UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
__X__QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1999
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 0-26016
PALMETTO BANCSHARES, INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
South Carolina 74-2235055
- --------------------------------- -----------------------
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
301 Hillcrest Drive
Laurens, South Carolina
29360
--------------------------------------------
(Address of principal executive offices)
(Zip Code)
(864) 984-4551
--------------------------------------------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements
for the past 90 days. Yes X No
--- ---
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Class Outstanding at August 9, 1999
- ----------------------------- -------------------------------
Common stock, $5.00 par value 3,104,117
<PAGE>
PALMETTO BANCSHARES, INC.
Quarterly Report on Form 10-Q
For the Quarter and Six Months Ended June 30, 1999
INDEX Page No.
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PART I - FINANCIAL INFORMATION
- ------------------------------
Consolidated Balance Sheets at June 30, 1999 and
December 31, 1998 1
Consolidated Income Statements for the Three Months
Ended June 30, 1999 and 1998 2
Consolidated Income Statements for the Six Months
Ended June 30, 1999 and 1998 3
Consolidated Statements of Cash Flows for
the Six Months Ended June 30, 1999 and 1998 4-5
Consolidated Statements of Changes in Shareholders' Equity
and Comprehensive Income for the Six Months Ended
June 30, 1999 and 1998 6
Notes to Consolidated Interim Financial Statements 7 - 8
Management's Discussion and Analysis of
Financial Condition and Results of Operations 8 - 17
PART II - OTHER INFORMATION 18-19
- ---------------------------
SIGNATURES 20
- ----------
<PAGE>
PALMETTO BANCSHARES, INC. AND SUBSIDIARY
Consolidated Balance Sheets
(Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
June 30, 1999 December 31, 1998
---------------------------------
Assets (unaudited)
<S> <C> <C>
Cash and due from banks $35,034 $27,929
Federal funds sold 3,212 110
Federal Home Loan Bank stock, at cost 1,733 1,541
Investment securities held to maturity (market values of $0
and $68,737 in 1999 and 1998, respectively) - 66,455
Investment securities available for sale (amortized cost of
$106,663 and $45,551, in 1999 and 1998, respectively) 105,299 46,087
Loans held for sale 3,084 2,122
Loans 427,928 413,266
Less allowance for loan losses (6,112) (5,795)
----------------------------------
Loans, net 421,816 407,471
Premises and equipment, net 15,133 14,347
Accrued interest 4,592 4,499
Other assets 7,242 6,839
----------------------------------
Total assets $597,145 $577,400
==================================
Liabilities and Shareholders' Equity
Liabilities:
Deposits:
Non-interest-bearing 86,748 83,788
Interest-bearing 434,036 415,885
----------------------------------
Total deposits 520,784 499,673
Securities sold under agreements to repurchase 14,244 21,630
Commercial paper (Master note) 14,985 10,859
Other liabilities 3,148 3,153
----------------------------------
Total liabilities 553,161 535,315
----------------------------------
Common stock subject to put/call option (ESOP) - 4,732
Shareholders' Equity:
Common stock-$5.00 par value. Authorized 10,000,000 shares;
3,104,117 issued and outstanding in 1999; and
3,099,695 issued and outstanding in 1998 15,520 15,498
Capital surplus 332 293
Retained earnings 28,971 25,964
Accumulated other comprehensive income (839) 330
Common stock subject to put/call option, 270,384 common
shares at $17.50 per share in 1998 (ESOP) - (4,732)
----------------------------------
Total shareholders' equity 43,984 37,353
----------------------------------
Total liabilities and shareholders' equity $597,145 $577,400
==================================
</TABLE>
See accompanying notes to consolidated interim financial statements.
1
<PAGE>
PALMETTO BANCSHARES, INC. AND SUBSIDIARY
Consolidated Income Statements (Unaudited)
Three Months Ended June 30, 1999 and 1998
(Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
1999 1998
-------------------------------
<S> <C> <C>
Interest income:
Interest and fees on loans $9,083 $8,580
Interest and dividends on investment securities available
for sale:
U.S. Treasury and U.S. Government agencies 200 198
State and municipal 856 117
Mortgage-backed securities 358 59
Interest and dividends on investment securities held to
maturity:
U.S. Treasury and U.S. Government agencies - 253
State and municipal - 486
Mortgage-backed securities - 367
Interest on federal funds sold 76 71
Dividends on FHLB stock 34 29
-------------------------------
Total interest income 10,607 10,160
-------------------------------
Interest expense:
Interest on deposits 3,683 3,757
Interest on securities sold under agreements to repurchase 116 179
Interest on federal funds purchased 16 13
Interest on commercial paper (Master note) 114 124
-------------------------------
Total interest expense 3,929 4,073
-------------------------------
Net interest income 6,678 6,087
Provision for loan losses 540 452
-------------------------------
Net interest income after provision for
loan losses 6,138 5,635
Non-interest income:
Service charges on deposit accounts 946 855
Fees for trust services 434 335
Other income 597 430
-------------------------------
Total non-interest income 1,977 1,620
Non-interest expenses:
Salaries and other personnel 2,445 2,452
Net occupancy 452 421
Furniture and equipment 518 439
FDIC assessment 52 48
Postage and supplies 283 273
Marketing and advertising 179 187
Telephone 232 144
Other expense 1,042 834
-------------------------------
Total non-interest expenses 5,203 4,798
-------------------------------
Income before income taxes 2,912 2,457
-------------------------------
Income tax provision 896 764
-------------------------------
Net income $2,016 $1,693
===============================
Increase in fair value of ESOP stock - ($1,026)
-------------------------------
Net income on common shares not subject to
put/call $2,016 $667
===============================
Net income per share-basic, not subject to
put/call $0.65 $0.24
Net income per share-dilutive, not subject to
put/call $0.63 $0.23
Cash dividends declared per share $0.15 $0.12
</TABLE>
See accompanying notes to consolidated interim financial statements.
