<PAGE>
================================================================================
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 QUARTER ENDED JUNE 30, 1998
COMMISSION FILE NUMBER: 0-11223
PROFESSIONAL BANCORP, INC.
(Exact name of registrant as specified in its charter)
PENNSYLVANIA 95-3701137
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
606 BROADWAY
SANTA MONICA, CALIFORNIA 90401
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (310) 458-1521
INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS REQUIRED
TO BE FILED BY SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 DURING
THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE REGISTRANT WAS
REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO SUCH FILING
REQUIREMENTS FOR THE PAST 90 DAYS. YES X NO
------- -------
As of July 21, 1998, 1,913,348 shares of the Registrant's $0.008 par value
common stock were outstanding.
1
<PAGE>
PROFESSIONAL BANCORP, INC.
INDEX
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1 Financial Statements
Consolidated Statements of Financial Condition as of
June 30, 1998 and December 31, 1997 3
Consolidated Statements of Operations for the three months
and six months ended June 30, 1998 and 1997 4
Consolidated Statements of Cash Flows for the six months
ended June 30, 1998 and 1997 5
Notes to Consolidated Financial Statements 6
Item 2 Management's Discussion and Analysis of Financial Condition
and Results of Operations 7
PART II. OTHER INFORMATION
Item 6 Exhibits and Reports on Form 8-K 18
SIGNATURES 19
</TABLE>
2
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
PROFESSIONAL BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
June 30, December 31,
1998 1997
------------ -------------
<S> <C> <C>
Assets
Cash and due from banks:
Noninterest-bearing $ 26,563,830 $ 28,627,771
Interest-bearing 153,830 111,899
Federal funds sold 43,200,000 25,600,000
------------ ------------
Cash and cash equivalents 69,917,660 54,339,670
Securities available-for-sale (cost of $40,159,000 and
$53,145,000 in 1998 and 1997, respectively) 39,881,431 52,696,180
Securities held-to-maturity (fair value of $29,425,000
and $35,147,000 in 1998 and 1997, respectively) 29,315,212 35,099,572
Loans (net of allowance for loan losses of $1,851,000
and $1,802,000 in 1998 and 1997, respectively) 98,281,562 103,900,082
Premises and equipment, net 1,499,796 1,547,771
Deferred tax asset 1,389,487 1,239,207
Accrued interest receivable and other assets 4,535,426 5,005,079
------------ ------------
$244,820,574 $253,827,561
============ ============
Liabilities and Shareholders' Equity
Liabilities
Deposits:
Demand, noninterest-bearing $ 97,684,876 $ 97,746,304
Demand, interest-bearing 12,094,158 14,961,400
Savings and money market 80,405,411 89,226,025
Time deposits 26,448,041 27,529,935
------------ ------------
Total deposits 216,632,486 229,463,664
Convertible notes 2,170,000 5,437,000
Acrued interest payable and other liabilities 2,392,387 3,063,744
------------ ------------
Total liabilities 221,194,873 237,964,408
------------ ------------
Commitments and contingent liabilities
Shareholders' equity:
Common stock, $.008 par value; 12,500,000 shares
authorized; 1,982,815 and 1,426,689 issued
and 1,913,348 and 1,357,222 outstanding in 1998
and 1997, respectively 15,862 11,413
Additional paid-in-capital 19,866,634 12,659,774
Retained earnings 4,437,767 3,993,026
Treasury stock, at cost (69,467 and 69,467 shares
in 1998 and 1997, respectively) (537,251) (537,251)
Unrealized loss on securities available-for sale, net of taxes (157,311) (263,809)
------------ ------------
Total shareholders' equity 23,625,701 15,863,153
------------ ------------
$244,820,574 $253,827,561
============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE>
PROFESSIONAL BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
------------------------- -------------------------
1998 1997 1998 1997
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Interest income
Loans $2,502,264 $2,423,760 $4,978,008 $4,686,154
Securities 1,071,114 1,509,188 2,356,289 3,000,829
Federal funds sold and securities purchased
under agreements to resell 544,736 201,649 791,656 462,093
Interest-bearing deposits in other banks 1,589 13,138 3,135 17,703
---------- ---------- ---------- ----------
Total interest income 4,119,703 4,147,735 8,129,088 8,166,779
---------- ---------- ---------- ----------
Interest expense
Deposits 814,435 761,044 1,604,529 1,562,493
Convertible notes 81,559 119,361 189,748 238,722
Federal funds purchased and securities
sold under agreements to repurchase - 15,807 3,055 15,807
---------- ---------- ---------- ----------
Total interest expense 895,994 896,212 1,797,332 1,817,022
---------- ---------- ---------- ----------
Net interest income 3,223,709 3,251,523 6,331,756 6,349,757
Provision for loan losses - 60,000 - 120,000
---------- ---------- ---------- ----------
Net interest income after provision
for loan losses 3,223,709 3,191,523 6,331,756 6,229,757
---------- ---------- ---------- ----------
Other operating income
Net gain (loss) on sale of securities
available-for-sale (8,735) - (8,735) -
Merchant discount 50,593 72,253 109,277 140,206
Mortgage banking fees 69,577 38,076 83,523 71,246
Service charges on deposits 222,842 215,414 479,789 400,094
Other income 125,795 215,813 263,153 357,440
---------- ---------- ---------- ----------
Total other operating income 460,072 541,556 927,007 968,986
---------- ---------- ---------- ----------
Other operating expenses
Salaries and employee benefits 1,653,224 1,393,068 3,191,079 2,901,699
Occupancy 352,892 377,322 701,463 760,338
Furniture and equipment 199,793 226,642 390,265 437,122
Meetings and business development 61,875 62,444 93,950 95,678
Donations 25,816 27,309 62,752 42,589
Other promotion 84,324 100,191 152,262 172,444
Legal fees 159,551 142,692 251,897 258,861
Audit, accounting and examinations 40,495 30,790 84,035 58,525
Professional services 282,215 420,248 639,229 759,471
Strategic planning and other outside consulting 37,473 - 91,388 -
Office supplies 55,481 53,522 121,494 113,550
Telephone 71,845 70,256 140,512 146,093
Postage 40,392 42,881 81,394 77,848
Messenger service 8,280 17,115 17,498 47,280
FDIC assessment 6,609 8,289 12,762 14,500
Other assessments 44,648 64,377 87,829 116,734
Imprinted checks 14,960 28,118 27,703 56,773
Other expense 155,677 136,840 280,685 286,628
