<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 March 31,1998 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 (973) 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 April 30, 1998:
Common Stock, $1.00 par value - 4,707,476
1
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BROAD NATIONAL BANCORPORATION
Index to Form 10-Q Financial Information
For the Three Months Ended March 31,1998
---------------------------------------------------------
PAGE
----
PART 1 - FINANCIAL INFORMATION 3
- ------------------------------
Consolidated Statements of Condition
as of March 31, 1998 and December 31, 1997 4
Consolidated Statements of Income for the
Three Month Periods Ended March 31, 1998 and 1997 5
Consolidated Statements of Cash Flows for the Three
Month Periods Ended March 31, 1998 and 1997 7
Notes to Consolidated Financial Statements 8
Management's Discussion and Analysis of Financial
Condition and Results of Operations 10
PART 2 - OTHER INFORMATION 23
- --------------------------
Items 1 to 3 Not Applicable or Negative
Item 4 23
Item 5 Not Applicable or Negative
Item 6 23
Signatures 24
Exhibit 1 - Computation of Net Income
per Common Share 25
Exhibit 2 - Independent Auditor's Review Report of Interim
Financial Information 26
Exhibit 27 - Financial Data Schedule 27
2
<PAGE>
BROAD NATIONAL BANCORPORATION
PART 1 - FINANCIAL INFORMATION
The following consolidated financial statements of Broad National Bancorporation
as of March 31, 1998 and December 31, 1997 as well as the three month periods
ended March 31, 1998 and 1997 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, 1997.
The results of operations for the periods presented are not necessarily an
indication of the results which can be expected for 1998.
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 26 for their report on this limited review.
3
<PAGE>
BROAD NATIONAL BANCORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CONDITION
(IN THOUSANDS)
(Unaudited)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1998 1997
---- ----
<S> <C> <C>
ASSETS
- ------
CASH AND DUE FROM BANKS $ 19,838 $ 21,933
FEDERAL FUNDS SOLD 35,020 37,300
- -----------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS 54,858 59,233
- -----------------------------------------------------------------------------------
SECURITIES HELD-TO-MATURITY
(aggregate market value $54,859)
and $65,203, respectively) 54,892 65,330
SECURITIES AVAILABLE-FOR-SALE 157,021 141,077
LOANS, Net of deferred loan fees 323,189 322,528
LESS -
Allowance for possible loan losses 6,674 6,974
- -----------------------------------------------------------------------------------
NET LOANS 316,515 315,554
- -----------------------------------------------------------------------------------
PREMISES AND EQUIPMENT, net 8,795 8,991
ACCRUED INTEREST RECEIVABLE 4,152 4,020
OTHER ASSETS 7,280 7,464
- -----------------------------------------------------------------------------------
TOTAL ASSETS $603,513 $601,669
- -----------------------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
DEPOSITS
Non-interest bearing demand $103,671 $103,054
Savings, money market and interest bearing demand 217,414 230,467
Time deposits less than $100,000 98,971 94,017
Time deposits of $100,000 or more 101,940 90,700
- -----------------------------------------------------------------------------------
Total Deposits 521,996 518,238
SHORT-TERM BORROWINGS 13,300 13,000
LONG-TERM DEBT 6,000 9,000
COMPANY-OBLIGATED MANDATORILY REDEEMABLE CUMULATIVE
TRUST PREFERRED SECURITIES OF A SUBSIDIARY TRUST
HOLDING SOLELY JUNIOR SUBORDINATED DEBENTURES OF
BANCORPORATION 11,500 11,500
ACCRUED TAXES, INTEREST AND OTHER LIABILITIES 10,431 10,700
- -----------------------------------------------------------------------------------
TOTAL LIABILITIES 563,227 562,438
- -----------------------------------------------------------------------------------
SHAREHOLDERS' EQUITY:
Common stock, $1 par value, authorized
10,000,000 shares; issued 4,950,476 shares at 3/31/98 and
4,948,921 shares at 12/31/97 4,950 4,949
Capital surplus 31,006 30,996
Retained earnings 8,440 7,153
Common stock in treasury, at cost: 243,000 shares
at 3/31/98 and 242,000 shares at 12/31/97 (4,132) (4,111)
Accumulated other comprehensive income 22 244
- -----------------------------------------------------------------------------------
TOTAL SHAREHOLDERS' EQUITY 40,286 39,231
- -----------------------------------------------------------------------------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $603,513 $601,669
- -----------------------------------------------------------------------------------
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE>
BROAD NATIONAL BANCORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS)
(Unaudited)
<TABLE>
<CAPTION>
3 MONTH PERIOD ENDED
--------------------
MARCH 31
1998 1997
------ ------
(Unaudited)
<S> <C> <C>
INTEREST INCOME
Interest and fees on loans $ 7,188 $6,413
Interest on securities held to maturity
Taxable 930 1,428
Tax exempt 17 13
Interest on securities available - for - sale 2,335 1,098
Interest on federal funds sold 508 730
- ----------------------------------------------------------------------
TOTAL INTEREST INCOME 10,978 9,682
- ----------------------------------------------------------------------
INTEREST EXPENSE:
Interest on savings & interest bearing
demand deposits 1,130 1,150
