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 September 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
2,883,156 shares of the Registrant's common stock, par value $.01 per share,
were outstanding at September 30, 1998.
<PAGE>
FIRST DECATUR BANCSHARES, INC.
FORM 10-Q FOR THREE AND NINE MONTHS ENDED SEPTEMBER 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 16
PART II - OTHER INFORMATION 19
Item 1. Legal Proceedings 19
Item 2. Changes in Securities 19
Item 3. Defaults upon Senior Securities 19
Item 4. Submission of Matters to a Vote of Security Holders 19
Item 5. Other Information 19
Item 6. Exhibits and Reports on Form 8-K 19
SIGNATURES 20
EXHIBITS
Exhibit 11. Computation of Earnings Per Share 21
<PAGE>
PART 1 - FINANCIAL INFORMATION
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FIRST DECATUR BANCSHARES, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
September 30, December 31,
1998 1997
------------------------------------------
<S> <C> <C>
(Unaudited)
Assets
Cash and due from banks $ 32,670 $ 22,880
Federal funds sold 4,785 17,145
-------------------------------------------
Cash and cash equivalents 37,455 40,025
Securities available for sale 135,622 106,600
Securities held to maturity 26,903 31,759
Loans, net 208,707 196,522
Premises and equipment 8,581 9,271
Other assets 10,754 8,060
-----------------------------------------------
Total assets $ 428,022 $ 392,237
===============================================
Liabilities
Deposits
Noninterest bearing $ 57,050 $ 53,436
Interest bearing 279,040 267,692
-----------------------------------------------
Total Deposits 336,090 321,128
Federal funds purchased and securities sold under
repurchase agreements 11,647 8,448
Federal Home Loan Bank loans 17,917 2,954
U.S. Treasury demand notes 1,219 3,151
Other liabilities 4,916 4,257
-----------------------------------------------
Total liabilities 371,788 339,938
-----------------------------------------------
Stockholders' Equity
Preferred stock, no par value. Authorized 200,000 shares,
none issued or outstanding
Common stock, $.01 par value. Authorized 5,000,000shares;
Issued 2,909,397 shares of which 26,241 shares and
30,910 shares were held as treasury stock 29 29
Surplus 7,874 7,858
Paid-in-capital - phantom stock 205 167
Retained earnings 47,521 44,506
Net unrealized gain on securities available for sale 1,175 380
-----------------------------------------------
56,804 52,940
Treasury stock, at cost (570) (641)
-----------------------------------------------
Total stockholders' equity 56,234 52,299
-----------------------------------------------
Total liabilities and stockholders' equity $ 428,022 $ 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 Nine Months Ended
September 30 September 30 September 30 September 30
1998 1997 1998 1997
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Interest Income
Interest on loans $ 4,460 $ 4,378 $ 12,974 $ 13,287
Interest on investments 2,261 1,909 6,615 5,861
Interest on federal funds sold 247 112 694 289
Other interest income 12 15 39 47
-----------------------------------------------------------------------------------
Total interest income 6,980 6,414 20,322 19,484
Interest Expense
Interest on deposits 3,007 2,833 8,658 8,235
Interest on borrowings 346 13 845 319
-----------------------------------------------------------------------------------
Total interest expense 3,353 2,846 9,503 8,554
-----------------------------------------------------------------------------------
Net Interest Income 3,627 3,568 10,819 10,930
Provision for loan losses 61 137 223 369
------------------------------------------------------------------------------------
Net Interest Income After Provision for
Loan Losses 3,566 3,431 10,596 10,561
------------------------------------------------------------------------------------
Other Income
Trust fees 425 384 1,248 1,132
Loan fee income 153 147 465 333
Remittance processing fees 1,284 1,046 3,598 3,136
Service charges on deposit accounts 252 260 750 794
Security transactions, net 13 14 37 43
Other 291 255 827 768
------------------------------------------------------------------------------------
