<PAGE> 1
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U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------------
FORM 10-Q
[ ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1999
COMMISSION FILE NUMBER: 1-13472
* * * * * *
NATIONAL BANCSHARES CORPORATION OF TEXAS
(Exact name of registrant as specified in its charter)
TEXAS 74-1692337
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
12400 HWY 281 NORTH, SAN ANTONIO, TEXAS 78216-2811
(Address of principal executive offices)
(210) 403-4200
(Registrant's telephone number, including area code)
N/A
(Former name, former address and former fiscal year, if changed
since last report)
Check 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 registrant was required to
file such reports), and (2) has been subject to such filing requirements for
the past 90 days. Yes X No
--- ---
State the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date: 4,167,559 shares of Common
Stock, $.001 par value, outstanding as of May 10, 1999.
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<PAGE> 2
Part I. Financial Information
Item 1. Financial Statements
NATIONAL BANCSHARES CORPORATION OF TEXAS AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
(Unaudited)
<TABLE>
<CAPTION>
ASSETS
MARCH 31, DECEMBER 31,
1999 1998
--------- ---------
<S> <C> <C>
Cash and due from banks $ 18,073 $ 16,473
Interest-bearing accounts 2,281 2,343
Federal funds sold 22,008 37,195
Investment securities available for sale 216,688 142,558
Investment securities held to maturity 26,894 89,923
Loans, net of discounts 203,475 192,219
Allowance for possible loan losses (2,791) (2,670)
Bank premises and equipment, net 18,957 17,793
Goodwill 8,710 8,804
Other assets 8,007 7,440
--------- ---------
Total Assets $ 522,302 $ 512,078
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Demand deposits - non-interest bearing $ 72,527 $ 67,160
Interest-bearing transaction accounts (NOW) 63,062 65,847
Savings and money market accounts 99,863 95,622
Certificates and time deposits under $100,000 136,860 136,996
Certificates and time deposits $100,000 and over 84,080 82,031
--------- ---------
Total Deposits 456,392 447,656
--------- ---------
Accrued interest payable and other liabilities 2,231 2,073
Other borrowings 8,812 8,459
Long term notes payable 2,630 1,684
--------- ---------
Total Liabilities 470,065 459,872
Stockholders' Equity:
Common Stock, $.001 par value, 100,000,000 shares authorized, 4,661,234
issued and 4,167,559 outstanding at March 31, 1999 and
4,661,234 issued and 4,197,559 outstanding at December 31, 1998 5 5
Additional paid-in-capital 29,252 28,629
Retained earnings 29,520 28,683
Accumulated other comprehensive income 2,476 3,395
Treasury Stock, at cost (31,000 shares in 1999, 463,675 in 1998) (9,016) (8,506)
--------- ---------
Total Stockholders' Equity 52,237 52,206
--------- ---------
Total Liabilities and Stockholders' Equity $ 522,302 $ 512,078
========= =========
</TABLE>
See Notes to Consolidated Financial Statements.
2
<PAGE> 3
NATIONAL BANCSHARES CORPORATION OF TEXAS AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Dollars in Thousands, except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
------------------------
MARCH 31, MARCH 31,
1999 1998
-------- --------
<S> <C> <C>
INTEREST INCOME:
Interest and Fees on Loans $ 4,488 $ 3,722
Interest on Investment Securities 3,541 3,830
Interest on Federal Funds Sold 380 360
Interest on Deposits in Banks 30 4
-------- --------
TOTAL INTEREST INCOME 8,439 7,916
INTEREST EXPENSE:
Interest on Deposits 3,571 3,547
Interest on Debt 192 67
-------- --------
TOTAL INTEREST EXPENSE 3,763 3,614
NET INTEREST INCOME 4,676 4,302
Less: Provision for Possible Loan Losses 123 20
-------- --------
NET INTEREST INCOME AFTER PROVISION FOR
POSSIBLE LOAN LOSSES 4,553 4,282
NON-INTEREST INCOME:
Service Charges and Fees 792 794
Net Trading Account Profit (Loss) -- 1,313
Net realized Gains (Losses) on Sales of Securities 29 526
Net Gains on Sales of Other Real Estate and Assets 26 --
Miscellaneous Income 287 73
-------- --------
TOTAL NON-INTEREST INCOME 1,134 2,706
NON-INTEREST EXPENSE:
Salaries and Employee Benefits 2,223 1,832
Occupancy and Equipment Expenses 720 570
Goodwill Amortization 94 94
Other Expenses 1,157 1,171
-------- --------
TOTAL NON-INTEREST EXPENSE 4,194 3,667
INCOME BEFORE FEDERAL INCOME TAXES 1,493 3,321
Federal Income Tax Expense 656 1,215
-------- --------
NET INCOME $ 837 $ 2,106
======== ========
BASIC EARNINGS PER SHARE $ 0.20 $ 0.45
======== ========
DILUTED EARNINGS PER SHARE $ 0.20 $ 0.44
======== ========
</TABLE>
See Notes to Consolidated Financial Statements.
3
<PAGE> 4
NATIONAL BANCSHARES CORPORATION OF TEXAS AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
(Dollars in thousands)
(Unaudited)
<TABLE>
<CAPTION>
ACCUMULATED
COMMON STOCK OTHER
------------------- COMPREHENSIVE
NUMBER OF PAID-IN- RETAINED TREASURY INCOME,
SHARES PAR CAPITAL EARNINGS STOCK NET OF TAX TOTAL
-------- -------- -------- -------- -------- ---------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE AT JANUARY 1, 1998 4,659 $ 5 $ 25,742 $ 23,395 $ -- $ 1,956 $ 51,098
Net Income -- -- -- 5,288 -- -- 5,288
Unrealized gain on securities AFS,
net of tax and reclassification
adjustment -- -- -- -- -- 1,439 1,439
--------
Total Comprehensive Income 6,727
--------
Reduction of Deferred tax valuation allowance -- -- 2,873 -- -- -- 2,873
Exercise of Common Stock Options 2 -- 14 -- -- -- 14
Treasury stock purchased (464) -- -- -- (8,506) -- (8,506)
-------- -------- -------- -------- -------- -------- --------
BALANCE AT DECEMBER 31, 1998 4,197 5 28,629 28,683 (8,506) 3,395 52,206
Net Income -- -- -- 837 -- -- 837
Unrealized loss on securities AFS,
net of tax and reclassification
adjustment -- -- -- -- -- (919) (919)
--------
Total Comprehensive Income (Loss) (82)
--------
Reduction of Deferred tax valuation allowance -- -- 617 -- -- -- 617
Exercise of Common Stock Options 1 -- 6 -- -- -- 6
Treasury stock purchased (31) -- -- -- (510) -- (510)
-------- -------- -------- -------- -------- -------- --------
BALANCE AT MARCH 31, 1999 4,167 $ 5 $ 29,252 $ 29,520 $ (9,016) $ 2,476 $ 52,237
======== ======== ======== ======== ======== ======== ========
Disclosure of reclassification amount:
Unrealized loss on securities AFS arising during period $ (938)
Reclassification adjustment for gains included in income, net of tax of $10 19
--------
Net unrealized loss on securities AFS, net of tax $ (919)
========
</TABLE>
See Notes to Consolidated Financial Statements.
