<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended June 30,1997 Commission File
Number 0-16637
BROAD NATIONAL BANCORPORATION
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
NEW JERSEY 22-2395057
- ------------------------------ -----------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) identification No.)
905 Broad Street, Newark NJ 07102
- ------------------------------ -----------------
(Address of principal executive offices) (Zip Code)
Registrant telephone number, including area code (201) 624-2300
----------------
N/A
- --------------------------------------------------------------------------------
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
------ -----
Number of shares outstanding of Broad National Bancorporation class of Common
Stock, as of July 31, 1997:
Common Stock, $1.00 par value - 4,554,348
1
<PAGE>
BROAD NATIONAL BANCORPORATION
Index to Form 10-Q Financial Information
For the Three Months and Six Months Ended June 30, 1997
-------------------------------------------------------
PAGE
----
PART 1 - FINANCIAL INFORMATION 3
- ------------------------------
Consolidated Statements of Condition
as of June 30, 1997 and December 31, 1996 4
Consolidated Statements of Income for the
Three Month and Six Month Periods Ended June 30, 1997
and 1996 5
Consolidated Statements of Cash Flows for the Six
Month Periods Ended June 30, 1997 and 1996 7
Notes to Consolidated Financial Statements 8
Management's Discussion and Analysis of Financial
Condition and Results of Operations 10
PART 2 - OTHER INFORMATION 21
- --------------------------
Items 1,2,3 & 5 Not Applicable or Negative
Item 4 21
Item 6 21
Signatures 22
Exhibit 1 - Computation of Net Income per Common Share 23
Exhibit 2 - Independent Auditor's Review Report of Interim
Financial Information 24
Exhibit 27 - Financial Data Schedule 25
2
<PAGE>
BROAD NATIONAL BANCORPORATION
PART 1 - FINANCIAL INFORMATION
The following consolidated financial statements of Broad National Bancorporation
as of June 30, 1997 and December 31, 1996 as well as the three month and six
month periods ended June 30, 1997 and 1996 have been prepared by Broad National
Bancorporation without audit, and reflect all normal, recurring adjustments and
disclosures which are, in the opinion of management, necessary for a fair
statement of results for the interim periods presented. These statements have
been prepared pursuant to the rules and regulations of the Securities and
Exchange Commission. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally accepted
accounting principles have been omitted. For further clarification and
understanding, these interim statements should be read in conjunction with the
annual report on Form 10-K of Broad National Bancorporation for the year ended
December 31, 1996.
The results of operations for the periods presented are not necessarily an
indication of the results which can be expected for 1997.
The registrant's independent public accountants, KPMG Peat Marwick LLP, have
performed a limited review of these interim statements in accordance with the
standards for such reviews promulgated by the American Institute of Certified
Public Accountants. See page 24 for their report on this limited review.
3
<PAGE>
BROAD NATIONAL BANCORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CONDITION
(IN THOUSANDS)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1997 1996
--------------- -------------------
(Unaudited)
<S> <C> <C>
ASSETS
- ------
CASH AND DUE FROM BANKS $ 39,114 $ 19,782
FEDERAL FUNDS SOLD 53,775 57,075
-------- --------
CASH AND CASH EQUIVALENTS 92,889 76,857
SECURITIES HELD-TO-MATURITY
(aggregate market value $84,390)
and $89,482, respectively) 84,992 90,170
SECURITIES AVAILABLE-FOR-SALE 82,767 69,044
LOANS, Net of deferred loan fees 307,601 287,116
LESS -
Allowance for possible loan losses 9,037 8,531
- --------------------------------------------------------------------------------------------------
NET LOANS 298,564 278,585
- --------------------------------------------------------------------------------------------------
PREMISES AND EQUIPMENT, net 8,909 8,888
ACCRUED INTEREST RECEIVABLE 3,823 3,351
OTHER ASSETS 8,327 6,720
- --------------------------------------------------------------------------------------------------
TOTAL ASSETS $580,271 $533,615
- --------------------------------------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
- ------------------------------------
DEPOSITS
Non-interest bearing demand $102,974 $100,945
Savings and interest bearing demand 233,144 217,250
Time deposits less than $100,000 90,717 85,714
Time deposits of $100,000 or more 90,200 81,164
- --------------------------------------------------------------------------------------------------
TOTAL DEPOSITS 517,035 485,073
SHORT-TERM BORROWINGS 3,506 1,000
ACCRUED TAXES, INTEREST AND OTHER LIABILITIES 8,874 9,184
TRUST PREFERRED SECURITIES 11,500 0
- --------------------------------------------------------------------------------------------------
TOTAL LIABILITIES 540,915 495,257
- --------------------------------------------------------------------------------------------------
SHAREHOLDERS' EQUITY:
Common stock, $1 par value, authorized
10,000,000 shares at 6/30/97 and 5,500,000 at 12/31/96;
issued 4,677,188 shares 4,677 4,677
Capital surplus 26,591 26,589
Retained earnings 9,400 7,004
Common Stock in treasury at cost; 92,500 shares at 6/30/97
and 5,000 shares at 12/31/96 (1,393) (58)
Unrealized gain on securities available-for-sale, net 81 146
- --------------------------------------------------------------------------------------------------
TOTAL SHAREHOLDERS' EQUITY 39,356 38,358
- --------------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $580,271 $533,615
- --------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE>
BROAD NATIONAL BANCORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS)
<TABLE>
<CAPTION>
3 MONTH PERIOD ENDED 6 MONTH PERIOD ENDED
-------------------- ---------------------
JUNE 30 JUNE 30
1997 1996 1997 1996
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
INTEREST INCOME
Interest and fees on loans $ 6,617 $6,074 $13,030 $11,863
Interest on securities held - to - maturity
Taxable 1,414 1,110 2,842 2,015
Tax exempt 13 13 26 30
Interest on securities available - for - sale 1,255 988 2,353 1,872
Interest on federal funds sold 714 289 1,444 798
