<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, 1996
-----------------------------------------------
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, 1996 , the number of shares outstanding of the
---------------------
registrant's common stock was 2,836,670.
------------
<PAGE>
SOUTHSIDE BANCSHARES CORP.
INDEX
Page
----
Part I. FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements:
Condensed Consolidated Balance Sheets at
September 30, 1996 and December 31, 1995 3
Condensed Consolidated Statements of Income for
the nine months and three months ended
September 30, 1996 and September 30, 1995 4
Condensed Consolidated Statements of Cash Flows for
the nine months ended September 30, 1996 and
September 30, 1995 5
Notes to Condensed Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 6
Part II. OTHER INFORMATION
Item 1. Legal Proceedings 19
Item 6. Exhibits and Reports on Form 8-K 19
Signatures 20
2
<PAGE>
SOUTHSIDE BANCSHARES CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
NINE AND THREE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
(dollars in thousands except share data)
(unaudited)
<TABLE>
<CAPTION>
SEPTEMBER 30, December 31,
ASSETS 1996 1995
------------ -----------
<S> <C> <C>
Cash and due from banks $ 17,732 $ 16,912
Due from banks - interest-bearing -- 18
Federal funds sold 17,600 19,100
Investments in debt securities:
Available-for-sale, at market value 60,386 50,152
Held-to-maturity, at amortized cost
(approximate market value of $113,901
in 1996, and $110,494 in 1995) 114,062 109,622
-------- --------
Total investments in debt securities 174,448 159,774
-------- --------
Loans, net of unearned discount
Less allowance for possible loan losses 296,389 303,824
(5,730) (5,635)
-------- --------
Loans, net 290,659 298,189
-------- --------
Bank premises and equipment 10,979 10,777
Other assets 8,013 8,138
-------- --------
TOTAL ASSETS $519,431 $512,908
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Noninterest-bearing demand $ 57,430 $ 60,999
Interest-bearing demand and savings 182,818 183,758
Time deposits 218,820 212,810
-------- --------
Total deposits 459,068 457,567
Short-term borrowings 1,925 779
Debt of employee stock ownership plan 1,779 2,987
Other liabilities 5,147 4,275
-------- --------
Total liabilities 467,919 465,608
-------- --------
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,
2,859,010 shares issued and outstanding in 1996 and 1995 2,859 2,859
Surplus 5,798 5,766
Retained earnings 45,449 41,655
Unearned employee stock ownership plan shares (1,631) (2,688)
Treasury stock, 22,340 shares in 1996 and 9,630 shares in 1995 (450) (167)
Net unrealized losses on available-for-sale securities (513) (125)
-------- --------
Total shareholders' equity 51,512 47,300
-------- --------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $519,431 $512,908
======== ========
See accompanying notes to condensed consolidated financial statements.
</TABLE>
3
<PAGE>
SOUTHSIDE BANCSHARES CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
NINE AND THREE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
(dollars in thousands except share data)
(unaudited)
<TABLE>
<CAPTION>
NINE MONTHS ENDED THREE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
1996 1995 1996 1995
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
INTEREST INCOME:
Interest and fees on loans $ 20,215 $ 19,960 $ 7,085 $ 6,769
Interest on investments in debt securities:
Taxable 6,548 6,148 2,306 1,997
Exempt from Federal income taxes 952 953 317 310
Interest on short-term investments 748 548 212 258
---------- ---------- ---------- ----------
TOTAL INTEREST INCOME 28,463 27,609 9,920 9,334
---------- ---------- ---------- ----------
INTEREST EXPENSE:
Interest on interest-bearing demand and savings deposits 4,221 4,363 1,448 1,425
Interest on time deposits 8,671 8,083 2,915 2,905
Interest on short-term borrowings 79 151 28 33
Interest on debt of employee stock ownership plan 132 110 37 55
Interest on subordinated capital notes -- 119 -- --
---------- ---------- ---------- ----------
TOTAL INTEREST EXPENSE 13,103 12,826 4,428 4,418
---------- ---------- ---------- ----------
NET INTEREST INCOME 15,360 14,783 5,492 4,916
Provision for possible loan losses 45 55 15 15
---------- ---------- ---------- ----------
NET INTEREST INCOME AFTER PROVISION
FOR POSSIBLE LOAN LOSSES 15,315 14,728 5,477 4,901
---------- ---------- ---------- ----------
NONINTEREST INCOME:
Trust department 658 706 201 239
Service charges on deposit accounts 937 903 312 306
Net gains (losses) on sale of other real estate
owned and other foreclosed property 52 (163) 75 (33)
Settlement of litigation -- 1,400 -- --
Gain on sale of Bay-Hermann-Berger Bank -- 825 -- --
Other 584 565 180 230
TOTAL NONINTEREST INCOME ---------- ---------- ---------- ----------
2,231 4,236 768 742
---------- ---------- ---------- ----------
NONINTEREST EXPENSES:
Salaries and employee benefits 5,521 5,227 1,871 1,735
Net occupancy and equipment expense 1,763 1,541 586 529
Data processing 351 638 108 340
Federal Deposit Insurance Corporation assessment 103 553 34 9
Attorney fees 242 519 132 103
Other 3,115 3,150 1,094 1,003
---------- ---------- ---------- ----------
TOTAL NONINTEREST EXPENSES 11,095 11,628 3,825 3,719
---------- ---------- ---------- ----------
INCOME BEFORE FEDERAL INCOME TAX EXPENSE 6,451 7,336 2,420 1,924
Federal income tax expense 1,701 1,995 577 522
---------- ---------- ---------- ----------
NET INCOME $ 4,750 $ 5,341 $ 1,843 $ 1,402
========== ========== ========== ==========
SHARE DATA:
Earnings per common share $1.76 $2.03 $0.68 $0.52
========== ========== ========== ==========
Dividends paid per common share $0.35 $0.265 $0.13 $0.10
========== ========== ========== ==========
Average common shares outstanding 2,698,864 2,631,034 2,710,294 2,696,154
========== ========== ========== ==========
See accompanying notes to condensed consolidated financial statements.