4
<PAGE> 5
NATIONAL BANCSHARES CORPORATION OF TEXAS AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
---------------------------
1999 1998
--------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 837 $ 2,106
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 505 451
Tax benefit realized from utilization of deferred tax assets 617 1,215
Provision to allowance for possible loan losses 123 20
Net realized gains on securities available for sale (29) (526)
Net increase in trading account -- (2,212)
Write-down of other real estate owned 20 --
Gain on sale of other real estate owned and other assets (23) --
(Increase) decrease in accrued interest receivable and other assets (211) 167
Increase in accrued interest payable and other liabilities 159 225
--------- ---------
Net cash provided by operating activities 1,998 1,446
CASH FLOWS FROM INVESTING ACTIVITIES:
Net decrease in federal funds sold 15,187 8,456
Net (increase) decrease in interest-bearing accounts 62 (17)
Net increase in loans (11,257) (13,155)
Purchases of securities available for sale (19,286) (10,862)
Proceeds from sales of securities available for sale 1,119 5,214
Proceeds from maturities of securities available for sale 2,501 2,767
Purchases of securities held to maturity -- (5,058)
Proceeds from maturities of securities held to maturity 3,120 5,115
Capital expenditures (1,495) (1,846)
Proceeds from sale of other real estate owned 121 --
--------- ---------
Net cash used in investing activities (9,928) (9,386)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase (decrease) in demand deposits, NOW accounts,
savings and money-market accounts 6,823 (4,147)
Net increase in certificates of deposit and time deposits 1,913 5,963
Proceeds from advances on other borrowings and long term debt 1,953 --
Principal payments on other borrowings and long term debt (655) (1,003)
Proceeds from obligations under short position -- 2,078
Purchase of treasury stock (510) (134)
Proceeds from exercise of common stock options 6 14
--------- ---------
Net cash provided by financing activities 9,530 2,771
Net increase (decrease) in cash and due from banks 1,600 (5,169)
Cash and due from banks at beginning of period 16,473 27,278
--------- ---------
Cash and due from banks at end of period $ 18,073 $ 22,109
========= =========
SCHEDULE OF SUPPLEMENTAL CASH FLOW INFORMATION
Interest $ 3,818 $ 3,602
Income taxes 112 --
Non-cash items:
Loans originated to facilitate the sale of foreclosed assets 89 10
Loan foreclosures -- 40
</TABLE>
See Notes to Consolidated Financial Statements.
5
<PAGE> 6
NATIONAL BANCSHARES CORPORATION OF TEXAS AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements of National
Bancshares Corporation of Texas and its wholly-owned subsidiaries have been
prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q of
Regulation S-K. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. The consolidated financial statements include the
accounts of the parent company and all subsidiaries, and all significant
intercompany balances and transactions have been eliminated. Certain items in
prior year's financial statements have been reclassified in conformity with the
current year's presentation. The consolidated financial statements are
unaudited, but include all adjustments (consisting primarily of normal
recurring accruals) which, in the opinion of management, are necessary for a
fair statement of the results of the periods presented. The results of
operations for the three-month period ended March 31, 1999 are not necessarily
indicative of the results that may be reported for the entire year. For further
information, refer to the consolidated financial statements and footnotes
thereto included in the Company's Form 10-K/A for the year ended December 31,
1998.
NOTE 2 - SUBSIDIARIES
The consolidated financial statements include the accounts of the Company and
its wholly-owned subsidiaries, NBT Securities Holdings, Inc. and NBT of
Delaware, Inc. It also includes the accounts of NBT Securities Holdings, Inc.'s
wholly-owned subsidiary, NBC Financial, Inc. and the accounts of NBT of
Delaware, Inc.'s wholly-owned subsidiaries (i) NBC Bank, N.A., Eagle Pass,
Texas; (ii) NBC Bank - Laredo, N.A., Laredo, Texas; (iii) NBC Bank, Rockdale,
Texas; (iv) NBC Bank - Central, N.A., Luling, Texas; and(v) NBC Holdings -
Texas, Inc., San Antonio, Texas.