Interest on time certificates of
deposit of $100,000 or more 1,419 1,209
Interest on other time deposits 1,337 1,150
Interest on short-term borrowings 192 12
Interest on long-term debt 123 0
Interest on 9.5% Cumulative Trust Preferred 273 0
- ----------------------------------------------------------------------
TOTAL INTEREST EXPENSE 4,474 3,521
- ----------------------------------------------------------------------
NET INTEREST INCOME 6,504 6,161
- ----------------------------------------------------------------------
PROVISION FOR POSSIBLE LOAN LOSSES 300 450
- ----------------------------------------------------------------------
INTEREST INCOME AFTER PROVISION FOR
POSSIBLE LOAN LOSSES 6,204 5,711
- ----------------------------------------------------------------------
NON-INTEREST INCOME
Service charges on deposit accounts 1,438 1,616
Other income 331 272
Gain on sale of securities available - for - sale 90 5
- ----------------------------------------------------------------------
TOTAL NON-INTEREST INCOME 1,859 1,893
- ----------------------------------------------------------------------
NON-INTEREST EXPENSES:
Salaries and wages 2,395 2,030
Employee benefits 557 641
Occupancy expense 493 475
Furniture and equipment expense 320 259
Data processing fees 241 291
Legal fees 165 192
Professional fees 174 253
Postage, delivery and communication 179 172
FDIC and OCC assessments 48 44
Other real estate expense (income) 20 (82)
Other expenses 616 415
- ----------------------------------------------------------------------
TOTAL NON-INTEREST EXPENSES 5,208 4,690
- ----------------------------------------------------------------------
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE>
BROAD NATIONAL BANCORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS)
(Unaudited)
3 MONTH PERIOD ENDED
MARCH 31
1998 1997
---- ----
(Unaudited)
- ------------------------------------------------------------
INCOME BEFORE INCOME TAXES 2,855 2,914
PROVISION FOR INCOME TAXES 1,050 1,253
- ------------------------------------------------------------
NET INCOME $1,805 $1,661
NET INCOME APPLICABLE TO COMMON STOCK $1,805 $1,661
- ------------------------------------------------------------
AVERAGE NUMBER OF COMMON SHARES
OUTSTANDING
BASIC 4,707,913 4,902,647 (1)
DILUTED 4,918,715 5,053,647 (1)
- ------------------------------------------------------------
NET INCOME PER COMMON SHARE
BASIC $0.38 $0.34 (1)
DILUTED $0.37 $0.33 (1)
(1) Restated to reflect the effect of the 5% stock dividend declared December
18, 1997.
See accompanying notes to consolidated financial statements.
6
<PAGE>
BROAD NATIONAL BANCORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTH PERIOD ENDED MARCH 31
1998 1997
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income
Adjustments to reconcile net income to net cash $ 1,805 $ 1,661
provided by (used in) operating activities:
Depreciation and amortization 315 308
Amortization of securities premium net 197 179
Amortization of deferred points and fees
and deferral of loan origination costs (57) (100)
Provision for possible loan losses 300 450
Deferred tax benefit (115) (220)
Increase (decrease) in accrued taxes,
interest, and other liabilities (269) 671
Gain on sale of securities available - for - sale (90) (5)
Gain on sale of loans (2) 0
Gain on sale of other real estate owned (18) (123)
Increase in accrued interest receivable (132) (397)
Other assets, net 163 54
- -------------------------------------------------------------------------------
Net cash provided by operating activities $ 2,097 $ 2,478
- -------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from the sale of other real
estate owned $ 346 $ 333
Net increase in loan balances (1,450) (4,245)
Proceeds from the sale of loans 182 0
Proceeds from maturities of securities
held-to-maturity 10,839 4,700
Purchase of securities held-to-maturity (479) (5,752)
Proceeds from maturities of securities
available-for-sale 11,159 2,585
Proceeds from the sale of securities
available-for-sale 12,590 6,196
Purchase of securities available-for-sale (40,059) (16,725)
Capital expenditures (119) (251)
- -------------------------------------------------------------------------------
Net cash used in investing activities $(6,991) $(13,159)
- -------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in certificates of deposit $16,194 $ 4,626
Net decrease in demand deposit, savings
and interest bearing demand accounts (12,436) (7,814)
Net increase in short-term borrowings 300 0
Dividends Paid (518) (465)
Decrease in long-term debt (3,000) 0
Purchase of Treasury Stock (21) (233)
- -------------------------------------------------------------------------------
Net cash provided by (used in) financing activities $ 519 $ (3,886)
- -------------------------------------------------------------------------------
NET DECREASE IN CASH AND CASH EQUIVALENTS $(4,375) $(14,567)
CASH AND CASH EQUIVALENTS, beginning of period 59,233 76,857
- -------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS, end of period $54,858 $ 62,290
- -------------------------------------------------------------------------------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the year for
Interest $ 4,365 $ 3,299
Taxes $ 40 $ 761
- -------------------------------------------------------------------------------
</TABLE>
See accompanying notes to consolidated financial statements.