</TABLE>
4
<PAGE>
SOUTHSIDE BANCSHARES CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
(dollars in thousands)
(unaudited)
<TABLE>
1996 1995
-------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 4,750 $ 5,341
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 1,426 1,248
Provision for possible loan losses 45 55
Gain on sale of Bay-Hermann-Berger Bank -- (825)
Other operating activities, net 309 1,489
-------- --------
Total adjustments 1,780 1,967
-------- --------
NET CASH PROVIDED BY OPERATING ACTIVITIES 6,530 7,308
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Net (increase) decrease in Federal funds sold 1,500 (6,300)
Proceeds from maturities of and principal payments on
debt securities 36,069 21,007
Purchases of debt securities (51,721) (14,899)
Net (increase) decrease in loans 6,609 (12,033)
Recoveries of loans previously charged off 876 600
Proceeds from the sale of Bay-Hermann-Berger Bank,
net of cash transferred -- 2,213
Proceeds from sales of other real estate owned and other
foreclosed property 617 1,377
Purchases of bank premises and equipment (1,086) (1,334)
-------- --------
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES (7,136) (9,369)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net decrease in demand and savings deposits (4,509) (23,981)
Net increase in time deposits 6,010 24,602
Net increase (decrease) in short-term borrowings 1,146 (1,408)
Payments to acquire treasury stock (283) --
Repayment of subordinated capital notes -- (4,190)
Cash dividends paid (956) (702)
Proceeds from issuance of common stock -- 4,279
-------- --------
NET CASH USED IN FINANCING ACTIVITIES 1,408 (1,400)
-------- --------
NET DECREASE IN CASH AND CASH EQUIVALENTS 802 (3,461)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 16,930 19,028
-------- --------
CASH AND CASH EQUIVALENTS, END OF QUARTER $ 17,732 $ 15,567
======== ========
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest on deposits and borrowings $ 13,105 $ 12,251
Income taxes 1,718 1,420
======== ========
Noncash transactions:
Transfers to other real estate owned in settlement of loans $ 381 $ 735
======== ========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
5
<PAGE>
SOUTHSIDE BANCSHARES CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1996 AND 1995
(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, 1995.
Operating results for the nine months ended September 30, 1996 are not
necessarily indicative of the results that may be expected for the year ending
December 31, 1996.
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 1995 condensed consolidated statement 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 1995 condensed consolidated statement 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.
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, 1996 and 1995.
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. Net income is also affected by the
levels of provisions for possible loan losses, noninterest income, and
noninterest expense.
