SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1997.
---------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from__________________to____________________.
Commission file number 0-15237
-------
HARLEYSVILLE NATIONAL CORPORATION
---------------------------------
(Exact name of registrant as specified in its charter)
Pennsylvania 23-2210237
- ------------ ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
483 Main Street, Harleysville, Pennsylvania 19438
- ----------------------------------------------- -----
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (215) 256-8851
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.
-----
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13, or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. Yes ___. No ___.
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date: 7,008,322 shares of Common
Stock, $1.00 par value, outstanding on July 31, 1997.
PAGE 1
<TABLE>
HARLEYSVILLE NATIONAL CORPORATION
INDEX TO FORM 10-Q REPORT
<CAPTION>
<S> <C>
PAGE
----
Part I. Financial Information
Consolidated Balance Sheets - (unaudited) June 30, 1997 and (audited) Dec. 31, 1996 3
Consolidated Statements of Income (unaudited) - Six Months and Three Months 4
Ended June 30, 1997 and 1996
Consolidated Statements of Cash Flows (unaudited) - Six Months Ended June 30, 1997 and 1996 5
Notes to Consolidated Financial Statements 6
Management's Discussion and Analysis of Financial Condition and 8
Results of Operations
Part II. Other Information 18
Signatures 20
</TABLE>
Page 2
PART 1. FINANCIAL INFORMATION
HARLEYSVILLE NATIONAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
(Unaudited) (Audited)
(Dollars in thousands) June 30, 1997 December 31, 1996
--------------- -------------------
ASSETS
<S> <C> <C>
Cash and due from banks $ 46,285 $ 39,407
Federal Funds sold 31,250 6,000
--------------- -------------------
Total cash and cash equivalents 77,535 45,407
--------------- -------------------
Interest-bearing deposits in banks 6,317 8,475
Investment securities available for sale 227,191 209,795
Investment securities held to maturity
(market value $58,422 and $66,680, respectively) 57,218 65,226
Loans 711,116 689,203
Less: Unearned income (6,211) (7,793)
Allowance for loan losses (11,204) (10,710)
--------------- -------------------
Net loans 693,701 670,700
--------------- -------------------
Bank premises and equipment, net 17,166 14,810
Accrued income receivable 7,463 6,653
Other real estate owned 1,032 972
Intangible assets, net 1,508 1,658
Other assets 2,682 2,432
--------------- -------------------
Total assets $ 1,091,813 $ 1,026,128
=============== ===================
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Noninterest-bearing $ 149,512 $ 139,723
Interest-bearing:
NOW accounts 98,558 102,270
Money market accounts 173,665 155,516
Savings 107,955 104,329
Time, under $100,000 296,171 294,501
Time, $100,000 or greater 68,148 51,360
--------------- -------------------
Total deposits 894,009 847,699
Accrued interest payable 14,499 13,927
U.S. Treasury demand notes 2,011 2,572
Federal Home Loan Bank (FHLB) borrowings 43,750 35,000
Securities sold under agreements to repurchase 25,353 21,949
Other liabilities 8,298 7,350
--------------- -------------------
Total liabilities 987,920 928,497
--------------- -------------------
Shareholders' Equity:
Series preferred stock, par value $1 per share;
authorized 3,000,000 shares, none issued - -
Common stock, par value $1 per share; authorized 30,000,000
shares; issued and outstanding 7,005,600 shares in 1997 and
6,656,770 shares in 1996 7,006 6,657
Additional paid in capital 49,144 40,316
Retained Earnings 44,048 47,849
Net unrealized gains on investment securities available for sale 3,695 2,809
--------------- -------------------
Total shareholders' equity 103,893 97,631
--------------- -------------------
Total liabilities and shareholders' equity $ 1,091,813 $ 1,026,128
=============== ===================
See accompanying notes to consolidated financial statements.
</TABLE>
PAGE 3
HARLEYSVILLE NATIONAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
(Unaudited)
Six months ended Three months Ended
(Dollars in thousands except weighted average number June 30, June 30,
of common shares and per share information) ----------------- ------------------
1997 1996 1997 1996
----------------- ---- ------------------ ----
INTEREST INCOME:
<S> <C> <C> <C> <C>
Loans, including fees $ 27,606 $ 26,059 $ 13,903 $ 12,956
Lease financing 2,237 1,709 1,129 865
Investment securities:
Taxable 6,256 5,897 3,131 3,004
Exempt from federal taxes 2,501 1,825 1,271 975
Federal funds sold 316 399 267 142
Deposits in banks 218 72 94 52
---------- ----------- ---------- -----------
Total interest income 39,134 35,961 19,795 17,994
---------- ----------- ---------- -----------
INTEREST EXPENSE:
Savings deposits 4,851 4,733 2,523 2,395
Time, under $100,000 8,151 8,527 4,109 4,222
Time, $100,000 or greater 1,440 875 800 461
Borrowed funds 1,919 993 956 474
---------- ----------- ---------- -----------
Total interest expense 16,361 15,128 8,388 7,552
---------- ----------- ---------- -----------
Net interest income 22,773 20,833 11,407 10,442
Provision for loan losses 1,130 1,055 590 529
---------- ----------- ---------- -----------
Net interest income after provision for loan losses 21,643 19,778 10,817 9,913
---------- ----------- ---------- -----------
OTHER OPERATING INCOME:
Service charges 1,416 1,265 730 657
Security gains (losses), net 704 (119) 676 (69)
Trust income 738 685 355 290
Other Income 658 585 365 309
---------- ----------- ---------- -----------
Total other operating income 3,516 2,416 2,126 1,187
---------- ----------- ---------- -----------
Net interest income after provision for loan losses
and other operating income 25,159 22,194 12,943 11,100
---------- ----------- ---------- -----------
OTHER OPERATING EXPENSES:
Salaries, wages and employee benefits 7,438 6,753 3,808 3,337
Occupancy 957 906 440 430
Furniture and equipment 1,255 994 652 494
Other expenses 4,087 3,745 2,004 1,815
---------- ----------- ---------- -----------
Total other operating expenses 13,737 12,398 6,904 6,076
---------- ----------- ---------- -----------
Income before income taxes 11,422 9,796 6,039 5,024
Income tax expense 3,138 2,767 1,669 1,380
---------- ----------- ---------- -----------
Net income $ 8,284 $ 7,029 $ 4,370 $ 3,644
========== =========== ========== ===========
Weighted average number of common shares 7,007,043 6,996,654 7,012,739 6,997,256
========== =========== ========== ===========
Net income per share information $ 1.18 $ 1.00 $ 0.62 $ 0.52
========== =========== ========== ===========
Cash dividends per share $ 0.42 $ 0.36 $ 0.21 $ 0.18
========== =========== ========== ===========
See accompanying notes to consolidated financial statements.