Total other income 2,418 2,106 6,925 6,206
-----------------------------------------------------------------------------------
Other Expenses
Salaries and employee benefits 2,112 1,946 6,175 5,871
Net occupancy 287 323 831 884
Equipment expenses 522 500 1,487 1,681
Professional fees 103 102 289 292
Data processing fees 144 114 234 258
Supplies 35 53 250 251
Service charges from corresponding banks 178 125 533 390
Other operating expenses 653 566 1,774 1,736
-------------------------------------------------------------------------------------
Total other expenses 4,034 3,729 11,573 11,363
------------------------------------------------------------------------------------
Income Before Income Tax 1,950 1,808 5,948 5,404
Income tax expense 605 567 1,809 1,694
------------------------------------------------------------------------------------
Net Income $ 1,345 $ 1,241 $ 4,139 $ 3,710
====================================================================================
Dividends Per Share $ 0.13 $ 0.13 $ 0.39 $ 0.35
Basic Earnings Per Share $ 0.47 $ 0.43 $ 1.44 $ 1.29
Average Shares Outstanding 2,883,162 2,881,265 2,883,107 2,887,315
Diluted Earnings Per Share $ 0.46 $ 0.43 $ 1.43 $ 1.28
Average Shares Outstanding 2,898,338 2,892,627 2,896,590 2,898,272
</TABLE>
Page 2
<PAGE>
FIRST DECATUR BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(IN THOUSANDS)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, 1998 September 30, 1998
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Net Income $1,345 $4,139
Other comprehensive income, net of tax
Unrealized gains on securities:
Unrealized holding gain arising during
during the period $865 $795
Less: Reclassification adjustment
for gains included in net income ( 0) ( 0)
----------- ---------
Other comprehensive income 865 795
-------- --------
Comprehensive income $2,210 $4,934
======== ========
</TABLE>
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, 1997 September 30, 1997
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Net Income $1,241 $3,710
Other comprehensive income, net of tax
Unrealized gains on securities:
Unrealized holding gain arising
during the period $244 $211
Less: Reclassification adjustment
for gains included in net income ( 0) ( 0)
-------- --------
Other comprehensive income 244 211
-------- --------
Comprehensive income $1,485 $3,921
======== ========
</TABLE>
Page 3
<PAGE>
FIRST DECATUR BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
Nine Months Ended
September 30, September 30,
1998 1997
(Unaudited) (Unaudited)
<S> <C> <C>
Cash flows from operating activities:
Net cash provided by operating activities $ 2,847 $ 4,343
Cash flows from investing activities:
Purchases of securities available for sale (66,417) (19,696)
Proceeds from maturities of securities available for sale 38,289 19,090
Proceeds from sales of securities available for sale 473 5,994
Purchases of securities held to maturity (1,548) (4,343)
Proceeds from maturities of securities held to maturity 6,355 6,443
Net change in loans (12,408) (7,596)
Purchases of premises and equipment (315) (351)
--------------------------------------------------
Net cash used by investing activities (35,571) (459)
---------------------------------------------------
Cash flows from financing activities:
Net change in
Noninterest-bearing, interest-bearing demand and savings deposits 17,826 (2,211)
Certificates of deposit (2,864) (5,248)
Federal funds purchased and securities sold under repurchase
agreements 3,199 (4,371)
Federal Home Loan Bank loans 14,963 466
U.S. Treasury demand notes (1,932) 763
Cash dividends (1,125) (1,011)
Net cash from (purchase) sale of treasury stock 87 (175)
----------------------------------------------------
Net cash provided (used) by financing activities 30,154 (11,787)
----------------------------------------------------
Net (decrease) in cash and cash equivalents (2,570) (7,903)
Cash and cash equivalents, beginning of period 40,025 48,588
---------------------------------------------------
Cash and cash equivalents, end of period $ 37,455 $ 40,685
===================================================
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest $ 9,493 $ 8,554