6
<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, 1996 December 31, 1995 September 30, 1995
------------------ ------------------- ------------------
<S> <C> <C> <C>
EARNINGS
Total interest income $ 28,463 $ 37,263 $ 27,609
Total interest expense 13,103 17,335 12,826
---------- ---------- ----------
Net interest income 15,360 19,928 14,783
Provision for possible loan losses 45 70 55
========== ========== ==========
Net interest income after provision for possible
loan losses $ 15,315 $ 19,858 $ 14,728
========== ========== ==========
Net income $ 4,750 $ 6,734 $ 5,341
========== ========== ==========
SHARE DATA/(1)/
Net income $ 1.76 $ 2.55 $ 2.03
Dividends paid .35 .365 .265
Book value 18.84 17.64 17.15
Tangible book value 18.71 17.49 17.00
Shares outstanding (period-end) 2,836,670 2,849,650 $2,859,010
FINANCIAL POSITION
Total assets $ 519,431 $ 512,908 $ 502,775
Total deposits 459,068 457,567 447,037
Total loans, net of unearned discount 296,389 303,824 299,366
Allowance for possible loan losses 5,730 5,635 5,471
Short-term borrowings 1,925 779 2,170
Debt of employee stock ownership plan 1,779 2,987 2,987
Total shareholders' equity 51,512 47,300 45,972
</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, 1996(2) December 31, 1995 September 30, 1995(2)
--------------------- ------------------- ---------------------
<S> <C> <C> <C>
Loan-to-deposit ratio 64.56% 66.40% 66.97%
Allowance for possible loan losses to total
loans 1.93 1.85 1.83
Return on average assets 1.23 1.33(3) 1.42 (3)
Return on average shareholders' equity 12.79 15.47(3) 6.74 (3)
Net interest margin on average interest-
earning assets 4.48 4.41 4.40
Average shareholders' equity to average total
assets 9.65 8.62 8.49
Tier I leverage capital to adjusted total
consolidated assets less intangibles 10.01 9.27 9.14
Tier I capital to risk-weighted assets 16.80 14.94 14.93
Total capital to risk-weighted assets 18.06 16.20 16.19
</TABLE>
(1) Share Data has been adjusted on a retroactive basis to reflect the effects
of the ten for one stock split on February 15, 1996.
(2) Statistical information is annualized where applicable.
(3) 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 as of December 31, 1995 would
have been 1.06% and 12.32%, respectively and as of September 30, 1995 would have
been 1.05% and 12.45%, respectively.
7
<PAGE>
Item 2. (continued)
FINANCIAL POSITION
Total consolidated assets of the Company have increased slightly during
1996 to $519,431,000 at September 30, 1996 compared to $512,908,000 at December
31, 1995.
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, 1996 December 31, 1995 September 30, 1995
------------------ ------------------ ------------------
<S> <C> <C> <C>
Commercial, financial and agricultural $ 64,470 $ 62,214 $ 59,603
Real estate-commercial 82,445 88,321 85,402
Real estate-construction 24,534 15,510 10,043
Real estate-residential 96,921 102,418 107,039
Consumer 16,749 17,626 18,694
Industrial revenue bonds 6,571 7,789 7,783
Other 4,699 9,946 10,802
-------- -------- --------
$296,389 $303,824 $299,366
======== ======== ========
</TABLE>
The Company's loan portfolio totaled $296,389,000 at September 30, 1996.
This represents a decline of approximately $7.4 million since December 31, 1995;
however, total loans have increased by $4.6 million since March 31, 1996, after
the portfolio balance decreased by $12 million during the first quarter of 1996.
The majority of the first quarter decline was the result of a few large loan
payoffs in the commercial and residential real estate and other loan categories,
as well as, normal activity on operating lines of credit. The increase in the
second and third quarter can be attributed to new commercial loan fundings, and
advances to borrowers in the construction industry. The increase in the
commercial loan portfolio is a result of management's focus on replacing the
loan payoffs in other segments of the loan portfolio. The increase in the
construction portfolio is a normal seasonal occurrence for this segment of
economy. Management is cognizant of the major role that loans play in the
overall financial performance of the Company, and has focused considerable
effort and attention to new loan generation; however, the Company still faces
stiff competition over new and existing borrowing relationships. Management of
the Company strongly believes that the prudent course of action is to weigh both
the short and long-term effects of pursuing and retaining borrowing
relationships during this period of intense competition, and that this approach
will contribute to the long-term financial success of the Company.
8
<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, 1996 December 31, 1995 September 30, 1995
------------------ -------------------- ------------------
<S> <C> <C> <C>
BALANCE AT BEGINNING OF PERIOD $ 5,635 $ 7,144 $ 7,144
Provision charged to expense 45 70 55
Loans charged off (826) (2,174) (2,001)
Recoveries 876 922 600
Adjustment due to sale of Bay-Hermann-
Berger Bank - (327) (327)
------- ------- -------
BALANCE AT END OF PERIOD $ 5,730 $ 5,635 $ 5,471
======= ======= =======
RATIOS:
Allowance for possible loan losses as
% of total loans 1.93% 1.85% 1.83%
Allowance for possible loan losses as
% of nonperforming loans 161.45 172.11 249.48
Allowance for possible loan losses as
multiple of net charge-offs (1) (2) 4.5x 3.9x
</TABLE>
(1) Statistical information is annualized where applicable.
(2) Not applicable, as the Company has experienced net recoveries through the
first three quarters of 1996.
