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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 period ended March 31, 1997
--------------
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from to
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Commission file Number 0-10535
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CITIZENS BANKING CORPORATION
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(Exact name of registrant as specified in its charter)
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<S><C>
MICHIGAN 38-2378932
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
One Citizens Banking Center, Flint, Michigan 48502
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(Address of principal executive offices) (Zip Code)
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(810) 766-7500
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(Registrant's telephone number, including area code)
None
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(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
X Yes No
--- ---
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
Class Outstanding at April 24, 1997
----------------------------- -----------------------------
Common Stock, No Par Value 14,377,411 Shares
(This report contains 21 pages)
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Citizens Banking Corporation
Index to Form 10-Q
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Page
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PART I - FINANCIAL INFORMATION
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Item 1 - Consolidated Financial Statements............................................. 3
Item 2 - Management's Discussion and Analysis of Financial Condition
and Results of Operations..................................................... 8
PART II - OTHER INFORMATION
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.............................................. 20
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2
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PART I - FINANCIAL INFORMATION
ITEM 1 - CONSOLIDATED FINANCIAL STATEMENTS
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CONSOLIDATED BALANCE SHEETS (UNAUDITED)
CITIZENS BANKING CORPORATION AND SUBSIDIARIES
MARCH 31, December 31,
(in thousands) 1997 1996
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<S> <C> <C>
ASSETS
Cash and due from banks $ 132,874 $ 137,867
Money market investments:
Interest-bearing deposits with banks 115 84
Federal funds sold 10,000 ---
Term federal funds and other 1,960 12,043
---------- ----------
Total money market investments 12,075 12,127
Securities available-for-sale:
U.S. Treasury and federal agency securities 397,838 374,617
State and municipal securities 186,625 191,373
Other securities 14,513 14,181
---------- ----------
Total investment securities 598,976 580,171
Loans:
Commercial 973,361 975,628
Real estate construction 33,800 37,803
Real estate mortgage 545,516 541,809
Consumer 1,046,943 1,018,318
Lease financing 44,050 47,173
---------- ----------
Total loans 2,643,670 2,620,731
Less: Allowance for loan losses (36,975) (35,997)
---------- ----------
Net loans 2,606,695 2,584,734
Premises and equipment 60,202 61,331
Intangible assets 63,546 64,916
Other assets 45,424 42,704
---------- ----------
TOTAL ASSETS $3,519,792 $3,483,850
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Noninterest-bearing $ 450,782 $ 471,780
Interest-bearing 2,471,897 2,393,027
---------- ----------
Total deposits 2,922,679 2,864,807
Federal funds purchased and securities sold
under agreements to repurchase 131,420 146,903
Other short-term borrowings 32,532 29,515
Other liabilities 43,417 43,250
Long-term debt 71,662 84,133
---------- ----------
Total liabilities 3,201,710 3,168,608
SHAREHOLDERS' EQUITY
Preferred stock - No par value --- ---
Common stock - No par value 89,380 89,231
Retained earnings 230,593 225,112
Net unrealized gain (loss) on securities available-for-sale, net of tax (1,891) 899
---------- ----------
Total shareholders' equity 318,082 315,242
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $3,519,792 $3,483,850
========== ==========
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</TABLE>
See notes to consolidated financial statements.
3
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CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
CITIZENS BANKING CORPORATION AND SUBSIDIARIES
THREE MONTHS ENDED
MARCH 31,
(in thousands, except per share data) 1997 1996
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<S> <C> <C>
INTEREST INCOME
Interest and fees on loans $ 56,312 $ 53,136
Interest and dividends on investment securities:
Taxable 6,401 5,788
Nontaxable 2,170 2,260
Money market investments 201 1,785
----------- -----------
Total interest income 65,084 62,969
INTEREST EXPENSE
Deposits 24,243 24,145
Short-term borrowings 1,966 1,722
Long-term debt 1,428 1,857
----------- -----------
Total interest expense 27,637 27,724
NET INTEREST INCOME 37,447 35,245
Provision for loan losses 2,145 1,771
----------- -----------
Net interest income after provision for loan losses 35,302 33,474
NONINTEREST INCOME
Trust fees 3,446 3,154
Service charges on deposit accounts 2,448 2,435
Bankcard fees 1,465 1,344
Other loan income 214 532
Investment securities gains (losses) (14) 52
Other 2,137 2,023
----------- -----------
Total noninterest income 9,696 9,540
NONINTEREST EXPENSE
Salaries and employee benefits 17,079 16,758
Equipment 2,593 2,424
Occupancy 2,391 2,352
Intangible assets amortization 1,370 1,357
Bankcard fees 902 772
Stationery and supplies 946 778
Postage and delivery 918 824
Advertising and public relations 994 944
Other 4,869 4,615
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Total noninterest expense 32,062 30,824
INCOME BEFORE INCOME TAXES 12,936 12,190
Income taxes 3,728 3,449
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NET INCOME $ 9,208 $ 8,741
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PRIMARY AND FULLY DILUTED INCOME PER SHARE $ 0.63 $ 0.60
=========== ===========
AVERAGE SHARES OUTSTANDING:
Primary 14,634,949 14,675,356
Fully Diluted 14,652,835 14,677,184
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See notes to consolidated financial statements.