Income taxes $ 1,621 $ 1,432
</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 to 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 three quarters 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 Nine Months Ended
-------------------------------------- ----------------------------------------
Accumulated Accumulated
Unrealized Gains Other Comprehensive Unrealized Gains Other Comprehensive
on Securities Income on Securities Income
September 30, 1998
<S> <C> <C> <C> <C>
Beginning balance $ 310 $ 310 $ 380 $ 380
Current period change 865 865 795 795
---------------------------------------- --------------------------------------
Ending balance $ 1,175 $ 1,175 $ 1,175 $ 1,175
======================================== ======================================
September 30, 1997
Beginning balance $ 100 $ 100 $ 133 $ 133
Current period change 244 244 211 211
---------------------------------------- -------------------------------------
Ending balance $ 344 $ 344 $ 344 $ 344
======================================== =====================================
</TABLE>
Page 8
<PAGE>
<TABLE>
<CAPTION>
Disclosure of Related Tax Effects Allocated to Each
COMPONENT OF OTHER COMPREHENSIVE INCOME
(in thousands)
<S> <C> <C> <C>
Before-Tax Amount Tax (Expense) or Net-of-Tax Amount
Three Months Ended September 30, 1998 Benefit
Unrealized gains on securities:
Unrealized holding gains rising during
Period $ 1,311 $ (446) $ 865
Less: reclassification adjustment for
Gains realized in income 0 0 0
--------------------------------------------------------------------------
Other comprehensive income $ 1,311 $ (446) $ 865
==========================================================================
NINE MONTHS ENDED SEPTEMBER 30, 1998
Unrealized gains on securities:
Unrealized holding gains rising during
Period $ 1,205 $ (410) $ 795
Less: reclassification adjustment for
Gains realized in income 0 0 0
--------------------------------------------------------------------------
Other comprehensive income $ 1,205 $ (410) $ 795
==========================================================================
</TABLE>
<TABLE>
<CAPTION>
Disclosure of Related Tax Effects Allocated to Each
COMPONENT OF OTHER COMPREHENSIVE INCOME
(in thousands)
<S> <C> <C> <C>
Before-Tax Amount Tax (Expense) or Net-of-Tax Amount
Three Months Ended September 30, 1997 Benefit
Unrealized gains on securities:
Unrealized holding gains rising during $ 370 $ (126) $ 244
Period
Less: reclassification adjustment for
Gains realized in income 0 0 0
--------------------------------------------------------------------------
Other comprehensive income 370 (126) 244
==========================================================================
NINE MONTHS ENDED SEPTEMBER 30, 1997
Unrealized gains on securities:
Unrealized holding gains rising during $ 320 $ (109) $ 211
Period
Less: reclassification adjustment for
Gains realized in income 0 0 0
---------------------------------------------------------------------------
Other comprehensive income $ 320 (109) 211
===========================================================================
</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 network,
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>
SEPTEMBER 30, 1998
TOTAL INTEREST INCOME $ 20,322 $ 95 $ 0 $ (95) $ 20,322
TOTAL NON-INTEREST INCOME 3,297 4,051 106 (529) 6,925
TOTAL INTEREST EXPENSE 9,598 0 0 (95) 9,503
TOTAL NON-INTEREST EXPENSE 8,388 3,638 76 (529) 11,573
INCOME BEFORE INCOME TAX 5,410 508 30 0 5,948
INCOME TAX EXPENSE 1,621 178 10 0 1,809
TOTAL ASSETS 425,369 5,586 56,233 (59,166) 428,022
CAPITAL EXPENDITURES 202 113 0 0 315
DEPRECIATION AND 750 257 18 0 1,025
AMORTIZATION
SEPTEMBER 30, 1997
Total interest income $ 19,484 $ 50 $ 0 $ (50) $ 19,484
Total non-interest income 2,942 3,565 105 (406) 6,206
Total interest expense 8,604 0 0 (50) 8,554
Total non-interest expense 8,573 3,122 74 (406) 11,363
Income before income tax 4,880 493 31 0 5,404
Income tax expense 1,505 178 11 0 1,694
Total assets 383,587 5,319 51,262 (53,560) 386,608
Capital expenditures 173 178 0 0 351
Depreciation and 806 315 18 0 1,139
amortization
</TABLE>
{(1)} Excludes dividend income received from subsidiaries.