NOTE 3 - INVESTMENT SECURITIES
The following tables present the amortized cost and approximate fair value of
the investment securities portfolio as of March 31, 1999 and December 31, 1998
(Dollars in thousands):
<TABLE>
<CAPTION>
MARCH 31, 1999
----------------------------------------------------------------
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED APPROXIMATE
COST GAINS LOSSES FAIR VALUE
--------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
SECURITIES AVAILABLE FOR SALE:
U.S. Treasury securities $ 183,396 $ 5,658 $ (12) $ 189,042
U.S. Government agency and mortgage-backed securities 20,651 146 (66) 20,731
Other securities including Federal Reserve Bank stock 8,889 -- (1,974) 6,915
--------- --------- --------- ---------
Total $ 212,936 $ 5,804 $ (2,052) $ 216,688
========= ========= ========= =========
SECURITIES HELD TO MATURITY:
U.S. Treasury securities $ 24,977 $ 864 $ -- $ 25,841
U.S. Government agency and mortgage-backed securities 1,852 8 (1) 1,859
Foreign debt securities 63 1 (3) 63
--------- --------- --------- ---------
Total $ 26,894 $ 873 $ (4) $ 27,763
========= ========= ========= =========
</TABLE>
6
<PAGE> 7
<TABLE>
<CAPTION>
DECEMBER 31, 1998
--------------------------------------------------
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED APPROXIMATE
COST GAINS LOSSES FAIR VALUE
--------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
SECURITIES AVAILABLE FOR SALE:
U.S. Treasury securities $127,081 $ 7,038 $ -- $134,119
U.S. Government agency and mortgage-backed securities 1,977 24 -- 2,001
Other securities including Federal Reserve Bank stock 8,354 0 (1,916) 6,438
-------- -------- -------- --------
Total $137,412 $ 7,062 $ (1,916) $142,558
======== ======== ======== ========
SECURITIES HELD TO MATURITY:
U.S. Treasury securities $ 87,885 $ 4,464 $ -- $ 92,349
U.S. Government agency and mortgage-backed securities 1,973 13 -- 1,986
Foreign debt securities 65 2 (3) 64
-------- -------- -------- --------
Total $ 89,923 $ 4,479 $ (3) $ 94,399
======== ======== ======== ========
</TABLE>
Unrealized gains and losses on investment securities held at March 31, 1999 and
December 31, 1998 have been judged to be temporary market fluctuations with no
material financial impact on the Company.
During the period ended March 31, 1999, the Company transferred securities with
a fair value of $59,873,000 from the held to maturity category into the
available for sale category.
The following table shows the maturity schedule of the Company's investment
portfolio as of March 31, 1999 (Dollars in thousands):
<TABLE>
<CAPTION>
MARCH 31, 1999
--------------------------------------------------
AVAILABLE FOR SALE HELD TO MATURITY
------------------------ -----------------------
AMORTIZED APPROXIMATE AMORTIZED APPROXIMATE
COST FAIR VALUE COST FAIR VALUE
--------- ----------- --------- -----------
<S> <C> <C> <C> <C>
Due in one year or less $ 28,058 $ 28,298 $ 1,005 $ 1,009
Due in one year to five years 112,202 114,923 14,024 14,358
Due from five to ten years 63,357 66,113 10,013 10,538
Due after ten years 349 352 1,852 1,858
-------- -------- -------- --------
Total $203,966 $209,686 $ 26,894 $ 27,763
Equity Securities 8,263 6,289 -- --
Mortgage backed securities 367 373 -- --
Federal Reserve Bank Stock 340 340 -- --
-------- -------- -------- --------
Total $212,936 $216,688 $ 26,894 $ 27,763
======== ======== ======== ========
</TABLE>
The carrying value of investment securities pledged to secure public funds
amounted to approximately $48,355,000 at March 31, 1999 and $55,824,000 at
December 31, 1998.
7
<PAGE> 8
NOTE 4 - LOANS AND ALLOWANCE FOR POSSIBLE LOAN LOSSES
An analysis of the allowance for possible loan losses for the three months
ended March 31, 1999 and 1998 is presented below:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
-----------------------
MARCH 31, MARCH 31,
1999 1998
--------- ---------
(Dollars in Thousands)
<S> <C> <C>
Balance at beginning of period $ 2,670 $ 2,458
Provisions for possible loan losses 123 20
Losses charged to the allowance (31) (77)
Recoveries credited to the allowance 29 111
------- -------
Net (charge-offs) recoveries (2) 34
------- -------
Balance at end of period $ 2,791 $ 2,512
======= =======
</TABLE>
Impaired Loans
A loan within the scope of SFAS No. 114 is considered impaired when, based on
current information and events, it is probable that the Company will be unable
to collect all amounts due according to the contractual terms of the loan
agreement, including scheduled principal and interest payments. At March 31,
1999 and 1998, the Banks have impaired loans of $1,072,000 and $1,216,000,
respectively. The allowance for loan losses related to those loans was $113,000
and $242,000, respectively. The average recorded investment in impaired loans
during the three months ended March 31, 1999 and 1998, were $665,000 and
$1,274,000, respectively. Interest income of approximately $15,000 and $19,000
on impaired loans was recognized for cash payments received during the three
months ended March 31, 1999 and 1998, respectively.
NOTE 5 - OTHER BORROWINGS AND NOTES PAYABLE
On March 31, 1999, a subsidiary bank holding company maintained a margin
account which is secured by investment securities. The interest rate is
variable (6.125% at March 31, 1999).
On October 2, 1998, the Company executed a $7.5 million revolving line of
credit with The Independent Bankers Bank in Dallas. The note bears a variable
interest rate at New York prime (7.75% at March 31, 1999). Interest only
payments are due quarterly beginning January 2, 1999 with the balance of unpaid
principal plus accrued interest due at maturity. The note matures on October 2,
1999. The note is collateralized by the common stock of NBT of Delaware, Inc.
and the stock of the subsidiary banks.
In May 1994, July 1995, September 1998, December 1998, and January 1999 a
subsidiary Bank borrowed $200,000, $175,000, $100,000, $1,250,000, and
$1,000,000 respectively, from the Federal Home Loan Bank of Dallas. The notes
bear interest rates of 7.49%, 6.393%, 5.15%, 5.126% and 5.216% respectively. The
maturity dates of the notes are June 1999, August 2015, October 2018, January
2004, and February 2004, respectively. Principal and interest payments are due
monthly in the approximate amount of $46,381 per month in the aggregate with the
remaining balances due at maturity.
8
<PAGE> 9
NOTE 6 - INCOME TAX EXPENSE
The provision for Federal income tax expense is less than that computed by
applying the federal statutory rate of 34% as indicated in the following
analysis:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
-----------------------
MARCH 31, MARCH 31,
1999 1998
-------- --------
(Dollars in Thousands)
<S> <C> <C>
Tax based on statutory rate $ 508 $ 1,129
Effect of tax-exempt income (5) (5)
Alternative minimum tax 30 66
Goodwill 7 7
Other, net 116 18
-------- --------
Federal income tax expense $ 656 $ 1,215
======== ========
</TABLE>
For federal income tax purposes, the Company had approximately $95 million in
net operating loss carryforwards as of March 31, 1999 which will be available
to reduce income tax liabilities in future years. The preconfirmation net
operating loss carryforwards arose from the Company's emergence from a
reorganization under Chapter 11 of the United States Bankruptcy Code in May
1992. If unused, approximately $91 million of such carryforwards will expire in
2005, with the remaining approximately $4 million expiring in 2006.
