<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended SEPTEMBER 30, 1995
----------------------------------------------
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________________________ to _________________
Commission file number 0-10849
-------
SOUTHSIDE BANCSHARES CORP.
- -----------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
MISSOURI 43-1262037
- --------------------------------- ---------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
3606 GRAVOIS AVENUE, ST. LOUIS, MISSOURI 63116
- -----------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (314) 776-7000
-----------------
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
------- -------
At November 14, 1995, the number of shares outstanding of the registrant's
-----------------
common stock was 285,032.
--------
<PAGE>
SOUTHSIDE BANCSHARES CORP.
INDEX
Page
----
Part I. FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements:
Condensed Consolidated Balance Sheets at
September 30, 1995 and December 31, 1994 3
Condensed Consolidated Statements of Income for
the nine months and three months ended
September 30, 1995 and September 30, 1994 4
Condensed Consolidated Statements of Cash Flows for
the nine months ended September 30, 1995 and
September 30, 1994 5
Notes to Condensed Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 7
Part II. OTHER INFORMATION
Item 1. Legal Proceedings 21
Item 6. Exhibits and Reports on Form 8-K 21
Signatures 22
2
<PAGE>
<TABLE>
<CAPTION>
Part I. FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements
SOUTHSIDE BANCSHARES CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
September 30, 1995 and December 31, 1994
(dollars in thousands except share data)
(unaudited)
September 30, December 31,
ASSETS 1995 1994
------------- ------------
<S> <C> <C>
Cash and due from banks $ 15,550 $ 18,681
Due from banks - interest-bearing 17 347
Federal funds sold 15,900 9,600
Investments in debt securities:
Available-for-sale, at market value 48,729 51,137
Held-to-maturity, at amortized cost
(approximate market value of $109,897
in 1995, and $120,822 in 1994) 109,786 122,098
-------- --------
Total investments in debt securities 158,515 173,235
-------- --------
Loans, net of unearned discount 299,366 301,397
Less allowance for possible loan losses (5,471) (7,144)
Loans, net -------- --------
293,895 294,253
-------- --------
Bank premises and equipment 10,030 9,516
Other assets 8,868 11,486
-------- --------
TOTAL ASSETS $502,775 $517,118
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Noninterest-bearing demand $ 55,509 $ 71,006
Interest-bearing demand and savings 179,269 198,346
Time deposits 212,259 198,741
-------- --------
Total deposits 447,037 468,093
Short-term borrowings 2,170 3,378
Debt of employee stock ownership plan 2,987 --
Subordinated capital notes -- 4,190
Other liabilities 4,609 3,455
-------- --------
Total liabilities 456,803 479,116
-------- --------
Commitments and contingent liabilities
Shareholders' equity:
Cumulative preferred stock, no par value, 1,000,000 shares
authorized and unissued -- --
Common stock, $1 par value
5,000,000 shares authorized,
285,901 shares issued and outstanding in 1995 and
259,144 shares issued and outstanding in 1994 286 259
Surplus 8,295 4,030
Unearned employee stock ownership plan shares (2,863) --
Retained earnings 40,529 35,890
Net unrealized holding losses on available-for-sale securities (275) (2,177)
-------- --------
Total shareholders' equity 45,972 38,002
-------- --------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $502,775 $517,118
======== ========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
3
<PAGE>
<TABLE>
<CAPTION>
SOUTHSIDE BANCSHARES CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(dollars in thousands except share data)
(unaudited)
NINE MONTHS ENDED THREE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
1995 1994 1995 1994
-------- -------- -------- --------
<S> <C> <C> <C> <C>
INTEREST INCOME:
Interest and fees on loans $19,960 $17,839 $6,769 $6,108
Interest on investments in debt securities:
Taxable 6,148 6,287 1,997 2,194
Exempt from Federal income taxes 953 903 310 316
Interest on short-term investments 548 361 258 143
------- ------- ------ ------
TOTAL INTEREST INCOME 27,609 25,390 9,334 8,761
------- ------- ------ ------
INTEREST EXPENSE:
Interest on interest-bearing demand and savings deposits 4,363 3,863 1,425 1,346
Interest on time deposits 8,083 6,517 2,905 2,206
Interest on short-term borrowings 151 186 33 67
Interest on debt of employee stock ownership plan 110 - 55 -
Interest on subordinated capital notes 119 303 0 101
------- ------- ------ ------
TOTAL INTEREST EXPENSE 12,826 10,869 4,418 3,720
------- ------- ------ ------
NET INTEREST INCOME 14,783 14,521 4,916 5,041
Provision for possible loan losses 55 148 15 45
------- ------- ------ ------
NET INTEREST INCOME AFTER PROVISION
FOR POSSIBLE LOAN LOSSES 14,728 14,373 4,901 4,996
------- ------- ------ ------
NONINTEREST INCOME:
Trust department 706 670 239 226
Service charges on deposit accounts 903 945 306 310
Net gains (losses) on sale of other real estate
owned and other foreclosed property (163) 189 (33) (141)
Settlement of litigation 1,400 - - -
Gain on sale of Bay-Hermann-Berger Bank 825 - - -
Other 565 342 230 111
------- ------- ------ ------
TOTAL NONINTEREST INCOME 4,236 2,146 742 506
------- ------- ------ ------
NONINTEREST EXPENSES:
Salaries and employee benefits 5,227 5,459 1,735 1,812
Net occupancy expense of bank premises 902 695 317 231
Equipment 639 607 212 249
Data processing 638 436 340 148
Federal Deposit Insurance Corporation assessment 553 922 9 285
Attorney fees 519 335 103 68
Other real estate owned 102 71 17 28
Other 3,048 2,811 986 872
------- ------- ------ ------
TOTAL NONINTEREST EXPENSES 11,628 11,336 3,719 3,693
------- ------- ------ ------
INCOME BEFORE FEDERAL INCOME TAX EXPENSE 7,336 5,183 1,924 1,809
Federal income tax expense 1,995 1,393 522 483
------- ------- ------ ------
NET INCOME $ 5,341 $ 3,790 $1,402 $1,326
======= ======= ====== ======
SHARE DATA:
Earnings per common share $20.25 $14.63 $5.24 $5.12
======= ======= ====== ======
Dividends paid per common share $2.65 $1.15 $1.00 $0.55
======= ======= ====== ======
Average common shares outstanding 263,753 259,144 267,486 259,144
======= ======= ======= =======
</TABLE>
See accompanying notes to condensed consolidated financial statements.