2
<PAGE>
PALMETTO BANCSHARES, INC. AND SUBSIDIARY
Consolidated Income Statements (Unaudited)
Six Months Ended June 30, 1999 and 1998
(Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
1999 1998
-------------------------------
<S> <C> <C>
Interest income:
Interest and fees on loans $18,026 $16,934
Interest and dividends on investment securities available
for sale:
U.S. Treasury and U.S. Government agencies 440 392
State and municipal 1,669 189
Mortgage-backed securities 763 65
Interest and dividends on investment securities held to
maturity:
U.S. Treasury and U.S. Government agencies - 516
State and municipal - 971
Mortgage-backed securities - 762
Interest on federal funds sold 104 134
Dividends on FHLB stock 65 56
-------------------------------
Total interest income 21,067 20,019
-------------------------------
Interest expense:
Interest on deposits 7,352 7,530
Interest on securities sold under agreements to repurchase 274 349
Interest on federal funds purchased 80 38
Interest on commercial paper (Master note) 219 252
-------------------------------
Total interest expense 7,925 8,169
-------------------------------
Net interest income 13,142 11,850
Provision for loan losses 1,031 842
-------------------------------
Net interest income after provision for
loan losses 12,111 11,008
Non-interest income:
Service charges on deposit accounts 1,826 1,678
Fees for trust services 828 670
Other income 1,072 764
-------------------------------
Total non-interest income 3,726 3,112
Non-interest expenses:
Salaries and other personnel 4,886 4,861
Net occupancy 884 836
Furniture and equipment 988 870
FDIC assessment 102 94
Postage and supplies 557 527
Marketing and advertising 415 424
Telephone 378 287
Other expense 1,988 1,668
-------------------------------
Total non-interest expenses 10,198 9,567
-------------------------------
Income before income taxes 5,639 4,553
-------------------------------
Income tax provision 1,732 1,393
-------------------------------
Net income $3,907 $3,160
===============================
Increase in fair value of ESOP stock - ($1,026)
-------------------------------
Net income on common shares not subject to
put/call $3,907 $2,134
===============================
Net income per share-basic, not subject to
put/call $1.26 $0.76
Net income per share-dilutive, not subject to
put/call $1.23 $0.74
Cash dividends declared per share $0.29 $0.24
</TABLE>
See accompanying notes to consolidated interim financial statements.
3
<PAGE>
PALMETTO BANCSHARES, INC. AND SUBSIDIARY
Consolidated Statements of Cash Flows (Unaudited)
Six Months Ended June 30, 1999 and 1998
(Dollars in thousands)
<TABLE>
<CAPTION>
1999 1998
-------------------------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 3,907 $ 3,160
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 1,049 1,335
Gain on sale of investment securities (30) -
Provision for loan losses 1,031 842
Origination of loans held for sale (18,956) (20,580)
Sale of loans held for sale 18,134 18,743
Loss (gain) on sale of loans (140) 177
Change in accrued interest receivable (93) (410)
Change in other assets (621) (816)
Change in other liabilities, net 727 372
-------------------------------
Net cash provided by operating activities 5,008 2,823
Cash flows from investing activities:
Purchase of investment securities held to maturity - (1,559)
Purchase of investment securities available for sale (21,101) (13,038)
Proceeds from maturities of investment securities held to
maturity - 3,000
Proceeds from maturities of investment securities available
for sale 11,865 770
Proceeds from sale of investment securities available for
sale 10,186 983
Principal paydowns on mortgage-backed securities held to
maturity - 3,857
Principal paydowns on mortgage-backed securities available
for sale 4,394 -
Purchase of Federal Home Loan Bank stock (192) (89)
Net increase in loans (15,376) (20,016)
Purchases of premises and equipment (1,553) (1,745)
-------------------------------
Net cash used in investing activities (11,777) (27,837)
Cash flows from financing activities:
Net increase in deposit accounts 21,075 21,884
Acquisitions of deposits, net - 2,029
Net increase (decrease) in securities sold under agreements
to repurchase (7,386) 3,242
Net increase in commercial paper 4,126 293
Net decrease in federal funds purchased - 4,700
Proceeds from issuance of common stock 61 2
Dividends paid (900) (742)
-------------------------------
Net cash provided by financing activities 16,976 31,408
-------------------------------
Net increase in cash and cash equivalents 10,207 6,394
-------------------------------
Cash and cash equivalents at beginning of the period 28,039 25,927
-------------------------------
Cash and cash equivalents at end of the period $ 38,246 $ 32,321
===============================
(Continued)
</TABLE>
4
<PAGE>
PALMETTO BANCSHARES, INC. AND SUBSIDIARY
Consolidated Statements of Cash Flows, Continued (Unaudited)
Six Months Ended June 30, 1999 and 1998
(Dollars in thousands)
<TABLE>
<CAPTION>
1999 1998
-------------------------------
<S> <C> <C>
Supplemental Information:
Cash paid during the period for:
Interest expense $ 7,985 $ 8,234
===============================
Income taxes 1,480 1,157
===============================
Supplemental schedule of non-cash investing and financing
transactions:
Change in unrealized gain on investment securities
available for sale (1,169) 10
===============================
Transfer of investment securities held to maturity
to available for sale 66,455 -
===============================
</TABLE>
See accompanying notes to consolidated interim financial statements.
5
<PAGE>
<TABLE>
<CAPTION>
PALMETTO BANCSHARES, INC. AND SUBSIDIARY
Consolidated Statements of Changes in Shareholders' Equity and Comprehensive Income (Unaudited)
Six Months Ended June 30, 1999 and 1998
(Dollars in thousands)
Common
Accumulated Stock
Other Subject to
Common Capital Retained Comprehensive Put/Call
Stock Surplus Earnings Income, Net Option Total
----- ------- -------- ------------- ---------- -----
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1997 15,448 317 20,658 193 (3,784) 32,832
Net income 3,160 3,160
Other comprehensive income, net of tax:
Unrealized holding gains arising during period,
net of tax effect of $6 10
Less: reclassification adjustment for gains
included in net income, net of tax effect
of $0 -
Net unrealized gains on securities 10
---------
Comprehensive income 3,170
---------
Cash dividend declared (742) (742)
Issuance of 300 shares in connection with stock
options 1 1 2
Increase in fair value of common stock subject to
put/call option (1,026) (1,026)
----------------------------------------------------------------------
Balance at June 30, 1998 15,449 318 23,076 203 (4,810) 34,236
======================================================================
Balance at December 31, 1998 15,498 293 25,964 330 (4,732) 37,353
Net income 3,907 3,907
Other comprehensive income, net of tax:
Unrealized holding losses arising during
period, net of tax effect of $721 (1,151)
Less: reclassification adjustment for gains
included in net income, net of tax effect
of $12 (18)
Net unrealized losses on securities (1,169)
---------
Comprehensive income 2,738
---------
Cash dividend declared (900) (900)
Issuance of 4,422 shares in connection with stock
options 22 39 61
Expiration of put/call option on common stock
subject to put/call 4,732 4,732
----------------------------------------------------------------------
Balance at June 30, 1999 15,520 332 28,971 (839) - 43,984
======================================================================
</TABLE>
See accompanying notes to consolidated interim financial statements.
