185 189
Data processing fees 52 83 89 144
Supplies 105 96 215 197
Service charges from corresponding banks 187 134 355 265
Other operating expenses 593 586 1,124 1,171
----------- ----------- ----------- -----------
Total other expenses 3,797 3,736 7,540 7,634
----------- ----------- ----------- -----------
Income Before Income Tax 1,926 1,746 3,998 3,597
Income tax expense 572 544 1,204 1,128
----------- ----------- ----------- -----------
Net Income $ 1,354 $ 1,202 $ 2,794 $ 2,469
=========== =========== =========== ===========
Dividends Per Share $ 0.13 $ 0.11 $ 0.26 $ 0.22
Basic Earnings Per Share $ 0.47 $ 0.42 $ 0.97 $ 0.85
Average Shares Outstanding 2,885,300 2,892,943 2,883,079 2,890,390
Diluted Earnings Per Share $ 0.47 $ 0.41 $ 0.97 $ 0.85
Average Shares Outstanding 2,899,997 2,903,270 2,896,306 2,900,938
</TABLE>
Page 2
<PAGE>
FIRST DECATUR BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(IN THOUSANDS)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, 1998 June 30, 1998
(Unaudited) (Unaudited)
------------------------ ----------------------
<S> <C> <C> <C> <C>
Net Income $ 1,354 $ 2,794
Other comprehensive income, net of tax
Unrealized gains on securities:
Unrealized holding gain arising
during the period $ 110 $ (70)
Less: Reclassification adjustment
for gains included in net income ( 0) ( 0)
------ ------
Other comprehensive income 110 (70)
----------- ------------
Comprehensive income $ 1 464 $ 2,724
=========== ============
</TABLE>
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, 1997 June 30, 1997
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Net Income $ 1,202 $ 2,469
Other comprehensive income, net of tax
Unrealized gains on securities:
Unrealized holding gain arising
during the period $ 505 $ (33)
Less: Reclassification adjustment
for gains included in net income ( 0) ( 0)
------ ------
Other comprehensive income 505 (33)
------------ ------------
Comprehensive income $ 1,707 $ 2,436
============ ============
</TABLE>
Page 3
<PAGE>
FIRST DECATUR BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
Six Months Ended
June 30, June 30,
1998 1997
(Unaudited) (Unaudited)
<S> <C> <C>
Cash flows from operating activities:
Net cash provided by operating activities $ 1,335 $ 2,234
Cash flows from investing activities:
Purchases of securities available for sale (45,425) (13,399)
Proceeds from maturities of securities available for sale 27,663 10,460
Proceeds from sales of securities available for sale 5,994
Purchases of securities held to maturity (785) (2,135)
Proceeds from maturities of securities held to maturity 4,891 4,682
Net change in loans (7,393) (13,571)
Purchases of premises and equipment (294) (243)
--------------- ----------------
Net cash used by investing activities (21,342) (8,212)
--------------- ----------------
Cash flows from financing activities:
Net change in
Noninterest-bearing, interest-bearing demand and savings deposits 16,724 (2,151)
Certificates of deposit (2,679) (3,961)
Federal funds purchased and securities sold under repurchase
agreements 2,400 (2,603)
Federal Home Loan Bank loans 14,975 477
U.S. Treasury demand notes (22) 750
Cash dividends (750) (636)
Net cash from sale of treasury stock 86 40
--------------- ----------------
Net cash used by financing activities 30,734 (8,084)
--------------- ----------------
Net increase (decrease) In cash and cash equivalents 10,727 (14,062)
Cash and cash equivalents, beginning of period 40,025 48,588
--------------- ----------------
Cash and cash equivalents, end of period $ 50,752 $ 34,526
=============== ================
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest $ 5,803 $ 5,652
Income taxes $ 1,184 $ 1,152
</TABLE>
Page 4
<PAGE>
FIRST DECATUR BANCSHARES, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
BASIS OF PRESENTATION
First Decatur Bancshares, Inc. ("Bancshares"), a Delaware corporation was
organized on February 28, 1980 and is a registered bank holding company under
the Bank Holding Company Act of 1956, as amended. Bancshares owns all of the
outstanding capital stock of the First National Bank of Decatur ("Decatur
Bank"), FirsTech, Inc. ("FirsTech") and the First Trust Bank of Shelbyville
("Shelby Bank"). The Decatur Bank, FirsTech, and the Shelby Bank are referred
to as the "Subsidiaries."
The interim financial statements have been prepared by First Decatur
Bancshares, Inc. ("Bancshares") pursuant to the rules and regulations of the
Securities and Exchange Commission applicable to quarterly reports on Form 10-
Q. Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted pursuant to such rules and regulations. These
financial statements should be read in conjunction with the audited
consolidated financial statements and related notes and schedules included in
the Company's Form 10-K for 1997 filed on March 19, 1998.
The results for the interim periods are not necessarily indicative of the
results of operations that may be expected for the fiscal year. In the opinion
of management, the information furnished reflects all adjustments which are of
a normal recurring nature and are necessary for a fair presentation of
Bancshares' financial position, results of operations and cash flows for the
period presented. Such adjustments were of a normal recurring nature.
The consolidated financial statements include the accounts of Bancshares
and its wholly-owned subsidiaries. All significant inter-company accounts and
transactions have been eliminated.