4
<PAGE>
<TABLE>
<CAPTION>
SOUTHSIDE BANCSHARES CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994
(dollars in thousands)
(unaudited)
1995 1994
-------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 5,341 $ 3,790
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 1,248 1,489
Provision for possible loan losses 55 148
Gain on sale of Bay-Hermann-Berger Bank (825) -
Other operating activities, net 557 1,667
-------- --------
Total adjustments 1,035 3,304
-------- --------
NET CASH PROVIDED BY OPERATING ACTIVITIES 6,376 7,094
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Net (increase) decrease in Federal funds sold (6,300) 11,100
Proceeds from maturities of and principal payments on
debt securities 21,007 38,426
Purchases of debt securities (14,899) (54,628)
Net (increase) decrease in loans (12,033) 14,096
Recoveries of loans previously charged off 600 814
Proceeds from the sale of Bay-Hermann-Berger Bank 3,145 -
Proceeds from sales of other real estate owned and other
foreclosed property 1,377 2,247
Purchases of bank premises and equipment (1,334) (611)
-------- --------
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES (8,437) 11,444
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net decrease in demand and savings deposits (23,981) (18,349)
Net increase (decrease) in time deposits 24,602 (5,849)
Net increase (decrease) in short-term borrowings (1,408) 935
Repayment of subordinated capital notes (4,190) -
Cash dividends paid (702) (298)
Proceeds from the issuance of common stock 4,279 -
-------- --------
NET CASH USED IN FINANCING ACTIVITIES (1,400) (23,561)
-------- --------
NET DECREASE IN CASH AND CASH EQUIVALENTS (3,461) (5,023)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 19,028 25,222
-------- --------
CASH AND CASH EQUIVALENTS, END OF QUARTER $ 15,567 $ 20,199
======== ========
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest on deposits and borrowings $ 12,251 $ 10,653
Income taxes 1,420 900
======== ========
Noncash transactions:
Transfers to other real estate owned in settlement of loans $ 735 $ 583
Loans made to facilitate the sale of other real estate owned 380 43
======== ========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
5
<PAGE>
SOUTHSIDE BANCSHARES CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1995 AND 1994
(unaudited)
1. BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and Rule
10-01 of Regulation S-X. They do not include all information and footnotes
required by generally accepted accounting principles for complete consolidated
financial statements. In the opinion of management, all adjustments, consisting
of normal recurring accruals, considered necessary for a fair presentation have
been included. For further information, refer to Southside Bancshares Corp.'s
(the Company) Annual Report on Form 10-K for the year ended December 31, 1994.
Operating results for the nine months ended September 30, 1995 are not
necessarily indicative of the results that may be expected for the year ending
December 31, 1995.
2. LITIGATION
On February 27, 1995, the Company settled a lawsuit in which the Company's
subsidiary, South Side National Bank in St. Louis (South Side), was the
plaintiff. Under the terms of the settlement agreement executed by the parties,
South Side received a cash payment of $1,400,000, which was offset by remaining
legal expenses of approximately $300,000. The litigation arose from a
$1,500,000 payment made by the Company in 1992 (and charged to earnings in
1991). The settlement amount is included in the condensed consolidated
statements of income as "Settlement of litigation" in noninterest income. The
related legal fees have been included in noninterest expense as part of
"Attorney fees".
3. SALE OF BAY-HERMANN-BERGER BANK
On March 17, 1995, the Company sold its wholly owned subsidiary, Bay-
Hermann-Berger Bank (the Bank), in an all cash transaction with an unaffiliated
institution. The purchasing institution paid approximately $3,145,000 for all
of the Bank's common stock, which resulted in a pretax gain to the Company of
$825,000. This gain is disclosed in the condensed consolidated statements of
income as a separate component of noninterest income. Bay-Hermann-Berger Bank
was the smallest of the Company's five subsidiary banks, and with total assets
of $24,157,000 as of December 31, 1994, represented only 4.67% of total
consolidated assets as of that date. Accordingly, the sale of the Bank did not
represent the disposition of a significant segment of the Company's business, as
defined in paragraph 13 of Accounting Principles Board Opinion No. 30.
4. SUBORDINATED CAPITAL NOTES
On April 17, 1995, the Company retired, prior to scheduled maturity,
$4,190,000 of 9.65% subordinated capital notes with a stated maturity of October
23, 1995 (Notes), which represented all of the outstanding Notes. In accordance
with the provisions of the Notes, the funds necessary to liquidate the
securities were provided through the issuance of capital securities in a private
placement of the Company's common stock. A total of 26,356 shares of the
Company's $1 par value common stock were issued at $160.00 per share.
6
<PAGE>
5. EMPLOYEE STOCK OWNERSHIP PLAN
In April 1995, the Company leveraged its employee stock ownership plan
(ESOP) that covers substantially all full-time employees. The ESOP purchased
18,667 shares of the Company's common stock with the proceeds of a $2,987,000
borrowing from an unaffiliated financial institution. The Company guarantees
the loan and is required to make annual contributions to the ESOP equal to the
ESOP's debt service less dividends received by the ESOP. The Company accounts
for its ESOP in accordance with Statement of Position 93-6, and accordingly, the
debt of the ESOP is recorded as debt and the shares not yet allocated to
participants are reported as unearned ESOP shares in the condensed consolidated
balance sheet.