7
<PAGE>
BROAD NATIONAL BANCORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1998
(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 -
Basic earnings per common share is computed by dividing net income by the
weighted average number of common shares outstanding. Diluted earnings per
common share includes any additional common shares as if all potentially
dilutive common shares were issued(e.g. stock options).
1997 share and per share amounts have been restated to reflect the 5% stock
dividend declared in December 1997.
(3) Company - obligated mandatorily redeemable 9.5% Cumulative Trust Preferred
Securities of a subsidiary trust holding solely junior subordinated
debentures of Bancorporation (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 and wholly - owned by Bancorporation. The net proceeds from
this issuance were invested in Bancorporation in exchange for
Bancorporation's junior subordinated debentures. The sole asset of BNB
Capital Trust, the obligor on the 9.5% Cumulative Trust Preferred
Securities, is $11,855,670 principal amount of 9.5% Junior Subordinated
Debentures of Bancorporation due June 30, 2027. Bancorporation has entered
into several contractual arrangements for the purpose of fully and
unconditionally supporting BNB Capital Trust's payment of distributions on,
payments on any redemption of, and any liquidation distribution with
respect to, the 9.5% Cumulative Trust Preferred Securities. These
contractual arrangements constitute a full and unconditional guarantee by
Bancorporation of BNB Capital Trust's obligations under the 9.5% Cumulative
Trust Preferred Securities.
8
<PAGE>
(4) Comprehensive Income
Effective January 1, 1998 the Company adopted Statement of Financial
Accounting Standards No. 130, "Reporting Comprehensive Income" ("SFAS
130"). 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 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 aid in capital in the equity section of a statement
of financial position.
The Company will display the financial statements required by SFAS 130
effective in its financial statements for December 31, 1998.
For the three month period ended March 31, 1998 and 1997, the Company
recorded comprehensive income of $1,583,000 and $1,234,000, respectively,
consisting of net income of $1,805,000 and other comprehensive losses of
$222,000 for the three month period ended March 31, 1998, and net income of
$1,661,000 and other comprehensive losses of $427,000 for the three month
period ended March 31, 1997. In each instance, the comprehensive losses
represent unrealized holding losses on securities available for sale, net
of tax.
(5) Reclassification -
Certain amounts in the consolidated financial statements presented for
prior periods have been reclassified to conform with the 1998 presentation.
9
<PAGE>
BROAD NATIONAL BANCORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1998
- ---------------------------------
SUMMARY
-------
The Company reported net income of $1,805,000 or $0.37 per diluted common share
for the first quarter of 1998 compared to net income of $1,661,000 or $0.33 per
diluted common share for the first quarter of 1997. Basic per share earnings
were $0.38 for the first quarter of 1998 and $0.34 for the first quarter of
1997. Per share data for the first quarter of 1997 has been restated to reflect
the effect of the 5% stock dividend declared in December 1997.
Total assets of $603,513,000 at March 31,1998 represent an increase of
$1,844,000 or 0.3% from the December 31, 1997 balance of $601,669,000. Total
deposits increased $3,758,000 or 0.7% from $518,238,000 at December 31, 1997 to
$521,996,000 at March 31, 1998.
Total shareholders'equity increased $1,055,000 during the first three months of
1998 as the result of net income of $1,805,000 and the exercise of stock options
for $11,000, reduced by dividends declared of $518,000, the repurchase of 1,000
shares of stock as treasury shares at a cost of $21,000 and a net decrease of
$222,000 in accumulated other comprehensive income.
The Company's annualized return on average assets and annualized return on
average shareholders' equity were 1.21% and 18.42%, respectively, for the first
three months of 1998, compared to annualized returns of 1.24% and 17.17%,
respectively, for the comparable 1997 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 and long-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) Average rates reflect the tax equivalent adjusted yields on nontaxable
investments.
(2) Represents the difference between interest earned and interest paid,
divided by total interest-earning assets.