NEW ACCOUNTING PRONOUNCEMENTS
The FASB has issued SFAS No. 123, "Accounting for Stock-based
Compensation". SFAS No. 123 establishes a fair value based method of
accounting for stock-based compensation plans. The FASB encourages all
entities to adopt this method for accounting for all arrangements under which
employees receive shares of stock or other equity instruments of the employer,
or the employer incurs liabilities to employees in amounts based on the price
of its stock.
Due the extremely controversial nature of this project, SFAS No. 123
permits a company to continue the accounting for stock-based compensation
prescribed in Accounting Principles Board Opinion No. 25, "Accounting for Stock
Issued to Employees". If a company elects that option, pro forma disclosures
of net income (and EPS, if presented) are required in the notes to the
financial statements as if the provisions of SFAS No. 123 had been used to
measure stock-based compensation. The disclosure requirements of Opinion No.
25 have been superseded by the disclosure requirements of this Statement. Once
an entity adopts the fair value based method of accounting for these
transactions, that election cannot be reversed.
Page 5
<PAGE>
Equity instruments granted or otherwise transferred directly to an
employee by a principal stockholder are stock-based employee compensation to be
accounted for in accordance with either Opinion No. 25 or SFAS No. 123 unless
the transfer clearly is for a purpose other than compensation. The accounting
requirements of SFAS No. 123 became effective for transactions entered into in
fiscal years beginning after December 31, 1995, and the disclosure requirements
became effective for financial statements for fiscal years beginning after
December 15, 1995. Pro forma disclosures required for entities that elect to
continue to measure compensation cost using Opinion No. 25 must include the
effects of all awards granted in fiscal years beginning after December 15,
1994. During the initial phase-in period, the effects of applying this
Statement are not likely to be representative of the effects on reported net
income for future years because options vest over several years and additional
awards generally are made each year.
Bancshares elected to continue to measure compensation costs using Opinion
No. 25. There were no pro forma disclosures required pursuant to SFAS No. 123
as no awards were granted in the first half of 1998 or during 1997.
SFAS No. 125, "Accounting for Transfers and Servicing of Financial Assets
and Extinguishments of Liabilities", breaks new ground in resolving long-
standing questions about whether transactions should be accounted for as
secured borrowing or as sales. The Statement provides consistent standards for
distinguishing transfers of financial assets that are sales from transfers that
are considered secured borrowings.
A transfer of financial assets in which the transferor surrenders control
over those assets is accounted for as a sale to the extent that consideration
other than beneficial interests in the transferred assets is received in
exchange. The transferor has surrendered control over transferred assets only
if all of the following conditions are met:
- - The transferred assets have been isolated from the transferor - put
presumptively beyond the reach of the transferor and its creditors, even in
bankruptcy or other receivership.
- - Each transferee obtains the right - free of conditions that constrain
it from taking advantage of that right - to pledge or exchange the
transferred assets, or the transferee is a qualifying special-purpose entity
and the holders of beneficial interest in that entity have the right - free
of conditions that constrain them from taking advantage of that right - to
pledge or exchange those interests.
- - The transferor does not maintain effective control over the
transferred assets through an agreement that both entities and obligates the
transferor to repurchase or redeem them before their maturity, or an
agreement that entitles the transferor to repurchase or redeem transferred
assets are not readily obtainable.
This Statement provides detailed measurement standards for assets and
liabilities included in these transactions. It also includes implementation
guidance for assessing isolation of transferred assets and for accounting for
transfers of partial interest, servicing of financial assets, securitization,
transfers or sales type and direct financing lease receivables, securities
lending transactions, repurchase agreements, "wash sales," loan syndications
and participation, risk participation in banker's acceptances, factoring
arrangements, transfers of receivables with recourse and extinguishment of
liabilities.
Page 6
<PAGE>
The Statement supersedes FASB Statements No. 76, "Extinguishment of Debt"
and No. 77, "Reporting by Transferors for Transfers of Receivables with
Recourse" and No. 122, "Accounting for Mortgage Servicing Rights", and amends
FASB Statement No. 115, "Accounting for Certain Investments in Debt and Equity
Securities", in addition to clarifying or amending a number of other statements
and technical bulletins. Except as amended by Statement No. 127, this
Statement is effective for transfers and servicing of financial assets and
extinguishments of liabilities occurring after December 31, 1996 and is to be
applied prospectively. Earlier or retroactive application is not permitted.
The FASB was made aware that the volume of certain transactions and the
related changes to information systems and accounting processes that are
necessary to comply with the requirements of Statement No. 125 would make it
extremely difficult, if not impossible, for some affected enterprises to apply
the transfer and collateral provisions of Statement No. 125 to those
transactions as soon as January 1, 1997. As a result, SFAS No. 127 defers for
one year the effective date (a) of paragraph 15 of Statement No. 125 and (b)
for repurchase agreement, dollar-roll, securities lending, and similar
transactions, of paragraphs 9-12 and 237(b) of Statement No. 125.
Statement No. 127 provides additional guidance on the types of
transactions for which the effective date of Statement No. 125 has been
deferred. It also requires that if it is not possible to determine whether a
transfer occurring during calendar-year 1997 is part of a repurchase agreement,
dollar-roll, securities lending, or similar transaction, then paragraphs 9-12
of Statement No. 125 should be applied to that transfer. All provisions of
Statement No. 125 should continue to be applied prospectively, and earlier or
retroactive application is not permitted.
