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 March 31, 1999
Commission file number 0-10972
First Farmers and Merchants Corporation
(Exact name of registrant as specified in its charter)
Tennessee 62-1148660
(State or other jurisdiction of incorporation (I.R.S. Employer
or organization) Identification No.)
816 South Garden Street
Columbia, Tennessee 38402 - 1148
(Address of principal executive offices) (Zip Code)
(931) 388-3145
(Registrant's telephone number, including area code)
(Former name, former address and former fiscal year, if changed since
last report)
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
Indicate the number of shares outstanding of each of the
issuer's common stock, as of March 31, 1999. 2,920,000 shares
This filing contains 12 pages.
<PAGE>
PART 1 - FINANCIAL INFORMATION
Item 1. Financial Statements
The following unaudited consolidated financial
statements of the registrant and its subsidiary for the three
months ended March 31, 1999, are as follows:
Consolidated balance sheets - March 31, 1999, and
December 31, 1998.
Consolidated statements of income - For the three
months ended March 31, 1999, and March 31, 1998.
Consolidated statements of cash flows - For the
three months ended March 31, 1999, and March 31, 1998.
<PAGE>
<TABLE>
FIRST FARMERS AND MERCHANTS CORPORATION AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
<CAPTION>
March 31 December 31
(Dollars in Thousands) 1999 1998
<S> <S> <C> <C>
ASSETS Cash and due from banks $ 20,472 $ 21,155
Federal funds sold 16,700 12,000
Securities
Available for sale (amortized cost
$95,416 and $83,395 respectively) 95,733 84,347
Held to maturity (fair value $119,486
and $118,010 respectively) 118,161 114,648
Total securities 213,894 198,995
Loans, net of deferred fees 320,844 320,184
Allowance for possible loan losses (4,342) (3,852)
Net loans 316,502 316,332
Bank premises and equipment, at cost
less allowance for depreciation 8,300 7,240
Other assets 17,614 14,689
TOTAL ASSETS $ 593,482 $ 570,411
LIABILITIES Deposits
Noninterest-bearing $ 72,794 $ 83,165
Interest-bearing (including
certificates of deposit over
$100,000: 1999 - $44,116;
1998 - $42,611) 444,568 417,366
Total deposits 517,362 500,531
Dividends payable - 896
Other short term liabilities 602 602
Accounts payable and accrued
liabilities 5,476 5,232
TOTAL LIABILITIES 523,440 507,261
STOCKHOLDERS' Common stock - $10 par value, 8,000,000
EQUITY shares authorized; issued and
outstanding - 2,920,000 in 1999;
2,800,000 in 1998 29,200 28,000
Retained earnings 36,325 34,560
Additional paid-in capital 4,320 -
Accumulated other comprehensive income 197 590
TOTAL STOCKHOLDERS' EQUITY 70,042 63,150
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 593,482 $ 570,411
</TABLE>
<PAGE>
<TABLE>
FIRST FARMERS AND MERCHANTS CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
<CAPTION>
(Dollars In Thousands Except Per Share Data)
Three Ended March 31, 1999 1998
<S> <S> <C> <C>
INTEREST INCOME Interest and fees on loans $ 6,914 $ 7,346
Income on investment securities
Taxable interest 2,148 1,446
Exempt from federal income tax 725 615
Dividends 51 42
2,924 2,103
Other interest income 114 127
TOTAL INTEREST INCOME 9,952 9,576
INTEREST EXPENSE Interest on deposits 4,217 4,263
Interest on other short term
borrowings 8 8
TOTAL INTEREST EXPENSE 4,225 4,271
NET INTEREST INCOME 5,727 5,305
PROVISION FOR POSSIBLE LOAN LOSSES 650 950
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 5,077 4,355
NONINTEREST INCOME Trust department income 405 392
Service fees on deposit accounts 951 872
Other service fees, commissions,
and fees 235 270
Other operating income 140 114
Held to maturity securities
gains (losses) - 351
TOTAL NONINTEREST INCOME 1,731 1,999
NONINTEREST EXPENSES Salaries and employee benefits 2,071 1,912
Net occupancy expense 350 324
Furniture and equipment expense 345 351
Other operating expenses 1,646 1,351
TOTAL NONINTEREST EXPENSES 4,412 3,938
INCOME BEFORE PROVISION FOR
INCOME TAXES 2,396 2,416
PROVISION FOR INCOME TAXES 631 678
NET INCOME $ 1,765 $ 1,738
EARNINGS PER SHARE Common stock
2,920,000 shares outstanding 1999
2,800,000 shares outstanding 1998 $ 0.60 $ 0.62
</TABLE>
<PAGE>
<TABLE>
FIRST FARMERS AND MERCHANTS CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOW
<CAPTION>
(Dollars In Thousands)
Three Months Ended March 31, 1999 1998
<S> <S> <C> <C>
OPERATING Net income $ 1,765 $ 1,738
ACTIVITIES Adjustments to reconcile net income to
net cash provided by operating
activities
Excess of provision for possible
loan losses over net charge offs 271 490