Page 10
<PAGE>
Information related to services or transfers between business segments is not
reflected because such items are immaterial.
The FASB has issued SFAS No. 133, "Accounting for Derivative Instruments
and Hedging Activities." SFAS No. 133 establishes accounting and reporting
standards for derivative instruments. It requires that an entity recognize all
derivatives as either assets or liabilities in the statement of financial
position and measure those instruments at fair value. This statement is
effective for all periods beginning after June 15, 1999. Bancshares will adopt
SFAS No. 133 during fiscal year 2000 and does not anticipate any impact to its
financial statements.
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 September 30, 1998, 19,385 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 nine month periods ended September 30,
1998 and 1997 and its consolidated financial condition at September 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.
Page 11
<PAGE>
RESULTS OF OPERATIONS
SUMMARY OF OPERATIONS
Net income in the third quarter of 1998 increased to $1,345,000, up 8%
from $1,241,000 earned in the same quarter of 1997. Basic earnings per share
for the quarterly period increased to 47 cents per share, up 9% from 43 cents
per share earned in the third quarter of 1997. For the nine months ended
September 30, 1998, net income was $4,139,000, up 12% compared to $3,710,000
for the first three quarters of 1997. Basic earnings per share for the nine-
month period ended September 30, 1998 were $1.44, up 12% compared to $1.29 in
the same period in 1997. Higher earnings in both periods were primarily due to
an increase in other income and a decrease in provision for loan losses offset
by an increase in other expenses and taxes.
NET INTEREST INCOME
For the nine months ended September 30, 1998, net interest income
decreased $111,000 or 1% compared to 1997. The reduction in net interest
income 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 which 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 third quarter of 1998 was 61,000
compared to $137,000 in 1997. For the nine month period ended September 30,
1998, the provision for loan losses were $223,000 compared to $369,000 for the
same period in 1997. The lower provisions for loan losses were primarily due
to the decrease in net charge-offs in the installment loan area.
OTHER INCOME
Other income for the three months ended September 30, 1998, increased
$312,000 or 15% compared to the same period in 1997. On a year-to-date basis,
other income increased $719,000 or 12% compared to the nine-month period in
1997. For the three month period, the increase is attributed to increases in
remittance processing fees and other income. For the nine month period, the
increase is attributed to increases in loan fee income, remittance processing
fees, trust fee income, and other income.
For the three and nine months ended September 30, 1998, remittance
processing fees generated by FirsTech increased by $238,000 (23%) and $462,000
(15%), respectively, compared
Page 12
<PAGE>
to the same periods in 1997. The increase in 1998 is the result of new clients
and increased volume from existing clients.
Loan fee income for the nine period ended September 30, 1998, increased
$132,000 or 40% compared to the nine month period in 1997. This increase is
mainly attributed to an increase in mortgage servicing rights fees associated
with FASB No. 125, "Accounting for Transfers and Servicing of Financial Assets
and Extinguishment of Liabilities." As a result of lower interest rates during
1998, more loans were sold in the secondary market to the Federal National
Mortgage Association.
Trust fee income increased $116,000 (10%) for the nine month period ended
September 30,1998 compared to the nine month period in 1997. This increase is
attributed to an anticipated increase in farm income and market fees over prior
year.
Other Income increased $36,000 or 14% for the three months ended September
30, 1998, compared to the same period in 1997. For the nine months ended
September 30, 1998 other income increased $59,000 (8%) compared to September
30, 1997. The increase in both periods is mainly attributed to increases in
brokerage commissions and ATM fees for the third quarter compared to 1997.
OTHER EXPENSES
Other expenses increased from $3,729,000 for the three months ended
September 30, 1997, to $4,034,000 for the three months ended September 30,
1998. This represents a $305,000 (8%) increase. For the nine months ended
September 30, 1998, other expenses increased $210,000 or 2% compared to the
same period in 1997. This increase in both periods was attributed to increases
in salaries and employee benefits and service charges from corresponding banks
offset by a reduction in equipment expense.