(3) Annualized
11
<PAGE>
NET INTEREST INCOME
Three Months Ended March 31
(Dollars in Thousands)
<TABLE>
<CAPTION>
1998 1997
-------- --------
Average Interest Average Average Interest Average
Balance and Fees Rate (3) Balance and Fees Rate (3)
------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Federal Funds Sold $36,011 $508 5.64% $56,369 $730 5.18%
-------- -------- ---- -------- ------- ----
Investment Securities
Securities held-to-maturity 61,557 947 6.15 89,724 1,447 6.46
Securities available-for-sale 148,501 2,346 6.32 71,653 1,098 6.12
-------- -------- ---- -------- ------- ----
Total Investment Securities 210,058 3,293 6.27 (1) 161,377 2,545 6.31 (1)
-------- -------- ---- -------- ------- ----
Loans
Mortgage $187,802 4,200 8.95 168,660 3,847 9.12
Installment 46,000 1,005 8.86 40,112 890 9.00
Commercial 88,937 1,983 9.04 78,471 1,676 8.66
-------- -------- ---- -------- ------- ----
Total Loans 322,739 7,188 9.03 287,243 6,413 9.05
-------- -------- ---- -------- ------- ----
Total interest earning assets 568,808 $ 10,989 7.84% (1) 504,989 $ 9,688 7.78%(1)
-------- -------- ---- -------- ------- ----
Less - Allowance for possible loan losses 6,772 8,693
All other assets 41,332 46,092
-------- --------
Total Assets $603,368 $542,388
-------- --------
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest Bearing Deposits
Savings, money market and interest
bearing demand deposits $217,362 $1,130 2.11% $212,042 $1,150 2.20%
Time Deposits
Under $100,000 103,925 1,337 5.22 90,852 1,150 5.13
Over $100,000 100,762 1,419 5.71 92,606 1,209 5.30
-------- -------- ---- -------- ------- ----
Total Interest Bearing Deposits 422,049 3,886 3.74 395,500 3,509 3.60
Short-term borrowings 13,024 192 5.90 1,000 12 4.80
Long-term debt 7,937 123 6.20 - - -
9.5% Cumulative Trust Preferred
Securities 11,500 273 9.50 - - -
Total Interest Bearing Liabilities 454,510 $4,474 3.99% 396,500 $ 3,521 3.60%
-------- -------- ---- -------- ------- ----
Other liabilities 9,998 10,118
Demand deposits 99,107 97,532
Shareholders' equity 39,753 39,238
-------- --------
Total liabilities and
shareholders' equity $603,368 $542,388
-------- --------
NET INTEREST INCOME; NET INTEREST SPREAD $ 6,515 3.85% $ 6,167 4.18%
NET INTEREST MARGIN 4.65% (2) 4.95% (2)
</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
three months ended March 31, 1998 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 $ 781 $ (6) $ 775
Investment securities 763 (15) 748
Federal funds sold (287) 65 (222)
------ ---- -------
Total interest income $1,257 $ 44 $1,301
------ ---- -------
Interest paid on:
Savings and interest
bearing demand deposits $ 40 $(60) $ (20)
Certificates of deposit:
Under $100,000 168 19 187
Over $100,000 115 95 210
Short term borrowings 177 3 180
Long term debt 123 0 123
9.5% Cumulative Trust Preferred
Securities 273 0 273
------ ---- -------
Total Interest expense $ 896 $ 57 $ 953
------ ---- -------
Change in net interest income $ 361 $(13) $ 348
Percent increase in net interest ------ ---- -------
income over the prior period 5.64%
-------
</TABLE>
Total tax equivalent interest income of $10,989,000 for the first three months
of 1998 represents an increase of $1,301,000 or 13.4% over total tax equivalent
interest income of $9,688,000 for the comparable 1997 period. This improvement
is primarily due to an increase of $63,819,000 in the average balance of total
interest earning assets for the first quarter of 1998 as compared to the first
quarter of 1997. The average balance of total investment securities was
$48,681,000 higher for the first quarter of 1998 as compared to the first
quarter of 1997, while the average balance of total loans was $35,496,000
higher. The increase in the average balance of interest earning assets
contributed $1,257,000 to the increase in total tax equivalent interest income.
An increase of 6 basis points in the average rate earned on total interest
earning assets, due primarily to the increased average rate earned on federal
funds sold, contributed an additional $44,000 to the overall increase in total
tax equivalent interest income.
13
<PAGE>
Total interest expense of $4,474,000 for the first quarter of 1998 was $953,000
or 27.1% higher than the comparable prior year period. An increase of
$58,040,000 in average total interest bearing liabilities is the primary reason
for this increase, resulting in an additional $896,000 of interest expense for
the first quarter of 1998 as compared to the first quarter of 1997. First
quarter 1998 interest expense increased an additional $57,000 due to an increase
in the cost of total interest-bearing liabilities. The average cost of total
interest-bearing liabilities for the first quarter of 1998 was 3.99%, an
increase of 39 basis points from 3.60% for the first quarter of 1997. Increases
in relatively higher costing time deposits as well as the addition of higher
costing short-term and long-term borrowings contributed to the increase in the
cost of total interest bearing liabilities for the first quarter of 1998.