6. ADOPTION OF NEW ACCOUNTING STANDARDS
Effective January 1, 1995, the Company adopted the provisions of Statements
of Financial Accounting Standards No. 114 and 118. SFAS 114 defines the
recognition criterion for loan impairment and the measurement methods for
certain impaired loans and loans whose terms have been modified in a troubled-
debt restructuring (a restructured loan). Specifically, a loan is considered
impaired when it is probable a creditor will be unable to collect all amounts
due - both principal and interest - according to the contractual terms of the
loan agreement. When measuring impairment, the expected future cash flows of an
impaired loan are required to be discounted at the loan's effective interest
rate. Alternatively, impairment can be measured by reference to an observable
market price, if one exists, or the fair value of the collateral for a
collateral-dependent loan. Regardless of the measurement method used
historically, SFAS 114 requires a creditor to measure impairment based on the
fair value of the collateral when the creditor determines foreclosure is
probable. Additionally, impairment of a restructured loan is measured by
discounting the total expected future cash flows at the loan's effective rate of
interest as stated in the original loan agreement. SFAS 118 amends SFAS 114 to
allow a creditor to use existing methods for recognizing interest income on an
impaired loan. The Company has elected to continue to use its existing
nonaccrual methods for recognizing interest income on an impaired loan. The
adoption of these statements had no impact on the Company's financial position
or results of operations.
ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
This discussion is presented to provide an understanding of Southside
Bancshares Corp. and subsidiaries (the "Company" or "Registrant") consolidated
financial condition and the results of operations for the nine months ended
September 30, 1995 and 1994.
The Company's net income is derived primarily from the net interest income
of its subsidiary banks. Net interest income is the difference (or spread)
between the interest income the subsidiary banks receive from their loan and
investment portfolios and their cost of funds, consisting primarily of the
interest paid on deposits and borrowings. The rates paid on deposits, and the
yields earned on loans and investments, significantly affect the subsidiary
banks' net interest income. Net income is also affected by the levels of
provisions for possible loan losses, noninterest income, and noninterest
expense.
7
<PAGE>
Item 2. (continued)
FINANCIAL HIGHLIGHTS
COMPARISON OF SELECTED FINANCIAL DATA
(dollars in thousands except share data)
<TABLE>
<CAPTION>
NINE MONTHS ENDED Twelve Months Ended Nine Months Ended
SEPTEMBER 30, 1995 December 31, 1994 September 30, 1994
------------------ ------------------- ------------------
<S> <C> <C> <C>
EARNINGS
Total interest income $ 27,609 $ 34,383 $ 25,390
Total interest expense 12,826 14,753 10,869
-------- -------- --------
Net interest income 14,783 19,630 14,521
Provision for possible loan losses 55 193 148
-------- -------- --------
Net interest income after provision for possible
loan losses $ 14,728 $ 19,437 $ 14,373
======== ======== ========
Net income $ 5,341 $ 5,014 $ 3,790
======== ======== ========
SHARE DATA
Net income $ 20.25 $ 19.35 $ 14.63
Dividends paid 2.65 1.80 1.15
Book value 171.53 146.64 145.36
Tangible book value 169.99 144.34 142.96
Shares outstanding 285,901 259,144 259,144
FINANCIAL POSITION
Total assets $502,775 $517,118 $510,161
Total deposits 447,037 468,093 460,110
Total loans, net of unearned discount 299,366 301,397 292,702
Allowance for possible loan losses 5,471 7,144 7,863
Short-term borrowings 2,170 3,378 4,493
Debt of employee stock ownership plan 2,987 - 120
Subordinated capital notes - 4,190 4,190
Total shareholders' equity 45,972 38,002 37,668
</TABLE>
SELECTED RATIOS
The table below summarizes various selected ratios as of the end of the periods
indicated.
<TABLE>
<CAPTION>
NINE MONTHS ENDED Twelve Months Ended Nine Months Ended
SEPTEMBER 30, 1995/(1)/ December 31, 1994 September 30, 1994/(1)/
----------------------- ------------------- -----------------------
<S> <C> <C> <C>
Loans to deposits 66.97% 64.39% 63.62%
Allowance for possible loan losses to total
loans 1.83 2.37 2.69
Return on average assets 1.42 (2) 0.97 0.98
Return on average shareholders' equity 16.74 (2) 13.48 13.70
Net interest margin on average interest-
earning assets 4.40 4.27 4.23
Average shareholders' equity to average total
assets 8.49 7.19 7.13
Tier I leverage capital to adjusted total
consolidated assets less intangibles 9.14 7.68 7.52
Tier I capital to risk-weighted assets 14.93 12.73 12.71
Total capital to risk-weighted assets 16.19 15.33 15.36
</TABLE>
(1) Statistical information is annualized where applicable.
(2) Annualized information includes the gain on sale of Bay-Hermann-Berger Bank
and the net litigation settlement. Excluding the after-tax effect of these two
nonrecurring items, the return on average assets and shareholders' equity would
have been 1.05% and 12.45%, respectively.
8
<PAGE>
Item 2. (continued)
FINANCIAL POSITION
Total consolidated assets of the Company decreased to $502,775,000 at
September 30, 1995 compared to $517,118,000 at December 31, 1994. The decrease
was due to the sale of Bay-Hermann-Berger Bank on March 17, 1995, which had
total assets of $24,157,000 as of December 31, 1994. A detailed discussion of
this transaction is included in Note 3 of the Notes to Condensed Consolidated
Financial Statements on page 6. Excluding the effects of the sale, total assets
of the Company increased by $9,814,000.
LOAN PORTFOLIO
The Company's loan portfolio consists of business loans to small and medium
size companies, commercial and residential real estate loans, and consumer
loans. Traditionally, the majority of the loan portfolio has focused on real
estate as an integral component of a credit's underlying source of repayment.
The following table is a breakdown of the Company's loan portfolio as of the
end of the periods indicated.