Salaries and employee benefits increased $166,000 (9%) for the three
months ended September 30, 1998. For the first nine months of 1998 compared to
the first nine months of 1997, salaries and employee benefits increased
$304,000 or 5%. This increase is mainly due to an increase in staff at
FirsTech as a result of new clients and increased processing volume from
existing clients.
For the nine months ended September 30, 1998, equipment expenses decreased
$194,000 or 12% 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.
For the three months ended September 30, 1998, service charges increased
$53,000 or 42% compared to the same period in 1997. Service charges increased
$143,000 or 37% for the first nine months of 1998 compared to the first nine
months of 1997. The increase in both periods is attributed to an increased
volume of checks processed by FirsTech in the retail lockbox business.
Page 13
<PAGE>
INCOME TAXES
Income tax expense increased $115,000 or 7% for the first nine months of
1998, compared to the first nine months of 1997. Higher income tax expense was
principally due to the increase in pre-tax earnings. Bancshares' effective tax
rate (income tax expense divided by income before taxes) was 30% and 31%,
respectively, as of September 30, 1998 and 1997.
FINANCIAL CONDITION
Bancshares' total assets increased $35,785,000 or 9% from December 31,
1997 to September 30, 1998. This increase was primarily due to an increase in
securities and net loans.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents decreased $2,570,000 from December 31, 1997 to
September 30, 1998. This change occurred due to a increase in cash and due
from banks of $9,790,000 offset by a decrease in federal funds sold of
$12,360,000. See the consolidated statement of cash flows for the nine months
ended September 30, 1998, in the interim financial statements for the details
representing the decrease 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 carrying
value of investment securities increased by $24,166,000 from December 31, 1997
to September 30,1998. During the first nine months of 1998, Bancshares
purchased $67,965,000 ($66,417,000 classified as available-for-sale), sold
$473,000 of securities classified as available-for-sale, and had $44,644,000
($38,289,000 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 $12,185,000 from December 31, 1997 to September
30, 1998 due mainly to an increase in commercial and real estate loans offset
by a decrease in consumer loans. Commercial loans increased by $16,284,000 due
to increases in construction and land development and a long term commercial
real estate loan, while real estate increased $1,117,000. Consumer loans
decreased by $4,917,000 as the result of reallocation of resources from
consumer loans to commercial loans to meet loan demand.
DEPOSITS
Total deposits increased $14,962,000 from December 31, 1997 to September
30, 1998. This increase is attributed to a $2,000,000 deposit by a local school
district and an increase in the pinnacle money market accounts of $4,000,000.
The remaining increase is related to increases in certificates of deposit and
demand deposit accounts.
Page 14
<PAGE>
FHLB ADVANCES & U.S. TREASURY DEMAND NOTES
FHLB advances and U.S. Treasury demand notes increased $14,963,000 from
December 31, 1997 to September 30, 1998. This increase was offset by a
decrease of $1,932,000 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 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 $3,935,000 or 8% from December 31, 1997 to
September 30, 1998. The increase is mainly attributed to net income of
$4,139,000 and an after-tax unrealized gain of $795,000 on securities less cash
dividends of $1,125,000.
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 June 30, 1998, Bancshares' consolidated
Tier 1 and total risk-based capital ratios were 23.46% and 24.71%,
respectively. Bancshares' leverage ratio at June 30, 1998, was 12.9%.
YEAR 2000
The Year 2000 compliance issue exists because many computer systems and
applications currently use two digit fields to designate a year. As the
century date change occurs, date-sensitive systems may not operate properly
unless the underlying programs are modified or replaced. Bancshares's lending
and deposit activities depend significantly upon computer systems to process
and record transactions, as well as, accrue interest. Bancshares is aware of
the Year 2000 problem and has appointed a Year 2000 Project Committee to oversee
the successful completion of the project. The Committee began identifying Year
2000 related problems in 1997.