Tax equivalent net interest income for the first quarter of 1998 was $6,515,000,
an increase of $348,000 or 5.64% from $6,167,000 for the first quarter of 1997,
primarily due to the average balance of interest earning assets increasing more
than the average balance of interest bearing liabilities. However, the net
interest spread on a tax equivalent basis declined 33 basis points to 3.85% for
the first quarter of 1998, and the net interest margin, which is tax equivalent
net interest income expressed as a percentage of average interest earning
assets, declined 30 basis points to 4.65% for the first quarter of 1998. This
reflects the fact that the growth of interest earning assets outpaced the growth
in net interest income, resulting from the use of higher cost time deposits as
well as short-term and long-term borrowings to fund the growth of average
interest earning assets.
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
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 $300,000 for the first quarter of 1998
compared to $450,000 for the comparable 1997 period. The decreased provision for
possible loan losses is primarily due to the decline in non-performing loans and
the improvement in the company's asset quality ratios. Actual net loan charge-
offs for the first three months of 1998 were $600,000 or 0.74% (annualized) of
average total loans, as compared to net loan charge-offs of $73,000 or 0.10%
(annualized) of average total loans for the comparable 1997 period.
14
<PAGE>
NON-INTEREST INCOME AND NON-INTEREST EXPENSES
- ---------------------------------------------
Total non-interest income of $1,859,000 for the first quarter of 1998 was
$34,000 or 1.8% lower than the comparable 1997 period. This decrease is
primarily attributable to the service charges on deposit accounts which were
$178,000 lower for the first quarter of 1998 as compared to the first quarter of
1997. This decline in service charge income was partially offset by an increase
of $59,000 in other income, primarily due to ATM non-customer convenience fees.
Additionally, 1998 first quarter non-interest income included $90,000 of gains
from the sale of securities available - for -sale, an improvement of $85,000
from the gain of $5,000 recorded in the first quarter of 1997.
Total non-interest expense of $5,208,000 for the first three months of 1998 was
$518,000 or 11% higher than the comparable 1997 period. Salaries and wages,
other real estate expense and other expenses were the significant factors
contributing to the increase in non-interest expense.
Salaries and wages totaled $2,394,000 for the first quarter of 1998, an increase
of $364,000 compared to the first quarter of 1997. Merit increases, staff
increases, and increased incentive salary programs were responsible for the
increase in salary and wages expense.
Other real estate expense of $20,000 for the first quarter of 1998 represented a
variance of $102,000 from income of $82,000 recorded in the first quarter of
1997. A gain of $123,000 from the sale of property classified as other real
estate owned resulted in the recognition of income for the first quarter of
1997.
Other non-interest expenses of $616,000 for the first quarter of 1998 were
$201,000 higher than the comparable 1997 period, reflecting increased costs
associated primarily with insurance and advertising, as well as expenses
associated with the issuance in June of 1997 of the 9.5% Cumulative Trust
Preferred Securities.
INCOME TAXES
- ------------
The effective rates for the first quarter of 1998 and 1997 were 36.8% and 43.0%.
The decrease in the effective tax rate for the first quarter of 1998 is due to
lower state income taxes.
FINANCIAL CONDITION
- -------------------
Loans
Total loans, net of deferred loan fees, of $323,189,000 at March 31, 1998
represent an increase of $661,000 from the December 31, 1997 balance of
$322,528,000. Increases of approximately $4,100,000 in commercial mortgages and
$3,400,000 in consumer loans were offset by decreases of $6,300,000 in
commercial loans and $650,000 in residential mortgages. For the first three
months of 1998, average loans of $322,739,000 represented 56.8% of total average
interest earning assets, as compared to 56.9% of total average interest earning
assets for the first three months of 1997.
15
<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.
<TABLE>
<CAPTION>
Three Months Three Months
Ended Ended
March 31, 1998 March 31,1997
--------------- -------------
(Dollars In Thousands)
<S> <C> <C>
Balance, beginning of period $ 6,974 $ 8,531
Provision charged to operations 300 450
Loans charged off (779) (245)
Recoveries of charged-off loans 179 172
-------- --------
Balance, end of period $ 6,674 $ 8,908
-------- --------
Average gross loans outstanding
during period..................... $322,739 $287,243
-------- --------
Total gross loans at period end.... $323,389 $291,664
-------- --------
Net loans charged-off $ 600 $ 73
-------- --------
Ratio of net loans charged-off to
average loans outstanding
during period (annualized)...... 0.74% 0.10%
----- ------
Allowance for possible loan losses as
a percentage of total gross loans.. 2.06% 3.05%
----- ------
</TABLE>
The amount of allowance applicable to non-classified loans was $5,134,000 and
$4,770,000 at March 31, 1998 and December 31, 1997, 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.