Pursuant to SFAS No. 109, the Company had available certain deductible temporary
differences and net operating loss carryforwards for use in future tax reporting
periods, which created deferred tax assets. SFAS No. 109, requires that deferred
tax assets be reduced by a valuation allowance if, based on the weight of the
available evidence, it is more likely than not that some portion or all of the
deferred tax assets will not be realized. During the three months ended March
31, 1999 and 1998, the deferred tax asset valuation allowance was reduced by
$617,000 and $1,155,000, respectively, to adjust the recorded net deferred tax
asset to an amount considered more likely than not to be realized. The deferred
tax asset net of the valuation allowance and recorded on the books of the
Company was $900,000 at March 31, 1999. Realization of this asset is dependent
on generating sufficient taxable income prior to the expiration of the loss
carryforwards. Realization could also be affected by a significant ownership
change of the Company over a period of three years as set forth in the Internal
Revenue Code. Although realization of the net deferred tax asset is not assured
because of these uncertainties, management believes it is more likely than not
that a significant portion of the recorded deferred tax asset will be realized.
In accordance with AICPA SOP No. 90-7, "Financial Reporting by Entities in
Reorganization Under the Bankruptcy Code", income tax benefits recognized from
preconfirmation net operating loss carryforwards and other tax assets are used
first to reduce the reorganization value in excess of amounts allocable to
identifiable assets and then to increase additional paid-in capital.
NOTE 7 - ACQUISITIONS
On July 18, 1997, the Company acquired three branches of Wells Fargo Bank in
Giddings, Marble Falls and Taylor, Texas. The Company acquired approximately
$103.4 million in deposits and $2.6 million in the owned branch facilities,
branch furniture, fixtures and certain equipment. The Company paid a purchase
price of approximately $9.9 million for the Wells Fargo acquisitions.
9
<PAGE> 10
NOTE 8 - STOCK REPURCHASE PLAN
On May 15, 1997, the Board of Directors approved a stock repurchase plan. The
plan authorized management to purchase up to 500,000 shares of the Company's
common stock through the open market based on market conditions. In the first
three months of 1999, 31,000 shares and in 1998, 463,675 shares were purchased
by the Company through the open market at an average cost of $16.45 per share
and $18.35, respectively.
10
<PAGE> 11
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Management's Discussion and Analysis of Financial Condition and Results of
Operations of the Company analyzes the major elements of the Company's
consolidated balance sheets and statements of income. This discussion should be
read in conjunction with the Consolidated Financial Statements, accompanying
notes, and selected financial data appearing elsewhere in this Report.
RESULTS OF OPERATIONS
Net income for the three months ended March 31, 1999 was $837,000 or $.20 per
share compared with $2.1 million or $.45 per share for the three months ended
March 31, 1999. The first quarter of 1999 and 1998 included non-recurring net
investment gains in the amount of $19,000 and $1.2 million, respectively, net of
tax. With the exclusion of the non-recurring items, net income for the first
quarter of 1999 and 1998 was $818,000, or $.19 per share and $892,000 or $.19
per share, respectively. Net interest income for the three months ended March
31, 1999 increased $374,000 over the same period of 1998 which is due primarily
to internal growth in the loan portfolio. Non-interest expenses were up
$528,000, or 14%, for the three months ended March 31, 1999 compared to the
three months ended March 31, 1998. This was primarily due to the opening of a
new branch in San Antonio in the first quarter of 1999. Non-interest income
increased $212,000 or 24.5% for the three months ended March 31, 1999, excluding
the non-recurring items. For the three months ended March 31, 1999, the
Company's return on average assets was .65%, or .61% adjusted for the
non-recurring items. The return on average assets for the three months ended
March 31, 1998 was 1.80% or .75% after deducting the non-recurring investments
gain.
NET INTEREST INCOME
Net interest income constitutes the principal source of income for the Banks
and represents the difference between interest income on interest-earning assets
and interest expense on interest-bearing liabilities. The increase of $374,000
or 8.7% in net interest income for the three months ended March 31, 1999
compared to the same period in 1998 was due to internal loan growth. Average
loans increased $55 million or 38% over the first quarter of 1998. Interest
income increased $523,000 or 6.6% over the same period in 1998 due to internal
loan growth. Interest expense increased $149,000 or 4.1% over the same period
in 1998 due to the $125,000 increase in interest expense on other debt. The net
interest margin for the three months ended March 31, 1999 was 4.18% compared to
4.17% as of March 31, 1998. The net interest margin is the net return on earning
assets which is computed by dividing taxable equivalent net interest income by
average total earning assets.
The net interest spread increased five basis points to 3.65% at March 31,
1999 from 3.60% at March 31, 1998. The increase in the net interest spread is
primarily due to the decrease in rates being paid on deposits.