SUMMARY OF LOAN PORTFOLIO COMPONENTS
<TABLE>
<CAPTION>
(in thousands)
SEPTEMBER 30, 1995 December 31, 1994 September 30, 1994
------------------ ----------------- ------------------
<S> <C> <C> <C>
Commercial, financial and agricultural $ 59,603 $ 69,219 $ 64,583
Real estate-commercial 85,402 82,807 79,446
Real estate-construction 10,043 11,019 9,773
Real estate-residential 107,039 108,134 107,234
Consumer 18,694 18,334 18,814
Industrial revenue bonds 7,783 9,311 9,078
Other 10,802 2,573 3,823
-------- -------- --------
$299,366 $301,397 $292,751
======== ======== ========
</TABLE>
The Company's loan portfolio totaled $299,366,000 at September 30, 1995,
which was down $2,031,000 from December 31, 1994 . Included in the sale of
Bay-Hermann-Berger Bank were approximately $12,064,000 in loans. Accordingly,
the four remaining subsidiary banks of the Company experienced a $10,033,000
increase in their respective loan portfolios during the first nine months of
1995, as a result of an increased emphasis being placed on attracting new loan
business. The decrease in Commercial, financial and agricultural loans was due,
in part, to the aforementioned sale of Bay-Hermann-Berger Bank, as well as
several large payoffs on commercial loans; however, these payoffs were replaced
with new loan originations in the Other loan category.
9
<PAGE>
Item 2. (continued)
SUMMARY OF ALLOWANCE FOR POSSIBLE LOAN LOSSES
<TABLE>
<CAPTION>
(dollars in thousands)
NINE MONTHS ENDED Twelve Months Ended Nine Months Ended
SEPTEMBER 30, 1995 December 31, 1994 September 30, 1994
------------------ ------------------- ------------------
<S> <C> <C> <C>
BALANCE AT BEGINNING OF PERIOD $ 7,144 $ 8,334 $ 8,334
Provision charged to expense 55 193 148
Loans charged off (2,001) (2,318) (1,433)
Recoveries 600 935 814
Adjustment due to sale of Bay-Hermann-
Berger Bank (327) - -
------- ------- -------
BALANCE AT END OF PERIOD $ 5,471 $ 7,144 $ 7,863
======= ======= =======
RATIOS:
Allowance for possible loan losses as
% of total loans 1.83% 2.37% 2.69%
Allowance for possible loan losses as
% of nonperforming loans 249.48 136.13 155.98
Allowance for possible loan losses as
multiple of net charge-offs (1) 3.9x 5.2x 0.2x
</TABLE>
(1) Statistical information is annualized where applicable.
The balance of the allowance for possible loan losses declined by
$1,673,000 during the first nine months of 1995. Part of the decline, $327,000,
can be attributed to the sale of Bay-Hermann-Berger Bank. The remainder of the
decrease is the result of $1,401,000 in net charge-offs, offset by $55,000 in
provisions for possible loan losses. In addition, the Company's internal
analysis of the adequacy of the allowance for possible loan losses indicates
that the level of the allowance for possible loan losses is adequate to cover
actual and potential losses in the loan portfolio under current conditions. The
ratio of the allowance for possible loan losses as a percentage of total loans
declined to 1.83% at September 30, 1995, compared to 2.37% at December 31,
1994, as a result of the charge-offs taken during 1995. Due to improvements in
loan quality, no additional provisions were considered necessary by management.
10
<PAGE>
Item 2. (continued)
NONPERFORMING ASSETS
<TABLE>
<CAPTION>
(dollars in thousands)
SEPTEMBER 30, 1995 December 31, 1994 September 30, 1994
------------------ ----------------- ------------------
<S> <C> <C> <C>
Nonaccrual loans $1,446 $2,829 $3,210
Loans past due 90 days and still accruing interest 747 2,419 1,756
Restructured loans - - 75
------ ------ ------
TOTAL NONPERFORMING LOANS 2,193 5,248 5,041
Other real estate owned 1,044 1,833 2,100
------ ------ ------
TOTAL NONPERFORMING ASSETS $3,237 $7,081 $7,141
====== ====== ======
RATIOS:
Total nonperforming loans as % of total loans 0.73% 1.74% 1.72%
Nonperforming assets as % of total loans and
other real estate owned 1.08 2.34 2.42
Nonperforming assets as % of total assets 0.64 1.37 1.40
</TABLE>
Nonperforming assets totaled $3,237,000 or 0.64% of total assets at
September 30, 1995 compared to $7,081,000 or 1.37% and $7,141,000 or 1.40% at
December 31, 1994 and September 30, 1994, respectively. The decrease in
nonperforming assets since December 31, 1994 has been approximately 54% and over
the past twelve months has totaled approximately 55%.
Other real estate owned was $1,044,000 at September 30, 1995 compared to
$1,833,000 and $2,100,000 at December 31, 1994 and September 30, 1994,
respectively. These properties are recorded at the lower of cost or their
estimated net realizable value, which means the properties are recorded on the
balance sheet of the Company at an amount no greater than the amount of the net
proceeds expected to be received upon the sale of the property.
Any loans classified for regulatory purposes, but not included above in
nonperforming loans, do not represent material credits, about which management
is aware of any information which causes management to have serious doubts as to
the borrower's ability to comply with the loan repayment terms or which
management reasonably expects will materially impact future operating results or
capital resources. As of September 30, 1995, there were no concentrations of
loans exceeding 10% of total loans which were not disclosed as a category of
loans detailed on page 9.
11
<PAGE>
Item 2. (continued)
INVESTMENTS IN DEBT SECURITIES
Investments in debt securities have decreased approximately $14,720,000
since December 31, 1994. Of the decline, $10,929,000 can be attributed to the
sale of Bay-Hermann-Berger Bank. The remaining $3,791,000 decline is the result
of increasing loan demand at the Company's remaining four subsidiary banks.
The portfolio contains a mixture of debt securities in terms of the types
of securities, interest rates, and maturity distribution. Management believes
this diversity, as well as their conservative philosophy towards risk
management, has resulted in a solid investment portfolio.
The following table summarizes the amortized cost and estimated market
value of the Company's available-for-sale and held-to-maturity debt securities
at September 30, 1995.