16
<PAGE>
The following table reflects the components of non-performing assets at March
31, 1998 and December 31, 1997:
<TABLE>
<CAPTION>
March 31, 1998 December 31, 1997
--------------- ------------------
(Dollars In Thousands)
<S> <C> <C>
Past due 90 days or more:
Mortgage....................... $ 268 $ 434
Commercial..................... 645 477
Installment.................... 65 20
------- -------
Total.......................... $ 978 $ 931
------- -------
Non-accrual loans:
Mortgage....................... $ 811 $ 652
Commercial..................... 2,387 3,229
Installment.................... 6 10
------- -------
Total....................... $ 3,204 $ 3,891
------- -------
TOTAL NON-PERFORMING LOANS....... $ 4,182 $ 4,822
Restructured loans (excluding
amounts classified as
non-performing loans) 1,615 1,619
Other real estate owned,
net of reserve................. 319 648
------- -------
TOTAL NON-PERFORMING ASSETS. $ 6,116 $ 7,089
------- -------
Non-performing loans as a
percent of total gross loans 1.29% 1.49%
------- -------
Non-performing loans as a
percent of total assets....... 0.69% 0.80%
------- -------
Non-performing assets as a
percent of loans and other
real estate owned.............. 1.89% 2.19%
------- -------
Allowance for possible loan
losses......................... $ 6,674 $ 6,974
------- -------
Allowance for possible loan
losses as a percent of
non-performing loans........... 159.59% 144.63%
------- -------
</TABLE>
In addition to the non-performing and restructured loans as of March 31, 1998
and December 31, 1997, the Company had classified an additional $2,927,000 and
$4,539,000, respectively, as substandard loans. A loan loss reserve has been
allocated to such loans in accordance with the Company's policies.
At March 31, 1998, the recorded investment in loans that are considered to be
impaired was $6,484,000 as compared to $7,334,000 at December 31, 1997. The
related allowance for possible credit losses was $0 as of March 31, 1998 and
December 31, 1997. The impaired loan portfolio is primarily collateral
dependent. There was no change in the allowance for impaired loans during the
first quarter of 1998, as compared to a recovery of $30,000 during the first
quarter of 1997. The average recorded investment in impaired loans during the
first quarter of 1998 was approximately $6,909,000 as compared to
17
<PAGE>
approximately $10,049,000 for the first quarter of 1997. For the first quarter
of 1998, the Company recognized cash basis interest income on these impaired
loans of $55,179 as compared to $55,279 for the first quarter of 1997.
The level of non-performing loans and assets is heavily dependent upon local
economic conditions. The March 31, 1998 total non-performing assets of
$6,116,000 represents a decrease of $973,000 or 13.7% from the total at December
31, 1997. There can be no assurance that the level of the Company's non-
performing assets will not increase in the future.
Investment Securities and Federal Funds Sold
Federal funds sold of $35,020,000 at March 31, 1998 represent a decrease of
$2,280,000 from the balance at December 31, 1997. Most of this decline is
attributable to the transfer of funds into the investment portfolio. Average
Federal Funds sold of $36,011,000 during the first three months of 1998
represented 6.3% of total average interest earning assets, as compared to 11.1%
during the first three months of 1997.
Total average investment securities of $210,058,000 for the first three months
of 1998 represent 36.9% of total average interest-earning assets, as compared to
32.0% for the comparable 1997 period.
Total investment securities, which include securities classified as held-to-
maturity and available-for-sale, of $211,913,000 at March 31, 1998 represent an
increase of $5,506,000 or 2.7% over the balance at December 31, 1997. During
the first quarter of 1998, securities available-for-sale of $12,590,000 were
sold, and a net gain of $90,000 was realized from the sale. During the first
quarter of 1997, securities available-for-sale of $6,196,000 were sold and a net
gain of $5,000 was realized from the sale.
Deposits
The March 31, 1998 total deposit balance of $521,996,000 represents a net
increase of $3,758,000 over total deposits of $518,238,000 at December 31, 1997.
Time deposits were responsible for this increase. Time deposits less than
$100,000 increased $4,954,000 during the first quarter of 1998, with most of
this growth represented by nine month and fifteen month certificates of deposit.
Time deposits of $100,000 or more were $11,240,000 higher at March 31, 1998 than
at December 31, 1997. This increase is primarily attributable to municipal
deposits.
Short Term Borrowings
Short-term borrowings represent Federal Home Loan Bank (FHLB) advances and
securities sold under agreements to repurchase, which are used to supplement the
Bank's deposit base as a source of funding. The FHLB advances have remaining
maturities of less than one year, while securities sold under agreement to
repurchase generally have terms ranging from one to ninety days.
The average balance of short-term borrowings was $13,024,000 for the first
quarter of 1998 as compared to $1,000,000 for the first quarter of 1997, and the
average cost of short-term borrowings was 5.90% for the first quarter of
18
<PAGE>
1998 as compared to 4.80% for the first quarter of 1997. In each instance, the
increase is primarily attributable to FHLB advances.