</TABLE>
PAGE 4
HARLEYSVILLE NATIONAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
(Dollars in thousands) Six Months Ended June 30,
<S> <C> <C>
OPERATING ACTIVITIES: 1997 1996
--------------------------- ---------
Net Income $ 8,284 $ 7,029
Adjustments to reconcile net income to
net cash provided by operating activities:
Provision for loan losses 1,130 155
Depreciation and amortization 708 646
Net amortization of investment
securities' discount/premiums 113 242
Net realized security (gain) loss (704) 119
Increase in accrued income receivable (810) (321)
Increase in accrued interest payable 572 1,018
Net (increase) decrease in other assets (250) 450
Net increase in other liabilities 470 2,472
Decrease in unearned income (1,582) (820)
Write-down of other real estate owned 4 111
Decrease in intangible assets 151 151
--------------------------- ---------
Net cash provided by operating activities 8,086 11,252
--------------------------- ---------
INVESTING ACTIVITIES:
Proceeds from sales of investment securities available for sale 15,199 38,520
Proceeds, maturity or calls of investment securities held to maturity 5,261 7,553
Proceeds, maturity or calls of investment securities available for sale 10,748 20,506
Purchases of investment securities available for sale (38,640) (85,736)
Net decrease (increase) in interest-bearing deposits in banks 2,158 (2,836)
Net increase in loans (23,218) (26,641)
Net increase in premises and equipment (3,064) (1,154)
Proceeds from sales of other real estate 605 87
--------------------------- ---------
Net cash used in investing activities (30,951) (49,701)
--------------------------- ---------
FINANCING ACTIVITIES:
Net increase in deposits 46,310 38,940
(Decrease) increase in U.S. Treasury demand notes (561) 199
Increase (decrease) in FHLB borrowings 8,750 (2,700)
Increase in securities sold under agreement 3,403 572
Cash dividends & fractional shares (2,933) (2,528)
Dividend reinvestment (17) (19)
Stock Options 41 21
--------------------------- ---------
Net cash provided by financing activities 54,993 34,485
--------------------------- ---------
Increase in cash and cash equivalents 32,128 (3,964)
Cash and cash equivalents at beginning of period 45,407 50,607
--------------------------- ---------
Cash and cash equivalents at end of the period $ 77,535 $ 46,643
=========================== =========
Cash paid during the period for:
Interest $ 15,789 $ 14,110
=========================== =========
Supplemental disclosure of noncash investing and financing activities:
Transfer of assets from loans to other real estate owned $ 669 $ 911
=========================== =========
See accompanying notes to consolidated financial statements.
</TABLE>
PAGE 5
HARLEYSVILLE NATIONAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - In the opinion of management, the accompanying unaudited consolidated
financial statements contain all adjustments, consisting only of normal
recurring adjustments, necessary to present fairly the consolidated financial
position of Harleysville National Corporation (the "Corporation") and its
wholly owned subsidiaries - Harleysville National Bank and Trust Company
("Harleysville"), The Citizens National Bank of Lansford ("Citizens") and
Security National Bank ("Security") (collectively, the "Banks") and HNC
Financial Company - as of June 30, 1997, the results of its operations for
six and three month periods ended June 30, 1997 and 1996 and the cash flows
for the six month periods ended June 30, 1997 and 1996. These unaudited
consolidated financial statements should be read in conjunction with the
audited consolidated financial statements of the Corporation and the notes
thereto set forth in the Corporation's 1996 annual report.
The results of operations for the six and three month periods ended June 30,
1997 and 1996 are not necessarily indicative of the results to be expected for
the full year.
NOTE 2 - Income tax expense is less than the amount calculated using the
statutory tax rate primarily the result of tax exempt income earned from state
and municipal securities and loans.
NOTE 3 - The Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS) No. 128, Earnings Per Share, which is
effective for financial statements issued after December 15, 1997. Early
adoption of the new standard is not permitted. The new standard eliminates
primary and fully diluted earnings per share and requires presentation of
basic and diluted earnings per share together with disclosure of how the per
share amounts were computed. The adoption of this new standard is not
expected to have a material impact on the disclosure of earnings per share in
the financial statements.
NOTE 4 - On January 1, 1996, the Corporation adopted the Financial Accounting
Standards Board issued (SFAS) No. 123, "Accounting for Stock-Based
Compensation," which contains a fair value-based method for valuing
stock-based compensation that entities may use, which measures compensation
cost at the grant date based on the fair value of the award. Compensation is
then recognized over the service period, which is usually the vesting period.
Alternatively, the standard permits entities to continue accounting for
employee stock options and similar instruments under Accounting Principles
Board (APB) Opinion No. 25, "Accounting for Stock Issued to Employees."
Entities that continue to account for stock options using APB Opinion No. 25
are required to make pro forma disclosures of net income and earnings per
share, as if the fair value-based method of accounting defined in SFAS No. 123
had been applied. The Corporation's employee stock option plan is accounted
for under APB Opinion No. 25. Accordingly, the adoption of SFAS No. 123 did
not have an impact on the Corporation's consolidated financial position or
results of operations.
