FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
QUARTERLY REPORT UNDER SECTION 13 or 15 (d) of THE
SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended September 30, 1999
Commission File Number 0-17071
First Merchants Corporation
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Indiana 35-1544218
- --------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation of organization) Identification No.)
200 East Jackson Street - Muncie, IN 47305-2814
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Address of principal executive office) (Zip code)
(765) 747-1500
- --------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
Not Applicable
- --------------------------------------------------------------------------------
(Former name former address and former fiscal year, if changed
since last report.)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days,
Yes X No
-----
As of November 3, 1999, there were outstanding 12,051,283 common shares,
without par value, of the registrant.
The exhibit index appears on page 2.
This report including the cover page contains a total of 22 pages.
<PAGE>
FIRST MERCHANTS CORPORATION
FORM 10-Q
INDEX
Page No.
PART I. Financial information:
Item 1. Financial Statements:
Consolidated Condensed Balance Sheet.........................3
Consolidated Condensed Statement of Income...................4
Consolidated Condensed Statement of
Comprehensive Income.........................................5
Consolidated Condensed Statement of Changes in
Stockholders' Equity.........................................6
Consolidated Condensed Statement of Cash Flows...............7
Notes to Consolidated Condensed Financial Statements.........8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.........................14
Item 3. Quantitative and Qualitative Disclosures About
Market Risk.................................................21
PART II. Other Information:
Item 4. Submission of Matters to a Vote of Security Holders.........22
Item 6. Exhibits and Reports of Form 8-K............................22
Signatures ............................................................23
<PAGE>
<TABLE>
<CAPTION>
FIRST MERCHANTS CORPORATION
FORM 10-Q
PART I. FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
CONSOLIDATED CONDENSED BALANCE SHEET
(Dollars in thousands, except per share amounts)
(Unaudited)
September 30, December 31,
------------- -------------
<S> <C> <C>
ASSETS:
Cash and due from banks $ 37,566 $ 35,474
Federal funds sold 1,800 45,295
----------- -----------
Cash and cash equivalents 39,366 80,769
Interest-bearing deposits 1,631 1,008
Investment securities available for sale 352,042 329,508
Investment securities held to maturity 15,772 21,709
Mortgage loans held for sale 183 776
Loans 976,303 890,356
Less: Allowance for loan losses (10,153) (9,209)
----------- -----------
Net loans 966,150 881,147
Premises and equipment 19,954 18,963
Federal Reserve and Federal Home Loan Bank stock 5,638 4,455
Interest receivable 11,700 10,797
Core deposit intangibles and goodwill 2,949 3,141
Others assets 13,452 10,254
----------- -----------
Total assets $1,428,837 $1,362,527
=========== ===========
LIABILITIES:
Deposits:
Noninterest-bearing $ 134,974 $ 139,469
Interest-bearing 923,007 946,483
----------- -----------
Total deposits 1,057,981 1,085,952
Borrowings 204,538 113,702
Interest payable 4,105 4,134
Other liabilities 5,460 4,848
----------- -----------
Total liabilities 1,272,084 1,208,636
STOCKHOLDERS' EQUITY:
Preferred stock, no-par value:
Authorized and unissued -- 500,000 shares
Common stock, $.125 stated value:
Authorized --- 50,000,000 shares
Issued and outstanding -- 12,050,374 and 11,975,955 shares 1,506 1,497
Additional paid-in capital 32,030 31,264
Retained earnings 125,969 118,919
Accumulated other comprehensive income (loss) (2,752) 2,211
----------- -----------
Total stockholders' equity 156,753 153,891
----------- -----------
Total liabilities and stockholders' equity $1,428,837 $1,362,527
=========== ===========
See notes to consolidated condensed financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FIRST MERCHANTS CORPORATION
FORM 10-Q
CONSOLIDATED CONDENSED STATEMENT OF INCOME
(Dollars in thousands, except per share amounts)
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
1999 1998 1999 1998
------ ------ ------ ------
<S> <C> <C> <C> <C>
Interest Income:
Loans receivable
Taxable $ 19,792 $ 19,347 $ 57,576 $ 56,562
Tax exempt 56 58 168 181
Investment securities:
Taxable 4,075 2,890 11,564 8,017
Tax exempt 1,302 1,239 3,935 3,620
Federal funds sold 33 202 459 823
Deposits with financial institutions 7 4 41 15