The balance of the allowance for possible loan losses has increased by
$95,000 during the first nine months of 1996, as recoveries have exceeded
charge-offs by $50,000, and the Company has recorded a provision for possible
loan losses during the first nine months of $45,000. Based upon the Company's
internal analysis of the adequacy of the allowance for possible loan losses,
management of the Company believes the level is adequate to cover actual and
potential losses in the loan portfolio under current conditions.
The ratio of allowance for possible loan losses as a percentage of total
loans increased to 1.93% as of September 30, 1996 compared to 1.85% and 1.83% at
December 31, 1995 and September 30, 1995, respectively, largely due to the
aforementioned net recoveries during the first nine months of the year. The
ratio of the allowance for possible loan losses to nonperforming loans declined
to 161.45% at September 30, 1996 compared to 172.11% and 249.48% as of December
31, 1995 and September 30, 1995, respectively. This decrease was primarily the
result of a slight increase in nonperforming loans which is more fully described
on the following page.
9
<PAGE>
Item 2. (continued)
NONPERFORMING ASSETS
<TABLE>
<CAPTION>
(dollars in thousands)
September 30, 1996 December 31, 1995 September 30, 1995
------------------ -------------------- ------------------
<S> <C> <C> <C>
Nonaccrual loans $ 3,065 $ 1,811 $ 1,446
Loans past due 90 days and still accruing interest 484 1,463 747
------- ------- -------
TOTAL NONPERFORMING LOANS 3,549 3,274 2,193
358 554 1,044
------- ------- -------
Other real estate owned $ 3,907 $ 3,828 $ 3,237
======= ======= =======
TOTAL NONPERFORMING ASSETS
RATIOS:
Total nonperforming loans as % of total loans 1.20% 1.08% 0.73%
Nonperforming assets as % of total loans and
other real estate owned 1.32 1.26 1.08
Nonperforming assets as % of total assets 0.75 0.75 0.64
</TABLE>
Nonperforming assets totaled $3,907,000 or 0.75% of total assets at
September 30, 1996 compared to $3,828,000 or 0.75% and $3,237,000 or 0.64% at
December 31, 1995 and September 30, 1995, respectively. The increase in
nonaccrual loans was the result of a commercial credit totaling $1.3 million
which deteriorated during the first half of 1996, and was placed on nonaccrual
status in June. Management anticipates resolving this credit through the work
out process during the fourth quarter of 1996. While management understands that
nonperforming asset levels are going to fluctuate periodically throughout the
year, it is management's commitment to continue to monitor and maintain an
acceptable level of nonperforming assets.
Other real estate owned decreased $196,000 during the first nine months of
1996 as a result of selling some of the properties. 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, 1996, there were no concentrations of
loans exceeding 10% of total loans which were not disclosed as a category of
loans detailed on page 8.
INVESTMENTS IN DEBT SECURITIES
Investments in debt securities have increased approximately $14.7 million
since December 31, 1995. As a result of the decrease in the loan portfolio
during the first nine months of 1996, the Company had additional funds available
to invest in securities. In addition, the yield curve steepened during the first
nine months of 1996, which resulted in a wider spread between short-term and
intermediate-term investment securities. This increased spread made the purchase
of securities in the intermediate-term category more attractive, and therefore,
management took advantage of this situation.
10
<PAGE>
Item 2. (continued)
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 its 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, 1996.
<TABLE>
<CAPTION>
(in thousands)
AVAILABLE-FOR-SALE HELD-TO-MATURITY
---------------------- -----------------------
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 $17,068 $16,913 $ 86,531 $ 85,669
Obligations of states and political subdivisions 545 553 21,868 22,528
Other debt securities 1,279 1,279 320 320
------- ------- -------- --------
18,892 18,745 108,719 108,517
Mortgage-backed securities 42,274 41,641 5,343 5,384
------- ------- -------- --------
$61,166 $60,386 $114,062 $113,901
======= ======= ======== ========
</TABLE>
DEPOSITS
Total deposits increased approximately $1.5 million during the first nine
months of 1996. This increase was largely due to an increase in time deposits
$100,000 and over, partially offset by a decline in noninterest-bearing demand
deposits. Depending on the funding needs of the Company's customers, the
balances in these accounts can fluctuate significantly on a daily basis. In
addition, customers continue to become more sophisticated in managing their cash
positions, and are finding more ways to keep their noninterest-bearing deposits
at a minimum.
The following table presents deposits by category as of the end of the periods
indicated.