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL INTEREST INCOME 10,013 8,474 19,695 16,578
- ---------------------------------------------------------------------------------------------------------------------------
INTEREST EXPENSE:
Interest on savings & interest bearing
demand deposits 1,181 1,250 2,331 2,449
Interest on time certificates of
deposit of $100,000 or more 1,415 396 2,624 680
Interest on other time deposits 1,173 997 2,323 2,109
Interest on short-term borrowings 21 15 33 33
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL INTEREST EXPENSE 3,790 2,658 7,311 5,271
- ---------------------------------------------------------------------------------------------------------------------------
NET INTEREST INCOME 6,223 5,816 12,384 11,307
- ---------------------------------------------------------------------------------------------------------------------------
PROVISION FOR POSSIBLE LOAN LOSSES 450 225 900 450
- ---------------------------------------------------------------------------------------------------------------------------
INTEREST INCOME AFTER PROVISION FOR
POSSIBLE LOAN LOSSES 5,773 5,591 11,484 10,857
- ---------------------------------------------------------------------------------------------------------------------------
NON-INTEREST INCOME
Service charges on deposit accounts 1,470 1,122 3,086 1,977
Other income 261 231 533 448
Gain (Loss) on sale of securities available-for-sale 52 (47) 57 (47)
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL NON-INTEREST INCOME 1,783 1,306 3,676 2,378
- ---------------------------------------------------------------------------------------------------------------------------
NON-INTEREST EXPENSES:
Salaries and wages 2,002 2,042 4,032 4,073
Employee benefits 596 624 1,237 1,158
Occupancy expense 515 450 990 924
Furniture and equipment expense 256 274 515 564
Data processing fees 274 255 565 523
Legal fees 195 193 387 388
Professional fees 215 324 468 465
Postage, delivery and communication 154 165 326 329
FDIC and OCC assessments 45 27 89 55
Other real estate expense 38 104 (44) 113
Other expenses 766 618 1,181 1,184
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL NON-INTEREST EXPENSES 5,056 5,076 9,746 9,776
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE>
BROAD NATIONAL BANCORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS)
<TABLE>
<CAPTION>
3 MONTH PERIOD ENDED 6 MONTH PERIOD ENDED
-------------------- --------------------
JUNE 30 JUNE 30
1997 1996 1997 1996
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
INCOME BEFORE INCOME TAXES 2,500 1,821 5,414 3,459
PROVISION FOR INCOME TAXES 841 694 2,094 1,295
- ---------------------------------------------------------------------------------------------
NET INCOME $ 1,659 $ 1,127 $ 3,320 $ 2,164
- ---------------------------------------------------------------------------------------------
NET INCOME APPLICABLE TO COMMON STOCK $ 1,659 $ 1,127 $ 3,320 $ 2,164
- ---------------------------------------------------------------------------------------------
AVERAGE NUMBER OF COMMON SHARES
OUTSTANDING /1/
PRIMARY 4,780,215 4,746,443 4,793,133 4,531,144
ASSUMING FULL DILUTION 4,803,826 4,324,793 4,834,060 4,319,334
- ---------------------------------------------------------------------------------------------
NET INCOME PER COMMON SHARE /1/
PRIMARY EARNINGS PER COMMON SHARE $ 0.35 $ 0.24 $ 0.69 $ 0.48
FULLY DILUTED EARNINGS PER COMMON SHARE $ 0.35 $ 0.23 $ 0.69 $ 0.45
</TABLE>
See accompanying notes to consolidated financial statements.
- --------------------
/1/ 1996 share and per share amounts have been restated to reflect the effect
of the 10% stock dividend distributed October 4, 1996.
6
<PAGE>
BROAD NATIONAL BANCORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTH PERIOD ENDED JUNE 30
1997 1996
---- ----
(Unaudited)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 3,320 $ 2,164
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization 628 567
Amortization of securities premium net 365 (387)
Amortization of deferred points and fees
and deferral of loan origination costs (220) (156)
Provision for possible loan losses 900 450
Deferred tax (benefit) expense (1,110) (371)
Decrease in accrued taxes
interest, and other liabilities (310) (9,622)
(Gain) Loss on sale of securities available-for-sale (57) 47
(Gain)Loss on sale of other real estate owned (115) 96
Increase in accrued interest receivable (472) (535)
Other Net (764) 557
- -------------------------------------------------------------------------------------
Net cash provided by (used in) operating activities $ 2,165 $ (7,190)
- -------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from the sale of other real estate owned $ 419 $ 292
Net increase in loan balances (20,660) (13,194)
Proceeds from maturities of securities
held-to-maturity 11,718 4,707
Proceeds from maturities of securities
available-for-sale 5,554 10,448
Proceeds from the sale of securities available-for-sale 15,035 14,703
Purchase of securities held-to-maturity (6,716) (26,479)
Purchase of securities available-for-sale (34,543) (29,878)
Capital expenditures (649) (449)
- -------------------------------------------------------------------------------------
Net cash (used in) investing activities $(29,842) $(39,850)
- -------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in certificates of deposit $ 14,039 $ 26,561
Net increase in demand deposit, savings
and interest bearing demand accounts 17,923 2,169
Net increase in short-term borrowings 2,506 218
Issuance of common stock 0 98
Redemption of preferred stock 0 (47)
Issuance of Trust Preferred securities 11,500 0
Purchase of Treasury Stock (1,335) 0
Dividends paid (924) (595)
- -------------------------------------------------------------------------------------
Net cash provided by financing activities $ 43,709 $ 28,404
- -------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 16,032 $(18,636)
CASH AND CASH EQUIVALENTS, beginning of period 76,857 87,110
- -------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS, end of period $ 92,889 $ 68,474
- -------------------------------------------------------------------------------------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the year for
Interest $ 7,104 $ 5,752
Taxes $ 3,185 $ 1,639
- -------------------------------------------------------------------------------------
See accompanying notes to consolidated financial statements.