4
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CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (UNAUDITED)
CITIZENS BANKING CORPORATION AND SUBSIDIARIES
1997 1996
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FIRST Fourth Third Second
(in thousands) QUARTER Quarter Quarter Quarter
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<S> <C> <C> <C> <C>
COMMON STOCK
Balance, beginning of quarter $ 89,231 $ 91,394 $ 92,677 $ 92,202
Exercise of stock options, net of shares
purchased 149 188 138 475
Shares acquired for retirement --- (2,351) (1,421) ---
--------- --------- ---------- ----------
Balance, end of quarter 89,380 89,231 91,394 92,677
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RETAINED EARNINGS
Balance, beginning of quarter 225,112 219,027 213,182 207,667
Net income 9,208 9,817 9,603 9,260
Cash dividends (3,727) (3,732) (3,758) (3,745)
--------- --------- ---------- ----------
Balance, end of quarter 230,593 225,112 219,027 213,182
--------- --------- ---------- ----------
UNREALIZED GAIN (LOSS) ON
SECURITIES AVAILABLE-FOR-SALE
Balance, beginning of quarter 899 (634) (2,327) 278
Net unrealized gain (loss), net of tax (2,790) 1,533 1,693 (2,605)
--------- --------- ---------- ----------
Balance, end of quarter (1,891) 899 (634) (2,327)
--------- --------- ---------- ----------
TOTAL SHAREHOLDERS' EQUITY $ 318,082 $ 315,242 $ 309,787 $ 303,532
========= ========= ========== ==========
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See notes to consolidated financial statements
5
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Consolidated Statements of Cash Flows (Unaudited)
Citizens Banking Corporation and Subsidiaries
Three Months Ended
March 31,
(in thousands) 1997 1996
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<S> <C> <C>
OPERATING ACTIVITIES:
Net income $ 9,208 $ 8,741
Adjustments to reconcile net income to net cash provided by
operating activities:
Provision for loan losses 2,145 1,771
Depreciation 1,785 1,805
Amortization of intangibles 1,370 1,357
Net amortization on investment securities 190 599
Investment securities losses (gains) 14 (52)
Other (1,050) (2,978)
---------- ----------
Net cash provided by operating activities 13,662 11,243
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INVESTING ACTIVITIES:
Net decrease in money market investments 52 92,140
Securities available-for-sale:
Proceeds from sales 4,986 ---
Proceeds from maturities 21,875 85,297
Purchases (50,163) (183,492)
Net increase in loans and leases (24,106) (60,620)
Purchases of premises and equipment (656) (953)
---------- ----------
Net cash used by investing activities (48,012) (67,628)
---------- ----------
FINANCING ACTIVITIES:
Net decrease in demand and savings deposits (15,862) (17,277)
Net increase in time deposits 73,734 69,054
Net increase (decrease) in short-term borrowings (12,466) 11,507
Principal reductions in long-term debt (12,471) (19,979)
Cash dividends paid (3,727) (3,293)
Proceeds from stock options exercised 149 722
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Net cash provided by financing activities 29,357 40,734
---------- ----------
Net decrease in cash and due from banks (4,993) (15,651)
Cash and due from banks at beginning of period 137,867 172,754
---------- ----------
Cash and due from banks at end of period $ 132,874 $ 157,103
========== ==========
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</TABLE>
See notes to consolidated financial statements.
6
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CITIZENS BANKING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for
interim financial information and the instructions for Form 10-Q and Article
10 of Regulation S-X. Accordingly, they do not include all of the information
and notes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary for a fair
presentation have been included. Operating results for the three month period
ended March 31, 1997 are not necessarily indicative of the results that may be
expected for the year ended December 31, 1997.
NOTE 2. RECLASSIFICATIONS
Certain prior year amounts have been reclassified to conform to the current
year financial statement presentation.
7
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ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following is a review of the Corporation's performance during the
three-month period ended March 31, 1997. This discussion should be read in
conjunction with the accompanying unaudited financial statements and notes
thereto appearing on pages 3 through 7 of this report and the Corporation's
1996 Annual Report on Form 10-K.
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SELECTED FINANCIAL DATA
Three Months Ended
March 31,
(in thousands, except per share data) 1997 1996
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<S> <C> <C>
FOR THE PERIOD
Interest income $65,084 $62,969
Net interest income 37,447 35,245
Provision for loan losses 2,145 1,771
Investment securities gains (losses) (14) 52
Other noninterest income 9,710 9,488
Noninterest expense 32,062 30,824
Income taxes 3,728 3,449
Net income 9,208 8,741
Cash dividends 3,727 3,293
PER SHARE DATA
Primary and fully diluted net income $0.63 $0.60
Cash dividends 0.26 0.23
Book value (end of period) 22.15 20.85
Market value (end of period close) 33.00 30.50
FINANCIAL RATIOS (ANNUALIZED)
Return on average:
Shareholders' equity 11.82% 11.78%
Earning assets 1.15 1.11
Assets 1.07 1.02
Net interest margin (Full taxable equivalent) 4.82 4.65
Net loan charge-offs to average loans 0.18 0.28
Average equity to average total assets 9.07 8.66
Nonperforming assets to loans plus other real estate
(end of period) 0.81 0.82
Nonperforming assets to total assets (end of period) 0.61 0.58
BALANCE SHEET TOTALS Percent
At Period End (March 31) Change
-------
Assets 0.3% $3,519,792 $3,508,223
Loans 6.3 2,643,670 2,487,431
Deposits 0.2 2,922,679 2,916,478
Shareholders' equity 6.0 318,082 300,147
Average balances
Assets 1.1 3,486,045 3,446,859
Loans 7.7 2,636,256 2,447,763
Deposits 0.9 2,874,128 2,848,356
Shareholders' equity 5.9 316,086 298,477
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8
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PERFORMANCE SUMMARY
Selected financial data as of March 31, 1997 and 1996 and for the three month
periods then ended are presented in the table on page 8. As shown, earnings
increased in 1997 resulting from higher net interest and noninterest income.
This improvement was offset in part by higher noninterest expense, provision
for loan losses and income taxes.
NET INTEREST INCOME
Net interest income and average balances and yields on major categories of
interest-earning assets and interest-bearing liabilities during the first three
months of 1997 and 1996 are summarized on page 10. The effects of changes in
average market rates of interest ("rate") and average balances ("volume") are
quantified in the table below.