---------- ---------- ---------- ----------
Total other operating expenses 3,295,550 3,202,104 6,428,197 6,346,133
---------- ---------- ---------- ----------
Earnings before taxes 388,231 530,975 830,566 852,610
Provision for income taxes 164,000 219,300 302,000 351,300
---------- ---------- ---------- ----------
Net earnings $ 224,231 $ 311,675 $ 528,566 $ 501,310
========== ========== ========== ==========
Earnings per share
Basic $ 0.13 $ 0.23 $ 0.34 $ 0.37
Diluted $ 0.13 $ 0.21 $ 0.30 $ 0.36
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE>
PROFESSIONAL BANCORP AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Six Months Ended June 30,
1998 1997
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net earnings $ 528,566 $ 501,310
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Depreciation and amortization 290,054 290,527
Provision for loan losses - 120,000
Loss on sales of securities available-for-sale 8,735 -
Amortization of convertible note expense 52,255 52,166
(Increase) in deferred tax asset (214,291) (18,260)
Decrease in accrued interest receivable and other assets 6,959 2,487,107
Decrease in accrued interest payable and other liabilities (110,971) (167,945)
Net amortization of premiums and discounts
on securities held-to-maturity 183,362 118,736
Net amortization of premiums and discounts
on securities available-for-sale 161,142 115,587
------------ ------------
Net cash provided by operating activities 905,811 3,499,228
------------ ------------
Cash flows from investing activities:
Proceeds from:
Maturities of securities held-to-maturity 3,056,168 3,250,000
Maturities of securities available-for-sale 6,870,516 -
Sales of securities available-for-sale 10,234,664 -
Principal payments and maturities of:
Mortgage-backed securities held-to-maturity 2,544,830 2,627,906
Mortgage-backed securities available-for-sale 6,348,014 3,643,320
Purchase of securities held-to-maturity - (2,991,950)
Purchase of securities available-for-sale (10,637,813) (6,037,422)
Net (increase) decrease in loans 5,618,520 (3,244,498)
Purchase of bank premises and equipment, net (242,079) (226,342)
------------ ------------
Net cash provided (used) by investing activities 23,792,820 (2,978,986)
------------ ------------
Cash flows from financing activities:
Net decrease in demand deposits and savings accounts (11,749,284) (24,252,263)
Net increase (decrease) in time deposits (1,081,895) (6,146,900)
Cash dividends (83,825) -
Proceeds from exercise of stock options 3,794,363 13,354
------------ ------------
Net cash used in financing activities (9,120,641) (30,385,809)
------------ ------------
Net decrease (increase) in cash and cash equivalents 15,577,990 (29,865,567)
------------ ------------
Cash and cash equivalents, beginning of period 54,339,670 66,339,978
------------ ============
Cash and cash equivalents, end of period $ 69,917,660 $ 36,474,411
============ ============
Supplemental disclosure of cash flow information -
Cash paid during the period for:
Interest $ 1,925,902 $ 1,986,400
Income taxes $ 122,000 $ 230,108
Supplemental disclosure of noncash items:
Decrease (increase) in unrealized losses on securities
available-for-sale, net of tax $ 170,509 $ (70,542)
Conversion of notes $ 2,836,562 $ -
Tax benefit on stock options exercised $ 560,384 $ -
</TABLE>
5
<PAGE>
PROFESSIONAL BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - BASIS OF PRESENTATION
The unaudited consolidated financial statements included herein have
been prepared by Professional Bancorp, Inc. (the "Company") pursuant to the
rules and regulations of the Securities and Exchange Commission. In the opinion
of management, all adjustments (which include only normal recurring adjustments)
necessary to present fairly the results of operations for the periods covered
have been made. Certain information and note disclosures normally included in
financial statements presented in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to such rules and
regulations. Management believes that the disclosures are adequate to make the
information presented not misleading.
The financial position at June 30, 1998, and the results of operations
for the three and six months ended June 30, 1998 are not necessarily indicative
of the results of operations that may be expected for the year ending December
31, 1998. These unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles on a basis
consistent with the Company's audited financial statements, and these interim
financial statements should be read in conjunction with the Company's audited
financial statements and notes thereto included in the Company's Form 10-K for
the year ended December 31, 1997.
NOTE 2 - ADOPTION OF NEW ACCOUNTING STANDARDS
As of December 31, 1997, the Company adopted Statement of Financial
Accounting Standards No. 128, "Earnings Per Share" (SFAS No. 128), and has
restated all prior period earnings per share data. SFAS No. 128 replaces
primary EPS with basic EPS and fully diluted EPS with diluted EPS. Basic EPS
excludes dilution and is computed by dividing income available to common
stockholders by the weighted average number of common shares outstanding for the
period. Diluted EPS reflects the potential dilution that could occur if
securities or other contracts to issue common stock were exercised or converted
into common stock or resulted from issuance of common stock that then shared in
earnings.
The Company adopted, effective January 1, 1998, Statement of Financial
Accounting Standards No. 130, "Reporting Comprehensive Income" (SFAS No. 130).
SFAS No. 130 requires companies to report comprehensive income and its
components in a financial statement and display the accumulated balance of other
comprehensive income separately from retained earnings and additional paid-in-
capital. Comprehensive income includes all changes in equity during a period
except those resulting from investments by stockholders and distributions to
stockholders. For the three and six months ended June 30, 1998, net income
totaled $224,231 and $528,566, other comprehensive income totaled $(92,201) and
$106,497 and total comprehensive income totaled $132,030 and $635,063. For the
three and six months ended June 30, 1997, net income totaled $311,675 and
$501,310, other comprehensive income totaled $3,476 and $(52,192) and total
comprehensive income totaled $315,151 and $449,118 respectively.