11
<PAGE> 12
INTEREST EARNED/INCURRED AND RATES
(Dollars in thousands)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED FOR THE THREE MONTHS ENDED
MARCH 31, 1999 MARCH 31, 1998
------------------------------ -----------------------------
INTEREST INTEREST
AVERAGE INCOME/ AVERAGE AVERAGE INCOME/ AVERAGE
BALANCE EXPENSE YIELD/RATE BALANCE EXPENSE YIELD/RATE
------- ----- ----- ------- ----- -----
<S> <C> <C> <C> <C> <C> <C>
INTEREST-EARNING ASSETS:
Interest-bearing accounts 2,326 30 5.23% 254 4 6.68%
Federal funds sold 27,784 380 5.55% 25,986 360 5.55%
Investment securities (F):
US Treasuries 211,975 3,292 6.30% 240,593 3,750 6.25%
US Government agencies 12,608 180 5.79% 4,106 71 6.89%
Other 1,592 69 17.58% 569 9 6.59%
------- ----- ----- ------- ----- -----
Total investment securities 226,175 3,541 6.35% 245,268 3,830 6.26%
Loans, net of discounts (A) 197,559 4,491 9.22% 142,667 3,726 10.48%
------- ----- ----- ------- ----- -----
Total interest-earning assets 453,844 8,442 7.54% 414,175 7,920 7.67%
NON-INTEREST BEARING ASSETS:
Cash and due from banks 18,490 19,785
Allowance for possible loan losses (2,717) (2,503)
Other assets 44,987 37,257
------- -------
Total assets 514,604 468,714
======= =======
INTEREST-BEARING LIABILITIES:
Interest bearing transaction accounts 64,878 391 2.44% 63,079 416 2.64%
Savings, money market and certificates of deposit 315,596 3,180 4.09% 289,689 3,131 4.34%
Other debt 11,501 192 6.77% 3,278 68 8.20%
------- ----- ----- ------- ----- -----
Total interest-bearing liabilities 391,975 3,763 3.89% 356,046 3,615 4.07%
Non-interest bearing liabilities:
Demand deposits 69,734 59,051
Other liabilities 3,056 2,892
------- -------
Total liabilities 464,765 417,989
STOCKHOLDERS' EQUITY (F) 49,839 50,725
------- -------
Total liabilities and stockholders' equity 514,604 468,714
======= =======
Taxable equivalent net interest income 4,679 4,305
Less: taxable equivalent adjustment 3 4
----- -----
Net interest income 4,676 4,301
===== =====
Net interest spread (B) 3.65% 3.60%
===== =====
Net interest margin (C) 4.18% 4.17%
===== =====
SELECTED OPERATING RATIOS:
Return on assets (D) 0.65% 1.80%
===== =====
Return on equity (E) 6.81% 16.65%
===== =====
</TABLE>
- ----------------------
(A) Non-accrual loans are included in the average balances used in calculating
this table.
(B) The net interest spread is the difference between the average rate on total
interest-earning assets and interest-bearing liabilities.
(C) The net interest margin is the taxable-equivalent net interest income
divided by average interest-earning assets.
(D) The return on assets ratio was computed by dividing net income by average
total assets.
(E) The return on equity ratio was computed by dividing net income by average
total stockholders' equity.
(F) The average balance has been adjusted to exclude the effect of the
unrealized gain or loss on securities available for sale.
12
<PAGE> 13
The following table analyzes the increase in taxable-equivalent net interest
income stemming from changes in interest rates and from asset and liability
volume, including mix, for the three months ended March 31, 1999 and 1998.
Non-accruing loans have been included in assets for calculating this table,
thereby reducing the yield on loans. The changes in interest due to both rate
and volume in the table below have been allocated to volume or rate change on a
pro-rata basis.
ANALYSIS OF CHANGES IN TAXABLE EQUIVALENT NET INTEREST INCOME
<TABLE>
<CAPTION>
MARCH 31, 1999 VS. MARCH 31, 1998
----------------------------------
Due to Changes in
Increase --------------------
(Decrease) Rates Volume
---------- ------- -------
(Dollars in Thousands)
<S> <C> <C> <C>
TAXABLE-EQUIVALENT INTEREST INCOME:
Interest-bearing accounts $ 26 $ (8) $ 34
Federal funds sold 20 -- 20
Investment securities (289) 49 (328)
Loans, net of discounts 765 (620) 1,385
------- ------- -------
Total taxable-equivalent interest income $ 522 $ (579) $ 1,101
INTEREST EXPENSE:
Interest-bearing deposits 24 (227) 251
Other debt 124 (41) 165
------- ------- -------
Total interest expense 148 (268) 416
------- ------- -------
TAXABLE-EQUIVALENT NET INTEREST INCOME $ 374 $ (311) $ 685
======= ======= =======
</TABLE>
Taxable-equivalent net interest income for the three months ended March 31,
1999 increased $374,000 or 8.7% over the same period in 1998. The increase is
reflected in the increase in the volume of earning assets and in the increase
in the volume of interest bearing liabilities.
13
<PAGE> 14
INTEREST RATE SENSITIVITY
Management seeks to maintain consistent growth of net interest income
through periods of changing interest rates by avoiding fluctuating net interest
margins. Interest rate sensitivity is the relationship between changes in
market interest rates and changes in net interest income due to repricing
characteristics of interest earning assets and liabilities.
The following table indicates the Company's interest rate sensitivity
position at March 31, 1999:
INTEREST-RATE SENSITIVE ASSETS AND LIABILITIES
(Dollars in thousands)
<TABLE>
<CAPTION>
NON-RATE
RATE SENSITIVE SENSITIVE
---------------------------------------------------------- ---------
IMMEDIATELY WITHIN WITHIN OVER
0-30 DAYS 90 DAYS ONE YEAR TOTAL ONE YEAR TOTAL
---------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Loans, net of discounts $ 62,740 $ 10,995 $ 23,723 $ 97,458 $106,017 $ 203,475
Investment securities 6,010 3,519 18,769 28,298 215,284 243,582
Federal funds sold 22,008 -- -- 22,008 -- 22,008
Interest-bearing accounts 199 100 1,163 1,462 819 2,281
--------- --------- --------- --------- -------- ---------
Total earning assets $ 90,957 $ 14,614 $ 43,655 $ 149,226 $322,120 $ 471,346
========= ========= ========= ========= ======== =========
Interest-bearing liabilities:
Interest-bearing transaction,
savings and money market $ 162,925 -- -- $ 162,925 -- $ 162,925
Certificates and time deposits 41,038 49,769 119,774 210,581 10,359 220,940
Debt 8,846 269 309 9,424 2,018 11,442
--------- --------- --------- --------- -------- ---------
Total interest-bearing
liabilities $ 212,809 $ 50,038 $ 120,083 $ 382,930 $ 12,377 $ 395,307
========= ========= ========= ========= ======== =========
Interest sensitivity gap $(121,852) $ (35,424) $ (76,428) $(233,704)
========= ========= ========= =========
Cumulative gap $(121,852) $(157,276) $(233,704) $(233,704)
========= ========= ========= =========
Ratio of earning assets to
interest-bearing liabilities 42.7% 29.2% 36.4% 39.0%
</TABLE>
The interest rate sensitivity table reflects a cumulative liability
sensitive position during the one-year period shown. Generally, this indicates
that the liabilities reprice more quickly than the assets in a given period,
and that a decline in market rates will benefit net interest income. An
increase in market rates would have the opposite effect.