The FASB has issued SFAS No. 128, "Earnings per Share". SFAS No. 128
establishes standards for computing and presenting earnings per share. SFAS
No. 128 simplifies the current standards for computing earnings per share and
makes them comparable to international earnings per share standards. Under
SFAS No. 128 the presentation of primary earnings per share is replaced with a
presentation of basic earnings per share. SFAS No. 128 also requires dual
presentation of basic and diluted earnings per share on the face of the income
statement for all entities with complex capital structures and requires the
reconciliation of the numerator and denominator of the basic earnings per share
computation to the numerator and denominator of the diluted earnings per share
computation. SFAS No. 128 is effective for financial statements issued for
periods ending after December 15, 1997, including interim periods and early
application is not permitted. SFAS No. 128 will require the restatement of all
prior period earnings per share data presented. Refer to the "Consolidated
Statement of Income" and Exhibit 11 - Computation of Per Share Income for this
calculation.
The FASB has issued SFAS No. 130, "Reporting Comprehensive Income". SFAS
No. 130 requires all items that are required to be recognized under accounting
standards as components of comprehensive income to be reported in a financial
statement that is displayed in equal prominence with the other financial
statements. It does not require a specific format for that financial
statement, but requires that an enterprise display an amount representing total
comprehensive income for the period in that financial statement. Enterprises
are required to classify items of "other comprehensive income" by their nature
in the financial statement and display the balance of other comprehensive
income separately in the equity section of a statement of financial position.
Page 7
<PAGE>
SFAS No. 130 is effective for both interim and annual periods beginning
after December 15, 1997. Earlier application is permitted. Comparative
financial statements provided for earlier periods are required to be
reclassified to reflect the provisions of this statement. Publicly traded
enterprises that issue condensed financial statements for interim periods are
required to report a total for comprehensive income in those financial
statements. Bancshares has provided a "Consolidated Statement of Comprehensive
Income" in the financial statement section of this report. SFAS No. 130 also
requires footnote disclosure of accumulated other comprehensive income balances
and footnote disclosure of related tax effects allocated to each component of
other comprehensive income. Both footnote disclosures are presented below.
<TABLE>
<CAPTION>
DISCLOSURE OF ACCUMULATED OTHER COMPREHENSIVE INCOME BALANCES
(in thousands)
Three Months Ended Six Months Ended
-------------------------------------- --------------------------------------
Accumulated Accumulated
Unrealized Gains Other Comprehensive Unrealized Gains Other Comprehensive
June 30, 1998 on Securities Income on Securities Income
- ---------------------- ----------------- ------------------- ----------------- -------------------
<S> <C> <C> <C> <C>
Beginning balance $ 200 $ 200 $ 380 $ 380
Current period change 110 110 (70) (70)
------------ ------------ ------------ -------------
Ending balance $ 310 $ 310 $ 310 $ 310
============ ============ ============ =============
JUNE 30, 1997
- ----------------------
Beginning balance $ (405) $ (405) $ 133 $ 133
Current period change 505 505 (33) (33)
------------ ------------ ------------ -------------
Ending balance $ 100 $ 100 $ 100 $ 100
============ ============ ============ =============
</TABLE>
Page 8
<PAGE>
<TABLE>
<CAPTION>
Disclosure of Related Tax Effects Allocated to Each
COMPONENT OF OTHER COMPREHENSIVE INCOME
(in thousands)
Tax (Expense) or
Three Months Ended June 30, 1998 Before-Tax Amount Benefit Net-of-Tax Amount
- ------------------------------------------- ------------------ ---------------- -----------------
<S> <C>
Unrealized gains on securities:
Unrealized holding gains rising during
Period $ 167 $ (57) $ 110
Less: reclassification adjustment for
Gains realized in income 0 0 0
-------------- ---------------- --------------
Other comprehensive income $ 167 $ (57) $ 110
============== ================ ==============
Six Months Ended June 30, 1998
- ------------------------------------------
Unrealized gains on securities:
Unrealized holding gains rising during
Period $ (106) $ 36 $ (70)
Less: reclassification adjustment for
Gains realized in income 0 0 0
-------------- ---------------- ---------------
Other comprehensive income $ (106) $ 36 $ (70)
============== ================ ===============
</TABLE>
<TABLE>
<CAPTION>
Disclosure of Related Tax Effects Allocated to Each
COMPONENT OF OTHER COMPREHENSIVE INCOME
(in thousands)
Tax (Expense) or
Three Months Ended June 30, 1997 Before-Tax Amount Benefit Net-of-Tax Amount
- ------------------------------------------ ----------------- ----------------- -----------------
<S> <C> <C> <C>
Unrealized gains on securities:
Unrealized holding gains rising during
Period $ 765 $ (260) $ 505
Less: reclassification adjustment for
Gains realized in income 0 0 0
-------------- ------------------ ----------------
Other comprehensive income $ 765 $ (260) $ 505
============== ================== ================
Six Months Ended June 30, 1997
- ------------------------------------------
Unrealized gains on securities:
Unrealized holding gains rising during
Period $ (50) $ 17 $ (33)
Less: reclassification adjustment for
Gains realized in income 0 0 0
-------------- ------------------- -----------------
Other comprehensive income $ (50) $ 17 $ (33)
============== =================== =================
</TABLE>
The FASB has issued SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information". SFAS No. 131 requires that a public
business enterprise report financial and descriptive information about its
reportable operating segments. Operating segments are components of an
enterprise about which separate financial information is available and is
evaluated regularly by the chief operating decision maker in deciding how to
allocate resources and in assessing performance.