Based on FFIEC and OCC bulletins, mission-critical systems and applications
were identified and priorities were assigned to all software, hardware, and
interfaces. Identified as mission-critical were: core banking software licensed
from Information Technology, Inc, Northern Trust Co, and the interface with the
Federal Reserve Bank of Chicago. Testing of these mission-critical systems
has begun and will be substantially completed by December 31, 1998, with final
testing to be completed no later than March 31, 1999. Initial testing results
have been positive and testing will expand to include other important systems.
A budget of $10,000 was established for 1998 Y2K-related expenses. As testing
continues into 1999 and beyond, the Committee will periodically review the
budget and forward their recommendations to the Board of Directors. The Board
is monitoring the progress in addressing Year 2000 issues and the Committee
provides information to the Board in the form of progress reports.
Through a risk assessment of large corporate depositors and borrowers by the
Bancshares's Officer Calling Group, management does not expect any significant
impact on it's net earnings or cash flow due to any anticipated Year 2000
related business failures. Although Bancshares believes it is taking the
necessary steps to address the Year 2000 compliance issue, no assurances can be
given that some problems will not occur or that we will not incur significant
additional expenses in future periods.
Page 15
<PAGE>
Bancshares is developing a contingency plan which will incorporate aspects of
it's Disaster Recovery Plan with Year 2000 related issues. This plan provides
for dealing effectively with problems that might occur that are related to
operations, and those which are beyond the scope of Bancshares's control, such
as failure of the local power supply and telecommnication disruption. The plan
will include methods to continue to service the customers despite the possible
occurrence of Year 2000 problems. Bancshare will complete the final draft on
this plan by March 31, 1999.
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 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 $160.5 million or 42.27% 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
Page 16
<PAGE>
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 September 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 17
<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 $ 21,442 $ 14,755 $ 23,205 $ 24,660 $ 33,246 $ 24,619 $141,927 $149,023
Average interest rate 8.65% 8.61% 8.70% 8.88% 8.46% 7.45% 8.43%
Variable rate 47,409 4,096 4,643 4,323 7,106 2,828 70,405 73,925
Average interest rate 8.64% 7.56% 7.80% 7.71% 7.55% 6.95% 8.35%
Securities (2)
Fixed rate 30,291 19,638 27,864 11,761 14,704 55,086 159,344 159,948
Average interest rate 5.74% 5.97% 5.91% 6.70% 6.03% 6.13% 6.14%
Variable rate 48 500 225 2,407 3,180 3,208
Average interest rate 5.36% 6.33% 5.09% 6.88% 5.82%
Federal funds sold 4,785 4,785 4,785
Average interest rate 5.54% 5.54%
-------------------------------------------------------------------------------------------------
Total interest-earning 103,927 38,537 56,212 40,969 55,056 84,940 379,641 390,889
assets --------------------------------------------------------------------------------------------------
NOW and savings accounts 5,112 5,112 5,112 5,112 5,112 76,684 102,244 102,244
Average interest rate 2.08% 2.08% 2.08% 2.08% 2.08% 2.08% 2.08%
Money market accounts 32,189 32,189 32,189
Average interest rate 3.84% 3.84%
Time deposits
Fixed rate 116,054 22,742 2,832 624 824 25 143,101 146,435
Average interest rate 5.42% 5.83% 5.77% 5.94% 6.27% 5.50% 5.49%
Variable rate 1,014 492 1,506 1,541
Average interest rate 4.77% 5.40% 5.09%
Federal funds purchased and
securities sold under
repurchase agreements 11,647 11,647 11,647
Average interest rate 5.07% 5.07%
FHLB advances 56 56 60 65 69 17,611 17,917 17,938
Average interest rate 5.49% 5.49% 5.49% 5.49% 5.49% 5.49% 5.49%
U.S. Treasury demand notes 1,219 1,219 1,219
Average interest rate 5.67% 5.67%
-------------------------------------------------------------------------------------------------
Total interest-bearing
liabilities 167,291 28,402 8,004 5,801 6,005 94,320 309,823 313,213
-------------------------------------------------------------------------------------------------
Interest-earning assets less
interest-bearing liabilities
("Gap") $(63,364) $ 10,135 $ 48,208 $ 35,168 $ 49,051 $(9,380) $ 69,818 $ 77,676
=================================================================================================
Cumulative gap $(63,364) $ (53,229) $ (5,021) $ 30,147 $ 79,198 $69,818 $ 69,818 $ 77,676
=================================================================================================
Cumulative Gap as a percentage
of total interest earning assets (16.69%) (14.02%) (1.32%) 7.94% 20.86% 18.39% 18.39% 19.87%
assets =================================================================================================
</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 September 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 $633,364 in one year
and $532,290 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
Page 18
<PAGE>
maturity, cash flow estimates or repricing opportunity. It fails to reflect
the differences in the timing 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 which 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 19
<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.