<TABLE>
<CAPTION>
(in thousands)
AVAILABLE-FOR-SALE HELD-TO-MATURITY
--------------------- ---------------------
Estimated Estimated
Amortized Market Amortized Market
Cost Value Cost Value
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
U.S. Treasury securities and obligations
of U.S. Government agencies and corporations $ 6,553 $ 6,573 $ 82,857 $ 81,869
Obligations of states and political subdivisions 530 544 21,624 22,593
Other debt securities 1,261 1,263 1,076 1,111
------- ------- -------- --------
8,344 8,380 105,557 105,573
Mortgage-backed securities 40,801 40,349 4,229 4,324
------- ------- -------- --------
$49,145 $48,729 $109,786 $109,897
======= ======= ======== ========
</TABLE>
As evidenced by the above table, the held-to-maturity portfolio contains an
unrealized loss at the present time, although the unrealized loss within the
portfolio has decreased significantly from year-end 1994. This unrealized loss
reflects the dramatic rise in interest rates during 1994 which caused a majority
of the financial instruments purchased in recent years to reflect an unrealized
loss. With interest rates declining during the first nine months of 1995, most
of these losses have been reduced or reversed completely. The Company's
investment portfolio is staggered as to maturity, to allow for the continual
purchase of new securities as others mature. This investment philosophy allows
the Company to mitigate, to a certain degree, the effects of large movements in
interest rates. In addition, these losses will only be realized if the
securities are disposed of prior to their contractual maturity date.
The following table summarizes the quality rating of debt securities at
September 30, 1995.
<TABLE>
<CAPTION>
(dollars in thousands)
MOODY'S RATING CARRYING VALUE PERCENT OF TOTAL
-------------- -------------- ----------------
<S> <C> <C>
Aaa $146,763 91%
Aa 2,500 2
A 4,262 3
Not rated /(1)/ 4,990 4
-------- ---
$158,515 100%
======== ===
</TABLE>
(1) Generally, these are securities issued by local municipalities of the
Company's subsidiary banks.
12
<PAGE>
Item 2. (continued)
DEPOSITS
Total deposits declined $21,056,000 from December 31, 1994 to September 30,
1995; however, excluding the $21,677,000 in deposits of Bay-Hermann-Berger Bank,
deposits actually increased $621,000 during the first nine months of 1995. The
decrease in demand and savings deposits was more than offset by an increase in
time deposits $100,000 and over, although it is still management's philosophy to
rely on "core" deposits rather than "volatile" liabilities as its primary
funding source. This is evidenced by the fact that time deposits $100,000 and
over comprise only 7.6% of the Company's total deposits.
The following table presents deposits by category as of the end of the periods
indicated.
<TABLE>
<CAPTION>
(in thousands)
SEPTEMBER 30, 1995 December 31, 1994 September 30, 1994
------------------ ----------------- ------------------
<S> <C> <C> <C>
Noninterest-bearing demand deposits $ 55,509 $ 71,006 $ 66,520
Interest-bearing demand deposits 116,693 128,493 125,479
Savings deposits 62,576 69,853 72,363
Time deposits under $100,000 178,321 179,003 179,465
-------- -------- --------
Total core deposits 413,099 448,355 443,827
Time deposits $100,000 and over/(1)/ 33,938 19,738 16,283
-------- -------- --------
Total deposits $447,037 $468,093 $460,110
======== ======== ========
</TABLE>
(1) Deposits which are generally deemed highly interest rate sensitive.
SHORT-TERM BORROWINGS
Short-term borrowings consist of Federal funds purchased, securities sold
under agreements to repurchase, U.S. Treasury tax and loan note account, and
other short-term borrowings. The following is a summary of short-term borrowings
as of the end of the periods indicated.
<TABLE>
<CAPTION>
(in thousands)
SEPTEMBER 30, 1995 December 31, 1994 September 30, 1994
------------------ ----------------- ------------------
<S> <C> <C> <C>
Federal funds purchased $ - $ 200 $ -
Securities sold under agreements to repurchase 386 362 1,731
U.S. Treasury tax and loan note account 1,784 555 500
Other short-term borrowings - 2,261 2,262
------ ------ ------
$2,170 $3,378 $4,493
====== ====== ======
</TABLE>
The decrease in other short-term borrowings was due to the Company paying
off its outstanding debt with an unaffiliated financial institution from the
proceeds of the sale of Bay-Hermann-Berger Bank. The decrease was partially
offset by an increase in securities sold under agreements to repurchase and the
U. S. Treasury tax and loan note account.
13
<PAGE>
Item 2. (continued)
ASSET/LIABILITY MANAGEMENT
The table on the following page is an analysis of the Company's interest
rate-sensitive assets and liabilities as of September 30, 1995. Because such an
analysis does not capture all of the factors which determine interest rate risk,
the Company also utilizes a simulation model to measure its exposure to changes
in interest rates. Under different rate and growth assumptions, these
projections enable the Company to adjust its strategies to protect the net
interest margin against significant rate fluctuations. Uniform sensitivity
reports and guidelines are used by all subsidiary banks of the Company. Based
on the Company's historical analysis, interest-bearing demand and savings
deposits have proven to be very stable core deposits even with significant
interest rate fluctuations. Accordingly, management believes these deposits are
not 100% rate-sensitive within the period of three months or less. As a result,
these deposits have been allocated between four repricing categories as follows:
three months or less - 35%, over three months through 12 months - 20%, over one
year through five years - 25%, and over five years - 20%.
As reflected on the Repricing and Interest Rate Sensitivity Analysis on the
following page, the Company has a reasonably well-balanced, interest rate
sensitivity position. The Company's current one-year cumulative gap is 0.96x.
Generally, a one-year cumulative gap ratio in a range of 0.80x - 1.20x indicates
an entity is not subject to undue interest rate risk. A one-year cumulative gap
ratio of 1.00x indicates that an institution has an equal amount of assets and
liabilities repricing within twelve months. A ratio in excess of 1.00x indicates
more assets than liabilities will be repriced during the period indicated, and a
ratio less than 1.00x indicates more liabilities than assets will be repriced
during the period indicated. However, actual experience may differ because of
the assumptions used in the allocation of deposits and other factors which are
beyond management's control. Additionally, the following analysis includes the
available-for-sale securities spread throughout their respective repricing
and/or maturity horizons, even though such securities are available for
immediate liquidity should the need arise in any particular time horizon.