6
<PAGE>
PALMETTO BANCSHARES, INC. AND SUBSIDIARY
Notes To Consolidated Interim Financial Statements
1. Basis of Presentation
---------------------
The accompanying unaudited consolidated interim financial statements have
been prepared pursuant to the rules and regulations for reporting on Form 10-Q.
Accordingly, certain information and footnotes required by generally accepted
accounting principles for complete financial statements are not included herein.
The interim statements should be read in conjunction with the financial
statements and notes thereto included in Palmetto Bancshares, Inc.'s (the
"Company's") Annual Report on Form 10-K for the year ended December 31, 1998.
In the Company's opinion, all adjustments necessary for a fair presentation
of these interim statements have been included and are of a normal and recurring
nature. The results of operations for the three and six-month periods ended June
30, 1999 are not necessarily indicative of the results that may be expected for
the entire year.
Certain amounts from December 31, 1998 have been reclassified to conform to
1999 presentation. These reclassifications have no effect on shareholders'
equity or on net income as previously reported.
2. Principles of Consolidation
---------------------------
The consolidated financial statements include the accounts of the Company
and its wholly-owned subsidiary, The Palmetto Bank (the "Bank"), and Palmetto
Capital, Inc., a wholly-owned subsidiary of The Bank. The Bank provides a
full-range of banking services, including the taking of deposits and the making
of loans. Palmetto Capital, Inc. offers the brokerage of stocks, bonds, mutual
funds and unit investment trusts. Palmetto Capital, Inc. also offers advisory
services and variable rate annuities. In consolidation, all significant
intercompany accounts and transactions have been eliminated.
3. Summary of Significant Accounting Changes
-----------------------------------------
In June 1998, the FASB issued SFAS No. 133, Accounting for Derivative
Instruments and Hedging Activities. The statement is effective for all fiscal
quarters of all fiscal years beginning after June 15, 2000, with earlier
adoption permitted, as amended by SFAS No. 137. SFAS No. 133 establishes
accounting and reporting standards for derivative instruments and for hedging
activities. The statement requires an entity to recognize all derivatives as
either assets or liabilities in the statement of financial position and measure
those instruments at fair value. The Company adopted SFAS No. 133 in its
entirety effective January 1, 1999. On January 1, 1999, the Company transferred
100% of its held-to-maturity investment securities to the available-for-sale
category at fair value as allowed by SFAS No. 133. Such transfers from the
held-to-maturity category at the date of initial adoption shall not call into
question the Company's intent to hold other debt securities to maturity in the
future. The adoption of this standard did not have a material effect on the
Company. The Company has no investments that are considered derivatives under
SFAS No. 133 and does not engage in any hedging activities.
4. Common Stock Subject to Put/Call Option
---------------------------------------
The stock in the Company's Employee Stock Ownership Plan ("ESOP") had a put
and a call feature because the Company's stock is not listed on a national
securities exchange. Accordingly, the shares
7
<PAGE>
that had been distributed from the ESOP were recorded outside of shareholders'
equity at their fair value, which is determined annually by an independent
valuation. The Company's Board of Directors had voted to terminate the ESOP
effective February 28, 1997. Per the Plan document, the shares distributed in
1998 due to the termination of the ESOP were subject to the put/call until June
29, 1999. Now that the put/call has expired, the current year balance sheet and
income statements are absent the put/call effect of the ESOP. The distributed
shares are now included in equity capital.
PALMETTO BANCSHARES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
DISCUSSION OF FINANCIAL CONDITION CHANGES FROM DECEMBER 31, 1998
TO JUNE 30, 1999
General
- -------
In June, a definitive agreement was signed with Carolina First Bank to
purchase their banking office in Abbeville, South Carolina. The Palmetto Bank
will assume deposit accounts, loans and other assets at this new location. The
Abbeville office strategically fits the Bank's long-term plan for the Upstate of
South Carolina and will significantly complement the business it already serves
there and in the adjacent Greenwood and Anderson counties. The Palmetto Bank has
also recently purchased banking facilities in the Greer community. The Bank is
planning on opening these two branches in the third and fourth quarters,
respectively.
On July 7, 1999, the Palmetto Bank introduced Internet banking services to
its customers. Reached through the bank's web site at www.palmettobank.com, the
bank's customers can now access accounts for multiple purposes in a virtual
banking environment - and a secure one. Customers can obtain balances, review
account histories, transfer money between accounts and even pay bills via the
Internet banking service. Investment in new technology has long been a tradition
with the Palmetto Bank and it is essential to remaining competitive and growing
a strong customer base.
Year 2000 Readiness Disclosure
- ------------------------------
Please see the Company's complete discussion of its Year 2000 readiness in
the Company's Annual Report on Form 10-K for the year ended December 31, 1998.
The discussion here is only an update to the year-end discussion.
Since February, representatives from the marketing and operations departments
have met with employees, general and community board members, local civic
groups, customers in our retirement facilities, and even a few churches to
discuss the Bank's readiness to greet the new century. More than 19 seminars
have been held and have provided a platform for those attending to ask questions
about the bank's readiness and contingency planning. All attendees have received
Year 2000 information kits as well as other materials related to the bank's
readiness.
8
<PAGE>
As of July 21, 1999, Business Resumption Contingency Plans have been drafted,
approved by the Company's board of directors and tested where possible.