November 13, 1998 By: /s/ John W. Luttell
John W. Luttrell
President and Chief Executive Officer
November 13, 1998 By: /s/ Craig A. Wells
Craig A. Wells
Principal Financial Officer
Page 20
<PAGE>
Exhibit 11. Computation of Earnings Per Share
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPT 30, 1998 SEPT 30, 1998
-----------------------------------------------------------------------------------------
Weighted Per Weighted Per
Average Share Average Share
Income Shares Amount Income Shares Amount
<S> <C> <C> <C> <C>
-----------------------------------------------------------------------------------
BASIC EARNINGS PER SHARE
Income available to
common stockholders $1,345 2,883 $0.47 $4,139 2,883 $1.44
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 $1,345 2,898 $0.46 $4,139 2,896 $1.43
==================================================================================
</TABLE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPT 30, 1997 SEPT 30, 1997
----------------------------------------------------------------------------------
Weighted Per Weighted Per
Average Share Average Share
Income Shares Amount Income Shares Amount
<S> <C> <C> <C> <C>
BASIC EARNINGS PER SHARE
Income available to
common stockholders $1,241 2,881 $0.43 $3,710 2,887 $1.29
Effect of Dilutive
Securities
Stock options 4 3
Phantom stock units 8 8
------- -------
Diluted Earnings Per Share
Income available to
common stockholders
and assumed conversions $1,241 2,893 $0.43 $3,710 2,898 $1.28
========================================================================================
</TABLE>
Page 21
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<MULTIPLIER> 1,000
<CURRENCY> US DOLLARS
<CAPTION>
<PERIOD-TYPE> 9-MOS
<S> <C>
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<EXCHANGE-RATE> 1
<CASH> 32,670
<INT-BEARING-DEPOSITS> 279,040
<FED-FUNDS-SOLD> 4,785
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 135,622
<INVESTMENTS-CARRYING> 26,903
<INVESTMENTS-MARKET> 163,156
<LOANS> 208,707
<ALLOWANCE> 3,472
<TOTAL-ASSETS> 428,022
<DEPOSITS> 336,090
<SHORT-TERM> 12,866
<LIABILITIES-OTHER> 4,916
<LONG-TERM> 17,917
<COMMON> 29
0
0
<OTHER-SE> 56,205
<TOTAL-LIABILITIES-AND-EQUITY> 428,022
<INTEREST-LOAN> 12,974
<INTEREST-INVEST> 6,615
<INTEREST-OTHER> 733
<INTEREST-TOTAL> 20,322
<INTEREST-DEPOSIT> 8,658
<INTEREST-EXPENSE> 9,503
<INTEREST-INCOME-NET> 10,819
<LOAN-LOSSES> 223
<SECURITIES-GAINS> 37
<EXPENSE-OTHER> 11,573
<INCOME-PRETAX> 5,948
<INCOME-PRE-EXTRAORDINARY> 5,948
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,139
<EPS-PRIMARY> 1.44
<EPS-DILUTED> 1.43
<YIELD-ACTUAL> 3.01
<LOANS-NON> 352
<LOANS-PAST> 3,627
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 1,524
<ALLOWANCE-OPEN> 3,531
<CHARGE-OFFS> 212
<RECOVERIES> 85
<ALLOWANCE-CLOSE> 3,472
<ALLOWANCE-DOMESTIC> 2,507
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 965
</TABLE>