Provision for depreciation and
amortization of premises and
equipment 275 158
Provision for depreciation of leased
equipment 75 125
Amortization of deposit base
intangibles 38 19
Amortization of investment security
premiums, net of accretion of discounts 220 106
Increase in cash surrender value of life
insurance contracts (52) (73)
Deferred income taxes (66) (216)
(Increase) decrease in
Interest receivable (483) (454)
Other assets (419) (402)
Increase (decrease) in
Interest payable 26 9
Other liabilities 93 (118)
Total adjustments (22) (356)
Net cash provided by operating
activities 1,743 1,382
INVESTING Proceeds from maturities, calls, and
ACTIVITIES sales of available-for-sale securities 8,552 4,000
Proceeds from maturities and calls of
held-to-maturity securities 6,671 3,467
Purchases of investment securities
Available-for-sale (7,579) (19,365)
Held-to-maturity (10,258) (7,288)
Net (increase) decrease in loans 4,339 2,190
Purchases of premises and equipment (493) (412)
Acquisition of other assets 2,789 -
Net cash used by investing
activities 4,021 (17,408)
FINANCING Net increase in noninterest-bearing and
ACTIVITIES interest-bearing deposits (851) 10,129
Net increase (decrease) in short term
borrowings - (2)
Cash dividends (896) (784)
Net cash provided by financing
activities (1,747) 9,343
Increase (decrease) in cash and cash
equivalents 4,017 (6,683)
Cash and cash equivalents at beginning
of year 33,155 27,917
Cash and cash equivalents at end of
year $ 37,172 $ 21,234
</TABLE>
Noncash Investing and Financing Activities
NONCASH
ACTIVITIES An agreement and plan to merge the Farmers and Merchants Bank
of White Bluff, Dickson County, Tennessee, with and into the
Bank was completed February 5, 1999. The merger was a noncash
transaction in which 120,000 shares of Corporation common
stock were issued to complete the acquisition of the assets
and the assumption of certain liabilities indicated in the
following schedule.
Securities $ 13,025 Deposits $ 17,682
Loans, net 4,998 Other liabilities 125
Other assets 1,045
<PAGE>
The unaudited consolidated financial statements have been
prepared on a consistent basis and in accordance with the
instructions to Form 10-Q and do not include all of the
information and footnotes required by generally accepted
accounting principles for complete financial statements. In the
opinion of management, all adjustments considered necessary for
a fair presentation have been included. These adjustments were
of a normal, recurring nature and consistent with generally
accepted accounting principles. For further information, refer
to the consolidated financial statements and footnotes included
in the Corporation's annual report on Form 10-K for the year
ended December 31, 1998.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial
Condition
Material Changes in Financial Condition
An agreement and plan to merge the Farmers and Merchants
Bank of White Bluff, Dickson County, Tennessee, with and into
the Bank was completed February 5, 1999. The purchase of the
$23 million dollar bank for 120,000 shares of Corporation common
stock must be considered in the discussion that follows where
the impact in each area will be indicated. Average earning
assets increased 3.7% in the first quarter of 1999 compared to a
1.6% increase in the first quarter of 1998. Almost half of this
increase resulted from the acquisition. As a financial
institution, the Bank's primary earning assets are loans. At
March 31, 1999, average net loans had decreased 1.5% and
represented 60.0% of average earning assets. The loans acquired
in Dickson County represent less than one percent of average
loans. Average net loans began a period of growth in the first
quarter of 1996 showing a 4.6% growth that continued throughout
last year. Management believes this growth is indicative of the
strengthening of its presence in the five county area in middle
Tennessee that it serves. This loan growth has slowed down,
even decreasing slightly, in the first quarter of this year as
increased competition and reaffirmation of strong credit
standards in our new markets has softened loan demand. Average
investments represented 40.0% of average earning assets at March
31, 1999, increasing 12.8% in the first quarter of 1999. Almost
2.0% of this increase can be attributed to the acquisition in
Dickson County. Average total assets were $573 million at the
end of the first three months of 1999 compared to $535 million
at the end of the first three months of 1998. Period-end assets
were $593 million compared to $570 million at December 31, 1998.