6
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
FINANCIAL CONDITION
Professional Bancorp, Inc. (the "Company"), holding company for First
Professional Bank, N.A. (the "Bank"), recorded net earnings of $224,000 or $0.13
per share for the second quarter of 1998, compared with net earnings of $312,000
or $0.23 per share for the second quarter of 1997. For the six months ended
June 30, 1998, the Company had net earnings of $529,000 or $0.34 per share .
This compares to net earnings of $501,000 or $0.37 per share for the first six
months of 1997. The Company had total assets of $244,821,000 at June 30, 1998,
compared to $253,828,000 at December 31, 1997.
LOANS
The following table sets forth the amount of loans outstanding by
category and the percentage of each category to the total loan portfolio.
<TABLE>
<CAPTION>
JUNE 30, 1998 DECEMBER 31, 1997
-------------------------- --------------------------
(in thousands) AMOUNT % OF TOTAL AMOUNT % OF TOTAL
------------ ----------- ------------ -----------
<S> <C> <C> <C> <C>
Commercial $ 80,607 80.4% $ 86,243 81.5%
Real estate secured commercial 10,153 10.1 10,512 9.9
-------- ----- -------- -----
90,760 90.5 96,755 91.4
Equity lines of credit 6,457 6.6 6,288 5.9
Other lines of credit 1,629 1.6 1,524 1.4
Installment 1,333 1.3 1,253 1.2
Lease financing 34 - 37 0.1
-------- ----- -------- -----
Gross loans 100,213 100.0% 105,857 100.0%
-------- --------
Less:
Allowance for loan losses 1,851 1,802
Deferred loan fees, net 80 155
-------- --------
Net loans $ 98,282 $103,900
======== ========
</TABLE>
In accordance with management's credit administration and regulatory
policy, loans are placed on nonaccrual status when the collection of principal
or interest is questionable. Generally, this means that loans are placed on
nonaccrual status when interest is 90 days or more past due, unless the loan is
well secured and in the process of collection or in the process of renewal.
Nonperforming loans and nonperforming assets do not include accruing loans 90
days or more past due where loan quality is not impaired, but rather the renewal
in process is pending receipt of the borrower's updated financial information.
Credit administrative policies discourage the use of "short-term"
extensions while awaiting receipt of updated financial packages from borrowers.
The policy is aimed at facilitating timely credit renewals. However, as a
result of this policy, aggregate "past due" volumes will not necessarily be
correlative to absolute asset quality measurement.
7
<PAGE>
The following table sets forth information about nonperforming assets
(which include nonaccrual loans, other real estate owned and other repossessed
assets), accruing loans 90 days or more past due, and certain ratios.
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
(in thousands) 1998 1997
-------- ------------
<S> <C> <C>
Nonperforming loans $ 527 $ 877
Other real estate owned (OREO) - -
Other repossessed assets 272 272
----- ------
Total nonperforming assets $ 799 $1,149
===== ======
Accruing loans 90 days or more past due $ 833 $ 17
===== ======
Nonperforming loans to total loans(1) 0.53% 0.83%
Nonperforming assets(1)
to total loans 0.80% 1.09%
to total loans, OREO and repossessed assets 0.80% 1.08%
to total assets 0.33% 0.45%
---------------------------------------------------------------------------------------
</TABLE>
(1) Nonperforming loans and nonperforming assets do not include
accruing loans 90 days or more past due.
The total accrued interest on loans 90 days or more past due and still
accruing was approximately $35,000 at June 30, 1998, and $1,000 at December 31,
1997. Of the $833,000 in accruing loans over 90 days or more past due and still
accruing, $495,000 represents loans where the renewal was in process, credit
quality was not impaired or risk rated below pass. As a result of the Company's
practice to discourage "short-term" extensions, these loans are carried as "past
due" to ensure proper underwriting and administrative controls.
The Company maintains the allowance for loan losses at a level
considered adequate by management to provide for potential loan losses. While
the Company's policy is to charge-off in the current period those loans for
which a loss is considered probable, there also exists the risk of future losses
which cannot be precisely quantified or attributed to particular loans.
Reasonable estimates of these future amounts are included in the allowance for
loan losses.
8
<PAGE>
The following table provides a summary of the Company's allowance for
loan losses and charge-off and recovery activity during the six months ended
June 30, 1998, the year ended December 31, 1997, and the six months ended June
30, 1997:
<TABLE>
<CAPTION>
PERIOD ENDED
---------------------------------------------------------
JUNE 30, DECEMBER 31, JUNE 30,
(in thousands) 1998 1997 1997
--------------- -------------- ------------
<S> <C> <C> <C>
Balance at beginning of period $ 1,802 $ 2,253 $ 2,253
Provision for loan losses - 180 120
-------- -------- -------
1,802 2,433 2,373
-------- -------- -------
Loan charge-offs 60 882 195
Recoveries on loans previously charged-off (109) (251) (111)
-------- -------- -------
Net charge-offs (recoveries) (49) 631 84
-------- -------- -------
Balance at end of period $ 1,851 $ 1,802 $ 2,289
======== ======== =======
Loans outstanding at end of period $100,213 $105,857 $96,382
Average loans outstanding during period 101,342 97,197 94,304
Net charge-offs (recoveries) to average loans outstanding -0.10% 0.65% 0.18%
Allowance for loan losses:
to total loans 1.85 1.70 2.37
to nonperforming loans/(1)/ 351.23 205.47 205.11
to nonperforming assets/(1)/ 231.66 156.83 164.91
/(1)/ Nonperforming loans and nonperforming assets do not include accruing loans 90 days or more past due.
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
Management considers a loan to be impaired when, based upon available
information and current events, it believes that it is probable the Company will
be unable to collect all amounts due on a timely basis in accordance with the
contractual terms of the loan agreement. Impairment of a loan is measured by
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. Impairment is recognized
by the establishment of a valuation allowance equal to the excess of the
Company's recorded investment in the loan over its measured value.