</TABLE>
7
<PAGE>
BROAD NATIONAL BANCORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1997
(Unaudited)
(1) Principles of consolidation -
The consolidated financial statements include the accounts of Broad National
Bancorporation, its wholly owned subsidiaries, BNB Capital Trust and Broad
National Bank (the "Bank") and the Bank's wholly owned subsidiaries BNB
Investment Corporation, Broad National Realty Corporation and Bronatoreo, Inc.
All intercompany accounts and transactions have been eliminated.
As used in this report, the term "Company" relates to Broad National
Bancorporation and its subsidiaries on a consolidated basis; the term
"Bancorporation" relates to Broad National Bancorporation (parent company
only); and the term "Bank" relates to Broad National Bank and its subsidiaries
on a consolidated basis.
(2) Net income per share -
Primary net income per common share is computed by dividing net income by the
weighted average number of common shares outstanding during each period
adjusted for dilutive stock options. Fully diluted per common share amounts
are computed by dividing net income by the weighted average number of common
shares outstanding adjusted for shares issuable upon conversion of preferred
stock and dilutive stock options. Share and per share data for 1996 have been
restated to reflect the effect of a 10% stock dividend distributed October 4,
1996.
(3) Stock buy back program -
On November 21, 1996, the Board of Directors of the Company authorized the
repurchase of up to 100,000 of its outstanding common shares. Additionally,
on June 19, 1997, the Board of Directors of the Company authorized the
purchase, through open market transactions, of up to an additional $4,000,000
market value of the Company's common stock. Management was given discretion
to determine the number and pricing of the shares to be purchased, as well as,
the timing of any purchases.
At June 30, 1997, the Company had repurchased 92,500 shares of common stock at
a cost of $1,393,125.
(4) 9.5% Cumulative Trust Preferred Securities -
On June 30, 1997, $11.5 million of 9.5% Cumulative Trust Preferred Securities
were issued by BNB Capital Trust, a Delaware statutory business trust formed
by the Company. The net proceeds from this issuance were invested in the
Company in exchange for the Company's junior subordinated debentures. The
Company intends to use these net proceeds, which qualify as Tier 1 capital
under regulatory capital guidelines, for general corporate purposes.
8
<PAGE>
(5) Reclassification -
Certain amounts in the consolidated financial statements presented for prior
periods have been reclassified to conform with the 1997 presentation.
9
<PAGE>
BROAD NATIONAL BANCORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1997
- ------------------------------
SUMMARY
-------
The Company reported net income of $1,659,000 or $0.35 per fully diluted common
share for the second quarter of 1997 compared to net income of $1,127,000 or
$0.23 per fully diluted common share for the second quarter of 1996.
For the first six months of 1997, the Company reported net income of $3,320,000
or $0.69 per fully diluted common share, compared to net income of $2,164,000 or
$0.45 per fully diluted common share for the first six months of 1996.
Per share data for 1996 has been restated to reflect the effect of a 10% stock
dividend distributed October 4, 1996.
As compared to December 31, 1996, total assets increased $46.7 million or 8.7%
to $580.3 million at June 30, 1997; loans, net of deferred fees, increased $20.5
million or 7.1% to $307.6 million and deposits increased $32.0 million or 6.6%
to $517.0 million.
Total shareholders' equity increased $998,000 during the first six months of
1997 as the result of net income of $3,320,000 offset by dividends declared to
shareholders of $924,000, the repurchase of 87,500 shares of stock as treasury
shares at a cost of $1,335,000 and a net decrease of $65,000 in the net
unrealized gain on securities available -for - sale, due to the change in the
interest rate environment.
The Company's annualized return on average assets and annualized return on
average shareholders' equity were 1.22% and 17.1%, respectively, for the first
six months of 1997, compared to annualized returns of .92% and 12.4%,
respectively, for the comparable 1996 period.
10
<PAGE>
RESULTS OF OPERATIONS
- ---------------------
Net Interest Income
- -------------------
Net interest income, the primary source of earnings for the Company, is the
difference between interest and fees earned on loans and other earning assets,
and interest paid on deposits and other interest bearing liabilities. Earning
assets include loans, investment securities and federal funds sold. Interest
bearing liabilities include savings, interest bearing demand and time deposits,
and short-term borrowings.
The table on the following page sets forth the Company's consolidated average
balance of assets, liabilities, and shareholders' equity as well as the amount
of interest income or interest expense and the average rate for each category of
interest-earning assets and interest-bearing liabilities. Non-accrual loans are
included in average loans, and interest on loans includes loan fees which were
not material. Non-taxable income from investment securities and loans is
presented on a tax-equivalent basis assuming a 34% tax rate.
NOTES TO NET INTEREST INCOME TABLE
(1) Interest income for investments in states and political subdivisions
include tax equivalent adjustments at 34% tax rate.
(2) Average rates reflect the tax equivalent adjusted yields on nontaxable
investments and loans.
(3) Represents the difference between interest earned and interest paid,
divided by total interest-earning assets.