14
<PAGE>
Item 2. (continued)
REPRICING AND INTEREST RATE SENSITIVITY ANALYSIS
(dollars in thousands)
SEPTEMBER 30, 1995
<TABLE>
<CAPTION>
Over Over
3 months 1 year
3 months through through Over
or less 12 months 5 years 5 years Total
-------- --------- -------- --------- -----
<S> <C> <C> <C> <C> <C>
Interest-earning assets:
Due from banks - interest-bearing $ 17 $ - $ - $ - $ 17
Federal funds sold 15,900 - - - 15,900
Investments available-for-sale 7,640 5,698 30,772 4,619 48,729
Investments held-to-maturity 5,378 13,644 67,402 23,362 109,786
Loans, net of unearned discount /(1)/ 79,820 89,916 114,261 15,369 299,366
-------- -------- -------- -------- --------
Total interest-earning assets 108,755 109,258 212,435 43,350 473,798
-------- -------- -------- -------- --------
Cumulative interest-earning assets
108,755 218,013 430,448 473,798 473,798
-------- -------- -------- ------- --------
Interest-bearing liabilities:
Interest-bearing demand deposits
Savings deposits 40,843 23,339 29,173 23,339 116,693
Time deposits under $100,000 21,902 12,515 15,644 12,515 62,576
Time deposits $100,000 and over 28,646 66,345 83,330 - 178,321
Short-term borrowings 17,315 11,857 4,766 - 33,938
Debt of employee stock ownership plan 2,170 - - - 2,170
- 2,987 - - 2,987
Total interest-bearing liabilities -------- -------- -------- ------- -------
110,876 117,043 132,912 35,854 396,685
-------- -------- -------- ------- -------
Cumulative interest-bearing liabilities 110,876 227,919 360,831 396,685 396,685
-------- -------- -------- ------- -------
Gap analysis:
Interest sensitivity gap $ (2,121) $ (7,785) $ 79,523 $ 7,496 $ 77,113
======== ======== ======== ======== ========
Cumulative interest
sensitivity gap $ (2,121) $ (9,906) $ 69,617 $ 77,113 $ 77,113
========= ======== ======== ======== ========
Cumulative gap ratio of interest-
earning assets to interest-bearing
liabilities 0.98x 0.96x 1.19x 1.19x 1.19x
===== ===== ===== ==== ====
</TABLE>
\\(1) Nonaccrual loans are reported in the "Over 1 year through 5 years"
column.\\
15
<PAGE>
Item 2. (continued)
CAPITAL RESOURCES
The regulatory capital guidelines require banking organizations to maintain
a minimum total capital ratio of 8% of risk-weighted assets (of which at least
4% must be Tier I capital). The Company's total capital ratios under the risk-
weighted guidelines at September 30, 1995, December 31, 1994, and September 30,
1994 were 16.19%, 15.33%, and 15.36%, respectively, which included Tier I
capital ratios of 14.93%, 12.73%, and 12.71%, respectively. These ratios
compare favorably to the minimum risk-weighted capital requirements.
In addition, the Company and its subsidiary banks must maintain a minimum
Tier I leverage ratio (Tier I capital to total adjusted consolidated assets) of
at least 3%. Capital, as defined under these guidelines, is total shareholders'
equity less goodwill excluding unrealized holding gains and losses on available-
for-sale securities of the Company. The Company's Tier I leverage ratios were
9.14%, 7.68%, and 7.52% at September 30, 1995, December 31, 1994, and September
30, 1994, respectively.
All of the subsidiary banks of the Company have exceeded the various
regulatory capital requirements at September 30, 1995. The following is a
summary of the Company's and its subsidiary banks' Tier I leverage capital
ratios at the respective dates shown below:
<TABLE>
<CAPTION>
SEPTEMBER 30, 1995 December 31, 1994 September 30, 1994
------------------- ------------------ -------------------
<S> <C> <C> <C>
Southside Bancshares Corp. 9.14% 7.68% 7.36%
South Side National Bank in St. Louis 9.17 8.16 7.91
State Bank of DeSoto 9.73 8.25 9.34
Bank of Ste. Genevieve 9.60 8.71 8.74
Bank of St. Charles County 9.38 9.87 10.07
</TABLE>
Management reviews the various capital measures monthly and takes
appropriate action to ensure that they are within internal and external
guidelines as established by law. Management believes that the Company's
current capital and liquidity positions are adequate to support its banking
operations.
SUPERVISION AND REGULATION
The Company and its subsidiary bank, South Side National Bank in St. Louis,
had been subject to certain restrictive operating agreements with regulatory
authorities. These agreements had placed restrictions on the Company and South
Side National Bank regarding payment of dividends, as well as requiring the
maintenance of certain capital levels, the strengthening of management, and
improvements in loan administration, loan review, and trust functions. In
February 1995, the Federal Reserve Bank of St. Louis terminated the Memorandum
of Understanding, which it issued to the Company in July 1992. In February
1995, the Office of the Comptroller of the Currency (OCC) also terminated the
July 1991 Agreement, which it had entered into with the Company's national
banking subsidiary, South Side National Bank. In March 1994, the OCC terminated
the April 1992 Agreement, which it had entered into with South Side National
Bank. The Company and all its subsidiary banks are now free of all formal
agreements with their regulators.
16
<PAGE>
Item 2. (continued)
RESULTS OF OPERATIONS
EARNINGS SUMMARY
Net income was $5,341,000 for the nine months ended September 30, 1995
compared to $3,790,000 for the nine months ended September 30, 1994. This
represents a $1,551,000 or 41% increase. The increase was the result of two
primary factors, the gain on the sale of Bay-Hermann-Berger Bank (described in
Note 3) and the litigation settlement received by South Side National Bank
(described in Note 2.) The gain on the sale of Bay-Hermann-Berger Bank was
$825,000 and the related taxes were approximately $185,000, which results in a
net after-tax gain of $640,000. The litigation settlement was $1,400,000, from
which attorney fees were paid of approximately $300,000. After factoring in the
estimated taxes due, the after-tax net gain was approximately $730,000.