14
<PAGE> 15
NON-INTEREST INCOME
The major components of non-interest income are service charges and fees
earned on deposit accounts. The following table summarizes changes in
non-interest income for the three months March 31, 1999 and 1998:
NON-INTEREST INCOME
(Dollars in thousands)
<TABLE>
<CAPTION>
THREE MONTHS ENDED 1999/1998
------------------------------- ----------------------
MARCH 31, 1999 MARCH 31, 1998 $ CHANGE % CHANGE
-------------- -------------- -------- --------
<S> <C> <C> <C> <C>
Service charges and fees $ 792 $ 794 $ (2) -0.3%
Net realized gains on sales of securities 29 1,313 (1,284) -97.8%
Net trading profits - 526 (526) -100.0%
Net gains on sales of other real estate owned 26 - 26 100.0%
Miscellaneous income 287 73 214 293.2%
---------- --------- ------- ------
Total non-interest income $ 1,134 $ 2,706 $(1,572) -58.1%
========== ========= ======= ======
</TABLE>
The $1.6 million or 58.1% decrease in non-interest income for the three
months ended March 31, 1999 is due primarily to the $1.8 million decrease in
net securities gains and trading account profits over the three months ended
March 31, 1998. Excluding the nonrecurring gains on sales of securities and
other real estate owned, non-interest income increased $212,000 or 24.5% over
the three months ended, March 31, 1998.
NON-INTEREST EXPENSE
Non-interest expense includes all expenses of the Company other than
interest expense, loan loss provision and income tax expense. The following
table summarizes the changes in non-interest expense for the three months ended
March 31, 1999 and 1998:
NON-INTEREST EXPENSE
(Dollars in thousands)
<TABLE>
<CAPTION>
THREE MONTHS ENDED 1999/1998
------------------------- ----------------------
MARCH 31, MARCH 31,
1999 1998 $ CHANGE % CHANGE
---------- --------- -------- --------
<S> <C> <C> <C> <C>
Salaries and employee benefits $ 2,223 $ 1,832 $ 391 21.3%
Occupancy and equipment expenses 720 570 150 26.3%
Data processing fees 83 70 13 18.6%
FDIC insurance 13 12 1 8.3%
Insurance 35 26 9 34.6%
Office supplies 181 164 17 10.4%
Postage and courier 134 134 0 0.0%
Professional fees 200 198 2 1.0%
Goodwill amortization 94 94 0 0.0%
Miscellaneous other expenses 511 567 (56) -9.5%
---------- --------- ------ ----
Total non-interest expense $ 4,194 $ 3,667 $ 527 14.4%
========== ========= ====== ====
</TABLE>
Total non-interest expense for the three months ended March 31, 1999
increased $527,000 or 14.4% over 1998. Salaries and benefits rose $391,000 or
21.3% in 1999. Salaries and benefits increased due primarily to the hiring of
personnel for the San Antonio branch which was opened during the first quarter
of 1999 and to the opening of the San Marcos and South Laredo branches in March
1998. The $150,000 or 26.3% increase in occupancy and equipment expenses is
due to the construction of the new 30,000 square foot building and associated
equipment costs for the San Antonio branch.
15
<PAGE> 16
INCOME TAXES
The Company recognized income tax expense of $656,000 for the three months
ended March 31, 1999 compared to $1,215,000 for the three months ended March
31, 1998. At March 31, 1999, the Company had approximately $95 million in net
operating loss carryforwards that will be available to reduce income tax
liabilities in future years. If unused, approximately $91 million of such
carryforwards will expire in 2005, with the remaining approximately $4 million
expiring in 2006.
LOANS
The following table presents the composition of the Company's loan portfolio
by type of loan:
LOAN PORTFOLIO
(Dollars in thousands)
<TABLE>
<CAPTION>
MARCH 31, % OF DECEMBER 31, % OF MARCH 31,
1999 TOTAL 1998 TOTAL 1998
--------- ----- --------- ----- ---------
<S> <C> <C> <C> <C> <C>
Commercial $ 33,204 16.3% $ 35,389 18.4% $ 22,711
Real estate construction 16,596 8.2% 12,125 6.3% 10,322
Real estate mortgage 127,448 62.6% 119,654 62.3% 93,021
Consumer installment, net of unearned discount 26,227 12.9% 25,051 13.0% 23,409
--------- ----- --------- ----- ---------
Total loans $ 203,475 100.0% $ 192,219 100.0% $ 149,463
========= ===== ========= ===== =========
</TABLE>
Total loans have increased 5.5% and 36.1% since December 31, 1998 and March
31, 1998, respectively. Real estate mortgage loans have shown a 6.5% and 37%
increase since December 31, 1998 and March 31, 1998, respectively. The increase
in total loans has been from internal growth.
16
<PAGE> 17
ALLOWANCE FOR LOAN LOSSES
The allowance for loan losses is established through charges to operations
in the form of a provision for loan losses. Loans, or portions thereof, which
are considered to be uncollectible are charged against the allowance and
subsequent recoveries, if any, are credited to the allowance. The allowance
represents the amount, which in the judgment of each subsidiary Bank's
management will be adequate to absorb possible losses. The adequacy of the
allowance is determined by management's continuous evaluation of the loan
portfolio and by the employment of third party loan review consultants.
Industry concentrations, specific credit risks, past loan loss experience,
delinquency ratios, current loan portfolio quality and projected economic
conditions in the Bank's market areas are pertinent factors in determining the
adequacy of the allowance for loan losses. Loans identified as losses by
management, external loan review or bank examiners are charged-off.
The Company recorded net charge-offs of $2,000 for the three months ended
March 31, 1999 compared to net recoveries of $34,000 for the three months ended
March 31, 1998.