NOTE 5 - On March 1, 1996, the Corporation consummated the acquisition of
Farmers & Merchants Bank (Honesdale, PA.) ("Farmers"). The acquisition was
pursuant to an Agreement and Plan of Reorganization and an Agreement and Plan
of Merger which was executed on September 7, 1995. The agreements delineate
the terms of the combination. The shareholders of Farmers approved the merger
at a meeting of shareholders on January 31, 1996. For each share of Farmers
common stock outstanding, 0.6190 shares of the Corporation's common stock were
issued at the effective date on March 1, 1996. As a result of the
transaction, 438,262 new shares of Harleysville National Corporation, par
value $1.00 per share, were issued on March 1, 1996 pursuant to Registration
Statement No. 33-65021 filed with the SEC and which was effective January 2,
1996. Farmers' banking operations were merged into those of Citizens. The
Farmers merger was accounted for on a pooling-of-interests basis.
NOTE 6 - On May 8, 1997, the Board of Directors of Harleysville National
Corporation declared a 5% stock dividend (five shares of common stock for
each 100 shares of common stock outstanding held) that was payable June 30,
1997, to shareholders of record June 13, 1997.
On May 9, 1996, the Board of Directors of Harleysville National
Corporation declared a 5% stock dividend (five shares of common stock for
each 100 shares of common stock outstanding held) that was payable June 28,
1996, to shareholders of record June 14, 1996.
PAGE 6
Prior period weighted average number of common shares, net
income per share and cash dividends per share information have been restated
to reflect the stock dividends.
NOTE 7 - On March 17, 1997, the HNC Financial Company, a subsidiary of
Harleysville National Corporation was incorporated as a Delaware Corporation.
HNC Financial Company's principal business function is to expand the
investment opportunities of the Corporation.
PAGE 7
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
RESULTS OF OPERATIONS
- -----------------------
The following is management's discussion and analysis of the
significant changes in the results of operations, capital resources and
liquidity presented in its accompanying consolidated financial statements for
the Corporation, the Banks and HNC Financial Company. The Corporation's
consolidated financial condition and results of operations consist almost
entirely of the Banks' financial condition and results of operations. This
discussion should be read in conjunction with the 1996 Annual Report. Current
performance does not guarantee, assure, or may be indicative of similar
performance in the future.
In addition to historical information, this Form 10-Q contains
forward-looking statements. The forward-looking statements contained herein
are subject to certain risks and uncertainties that could cause actual results
to differ materially from those projected in the forward-looking statements.
Important factors that might cause such a difference include, but are not
limited to, those discussed in the section entitled "Management's Discussion
and Analysis of Results of Operations and Financial Condition." Readers are
cautioned not to place undue reliance on these forward-looking statements,
which reflect management's analysis only as of the date hereof. The
Corporation undertakes no obligation to publicly revise or update these
forward-looking statements to reflect events or circumstances that arise after
the date hereof. Readers should carefully review the risk factors described
in other documents the Corporation files from time to time with the Securities
and Exchange Commission, including the Quarterly Reports on Form 10-Q to be
filed by the Corporation in 1997 and 1998, and any Current Reports on Form 8-K
filed by the Corporation.
Consolidated net income for the first six months of 1997 was $8,284,000,
an increase of $1,255,000, or 17.9%, over the first six months of 1996 net
income of $7,029,000. Earnings per share for the first six months of 1997 of
$1.18 increased $0.18, over the first six months of 1996 earnings per share of
$1.00. Consolidated net income for the second quarter of 1997 was $4,370,000,
an increase of $726,000, or 19.9%, over the second quarter of 1996 net income
of $3,644,000. Earnings per share for the second quarter of 1997 of $0.62
increased $0.10, over the second quarter of 1996 earnings per share of $0.52.
The second quarter of 1997 net income included a security gain,
resulting from the sale of equity securities held at HNC Financial Company.
This gain contributed approximately $400,000 to net income during the second
quarter of 1997. Management continuously reviews the available for sale
security portfolio for opportunities to sell securities and recognize gains.
The timing of security sales is dependent on portfolio management strategies
and market conditions. It is anticipated that Management may sell securities
in the future that may result in gains or losses.
For the six months ended June 30, 1997, the annualized return on average
assets and the annualized return on average shareholders' equity were 1.58%
and 16.49%, respectively. For the same period in 1996, the annualized return
on average assets was 1.48% and the annualized return on average shareholders'
equity was 15.86%. For the three months ended June 30, 1997, the annualized
return on average assets was 1.64%, compared to 1.51% for the same period in
1996, and the annualized return on average shareholders' equity was 17.20% for
the second quarter of 1997 and 16.23% for the second period of 1996.
Net income is affected by five major elements: net interest income, or
the difference between interest income earned on loans and investments and
interest expense paid on deposits and borrowed funds; the provision for loan
losses, or the amount added to the allowance for loan losses to provide
reserves for future losses on loans; other operating income, which is made up
primarily of certain fees, trust income and gains and losses from sales of
securities; other operating expenses, which consist primarily of salaries and
other operating expenses and income taxes. Each of these major elements will
be reviewed in more detail in the following discussion.
PAGE 8
NET INTEREST INCOME AND RELATED ASSETS AND LIABILITIES
-------------------------------------------------------------
Net interest income for the first six months of 1997 of $22,773,000
increased $1,940,000, or 9.3%, over the first six months of 1996 net interest
income of $20,833,000. As illustrated in the table on the next page, the
primary source of this increase was a rise in interest income resulting from
increases to earning asset volumes in the first six months of 1997, compared
to the same period in 1996. The increase in interest income was partially
offset by a rise in interest expense, as a result of an increase in the
volumes of other borrowings. Other borrowings include Federal Funds
purchased, Federal Home Loan Bank borrowings, securities sold under agreements
to repurchase and U. S. Treasury demand notes.
The rate-volume variance analysis set forth in the table below, which is
computed on a tax-equivalent basis (tax rate of 35%), analyzes changes in net
interest income for the six months ended June 30, 1997 over June 30, 1996 and
the three months ended June 30, 1997 over June 30, 1996 by their rate and
volume components.