<TABLE>
<CAPTION>
(in thousands)
SEPTEMBER 30, 1996 December 31, 1995 September 30, 1995
------------------ ----------------- ------------------
<S> <C> <C> <C>
Noninterest-bearing demand deposits $ 57,430 $ 60,999 $ 55,509
Interest-bearing demand deposits 123,037 123,624 116,693
Savings deposits 59,781 60,134 62,576
Time deposits under $100,000 175,698 176,200 178,321
-------- -------- --------
Total core deposits 415,946 420,957 413,099
Time deposits $100,000 and over/(1)/ 43,122 36,610 33,938
-------- -------- --------
Total deposits $459,068 $457,567 $447,037
======== ======== ========
</TABLE>
(1) Deposits which are generally deemed highly interest rate sensitive.
11
<PAGE>
Item 2. (continued)
SHORT-TERM BORROWINGS
Short-term borrowings consist of securities sold under agreements to
repurchase and a U.S. Treasury tax and loan note account. The following is a
summary of short-term borrowings as of the end of the periods indicated.
<TABLE>
<CAPTION>
(in thousands)
September 30, 1996 December 31, 1995 September 30, 1995
------------------ ----------------- ------------------
<S> <C> <C> <C>
Securities sold under agreements to repurchase $1,925 $ 307 $ 386
U.S. Treasury tax and loan note account - 472 1,784
------ ----- -------
$1,925 $ 779 $ 2,170
====== ===== =======
</TABLE>
The balance of the U. S. Treasury tax and loan note account, which houses
federal tax deposits on an interim basis, fluctuates based on the cash flow
needs of the U. S. Treasury Department. They periodically draw down the balance
in this account and then allow it to be replenished. The maximum balance in the
account is $2 million. The increase in securities sold under agreement to
repurchase is due to a new daily "repo sweep" account introduced by the Company
during the third quarter. This cash management product allows commercial
customers to more effectively invest their operating funds within the banks.
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, 1996. 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 1.07x.
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.
12
<PAGE>
Item 2. (continued)
REPRICING AND INTEREST RATE SENSITIVITY ANALYSIS
(dollars in thousands)
SEPTEMBER 30, 1996
<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:
Federal funds sold $ 17,600 $ - $ - $ - $ 17,600
Investments available-for-sale 11,589 11,329 35,595 1,873 60,386
Investments held-to-maturity 7,419 17,739 68,937 19,967 114,062
Loans, net of unearned discount/(1)/ 127,511 69,035 81,063 18,780 296,389
-------- -------- -------- -------- --------
Total interest-earning assets 164,119 98,103 185,595 40,620 488,437
-------- -------- -------- -------- --------
Cumulative interest-earning assets 164,119 262,222 447,817 488,437 488,437
-------- -------- -------- -------- --------
Interest-bearing liabilities:
Interest-bearing demand deposits 43,063 24,607 30,760 24,607 123,037
Savings deposits 20,923 11,956 14,946 11,956 59,781
Time deposits under $100,000 37,227 65,465 73,006 - 175,698
Time deposits $100,000 and over 18,807 19,646 4,669 - 43,122
Short-term borrowings 1,925 - - - 1,925
Debt of employee stock ownership plan 1,779 - - - 1,779
-------- -------- -------- -------- --------
Total interest-bearing liabilities 123,724 121,674 123,381 36,563 405,342
-------- -------- -------- -------- --------
Cumulative interest-bearing liabilities 123,724 245,398 368,779 405,342 405,342
-------- -------- -------- -------- --------
Gap analysis:
Interest sensitivity gap $ 40,395 $(23,571) $ 62,214 $ 4,057 $ 83,095
======== ======== ======== ======== ========
Cumulative interest sensitivity gap $ 40,395 $ 16,824 $ 79,038 $ 83,095 $ 83,095
======== ======== ======== ======== ========
Cumulative gap ratio of interest-earning
assets to interest-bearing liabilities 1.33x 1.07x 1.21x 1.20x 1.20x
======== ======== ======== ======== ========
</TABLE>
/(1)/ Nonaccrual loans are reported in the "Over 1 year through 5 years"
column.
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 were 18.06%, 16.20% and 16.19% as of September 30, 1996,
December 31, 1995, and September 30, 1995, respectively, which included Tier I
capital ratios of 16.80%, 14.94%, and 14.93%, respectively. These ratios are
well above 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 and excluding unrealized holding gains and losses on
available-for-sale
13
<PAGE>
Item 2. (continued)
securities of the Company. The Company's Tier I leverage ratios were 10.01%,
9.27%, and 9.14% at September 30, 1996, December 31, 1995, and September 30,
1995, respectively.
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.