Page 9
<PAGE>
SFAS No. 131 requires that a public business enterprise report a measure
of segment profit or loss, certain specific revenue and expense items and
segment assets. It requires a reconciliation of total segment revenues, total
segment profit or loss, total segment assets, and other amounts disclosed for
segments to corresponding amounts in the enterprise's general purpose financial
statements. SFAS No. 131 also requires a public business enterprise to report
descriptive information about the way that the operating segments were
determined, the products and services provided by the operating segments,
differences between the measurements used in reporting segment information and
those used in the enterprise's general purpose financial statements and changes
in the measurement of segment amounts from period to period.
SFAS No. 131 is effective for both interim and annual periods beginning
after December 15, 1997. Bancshares currently operates in two industry
segments. The primary business involves a providing banking services to
Central Illinois. The Decatur Bank and the Shelby Bank offer a full range of
financial services to commercial, industrial and individual customers. These
services include demand, savings, and time deposit accounts and programs
including individual retirement accounts and interest and non-interest bearing
checking accounts; commercial, consumer, agricultural, and real estate lending
including installment loans and personal lines of credit; safe deposit and
night depository services; farm management; full service trust departments; and
discount brokerage services. The other industry segment involves retail
payment processing. FirsTech provides the following services to electric,
water and gas utilities, telecommunication companies, cable television firms
and charitable organizations: retail lockbox processing of payments delivered
by mail to the biller; processing of payments delivered by customer to pay
agents such as grocery stores, convenience stores and check cashers; and
concentration of payments delivered by the Automated Clearing House netowrk,
money management software such as QUICKEN and through networks such as Visa e-
Pay and Mastercard RPS. The following is a summary of selected data for the
various business segments:
<TABLE>
<CAPTION>
BANKING REMITTANCE
SERVICES SERVICES COMPANY{1) ELIMINATIONS TOTAL
-------------- ------------------- ------------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
JUNE 30, 1998
TOTAL INTEREST INCOME $ 13,342 $ 61 $ $ (61) $ 13,342
TOTAL NON-INTEREST INCOME 2,168 2,617 70 (347) 4,508
TOTAL INTEREST EXPENSE 6,211 (61) 6,150
TOTAL NON-INTEREST EXPENSE 5,487 2,350 50 (347) 7,540
INCOME BEFORE INCOME TAX 3,650 328 20 3,998
INCOME TAX EXPENSE 1,082 115 7 1,204
TOTAL ASSETS 422,933 5,405 54,383 (57,367) 425,354
CAPITAL EXPENDITURES
DEPRECIATION AND 494 171 12 677
AMORTIZATION
JUNE 30, 1997
Total interest income $ 13,071 $ 34 $ $ (34) $ 13,071
Total non-interest income 1,893 2,404 70 (267) 4,100
Total interest expense 5,742 (34) 5,708
Total non-interest expense 5,726 2,128 47 (267) 7,634
Income before income tax 3,263 310 24 3,597
Income tax expense 1,009 111 8 1,128
Total assets 385,096 5,045 50,343 (52,484) 388,000
Capital expenditures
Depreciation and 543 210 12 775
amortization
(1) Excludes dividend income received from subsidiaries.
</TABLE>
Information related to services or transfers between business segments is not
reflected because such items are immaterial.
Page 10
<PAGE>
COMMON SHARES
During the third quarter of 1996, the Company's Board of Directors
approved a stock repurchase program which authorizes the repurchase of common
shares to be used for the issuance of shares under the Company's employee stock
option plan. The shares will be repurchased from time to time in the open
market or in private transactions. At June 30, 1998, 19,966 shares had been
repurchased.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion represents management's analysis of Bancshares'
results of operations for the three and six month periods ended June 30, 1998
and 1997 and its consolidated financial condition at June 30, 1998 as compared
to December 31, 1997. This discussion should be read in conjunction with
Bancshares' unaudited condensed consolidated financial statements and notes
thereto.
On April 1, 1996, Bancshares completed the acquisition of First Shelby
Financial Group, Inc. ("First Shelby") and the Shelby Bank. As a result of the
merger, First Shelby and the Shelby Bank became wholly owned subsidiaries of
Bancshares. The acquisition was accounted for as a pooling of interests and,
accordingly, the financial condition and results of operations of Bancshares,
First Shelby and the Shelby Bank have been combined. Effective May 13, 1997,
First Shelby was dissolved, with the net assets transferred to Bancshares.
RESULTS OF OPERATIONS
SUMMARY OF OPERATIONS
Net income in the second quarter of 1998 increased to $1,354,000, up 13%
from $1,202,000 earned in the same quarter of 1997. Basic earnings per share
for the quarterly period increased to 47 cents per share, up 12% from 42 cents
per share earned in the second quarter of 1997. Diluted earnings per share for
the quarterly period increased to 47 cents per share, up 15% from 41 cents per
share earned in the second quarter of 1997. For the six months ended June 30,
1998, net income was $2,794,000, up 13% compared to $2,469,000 for the first
half of 1997. Basic and diluted earnings per share for the six-month period
were 97 cents, up 14% compared to 85
Page 11
<PAGE>
cents for the same period in 1997. Higher earnings for the three-month
period were primarily due to an increase in other income offset by an
increase in other expenses and taxes. For the six-month period, higher
earnings are attributed to an increase in other income and a decrease
in other expenses offset by a reduction in net interest income after loan
losses.