The Company had $839,000 in impaired loans as of June 30, 1998. The
carrying value of impaired loans for which there is a related allowance for loan
losses was $193,000, with the amount of specific allowance for loan losses
allocated to these loans of $59,000. There were $646,000 in impaired loans for
which there was a general allowance allocated consistent with the Company's
allowance for loan loss methodology. The average recorded investment in
impaired loans during the first six months of 1998 was approximately $981,000
and income recorded utilizing the cash basis and accrual basis method of
accounting was $33,000. Impaired loans at June 30, 1998, included $527,000 of
nonaccrual loans.
The Company had $1,233,000 in impaired loans as of June 30, 1997. The
carrying value of impaired loans for which there is a related allowance for loan
losses was $517,000, with the amount of specific allowance for loan losses
allocated to these loans of $304,000. There were $716,000 in impaired loans for
which there was a general allowance allocated consistent with the Company's
allowance for loan loss methodology. The average recorded investment in
impaired loans during the first six months of 1997 was approximately $1,494,000
and income recorded utilizing the cash basis and accrual basis method of
accounting was $28,000. Nonaccrual loans at June 30, 1997, included $804,000 of
the impaired loans.
9
<PAGE>
INVESTMENT SECURITIES
The following table sets forth the amortized cost and fair value of
securities available-for-sale as of June 30, 1998 and December 31, 1997:
<TABLE>
<CAPTION>
JUNE 30, 1998
-------------------------------------------------------------------------
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
(in thousands) COST GAIN LOSS VALUE
--------- ----------- ----------- ----------
<S> <C> <C> <C> <C>
U.S. Government securities $ - $ - $ - $ -
U.S. Government agency and
mortgage-backed securities 36,913 69 345 36,637
Small Business Administration securities 926 16 - 942
Collateralized mortgage obligations 2,320 - 18 2,302
------- ---- ---- -------
Total $40,159 $ 85 $363 $39,881
======= ==== ==== =======
<CAPTION>
DECEMBER 31, 1997
-------------------------------------------------------------------------
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
(in thousands) COST GAIN LOSS VALUE
--------- ----------- ----------- ----------
<S> <C> <C> <C> <C>
U.S. Government securities $ 2,003 $ 1 $ - $ 2,004
U.S. Government agency and
mortgage-backed securities 34,963 99 322 34,740
Small Business Administration securities 1,281 11 - 1,292
Collateralized mortgage obligations 14,898 - 238 14,660
------- ---- ---- -------
Total $53,145 $111 $560 $52,696
======= ==== ==== =======
</TABLE>
10
<PAGE>
The amortized cost and fair value of securities held-to-maturity as of
June 30, 1998, and December 31, 1997 are as follows:
<TABLE>
<CAPTION>
JUNE 30, 1998
-------------------------------------------------------------------------
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
(in thousands) COST GAIN LOSS VALUE
--------- ----------- ----------- ----------
<S> <C> <C> <C> <C>
U.S. Government securities $ 3,049 $ 68 $ - $ 3,117
U.S. Government agency securities 2,500 - 2,500
U.S. Government agency
mortgage-backed securities 23,327 69 27 23,369
Federal Reserve Bank stock 439 - - 439
------- ---- ---- -------
Total $29,315 $137 $ 27 $29,425
======= ==== ==== =======
<CAPTION>
DECEMBER 31, 1997
-------------------------------------------------------------------------
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
(in thousands) COST GAIN LOSS VALUE
--------- ----------- ----------- ----------
<S> <C> <C> <C> <C>
U.S. Government securities $ 3,054 $ 55 $ - $ 3,109
U.S. Government agency securities 2,750 - 10 2,740
U.S. Government agency
mortgage-backed securities 28,857 72 70 28,859
Federal Reserve Bank stock 439 - - 439
------- ---- ---- -------
Total $35,100 $127 $ 80 $35,147
======= ==== ==== =======
</TABLE>
During the three months ended June 30, 1998 securities available-for-
sale were sold for aggregate proceeds of $10,285,000. This sale resulted in a
gross realized loss of $9,000. There were no sales of securities available-for-
sale in the twelve months ended December 31, 1997.
DEPOSITS
Total deposits at June 30, 1998 were $216,632,000, a decrease of
$12,831,000 or 5.6% from $229,464,000 at December 31, 1997. The Company
attracts deposits primarily from individuals and businesses related to the
health care services industry, as well as other professionals and professional
services firms. The Company has no brokered deposits and the Company's practice
is to not purchase brokered deposits.
The following table sets forth the amount of deposits by category and
the percentage of each category to total deposits as of June 30, 1998 and
December 31, 1997:
<TABLE>
<CAPTION>
JUNE 30, 1998 DECEMBER 31, 1997
--------------------------------- ---------------------------------
(in thousands) AMOUNT % OF TOTAL AMOUNT % OF TOTAL
-------------- ---------------- -------------- ----------------
<S> <C> <C> <C> <C>
Demand, noninterest-bearing $ 97,685 45.1% $ 97,746 42.6%
Demand, interest-bearing 12,094 5.6 14,961 6.5
Savings deposits 12,935 6.0 10,603 4.6
Money market deposits 67,470 31.1 78,624 34.3
Time deposits under $100,000 8,146 3.8 7,374 3.2
Time deposits of $100,000 and over 18,302 8.4 20,156 8.8
-------- ----- -------- -----
$216,632 100.0% $229,464 100.0%
======== ===== ======== =====
</TABLE>
11
<PAGE>
Historically, deposit levels decrease substantially in the first and
second quarter when clients tend to make first and second quarter tax payments
and risk-sharing distributions. In addition, increasing competition for
operating cash deposits comes from broker dealer products and accounts. In
order to minimize the effects of such "disintermediation" from the Company to
such accounts, the Company is currently offering to clientele such accounts
through its' C-Net Pro product.