Excluding these two nonrecurring items, net income for the first nine months of
1995 would have been $3,971,000, which is $181,000 or 5% over the first nine
months from the previous year. This increase was partially due to an increase
in the net interest margin.
Earnings per common share increased to $20.25 from $14.63 for the nine
months ended September 30, 1995 when compared to the nine months ended September
30, 1994; however the 1995 amount was also affected by the aforementioned
nonrecurring items.
NET INTEREST INCOME
As reflected in the selected statistical information table on the
following page, net interest income on a tax-equivalent basis increased by
$299,000 in the first nine months of 1995 when compared to the first nine months
of 1994, which was the result of an increase in the net interest margin from
4.23% to 4.40%. This increase was partially offset by a decline in the level of
average interest-earning assets as a result of the sale of Bay-Hermann-Berger
Bank.
17
<PAGE>
Item 2. (continued)
SELECTED STATISTICAL INFORMATION
The following is selected statistical information for Southside Bancshares Corp.
and subsidiaries.
I. Distribution of Assets, Liabilities and Shareholders' Equity; Interest Rates
and Interest Differential
Condensed Consolidated Average Balance Sheet and Average Interest Rates
(dollars in thousands)
<TABLE>
<CAPTION>
Nine Months Ended September 30,
- -----------------------------------------------------------------------------------------------------------------------------------
1995 1994
- ------------------------------------------------------------------------------------------------------------------------------------
AVERAGE Average
INTEREST RATES Interest Rates
AVERAGE INCOME\ EARNED\ Average Income\ Earned\
BALANCE EXPENSE PAID(3) Balance Expense Paid(3)
------- ------- ------ ------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Loans, net of unearned discount (1) (2) (3) $296,057 $20,202 9.10% $293,682 $18,070 8.20%
Investments in debt securities:
Taxable(4) 139,702 6,148 5.87 152,584 6,287 5.49
Exempt from Federal income tax (3) (4) 22,167 1,444 8.69 21,154 1,368 8.62
Short-term investments 12,546 548 5.82 12,349 361 3.90
Total interest-earning assets/interest -------- ------- -------- -------
income/overall yield (3) 470,472 28,342 8.03 479,769 26,086 7.25
Allowance for possible loan losses (6,344) ====== ==== (8,310) ====== ====
Cash and due from banks 16,989 22,449
Other assets 20,218 23,242
-------- --------
TOTAL ASSETS $501,335 $517,150
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest-bearing demand and savings deposits $185,989 4,363 3.13% $201,153 3,863 2.56%
Time deposits 203,759 8,083 5.29 198,005 6,517 4.39
Short-term borrowings 3,356 151 6.00 3,648 186 6.80
Debt of employee stock ownership plan 1,630 110 9.00 - - -
Subordinated capital notes 1,645 119 9.65 4,190 303 9.65
-------- ------- -------- ------
Total interest-bearing liabilities/interest-
expense/overall rate 396,379 12,826 4.31 406,996 10,869 3.56
Non-interest-bearing demand deposits 58,067 ------- ==== 70,053 ------ ====
Other liabilities 4,356 3,216
Shareholders' equity 42,533 36,885
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY -------- ------
$501,335 $517,150
NET INTEREST INCOME ======== ========
$15,516 $15,217
NET INTEREST MARGIN ON AVERAGE INTEREST-EARNING ======= =======
ASSETS 4.40% 4.23%
==== ====
</TABLE>
(1) Interest income includes loan origination fees.
(2) Average balance includes nonaccrual loans.
(3) Interest yields are presented on a tax-equivalent basis. Nontaxable
income has been adjusted upward by the amount of Federal income tax that
would have been paid if the income tax had been taxable at a rate of 34%,
adjusted downward by the disallowance of the interest cost to carry
nontaxable loans and securities subsequent to December 31, 1982.
(4) Includes investments available-for-sale.
18
<PAGE>
Item 2. (continued)
ANALYSIS OF CHANGES IN NET INTEREST INCOME
DUE TO CHANGES IN VOLUME AND CHANGES IN RATES
The following table sets forth on a tax-equivalent basis, for the
periods indicated, a summary of the changes in interest income and interest
expense resulting from changes in the volume and changes in rates. The change
in interest due to both volume and rate has been allocated in proportion to the
relationship of the absolute dollar amounts of the change in each.
FIRST NINE MONTHS 1995 COMPARED TO FIRST NINE MONTHS 1994
(in thousands)
<TABLE>
<CAPTION>
Increase (decrease)
due to change in
--------------------
Net
Increase Average Average
(Decrease) Volume Rate
---------- --------- ---------
<S> <C> <C> <C>
Changes in interest income on:
Loans $2,132 $ 146 $1,986
Investments in debt securities:
Taxable (139) (554) 415
Nontaxable 76 65 11
Short-term investments 187 6 181
------ ----- ------
TOTAL INTEREST INCOME 2,256 (337) 2,593
------ ----- ------
Changes in interest expense on:
Interest-bearing demand and savings deposits
Time deposits 500 (297) 797
Short-term borrowings 1,566 194 1,372
Debt of employee stock ownership plan (35) (14) (21)
Subordinated capital notes 110 110 -
(184) (184) -
TOTAL INTEREST EXPENSE ------ ----- ------
1,957 (191) 2,148
CHANGE IN NET INTEREST INCOME ------ ----- ------
$ 299 $(146) $ 445
====== ===== ======
</TABLE>
PROVISION FOR POSSIBLE LOAN LOSSES
The provision for possible loan losses remained at a relatively low level
during the first nine months of 1995, at $55,000. Because of the increase in the
quality of the loan portfolio, the decline in nonperforming loans and the
controlled loan growth, management determined it was not necessary to record
significant provisions for possible loan losses.
NONINTEREST INCOME
Noninterest income increased $2,090,000 when comparing the income for
the first nine months of 1995 of $4,236,000 to the first nine months of 1994 of
$2,146,000. The increase was due to the $825,000 gain on the sale of Bay-
Hermann-Berger Bank (described in Note 3) and the $1,400,000 litigation
settlement received by South Side National Bank (described in Note 2).