<TABLE>
Six Months Ended Three Months Ended
June 30, 1997 June 30, 1997
Over/(Under) Over/(Under)
June 30, 1996 June 30, 1996
<CAPTION>
Total Caused by: Total Caused by:
------------ ------------
Variance Rate Volume Variance Rate Volume
--------- ------------ ------- --------- ------------ -------
Interest Income:
<S> <C> <C> <C> <C> <C> <C>
Securities * $ 1,397 $ 356 $ 1,041 $ 581 $ 134 $ 448
Money market instruments 64 34 30 167 6 161
Loans * 2,085 (410) 2,495 1,224 43 1,181
--------- ------------ ------- --------- ------------ -------
Total 3,546 (20) 3,566 1,972 183 1,790
--------- ------------ ------- --------- ------------ -------
Interest Expense:
Savings deposits 118 (64) 182 128 23 106
Time deposits and certificates of deposit 190 (212) 402 226 (25) 251
Other borrowings 926 (11) 937 482 13 469
--------- ------------ ------- --------- ------------ -------
Total 1,234 (287) 1,521 836 11 826
--------- ------------ ------- --------- ------------ -------
Net interest income $ 2,312 $ 267 $ 2,045 $ 1,136 $ 172 $ 964
========= ============ ======= ========= ============ =======
*Tax Equivalent Basis
</TABLE>
Taxable-equivalent net interest income was $24,277,000 for the first six
months of 1997, compared to $21,965,000 for the same period in 1996, a 10.5%
or $2,312,000 increase. This increase in taxable-equivalent net interest
income was primarily due to a $2,045,000 increase related to volume. The
increase related to interest rates was $267,000. Total taxable-equivalent
interest income grew $3,546,000, primarily the result of the higher volumes in
both the security and loan earning asset categories. Average year-to-date
earning assets increased to $993,036,000 at June 30, 1997 from $905,386,000 at
June 30, 1996, a 9.7% increase. This increase in earning assets was
primarily due to the growth in loans, as a result of persistent sales efforts
and new branch openings.
Total interest expense grew $1,234,000 during the first six months
of 1997, compared to the same period in 1996. This growth was principally the
result of higher volumes, primarily due to an increase in other borrowings.
The volume of average other borrowings increased $36,621,000, or 95.3% during
the first six months of 1997, compared to the first six months of 1996. The
increase in other borrowings was used to finance asset growth. Partially
offsetting this growth in interest expense were lower interest rates paid on
deposits during the first half of 1997, compared to the same period in 1996.
The lower deposit rates were primarily due to lower time deposit rates. The
decrease in the time deposit rates is related to the repricing of maturing
higher rate CD's, into CD's with lower rates.
PAGE 9
Taxable-equivalent net interest income of $12,179,000 was
$1,136,000, or 10.3% higher for the second quarter of 1996, compared to
$11,043,000 for the same period in 1996. Interest income grew $1,972,000
during the period, as a result of an increase in earning asset volumes.
Second quarter average earning assets grew $90,864,000, compared to the second
quarter of 1996. This growth included a $54,470,000 rise in loans and a
$24,894,000 increase in securities. The increase in the interest income was
partially offset by a $836,000 rise in interest expense. Increases in all
deposit category volumes contributed to this increase in interest expense.
Nonaccruing loans are included in the average balance yield calculations, but
the average nonaccruing loans had no material effect on the results.
NET INTEREST MARGIN
---------------------
The net interest margin of 4.89% for the six month period ended June 30,
1997, increased from the 4.85% net interest margin for the first six months of
1996. The yield on earning assets was 8.19% during the first six months of
1997 and 1996. During the first six months of 1997, a decrease in the yield
on loans was offset by increases in both the securities and money market
instrument earning asset categories, compared to the same period in 1996.
The 4.11% average interest rate paid on interest bearing deposits and other
borrowings during the first six months of 1997, decreased from the 4.14% rate
paid during the same period in 1996. The decrease in the rate is due
generally to the lower rates paid on time deposits. The net interest margin
was 4.84% in the second quarter of 1996, a .01% increase from the 4.83% net
interest margin recorded in the second quarter of 1996. The Banks have been
able to effectively match assets and liabilities and maintain a consistent
percentage of earning assets to total assets.
PROVISION FOR LOAN LOSSES
- ----------------------------
The provision is based on management's analysis of the adequacy of the
allowance for loan losses. In its evaluation, management considers past loan
experience, overall characteristics of the loan portfolio, current economic
conditions and other relevant factors. Based on the latest monthly evaluation
of potential loan losses, management currently believes that the allowance is
adequate to absorb known and inherent losses in the loan portfolio.
Ultimately, however, the adequacy of the allowance is largely dependent upon
the economy, a factor beyond the Corporation's control. With this in mind,
additions to the allowance for loan losses may be required in future periods,
especially if economic trends worsen or certain borrowers' ability to repay
declines.
For the first six months of 1997 the provision for loan losses was
$1,130,000, compared to $1,055,000 for the same period in 1996. Net charge
offs were $636,000 for the six months ended June 30, 1997, compared with
$452,000 for the six months ended June 30, 1996. The net loans charged off
during the first six months of 1997 were primarily attributed to consumer
loans (installment, personal credit lines and credit cards). During the
first half of 1997, management took steps to control the risk of consumer
charge offs by tightening credit standards and increasing reserve for loan
losses for consumer loans. Total net loans charged off during the second
quarter of 1997 were 25.3% less than the first quarter of 1997. The ratio of
the allowance for loan losses to loans at June 30, 1997 of 1.59% was higher
than the December 31, 1996 ratio of 1.57%, and was lower than the June 30,
1996 ratio of 1.60%.