CAPITAL
The Office of the Comptroller of the Currency (the "OCC"), the Bank's
primary regulator, has established minimum leverage ratio guidelines for
national banks. These guidelines provide for a minimum Tier 1 capital leverage
ratio (Tier 1 capital to adjusted average total assets) of 3.0% for national
banks that meet certain specified criteria, including having the highest
regulatory rating. All other national banks will generally be required to
maintain a minimum Tier 1 capital leverage ratio of 3.0% plus an additional
cushion of 100 to 200 basis points. The OCC has not advised the Bank of any
specific minimum Tier 1 capital leverage ratio applicable to it.
The Federal Reserve Bank, as Bancorp's primary regulator, has
similarly established minimum leverage ratio guidelines for bank holding
companies. These guidelines also provide for a minimum Tier 1 leverage ratio of
3.0% for bank holding companies that meet certain specified criteria, including
having the highest regulatory rating. All other bank holding companies will
generally be required to maintain a minimum Tier 1 capital leverage ratio of
3.0% plus an additional cushion of 100 to 200 basis points. The Federal Reserve
Bank has not advised the Bancorp of any specific minimum Tier 1 capital leverage
ratio applicable to it.
Risk-based capital standards were implemented on December 31, 1992.
Since December 31, 1992, banking organizations have been expected to meet a
minimum ratio for qualifying total capital to risk-weighted assets of 8.0%, 4.0%
of which must be Tier 1 capital. A banking organization's risk-based capital
ratios are obtained by dividing its qualifying capital by its total risk-
adjusted assets and risk-weighted off-balance sheet items.
The Federal Deposit Insurance Act of 1991 contains "prompt correction
action" provisions pursuant to which insured depository institutions are to be
classified into one of five categories based primarily upon capital adequacy,
ranging from "well-capitalized" to "critically undercapitalized" and which
require, subject to certain exceptions, the appropriate federal banking agency
to take prompt corrective action with respect to an institution which becomes
"undercapitalized" and to take additional actions if the institution becomes
"significantly undercapitalized" or "critically undercapitalized."
12
<PAGE>
The following table presents the capital ratios for the Company and
the Bank, compared with the standards for "well-capitalized" depository
institutions (which standards do not apply to bank holding companies) and the
minimum required capital ratios to be deemed "adequately capitalized" under
applicable federal regulations, as of June 30, 1998.
<TABLE>
<CAPTION>
TO BE WELL
CAPITALIZED UNDER
FOR CAPITAL PROMPT CORRECTIVE
ACTUAL ADEQUACY PURPOSES ACTION PROVISIONS
----------------------------------------------------------------
(in thousands) AMOUNT RATIO AMOUNT RATIO AMOUNT RATIO
------- ------ --------- ------ --------- ------
<S> <C> <C> <C> <C> <C> <C>
COMPANY
Leverage /(1)/ $23,626 9.44% $10,006 4.00% $12,507 5.00%
Tier 1 Risk-Based 23,626 17.81 5,306 4.00 7,959 6.00
Total Risk-Based 27,456 20.70 10,612 8.00 13,264 10.00
BANK
Leverage $21,420 8.72% $ 9,824 4.00% $12,280 5.00%
Tier 1 Risk-Based 21,420 16.21 5,285 4.00 7,927 6.00
Total Risk-Based 23,074 17.46 10,569 8.00 13,212 10.00
/1/ The minimum required by the FRB is 3%; for all but the most highly rated bank holding companies, the FRB expects a leverage
ratio of 3% plus 100 to 200 basis points.
</TABLE>
The Company and the Bank, at June 30, 1998, were considered "well-
capitalized" and exceeded all applicable minimum capital requirements. Capital
requirements of the federal banking regulators, however, could limit the
Company's future growth if the Company were to rely solely on the retention of
earnings to generate additional capital or rapid growth.
During March 1998, the Company received approximately $3,490,000 in
additional capital due to the exercise of 276,515 in stock options. On May 29,
1998, the Company gave notice of its' intent to call for partial redemption of
$2,625,000 principal amount of the Professional Bancorp, Inc., 8.50% Convertible
Subordinated Reset Notes due March 1, 2004. As a result of this call,
approximately $2,552,000 of the notes converted to 200,955 shares of common
stock and $73,000 in notes were redeemed by the June 30, 1998 redemption date.
Subsequent to quarter end and in the month of July 1998, approximately
$1,024,000 of additional notes converted to 80,636 of shares of common stock.
LIQUIDITY
The Company's primary source of liquidity is dividends from the Bank.
Dividends from the Bank to the Company are subject to certain regulatory
restrictions. Under federal banking law, dividends declared by the Bank in any
calendar year may not, without the approval of the OCC, exceed its net earnings,
as defined, for that year combined with its retained net earnings for the
proceeding two years. The Company's annual operating expenses and interest
obligations with respect to its convertible notes are approximately $750,000.
However, based upon the above redemption, Bancorp operating expenses will be
reduced approximately $222,000 on an annual basis
The Bank's primary sources of liquidity are federal funds sold to
other banks and the investment securities portfolio. For the six months ended
June 30, 1998, federal funds sold averaged $29,395,000 and compared to
$17,530,000 for the same period in 1997. In addition, securities in the
available-for-sale portfolio can be sold in response to liquidity needs or used
as collateral under reverse repurchase agreements. Securities held-to-maturity
are available for liquidity needs primarily as collateral for reverse repurchase
agreements. The fair value of securities available-for-sale and securities
held-to-maturity at June 30, 1998, were $39,881,000 and $29,425,000,
respectively.
The Bank sells securities under agreements to repurchase. Securities
sold under repurchase agreements are recorded as short-term obligations. During
the first six months of 1998, the highest daily outstanding balance and the
13
<PAGE>
average balance of securities sold under agreements to repurchase was $5,000,000
and $110,000, respectively; the average rate paid was 5.5%. At June 30, 1998,
there were no securities sold under agreements to repurchase.