(4) Annualized
11
<PAGE>
NET INTEREST INCOME
Six Months Ended June 30
(Dollars in Thousands)
<TABLE>
<CAPTION>
1997 1996
---- ----
Average Interest Average Average Interest Average
Balance and Fees Rate (4) Balance and Fees Rate (4)
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Federal Funds Sold $ 53,934 $ 1,444 5.33% $ 30,340 $ 798 5.20%
-------- ------- ----- -------- -------- -----
Investment Securities (1)
Securities held - to - maturity 89,764 2,881 6.42 67,995 2,058 6.05
Securities available - for - sale 75,815 2,353 6.21 63,780 1,872 5.87
-------- ------- ----- ------ ------- -----
Total Investment Securities 165,579 5,234 6.32 (2) 131,775 3,930 5.97 (2)
-------- ------- ----- ------- -------- -----
Loans
Mortgage 172,031 7,638 8.88 163,432 6,947 8.50
Installment 41,335 1,873 9.14 35,411 1,647 9.35
Commercial 80,082 3,518 8.86 73,904 3,226 8.78
State and political subdivisions (1) 10 1 20.00 1,058 65 12.29
-------- ------- ----- ------ ------- -----
Total Loans 293,458 13,030 8.95 273,805 11,885 8.73
-------- ------- ----- -------- -------- -----
Total interest earning assets 512,971 $19,708 7.75% (2) 435,920 $16,613 7.66% (2)
------- ------- ---- ------- ------- -----
Less - Allowance for possible loan losses 8,863 7,556
All other assets 44,950 45,975
------- ------
Total Assets $549,058 $474,339
-------- --------
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest Bearing Deposits
Savings and interest bearing $214,115 2,331 2.20% $224,661 $2,449 2.19%
demand deposits
Time Deposits
Under $100,000 92,520 2,323 5.06 83,876 2,109 5.06
Over $100,000 94,727 2,624 5.59 27,571 680 4.96
-------- ------- ----- ------- ------ -----
Total interest bearing deposits 401,362 7,278 3.66 336,108 5,238 3.13
Short term borrowings 1,332 33 4.93 1,301 33 5.02
-------- ------- ----- ------- ------ -----
Total Interest Bearing Liabilities 402,694 $ 7,311 3.66% 337,409 $5,271 3.14%
-------- ------- ----- ------- ------ -----
Other liabilities 8,624 7,781
Demand deposits 98,582 93,997
Shareholders' equity 39,158 35,152
-------- --------
Total liabilities and shareholders' $549,058 $474,339
equity -------- --------
NET INTEREST INCOME; NET INTEREST SPREAD $12,397 4.09% $11,342 4.52%
NET INTEREST MARGIN 4.87% (3) 5.23% (3)
</TABLE>
12
<PAGE>
Rate/Volume Analysis Of Net Interest Income
- -------------------------------------------
The effect of changes in average balance and rate from the corresponding prior
period on interest income, interest expense and net interest income for the six
months ended June 30, 1997 is set forth below. The effect of a change in
average balance has been determined by applying the average rate for the earlier
period to the change in average balance for the later period, as compared with
the earlier period. The effect of a change in the average rate has been
determined by applying the average balance for the earlier period to the change
in average rate for the later period, as compared with the earlier period. The
variances attributable to simultaneous balance and rate changes have been
allocated in proportion to the relationship of the dollar amount of change in
each category.
<TABLE>
<CAPTION> Increase (Decrease) Due to a
Change in the
------------------------------
Average Balance Average Rate Total
---------------- ------------- -------
(Dollars in Thousands)
<S> <C> <C> <C>
Interest Earned on:
Loans $ 861 $284 $1,145
Investment securities 1,068 236 1,304
Federal funds sold 627 19 646
------ ---- ------
Total interest income $2,556 $539 $3,095
------ ---- ------
Interest paid on:
Savings and interest
bearing demand deposits $ (205) $ 87 $ (118)
Time deposits:
Under $100,000 214 - 214
Over $100,000 1,858 86 1,944
Short term borrowings 1 (1) -
------ ---- ------
Total Interest expense $1,868 $172 $2,040
------ ---- ------
Change in net interest income $ 688 $367 $1,055
------ ---- ------
Percent increase in net interest
income over the prior period 9.30%
-----
</TABLE>
Total tax equivalent interest income of $19,708,000 for the first six months of
1997 represents an increase of $3,095,000 or 18.6% over total tax equivalent
interest income of $16,613,000 for the comparable 1996 period. This improvement
is primarily due to an increase of $77,051,000 in the average balance of total
interest earning assets for the first six months of 1997 as compared to the
first six months of 1996. This increase in the average balance of total
interest earning assets resulted in a $2,556,000 increase in total tax
equivalent interest income. Additionally, an increase of 9 basis points in the
average rate earned on total interest earning assets contributed $539,000 to the
increase in total tax equivalent interest income. The mix of interest earning
assets changed for the first six months of 1997 as compared to the first six
months of 1996. Higher yielding loans declined to 57.2% of total average
interest earning assets for the first half of 1997 from 62.8% of total average
interest earning assets for the comparable 1996 period. Relatively lower
yielding federal funds sold and investment securities represented a combined
42.8% of total average interest earning assets for the first half of 1997 as
compared to 37.2% of total average interest earning assets for the first half of
1996. This shift in the mix of interest earning assets is primarily attributable
to the investment of short term public fund time deposits greater than $100,000
into relatively more liquid federal funds sold and investment securities.
Total interest expense of $7,311,000 for the first six months of 1997 was
$2,040,000 or 38.7% higher than the comparable prior year period. An increase
of $65,285,000 in the average balance of total interest bearing liabilities is
the primary reason for this increase, resulting in an additional $1,868,000 of
interest expense for the first six months of 1997 as compared to the first six
months of 1996. The most significant growth in the average balance of total
interest bearing liabilities occurred in time deposits over $100,000, which
average balance was $67,156,000 higher for the first
13
<PAGE>
half of 1997 than for the first half of 1996. This growth originated from new or
expanded relationships with municipal units within markets served by the Bank.
Tax equivalent net interest income for the first six months of 1997 was
$1,055,000 or 9.3% higher than for the first six months of 1996. This increase
is primarily attributable to the increase in the average balance of interest
earning assets. However, the change in the mix of interest earning assets, with
a larger percentage of interest earning assets in relatively lower yielding
investments and federal funds sold, contributed to the decline in the net
interest margin for the first six months of 1997 as compared to the first half
of 1996.