Management believes that the most likely worst case scenario entails customers
withdrawing significant amounts of cash from deposit accounts and on lines of
credit as a result of fears of a Year 2000 banking crisis that would limit their
access to cash. Management is currently anticipating and planning for this
potential liquidity issue. Management believes the second most likely worst case
scenario entails temporary interruptions of power service. Management believes
the risk of this occurring is low. The contingency plans in place include using
a generator to power the Company's Corporate Center, sending our customers to
nearby branches where power service has not been interrupted or processing
transactions manually at a branch without power. In the event such scenarios
occur, they are not expected to have a material adverse impact on consolidated
results of operations or financial position.
Based on assessments completed to date and contingency plans in place,
management believes Year 2000 issues, including the cost of making critical
systems and equipment ready, will not have a material adverse effect on the
Company's business operation or consolidated results of operations or financial
position. Nevertheless, achieving Year 2000 readiness is subject to risks and
uncertainties, including those described above. While management believes the
possibility is remote, if the Company's internal systems, or the internal
systems of external parties, fail to achieve Year 2000 readiness in a timely
manner, the Company's business, consolidated results of operations or financial
condition could be adversely affected.
Assets
- ------
Liquid assets, which include cash, federal funds sold, and investments
available for sale increased by $69.4 million, or 94%, for the six-month period.
This increase was due to the $66.5 million transfer of investment securities
held to maturity to investment securities available for sale (see note 3 on page
7). The increase was also attributable to the $10.2 million increase in cash and
due from banks and federal funds sold.
Loans, net, increased by $14.3 million, or 4%, during the six-month period as
a result of normal growth. The Company increased the allowance for loan losses
to 1.43% from 1.39% at June 30, 1999 and 1998, respectively, due to a change in
the loan mix.
At June 30, 1999, the Company had $3.1 million in loans held for sale with
commitments to sell these loans in July and August 1999. The mortgage servicing
rights related to the mortgage servicing department's activities were $1.2
million at June 30, 1999, which approximates their fair value. Loans serviced
for the benefit of others amounted to $140.6 million at June 30, 1999.
Other assets increased by $403,000, or 6%, due to normal growth offset by the
amortization of intangibles and various prepaids.
Liabilities and Shareholders' Equity
- ------------------------------------
Deposit balances increased by 4% during the six-month period, from $499.7
million to $520.8 million. The increase was due to normal growth.
9
<PAGE>
Securities sold under agreements to repurchase decreased by $7.4 million, or
34%, and commercial paper associated with the alternative commercial sweep
accounts (master note program) increased by $4.1 million, or 38%. These changes
are the result of normal fluctuations in the accounts.
Total shareholders equity increased by $6.6 million, or 18%, for the
six-month period as a result of comprehensive income of $2.7 million, and
expiration of the put/call on the ESOP of $4.7 million (see footnote 4 on pages
7-8), less dividends paid of $900,000.
Liquidity
- ---------
The liquidity ratio is an indication of a company's ability to meet its
short-term funding obligations. The Company's policy is to maintain a liquidity
ratio between 15% and 25%. At June 30, 1999, the Company's liquidity ratio was
19.52%.
The Company has certain cash needs, including general operating expenses and
the payment of dividends and interest on borrowings. The Company currently has
no debt outstanding and has declared $0.29 per share in dividends so far in
1999. There can be no guarantee, however, that any additional dividends will be
paid. Liquidity is provided from the Company's subsidiary, the Bank. The only
restrictions on the amount of dividends available for payment to the Company are
guidelines established by regulatory authorities for capital to asset ratios.
The Bank's current primary capital ratio is 8.16%. At June 30, 1999, the Bank
had $7.0 million of excess retained earnings available for the payment of
dividends. The Bank plans to continue its quarterly dividend payout.
Capital Resources
- -----------------
As of June 30, 1999, the Company and the Bank were in compliance with each of
the applicable regulatory capital requirements and met or exceeded the
"well-capitalized" regulatory guidelines. The table below sets forth various
capital ratios for the Company and the Bank:
- -------------------------------------------------------------------------
ADEQUATELY
AS OF CAPITALIZED WELL-CAPITALIZED
6/30/99 REQUIREMENT REQUIREMENT
- -------------------------------------------------------------------------
Company:
- --------
Total Risk-based Capital 10.67% 8.00% 10.00%
Tier 1 Risk-based Capital 9.42 4.00 6.00
Tier 1 Leverage Ratio 7.05 4.00 5.00
10
<PAGE>
- -------------------------------------------------------------------------
ADEQUATELY
AS OF CAPITALIZED WELL-CAPITALIZED
6/30/99 REQUIREMENT REQUIREMENT
- -------------------------------------------------------------------------
Bank:
- -----
Total Risk-based Capital 10.65 8.00 10.00
Tier 1 Risk-based Capital 9.40 4.00 6.00
Tier 1 Leverage Ratio 7.03 4.00 5.00
- -------------------------------------------------------------------------
Because the Bank's total risk-based capital ratio is 10.65%, the Company is
defined to be "well-capitalized" under currently applicable regulatory
guidelines.
Accounting and Reporting Matters
- --------------------------------
The Financial Accounting Standards Board has not released any accounting
pronouncements that have not been adopted and that affect the Company or the
Bank.
COMPARISON OF THE RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED JUNE 30,
1999 AND 1998
Net income for the three months ended June 30, 1999 was $2.0 million, an
increase of 19% from the $1.7 million reported for the same period in 1998. Net
income per common share-basic was $0.65 for the 1999 period as compared with
$0.24 for the comparable period in 1998. Net income per common share-dilutive
was $0.63 for the 1999 period as compared with $0.23 for the comparable period
in 1998. The reason that net income per share-basic increased 171% in 1999
versus 1998 even though net income increased only 19% is because there is no
adjustment to net income for the ESOP valuation in 1999 because the put/call on
the ESOP stock expired in 1999.
Net Interest Income
- -------------------
The largest component of the Company's net income is the Bank's net interest
income, defined as the difference between gross interest and fees on earning
assets, primarily loans and investment securities, and interest paid on deposits
and borrowed funds. Net interest income is affected by the interest rates earned
or paid and by volume changes in loans, securities, deposits and borrowed funds.