NET INTEREST INCOME
Second quarter net interest income was $3,596,000, a decrease of $56,000
or 2% compared with the second quarter of 1997. For the six months ended June
30, 1998, net interest income decreased $171,000 or 2% compared to 1997. The
reduction in net interest income for both periods was mainly due to a decrease
in interest income on loans and an increase in interest expense on deposits and
borrowings offset by increases in interest income on investments and Federal
Funds sold.
ALLOWANCE AND PROVISION FOR LOAN LOSSES
Asset quality, particularly in the loan area, continues to be an important
concern of Bancshares' management. Both the Decatur Bank and the Shelby Bank
maintain a separate loan review department that continuously reviews problem
and significant loans and the adequacy of the allowance for loan losses.
Separate loan committees of the board of directors at the Decatur Bank and
Shelby Bank meet at least quarterly to review past due loans and problem
credits, lending policies and practices and results of the loan review
department's analyses. The allowance for loan losses is maintained at a level
management believes to be adequate to provide for known and potential risks
inherent in the loan portfolios.
The provision for loan losses during the second quarter of 1998 was
$81,000 compared to $136,000 in 1997. For the six month period ended June 30,
1998, the provision for loan losses were $162,000 compared to $232,000 for the
same period in 1997. The lower provisions for loan losses were primarily due
to lower net charge-offs in the installment loan area.
OTHER INCOME
Other income for the three months ended June 30, 1998, increased $242,000
or 12% compared to the same period in 1997. On a year-to-date basis, other
income increased $408,000 or 10% compared to the six month period in 1997.
For the three month period, the increase is attributed to increases in
loan fee income, remittance processing fees and other income. For the
six-month period, the increase is attributed to increases in loan fee income
and remittance processing fees.
For the three and six months ended June 30, 1998, remittance processing
fees generated by FirsTech increased by $147,000 (15%) and $223,000 (11%),
respectively, compared to the same periods in 1997. The increase in 1998 is
the result of new clients and increased processing volume from existing clients.
Loan fee income for the three-month period ended June 30, 1998, increased
$22,000 or 20% over the same period in 1997. On a year to date basis, loan fee
income increased $126,000 or 68% compared to the six-month period in 1997.
This increase is mainly attributed to an increase in mortgage servicing right
fees associated with FASB No. 125, "Accounting for Transfers and Servicing of
Financial Assets and Extinquishment of Liabilities". As a result of lower
interest rates
Page 12
<PAGE>
during 1998, more loans were sold in the secondary market to the Federal
National Mortgage Association.
Other income increased $68,000 or 32% for the three months ended June 30,
1998, compared to the same period in 1997. This increase is mainly attributed
to increases in brokerage commissions and ATM fees for the second quarter
compared to 1997.
OTHER EXPENSES
Other expenses increased from $3,736,000 for the three months ended June
30, 1997, to $3,797,000 for the three months ended June 30, 1998. This
represents a $61,000 (2%) increase and was attributed to increases in salaries
and employee benefits and service charges from corresponding banks. For the six
months ended June 30, 1998, other expenses decreased $94,000 or 1% compared to
the same period in 1997. This decrease was attributed to decreases in equipment
expenses and data processing fees offset by an increase in salaries and
employee benefits and service charges from corresponding banks.
Salaries and employee benefits increased $45,000 or 12% for the second
quarter of 1998 and $138,000 or 4% for the first six months of 1998 compared to
the same periods of 1997. This increase is mainly due to an increase in staff
at FirsTech as a result of the addition of new clients and increased processing
volume from existing clients.
Equipment expenses decreased $217,000 or 18% for the six months ended June
30, 1998, compared to the same period in 1997. The decrease is mainly
attributed to a decrease in depreciation on equipment as well as a decrease in
FirsTech machine maintenance. During April 1997, FirsTech signed a two-year
maintenance agreement that locked in prices at a rate lower than that paid for
the first quarter of 1997.
Data processing expenses decreased $31,000 or 37% for the second quarter
of 1998 and $55,000 or 38% for the first half of 1998 compared to the same
periods in 1997. The decrease is attributed to a decrease in third party data
processing costs associated with the Decatur Bank's Trust Department.
For the three months ended June 30, 1998, service charges from
corresponding banks increased $53,000 or 40% compared to the same period in
1997. Service charges increased $90,000 or 34% for the first half of 1998
compared to the first half of 1997. The increase in both periods is attributed
to an increased volume of checks processed by FirsTech in the retail lockbox
business.
INCOME TAXES
Income tax expense increased $28,000 or 5% for the second quarter of 1998
compared to the second quarter of 1997. Income taxes increased $76,000 or 7%
for the first six months of 1998, compared to the first six months of 1997.
Higher income tax expense for both periods was principally due to the increase
in pre-tax earnings. Bancshares' effective tax rate (income tax expense
divided by income before taxes) was 30% as of June 30, 1998 and 31% as of June
30, 1997.
Page 13
<PAGE>
FINANCIAL CONDITION
Bancshares' assets increased $33,117,000 or 8.4% from December 31, 1997 to
June 30, 1998. This increase was primarily due to increases in cash and cash
equivalents, securities and net loans.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents increased $10,727,000 from December 31, 1997 to
June 30, 1998. This change occurred due to an increase in cash and due from
banks of $6,187,000 and an increase in federal funds sold of $4,540,000. See
the consolidated statement of cash flows for the six months ended June 30,
1998, in the interim financial statements for the details representing the
increase in cash and cash equivalents. Federal funds sold are of a short-term
nature and provide the needed liquidity to fund loan growth.