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ANALYSIS OF CHANGES IN INTEREST INCOME AND INTEREST EXPENSE
1997 Compared With 1996
-----------------------------------
Increase (Decrease)
Three Months Ended March 31 Net Due to Change in
----------------------
(in thousands) Change(1) Rate(2) Volume
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<S> <C> <C> <C>
INTEREST INCOME:
Money market investments:
Time deposits with banks $ (78) $ (1) $ (77)
Federal funds sold (683) 6 (689)
Term federal funds sold (823) (9) (814)
Investment securities:
Taxable 613 351 262
Tax-exempt (90) 39 (129)
Loans 3,176 (685) 3,861
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Total 2,115 (299) 2,414
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INTEREST EXPENSE:
Deposits:
Demand (236) (190) (46)
Savings (50) (77) 27
Time 384 (336) 720
Short-term borrowings 244 (34) 278
Long-term debt (429) (67) (362)
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Total (87) (704) 617
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NET INTEREST INCOME $ 2,202 $ 405 $ 1,797
======== ======= ========
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(1) Changes are based on actual interest income and do not reflect taxable
equivalent adjustments.
(2) Rate/Volume variances are allocated to changes due to rate.
Favorable rate and volume related variances in net interest income resulted in
an increase in net interest income of $2,202,000 for the three months ended
March 31, 1997 as compared with the same period in 1996. Yields on earning
assets increased from 8.18% to 8.28% for the three months ended March 31, 1997
as compared with the same period of 1996. This resulted from higher yields on
investment securities, consumer loans and lease financing. Additional income
due to loan growth was partially offset by reduced short term investment
securities income. This resulted in $2,414,000 in volume related increases for
interest income when comparing the first three months of 1997 to the same
period in 1996.
The cost of interest bearing liabilities decreased from 4.22% to 4.17% for the
three months ended March 31, 1997 as compared with the same period in 1996.
The rate decline was the result of lower rates on demand and time deposits and
short and long term debt borrowings. Overall, rate decreases on interest
bearing liabilities more than offset volume related increases. This combined
with favorable rate variances on earning assets caused the interest spread on
earning assets (the difference between the average yield on earning assets and
the average rate on interest-bearing liabilities) to increase from 3.96% in
1996 to 4.11% in 1997. As a result, the net interest margin increased from
4.65% during the first three months of 1996 to 4.82% during the same period in
1997.
Management continually monitors the Corporation's balance sheet to insulate net
interest income from significant swings caused by interest rate volatility. If
market rates change in 1997, corresponding changes in funding costs would be
considered to avoid any potential negative impact on net interest income.
The Corporation's policies in this regard are further discussed in the section
titled "Interest Rate Risk".
9
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AVERAGE BALANCES/NET INTEREST INCOME/AVERAGE RATES
1997 1996
-------------------------------- ---------------------------------
Three Months Ended March 31 AVERAGE AVERAGE Average Average
(in thousands) BALANCE INTEREST(1) RATE(2) Balance Interest(1) Rate(2)
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<S> <C> <C> <C> <C> <C> <C>
EARNING ASSETS
Money market investments:
Interest earning deposits with banks $ 195 $ 2 4.26% $ 5,583 $ 80 5.79%
Federal funds sold 8,316 117 5.68 59,396 800 5.42
Term federal funds sold 6,767 82 4.93 66,457 905 5.49
Investment securities(3):
Taxable 423,554 6,401 6.07 409,556 5,788 5.67
Tax-exempt 164,160 2,170 8.16 174,447 2,260 8.01
Loans:
Commercial 1,002,289 21,256 8.67 944,003 20,643 8.89
Real estate 551,287 11,018 7.99 475,067 9,981 8.40
Consumer 1,037,609 23,247 9.08 970,830 21,523 8.91
Lease financing 45,071 791 7.02 57,862 989 6.84
---------- ------- ------ ---------- ------- -----
Total earning assets(3) 3,239,248 65,084 8.28 3,163,201 62,969 8.18
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NONEARNING ASSETS
Cash and due from banks 116,774 141,918
Bank premises and equipment 60,929 62,761
Other nonearning assets 105,645 113,912
Allowance for loan losses (36,551) (34,933)
---------- ----------
Total assets $3,486,045 $3,446,859
========== ==========
INTEREST-BEARING LIABILITIES
Deposits:
Demand deposits $ 307,298 1,135 1.50 $ 315,144 1,371 1.75
Savings deposits 889,857 6,075 2.77 906,589 6,125 2.72
Time deposits 1,239,038 17,033 5.58 1,176,934 16,649 5.69
Short-term borrowings 171,106 1,966 4.66 147,209 1,722 4.71
Long-term debt 80,397 1,428 7.18 99,306 1,857 7.52
---------- ------- ------ ---------- ------- -----
Total interest-bearing liabilities 2,687,696 27,637 4.17 2,645,182 27,724 4.22
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NONINTEREST-BEARING LIABILITIES AND
SHAREHOLDERS' EQUITY
Demand deposits 437,935 449,689
Other liabilities 44,328 53,511
Shareholders' equity 316,086 298,477
Total liabilities and shareholders' equity $3,486,045 $3,446,859
========== ==========
NET INTEREST INCOME $37,447 $35,245
======= =======
NET INTEREST INCOME AS A PERCENT OF EARNING
ASSETS 4.82% 4.65%
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</TABLE>
(1) Interest income shown on actual basis and does not include taxable
equivalent adjustments.
(2) Average rates are presented on an annual basis and include taxable
equivalent adjustments to interest income of $1,422 and $1,488 for the three
months ended March 31, 1997 and 1996, respectively, based on a tax rate of
35%.
(3) For presentation in this table, average balances and the corresponding
average rates for investment securities are based upon historical cost,
adjusted for amortization of premiums and accretion of discounts.
10
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PROVISION AND ALLOWANCE FOR LOAN LOSSES
Management provides for possible loan losses at a rate considered appropriate
based on judgments regarding economic conditions, historical loss experience,
the size and composition of the loan portfolio, the amount and character of
nonperforming assets, estimated future net charge-offs and other factors. A
summary of loan loss experience during the three months ended March 31, 1997
and 1996 is provided below. The provision for loan losses increased $374,000
during the first quarter of 1997 compared with the same period of 1996. The
allowance for loan losses increased $2.1 million to $37.0 million at March 31,
1997 compared with March 31, 1996. The ratio of loans charged off to average
loans outstanding decreased from 0.28% to 0.18%. First quarter 1997 gross
charge-offs decreased $534,000 as compared to the same period in 1996
primarily due to reduced commercial loan charge-offs.