The following table summarizes, for the periods presented, the activity in
the allowance for loan losses arising from provisions credited to operations,
loans charged off and recoveries of loans previously charged off.
ANALYSIS OF ALLOWANCE FOR LOAN LOSSES
(Dollars in thousands)
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
----------------------------
1999 1998
------------- -------------
<S> <C> <C>
Average loans outstanding $ 197,559 $ 142,667
Balance of allowance for loan losses at beginning of period $ 2,670 $ 2,458
Provision for loan losses 123 20
Charge-Offs:
Commercial 4 5
Real estate construction -- --
Real estate mortgage -- 15
Consumer installment 27 57
--------- ---------
Total charge-offs 31 77
--------- ---------
Recoveries:
Commercial 5 4
Real estate construction -- --
Real estate mortgage 7 23
Consumer installment 17 84
--------- ---------
Total recoveries 29 111
--------- ---------
Net charge-offs (recoveries) 2 (34)
--------- ---------
Balance of allowance for loan losses at end of period $ 2,791 $ 2,512
========= =========
Net charge-offs (recoveries) as a percentage
of average loans outstanding 0.00% -0.02%
========= =========
Allowance for loan losses as a percentage of:
Total loans, net of unearned discount 1.37% 1.68%
========= =========
</TABLE>
17
<PAGE> 18
NON-PERFORMING ASSETS
Non-performing assets consist of non-accrual loans and foreclosed real
estate. Loans to a customer whose financial condition has deteriorated are
considered for non-accrual status whether or not the loan is ninety days or
more past due. All installment loans past due ninety days or more are placed on
non-accrual unless the loan is well secured or in the process of collection. On
non-accrual loans, interest income is not recognized until actually collected.
At the time the loan is placed on non-accrual status, interest previously
accrued but not collected is reversed and charged against current income.
Foreclosed real estate consists of property which has been acquired through
foreclosure. At the time of foreclosure, the property is recorded at the lower
of the estimated fair value less selling expenses or the loan balance with any
write down charged to the allowance for loan losses. Any future write-downs on
the property are charged to operations.
The following table discloses non-performing assets and loans ninety days
past due and still accruing interest as of March 31, 1999 and December 31,
1998: (Dollars in thousands)
NON-PERFORMING ASSETS
(Dollars in Thousands)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1999 1998
------ ------
<S> <C> <C>
Non-accrual loans $1,072 $ 899
Foreclosed real estate 1,082 1,195
------ ------
Total non-performing assets $2,154 $2,094
====== ======
Non-performing assets as a percentage of:
Total assets 0.41% 0.41%
Total loans plus foreclosed real estate 1.05% 1.08%
Accruing loans past due 90 days or more $ 98 $ 311
</TABLE>
Independent third party loan reviews of the subsidiary Banks are performed
on an annual basis. The loans are also reviewed by banking regulators on an
eighteen-month basis. On a monthly basis, the Board of Directors' Loan
Committee of each Bank reviews new loans, renewals and delinquencies.
Management of each Bank monitors on a continuing basis those loans which it
feels should be followed closely. The Banks are required by regulation to have
foreclosed real estate appraised periodically.
LIQUIDITY
Liquidity is the ability to have funds available at all times to meet the
commitments of the Company. Asset liquidity is provided by cash and assets
which are readily marketable or pledgeable or which will mature in the near
future. Liquid assets include cash and short-term investments in time deposits
in banks, federal funds sold and securities available for sale. Liquidity is
also provided by access to core funding sources, primarily core depositors in
the Company's trade area. The Banks have not and do not solicit brokered
deposits as a funding source. The liquidity of the Company is enhanced by the
fact that 79% of total deposits at March 31, 1999 were "core" deposits. Core
deposits, for this purpose, are defined as total deposits less public funds and
certificates of deposit greater than $100,000.
At March 31, 1999, the Company's liquid assets totaled $259 million or 50%
of total gross assets, compared to 41% at March 31, 1998. Secondary sources of
liquidity include the Banks' ability to sell loan participations and purchase
federal funds. NBC-Eagle Pass has an approved federal funds line at a
correspondent bank. NBC-Laredo has an approved line of credit with the Federal
Home Loan Bank.
18
<PAGE> 19
The Company's principal source of funds consists of dividends received from
the Banks, which derive their funds from deposits, interest and principal
payments on loans and investment securities, sales of investment securities and
borrowings.
CAPITAL RESOURCES
Total stockholders' equity decreased $2.5 million to $52.2 million at March
31, 1999 from $54.8 million at March 31, 1998. The ratio of total stockholders'
equity to total assets was 10.0% at March 31, 1999 compared with 11.5% at March
31, 1998. The Company began a stock repurchase plan in 1997 and has repurchased
494,675 common shares at a cost of $9.0 million as of March 31, 1999, which is
the reason for the decrease in total stockholders equity.
The Company and subsidiary Banks are subject to minimum capital ratios
mandated by their respective banking industry regulators. The table below
illustrates the Company and subsidiary Bank's compliance with the risk-based
capital guidelines of the Federal Reserve Bank (FRB) and the Office of the
Comptroller of the Currency (OCC). These guidelines are designed to measure
Tier 1 and total capital while taking into consideration the risk inherent in
both on and off balance sheet items. Off balance sheet items include unfunded
loan commitments and letters of credit. Currently under the regulatory
guidelines, the net unrealized gain or loss on securities available for sale is
not included in the calculation of risk-based capital and the leverage ratio.
The leverage ratio is Tier 1 capital divided by average total assets. A
leverage ratio of 3.0 percent is the minimum requirement for only the most
highly rated banking organizations and all other institutions are required to
maintain a leverage ratio of 3 to 5 percent.
Tier 1 capital includes common stockholders' equity less goodwill. Total
capital includes Tier 1 capital and a portion of the allowance for loan losses.
The ratios are calculated by dividing the qualifying capital by the
risk-weighted assets.