The following sections analyze the average balance sheet and
the major components of the period-end balance sheet.
SECURITIES
The Bank maintains a formal asset and liability management
process to control interest rate risk and assist management in
maintaining reasonable stability in the gross interest margin as
a result of changes in the level of interest rates and/or the
spread relationships among interest rates. The Bank uses an
earnings simulation model to evaluate the impact of different
interest rate scenarios on the gross margin. Each month, the
Asset/Liability Committee monitors the relationship of rate
sensitive earning assets to rate sensitive interest bearing
liabilities (interest rate sensitivity) which is the principal
factor in determining the effect that fluctuating interest rates
will have on future net interest income. Rate sensitive earning
assets and interest bearing liabilities are those which can be
repriced to current market rates within a defined time period.
Available-for-sale securities are an integral part of the
asset/liability management process. As such, they represent an
important source of liquidity available to fund loans and
accommodate asset reallocation strategies dictated by changes in
bank operating and tax plans, shifting yield spread
relationships, and changes in configuration of the yield curve.
At March 31, 1999, the Corporation's investment securities
portfolio had $95.7 million available-for-sale securities and
$118.1 million held-to-maturity securities. Of the $12.9
million securities acquired in the Dickson County transaction,
$7.8 million were recorded as available-for-sale and $5.1
million were recorded as held-to-maturity. This compares to
$84.3 available-for-sale securities and $114.6 million
held-to-maturity securities at December 31, 1998.
LOANS
The loan portfolio is the largest component of earning assets
and consequently provides the highest amount of revenues. The loan
portfolio also contains, as a result of credit quality, the highest
<PAGE>
exposure to risk. When analyzing potential loans, management
assesses both interest rate objectives and credit quality
objectives in determining whether to make a given loan and the
appropriate pricing for that loan. The Bank maintains a diversified
portfolio in order to spread its risk and reduce its exposure to
economic downturns which may occur in different segments of the
economy or in particular industries. The average loan portfolio
decreased $4.9 million or 1.5% in the first three months of 1999
compared to a $13.9 million or 4.4% increase in the first three
months of 1998. Commercial loans decreased 19.4%, personal loans
posted a 5.0% decline, but loans secured by real estate posted a
3.8% growth for the first three months of 1999. An asset/liability
strategic decision to keep higher quality mortgage loans in the
portfolio, rather than sell them in the secondary market, contributed
to the increase in this type of loans.
The Corporation's subsidiary loan review function reviews
lines of credit over $50,000. After this review during the
first quarter of 1999, loans totaling $1.8 million, .6% of the
portfolio, were classified as other assets especially mentioned
at March 31, 1999, which is down from the $2.6 million so
classified at December 31, 1998. Loans totaling $15.6 million,
4.9% of the portfolio, were classified as substandard at March
31, 1999, compared to $8.3 million so classified at December 31,
1998. Loans totaling $2.6 million, .8% of the portfolio, were
classified as doubtful at March 31, 1999, compared to $2.0
million at December 31, 1998. Any loans classified for
regulatory purposes as loss, doubtful, substandard, or special
mention do not represent or result from trends or uncertainties
which management reasonably expects will materially affect
operating results, liquidity, or capital resources. Neither do
such loans represent material credits about which management is
aware of any information which causes management to have serious
doubts as to the ability of such borrowers to comply with the
loan repayment terms. Management is not aware of any known
trends, events or uncertainties that will have or that are
reasonably likely to have a material effect on the corporation's
liquidity, capital resources or operations. Loans having
recorded investments of $3.3 million, 1.0% of the total
portfolio, were identified as impaired at the end of the first
three months of 1999 compared to $3.9 million at December 31,
1998.