RESULTS OF OPERATIONS
The Company reported consolidated net earnings of $224,000 for the
second quarter of 1998, compared with net earnings of $312,000 for the second
quarter of 1997. Basic and diluted earnings per share for the second quarter of
1998 were $0.13 compared to $0.23 basic and $0.21 diluted earnings per share for
the same period in 1997. Return on average equity for the second quarter of
1998 and 1997, were 4.21% and 8.74%, respectively. Additionally, return on
average assets for the second quarter of 1998 and 1997, were 0.36% and 0.53%,
respectively.
For the first six months of 1998, the Company reported net earnings of
$529,000 compared to $501,000 for the same period in 1997. Basic and diluted
earnings per share for the six months ended June 30, 1998, were $0.34 and $0.30,
respectively. Comparatively, basic and diluted earnings per share for the six
months ended June 30, 1997, were $0.37 and $0.36, respectively.
The comparative decline in earnings for the three months ended June
30, 1998, over the same period in 1997 is primarily due to the effect of two
nonrecurring transactions in the second quarter of 1997 that provided
approximately $133,000 of 1997's net earnings. Secondarily, the quarter was
impacted by higher legal expenses incurred in the convertible notes redemption
program. Earnings for the first six months of 1998 are slightly improved over
the same period in 1997 primarily due to reduced provision for loan losses and
improved noninterest income relating to account analysis fees offset by
nonrecurring fee income and expense reductions in 1997.
NET INTEREST INCOME
The Company's earnings depend primarily on net interest income, which
is the difference between the interest and fees earned on loans and investments
less the interest paid on deposits, borrowings and convertible notes. For the
quarter ended June 30, 1998, net interest income decreased $28,000 from
$3,252,000 for the quarter ended June 30, 1997, to $3,224,000, for the quarter
ended June 30, 1998. For the six months ended June 30, 1998 and 1997, net
interest income was $6,332,000 and $6,350,000, respectively. The decline in net
interest income is primarily a result of a decline in interest income from
securities which occurred due to a decrease in the size of the average portfolio
of approximately $15,677,000 and the maturity on December 31, 1997 of an
interest rate floor contract which provided approximately $118,000 in interest
income for the first six months of 1997. For the three months ended June 30,
1998 and 1997, the net interest margin was 5.96% and 6.26%, respectively.
The following tables present the distribution of average assets,
liabilities and shareholders' equity as well as the total dollar amount of
interest income from average interest-earning assets and resultant yields, and
the dollar amounts of interest expense and average interest-bearing liabilities,
expressed both in dollars and rates for the three months ended June 30, 1998 and
1997.
14
<PAGE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30,
--------------------------------------------------------------------
1998 1997
---------- ----------
AVERAGE YIELD/ AVERAGE YIELD/
(in thousands) BALANCE RATE INTEREST BALANCE RATE INTEREST
---------- ------- -------- ---------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Assets
Interest-earning assets:
Securities $ 76,045 5.65% $1,071 $ 96,681 6.26% $1,509
Loans/(1)/ 100,062 10.03 2,502 96,223 10.10 2,424
Federal funds sold 40,328 5.42 545 14,907 5.44 202
Interest-earning deposits - banks 614 1.31 2 498 10.47 13
-------- ------ -------- ------
Total interest-earning assets 217,049 7.61 4,120 208,309 7.99 4,148
-------- ------ -------- ------
Deferred loan fees (92) (145)
Allowance for loan losses (1,843) (2,284)
Nonearning assets:
Cash and due from banks 23,619 22,206
Premises and equipment 1,557 1,624
Other assets 5,897 7,724
-------- --------
Total assets $246,187 $237,434
======== ========
Liabilities and Shareholders' Equity
Interest-bearing liabilities:
Interest-bearing demand deposits $ 12,927 0.94% $ 30 $ 13,021 0.80% $ 26
Savings and money market deposits 81,094 2.06 417 94,530 1.84 434
Time deposits 31,892 4.62 367 25,675 4.70 301
Convertible notes 4,224 7.76 82 5,617 8.50 119
Repurchase agreements - - - 1,099 5.84 16
-------- ----- ------ -------- ------
Total interest-bearing liabilities 130,137 2.76 896 139,942 2.57 896
-------- ------ -------- ------
Noninterest-bearing liabilities:
Noninterest-bearing demand deposits 92,091 80,031
Other liabilities 2,253 3,163
Shareholders' equity 21,706 14,298
-------- --------
Total liabilities and shareholders' equity $246,187 $237,434
======== ========
Interest income as a percentage of average
earning assets 7.61% 7.99%
Interest expense as a percentage of average
interest-bearing liabilities 2.76 2.57
Net interest margin and income 5.96% $3,224 6.26% $3,252
====== ======
/(1)/ Nonaccrual loans are included in average balances and rate calculations.
</TABLE>
15
<PAGE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
--------------------------------------------------------------------
1998 1997
---------- ----------
AVERAGE YIELD/ AVERAGE YIELD/
(in thousands) BALANCE RATE INTEREST BALANCE RATE INTEREST
---------- ------- -------- ---------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Assets
Interest-earning assets:
Securities $ 80,541 5.90% $2,356 $ 96,218 6.29% $3,001
Loans/(1)/ 101,342 9.91 4,978 94,304 10.02 4,686
Federal funds sold 29,395 5.43 792 17,530 5.31 462
Interest-earning deposits - banks 411 1.54 3 425 8.54 18
-------- ------ -------- ------
Total interest-earning assets 211,689 7.74 8,129 208,477 7.90 8,167
-------- ------ -------- ------
Deferred loan fees (118) (141)
Allowance for loan losses (1,826) (2,299)
Nonearning assets:
Cash and due from banks 24,754 22,245
Premises and equipment 1,553 1,672
Other assets 6,228 8,086
-------- --------
Total assets $242,280 $238,040
======== ========
Liabilities and Shareholders' Equity
Interest-bearing liabilities:
Interest-bearing demand deposits $ 13,276 0.93% $ 61 $ 13,122 0.77% $ 50
Savings and money market deposits 80,723 2.07 828 94,505 1.84 860
Time deposits 31,181 4.63 715 27,911 4.71 652
Convertible notes 4,800 7.97 190 5,617 8.50 239
Repurchase agreements 110 5.58 3 552 5.85 16
-------- ------ -------- ------
Total interest-bearing liabilities 130,090 2.79 1,797 141,707 2.59 1,817
-------- ------ -------- ------
Noninterest-bearing liabilities:
Noninterest-bearing demand deposits 90,008 78,835
Other liabilities 2,741 3,278
Shareholders' equity 19,441 14,220
-------- --------
Total liabilities and shareholders' equity $242,280 $238,040
======== ========
Interest income as a percentage of average
earning assets 7.74% 7.90%
Interest expense as a percentage of average
interest-bearing liabilities 2.79 2.59
Net interest margin and income 6.03 $6,332 6.14 $6,350
====== ======
/(1)/ Nonaccrual loans are included in average balances and rate calculations.