Results of Operations
Earnings Summary
Net income was $4,750,000 for the nine months ended September 30, 1996
compared to $5,341,000 for the nine months ended September 30, 1995. This
decrease can be attributed to the effects of two nonrecurring items which
occurred during the first nine months of 1995. The first item was the gain on
the sale of Bay-Hermann-Berger Bank of $825,000, with the resulting net after-
tax gain being $640,000. The second item was the litigation settlement received
by South Side National Bank of $1,400,000, from which attorney fees of
approximately $300,000 were paid. After factoring in the estimated taxes due,
the after-tax net gain was approximately $730,000. Excluding these two
nonrecurring items, core net earnings for the first nine months of 1995 were
$3,971,000. Therefore, excluding the effects of these nonrecurring items, the
Company achieved a $779,000, or 20%, increase in core net earnings in the first
nine months of 1996 versus the first nine months of 1995. The improvement in
core net earnings during 1996 was largely due to an increase in net interest
income and a decrease in noninterest expense.
Net income for the third quarter of 1996 was $1,843,000 compared to
$1,402,000 in the third quarter of 1995. This increase in net income on a
comparative basis was due largely to a $576,000 increase in net interest income
partially offset by an increase in noninterest expenses of $106,000. Third
quarter net interest income was positively affected by the recovery of past due
interest on a nonperforming loan.
Earnings per common share were $1.76 for the first nine months of 1996
compared to $2.03 for the first nine months of 1995, or $1.51 after
consideration of the aforementioned nonrecurring items. The earnings per common
share amounts were $0.68 and $0.52 for the third quarter of 1996 and 1995,
respectively. The earnings per common share amounts have been retroactively
adjusted for the ten-for-one stock split which occurred on February 15, 1996.
The first nine months net income of 1996 results in an annualized return on
average assets (ROA) of 1.23% and a return on average shareholders' equity (ROE)
of 12.79%. While these ratios are below the comparable ratios from the first
nine months of 1995 because of the aforementioned nonrecurring items, they are
consistent with our peers in the industry.
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 $750,000 in the
first nine months of 1996 when compared to the first nine months of 1995.
Approximately one half of the increase is attributable to the aforementioned
interest recovery, which in turn resulted in an increase in the net interest
margin from 4.40% in 1995 to 4.48% in 1996. The remainder of the increase is due
to a $14 million increase in average earning assets during 1996.
14
<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,
- ------------------------------------------------------------------------------------------------------------------------------
1996 1995
- ------------------------------------------------------------------------------------------------------------------------------
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) $ 296,274 $ 20,631 9.28% $ 296,057 $ 20,202 9.10%
Investments in debt securities:
Taxable(4) 146,249 6,548 5.97 139,702 6,148 5.87
Exempt from Federal income tax (3) (4) 23,088 1,442 8.33 22,167 1,444 8.69
Short-term investments 18,786 748 5.31 12,546 548 5.82
--------- --------- --------- ---------
Total interest-earning assets/interest
income/overall yield (3) 484,397 29,369 8.08 470,472 28,342 8.03
--------- ======= --------- =======
Allowance for possible loan losses (5,576) (6,344)
Cash and due from banks 15,439 16,989
Other assets 18,809 20.218
--------- ---------
Total Assets $ 513,069 $ 501,335
========= =========
Liabilities and Shareholders' Equity
Interest-bearing demand and savings deposits $ 183,763 4,221 3.06% $ 185,989 4,363 3.13%
Time deposits 215,753 8,671 5.36 203,759 8,083 5.29
Short-term borrowings 1,942 79 5.42 3,356 151 6.00
Debt of employee stock ownership plan 2,133 132 8.25 1,630 110 9.00
Subordinated capital notes - - - 1,645 119 9.65
--------- --------- --------- ---------
Total interest-bearing liabilities/interest-
expense/overall rate 403,591 13,103 4.33 396,379 12,826 4.31
--------- ======= --------- =======
Non-interest-bearing demand deposits 54,991 58,067
Other liabilities 4,953 4,356
Shareholders' equity 49,534 42,553
--------- ---------
Total Liabilities and Shareholders' Equity $ 513,069 $ 501,335
========= =========
Net interest income $ 16,266 $ 15,516
========= =========
Net interest margin on average interest-earning
assets 4.48% 4.40%
======= =======
- ------------------------------------------------------------------------------------------------------------------------------
</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.
15
<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 1996 Compared to First Nine Months 1995
(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 $ 429 $ 15 $414
Investments in debt securities:
Taxable 400 293 107
Nontaxable (2) 59 (61)
Short-term investments 200 252 (52)
------ ----- ----
Total interest income 1,027 619 408
------ ----- ----
Changes in interest expense on:
Interest-bearing demand and savings deposits (142) (50) (92)
Time deposits 588 480 108
Short-term borrowings (72) (59) (13)
Debt of employee stock ownership plan 22 32 (10)
Subordinated capital notes (119) (119) -
------ ----- ----
Total interest expense 277 284 (7)
Change in net interest income ------ ----- ----
$ 750 $ 335 $415
====== ===== ====
</TABLE>
Provision for Possible Loan Losses
The provision for possible loan losses remained at a relatively low level of
$45,000 during the first nine months of 1996. Based on the Company's analysis of
the adequacy of the allowance for possible loan losses, management determined it
was not necessary to record significant provisions for possible loan losses.