SECURITIES
Bancshares' overall investment goal is to maximize earnings while
maintaining liquidity in securities having minimal credit risk. The types and
maturities of securities purchases are primarily based on Bancshares' current
and projected liquidity and interest rate sensitivity positions. The book
value of investment securities increased by $13,688,000 from December 31, 1997
to June 30,1998. During the first six months of 1998, Bancshares purchased
$46,210,000 ($45,425,000 classified as available-for-sale), and had 32,554,000
($27,663,00 classified as available-for-sale) mature. The increase in
investments was primarily due to an increase in total deposits and borrowings
from the Federal Home Loan Bank ("FHLB").
LOANS
Total loans increased by $7,231,000 from December 31, 1997 to June 30,
1998 due mainly to an increase in commercial loans offset by a decrease in
consumer loans and real estate loans. Commercial loans increased by
$11,121,000 due to increases in construction and land development and a long-
term commercial real estate loan. Consumer loans decreased by $2,549,000 and
real estate and other loans decreased by $1,341,000.
DEPOSITS
Total deposits increased $14,045,000 from December 31, 1997 to June 30,
1998. This increase is attributed to the collection of $10,0000,000 in tax
money during the second quarter that will not be paid out until the third
quarter and customers making large deposits at the end of June to meet minimum
required deposits for the month.
FHLB ADVANCES AND U.S. TREASURY DEMAND NOTES
FHLB advances and U.S. Treasury demand notes increased $14,953,000 from
December 31, 1997 to June 30, 1998. This increase is attributed to an increase
of $14,975,000 in borrowings from the FHLB offset by a decrease of $22,000 in
U.S. Treasury demand notes. Two $5,000,000 long-term borrowings were made
during the first quarter of 1998 and one $5,000,000 borrowing was made during
the second quarter of 1998, all with the FHLB. Two borrowings were used to
Page 14
<PAGE>
purchase higher yielding securities with the same maturities as the borrowings.
The other borrowing is being used to fund loan growth with matching maturities.
STOCKHOLDERS' EQUITY
Total stockholders' equity rose $2,086,000 or 4% from December 31, 1997 to
June 30, 1998. The increase is mainly attributed to net income of $2,794,000
less cash dividends of $750,000.
The capital ratios of Bancshares are presently in excess of the
requirements necessary to meet the "well capitalized" capital category
established by bank regulators. At March 31, 1998, Bancshares' consolidated
Tier 1 and total risk-based capital ratios were 24.0% and 25.3%, respectively.
Bancshares' leverage ratio at March 31, 1998, was 13.0%.
YEAR 2000
Bancshares has established a Project Team to address the Year 2000 issue.
They are following guidelines established in an OCC Advisory Letter dated May
16, 1997. This letter contains guidance regarding measures banks should be
taking to make certain they are ready for the year 2000 and beyond. The OCC
describes 5 phases in Year 2000 project management: (1) Awareness - define the
problem and develop a strategy, (2) Assessment - identify, inventory, and
assess, (3) Renovation - enhancements, upgrades, repairs and replacement, (4)
Validation - testing to ensure desired results and (5) Implementation - certify
systems and contingency plans.
The project team is currently in phase 3. Based on current assessments,
Bancshares does not expect the amounts to be expended over the next two years
to have a material effect on its financial position or results of operations.
The amount expensed in the first half of 1998 and for the year ended 1997 was
immaterial.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Asset/liability management involves the funding and investment strategies
necessary to maintain an appropriate balance between interest sensitive assets
and liabilities. It also involves providing adequate liquidity while
sustaining stable growth in net interest income. Regular review and analysis
of deposit trends, cash flows in various categories of loans and monitoring of
interest spread relationships are vital to this process. The nature of the
banking business requires Bancshares maintain adequate liquidity to meet
changes in composition and volume of assets and liabilities due to seasonal,
cyclical or other reasons. Liquidity describes the ability of Bancshares to
meet financial obligations that arise during the normal course of business.
Liquidity is primarily needed to meet the borrowing and deposit withdrawal
requirements of the customers of Bancshares, as well as meeting current and
future planned expenditures. This liquidity is typically provided by the funds
received through customer deposits, investment maturities, loan repayments,
borrowings and income. Bancshares' management considers the current liquidity
position to be adequate to meet the needs of customers.
Bancshares seeks to contain the risks associated with interest rate
fluctuations by managing the balance between interest sensitive assets and
liabilities. Managing to mitigate interest rate risk is, however, not an exact
science. Not only does the interval until repricing of
Page 15
<PAGE>
interest rates on assets and liabilities change from day to day as the assets
and liabilities change, but for some assets and liabilities, contractual
maturity and actual maturity experienced are not the same. For example,
mortgage-backed securities may have contractual maturities well in excess of
five years but, depending upon the interest rate carried by the specific
underlying mortgages and the then currently prevailing rate of interest, these
securities may be prepaid in a shorter time period. Accordingly, the
mortgage-backed securities and collateralized mortgage obligations that
have average stated maturities in excess of five years, are evaluated as
part of the asset/liability management process using their expected average
lives due to anticipated prepayments on the underlying loans. NOW and savings
accounts, by contract, may be withdrawn in their entirety upon demand. While
these contracts are extremely short, it has been Bancshare's experience that
these accounts turn over at the rate of five percent per year. If all of
the NOW and savings accounts were treated as repricing in one year or less,
the cumulative negative gap at one year or less would be $137.7 million or
36.14% of interest earning assets. Due to their very liquid nature, the entire
balance of money market accounts is assumed to be repriced within one year.