</TABLE>
The Company's net interest income is affected by changes in the amount
and mix of interest-earning assets and interest-bearing liabilities, referred to
as "volume change." It is also affected by changes in yields earned on
interest-earning assets and interest rates paid on interest-bearing deposits and
other borrowed funds, referred to as a "rate change." The following table sets
forth changes in interest income and interest expense for each major category of
interest-earning assets and interest-bearing liabilities, and the amount of
change attributable to volume and rate changes for the three and six months
ended June 30, 1998 and 1997. The changes due to both rate and volume have been
allocated to rate and volume in proportion to the relationship between their
absolute dollar amounts.
16
<PAGE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, 1998 AND 1997 JUNE 30, 1998 AND 1997
--------------------------- ---------------------------
(in thousands) VOLUME RATE TOTAL VOLUME RATE TOTAL
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in interest income:
Securities $(301) $(137) $(438) $(467) $(178) $(645)
Loans 96 (18) 78 346 (54) 292
Federal funds sold 344 (1) 343 320 10 330
Interest-bearing deposits - banks 2 (13) (11) (1) (14) (15)
----- ----- ----- ----- ----- -----
141 (169) (28) 198 (236) (38)
----- ----- ----- ----- ----- -----
Increase (decrease) in interest expense:
Interest-bearing demand deposits - 4 4 1 10 11
Savings and money market deposits (66) 49 (17) (134) 102 (32)
Time deposits 72 (5) 67 75 (12) 63
Convertible notes (28) (10) (38) (33) (16) (49)
Repurchase agreements (8) (8) (16) (12) (1) (13)
----- ----- ----- ----- ----- -----
(30) 30 - (103) 83 (20)
----- ----- ----- ----- ----- -----
Increase (decrease) in net interest income $ 171 $(199) $ (28) $ 301 $(319) $ (18)
===== ===== ===== ===== ===== =====
</TABLE>
Interest income represents interest earned on loans, investment
securities and federal funds sold. Interest income decreased a total of $28,000
from $4,148,000 for the three months ended June 30, 1997 to $4,120,000 for the
three months ended June 30, 1998. Interest income decreased a total of $38,000
from $8,167,000 for the six months ended June 30, 1997 to $8,129,000 for the six
months ended June 30, 1998. The decrease in interest income for the three and
six months ended June 30, 1998 was a result of a slight decrease in the yield
and volume of securities offset by an increase of interest earning assets. The
primary reason for the decline in rate of securities was the maturity in
December of 1997 of an interest rate floor contract which provided approximately
$118,000 in interest income in the first six months of 1997. Overall average
interest earning assets increased $3,212,000 from $208,477,000 for the six
months ended June 30, 1997 to $211,689,000 for the six months ended June 30,
1998.
Interest expense represents interest paid on deposits, Company
borrowings and convertible notes. For the first six months of 1998, interest
expense decreased $20,000 to 1,797,000, as compared with $1,817,000 for the
first six months of 1997. Interest expense for the three months ended June 30,
1998 was the same as the same period in 1997. A decrease of $11,617,000 in
average interest-bearing liabilities from $141,707,000 at June 30, 1997 to
$130,090,000 at June 30, 1998 was the primary reason for the reduction in
interest expense. Repurchase agreements averaged $110,000 during the first
six months of 1998, while there were no repurchase agreements during the first
six months of 1997. The decrease in deposits was centered primarily in average
savings and money market deposits which declined $13,436,000 from $94,530,000
for the three months ended June 30, 1997 to $81,094,000 for the three months
ended June 30, 1998. The decline in deposits for the six months ended June 30,
1998, was also primarily in average savings and money market deposits which
declined $13,783,000 from $94,505,000 to $80,722,000 at June 30, 1997 and 1998,
respectively.
NONINTEREST INCOME
For the six months ended June 30, 1998, noninterest income totaled
$927,000 compared with $969,000 for the same period in 1997. The primary reason
for the decrease from 1997 to 1998 was in other income which decreased $94,000
to $927,000 for the six months ended June 30, 1998. The decrease is primarily
the result of a $69,000 cancellation fee received by the Bank in the second
quarter of 1997 for warrants extinguished in connection with a credit
assumption. The Company continues to generate fees for services provided to
customers which increased approximately $80,000 from $400,000 for six months
ended June 30, 1997 to $480,000 for the same period in 1998.
17
<PAGE>
NONINTEREST EXPENSE
Noninterest expense for the second quarter of 1998, increased $94,000
to $3,296,000 from $3,202,000 for the second quarter of 1997. For the six
months ended June 30, 1998, noninterest expense was $6,428,000 or $82,000 higher
than the same period in 1997.
Salaries and other employee benefits increased approximately $260,000
to $1,653,000 for the second quarter of 1998, compared with $1,393,000 for the
second quarter of 1997. For the six months ended June 30, 1998, salaries and
employee benefits increased $289,000 to $3,191,000 as compared to $2,902,000 for
the same period in 1997. This increase was largely due to returning the Company
to full staff level and annual staff performance percentage increases together
with a $64,000 reversal in the second quarter of 1997 for severance payments to
a former employee that had initially been expensed, but was reversed because it
had been accrued in the prior year.