For the three-month period ended June 30, 1999, net interest income was $6.7
million, which represented a 10% increase from the same period in 1998. This
increase was the result of increases in the volume of earning assets as well as
an increased average rate. Earning assets averaged $544.1
11
<PAGE>
million and $494.8 million during the second quarters of 1999 and 1998,
respectively. The increases in volume were due to the growth of loans compared
to second quarter-end 1998. The average tax-equivalent net interest margin for
the 1999 period was 5.15%, compared to 5.11% for the same period in 1998.
Interest and fees on loans increased 6%, from $8.6 million to $9.1 million,
for the 1999 three-month period compared to the corresponding period in 1998 due
to increased volume offset by decreased average rate. Interest and dividends on
investment securities remained constant for the 1999 three-month period compared
to the corresponding period in 1998 due to maintained volume. Interest income on
federal funds sold increased 1% due to increased average volume of federal funds
sold for the quarter compared to the same period last year. The yield on average
earning assets, which includes loans and investment securities, decreased from
8.24% for the three months ended June 30, 1998 to 7.82% for the three months
ended June 30, 1999.
Total interest expense decreased by 4%, from $4.1 million to $3.9 million,
due to a decrease in the average cost of interest-bearing liabilities from 3.85%
for the quarter ended June 30, 1998 to 3.47% for the quarter ended June 30,
1999.
Market Risk
- -----------
Market risk is the risk of loss from adverse changes in market prices and
rates. The Company's market risk arises principally from interest rate risk
inherent in its lending, deposit and borrowing activities. Management actively
monitors and manages its inherent rate risk exposure. Although the Company
manages other risks, such as credit quality and liquidity risk, in the normal
course of business, management considers interest rate risk to be its most
significant market risk and believes that this risk could potentially have the
largest material effect on the Company's financial condition and results of
operations. Other types of market risks, such as foreign currency exchange rate
risk and commodity price risk, do not arise in the normal course of the
Company's business activities.
The Company's profitability is affected by fluctuations in interest rates.
Management's goal is to maintain a reasonable balance between exposure to
interest rate fluctuations and earnings. A sudden and substantial increase in
interest rates may adversely impact the Company's earnings to the extent that
the interest rates on interest-earning assets and interest-bearing liabilities
do not change at the same speed, to the same extent or on the same basis. The
Company monitors the impact of changes in interest rates on its net interest
income using several tools.
The Bank's goal is to minimize interest rate risk between interest bearing
assets and liabilities at various maturities through its Asset-Liability
Management ("ALM"). ALM involves managing the mix and pricing of assets and
liabilities in the face of uncertain interest rates and an uncertain economic
outlook. It seeks to achieve steady growth of net interest income with an
acceptable amount of interest rate risk exposure and sufficient liquidity. The
process provides a framework for determining, in conjunction with the profit
planning process, which elements of the Company's profitability factors can be
controlled by management. Understanding the current position and implications of
past decisions is necessary in providing direction for the future financial
management of the Company. The Company uses an asset-liability model to
determine the appropriate strategy for current conditions.
12
<PAGE>
Interest sensitivity management is part of the asset-liability management
process. Interest sensitivity gap ("GAP") is the difference between total rate
sensitive assets and rate sensitive liabilities in a given time period. The
Company's current GAP analysis reflects that in periods of increasing interest
rates, rate sensitive assets will reprice slower than rate sensitive
liabilities. The Company's GAP analysis also shows that at the interest
repricing of one year, the Company's net interest margin would be adversely
impacted. This analysis, however, does not take into account the dynamics of the
marketplace. GAP is a static measurement that assumes that if the prime rate
increases by 100 basis points, all assets and liabilities that are due to
reprice will increase by 100 basis points at the next opportunity. However, the
Company is actually able to experience a benefit from rising rates in the short
term because deposit rates generally do not follow the national money market,
but are instead controlled by the local market. Loans do follow the money
market, so when rates increase they reprice immediately, but the Company is able
to manage the deposit side. The Company generally does not raise deposit rates
as fast or as much as loan rates. The Company also has the ability to manage its
funding costs by choosing alternative sources of funds.
The Company's current GAP position would also be interpreted to mean that
in periods of declining interest rates, the Company's net interest margin would
benefit. However, competitive pressures in the local market may not allow the
Company to lower rates on deposits, but may force the Company to lower rates on
loans.
Because the Company's management feels that GAP analysis is a static
measurement, it manages its interest income through its asset/liability
strategies which focus on a net interest income model based on management's
projections. The Company has a targeted net interest income range of plus or
minus twenty percent based on a 300 basis point shock over twelve months. The
asset/liability committee meets weekly to address interest pricing issues, and
this model is reviewed monthly. Management will continue to monitor its
liability sensitive position in times of higher interest rates which might
adversely affect its net interest margin. The Company does not feel that the
market risk to the Company has changed significantly since December 31, 1998.
Provision for Loan Losses
- -------------------------
The provision for loan losses was $540,000 and $452,000 for the three
months ended June 30, 1999 and 1998, respectively. The provision is adjusted
each month to reflect loan volume growth and allow for loan charge-offs,
recoveries and other factors which impact management's assessment of the
adequacy of the allowance for loan losses. Management's objective is to maintain
the allowance for loan losses at an adequate level to cover probable inherent
losses in the portfolio. Additions to the allowance for loan losses are based on
management's evaluation of the loan portfolio under current economic conditions,
past loan loss experience, and such other factors, which in management's
judgment, deserve recognition in estimating loan losses. Loans are charged off
when, in the opinion of management, they are deemed to be uncollectible.
Recognized losses are charged against the allowance, and subsequent recoveries
are added to the allowance. Loans over 90 days delinquent and on non-accrual
amounted to approximately $1,763,000 and $1,664,000 at June 30, 1999 and 1998,
respectively. The annualized net charge-off ratio has increased from 0.32% at
June 30, 1998 to 0.34% at June 30, 1999. While management uses the best
information available to make evaluations, future adjustments to the allowance
may be necessary if economic conditions differ substantially from the
assumptions used in making the evaluation. The allowance for loan losses is
subject to periodic evaluation by various regulatory authorities and may be
subject to adjustment, based upon information that is available to them at the
time of their examination.