Interest rate sensitivity is an important factor in the management of the
composition and maturity configurations of Bancshare's earning assets and
funding sources. An Asset/Liability Committee ("ALCO") manages the interest
rate sensitivity position in order to maintain an appropriate balance between
the maturity and repricing characteristics of assets and liabilities that is
consistent with Bancshare's liquidity analysis, growth, and capital adequacy
goals. Bancshares sells fixed-rate real estate loans in the secondary mortgage
market. Bancshare's management believes that by selling certain loans rather
than retaining them in its portfolio, it is better able to match the maturities
of interest sensitive assets to interest sensitive liabilities. It is the
objective of the ALCO to maximize net interest margins during periods of both
volatile and stable interest rates, to attain earnings growth and to maintain
sufficient liquidity to satisfy depositors' requirements and meet credit needs
of customers.
Sources of market risk include interest rate risk, foreign currency
exchange rate risk, commodity price risk, and equity price risk. Bancshares is
only subject to interest rate risk. Bancshares purchased no financial
instruments for trading purposes during the first half of 1998 or during 1997.
The following table summarizes, as of June 30, 1998, the anticipated
maturities or repricing of Bancshare's interest sensitive assets and
liabilities, Bancshare's interest sensitivity gap (interest-earning assets less
interest-bearing liabilities), Bancshares cumulative interest rate sensitivity
gap and Bancshare's cumulative interest sensitivity repricing gap ratio
(cumulative interest rate sensitivity gap divided by total assets). A
negative gap for any period means that more interest-bearing liabilities will
reprice or maturing during that time period than interest-earning assets.
During periods of rising interest rates, a negative gap position would
generally decrease earnings, and during periods of declining interest rates, a
negative gap position would generally increase earnings. The converse would be
true for a positive gap position.
Page 16
<PAGE>
TABLE 14 GAP TABLE
<TABLE>
<CAPTION>
After Fair
Year 1 Year 2 Year 3 Year 4 Year 5 Year 5 Total Value
------------ ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Loans (1)
Fixed rate $ 27,265 $ 12,716 $ 22,643 $ 28,123 $ 27,096 $ 16,458 $134,301 $141,758
Average interest rate 7.74% 8.85% 8.87% 8.75% 8.73% 7.58% 8.44%
Variable rate 48,451 7,400 2,429 7,227 4,301 3,242 73,050 77,106
Average interest rate 8.64% 7.05% 7.90% 7.72% 7.79% 6.76% 8.31%
Securities (2)
Fixed rate 33,321 21,737 23,096 17,866 13,008 39,741 148,769 149,145
Average interest rate 5.59% 6.13% 5.57% 6.70% 6.02% 6.52% 5.78%
Variable rate 308 2,970 3.278 3,307
Average interest rate 6.65% 6.89% 6.87%
Federal funds sold 21,685 21,685 21,685
Average interest rate 5.59% 5.59%
--------- --------- --------- --------- ---------- --------- --------- ---------
Total interest-earning assets 130,722 41,853 48,168 53,524 44,405 62,411 381,083 393,001
--------- --------- --------- --------- ---------- --------- --------- ---------
NOW and savings accounts 5,150 5,150 5,150 5,150 5,150 77,249 102,999 102,999
Average interest rate 2.90% 2.90% 2.90% 2.90% 2.90% 2.90% 2.90%
Money market accounts 30,560 30,560 30,560
Average interest rate 3.93% 3.93%
Time deposits
Fixed rate 119,862 18,754 3,244 826 646 143,332 146,670
Average interest rate 5.41% 5.89% 5.78% 5.86% 6.48% 5.48%
Variable rate 1,000 460 1,460 1,493
Average interest rate 4.77% 5.85% 5.11%
Federal funds purchased and
securities sold under
repurchase agreements 10,848 10,848 10,848
Average interest rate 5.17% 5.17%
FHLB advances 52 55 59 63 68 17,632 17,929 18,117
Average interest rate 5.49% 5.49% 5.49% 5.49% 5.49% 5.49% 5.49%
U.S. Treasury demand notes 3,129 3,129 3,129
Average interest rate 5.81% 5.81%
--------- ---------- ---------- ---------- ---------- --------- --------- ----------
Total interest-bearing
liabilities 170,601 24,419 8,453 6,039 5,864 94,881 310,257 313,772
--------- ---------- ---------- ---------- ---------- --------- --------- ----------
Interest-earning assets less
interest- bearing liabilities
("Gap") $(39,879) $ 17,434 $ 39,715 $ 47,485 $ 38,541 $(32,470) $ 70,826 $ 79,229
========= =========== ========= ========= ========== ========= ========== ==========
Cumulative gap $(39,879) $ (22,445) $ 17,270 $ 64,755 $ 103,296 $ 70,826 $ 70,826 $ 79,229
========= =========== ========= ========= ========== ========= ========== ==========
Cumulative Gap as a percentage
of total interest earning assets (10.46%) (5.89%) 4.53% 16.99% 27.11% 18.59% 18.59% 20.79%
========= =========== ========= ========= =========== ========== ========== ==========
</TABLE>
(1) Includes consumer loans net of unearned income, and excludes nonaccrual and
impaired loans.