Legal fees increased $17,000 to $160,000 for the second quarter of
1998 compared to $143,000 for the second quarter of 1997 and $7,000 for the six
months ended June 30, 1998 when compared to the same period in 1997. The modest
increase in legal fees is due primarily to nonrecurring legal expenses
associated with various corporate matters, including the call for redemption of
approximately $2,625,000 principal amount of the Professional Bancorp, Inc.,
8.50% Convertible Subordinated Reset Notes due March 1, 2004.
Other professional services decreased $138,000 to $282,000 for the
second quarter of 1998, compared with $420,000 for the comparable period in 1997
and $120,000 for the first six month of 1998 over the same period in 1997. As
the Company returns to full staffing the utilization of the services of outside
professionals to augment staffing and support service training has been reduced.
INCOME TAXES
For the three months ended June 30, 1998, the provision for income
taxes was $164,000 compared to $219,000 for the same period in 1997. For the
six months ended June 30, 1998 the provision for income taxes was $302,000
compared to $351,000 for the same period in 1997.
Management of the Company is not aware of any trends, events,
uncertainties or recommendations by regulatory authorities that will have or
that are reasonably likely to have a material effect on the liquidity, capital
resources or operations of the Company.
18
<PAGE>
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
11 Statement regarding computation of per share earnings
(b) Reports on Form 8-K: Reports on Form 8-K were filed on January
and March 1998 reporting on the following items:
ITEM 5. OTHER EVENTS -
In January 1998, a Report on Form 8-K was filed reporting that
Professional Bancorp, Inc. ("Bancorp") and its wholly-owned subsidiary, First
Professional Bank, N.A. (the "Bank"), entered into a Settlement Agreement and
Release with St. Paul Mercury Insurance Company ("St. Paul"), their Directors
and Officers Liability insurance carrier.
In March 1998, a Report on Form 8-K was filed reporting that Joel W.
Kovner had exercised all of his options to purchase 276,515 shares of common
stock of Bancorp pursuant to Bancorp's 1990 and 1992 Stock Option Plans.
19
<PAGE>
SIGNATURES
Pursuant to requirements of the Securities Exchange Act of 1934, the registrant
has duly caused this report to be signed on its behalf by the undersigned
hereunto duly authorized.
PROFESSIONAL BANCORP, INC.
---------------------------
(Registrant)
Date: August 11, 1998 /s/ Julie P. Thompson
---------------------------
Julie P. Thompson
Chairman of the Board
Date: August 11, 1998 /s/ Melissa Lanfre
---------------------------
Melissa Lanfre
Chief Financial Officer and
Senior Vice President
20
<PAGE>
EXHIBIT 11 - COMPUTATION OF BASIC AND DILUTED EARNINGS PER SHARE
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
-------------------------- ---------------------------
1998 1997 1998 1997
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Net income
(used in basic EPS computation) $ 224,231 $ 311,675 $ 528,566 $ 501,310
Adjustments to net income per
assumed effect of dilutive securities:
Interest on convertible notes, net of tax effect 48,120 70,423 111,951 140,846
---------- ---------- ---------- ----------
Adjusted earnings for diluted earnings per
share computation $ 272,351 $ 382,098 $ 640,517 $ 642,156
========== ========== ========== ==========
Weighted average number of shares
outstanding for calculating basic earnings
per share 1,690,479 1,357,222 1,553,870 1,357,222
Effect of dilutive securities:
Options and warrants 82,118 /(1)/ 194,228 /(1)/
Convertible notes 393,757 442,339 406,097 442,339
---------- ---------- ---------- ----------
Weighted average number of shares
outstanding for calculation of diluted
earnings per share 2,166,354 1,799,561 2,154,195 1,799,561
========== ========== ========== ==========
Basic earnings per share $ 0.13 $ 0.23 $ 0.34 $ 0.37
========== ========== ========== ==========
Diluted earnings per share $ 0.13 $ 0.21 $ 0.30 $ 0.36
========== ========== ========== ==========
/(1)/ Anti-dilutive
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM 10-Q
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> APR-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 26,563,830
<INT-BEARING-DEPOSITS> 153,830
<FED-FUNDS-SOLD> 43,200,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 39,881,431
<INVESTMENTS-CARRYING> 29,315,212
<INVESTMENTS-MARKET> 29,425,000
<LOANS> 100,132,694
<ALLOWANCE> 1,851,132
<TOTAL-ASSETS> 244,820,574
<DEPOSITS> 216,632,486
<SHORT-TERM> 0
<LIABILITIES-OTHER> 2,392,387
<LONG-TERM> 2,170,000
0
0
<COMMON> 15,863
<OTHER-SE> 23,609,838
<TOTAL-LIABILITIES-AND-EQUITY> 244,820,574
<INTEREST-LOAN> 2,502,264
<INTEREST-INVEST> 1,071,114
<INTEREST-OTHER> 546,325
<INTEREST-TOTAL> 4,119,703
<INTEREST-DEPOSIT> 814,435
<INTEREST-EXPENSE> 81,559
<INTEREST-INCOME-NET> 3,223,709
<LOAN-LOSSES> 0
<SECURITIES-GAINS> (8,735)
<EXPENSE-OTHER> 3,295,550
<INCOME-PRETAX> 388,231
<INCOME-PRE-EXTRAORDINARY> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 224,231
<EPS-PRIMARY> 0.13
<EPS-DILUTED> 0.13
<YIELD-ACTUAL> 5.96
<LOANS-NON> 527,000
<LOANS-PAST> 833,000
<LOANS-TROUBLED> 839,000
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 1,802,000
<CHARGE-OFFS> 10,000
<RECOVERIES> 36,000
<ALLOWANCE-CLOSE> 1,851,000
<ALLOWANCE-DOMESTIC> 1,851,000
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