PROVISION FOR POSSIBLE LOAN LOSSES
- ----------------------------------
In determining the provision for possible loan losses, management considers
historical loan loss experience, changes in composition and volume of the loan
portfolio, the level and composition of non-performing loans, the adequacy of
the allowance for possible loan losses, and prevailing economic conditions. The
provision for possible loan losses was $900,000 for the first six months of
1997 compared to $450,000 for the comparable 1996 period. The increase in the
provision for possible loan losses is attributable to the increase in loans
outstanding, as well as an increase in loans charged off during the first six
months of 1997 as compared to the first six months of 1996. Actual net loan
charge-offs for the first six months of 1997 were $394,000 or 0.27% (annualized)
of average total loans, as compared to net loan charge-offs of $48,000 or 0.04%
(annualized) of average total loans for the comparable 1996 period.
NON-INTEREST INCOME AND NON-INTEREST EXPENSES
- ---------------------------------------------
Total non-interest income of $3,676,000 for the first six months of 1997 was
$1,298,000 or 54.6% higher than the comparable 1996 period. This increase is
primarily attributable to service charges on deposit accounts which were
$1,109,000 or 56.1% higher for the first six months of 1997 as compared to the
first six months of 1996. This increase results from a more consistent
collection of fee income for services provided. This improvement in service
charge income is not necessarily indicative of the results which can be expected
for the remainder of 1997. At current levels, service charge income for the
remaining six months of 1997 is not anticipated to match service charge income
of $3,393,000 recorded during the last six months of 1996. Non-interest income
for the first six months of 1997 includes a gain of $57,000 from the sale of
securities available-for-sale, which represents an improvement of $104,000 from
the loss of $47,000 recorded from the sale of securities available-for-sale
during the first six months of 1996.
Total non-interest expense of $9,746,000 for the first six months of 1997 was
$30,000 lower than the comparable 1996 period. A significant factor
contributing to this relatively flat performance for non interest expense is a
non recurring gain of $123,000 from the sale during the first half of 1997 of a
property classified as other real estate owned. This represents an improvement
of $157,000 in other real estate expense for the first six months of 1997 as
compared to the first six months of 1996.
FINANCIAL CONDITION
- -------------------
Loans
Total loans, net of deferred loan fees, were $307,601,000 at June 30, 1997 which
represents an increase of $20,485,000 or 7.1% from the December 31, 1996 balance
of $287,116,000. The most significant components of the increase in loan
balances were an increase of $11,031,000 or 8.8% in commercial mortgages and an
increase of $4,663,000 or 24.7% in consumer loans. For the first six months of
1997, average loans of $293,458,000 represented 57.2% of total average interest
earning assets, as compared to 62.8% of total average interest earning assets
for the first six months of 1996.
14
<PAGE>
Allowance for Possible Loan Losses
The following table summarizes the activity in the allowance for possible loan
losses for the periods presented. Also presented are certain key ratios
regarding the allowance.
Six Months Six Months
Ended Ended
June 30,1997 June 30,1996
------------ ------------
(Dollars In Thousands)
Balance, beginning of period $ 8,531 $ 7,402
Provision charged to operations 900 450
Loans charged off (733) (519)
Recoveries of charged-off loans 339 471
-------- --------
Balance, end of period $ 9,037 $ 7,804
-------- --------
Average gross loans outstanding
during period......................... $293,458 $273,805
-------- --------
Total gross loans at period end........ $307,601 $280,882
-------- --------
Net loans charged-off. $ 394 $ 48
-------- --------
Ratio of net loans charged-off to
average loans outstanding
during period (annualized)......... 0.27% 0.04%
-------- --------
Allowance for possible loan losses as
a percentage of total gross loans.... 2.94% 2.78%
-------- --------
The amount of allowance applicable to non-classified loans was $6,422,000 and
$5,819,000 at June 30, 1997 and December 31, 1996, respectively.
Asset Quality
Non-performing assets consist of (i)non-performing loans, which include non-
accrual loans and loans past due 90 days or more as to interest or principal
payments but not placed on non-accrual status; (ii) loans that have been
renegotiated due to a weakening in the financial position of the borrower
(restructured loans) and (iii) other real estate owned ("OREO"), net of
reserves.
15
<PAGE>
The following table reflects the components of non-performing assets at June 30,
1997 and December 31, 1996:
<TABLE>
<CAPTION>
June 30, 1997 December 31, 1996
-------------- ------------------
(Dollars In Thousands)
<S> <C> <C>
Past due 90 days or more:
Mortgage....................... $ 572 $ 1,068
Commercial..................... 411 247
Installment.................... 61 34
------- -------
Total....................... $ 1,044 $ 1,349
------- -------
Non-accrual loans:
Mortgage....................... $ 1,927 $ 2,800
Commercial..................... 3,571 5,584
Installment.................... 0 0
------- -------
Total....................... $ 5,498 $ 8,384
------- -------
Total non-performing loans....... $ 6,542 $ 9,733
Restructured loans (excluding
amounts classified as
non-performing loans) 3,845 3,934
Other real estate owned,
net of reserve................. 862 841
------- -------
Total non-performing assets...... $11,249 $14,508
------- -------
Non-performing loans as a
percent of total gross loans 2.13% 3.39%
------- -------
Non-performing loans as a
percent of total assets....... 1.13% 1.82%
------- -------
Non-performing assets as a
percent of loans and other
real estate owned.............. 3.65% 5.03%
------- -------
Allowance for possible loan
losses......................... $ 9,037 $ 8,531
------- -------
Allowance for possible loan
losses as a percent of
non-performing loans........... 138.14% 87.65%
------- -------
</TABLE>
In addition to the non-performing and restructured loans as of June 30, 1997 and
December 31, 1996, the Company had classified an additional $3,724,000 and
$3,088,000, respectively, as substandard loans. A loan loss reserve has been
allocated to such loans in accordance with the Company's policies.