Long-Term Debt
Long-term debt of $6,000,000 at March 31, 1998 represents FHLB advances with
maturities of greater than one year. This debt represents a series of six
$1,000,000 advances with interest rates ranging from 6.21% to 6.28% and
maturities from April 1, 1999 to September 30, 1999. The advances are secured
by residential mortgages and securities under a blanket collateral agreement.
Liquidity of the Bank
The Bank actively monitors its liquidity position to ensure that it has
sufficient funds to provide for cash outflows without incurring losses from the
premature liquidation of assets or the unexpected acquisition of costly
liabilities. The Bank's cash outflows encompass interest paid to depositors and
other creditors, deposit withdrawals, and disbursements to acquire assets and
pay general operating costs. The Bank obtains cash from customers in the form
of interest and principal payments on loans, fees paid for services, and from
new deposits. Investment maturities also provide a source of cash.
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 March 31, 1998 and December 31, 1997.
<TABLE>
<CAPTION>
March 31, 1998 December 31, 1997
--------------- ------------------
<S> <C> <C>
Cash and cash equivalents
and securities maturing in
one year to total assets 11.4% 11.3%
Net loans to total deposits 60.6% 60.9%
</TABLE>
The Consolidated Statements of Cash Flows present the change in cash from
operating, investing and financing activities. During the first three months of
1998, cash and cash equivalents decreased by $4,375,000, primarily to fund
growth in the investment portfolio, and to a lesser extent, loans.
Net cash provided by operating activities was $2,097,000 for the first quarter
of 1998, representing primarily the results of operations adjusted for
depreciation, amortization and the provision for possible loan losses.
Net cash used in financing activities was $6,991,000 which was used primarily to
fund growth in the securities portfolio and loans.
Net cash provided by financing activities was $519,000, reflecting a net
increase in deposits, partially offset by a decrease of long term debt and
payment of dividends to shareholders.
To assist in the management of its liquidity, the bank has available
19
<PAGE>
$26,318,000 in lines of credit for federal funds. However, none of these lines
were in use during the first quarter of 1998.
Managing the Bank's liquidity position involves a significant degree of
analytical estimation and other objective factors. 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 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, 1997, retained earnings of the Bank of $9,765,000
were available for payment of dividends to the parent company without regulatory
approval. Additionally, at March 31, 1998 Bancorporation had $4,435,000 of cash
for the purpose of paying operating costs 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 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
environment and negatively impact earnings in a rising interest rate
environment.
At March 31, 1998 the Company had a one year cumulative negative gap of
20
<PAGE>
12.35%. 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 involves 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 prepayments of loans and investment securities as well as
to the repricing of deposit accounts. The impact of actual repayments,
repricings and changes in interest rates may differ from the implications
derived from the interest sensitivity gap analysis. Consequently, these static
measurements are best used as early indicators of potential interest rate
exposure.
The Company also uses a simulation model to analyze net interest income
sensitivity to movements in interest rates. The simulation model projects net
interest income based on both an immediate rise or fall of 200 basis points in
interest rates (rate shock) over a twelve month period. Based on information and
assumptions in effect at March 31, 1998, management believes that a 200 basis
point rate shock over a twelve month period, up or down, would not significantly
affect the Company's annualized net interest income.
Capital Adequacy
At March 31, 1998, the Company had total capital equal to 14.65% of risk-based
assets which included tier one capital equal to 13.38% of risk-based assets.
These compare to minimum regulatory capital requirements of 8% and 4%,
respectively. At March 31, 1998, the Company had tier one capital equal to
8.46% of adjusted total assets. This compares to a minimum regulatory capital
requirement of 4% to 5%.
At March 31, 1998, the Bank had total capital equal to 13.48% of risk-based
assets, which included tier one capital equal to 12.23% of risk-based assets.
These compare to minimum regulatory capital requirements of 8% and 4%,
respectively. At March 31, 1998, the Bank had tier one capital equal to 7.73%
of adjusted total assets. This compares to a minimum regulatory capital
requirement of 4% to 5%.
Recent Accounting Pronouncements and Other Matters
In June 1997, The FASB issued SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information." SFAS 131 requires public companies to
report information about business segments in their annual financial statements
and selected business segment information in quarterly reports issued to
shareholders. SFAS 131 requires entity-wide disclosures about the products and
services an entity provides, the material countries in which it holds assets and
reports revenues and its major customers. This statement supersedes SFAS 14,
"Financial Reporting for Segments of a Business Enterprise". SFAS 131 is
effective for fiscal years beginning after December 31, 1997, but it need not be
applied to interim financial statements in the initial year of its application.
21
<PAGE>
Year 2000
In 1997, the Company conducted a review of its computer systems to determine the
systems that would be affected by the Year 2000 issue. A steering committee
comprised of senior management has been formed to ensure that adequate resources
are allocated to this project and to monitor the progress and testing of the
Year 2000 transition.
The Company's primary computer applications are handled by an outside processor.