(2) Reflects fair value adjustments for securities available for sale.
At June 30, 1998, the table above reflects that Bancshares has a negative
liability gap due to the level of interest bearing demand deposits and savings
that are generally subject to immediate withdrawal and are repriceable at any
time. As such, the effect of an increase in the prime rate of 100 basis points
would decrease net interest income by approximately $398,800 in one year and
$224,500 in two years assuming no management intervention. A fall in
the interest rates would have the opposite effect for the same period.
In analyzing interest rate sensitivity, Bancshares' management considers
these differences and incorporates other assumptions and factors, such as
balance sheet growth and prepayments, to better measure interest rate risk.
While the gap analysis provides an indication of interest rate
sensitivity, experience has shown that it does not fully capture the true
dynamics of interest rate changes. Essentially, the analysis presents only a
static measurement of asset and liability volumes based on contractual
maturity, cash flow estimates or repricing opportunity. It fails to reflect
the differences in the timing
Page 17
<PAGE>
and degree of repricing of assets and liabilities due to interest rate
changes. In analyzing interest rate sensitivity, management considers
these differences and incorporates other assumptions and factors, such as
balance sheet growth and prepayments, to better measure interest rate
risk.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Bancshares is involved from time to time in routine litigation incidental
to its business. However, Bancshares' management believes that it is not a
party to any material pending litigation, which, if decided adversely to
Bancshares, would have a significant negative impact on the business, income,
assets or operation of Bancshares. Bancshares' management is not aware of any
other material threatened litigation that might involve Bancshares.
ITEM 2. CHANGES IN SECURITIES
Not Applicable
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not Applicable
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not Applicable
ITEM 5. OTHER INFORMATION
Not Applicable
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit
Number Description of Exhibit
11 Computation of Per Share Income
27 Financial Data Schedule
(b) Reports on Form 8-K
Not applicable
Page 18
<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 DECATUR BANCSHARES, INC.
August 5, 1998 By: /s/ John W. Luttrell
-------------------------------------------
John W. Luttrell
President and Chief Executive Officer
August 5, 1998 By: /s/ Craig A. Wells
-------------------------------------------
Craig A. Wells
Vice President and Chief Financial Officer
Page 19
<PAGE>
Exhibit 11. Computation of Earnings Per Share
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, 1998 JUNE 30, 1998
--------------------------------------- ------------------------------------
Weighted Per Weighted Per
Average Share Average Share
Income Shares Amount Income Shares Amount
---------- ----------- --------- ------------ ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
BASIC EARNINGS PER SHARE
Income available to
common stockholders $1,354 2,885 $0.47 $2,794 2,883 $0.97
Effect of Dilutive Securities
Stock options 7 5
Phantom stock units 8 8
------ ------
Diluted Earnings Per Share
Income available to
common stockholders
and assumed conversions $1,354 2,900 $0.47 $2,794 2,896 $0.97
========== ========== ========= ============ ============ =========
</TABLE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, 1997 JUNE 30, 1997
------------------------------------- -----------------------------------
Weighted Per Weighted Per
Average Share Average Share
Income Shares Amount Income Shares Amount
----------- ----------- --------- ---------- ----------- --------
<S> <C> <C> <C> <C> <C> <C>
BASIC EARNINGS PER SHARE
Income available to
common stockholders $1,202 2,893 $0.42 $2,469 2,890 $0.85
Effect of Dilutive Securities
Stock options 3 4
Phantom stock units 7 7
------ ------
Diluted Earnings Per Share
Income available to
common stockholders
and assumed conversions $1,202 2,903 $0.41 $2,469 2,901 $0.85
======== ========== ========= =========== ============ =========
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<MULTIPLIER> 1,000
<CURRENCY> US DOLLARS
<CAPTION>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<EXCHANGE-RATE> 1
<CASH> 29,067
<INT-BEARING-DEPOSITS> 278,351
<FED-FUNDS-SOLD> 21,685
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 124,428
<INVESTMENTS-CARRYING> 27,619
<INVESTMENTS-MARKET> 152,432
<LOANS> 207,351
<ALLOWANCE> 3,598
<TOTAL-ASSETS> 425,354
<DEPOSITS> 335,173
<SHORT-TERM> 13,977
<LIABILITIES-OTHER> 3,890
<LONG-TERM> 17,929
<COMMON> 29
0
0
<OTHER-SE> 54,356
<TOTAL-LIABILITIES-AND-EQUITY> 425,354
<INTEREST-LOAN> 8,514
<INTEREST-INVEST> 4,354
<INTEREST-OTHER> 474
<INTEREST-TOTAL> 13,342
<INTEREST-DEPOSIT> 5,651
<INTEREST-EXPENSE> 6,150
<INTEREST-INCOME-NET> 7,192
<LOAN-LOSSES> 162
<SECURITIES-GAINS> 24
<EXPENSE-OTHER> 7,540
<INCOME-PRETAX> 3,998
<INCOME-PRE-EXTRAORDINARY> 3,998
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,794
<EPS-PRIMARY> 0.97
<EPS-DILUTED> 0.97
<YIELD-ACTUAL> 3.20
<LOANS-NON> 329
<LOANS-PAST> 2,467
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 1,469
<ALLOWANCE-OPEN> 3,531
<CHARGE-OFFS> 140
<RECOVERIES> 45
<ALLOWANCE-CLOSE> 3,598
<ALLOWANCE-DOMESTIC> 2,633
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 965
</TABLE>