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ANALYSIS OF ALLOWANCE FOR LOAN LOSSES
Three Months Ended
March 31,
(In thousands) 1997 1996
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<S> <C> <C>
Allowance for loan losses - beginning of period $ 35,997 $ 34,771
Charge-offs 1,814 2,452
Recoveries 646 750
---------- ----------
Net charge-offs 1,168 1,702
Provision for loan losses 2,145 1,771
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Allowance for loan losses - end of period $ 36,974 $ 34,840
========== ==========
Loans outstanding at period end $2,643,670 $2,487,431
Average loans outstanding during period 2,636,256 2,447,763
Allowance for loan losses as a percentage of loans outstanding at period end 1.40% 1.40%
Ratio of net charge-offs during period to average loans outstanding (annualized) 0.18 0.28
Loan loss coverage (allowance as a multiple of net charge-offs, annualized) 7.9x 5.1x
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</TABLE>
The Corporation maintains formal policies and procedures to monitor and
control credit risk. The Corporation's loan portfolio has no significant
concentrations in any one industry nor any exposure to foreign loans. The
Corporation has generally not extended credit to finance highly leveraged
transactions nor does it intend to do so in the future. Based on present
information, management believes the allowance for loan losses is adequate to
meet presently known risks in the loan portfolio.
Employment levels and other economic conditions in the Corporation's local
markets may have a significant impact on the level of credit losses.
Management has identified and devotes appropriate attention to credits which
may not be performing as well as expected. Nonperforming loans are further
discussed in the section entitled "Nonperforming Assets."
11
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NONINTEREST INCOME
A summary of significant sources of noninterest income during the first three
months of 1997 and 1996 follows:
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NONINTEREST INCOME
Three Months Ended Changes in 1997
March 31, --------------------
(in thousands) 1997 1996 Amount Percent
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Trust fees $3,446 $3,154 $ 292 9.3%
Service charges on deposit accounts 2,448 2,435 13 0.5
Bankcard fees 1,465 1,344 121 9.0
Brokerage and investment fees 447 398 49 12.3
Other loan income 214 532 (318) (59.8)
ATM network user fees 475 462 13 2.8
Cash management services 394 279 115 41.2
Safe deposit rentals 310 273 37 13.6
Investment securities gains (losses) (14) 52 (66) (126.9)
Other, net 511 611 (100) (16.4)
------ ------ ----- ------
Total noninterest income $9,696 $9,540 $ 156 1.6
====== ====== ===== ======
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</TABLE>
Noninterest income increased 1.6% in the first quarter of 1997 as compared
with the same quarter in the prior year primarily due to enhanced trust fees,
bankcard fees, brokerage and investment income and cash management services
fees partially offset by declines in other loan income.
Increased fees in the investment advisory, estate and employee benefit areas
resulted in trust revenue increasing 9.3% for the first three months of 1997
as compared to the same period in the prior year. The increased bankcard
fees resulted from additional merchant activity volumes. Brokerage and
investment fees increased $49,000 or 12.3% as compared to the first quarter of
1996, the result of increased market penetration. Other loan income declined
$318,000 from the prior year due to the Corporation's sale of its mortgage
servicing operations in the third quarter of 1996 as well as fewer sales of
mortgage loans into the secondary market. Cash management services fees
increased $115,000, or 41.2% as compared to the previous year. This increase
is volume related as clients have responded to enhanced investment options
which include various money market mutual funds from which the Corporation
receives a management fee.
The 1996 and 1997 first quarter gains and losses on the sale of investment
securities resulted from the sale of certain securities to reposition the
investment portfolio based on the current rate environment. Other
miscellaneous income decreased $100,000 or 16.4% as compared to the previous
year due to a declines in several fee categories none of which were material.
12
<PAGE> 13
NONINTEREST EXPENSE
Significant changes in noninterest expense during the first quarter of 1997
compared with the same period of 1996 are summarized in the table below.
<TABLE>
<CAPTION>
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NONINTEREST EXPENSE
Three Months Ended Changes in 1997
March 31, -------------------
(in thousands) 1997 1996 Amount Percent
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Salaries and employee benefits $17,079 $16,758 $ 321 1.9%
Equipment 2,593 2,424 169 7.0
Occupancy 2,391 2,352 39 1.7
Intangible asset amortization 1,370 1,357 13 1.0
Bankcard fees 902 772 130 16.8
Stationery and supplies 946 778 168 21.6
Postage and delivery 918 824 94 11.4
Taxes other than income taxes 660 654 6 0.9
Advertising and public relations 994 944 50 5.3
Consulting and other professional fees 647 454 193 42.5
Legal, audit and examination fees 400 390 10 2.6
Other loan fees 750 719 31 4.3
Other 2,412 2,398 14 0.6
------- ------- ------
Total noninterest expense $32,062 $30,824 $1,238 4.0
======= ======= ======
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</TABLE>
SALARIES AND EMPLOYEE BENEFITS
Salaries and employee benefits expense was $17,079,000 in the first quarter of
1997 as compared to $16,758,000 in 1996, an increase of 1.9%. Salary
expense increased only 0.5% as compared to the same period in the prior year
due in part to cost savings attributable to staff reductions through attrition
partially offset by the effects of normal merit increases. These staff
reductions were associated with the consolidation of the Corporation's six
Michigan bank charters into one called Citizens Bank and the sale of the
Corporation's mortgage servicing operations. These changes both occurred in
1996. Benefit expenses increased 8.5% resulting from higher costs for
pension, hospitalization and workers compensation.
OTHER NONINTEREST EXPENSE
Other noninterest expenses increased 6.5%. The most significant increases
were attributable to bankcard fees, stationery and supplies, postage and
delivery and consulting and other professional expenses.