Management will continue to assess the adequacy of the allowance for possible
loan losses on a regular basis throughout the year.
Noninterest Income
Noninterest income decreased $2,005,000 when comparing the first nine months
of 1996 to the first nine months of 1995; however, the decrease was caused by
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 increased by $220,000. This increase was largely the result of $52,000 in
gains on the sales of other real estate owned in 1996 versus net losses of
$163,000 in 1995.
16
<PAGE>
Item 2. (continued)
Noninterest income in the third quarter of 1996 was $768,000 compared to
$742,000 in the third quarter of 1995. This increase is largely the result of
gains on the sales of other real estate owned. In the prior year, losses of
$33,000 were recognized on these sales, while in 1996, gains of $75,000 were
recognized during the third quarter. These gains were partially offset by
declines in the trust department and other income.
Noninterest Expense
Noninterest expense for the first nine months of 1996 was $533,000 less than
the comparable expense from the prior year. This decrease can largely be
attributed to decreases in data processing expense, FDIC assessments, attorney
fees and other expense, which were partially offset by an increase in salaries
and employee benefits and net occupancy and equipment expense. The reduction in
data processing expense was due to the data processing conversion completed in
1995. One of the objectives of the conversion was to reduce the monthly data
processing expense, although a portion of this savings has been offset by an
increase in equipment expense. The decrease in the FDIC assessment was a result
of the Bank Insurance Fund achieving its federally-mandated fully funded level
in 1995. When this occurred, the FDIC assessment rate paid by most institutions
dropped to the minimum level required by law. The Company does, however, still
have a small portion of deposits, which were acquired from the Resolution Trust
Corporation in 1990, which are covered by the Savings Association Insurance
Fund. The Company is assessed a higher premium on these deposits. Attorney fees
in 1995 included the $300,000 in fees pertaining to the litigation settlement at
South Side National Bank. Excluding these fees, the expense was comparable
between the two time periods. The increase in net occupancy and equipment
expense can be partially attributed to the increased equipment cost associated
with the data processing conversion. The remainder of the increase was the
result of a new facility opened by South Side National Bank on February 1, 1996.
This is the seventh location for the Company's lead bank and the thirteenth
location for the organization as a whole.
Noninterest expense during the third quarter of 1996 was $3,825,000 versus
$3,719,000 in the prior year. The increase was the result of increases in
salaries and employee benefits and net occupancy and equipment expense, which
were partially offset by a decline in data processing expense. These
fluctuations are largely attributable to the same factors as the year-to-date
information above.
Income Taxes
Federal income tax expense for the first nine months of 1996 was $1,701,000
compared to $1,995,000 in the first nine months of 1995. The decrease was due to
a decline in the first nine months pretax earnings. The effective tax rate
decreased to 26.37% in 1996 from 27.19% in 1995. This decrease was largely due
to an increase in interest income exempt from Federal income tax expense.
Effect of New Accounting Standards
Effective January 1, 1996, the Company adopted Statement of Financial
Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed of" ("SFAS 121").
SFAS 121 provides guidance for recognition and measurement of impairment of
long-lived assets, certain
17
<PAGE>
Item 2. (continued)
identifiable intangibles, and goodwill related both to assets to be held and
used and assets to be disposed of. The statement requires entities to perform
separate calculations for assets to be held and used to determine whether
recognition of an impairment loss is required and, if so, to measure impairment.
If the sum of the expected future cash flows, undiscounted and without interest
charges, is less than the asset's carrying amount, an impairment loss can be
recognized. If the sum of the expected future cash flows is more than the
asset's carrying amount, an impairment loss cannot be recognized. Measurement of
an impairment loss is based on the fair value of the asset. SFAS 121 also
requires long-lived assets and certain identifiable intangibles to be disposed
of to be reported at the lower of carrying amount or fair value less cost to
sell.
As of the adoption date of January 1, 1996, the Company had no impaired
long-lived or intangible assets affected by this statement.
Effective January 1, 1996, the Company adopted Statement of Financial
Accounting Standards No. 123, "Accounting for Stock-Based Compensation" ("SFAS
123").