To date, the Company has received confirmation that this processor has developed
a plan of action for testing and implementation of Year 2000 enhancements. The
Company will use internal resources to identify and test all vendor applications
for Year 2000 compliance. Testing is scheduled to begin in June 1998 and be
completed by March 1999. The Company does not expect the costs associated with
the Year 2000 transition to be material.
* * * * * * * * * * * * * * * * * * * *
Except for the historical information contained herein, the matters discussed in
this report 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 Company's net interest
income, the quality of the Company'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 Company'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 banking 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 statement herein.
22
<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
held on April 16, 1998.
(b) The Directors elected at this meeting were:
<TABLE>
<CAPTION>
Affirmative Withheld
Votes Authority
----------- ---------
<S> <C> <C>
Mr. Licinio Cruz 3,561,391 97,607
Mr. John A. Dorman 3,658,084 914
Mr. Arthur Fischman 3,656,672 2,326
Mr. John J. Iannuzzi 3,658,193 805
Mr. Donald M. Karp 3,658,084 914
Mr. James J. Lazarus 3,568,573 90,425
Mr. Edward J. Lenihan 3,656,672 2,326
Mr. Stanley J. Lesnik 3,557,310 101,688
Ms. Catherine McFarland 3,658,193 805
Mr. Louis J. Owen 3,560,971 98,027
Mr. A. Harold Schwartz 3,657,279 1,719
Mr. Hubert Williams 3,561,282 97,716
</TABLE>
(f) KPMG Peat Marwick LLP was appointed as the Corporation's independent
auditors for the year ending December 31, 1998 by holders of shares of
common stock, as follows:
FOR 3,656,781
---------
AGAINST 1,331
---------
ABSTAIN 2,225
---------
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) No report on Form 8-K has been filed during the three month period
ended March 31, 1998.
23
<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: May 14, 1998 /s/ Donald M. Karp
-------------------
Donald M. Karp
Chairman and CEO
/s/ James Boyle
-------------------
James Boyle
Treasurer
24
<PAGE>
BROAD NATIONAL BANCORPORATION
Computation of Net Income Per Share
(Unaudited)
<TABLE>
<CAPTION>
THREE-MONTH PERIOD
ENDED MARCH 31
1998 1997(1)
---- -------
<S> <C> <C>
BASIC:
Net income available to common shareholders $1,805,250 $1,661,150
---------- ----------
Weighted average number of common shares
outstanding 4,707,913 4,902,647
---------- ----------
BASIC EARNINGS PER COMMON SHARE $ 0.38 $ 0.34
========== ==========
DILUTED:
Net income available to common shareholders $1,805,250 $1,661,150
---------- ----------
Weighted average number of common shares
outstanding 4,707,913 4,902,647
Effects of dilutive securities
Stock options 210,802 151,000
---------- ----------
Adjusted weighted average number of common
shares outstanding 4,918,715 5,053,647
---------- ----------
DILUTED EARNINGS PER COMMON SHARE $ 0.37 $ 0.33
==== ====
</TABLE>
(1) Restated to reflect the effect of the 5% stock dividend declared in December
1997.
25
<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 March 31,
1998, and the related consolidated condensed statements of income, and cash
flows for the three-month periods ended March 31, 1998 and 1997. 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, 1997, 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, 1998, 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, 1997, 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
May 14, 1998
26
<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 MARCH 31, 1998.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 19838
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 35020
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 157021
<INVESTMENTS-CARRYING> 54892
<INVESTMENTS-MARKET> 54859
<LOANS> 323189
<ALLOWANCE> 6674
<TOTAL-ASSETS> 603513
<DEPOSITS> 521996
<SHORT-TERM> 13300
<LIABILITIES-OTHER> 10431
<LONG-TERM> 17500
0
0
<COMMON> 4950
<OTHER-SE> 35336
<TOTAL-LIABILITIES-AND-EQUITY> 603513
<INTEREST-LOAN> 7188
<INTEREST-INVEST> 3282
<INTEREST-OTHER> 508
<INTEREST-TOTAL> 10978
<INTEREST-DEPOSIT> 3886
<INTEREST-EXPENSE> 4474
<INTEREST-INCOME-NET> 6504
<LOAN-LOSSES> 300
<SECURITIES-GAINS> 90
<EXPENSE-OTHER> 5208
<INCOME-PRETAX> 2855
<INCOME-PRE-EXTRAORDINARY> 2855
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1805
<EPS-PRIMARY> 0.38
<EPS-DILUTED> 0.37
<YIELD-ACTUAL> 4.65
<LOANS-NON> 3204
<LOANS-PAST> 978
<LOANS-TROUBLED> 1615
<LOANS-PROBLEM> 2927
<ALLOWANCE-OPEN> 6974
<CHARGE-OFFS> 779
<RECOVERIES> 179
<ALLOWANCE-CLOSE> 6674
<ALLOWANCE-DOMESTIC> 6674
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 5134
</TABLE>