Increases in bankcard fee expense resulted from higher fees charged by the
Corporation's outside processor for services provided. One time conversion
costs paid in 1997 relating to the consolidation of the Corporation's Michigan
charters in 1996 resulted in the majority of the increase in supplies and
stationery costs. Postage and delivery costs increased in the first quarter
of 1997 as compared to the same period in the prior year due to essentially
all courier service between branches now being provided by an outside company.
Consulting and other professional services increased significantly from the
prior year due to various ongoing corporate automation projects.
INCOME TAXES
Federal income tax expense increased to $3,728,000 for the first quarter of
1997 from $3,449,000 during the same period of 1996, an increase of $279,000
resulting from higher pre-tax earnings and a slightly lower level of
tax-exempt interest income.
BALANCE SHEET
The Corporation had total assets of $3.520 billion as of March 31, 1997, an
increase of $36 million or 1.0% from $3.484 billion as of December 31, 1996.
Average earning assets comprised 92.9% of average total assets during the
first quarter of 1997 compared with 91.9% in the first quarter of 1996. This
increase is the result of enhanced cash management techniques implemented
during 1996 and early 1997 which lowered the Corporation's cash and
correspondent bank balances.
13
<PAGE> 14
INVESTMENT SECURITIES AND MONEY MARKET INVESTMENTS
Total average investments, including money market investments, comprised 18.6%
of average earning assets during the first quarter of 1997, compared with
22.7% for the same period of 1996. Average money market investment balances
decreased to 0.5% of total average earning assets during the first quarter of
1997 from 4.1% during the corresponding period of 1996. The large decline
resulted from loan growth surpassing deposit growth during the past year.
LOANS
The Corporation extends credit primarily within the market areas of its two
banking subsidiaries; one located in Michigan and one in Illinois. The loan
portfolio is widely diversified by borrowers and industry groups with no
significant concentrations in any industry. Total average loans increased
7.7% in the first quarter of 1997 as compared to the same period in 1996.
This growth occurred in all categories except lease financing.
NONPERFORMING ASSETS
Financial Accounting Standards Board Statement ("SFAS") No. 114, "Accounting
by Creditors for Impairment of a Loan" and SFAS 118, "Accounting by Creditors
for Impairment of a Loan -- Income Recognition and Disclosures" requires
creditors to establish a valuation allowance for impaired loans. A loan is
considered impaired when management determines it is probable that all the
principal and interest due under the contractual terms of the loan will not be
collected. The impairment is measured based on the present value of expected
future cash flows discounted at the loan's effective interest rate, the loan's
observable market price, or the fair value of the collateral if the loan is
collateral dependent. For all impaired loans, other than nonaccrual loans,
interest income is recorded on an accrual basis. Interest income on impaired
nonaccrual loans is recognized on a cash basis.
The Corporation measures impairment on all large balance nonaccrual commercial
and commercial real estate loans. Certain large balance accruing loans rated
substandard or worse are also measured for impairment. In most instances,
impairment is measured based on the fair value of the underlying collateral.
Impairment losses are included in the provision for loan losses. SFAS 114
does not apply to large groups of smaller balance homogeneous loans that are
collectively evaluated for impairment, except for those loans restructured
under a troubled debt restructuring. Loans collectively evaluated for
impairment include certain smaller balance commercial loans, consumer loans,
residential real estate loans, and credit card loans, and are not included in
the impaired loan data that follows.
At March 31, 1997, loans considered to be impaired under the Statements
totalled $14.9 million (of which $10.9 million were on a nonaccrual basis).
Included within this amount was $7.9 million of impaired loans for which the
related allowance for loan losses was $0.3 million and $7.0 million of
impaired loans for which the fair value exceeded the recorded investment in
the loan. The average recorded investment in impaired loans during the
quarter ended March 31, 1997 was approximately $16.3 million. For the quarter
ended March 31, 1997, the Corporation recognized interest income of $386,000
which included $233,000 of interest income recognized using the cash basis
method of income recognition.
At March 31, 1996, loans considered to be impaired under the Statements
totalled $17.0 million (of which $10.3 million were on a nonaccrual basis).
Included within this amount is $5.8 million of impaired loans for which the
related allowance for loan losses is $1.2 million and $11.2 million of
impaired loans for which the fair value exceeded the recorded investment in
the loan. The average recorded investment in impaired loans during the
quarter ended March 31, 1996 was approximately $16.6 million. For the quarter
ended March 31, 1996, the Corporation recognized interest income of $446,000
which included $298,000 of interest income recognized using the cash basis
method of income recognition.
Nonperforming assets consist of nonaccrual loans, restructured loans, loans 90
days past due and still accruing interest, and other real estate owned.
Certain of these loans, as defined above, are considered to be impaired under
the Statements. The Corporation maintains policies and procedures to identify
and monitor nonaccrual loans. A loan (including a loan impaired under the
Statements) is placed on nonaccrual status when there is doubt regarding
collection of principal or interest, or when principal or interest is past due
90 days or more and the loan is not well secured and in the process of
collection. Interest accrued but not collected is reversed and charged
against income when the loan is placed on nonaccrual status.
14
<PAGE> 15
The table below provides a summary of nonperforming assets as of March 31,
1997, December 31, 1996 and March 31, 1996. Total nonperforming assets
amounted to $21.3 million as of March 31, 1997, compared with $20.4 million as
of December 31, 1996 and $20.3 million as of March 31, 1996. Nonperforming
assets as a percent of total assets are comparable for all three periods
presented.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
NONPERFORMING ASSETS
MARCH 31, December 31, March 31,
(in thousands) 1997 1996 1996
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
NONPERFORMING LOANS
Nonaccrual
Less than 30 days past due $ 5,177 $ 5,531 $ 4,879
From 30 to 89 days past due 973 1,278 827
90 or more days past due 13,779 10,979 12,085
-------- ------- -------
Total 19,929 17,788 17,791
90 days past due and still accruing 299 1,362 517
Restructured 425 502 502
-------- ------- -------
Total nonperforming loans 20,653 19,652 18,810
OTHER REAL ESTATE OWNED ("OREO") 691 749 1,532
-------- ------- -------
Total nonperforming assets $ 21,344 $20,401 $20,342
======== ======= =======
Nonperforming assets as a percent of total loans plus OREO 0.81% 0.78% 0.82%
Nonperforming assets as a percent of total assets 0.61 0.59 0.58
- --------------------------------------------------------------------------------------------------------------
</TABLE>
Employment levels and other economic conditions in the Corporation's local
markets can impact the level and composition of nonperforming assets. In a
deteriorating or weak economy, higher levels of nonperforming assets,
charge-offs and provisions for loan losses could result which may adversely
impact the Corporation's results.