PAGE 10
ALLOWANCE FOR LOAN LOSSES
- ----------------------------
Transaction in the allowance for loan losses are as follows:
<TABLE>
<CAPTION>
1997 1996
---------------- ---------------
Balance, Beginning of Year $10,710,000 $9,891,000
Provision charged to operating expenses 1,130,000 1,055,000
Loans charged off (777,000) (513,000)
Recoveries 141,000 61,000
---------------- ---------------
Balance, June 30 $11,204,000 $10,494,000
================ ===============
<S> <C> <C> <C>
Ratios: June 30, 1997 Dec. 31, 1996 June 30, 1996
- ------------------------------------------------- ---------------- --------------- --------------
Allowance for loan losses to nonperforming assets 178.2% 188.8% 82.9%
---------------- --------------- --------------
Nonperforming assets to total loans & net assets
acquired in foreclosure 0.88% 0.83% 1.90%
Allowance for loan losses to total loans 1.59% 1.57% 1.60%
</TABLE>
The following table sets forth an allocation of the allowance for loan
losses by loan category:
<TABLE>
<CAPTION>
June 30, 1997
--------------
Percent
Amount of Loans
-------------- ---------
<S> <C> <C>
Commercial and industrial $ 1,945,000 26%
Installment and other 1,706,000 32%
Real estate 1,710,000 34%
Lease financing 137,000 8%
Unallocated 5,706,000 N/A
-------------- ---------
Total $ 11,204,000 100%
============== =========
</TABLE>
Nonperforming assets (nonaccruing loans, net assets in foreclosure and
troubled debt restructured loans) were 0.88% of total loans and net assets
acquired in foreclosure at June 30, 1997, compared to 0.83% at December 31,
1996 and 1.90% at June 30, 1996. The decline in this ratio from June 30, 1996
to June 30, 1997, is the result of the reduction in nonaccruing loans during
this period. The ratio of the allowance for loan losses to non-performing
assets was 178.2% at June 30, 1997 compared to 188.8% at December 31, 1996 and
82.9% at June 30, 1996.
Nonaccruing loans at June 30, 1997 of $4,217,000, increased $1,234,000
from the December 31, 1996 level of $2,983,000, and decreased $5,395,000 from
the June 30, 1996 level of $9,612 ,000. The increase from December 31, 1997
is primarily related to commercial & real estate loans. The $5,394,000
reduction in nonaccrual loans from June 30, 1996 to June 30, 1997, is
primarily due to one loan being upgraded to accruing status during the fourth
quarter of 1996. This loan achieved accrual status after meeting appropriate
standards.
Net assets in foreclosure totaled $1,032,000 as of June 30,
1997, an increase of $60,000 from the December 31, 1996 balance of $972,000.
During the first six months of 1997, transfers from loans to assets in
foreclosure were $669,000, payments on foreclosed properties totaled $605,000
and write downs of assets in foreclosure equaled $4,000. The $669,000 in
loans transferred to assets in foreclosure included $367,000 of real estate
loans and $302,000 commercial loans. The balance of net assets in foreclosure
at June 30, 1996 was $1,933,000. Efforts to liquidate assets acquired in
foreclosure are proceeding as quickly as potential buyers can be located and
legal constraints permit. Generally accepted accounting principles require
foreclosed assets to be carried at the lower of cost (lesser of carrying value
of asset or fair value at date of acquisition) or estimated fair value.
PAGE 11
As of June 30, 1997, there were two unrelated borrowers with troubled
debt restructured loans totaling $1,037,000, compared with a balance of
$1,717,000 as of December 31, 1996 and $1,115,000 at June 30, 1996. Both of
the customers were complying with the restructured terms as of June 30, 1997.
Loans past due 90 days or more and still accruing interest are loans that
are generally well-secured and expected to be restored to a current status in
the near future. As of June 30, 1997, loans past due 90 days or more and
still accruing interest were $2,189,000, compared to $1,848,000 as of
December 31, 1996 and $1,988,000 as of June 30, 1996. The $341,000 increase
in loans past due 90 days from December 31, 1996 to June 30, 1997 was
primarily the result of an increase in real estate loans past due 90 days.
The following information concerns impaired loans:
Impaired Loans:
Restructured Loans $1,037,000
Nonaccrual Loans 3,011,000
----------
$4,048,000
==========
Average year-to-date impaired loans: $4,089,000
==========
Impaired loans with specific loss allowances: $4,048,000
==========
Loss allowances reserved on impaired loans: $ 533,000
==========
Income recognized on impaired loans during
the first six months of 1997 $ 75,000
==========
The Banks' policy for interest income recognition on impaired loans is to
recognize income on restructured loans under the accrual method. The Banks
recognize income on nonaccrual loans under the cash basis when the loans are
both current and the collateral on the loan is sufficient to cover the
outstanding obligation to the Banks. The Banks will not recognize income if
these factors do not exist.
OTHER OPERATING INCOME
- ------------------------
<TABLE>
<CAPTION>
Six Months Ended June 30, Three Months Ended June 30,
---------------------------- -----------------------------
1997 1996 1997 1996
----------- ---------------- ------------- ----------------
<S> <C> <C> <C> <C>
(Dollars in thousands)
Service charges $ 1,416 $ 1,265 $ 730 $ 657
Securities gains (losses), net 704 (119) 676 (69)
Trust income 738 685 355 290
Other income 658 585 365 309
----------- ---------------- ------------- ----------------
Total other operating income $ 3,516 $ 2,416 $ 2,126 $ 1,187
=========== ================ ============= ================
</TABLE>
PAGE 12
Other operating income for the first six months of 1997 increased
$1,100,000, or 45.5%, from $2,416,000 at June 30, 1996 to $3,516,000 at June
30, 1997. This rise in other operating income is primarily the result of a
$823,000 rise in net security gains during the first half of 1997, compared to
the same period in 1996. Also contributing to this increase were service
charges, trust fees and other income that grew $151,000, $53,000 and $73,000,
respectively, compared to the first half of 1996. The second quarter of 1997
other income of $2,126,000 was $939,000, or 79.1% higher than the second
quarter of 1996 other operating income of $1,187,000. The increase was
primarily the result of an increase in net security gains during the second
quarter of 1997.
The $151,000, or 11.9% increase in service charges is the result of the
6.3% growth in average deposits eligible for service charges and an effort by
the banks to enhance the collection of service fees. During this period
service charges on deposits grew $59,000, or 10.3%, and overdraft fees
increased $61,000, or 10.9%. The remaining increase is attributed to the fact
that the first half of 1997 average deposits eligible for service charges
increased 11.9% over the first half of 1996 levels. The 1997 second quarter
increase in service charges was 11.1%, compared to the second quarter in 1996.
The corporation recorded a net security gain of $704,000 in the
first half of 1997, compared to a $119,000 loss in the same period in 1996.
The second quarter 1997 net security gain was $745,000 higher than the second
quarter of 1996. The majority of the 1997 security gain is the result of the
sale of equity securities held at HNC Financial Company. From time to time,
the Corporation sells investment securities available for sale to fund the
purchase of other securities in an effort to enhance the overall return of the
portfolio.