SFAS 123 provides guidance for accounting and reporting standards for stock-
based employee compensation plans. SFAS 123 defines a fair value based method of
accounting for an employee stock option or similar equity instrument and
encourages all entities to adopt that method of accounting for all of their
employee stock compensation plans. However, it also allows an entity to continue
to measure compensation cost for those plans using the intrinsic value based
method of accounting prescribed by APB Opinion No. 25, Accounting for Stock
Issued to Employees. Entities electing to remain with the accounting in Opinion
25 must make pro forma disclosures of net income and, if presented, earnings per
share, as if the fair value based method of accounting defined in SFAS 123 and
been applied. Under the fair value based method, compensation cost is measured
at the grant date on the value of the award and is recognized over the service
period, which is usually the vesting period. Under the intrinsic value based
method, compensation cost is the excess, if any, of the quoted market price of
the stock at grant date or other measurement date over the amount an employee
must pay to acquire the stock.
The Company has elected to continue to use the intrinsic value based method
of accounting, and will disclose the effect of the fair value based method in
the 1996 Annual Report Form 10-K.
In June 1995, the FASB issued SFAS 125, Accounting for Transfers and
Servicing Financial Assets and Extinguishment of Liabilities (SFAS 125). SFAS
125 established accounting and reporting standards for transfers and servicing
of financial assets and extinguishment of liabilities.
The standards established by SFAS 125 are based on consistent applications
of a financial-components approach that focuses on control. Under that approach,
after a transfer of financial assets, an entity recognizes the financial and
servicing assets it controls and the liabilities that it has incurred,
derecognizes financial assets when control has been surrendered, and
derecognizes liabilities when extinguished. This statement provides consistent
standards for distinguishing transfers of financial assets that are sales from
transfers that are secured borrowings.
SFAS 125 is effective for transfers and servicing of financial assets and
extinguishments of liabilities occurring after December 31, 1996, and is to be
applied prospectively. Earlier or retroactive application is not permitted.
18
<PAGE>
Item 2. (continued)
Management does not believe the implementation of SFAS 125 will have a
material effect on its consolidated financial position or results of operation.
Common Stock - Market Price and Dividends
The table below sets forth the high, low and closing bid 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. The information presented has been
retroactively adjusted to reflect the effects of the ten-for-one stock split on
February 15, 1996.
<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 - 1996 $20.50 $20.25 $20.50 $18.84 108.81% $ 0.13
2nd Quarter - 1996 20.00 19.00 20.00 18.25 109.59 0.12
1st Quarter - 1996 21.00 19.00 19.00 18.00 105.56 0.10
4th Quarter - 1995 20.00 17.80 20.00 17.64 113.38 0.10
3rd Quarter - 1995 17.80 17.50 17.80 17.15 103.79 0.10
2nd Quarter - 1995 17.00 16.00 17.00 16.75 101.49 0.10
1st Quarter - 1995 16.00 16.00 16.00 15.96 100.25 0.065
</TABLE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
In the normal course of business, the Company had certain routine lawsuits
pending at September 30, 1996. 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
None
19
<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, 1996 /s/ Thomas M. Teschner
- ----------------- --------------------------------------------
Thomas M. Teschner
President
(Principal Executive Officer)
November 14, 1996 /s/ Joseph W. Pope
- ----------------- --------------------------------------------
Joseph W. Pope
Senior Vice President and Chief
Financial Officer (Principal Financial
Officer, Controller, and Principal
Accounting Officer)
20
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<LEGEND>
This schedule contains summary financial information extracted from Southside
Bancshares Corp. Third Quarter Report on Form 10 Q 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-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 17,732
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 17,600
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 60,386
<INVESTMENTS-CARRYING> 114,062
<INVESTMENTS-MARKET> 113,901
<LOANS> 296,389
<ALLOWANCE> 5,730
<TOTAL-ASSETS> 519,431
<DEPOSITS> 459,068
<SHORT-TERM> 1,925
<LIABILITIES-OTHER> 5,147
<LONG-TERM> 1,779<FN>
<COMMON> 2,859
0
0
<OTHER-SE> 48,653
<TOTAL-LIABILITIES-AND-EQUITY> 519,431
<INTEREST-LOAN> 20,215
<INTEREST-INVEST> 7,500
<INTEREST-OTHER> 748
<INTEREST-TOTAL> 28,463
<INTEREST-DEPOSIT> 12,892
<INTEREST-EXPENSE> 13,103
<INTEREST-INCOME-NET> 15,360
<LOAN-LOSSES> 45
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 11,095
<INCOME-PRETAX> 6,451
<INCOME-PRE-EXTRAORDINARY> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,750
<EPS-PRIMARY> 1.76
<EPS-DILUTED> 1.76
<YIELD-ACTUAL> 4.48
<LOANS-NON> 3,065
<LOANS-PAST> 484
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 5,635
<CHARGE-OFFS> 826
<RECOVERIES> 876
<ALLOWANCE-CLOSE> 5,730
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
<FN>
<F1> Represents debt of the Company's Employee Stock Ownership Plan, which is
reflected on the Company's Financial Statement according to Generally
Accepted Accounting Principles.
</FN>
</TABLE>