In addition to nonperforming loans, management identifies and closely monitors
other credits that are current in terms of principal and interest payments
but, in management's opinion, may deteriorate in quality if economic
conditions change. As of March 31, 1997 such credits amounted to $12.8
million or 0.5 % of total loans, compared with $12.3 million or 0.5 % at
December 31, 1996 and $11.6 million or 0.5% as of March 31, 1996. These loans
are primarily commercial and commercial real estate loans made in the normal
course of business and do not represent a concentration in any one industry.
DEPOSITS
The Corporation gathers deposits primarily in its local markets and
historically has not relied on brokered funds to sustain liquidity. Average
deposits increased 0.9% in the first quarter of 1997 as compared to the same
period in 1996. The shift in customer preferences from demand and savings
deposits to time deposit alternatives reflects changing customer liquidity
preferences and the desire for higher interest rates. Management seeks to
maintain core deposit stability by offering clients a wide range of deposit
products at competitive rates.
SHORT-TERM BORROWINGS AND LONG-TERM DEBT
On average, total short-term borrowings increased to $171.1 million during the
first quarter of 1997 compared with $147.2 million during the same period of
1996. This increase is due to higher purchases of federal funds and overnight
repurchase agreements with clients. Long-term debt accounted for $80.4
million or 3.0% of average interest-bearing funds for the first quarter ended
1997, decreasing from $99.3 million or 3.8% for the same period in 1996. To
finance the February 28, 1995 acquisition, the Corporation's Parent company
obtained a $115 million seven year amortizing revolving credit facility. The
Corporation has made principal payments reducing the outstanding balance to
$46 million at March 31, 1997. Of this amount, $26 million reprices in 1997,
$7 million in March 1998 and $13 million in 1999. The debt agreement allows
the Corporation to prepay the debt without penalty subject to certain
restrictions. The Parent company services the debt's principal and interest
payments with dividends from the subsidiary banks. The agreement also
requires the Corporation to maintain certain financial covenants. The
Corporation is in full compliance with all debt covenants as of March 31, 1997.
15
<PAGE> 16
NEW ACCOUNTING PRONOUNCEMENTS
In June 1996 the Financial Accounting Standards Board issued Statement No. 125
"Accounting for Transfers and Servicing of Financial Assets and Extinguishment
of Liabilities". In December 1996, the Financial Accounting Standards Board
issued Statement No. 127 which delayed the effective dates of certain
provisions of the original Statement. The Statements establish accounting and
reporting standards to assist in determining when to recognize or derecognize
financial assets and liabilities in the financial statements after a transfer
of financial assets has occurred. The Corporation has adopted the Statements
to the extent permitted and will adopt the remaining provisions effective
January 1, 1998. The adoption is not expected to be material.
In March 1997, the Financial Accounting Standards Board issued Statement No.
128 "Earnings per Share". The Statement establishes standards for computing
and presenting earnings per share (EPS), simplifies the standards for
computing and makes the calculation comparable to international standards.
Primary EPS would be replaced by basic EPS and requires basic and fully
diluted EPS to be presented on the face of the income statement. The
Statement is effective for periods beginning after December 15, 1997 and
supersedes APB Opinion No. 15 and AICPA Accounting interpretations 1-102 of
Opinion 15. Early adoption is not permitted and full restatement of EPS must
occur upon adoption. The Corporation will adopt the Statement effective
January 1, 1998 and does not expect the impact to the current EPS calculation
to be material.
CAPITAL RESOURCES
REGULATORY CAPITAL REQUIREMENTS
Bank holding companies, such as the Corporation, and their bank subsidiaries
are required by banking regulators to meet certain minimum levels of capital
adequacy. These are expressed in the form of certain ratios. Capital is
separated into Tier I capital (essentially common stockholders' equity less
goodwill) and Tier II capital (essentially the allowance for loan losses
limited to 1.25% of risk-weighted assets). The first two ratios, which are
based on the degree of credit risk in the company's assets, provide for
weighting assets based on assigned risk factors and include off-balance sheet
items such as loan commitments and stand-by letters of credit. The ratio of
Tier I capital to risk-weighted assets must be at least 4.0% and the ratio of
Total capital (Tier 1 capital plus Tier 2 capital) to risk-weighted assets
must be at least 8.0%. The capital leverage ratio supplements the risk-based
capital guidelines. Banks and bank holding companies are required to maintain
a minimum ratio of Tier 1 capital to adjusted quarterly average total assets
of 3.0%
The FDIC, the insurer of deposits in financial institutions, has adopted a
risk-based insurance premium system based in part on an institution's capital
adequacy. Under this system, a depository institution is classified into one
of three capital categories (well-capitalized, adequately capitalized or
undercapitalized) according to its risk-based capital and leverage ratios and
is required to pay successively higher premiums depending on its capital
levels and its supervisory rating by its primary regulator. It is the
Corporation's intention to maintain sufficient capital in both of its bank
subsidiaries to permit them to maintain a "well capitalized" designation (the
FDIC's highest rating).