Excluding the effects of these two items, noninterest income declined by
$135,000 because of a decrease in net gains on the sale of other real estate
owned in 1995, which was partially offset by an increase in other income.
Noninterest income on a quarter to quarter basis was up by $236,000 also due to
a decrease in net losses on the sale of other real estate owned, and an increase
in other income.
19
<PAGE>
Item 2. (continued)
NONINTEREST EXPENSE
This increase can largely be attributed to increases in occupancy, data
processing and other expense, which were partially offset by a reduction in
personnel expense and a decline in the Federal Deposit Insurance Corporation
(FDIC) assessment. Noninterest expense during the third quarter was relatively
consistent on a year to year basis, as the increase in data processing expense
was offset by the decrease in the FDIC assessment. The increase in occupancy
expense is largely due to the additional cost of hiring a security firm to
provide guards at the bank facilities. During the third quarter, three of the
Company's four subsidiary banks converted to a new computer system. As a result,
data processing expense increased dramatically during that period because of
numerous nonrecurring conversion related costs. The reduction in personnel can
largely be attributed to the salaries and benefits for Bay-Hermann-Berger Bank,
which was sold in March 1995. On September 15, 1995, the FDIC sent refunds to
all of the Company's subsidiary banks for a retroactive reduction in the
insurance assessment rate from 23 cents to 4 cents per $100 in insured deposits.
The reduction's effective date was June 1, 1995, and, as a result, the Company
received approximately $250,000 for overpayments made for the past four months.
This reduced rate will also lead to a substantial lower FDIC assessment premium
on an ongoing basis.
INCOME TAXES
Federal income tax expense for the first nine months of 1995 was $1,995,000
compared to $1,393,000 in the first nine months of 1994. This increase is
consistent with the increase in pretax income. The Company's effective tax rate
increased to 27.22% in 1995 from 26.97% in 1994, as a result of the level of
tax-exempt income in proportion to the level of pretax income. While pretax
income for the first nine months of 1995 is up substantially over the first
nine months of 1994, tax exempt income has increased only slightly.
COMMON STOCK - MARKET PRICE AND DIVIDENDS
The table below sets forth the high and low closing trade prices of the
Company's common stock for the periods presented. The Company's common stock is
traded on the National Association of Securities Dealers Automated Quotation
System/Small-Cap Market System ("NASDAQ/SCM") under the symbol SBCO.
Accordingly, information included below represents the high and low bid prices
of the common stock reported on NASDAQ/SCM.
<TABLE>
<CAPTION>
Book Dividends Paid Per
High Bid Low Bid Close Value Market/Book Common Share
-------- ------- ------- ------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
3rd Quarter - 1995 $178.00 $175.00 $178.00 $171.53 103.77% $1.00
2nd Quarter - 1995 170.00 170.00 170.00 167.52 100.25 1.00
1st Quarter - 1995 160.00 160.00 160.00 159.59 100.26 0.65
4th Quarter - 1994 160.00 160.00 160.00 146.64 109.11 0.65
3rd Quarter - 1994 165.00 165.00 165.00 145.36 113.51 0.55
2nd Quarter - 1994 165.00 165.00 165.00 142.39 115.88 0.30
1st Quarter - 1994 180.00 180.00 180.00 139.87 128.69 0.30
</TABLE>
20
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
In the normal course of business, the Company had certain routine lawsuits
pending at September 30, 1995. In the opinion of management, after consultation
with legal counsel, none of these lawsuits will have a material adverse effect
on the consolidated financial condition of the Company.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
On September 15, 1995, the Company filed a report on Form 8-K reporting
that it had mailed its shareholders a 1995 Interim Report, which described
certain financial information for the six months ended June 30, 1995.
21
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Report to be signed on its behalf by the
undersigned thereunto duly authorized.
SOUTHSIDE BANCSHARES CORP.
-----------------------------------
November 14, 1995 /s/ Thomas M. Teschner
- ----------------- --------------------------------------
Thomas M. Teschner
President
(Principal Executive Officer)
November 14, 1995 /s/ Joseph W. Pope
- ----------------- --------------------------------------
Joseph W. Pope
Senior Vice President and Chief
Financial Officer (Principal Financial
Officer, Controller, and Principal
Accounting Officer)
22
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<LEGEND>
This schedule contains summary financial information extracted from
Condensed Consolidated Financial Statements in the 10Q for September 30, 1995
and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> SEP-30-1995
<CASH> 15,550
<INT-BEARING-DEPOSITS> 17
<FED-FUNDS-SOLD> 15,900
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 48,729
<INVESTMENTS-CARRYING> 109,786
<INVESTMENTS-MARKET> 109,897
<LOANS> 299,366
<ALLOWANCE> 5,471
<TOTAL-ASSETS> 502,775
<DEPOSITS> 447,037
<SHORT-TERM> 2,170
<LIABILITIES-OTHER> 4,609
<LONG-TERM> 2,987<F1>
<COMMON> 286
0
0
<OTHER-SE> 45,686
<TOTAL-LIABILITIES-AND-EQUITY> 502,775
<INTEREST-LOAN> 19,960
<INTEREST-INVEST> 7,101
<INTEREST-OTHER> 548
<INTEREST-TOTAL> 27,609
<INTEREST-DEPOSIT> 12,446
<INTEREST-EXPENSE> 12,826
<INTEREST-INCOME-NET> 14,783
<LOAN-LOSSES> 55
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 11,628
<INCOME-PRETAX> 7,336
<INCOME-PRE-EXTRAORDINARY> 7,336
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,341
<EPS-PRIMARY> 20.25
<EPS-DILUTED> 20.25
<YIELD-ACTUAL> 4.40
<LOANS-NON> 1,446
<LOANS-PAST> 747
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 7,144
<CHARGE-OFFS> 2,001
<RECOVERIES> 600
<ALLOWANCE-CLOSE> 5,471
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
<FN>
<F1> See Footnote 5 in the Company's third quarter report on Form 10Q.
</FN>
</TABLE>