The Bank is a party to financial instruments with
off-balance-sheet risk in the normal course of business to meet
the financing needs of its customers. These financial
instruments include commitments to extend credit and standby
letters of credit. Those instruments involve, to varying
degrees, elements of credit risk in excess of the amount
recognized in the balance sheet. The contract or notional
amounts of those instruments reflect the extent of involvement
the Bank has in those particular financial instruments. The
total outstanding loan commitments and stand-by letters of
credit in the normal course of business at March 31, 1999, were
$35.6 million and $1.8 million respectively. Loan commitments
are agreements to lend to a customer as long as there is not a
violation of any condition established in the contract. Standby
letters of credit are conditional commitments issued by the Bank
to guarantee the performance of a customer to a third party.
Those guarantees are primarily issued to support public and
private borrowing arrangements, including commercial paper, bond
financing, and similar transactions. The credit risk involved
in issuing letters of credit is essentially the same as that
involved in making a loan.
The loan portfolio is well diversified with loans generally
secured by tangible personal property, real property, or stock.
The loans are expected to be repaid from cash flow or proceeds
from the sale of selected assets of the borrowers. Collateral
requirements for the loan portfolio are based on credit
evaluation of the customer. It is management's opinion that
there is not a concentration of credit risk in the portfolio.
<PAGE>
DEPOSITS
The Corporation's subsidiary bank does not have any foreign
offices and all deposits are serviced in its seventeen domestic
offices. The bank's average deposits grew during the first
three months of 1999 reflecting a 3.7% growth compared to a 1.0%
growth in the first quarter of 1998. Deposits totaling over
$17.6 million were assumed in the Dickson County acquisition and
represent 2.2% of average deposits accounting for almost 60% of
the deposit growth in the first quarter. Short and medium term
rates were competitive compared to longer term rates. This was
a contributing factor to 3.6% growth in average interest-bearing
checking accounts and 1.6% growth in certificates of deposits
under $100 thousand during the first quarter of 1999. Savings
deposits with limited transactions increased 9.9% during the
first three months of 1999. Savings deposits have been strong
historically providing a core, low cost, source of funding.
Certificates of deposit over $100 thousand decreased .6% in the
first quarter of 1999.
CAPITAL
During 1998, the Corporation amended its corporate charter
to increase the number of authorized shares of its common stock
from 4,000,000 to 8,000,000 shares and on April 21, 1998, the
Corporation's stockholders approved a two-for-one split effected
in the form of a 100% stock dividend to stockholders of record
on April 21, 1998. In accordance with State corporate legal
requirements, the transaction was recorded by a transfer from
retained earnings to common stock in the amount of $14,000,000
($10 for each additional share issued). All per share and share
data in the accompanying consolidated financial statements and
footnotes have been restated to give retroactive effect to the
transaction. Average shareholders' equity remained strong
totaling $66.2 million at March 31, 1999, a 4.8% increase from
1998 year end. The issuance of stock to complete the Dickson
County merger accounts for over 71% of this growth. The
Corporation and the Bank are subject to federal regulatory
risk-adjusted capital adequacy standards. Failure to meet
capital adequacy requirements can initiate certain mandatory,
and possibly additional discretionary, actions by regulators
that could have a direct material effect on the consolidated
financial statements of the Corporation and its subsidiary, the
Bank. The regulations require the Bank to meet specific capital
adequacy guidelines that involve quantitative measures of
assets, liabilities, and certain off-balance-sheet items as
calculated under regulatory accounting practices. The capital
classification is also subject to qualitative judgments by the
regulators about components, risk weightings, and other factors.