As summarized below, the Corporation's risk based capital levels were well in
excess of all regulatory standards.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
CAPITAL RATIOS Regulatory
Minimum
For "Well March 31, December 31, March 31,
Capitalized" 1997 1996 1996
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Risk based capital:
Tier I 6.0% 9.5% 9.4% 8.8%
Total capital 10.0 10.8 10.6 10.1
Tier I leverage 5.0 7.5 7.3 6.8
- -------------------------------------------------------------------------------------------------
</TABLE>
16
<PAGE> 17
COMMON AND PREFERRED STOCK
The Corporation maintains a stock repurchase program initiated in November
1987. A total of 1,260,970 shares have been purchased under this program at
an average price of $15.84 per share. Effective January 27, 1997, the
Corporation's stock repurchase program was formally rescinded by its Board of
Directors in conjunction with the agreement to acquire CB Financial
Corporation.
OTHER
Total shareholders' equity was $318.1 million or $22.15 per share as of March
31, 1997, compared with $315.2 million or $21.98 per share as of December 31,
1996 and $300.1 million or $20.85 per share as of March 31, 1996. The
Corporation declared cash dividends of $0.26 per share during the first
quarter of 1997, an increase of 13.0% over the $0.23 per share declared during
the same period in 1996.
LIQUIDITY AND DEBT CAPACITY
The level of liquid assets available to meet ongoing funding needs and to
capitalize on opportunities for business expansion is closely monitored by
management. It is management's intent to maintain adequate liquidity so that
sufficient funds are readily available at a reasonable cost. Various
techniques are used by the Corporation to measure liquidity, including ratio
analysis. Some ratios monitored by the Corporation include: loans to
deposits, core funding (deposits plus a portion of repurchase agreements and
long term debt less single maturity certificates of deposits) to total funding
(volatile funding plus core funding) and liquid assets to volatile funding
(interest bearing liabilities plus noninterest bearing deposits less core
funding). During 1996, the Corporation's strategy to operate at lower levels
of liquid assets to volatile funding and a higher loan to deposit ratio
improved the asset mix, resulting in increased net interest income. The
Corporation experienced no liquidity or operational problems as a result of
the reduced liquidity levels. These ratios are summarized below:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------
Key Liquidity Ratios
March 31, December 31, March 31,
1997 1996 1996
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C>
Quarterly average:
Loans to deposits 91.7% 90.7% 86.0%
Liquid assets to volatile funding 46.7 56.8 82.3
Core funding to total funding 88.8 89.3 87.2
- ---------------------------------------------------------------------------------------
</TABLE>
The Corporation's quarterly average loan to deposit ratio increased to 91.7%
at March 31, 1997 from 90.7% at December 31, 1996. The 1995 acquisition was
funded from the proceeds of long-term debt financing of $115 million through
the Corporation's parent company. The long-term debt to equity ratio has
declined to 22.5% at March 31, 1997 from 26.7% at December 31, 1996. The
parent will continue to service the scheduled principal and interest payments
with dividends from the Corporation's subsidiary banks. Management believes
that the Corporation has sufficient liquidity to meet presently known cash
flow requirements arising from ongoing business transactions.
17
<PAGE> 18
INTEREST RATE RISK
Interest rate risk generally arises when the maturity or repricing structure
of the Corporation's assets and liabilities differs significantly.
Asset/liability management, which among other things addresses such risk, is
the process of developing, testing and implementing strategies that seek to
maximize net interest income, maintain sufficient liquidity and minimize
exposure to significant changes in interest rates. This process includes
monitoring contractual and expected repricing of assets and liabilities as
well as forecasting earnings under different interest rate scenarios and
balance sheet structures. Generally, management seeks a structure that
insulates net interest income from large swings attributable to changes in
market interest rates. The Corporation's static interest rate sensitivity
("GAP") as of March 31, 1997 is illustrated in the following table.
As shown, the Corporation's interest rate risk position is well balanced in
the less than one year time frame with rate sensitive assets exceeding rate
sensitive liabilities by $26.3 million. This position suggests that the
Corporation's net interest income may not be significantly impacted by changes
in interest rates over the next 12 months. Management is continually
reviewing its interest rate risk position and modifying its strategies based
on projections to minimize the impact of future interest rate declines. While
traditional GAP analysis does not always incorporate adjustments for the
magnitude or timing of noncontractual repricing, this table does incorporate
appropriate adjustments as indicated in footnotes 2 and 3 to the table.
Because of these and other inherent limitations of any GAP analysis,
management utilizes simulation modeling as its primary tool to evaluate the
impact of changes in interest rates and balance sheet strategies. Management
uses these simulations to develop strategies that can limit interest rate risk
and provide liquidity to meet client loan demand and deposit preferences.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
INTEREST RATE SENSITIVITY
TOTAL
March 31, 1997 1-30 31-90 91-180 181-365 WITHIN 1-5 Over
(in millions) Days Days Days Days 1 YEAR Years 5 Years Total
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
RATE SENSITIVE ASSETS(3)
Loans and leases $828.1 $ 128.8 $ 150.2 $ 279.0 $1,386.1 $ 959.5 $ 298.1 $2,643.7
Investment securities 11.3 38.1 31.6 42.9 123.9 345.2 129.9 599.0
Short-term investments 12.1 --- --- --- 12.1 --- --- 12.1
------ ------- ------- ------- -------- -------- ------- --------
Total $851.5 $ 166.9 $ 181.8 $ 321.9 $1,522.1 $1,304.7 $ 428.0 $3,254.8
====== ======= ======= ======= ======== ======== ======= ========
RATE SENSITIVE LIABILITIES
Deposits (2) $194.0 $ 254.5 $ 308.6 $ 520.3 $1,277.4 $1,015.7 $ 178.8 $2,471.9
Short-term borrowings 164.0 --- --- --- 164.0 --- --- 164.0
Long-term debt 21.4 13.0 13.0 7.0 54.4 12.9 4.4 71.7
------ ------- ------- ------- -------- -------- ------- --------
Total $379.4 $ 267.5 $ 321.6 $ 527.3 $1,495.8 $1,028.6 $ 183.2 $2,707.6
====== ======= ======= ======= ======== ======== ======= ========
Period GAP (1) $472.1 $(100.6) $(139.8) $(205.4) $ 26.3 $ 276.1 $ 244.8 $ 547.2
Cumulative GAP 472.1 371.5 231.7 26.3 --- 302.4 547.2 ---
Cumulative GAP to
Total Assets 13.41% 10.56% 6.59% 0.75% 0.75% 8.59% 15.55% 15.55%
Multiple of Rate Sensitive
Assets to Liabilities 2.24 0.62 0.57 0.61 1.02 1.27 2.34 1.20
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) GAP is the excess of rate sensitive assets (liabilities).