At June 30, 1997, the recorded investment in loans that are considered to be
impaired under SFAS 114 was $9,761,000 as compared to $10,109,000 at December
31, 1996. The related allowance for credit losses was $470,000 as of June 30,
1997 as compared to $500,000 as of December 31, 1996. The impaired loan
portfolio is primarily collateral dependent, as defined by SFAS 114. The change
in the allowance for impaired loans during the first six months of 1997
represented a recovery of $30,000. The average recorded investment in impaired
loans during the first six months of 1997 was approximately $9,935,000. For the
first six months of 1997, the Company recognized cash basis interest income on
these impaired loans of $131,289.
16
<PAGE>
The level of non-performing loans and assets is heavily dependent upon local
economic conditions. The June 30, 1997 total non-performing assets of
$11,249,000 represents a decrease of $3,259,000 or 22.5% over the total at
December 31, 1996. The major components of this decrease include a $1,560,000
loan which, after performing in accordance with the contractual terms of the
loan for a period in excess of six months, was returned to accrual status;
$609,000 in charge-offs and $655,000 in payoffs/paydowns. There can be no
assurance that non-performing assets will not increase in the future.
Investment Securities and Federal Funds Sold
Federal funds sold of $53,775,000 at June 30, 1997 represent a decrease of
$3,300,000 from the balance at December 31, 1996. Average Federal Funds sold of
$53,934,000 during the first six months of 1997 represented 10.5% of total
average interest earning assets, as compared to 7.0% during the first six months
of 1996.
Total average investment securities of $165,579,000 for the first six months of
1997 represent 32.3% of total average interest-earning assets, as compared to
30.2% for the comparable 1996 period.
Total investment securities, which include securities classified as held-to-
maturity and available-for-sale, of $167,759,000 at June 30, 1997 represent an
increase of $8,545,000 or 5.4% over the balance at December 31, 1996. During the
first half of 1997, securities available-for-sale of $15,035,000 were sold and a
net gain of $57,000 was realized as compared to sales of $14,703,000 and a loss
of $47,000 for the first half of 1996. The proceeds from these sales were
reinvested in higher yielding securities in an effort to improve the overall
yield of the investment portfolio.
Deposits
The June 30, 1997 total deposit balance of $517,035,000 represents an increase
of $31,962,000 or 6.6% over total deposits of $485,073,000 at December 31, 1996.
The most significant factors contributing to this increase were time deposits of
$100,000 or more, interest bearing public fund deposits, and a special
promotional time deposit account. Time deposits of $100,000 or more were
$9,036,000 higher at June 30, 1997 than at December 31, 1996. The majority of
this increase came from an increase of $4,868,000 in municipal deposits.
Interest bearing public fund deposits, which are included in the savings and
interest bearing demand deposit category in the Statement of Condition, were
$12,602,000 higher at June 30, 1997 than at December 31, 1996. A special
fifteen month time deposit promotion provided $8,000,000 in balances, accounting
for the increase in time deposits less than $100,000.
Short Term Borrowings
Short-term borrowings represent federal funds purchased and securities sold
under agreements to repurchase. The majority of these instruments have terms
ranging from one to thirty days. These balances increased $2,506,000 to
$3,506,000 at June 30, 1997 from the December 31, 1996 balance of $1,000,000.
Trust Preferred Securities
On June 30, 1997, $11,500,000 of 9.5% Cumulative Trust Preferred Securities were
issued by BNB Capital Trust, a Delaware statutory business trust formed by the
Company. The net proceeds from this issuance were invested in the Company in
exchange for the Company's junior subordinated debentures. The Company may use
these proceeds to repurchase stock and for other general corporate purposes as
well as to meet debt service obligations of the Company pursuant to the junior
subordinated debentures. Pending such use, the net proceeds may be temporarily
invested in short - term obligations with yields substantially less than the
cost of the Trust Preferred Securities. Such investment in short - term
obligations could adversely impact the Company's net interest income and net
interest margin in future periods.
17
<PAGE>
Liquidity of the Bank
Many different measurements of liquidity are used in the banking industry. The
ratios of cash and cash equivalents (including federal funds sold) and short-
term securities to total assets and net loans to total deposits are among some
of the more commonly used indicators. These measurements are set forth below as
of June 30, 1997 and December 31, 1996.
<TABLE>
<CAPTION>
June 30, 1997 December 31, 1996
-------------- ------------------
<S> <C> <C>
Cash and cash equivalents
and securities maturing in
one year to total assets 16.8% 14.9%
Net loans to total deposits 57.7% 57.4%
</TABLE>
To assist in the management of its liquidity, the bank has available $26,000,000
in lines of credit for federal funds. However, none of these lines were in use
during the first six months of 1997.
Although customer demand for funds, in the form of loans or deposit withdrawals,
is largely dependent on general economic factors outside of the Bank's control,
management believes that its present liquidity structure is adequate to meet
such needs.
Liquidity of Bancorporation
Bancorporation's ability to meet its cash requirements, including interest and
dividend payments, is generally dependent upon the declaration and payment of
dividends by the Bank to Bancorporation. Under Federal law, the approval of the
Comptroller of the Currency is required for the payment of dividends in any
calendar year by Broad National Bank to Broad National Bancorporation if the
total of all dividends declared in any calendar year exceeds the net income for
that year combined with the retained net income for the preceding two calendar
years. As of December 31, 1996, retained earnings of the Bank of $6,942,000
were available for payment of dividends to the parent company without regulatory
approval. Additionally, at June 30, 1997 Bancorporation had $11,223,000 of cash
for the purpose of paying operating costs, interest and dividends. However, a
change in circumstances, such as changes in regulatory requirements or in the
Bank's financial condition, could result in the Bank's inability to pay
dividends to Bancorporation or could result in Bancorporation being required by
regulatory authorities to utilize its funds to increase the Bank's capital. In
such event, Bancorporation may not have sufficient cash for operations or to
make dividend payments and may be required to seek other sources of capital and
liquidity, if available.