Quantitative measures established by regulation to ensure
capital adequacy require the Corporation and the Bank to
maintain minimum amounts and ratios of Total Capital and Tier I
Capital to risk-weighted assets and of average Tier I Capital to
average assets. Equity capital (net of certain adjustments for
intangible assets and investments in non-consolidated
subsidiaries and certain classes of preferred stock are
considered Tier 1 ("core") capital. Tier 2 ("total") capital
consists of core capital plus subordinated debt, some types of
preferred stock, and varying amounts of the Allowance for
Possible Loan Losses. As of March 31, 1999, the Bank's total
risk-based and core capital ratios were 22.0% and 20.8%
respectively. The comparable ratios were 20.7% and 19.5% at
year end, 1998. As of March 31, 1999, the Corporation's total
risk-based and core capital ratios were 22.2% and 20.9%
respectively. The comparable ratios were 20.97% and 19.7% at
year end, 1998. As of March 31, 1999, the Bank and the
Corporation had a ratio of average core capital to average total
assets of 12.1% and 12.2% respectively, compared to 11.1% and
11.2% at December 31, 1998. Management believes, as of March
31, 1999, that the Corporation and the Bank meet all capital
adequacy requirements to which they are subject. The Bank's
calculated risk-adjusted capital ratios exceeded the minimum
<PAGE>
standard for a "well capitalized" bank. Most of the capital
needs of the Bank have historically been financed through
internal growth. The approval of the Comptroller of the
Currency is required before the Bank's dividends in a given year
may exceed the total of its net profit (as defined) for the year
combined with retained net profits of the preceding two years.
As of March 31, 1999, additional dividends of approximately $10
million could have been declared by the Bank to the Corporation
without regulatory agency approval.
YEAR 2000 COMPLIANCE TASK FORCE
A Year 2000 Compliance Task Force was established to
evaluate the mission critical software and hardware that must be
compatible for continued satisfactory data processing;
representations have been obtained, and satisfactorily tested,
from our software and hardware vendors, confirming their Year
2000 compatibility. Testing of systems' compatibility was 90%
complete for all areas and 100% complete for core application
processing, by December 31, 1998. The committee plans to have
all testing complete and software changes made by June 30, 1999.
Significant expenses relating to this issue have been limited
because the Bank uses an outside core processor. However, the
task force developed a budget and continually reviews expenses
as they emerge, reporting to the Board of Directors quarterly.
Expenses are not expected to have a material impact on the
financial statements of the Corporation. The Bank has developed
contingency plans for the most critical operational areas and is
finalizing comprehensive contingency/business continuation
plans. No material effect on operations is anticipated in
preparing for potential risks. Management believes that all
information systems will be Year 2000 compliant.
Material Changes in Results of Operations
Total interest income was 3.9% higher in the first three
months of 1999 than the first three months of 1998. Interest
and fees earned on loans decreased 5.9% due to the decrease in
the volume of average loans. Interest earned on investment
securities and other investments increased 36.3% compared to the
first three months of 1998 due to the increased volume of
securities. Investment securities acquired in the acquisition
in Dickson County are 3.6% of total investment securities and
contribute to this increase.
Total interest expense showed almost no change in the first
three months of 1999 compared to the first three months of 1998
declining 1.1%. The total cost of interest-bearing deposits has
remained steady all last year and this year under monthly
monitoring by the Asset/Liability Committee. As a policy,
budgeted financial goals are monitored on a monthly basis by the
Asset/Liability Committee where the actual dollar change in net
interest income given different interest rate movements is
reviewed. A negative dollar change in net interest income for a
twelve month period of less than 3% of net interest income given
a three hundred basis point shift in interest rates is
considered an acceptable rate risk position. The net interest
margin, on a tax equivalent basis, at March 31, 1999, 1998, and
December, 31, 1998 was 4.55%, 4.54%, and 4.64% respectively.
Net interest income on a fully taxable equivalent basis is
influenced primarily by changes in: (1) the volume and mix of
earning assets and sources of funding; (2) market rates of
interest, and (3) income tax rates. The impact of some of these
factors can be controlled by management policies and actions.
External factors also can have a significant impact on changes
in net interest income from one period to another. Some examples
of such factors are: (1) the strength of credit demands by customers;
<PAGE>
(2) Federal Reserve Board monetary policy, and (3)
fiscal and debt management policies of the federal government,
including changes in tax laws.