(2) Includes interest bearing savings and demand deposits of $350 million in
the less than one year category, and $852 million in the over one year
category, based on historical trends for these noncontractual maturity
deposit types, which reflects industry standards.
(3) Incorporates prepayment projections for certain assets which may shorten
the time frame for repricing or maturity compared to contractual runoff.
18
<PAGE> 19
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS--None
ITEM 2. CHANGES IN SECURITIES--None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES--None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Proxies were solicited pursuant to Regulation 14 under the Securities Exchange
Act of 1934 to be voted at the annual meeting of shareholders of the
Corporation held on April 15, 1997. There was no solicitation in opposition to
management's nominees for directors as set forth in the Corporation's Proxy
Statement dated March 14, 1997 and all such nominees were elected.
The results were as follows with respect to each director nominee:
<TABLE>
<CAPTION>
Votes Against/ Shares Not Voted
Director Votes For Withheld or Abstentions
------------ ----------- ---------------- -------------------
<S> <C> <C> <C>
Joseph P. Day 12,379,182 48,135 500
John W. Ennest 12,377,489 49,828 2,193
Victor E. George 12,362,497 64,820 17,185
Gerald Schrieber 12,379,682 47,635 0
Ada C. Washington 12,361,073 66,244 18,609
James L. Wolohan 12,377,972 49,345 1,710
</TABLE>
Total shares eligible to vote: 14,352,394
Broker non-votes included in non-voted shares above: 565,177
ITEM 5. OTHER INFORMATION
On January 27, 1997, the Corporation announced an agreement to acquire CB
Financial Corporation headquartered in Jackson, Michigan. CB Financial
Corporation has a combined asset base of $826 million and operates thirty-nine
offices throughout Michigan. The Corporation will issue approximately 4.2
million shares of its common stock in a tax free exchange for all of the
outstanding stock of CB Financial Corporation. The acquisition will be
accounted for as a pooling of interests and is expected to be completed by the
end of the second quarter of 1997.
19
<PAGE> 20
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
(11) Statement re: computation of per share earnings
(27) Financial Data Schedule
(b) Reports on Form 8-K:
During the three month period ending March 31, 1997, a report was filed on Form
8-K under item 5, Other Events. The report dated February 3, 1997 and filed
on February 4, 1997 announced the acquisition of CB Financial Corporation.
SIGNATURE
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.
CITIZENS BANKING CORPORATION
Date May 9, 1997 By /s/ John W. Ennest
----------- -----------------------
John W. Ennest
Vice Chairman of the Board, Treasurer
and Chief Financial Officer
(Principal Financial and Accounting Officer)
(Duly Authorized Signatory)
20
<PAGE> 1
FORM 10-Q
EXHIBIT 11
STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS
Net income per share is computed based on the weighted average number of
shares outstanding, including the dilutive effect of stock options, as follows:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------
Three Months Ended
March 31,
(in thousands, except per share amounts) 1997 1996
- ------------------------------------------------------------------------------------------
<S> <C> <C>
NET INCOME: $ 9,208 $ 8,741
======= =======
PRIMARY EARNINGS PER SHARE:
Actual average shares outstanding 14,349 14,356
Net effect of the assumed exercise of
stock options -- based on the treasury stock
method using average market price for the period 286 319
------- -------
Pro forma average shares outstanding 14,635 14,675
======= =======
Net Income Per Share $ 0.63 $ 0.60
======= =======
FULLY DILUTED EARNINGS PER SHARE:
Actual average shares outstanding 14,349 14,356
Net effect of the assumed exercise of
stock options -- based on the treasury stock
method using higher of average or closing market price 304 321
------- -------
Pro forma average shares outstanding 14,653 14,667
======= =======
Net Income Per Share $ 0.63 $ 0.60
======= =======
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 132,874
<INT-BEARING-DEPOSITS> 115
<FED-FUNDS-SOLD> 11,960
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 598,976
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 2,643,670
<ALLOWANCE> 36,975
<TOTAL-ASSETS> 3,519,792
<DEPOSITS> 2,922,679
<SHORT-TERM> 163,952
<LIABILITIES-OTHER> 43,417
<LONG-TERM> 71,662
0
0
<COMMON> 89,380
<OTHER-SE> 228,702
<TOTAL-LIABILITIES-AND-EQUITY> 3,519,792
<INTEREST-LOAN> 56,312
<INTEREST-INVEST> 8,772
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 65,084
<INTEREST-DEPOSIT> 24,243
<INTEREST-EXPENSE> 27,637
<INTEREST-INCOME-NET> 37,447
<LOAN-LOSSES> 2,145
<SECURITIES-GAINS> (14)
<EXPENSE-OTHER> 32,062
<INCOME-PRETAX> 12,936
<INCOME-PRE-EXTRAORDINARY> 9,208
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 9,208
<EPS-PRIMARY> .63
<EPS-DILUTED> .63
<YIELD-ACTUAL> 8.28
<LOANS-NON> 19,929
<LOANS-PAST> 299
<LOANS-TROUBLED> 425
<LOANS-PROBLEM> 12,800
<ALLOWANCE-OPEN> 35,997
<CHARGE-OFFS> 1,814
<RECOVERIES> 646
<ALLOWANCE-CLOSE> 36,974
<ALLOWANCE-DOMESTIC> 24,957
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 12,017
</TABLE>