13
<PAGE>
Non-interest Income
- -------------------
Total non-interest income increased by $357,000, or 22%, for the three
months ended June 30, 1999, as compared to the same period in 1998. The largest
portion of this increase can be attributed to other income, which increased by
$167,000, or 39%, during the 1999 period compared to the same period in 1998 due
primarily to ATM fee income. This income has increased $93,000 due to the fact
that the Bank is charging $1.00 per foreign transaction. The Bank began charging
this fee in June 1998.
The second largest contributor to the increase in non-interest income is
fees for trust services, which increased $99,000, or 30%, due to a new fee
structure, new business and increased assets under management. At June 30, 1999,
assets under management amounted to $209,828,000 compared to $183,026,000 at
June 30, 1998, a 15% increase.
Non-interest Expenses
- ---------------------
Total non-interest expenses increased by $405,000, or 8%, during the 1999
three-month period compared to the same period in 1998. The largest contributor
to non-interest expense was other expense, which increased $208,000, or 25%, due
to increased expenses related to outside management consultants, credit card
processing, armored car couriers and miscellaneous loan expense. These increases
were due to increased fees and/or increased activity in these areas.
The second largest contributor to the increase in total non-interest
expense is telephone expense which increased $88,000, or 61%, due to increased
telephone usage related to the Local Area Network/Wide Area Network (LAN/WAN)
now installed at the branches and departments at the Bank. These networks allow
for better communication among employees via email, standard software usage
among employees and Internet access. This equipment is necessary for the Bank to
offer Internet banking to its customers. Internet banking usage has also
contributed to the increase in telephone expense.
The other categories within total non-interest expense increased due to
normal growth and activity.
Income Taxes
- ------------
The Company incurred income tax expense of $896,000 for the 1999
three-month period compared to $764,000 for the same period in 1998 due to the
increase in taxable income. This expense is based on an expected annual
effective tax rate of approximately 30%.
Net Income Per Share
- --------------------
The following table illustrates a reconciliation of the numerators and
denominators of the basic and diluted per-share computations for net income for
the three-months ended June 30, 1999 and 1998:
14
<PAGE>
Income Shares Per-Share
1999 (Numerator) (Denominator) Amount
---- -----------------------------------
Basic EPS:
----------
Income available to common
stockholders $2,016 3,104,046 $0.65
---------------------------------
Effect of Dilutive Securities:
Stock Options -- 88,462 --
Diluted EPS:
------------
Income available to common
stockholders plus assumed
conversions $2,016 3,192,508 $0.63
=================================
Income Shares Per-Share
1998 (Numerator) (Denominator) Amount
---- -----------------------------------
Basic EPS:
----------
Income available to common
stockholders $667 2,815,011 $0.24
-----------------------------------
Effect of Dilutive Securities:
Stock Options -- 78,348 --
Diluted EPS:
------------
Income available to common
stockholders plus assumed
conversions $667 2,893,359 $0.23
===================================
COMPARISON OF THE RESULTS OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 1999
AND 1998
Net income for the six months ended June 30, 1999 was $3.9 million, an
increase of 24% from the $3.2 million reported for the same period in 1998. Net
income per common share-basic was $1.26 for the 1999 period as compared with
$0.76 for the comparable period in 1998. Net income per common share-dilutive
was $1.23 for the 1999 period as compared with $0.74 for the comparable period
in 1998. The reason that net income per share-basic increased 66% in 1999 versus
1998 even though net income increased only 24% is because there is no adjustment
to net income for the ESOP valuation in 1999 because the put/call on the ESOP
stock expired in 1999.
Net Interest Income
- -------------------
The largest component of the Company's net income is the Bank's net
interest income, defined as the difference between gross interest and fees on
earnings assets, primarily loans and investment securities, and interest paid on
deposits and borrowed funds. Net interest income is affected by the interest
rates earned or paid and by volume changes in loans, securities, deposits, and
borrowed funds.
For the six-month period ended June 30, 1999, net interest income was $13.1
million, which represented an 11% increase from the same period in 1998. This
increase was the result of increases in the volume of earning assets. Earning
assets averaged $538.6 million and $486.5 million during the first six months of
1999 and 1998, respectively. The increases in volume were due to the growth of
loans and investments compared to 1998. The average tax equivalent net interest
margin for the 1999 period was 5.14%, compared to 5.08% for the same period in
1998.
15
<PAGE>
Interest income on loans increased 6% due to increased volume. Due to
fairly constant volume in the investment security portfolio, interest income on
investment securities remained static at $2.9 million during the 1999 period
compared to the corresponding period in 1998. The weighted average rate (tax
equivalent) on the portfolio was 6.79% and 6.96%, at June 30, 1999 and 1998,
respectively. Interest income on federal funds sold decreased due to decreased
average volume of federal funds sold compared to the first six months of last
year. The yield on average earning assets, which includes federal funds sold,
loans and investment securities, decreased from 8.30% for the six months ended
June 30, 1998 to 7.89% for the six months ended June 30, 1999.
Total interest expense decreased by 3% during the 1999 period mostly due to
decreased rates on deposits at June 30, 1999, compared to June 30, 1998. Average
total interest-bearing liabilities, increased by 7% from June 30, 1999 to June
30, 1998. The average rate paid on interest bearing liabilities decreased from
3.93% during the six-month period in 1998, to 3.54% during the 1999 period.
The profitability of the Bank is influenced significantly by management's
ability to control the relationship between rate sensitive assets and
liabilities, and the current interest rate environment. See further discussion
under AComparison of the Results of Operations for the Three Months Ended June
30, 1999 and 1998" above.
Provision for Loan Losses
- -------------------------
The provision for loan losses was $1,031,000 for the six months ended June
30, 1999 compared to $842,000 for the six months ended June 30, 1998. See
further discussion under AComparison of the Results of Operations for the Three
Months Ended June 30, 1999 and 1998" above.
Non-interest Income
- -------------------
Total non-interest income increased by $614,000, or 20%, for the six months
ended June 30, 1999, as compared to the same period in 1998. The largest
contributor to this increase is ATM fee income, which increased $179,000 due to
the $1.00 charge per foreign transaction the Bank began charging in June of
1998.
The second largest contributor to this increase is fees for trust services,
which increased $158,000, or 24%, due to a new fee structure, new business and
increased assets under management. Assets under management were $209.8 million
and $183.0 million at June 30, 1999 and 1998, respectively, representing a 15%
increase.