Income from the Trust and Financial Services Department increased
$53,000, or 7.7%, in the first six months of 1997, compared to the same period
in 1996. This increase was the result of both an increase in the book value
of trust assets of 5.8% from June 30, 1996 to June 30, 1997, and the
Corporation's continuing emphasis on marketing the Trust and Financial
Services Department's products and services. The second quarter 1997 trust
fees grew 22.4%, compared to the same period in 1996. Other income for the
first six months of 1997 increased $73,000, or 12.5%, compared to the same
period in 1996. The 1997 second quarter other income grew 18.1% over the
amount recorded in the second quarter of 1996. These increases were due to
higher ATM, merchant credit card processing and leasing related fees.
OTHER OPERATING EXPENSES
- --------------------------
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30, THREE MONTHS ENDED JUNE 30,
----------- ----------------------- ------------- ---------------
1997 1996 1997 1996
----------- ----------------------- ------------- ---------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Salaries $ 5,702 $ 5,028 $ 2,937 $ 2,499
Employee benefits 1,736 1,725 871 838
Net occupancy expense 957 906 440 430
Equipment expense 1,255 994 652 494
Other expenses 4,087 3,745 2,004 1,815
---------- ---------------------- ------------- ---------------
Total other operating expenses $ 13,737 $ 12,398 $ 6,904 $ 6,076
=========== ======================= ============= ===============
</TABLE>
Other operating expenses for the first six months of 1997 of $13,737,000
increased $1,339,000, or 10.8%, from the $12,398,000 for the same period in
1996. The second quarter of 1997 other operating expenses grew 13.6%,
compared to the second quarter of 1996. The rise in operating expenses was
due to higher expenses related to three new branches opened after September
30, 1996, increases in equipment expenses and other expenses related to the
overall growth of the Banks.
Employee salaries increased $674,000, or 13.4% from $5,028,000 for the
first six months of 1996 to $5,702,000 for the same period in 1997. The
PAGE 13
salary increase directly related to the staffing of the three new branches was
$177,000, or 26.3% of the total salary increase. The remaining increase in
salaries reflects cost of living increases, merit increases and additional
staff necessitated by current and planned future growth. Employee benefits of
$1,736,000 expensed in the first six months of 1997, were 0.6% higher than the
employee benefits expensed during the same period in 1996. This small
increase is the result of the modification of the Banks' profit-sharing plan
into a 401 (K) plan during 1996. The profit-sharing plan was funded entirely
by the Banks and the modified 401 (K) plan is both Bank and employee funded.
The second quarter of 1997 salaries and employee benefits increased 17.5% and
3.9% , respectively, compared to the second quarter of 1996.
Net occupancy expense increased $51,000, or 5.6%, from $906,000 in the
first six months of 1996 to $957,000 in the first six months of 1997. The
second quarter of 1997 occupancy expense increased $10,000 over the same
period in 1996. The three new branches were responsible for these increases.
Equipment expense increased $261,000, or 26.3% during the first six months of
1997, compared to the same period in 1996. The first six months of 1997
equipment expense related to the new branches totaled $69,000. The remainder
of this increase is due to both equipment rental, and depreciation and
maintenance associated with planned increased data processing capabilities.
The increased data processing capabilities include equipment used to process
check imaging and the ongoing updating of data processing equipment to manage
the rise in volume related to the growth of the Corporation. The second
quarter of 1997 furniture and equipment expenses grew $158,000, compared to
the second quarter of 1996.
Other expenses increased $342,000, or 9.1%, from $3,745,000 in
the first six months of 1996, compared to other expenses recorded during the
same period in 1997 of $4,087,000. The increase related to the three new
branches totaled $122,000. The remainder of the growth is the result of
higher stationery and supplies, postage expenses and other expenses directly
related to the 11.4% growth in the bank during this period. The second
quarter of 1997 other expenses grew 10.4%, compared to the second quarter in
1996.
INCOME TAXES
- -------------
Income tax expense is less than the amount calculated using the statutory
tax rate primarily as a result of tax exempt income earned from state and
municipal securities and loans.
BALANCE SHEET ANALYSIS
- ------------------------
Total assets grew $65,685,000, or 6.4%, from $1,026,128,000 at December
31, 1996 to $1,091,813,000 at June 30, 1997. This growth was primarily in
interest earning assets which grew $55,975,000 to $1,026,881,000 at June 30,
1997, from $970,906,000 at December 31, 1996. During the first six months of
1997 Federal Funds Sold grew $25,250,000, loans increased $23,495,000,
investment securities rose $9,388,000, and interest-bearing deposits in banks
declined $2,158,000.
Total deposits grew $46,310,000 from $847,699,000 at December 31, 1996
to $894,009,000 at June 30, 1997. This growth was due to a $18,458,000 rise
in time deposits, a $18,149,000 increase in money market accounts, a
$9,789,000 growth in noninterest-bearing accounts, and a $3,626,000 increase
in savings accounts. Offsetting these increases was a $3,712,000 decrease
in NOW accounts. Other borrowings increased $11,593,000 during the first six
months of 1997, primarily the result of an increase in Federal Home Loan Bank
borrowings. Other borrowings and deposits are used to fund loan and
investment growth.
CAPITAL
- -------
Capital formation is critical to the Corporation's well being and future
growth. Capital for the period ending June 30, 1997 was $103,893,000, an
increase of $6,262,000 over the end of 1996. The increase is primarily the
result of the retention of the Corporation's earnings. Management believes
that the Corporation's current capital and liquidity positions are adequate to
support its operations. Management is not aware of any recommendations by any
regulatory authority which, if it were to be implemented, would have a
material adverse effect on the Corporation's capital.