INTEREST RATE SENSITIVITY
Management of interest rate sensitivity involves matching the maturity and
repricing dates of interest-earning assets with interest-bearing liabilities in
an effort to reduce the impact of fluctuating net interest margins and to
promote consistent growth of net interest income during periods of changing
interest rates.
Interest rate risk arises from mismatches (i.e., the interest sensitivity gap)
between the dollar amount of repricing or maturing assets and liabilities, and
is measured in terms of the ratio of the interest rate sensitivity gap to total
assets. More assets repricing or maturing than liabilities over a given time
period is considered asset-sensitive and is reflected as a positive gap, and
more liabilities repricing or maturing than assets over a given time period is
considered liability-sensitive and is reflected as a negative gap. An asset-
sensitive position (i.e., a positive gap) will generally enhance earnings in a
rising interest rate environment and will negatively impact earnings in a
falling interest rate environment, while a liability-sensitive position (i.e, a
negative gap) will generally enhance earnings in a falling interest rate
18
<PAGE>
environment and negatively impact earnings in a rising interest rate
environment. Fluctuations in interest rates are not predictable or
controllable. At June 30, 1997, the Company had a one year cumulative negative
gap of 22.5%. This negative one year gap position may, as noted above, have a
negative impact on earnings in a rising interest rate environment.
The calculation of these interest sensitivity gap positions involve certain
assumptions as to the repricing period of interest earning assets and interest
bearing liabilities. These gap positions are significantly impacted by
assumptions made as to the repricing of, among other items, NOW accounts,
savings accounts, and money market accounts. Consequently, the actual impact of
changes in interest rates may differ from that indicated above.
The Company also uses simulation modeling techniques which apply alternative
interest rate scenarios to forecasts of future business activity. The results
of such simulation modeling techniques may differ from the implications derived
from the interest sensitivity gap analysis.
Capital Adequacy
At June 30, 1997, the Company had total capital equal to 15.15% of risk-based
assets which included tier one capital equal to 13.89% of risk-based assets.
These compare to minimum regulatory capital requirements of 8% and 4%,
respectively. At June 30, 1997, the Company had tier one capital equal to 8.86%
of adjusted total assets. This compares to a minimum regulatory capital
requirement of 4% to 5%.
At June 30, 1997, the Bank had total capital equal to 12.07% of risk-based
assets, which included tier one capital equal to 10.80% of risk-based assets.
These compare to minimum regulatory capital requirements of 8% and 4%,
respectively. At June 30, 1997, the Company had tier one capital equal to 6.88%
of adjusted total assets. This compares to a minimum regulatory capital
requirement of 4% to 5%.
Recent Accounting Developments
Statement of Financial Accounting Standards No. 128, "Earnings per Share" ("SFAS
128") establishes standards for computing and presenting earnings per share
(EPS) and applies to entities with publicly held common stock or potential
common stock. SFAS 128 replaces the presentation of primary EPS with a
presentation of basic EPS and requires dual presentation of basic and diluted
EPS on the face of the income statement for all entities with complex capital
structures and requires a reconciliation of the numerator and denominator of the
basic EPS computation to the numerator and denominator of the diluted EPS
computation. SFAS 128 is effective for financial statements issued for periods
ending after December 15, 1997, including interim periods; earlier application
is not permitted and requires restatement of all prior-period EPS data
presented.
The pro forma basic EPS for the three month and six month periods ended June 30,
1997 were $0.36 and $0.72 per share, respectively. The pro forma basic EPS for
the three month and six month periods ended June 30, 1996 were $0.24 and $0.49
per share, respectively. The diluted EPS is not expected to be materially
different from the fully diluted earnings per share disclosed in the income
statement.
Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive
Income ("SFAS 130") establishes standards for reporting and display of
comprehensive income and its components (revenues, expenses, gains, and losses)
in a full set of general - purpose financial statements. SFAS 130 requires that
all items that are required to be
19
<PAGE>
recognized under accounting standards as components of comprehensive income be
reported in a financial statement that is displayed with the same prominence as
other financial statements. SFAS 130 does not require a specific format for that
financial statement but requires that an enterprise display an amount
representing total comprehensive income for the period in that financial
statement. SFAS 130 requires that an enterprise (a) classify items of other
comprehensive income by their nature in a financial statement and (b) display
the accumulated balance of other comprehensive income separately from retained
earnings and additional paid in capital in the equity section of a statement of
financial position. SFAS 130 is effective for fiscal years beginning after
December 15, 1997. Reclassification of financial statements for earlier periods
provided for comparative purposes is required.
* * * *
Except for the historical information contained herein, the matters discussed in
this Form 10-Q are forward looking statements that involve risks and
uncertainties, including risks and uncertainties associated with quarterly
fluctuations in results, the impact of changes in interest rates on the Bank's
net interest income, the quality of the Bank's loans and other assets and the
credit risk associated with lending activities, the fluctuations in the general
economic and real estate climate in the Bank's primary market area of New
Jersey, the impact of competition from other banking institutions and financial
service providers and the increasing consolidation of the banking industry, the
enforcement of federal and state bank regulations and the effect of changes in
such regulations, and other risks and uncertainties detailed from time to time
in the Company's SEC reports. Actual results may vary materially from those
expressed in any forward-looking statements herein.
20
<PAGE>
BROAD NATIONAL BANCORPORATION
PART 2 - OTHER INFORMATION
- --------------------------
4. Submission of Matters to a Vote of Security Holders
(a) The annual shareholders meeting of Broad National Bancorporation was
reconvened on May 13, 1997.
(b) An amendment to the Corporation's Certificate of Incorporation to
expand the limitations on shareholder's preemptive rights was
approved by holders of shares of common stock as follows:
For 3,155,334
---------
Against 461,487
---------
Abstain 38,368
---------
There were 654,393 broker non-votes with respect to approval of the
amendment to the Corporation's Certificate of Incorporation to
expand the limitations on shareholder's preemptive rights.