Non-interest Expense
- --------------------
Total non-interest expenses increased by $631,000, or 7%, during the 1999
six-month period over the same period in 1998. The largest contributor to this
increase is the increase in other expense which is attributable to increased
expenses related to outside management consultants, credit card processing,
armored car couriers and miscellaneous loan expense. These increases were due to
increased fees and/or increased activity in these areas.
16
<PAGE>
The second largest increase was in furniture and equipment expense, which
increased $118,000 or 24%. This increase was due to increased depreciation and
miscellaneous equipment purchased related to the new LAN/WAN and Internet
banking.
Income Taxes
- ------------
The Company incurred income tax expense of $1.7 million for the 1999
six-month period compared to $1.4 million for the same period in 1998 due to the
increase in taxable income. This expense is based on an expected effective tax
rate of approximately 30%.
Net Income Per Share
- --------------------
The table below illustrates a reconciliation of the numerators and denominators
of the basic and diluted per-share computations for net income for the
six-months ended June 30, 1999 and 1998:
Income Shares Per-Share
1999 (Numerator) (Denominator) Amount
---- -----------------------------------
Basic EPS:
----------
Income available to common
stockholders $3,907 3,103,203 $1.26
Effect of Dilutive Securities:
Stock Options -- 86,039 --
Diluted EPS:
------------
Income available to common
stockholders plus assumed
conversions $3,907 3,189,242 $1.23
Income Shares Per-Share
1998 (Numerator) (Denominator) Amount
---- -----------------------------------
Basic EPS:
----------
Income available to common
stockholders $2,134 2,814,810 $0.76
Effect of Dilutive Securities:
Stock Options -- 69,776 --
Diluted EPS:
------------
Income available to common
stockholders plus assumed
conversions $2,134 2,884,586 $0.74
INDUSTRY DEVELOPMENTS
Certain proposed industry-related legislation could have an effect on both
the costs of doing business and the competitive factors facing the financial
institution industry. Because of the uncertainty of the final terms and
likelihood of passage of the proposed legislation, the Company is unable to
assess the impact of any proposed legislation on its financial condition or
operations at this time.
17
<PAGE>
PALMETTO BANCSHARES, INC. AND SUBSIDIARY
Part II - Other Information
Item 1. Legal Proceedings
-----------------
Palmetto Bancshares, Inc. (the Company) is not engaged in any legal
proceedings. From time to time The Palmetto Bank (the Bank) is involved in legal
proceedings incidental to its normal course of business as a bank. Management
believes none of these proceedings is likely to have a materially adverse effect
on the business of the Company or the Bank.
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits:
Exhibit No. Description
----------- -----------
3.1.1 Articles of Incorporation filed on May 13, 1982 in the
office of the Secretary of State of South Carolina:
Incorporated by reference to Exhibit 3 to the Company's
Registration Statement on Form S-4, No. 33-19367, filed
with the Securities and Exchange Commission on December
30, 1987
3.1.2 Articles of Amendment filed on May 5, 1988 in the office
of the Secretary of State of South Carolina:
Incorporated by reference to Exhibit 4.1.2 to the
Company's Registration Statement on Form S-8, Commission
File No. 33-51212, filed with the Securities and
Exchange Commission on August 20, 1992
3.1.3 Articles of Amendment filed on January 26, 1989 in the
office of the Secretary of State of South Carolina:
Incorporated by reference to Exhibit 4.1.3 to the
Company's Registration Statement on Form S-8, Commission
File No. 33-51212, filed with the Securities and
Exchange Commission on August 20, 1992
3.1.4 Articles of Amendment filed on April 23, 1990 in the
office of the Secretary of State of South Carolina:
Incorporated by reference to Exhibit 4.1.4 to the
Company's Registration Statement on Form S-8, Commission
File No. 33-51212, filed with the Securities and
Exchange Commission on August 20, 1992
3.1.5 Articles of Amendment filed on October 16, 1996 in the
office of the Secretary of State of South Carolina:
Incorporated by reference to Exhibit 3.1.5 of the
Company's quarterly report on Form 10-Q for the fiscal
quarter ended June 30, 1996.
18
<PAGE>
3.1.6* Articles of Amendment filed on May 17, 1999 in the
office of the Secretary of State of South Carolina:
filed herewith.
3.2.1 By-Laws adopted April 10, 1990: Incorporated by
reference to Exhibit 3.2.1 to the Company's Annual
Report on Form 10-K, filed with the Securities and
Exchange Commission on June 30, 1997.
3.2.2 Amendment to By-Laws dated April 12, 1994: Incorporated
by reference to Exhibit 3.2.2 to the Company's Annual
Report on Form 10-K, filed with the Securities and
Exchange Commission on June 30, 1997.
3.2.3 Amendment to By-Laws dated January 19, 1999:
Incorporated by reference to Exhibit 3.2.3 to the
Company's Annual Report on Form 10-K, filed with the
Securities and Exchange Commission on March 19, 1999.
4.1.1 Articles of Incorporation of the Registrant: Included in
Exhibits 3.1.1 -- .5
4.2 Bylaws of the Registrant: Included in Exhibits
3.2.1 -- .2.
4.3 Specimen Certificate for Common Stock: Incorporated by
reference to Exhibit 4.3 to the Company's Registration
Statement on Form S-8, Commission File No. 33-51212,
filed with the Securities and Exchange Commission on
August 20, 1992
4.4 Palmetto Bancshares, Inc. 1998 Stock Compensation Plan,
as amended to date. Incorporated by reference to the
Company's Annual Report on Form 10-K, filed with the
Securities and Exchange Commission on March 23, 1998.
27.1* Financial Data Schedule
* Filed herewith.
(b) Reports on Form 8-K
The Company did not file any reports on Form 8-K during the six months
ended June 30, 1999.
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.
PALMETTO BANCSHARES, INC.