PAGE 14
<TABLE>
<CAPTION>
Tier 1 Capital to Risk- Total Capital to Risk-
Leverage Ratio Weighted Assets Ratio Weighted Asset Ratio
June 30, 1997 June 30,1997 June 30, 1997
--------------- ------------------------ -----------------------
Amount Ratio Amount Ratio Amount Ratio
--------------- ------ ------------------------ ------ ----------------------- ------
<S> <C> <C> <C> <C> <C> <C>
Entity:
Corporation $ 98,689 9.42% $ 98,689 13.35% $ 107,956 14.60%
Subsidiary Banks:
Harleysville National Bank 69,595 8.34 69,595 11.60 77,117 12.86
Citizens National Bank 20,621 12.85 20,621 22.66 21,639 23.77
Security National Bank 5,980 9.03 5,980 12.56 6,577 13.81
"Well Capitalized" institution
(under FDIC regulations) 5.00 6.00 10.00
</TABLE>
<TABLE>
<CAPTION>
December 31, 1996 December 31,1996 December 31, 1996
------------------ ----------------- ------------------
Amount Ratio Amount Ratio Amount Ratio
------------------ ------ ----------------- ------ ------------------ ------
Entity:
<S> <C> <C> <C> <C> <C> <C>
Corporation $ 93,164 9.21% $ 93,164 13.12% $ 102,061 14.38%
Subsidiary Banks:
Harleysville National Bank 67,253 8.34 67,253 11.59 74,528 12.85
Citizens National Bank 20,031 13.08 20,031 22.60 20,993 23.69
Security National Bank 3,885 6.81 3,885 9.57 4,394 10.83
"Well Capitalized" institution
(under FDIC regulations) 5.00 6.00 10.00
</TABLE>
(1) Accordingly, at June 30, 1997, both the Corporation and its subsidiary
banks were "well capitalized" under FDIC regulations.
The Corporation's capital ratios exceed regulatory requirements.
Existing minimum regulatory capital ratio requirements are 5.0% for primary
capital and 6.0% for total capital. The Corporation's primary capital ratio
was 10.31% at June 30, 1997, compared with 10.29% at December 31, 1996.
Since the Corporation's only capital is primary capital, the total capital
ratios are the same as the primary capital ratios.
Pursuant to the federal regulators' risk-based capital adequacy
guidelines, the components of capital are called Tier 1 and Tier 2 capital.
For the Corporation, Tier 1 Capital is the shareholders' equity, and Tier 2
capital is the allowance for loan losses. The risk-based capital ratios are
computed by dividing the components of capital by risk-adjusted assets.
Risk-adjusted assets are determined by assigning credit risk-weighting factors
from 0% to 100% to various categories of assets and off-balance sheet
financial instruments. The minimum for the Tier 1 ratio is 4.0%, and the
total capital ratio (Tier 1 plus Tier 2 capital divided by risk-adjusted
assets) minimum is 8.0%. At June 30, 1997, the Corporation's Tier 1
risk-adjusted capital ratio was 13.35%, and the total risk-adjusted capital
ratio was 14.60%, both well above the regulatory requirements. The risk-based
capital ratios of each of the Corporation's commercial banks also exceeded
regulatory requirements at June 30, 1997.
To supplement the risk-based capital adequacy guidelines, the Federal
Reserve Board established a leverage ratio guideline. The leverage ratio
consists of Tier 1 capital divided by quarterly average total assets,
excluding intangible assets. The minimum leverage ratio guideline is 3% for
banking organizations that do not anticipate significant growth and that have
well-diversified risk, excellent asset quality, high liquidity, good earnings
and, in general, are considered top-rated, strong banking organizations.
Other banking organizations are expected to have ratios of at least 4% and 5%,
depending upon their particular condition and growth plans. Higher leverage
PAGE 15
ratios could be required by the particular circumstances or risk profile of a
given banking organization. The Corporation's leverage ratios were 9.42% at
June 30, 1997 and 9.21% at December 31, 1996.
The year-to-date June 30, 1997 cash dividend per share of $.42 was 16.7%
higher than the cash dividend for the same period in 1996 of $.36. On June 30,
1997, the Corporation paid a 5% stock dividend (five shares of common stock
for each 100 shares of common stock outstanding held), to shareholders of
record June 13, 1997. On June 28, 1996, the Corporation paid a 5% stock
dividend (five shares of common stock for each 100 shares of common stock
outstanding held), to shareholders of record June 14, 1996. Activity in both
the Corporation's dividend reinvestment and stock purchase plan and the stock
option plan did not have a material impact on capital during the first six
months of 1997.
LIQUIDITY
- ---------
Liquidity is a measure of the ability of the Banks to meet their needs
and obligations on a timely basis. For a bank, liquidity answers the ability
to meet the day-to-day demands of deposit customers, along with the ability to
fulfill the needs of borrowing customers. Generally, the Banks arrange their
mix of cash, money market investments, investment securities and loans in
order to match the volatility, seasonality, interest sensitivity and growth
trends of its deposit funds. Federal Funds sold averaged $11,680,000 during
the first six months of 1997 and securities available for sale averaged
$218,081,000 during the first six months of 1997, more than sufficient to
match normal fluctuations in loan demand or deposit fund supplies. Backup
sources of liquidity are provided by Federal Fund lines carried in the
subsidiary Banks. Additional liquidity could be generated through borrowings
from the Federal Reserve Bank of Philadelphia and the Federal Home Loan Bank
of Pittsburgh, of which Harleysville, Citizens and Security are members.
Unused lines of credit at the FHLB were $174,749,000, as of June 30, 1997.
There are currently a number of issues before Congress which may affect
the Corporation and its business operations, and the business operations of
its subsidiaries. However, management does not believe these issues will have
a material adverse effect on liquidity, capital resources or the results of
operations.
Recently, Pennsylvania enacted a law to permit State chartered
banking institutions to sell insurance. This follows a U. S. Supreme Court
decision in favor of nationwide insurance sales by banks and which also bars
states from blocking insurance sales by national banks in towns with
populations of no more the 5,000. However, the Bank does not currently
anticipate entering into these activities.
Congress is currently considering legislative reforms to
modernize the financial services industry, including repealing the Glass
Steagall Act which prohibits commercial banks from engaging in the securities
industry. Consequently, equity underwriting activities of banks may increase
in the near future. However, the Corporation does not currently anticipate
entering into these activities.