The analysis and review of asset quality by the
Corporation's subsidiary loan review function and credit
administrator also includes a formal review that is prepared
quarterly to assess the risk in the loan portfolio and to
determine the adequacy of the allowance for loans losses. This
review supported management's assertion that the allowance was
adequate at March 31, 1999. Additions to the allowance during
the first three months of 1999 were lower than the first three
months of 1998 due almost entirely to a consumer loan
underwriting problem that was being corrected. Net charge offs
of $379 thousand for the first three months of 1999 were
declining from prior quarters as the loan underwriting problem
was being resolved. The ratio of net charge offs to net average
loans outstanding was .5% as of March 31, 1999.
There were no write downs of other real estate associated
with declines in real estate values subsequent to foreclosure
and disposition of the properties at less than their carrying
value during the first quarter of 1999. The carrying value of
Other Real Estate is included in other assets on the face of the
balance sheet and represents real estate acquired through
foreclosure and is stated at the lower of cost or fair value
minus cost to sell. An allowance for other real estate owned is
not maintained. Any decreases or losses associated with the
properties have been charged to current income. Management
evaluates properties included in this category on a regular
basis. Actual foreclosures were included in the carrying value
for Other Real Estate at March 31, 1999, December 31, 1998, and
March 31, 1998, and totaled $786 thousand, $544 thousand, and
$411 thousand respectively.
Noninterest income decreased 13.4% during the first three
months of 1999 due to a large securities transaction gain in the
first three months of 1998. Without considering the securities
gain, noninterest income increased 5.0%. Income from fiduciary
services provided in the Bank's Trust Department remained
strong, increasing 3.2%.
Noninterest expenses, excluding the provision for possible
loan losses, were 12.0% more in the first three months of 1999
than in the first three months of 1998. Extra expenses related
to the Dickson County acquisition including the salaries of
additional employees contribute to this increase.
Net income is 1.6% higher for the first three months of
1999 compared to the first three months of 1998. The increase
in interest income combined with the steady interest cost
contributed to enough of an increase in net interest income
that, combined with the tax savings, offset the decline in
noninterest income and the increase in noninterest expense.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned thereunto duly authorized.
FIRST FARMERS AND MERCHANTS CORPORATION
(Registrant)
Date May 15, 1999 /s/ Waymon L. Hickman
Waymon L. Hickman,
Chairman of the Board
(Chief Executive Officer)
Date May 15, 1999 /s/ Patricia N. McClanahan
Patricia N. McClanahan,
Treasurer
(Principal Accounting Officer)
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> MAR-31-1999
<CASH> 20,463
<INT-BEARING-DEPOSITS> 9
<FED-FUNDS-SOLD> 16,700
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 95,733
<INVESTMENTS-CARRYING> 118,161
<INVESTMENTS-MARKET> 119,486
<LOANS> 320,844
<ALLOWANCE> (4,342)
<TOTAL-ASSETS> 593,482
<DEPOSITS> 517,362
<SHORT-TERM> 0
<LIABILITIES-OTHER> 6,078
<LONG-TERM> 0
0
0
<COMMON> 29,200
<OTHER-SE> 40,842
<TOTAL-LIABILITIES-AND-EQUITY> 593,482
<INTEREST-LOAN> 6,914
<INTEREST-INVEST> 2,924
<INTEREST-OTHER> 114
<INTEREST-TOTAL> 9,952
<INTEREST-DEPOSIT> 4,217
<INTEREST-EXPENSE> 4,225
<INTEREST-INCOME-NET> 5,727
<LOAN-LOSSES> 650
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 4,412
<INCOME-PRETAX> 2,396
<INCOME-PRE-EXTRAORDINARY> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,765
<EPS-BASIC> .60
<EPS-DILUTED> 0
<YIELD-ACTUAL> 4.55
<LOANS-NON> 3,316
<LOANS-PAST> 646
<LOANS-TROUBLED> 248
<LOANS-PROBLEM> 20,039
<ALLOWANCE-OPEN> 3,852
<CHARGE-OFFS> 436
<RECOVERIES> 58
<ALLOWANCE-CLOSE> 4,342
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