By:
/s/ L. Leon Patterson
- ------------------------------------
L. Leon Patterson
Chairman and Chief Executive Officer
/s/ Paul W. Stringer
- -------------------------------------
Paul W. Stringer
President and Chief Operating Officer
(Chief Accounting Officer)
Date: August 10, 1999
20
<PAGE>
EXHIBIT INDEX
Exhibit No. Description
- ----------- -----------
3.1.1 Articles of Incorporation filed on May 13, 1982 in the
office of the Secretary of State of South Carolina:
Incorporated by reference to Exhibit 3 to the Company's
Registration Statement on Form S-4, No. 33-19367, filed
with the Securities and Exchange Commission on December
30, 1987.
3.1.2 Articles of Amendment filed on May 5, 1988 in the office
of the Secretary of State of South Carolina:
Incorporated by reference to Exhibit 4.1.2 to the
Company's Registration Statement on Form S-8, Commission
File No. 33-51212, filed with the Securities and
Exchange Commission on August 20, 1992.
3.1.3 Articles of Amendment filed on January 26, 1989 in the
office of the Secretary of State of South Carolina:
Incorporated by reference to Exhibit 4.1.3 to the
Company's Registration Statement on Form S-8, Commission
File No. 33-51212, filed with the Securities and
Exchange Commission on August 20, 1992.
3.1.4 Articles of Amendment filed on April 23, 1990 in the
office of the Secretary of State of South Carolina:
Incorporated by reference to Exhibit 4.1.4 to the
Company's Registration Statement on Form S-8, Commission
File No. 33-51212, filed with the Securities and
Exchange Commission on August 20, 1992.
3.1.5 Articles of Amendment filed on October 16, 1996 in the
office of the Secretary of State of South Carolina:
Incorporated by reference to Exhibit 3.1.5 of the
Company's quarterly report on Form 10-Q for the fiscal
quarter ended June 30, 1996.
3.1.6* Articles of Amendment filed on May 17, 1999 in the
office of the Secretary of State of South Carolina:
filed herewith.
3.2.1 By-Laws adopted April 10, 1990: Incorporated by
reference to Exhibit 3.2.1 to the Company's Annual
Report on Form 10-K, filed with the Securities and
Exchange Commission on June 30, 1997.
3.2.2 Amendment to By-Laws dated April 12, 1994: Incorporated
by reference to Exhibit 3.2.2 to the Company's Annual
Report on Form 10-K, filed with the Securities and
Exchange Commission on June 30, 1997
3.2.3 Amendment to By-Laws dated January 19, 1999:
Incorporated by reference to Exhibit 3.2.3 to the
Company's Annual Report on Form
21
<PAGE>
10-K, filed with the Securities and Exchange Commission
on March 19, 1999
4.1.1 Articles of Incorporation of the Registrant: Included in
Exhibits 3.1.1 -- .5
4.2 Bylaws of the Registrant: Included in Exhibits
3.2.1 -- .2.
4.3 Specimen Certificate for Common Stock: Incorporated by
reference to Exhibit 4.3 to the Company's Registration
Statement on Form S-8, Commission File No. 33-51212,
filed with the Securities and Exchange Commission on
August 20, 1992
4.4 Palmetto Bancshares, Inc. 1998 Stock Compensation Plan,
as amended to date. Incorporated by reference to the
Company's Annual Report on Form 10-K, filed with the
Securities and Exchange Commission on March 23, 1998
27.1* Financial Data Schedule
* Filed herewith.
22
Exhibit 3.1.6
The Articles of Incorporation of the Corporation are amended to add the
following provisions:
Amendment 1
The Board of Directors, when evaluating any offer of another party to (i.) make
a tender or exchange offer for any equity security of the Corporation, (ii)
merge or consolidate the Corporation with another Corporation, or (iii) purchase
or otherwise acquire all or substantially all of the properties and assets of
the Corporation, may, in connection with the exercise of its judgment in
determining what is in the best interest of the Corporation and its
shareholders, give due consideration to (u) whether the offer is acceptable
based on the historical operating results, current financial condition and
future prospects of the Corporation and its subsidiaries, including
consideration of the Corporation's current strategic plan; (v) whether a more
favorable offer could be obtained in the foreseeable future; (w) the social,
economic or any other material impact of the proposed transaction upon the
employees and customers of the Corporation and its subsidiaries and the
community that they serve; (x) the reputation and business practices of the
offeror and its management and affiliates as they might affect the employees and
customers of the Corporation and its subsidiaries and the future value of the
Corporation's stock; (y) the value of the securities, if any, that the offeror
is offering in exchange for the Corporation's or its subsidiary's securities or
assets based on an analysis of the value of the Corporation or its subsidiary as
compared to the value of the offeror or other entity whose securities are being
offered; and (z) any antitrust or other legal or regulatory issues that are
raised by the offer.
Amendment 2
A director may be removed from office prior to the expiration of such director's
term only for cause and only if such removal is approved by affirmative vote of
the holders of a majority of the Company's outstanding common stock.
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
The schedule contains summary financial information extracted from Palmetto
Bancshares, Inc. and subsidiary Consolidated Income Statements and Consolidated
Balance Sheets and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> JUN-30-1999
<CASH> 35,034
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 3,212
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 105,299
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 427,928
<ALLOWANCE> (6,112)
<TOTAL-ASSETS> 597,145
<DEPOSITS> 520,784
<SHORT-TERM> 29,229
<LIABILITIES-OTHER> 3,148
<LONG-TERM> 0
0
0
<COMMON> 15,520
<OTHER-SE> 28,464
<TOTAL-LIABILITIES-AND-EQUITY> 597,145
<INTEREST-LOAN> 18,026
<INTEREST-INVEST> 2,872
<INTEREST-OTHER> 169
<INTEREST-TOTAL> 21,067
<INTEREST-DEPOSIT> 7,352
<INTEREST-EXPENSE> 7,925
<INTEREST-INCOME-NET> 13,142
<LOAN-LOSSES> 1,031
<SECURITIES-GAINS> 30
<EXPENSE-OTHER> 10,198
<INCOME-PRETAX> 5,693
<INCOME-PRE-EXTRAORDINARY> 3,907
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,907
<EPS-BASIC> 1.26
<EPS-DILUTED> 1.23
<YIELD-ACTUAL> 4.92
<LOANS-NON> 1,763
<LOANS-PAST> 72
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 5,795
<CHARGE-OFFS> (753)
<RECOVERIES> 39
<ALLOWANCE-CLOSE> 6,112
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