On September 30, 1996, the President signed into law the
Deposit Insurance Funds Act of 1996 to recapitalize the Savings Association
Insurance Fund ("SAIF") administered by the Federal Deposit Insurance
Corporation ("FDIC") and to provide for repayment of the FICO (Financial
Institution Collateral Obligation) bonds issued by the United States Treasury
Department. Pursuant to the act, during the years 1997, 1998 and 1999, the
Bank Insurance Fund ("BIF") will pay $322 million of FICO debt service, and
SAIF will pay $458 Million.
Based on current projected deposit levels during 1997,
Management expects that the increase in the FDIC assessment rate will not have
a material impact on earnings. However, individual institution's assessments
will continue to vary according to their capital and management ratings. As
always, the FDIC will be able to raise the assessments as necessary to
maintain the funds at their target capital ratios provided by law.
The Corporation is currently analyzing the recently enacted
changes to the federal tax law. The impact of such changes on liquidity,
operating results, and capital is not known at this time. However, the impact
is not expected to be adverse to the Corporation and its subsidiaries.
PAGE 16
From time to time, various types of federal and state
legislation have been proposed that could result in additional regulation of,
and restrictions on, the business of the Corporation and the Banks. It cannot
be predicted whether such legislation will be adopted or, if adopted, how such
legislation would affect the business of the Corporation and the Banks. As a
consequence of the extensive regulation of commercial banking activities in
the United States, the Corporation's and the Bank's business is particularly
susceptible to being affected by federal legislation and regulations that may
increase the costs of doing business. Except as specifically described above,
Management believes that the affect of the provisions of the aforementioned
legislation on liquidity, capital resources, and results of operations of the
Corporation will be immaterial. Management is not aware of any other current
specific recommendations by regulatory authorities or proposed legislation,
which if they were implemented, would have a material adverse effect upon the
liquidity, capital resources, or results of operations, although the general
cost of compliance with numerous and multiple federal and state laws and
regulations does have, and in the future may have, a negative impact on the
Corporation's results of operations.
Further, the business of the Corporation is also affected by
the state of the financial services industry in general. As a result of legal
and industry changes, Management predicts that the industry will continue to
experience an increase in consolidations and mergers as the financial services
industry strives for greater cost efficiencies and market share. Management
also expects increased diversification of financial products and services
offered by the Bank and its competitors. Management believes that such
consolidations and mergers, and diversification's of products and services may
enhance its competitive position as a community bank.
PAGE 17
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
- ---------------------------
Management, based upon discussions with the Corporation's legal counsel,
is not aware of any litigation that would have a material adverse effect on
the consolidated financial position of the Corporation. There are no
proceedings pending other than the ordinary routine litigation incident to the
business of the Corporation and its subsidiaries - Harleysville National Bank
and Trust Company, The Citizens National Bank of Lansford and Security
National Bank. In addition, no material proceedings are pending or are known
to be threatened or contemplated against the Corporation and the Banks by
government authorities.
Item 2. Change in Securities.
- ----------------------------
Not applicable.
Item 3. Defaults Upon Senior Securities.
- ---------------------------------------
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders.
- -----------------------------------------------------------
(a) An annual meeting of shareholders was held at 9:30 a.m.,
on Tuesday, April 8, 1997, at Presidential caterers, 2910 DeKalb Pike,
Norristown, Pennsylvania 19401.
(b), (c) One matter was voted upon as follows:
Two directors were elected, as below:
Elected Term Expires
------- -------------
Bradford W. Mitchell 2001
William M. Yocum 2001
The results of the voting for the
directors are as follows:
Bradford W. Mitchell:
For 5,633,725
Against 34,805
Abstain 1,106
William M. Yocum:
For 5,651,244
Against 17,286
Abstain 1,106
Directors whose term continued after
the meeting:
Term Expires
-------------
Walter E. Daller, Jr. 1998
Martin E. Fossler 1998
Thomas S. McCready 1998
Walter F. Vilsmeier 1999
Harold A. Herr 1999
Henry M. Pollak 1999
John W. Clemens 2000
Palmer (Pete) Retzlaff 2000
PAGE 18
Item 5. Other Information.
- -------------------------
None.
Item 6. Exhibits and Reports on Form 8-K.
- ----------------------------------------
(a) Exhibits:
None.
(b) Reports on Form 8-K:
None.
PAGE 19
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
HARLEYSVILLE NATIONAL CORPORATION
/s/ Walter E. Daller, Jr.
________________________
Walter E. Daller, Jr., President
and Chief Executive Officer
(Principal executive officer)
/s/ Vernon L. Hunsberger
_________________________
Vernon L. Hunsberger, Treasurer
(Principal financial and accounting officer)
Date: August 13, 1997
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 46,285
<INT-BEARING-DEPOSITS> 6,317
<FED-FUNDS-SOLD> 31,250
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 227,191
<INVESTMENTS-CARRYING> 57,218
<INVESTMENTS-MARKET> 58,422
<LOANS> 704,905
<ALLOWANCE> 11,204
<TOTAL-ASSETS> 1,091,813
<DEPOSITS> 894,009
<SHORT-TERM> 69,114
<LIABILITIES-OTHER> 22,797
<LONG-TERM> 2,000
0
0
<COMMON> 7,006
<OTHER-SE> 96,887
<TOTAL-LIABILITIES-AND-EQUITY> 1,091,813
<INTEREST-LOAN> 29,843
<INTEREST-INVEST> 8,757
<INTEREST-OTHER> 534
<INTEREST-TOTAL> 39,134
<INTEREST-DEPOSIT> 14,442
<INTEREST-EXPENSE> 1,919
<INTEREST-INCOME-NET> 22,773
<LOAN-LOSSES> 1,130
<SECURITIES-GAINS> 704
<EXPENSE-OTHER> 13,737
<INCOME-PRETAX> 11,422
<INCOME-PRE-EXTRAORDINARY> 11,422
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8,284
<EPS-PRIMARY> 1.18
<EPS-DILUTED> 1.18
<YIELD-ACTUAL> 4.89
<LOANS-NON> 4,217
<LOANS-PAST> 2,189
<LOANS-TROUBLED> 1,037
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 10,710
<CHARGE-OFFS> 777
<RECOVERIES> 141
<ALLOWANCE-CLOSE> 11,204
<ALLOWANCE-DOMESTIC> 11,204
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 5,706
</TABLE>