The table below illustrates the Company and its subsidiary Banks' compliance
with the risk-based capital guidelines as of March 31, 1999:
<TABLE>
<CAPTION>
NBC NBC NBC NBC
CONSOLIDATED EAGLE PASS LAREDO ROCKDALE LULING
------------ ---------- ------- -------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Total average assets (net of goodwill) $505,044 $273,654 $83,541 $112,373 $29,072
Risk weighted assets (net of goodwill) $221,577 $122,393 $54,111 $ 30,216 $18,767
Tier 1 capital $ 39,448 $ 17,479 $ 8,156 $ 6,911 $ 3,785
Total capital $ 42,218 $ 18,773 $ 8,776 $ 7,289 $ 4,023
Leverage ratio 7.81% 6.39% 9.76% 6.15% 13.02%
Risk based capital ratios:
Tier 1 17.80% 14.28% 15.07% 22.87% 20.17%
Total capital 19.05% 15.34% 16.22% 24.12% 21.44%
</TABLE>
YEAR 2000
The Year 2000 (Y2K) issue centers on the inability of computer systems to
recognize the year 2000. Many existing computer programs and systems were
originally programmed with six digit dates that provided only two digits to
identify the calendar year in the date field, without considering the upcoming
change in the century. With the impending millennium, these programs and
computers may recognize "00" as the year 1900 rather that the year 2000.
The Company has formed a Y2K project team comprising technological, data
processing, and operations personnel from each of the Banks' management. The
project team has developed and is currently executing a planned review and risk
assessment of all technology items used in the Company's operations, including
core data processing systems, as well as material relationships with suppliers,
correspondents, and customer groups. The identification of critical items and
relations, and the renovation or replacement of items which are non-compliant
with current guidelines were complete in 1998 in accordance with regulatory
agency
19
<PAGE> 20
guidelines. Y2K compliance will be effected through data processing hardware
and software upgrades and purchases of new equipment with an estimated
aggregate cost of approximately $573,000.
The three core systems, or mission critical systems, were implemented and
tested for Y2K compliance in December 1998. These three systems include the
deposit and loan systems, any ancillary or interface programs and the imaging
software. The ATM software and the NT Server software will both be upgraded and
tested by the end of the second quarter of 1999.
FORWARD-LOOKING INFORMATION
The Company may from time to time make "forward-looking" statements as such
term is defined in The Private Securities Litigation Reform Act of 1995 and
information relating to the Company and its subsidiaries that are based on the
beliefs of the Company's management. When used in this report, the words
"anticipate," "believe," "estimate," "expect" and "intend" and words or phrases
of similar import, as they relate to the Company or its subsidiaries or Company
management, are intended to identify forward-looking statements. Such
statements reflect the current risks, uncertainties and assumptions related to
certain factors including, without limitation, competitive factors, general
economic conditions, the interest rate environment, governmental regulation and
supervision, technological change, one-time events and other factors described
herein and in other filings made by the Company with the Securities and
Exchange Commission. Based upon changing conditions, should any one or more of
these risks or uncertainties materialize, or should any underlying assumptions
prove incorrect, actual results may vary materially from such forward-looking
statements.
20
<PAGE> 21
PART II - OTHER INFORMATION:
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) 11.1 Statement regarding computation of Earnings Per Share
27.1 Financial Data Schedule
(b) Reports on Form 8-K:
Reports on Form 8-K were filed on April 23, 1999. An amended December 31,
1998 10-K/A was also filed on April 23, 1999.
21
<PAGE> 22
SIGNATURES
In accordance with the requirements of the Securities Exchange Act, the
registrant has caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
NATIONAL BANCSHARES CORPORATION OF TEXAS
Date: May 14, 1999 By: /s/ Anne R. Renfroe
-------------------------------------
Anne Renfroe, Chief Accounting
Officer and Principal Financial
Officer
22
<PAGE> 23
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------ -----------
<S> <C>
11.1 Statement regarding computation of Earnings Per Share
27.1 Financial Data Schedule
</TABLE>
<PAGE> 1
EXHIBIT 11.1
NATIONAL BANCSHARES CORPORATION OF TEXAS AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
-------------------------
1999 1998
---------- ----------
<S> <C> <C>
BASIC EPS:
Net income $ 0.20 $ 0.45
========== ==========
DILUTED EPS:
Net income $ 0.20 $ 0.44
========== ==========
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
-------------------------
1999 1998
---------- ----------
<S> <C> <C>
Income available to common stockholders $ 837 $ 2,106
========== ==========
Weighted average number of common
shares used in Basic EPS 4,169,848 4,659,523
Effect of dilutive stock options 96,768 122,628
---------- ----------
Weighted number of common shares
and dilutive potential common stock
used in Diluted EPS 4,266,616 4,782,151
========== ==========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> MAR-31-1999
<CASH> 18,073
<INT-BEARING-DEPOSITS> 2,281
<FED-FUNDS-SOLD> 22,008
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 216,688
<INVESTMENTS-CARRYING> 26,894
<INVESTMENTS-MARKET> 27,763
<LOANS> 203,475
<ALLOWANCE> 2,791
<TOTAL-ASSETS> 522,302
<DEPOSITS> 456,392
<SHORT-TERM> 8,812
<LIABILITIES-OTHER> 2,231
<LONG-TERM> 2,630
0
0
<COMMON> 5
<OTHER-SE> 52,237
<TOTAL-LIABILITIES-AND-EQUITY> 522,302
<INTEREST-LOAN> 4,488
<INTEREST-INVEST> 3,541
<INTEREST-OTHER> 410
<INTEREST-TOTAL> 8,439
<INTEREST-DEPOSIT> 3,571
<INTEREST-EXPENSE> 192
<INTEREST-INCOME-NET> 4,676
<LOAN-LOSSES> 123
<SECURITIES-GAINS> 29
<EXPENSE-OTHER> 1,134
<INCOME-PRETAX> 1,493
<INCOME-PRE-EXTRAORDINARY> 1,493
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 837
<EPS-PRIMARY> 0.20
<EPS-DILUTED> 0.20
<YIELD-ACTUAL> 7.54
<LOANS-NON> 1,072
<LOANS-PAST> 98
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 6,044
<ALLOWANCE-OPEN> 2,670
<CHARGE-OFFS> 31
<RECOVERIES> 29
<ALLOWANCE-CLOSE> 2,791
<ALLOWANCE-DOMESTIC> 2,791
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 1,588
</TABLE>