6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits
Statements re: computation of per share earnings is part of this
Form 10-Q as Exhibit I.
(b) Reports on Form 8-K
On June 24, 1997, the Company filed a form 8-K Item 5 (date of
earliest event - June 19, 1997), to announce that on June 19, 1997,
the Board of Directors of the Company authorized the purchase,
through open market transactions, of up to $4,000,000 market value
of the Company's common stock. Management was given discretion to
determine the number and pricing of the shares to be purchased, as
well as, the timing of any such purchases. The Company will purchase
its shares through Ryan, Beck & Co. or other broker dealers at
prices for the common stock prevailing from time to time in NASDAQ's
National Market.
21
<PAGE>
BROAD NATIONAL BANCORPORATION
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.
BROAD NATIONAL BANCORPORATION
-----------------------------
(registrant)
Date: August 13, 1997 /s/ Donald M. Karp
--------------------
Donald M. Karp
Chairman and CEO
/s/ James Boyle
------------------
James Boyle
Treasurer
22
<PAGE>
BROAD NATIONAL BANCORPORATION
Computation of Net Income Per Share
(Unaudited)
<TABLE>
<CAPTION>
THREE-MONTH PERIOD SIX-MONTH PERIOD
ENDED JUNE 30 ENDED JUNE 30
1997 1996/1/ 1997 1996/1/
---- ------- ---- -------
<S> <C> <C> <C> <C>
PRIMARY:
--------
Average number of common shares
outstanding 4,602,053 4,653,248 4,632,287 4,445,361
Assumed exercise of options outstanding 178,162 93,195 160,846 85,784
---------- ---------- ---------- ----------
Average number of common shares and
common share equivalents outstanding 4,780,215 4,746,443 4,793,133 4,531,144
---------- ---------- ---------- ----------
Net Income available to common
shareholders $1,658,537 $1,127,062 $3,319,687 $2,163,712
Primary earnings per common share $ 0.35 $ 0.24 $ 0.69 $ 0 .48
========== ========== ========== ==========
FULLY DILUTED:
--------------
Average number of common shares
outstanding 4,602,053 4,653,248 4,632,287 4,445,361
Assumed exercise of options outstanding 201,773 93,195 201,773 85,784
Assumed conversion of preferred shares 0 10,830 0 220,123
---------- ---------- ---------- ----------
Adjusted average number of common shares 4,803,826 4,757,272 4,834,060 4,751,267
---------- ---------- ---------- ----------
Net Income $1,658,537 $1,127,062 $3,319,687 $2,163,712
---------- ---------- ---------- ----------
Fully diluted earnings per common share $ 0.35 $ 0.23 $ 0.69 $ 0.45
========== ========== ========== ==========
</TABLE>
- ----------
/1/ Restated to reflect the effect of the 10% stock dividend distributed
October 4, 1996.
23
<PAGE>
Independent Auditors' Report
----------------------------
The Board of Directors
Broad National Bancorporation:
We have reviewed the accompanying consolidated condensed statement of condition
of Broad National Bancorporation and subsidiaries (the Company) as of June 30,
1997, and the related consolidated condensed statements of income, and cash
flows for the three-month and six month periods ended June 30, 1997 and 1996.
These consolidated condensed financial statements are the responsibility of the
Company's management.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial
data and making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in
accordance with generally accepted auditing standards, the objective of which is
the expression of an opinion regarding the financial statements taken as a
whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the accompanying consolidated condensed financial statements referred
to above for them to be in conformity with generally accepted accounting
principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated statement of condition of the Company as of December
31, 1996, and the related consolidated statements of income, changes in
shareholders' equity, and cash flows for the year then ended (not presented
herein); and in our report dated January 15, 1997, we expressed an unqualified
opinion on those consolidated financial statements. In our opinion, the
information set forth in the accompanying consolidated statement of condition as
of December 31, 1996, is fairly presented, in all material respects, in relation
to the consolidated statement of condition from which it has been derived.
/s/ KPMG Peat Marwick LLP
Short Hills, New Jersey
August 13, 1997
24
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
BROAD NATIONAL BANCORPORATION'S FORM 10-Q FOR THE QUARTER ENDED JUNE
30, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 39,114
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 53,775
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 82,767
<INVESTMENTS-CARRYING> 84,992
<INVESTMENTS-MARKET> 84,390
<LOANS> 307,601
<ALLOWANCE> 9,037
<TOTAL-ASSETS> 580,271
<DEPOSITS> 517,035
<SHORT-TERM> 3,506
<LIABILITIES-OTHER> 8,874
<LONG-TERM> 11,500
0
0
<COMMON> 4,677
<OTHER-SE> 34,679
<TOTAL-LIABILITIES-AND-EQUITY> 580,271
<INTEREST-LOAN> 13,030
<INTEREST-INVEST> 5,221
<INTEREST-OTHER> 1,444
<INTEREST-TOTAL> 19,695
<INTEREST-DEPOSIT> 7,278
<INTEREST-EXPENSE> 7,311
<INTEREST-INCOME-NET> 12,384
<LOAN-LOSSES> 900
<SECURITIES-GAINS> 57
<EXPENSE-OTHER> 9,746
<INCOME-PRETAX> 5,414
<INCOME-PRE-EXTRAORDINARY> 5,414
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,320
<EPS-PRIMARY> 0.69
<EPS-DILUTED> 0.69
<YIELD-ACTUAL> 4.87
<LOANS-NON> 5,498
<LOANS-PAST> 1,044
<LOANS-TROUBLED> 3,845
<LOANS-PROBLEM> 3,724
<ALLOWANCE-OPEN> 8,531
<CHARGE-OFFS> 733
<RECOVERIES> 339
<ALLOWANCE-CLOSE> 9,037
<ALLOWANCE-DOMESTIC> 9,037
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 6,422
</TABLE>