Federal Reserve and Federal Home Loan Bank stock 115 103 323 294
-------- -------- -------- --------
Total interest income 25,380 23,843 74,066 69,512
-------- -------- -------- --------
Interest expense:
Deposits 9,480 10,124 28,160 30,043
Borrowings 2,324 1,228 6,028 2,811
-------- -------- -------- --------
Total interest expense 11,804 11,352 34,188 32,854
-------- -------- -------- --------
Net Interest Income 13,576 12,491 39,878 36,658
Provision for loan losses 590 539 1,617 1,551
-------- -------- -------- --------
Net Interest Income After Provision for Loan Losses 12,986 11,952 38,261 35,107
-------- -------- -------- --------
Other Income:
Net realized gains on sales of available-for-sale securities 12 72 169 127
Other income 3,722 3,221 10,757 9,195
-------- -------- -------- --------
Total other income 3,734 3,293 10,926 9,322
Total other expenses 9,235 8,187 27,413 23,851
-------- -------- -------- --------
Income before income tax 7,485 7,058 21,774 20,578
Income tax expense 2,622 2,499 7,619 7,212
-------- -------- -------- --------
Net Income $ 4,863 $ 4,559 $ 14,155 $ 13,366
======== ======== ======== ========
Per share:
Net Income:
Basic $ .40 $ .38 $ 1.18 $ 1.12
Diluted .40 .38 1.17 1.11
Dividends .22 .20 .62 .57
See notes to consolidated condensed financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FIRST MERCHANTS CORPORATION
FORM 10-Q
CONSOLIDATED CONDENSED STATEMENT OF COMPREHENSIVE INCOME
(Dollar amounts in thousands)
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
1999 1998 1999 1998
-------- ------- -------- ------
<S> <C> <C> <C> <C>
Net Income $ 4,863 $ 4,559 $14,155 $13,366
-------- -------- -------- -------
Other comprehensive income, net of tax:
Unrealized gains (losses) on securities available for sale:
Unrealized holding (losses) gains arising during the period, net of
income tax of $1,032, $(853), $3,241, $(761) (1,562) 1,194 (5,064) 990
Less: Reclassification adjustment for gains included
in net income, net of income tax $(5), $(29), $(68), $(51) 7 43 101 76
-------- ------- -------- --------
(1,555) 1,237 (4,963) 1,066
Comprehensive income $ 3,308 $ 5,796 $ 9,192 $14,432
======== ======== ======== =======
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FIRST MERCHANTS CORPORATION
FORM 10-Q
CONSOLIDATED CONDENSED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
(Dollar amounts in thousands)
(Unaudited)
1999 1998
---------- ----------
<S> <C> <C>
Balances, January 1 $ 153,891 $ 141,794
Net income 14,155 13,366
Cash dividends (7,107) (5,837)
Net change in accumulated other comprehensive income (4,963) 1,066
Stock repurchased (339)
Stock issued under "employee" benefit plans 428 384
Stock issued under dividend reinvestment and stock purchase plan 511 511
Stock options exercised 177 288
---------- ----------
Balances, September 30 $ 156,753 $ 151,572
========== ==========
See notes to consolidated condensed financial statements
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FIRST MERCHANTS CORPORATION
FORM 10-Q
CONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS
(Dollar amounts in thousands)
(Unaudited)
Nine Months Ended
September 30,
1999 1998
--------------------
<S> <C> <C>
Cash Flows From Operating Activities:
Net income $ 14,155 $13,366
Adjustments to reconcile net income to net cash provided by operating activities
Provision for loan losses 1,617 1,551
Depreciation and amortization 2,193 1,924
Securities amortization, net 266 214
Securities losses (gains), net (169) (127)
Mortgage loans originated for sale (5,801) (5,982)
Proceeds from sales of mortgage loans 6,394 5,722
Change in interest receivable (903) (721)
Change in interest payable (29) 330
Other adjustments 705 (1,590)
---------- ---------
Net cash provided by operating activities 18,428 14,687
---------- ---------
Cash Flows From Investing Activities:
Net change in interest-bearing deposits (623) (72)
Purchases of
Securities available for sale (146,666) (147,113)
Securities held to maturity (90)
Proceeds from maturities of
Securities available for sale 97,389 63,389
Securities held to maturity 5,807 11,909
Proceeds from sales of
Securities available for sale 17,339 7,393
Net change in loans (86,620) (44,032)
Purchases of premises and equipment (2,965) (4,772)
Other investing activities (27) (1,593)
---------- ---------
Net cash provided by investing activities (116,366) (114,981)
---------- ---------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FIRST MERCHANTS CORPORATION
FORM 10-Q
CONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS
(Dollar amounts in thousands)
(Unaudited)
Nine Months Ended
June 30,
1999 1998
--------------------
<S> <C> <C>
Cash Flows From Financing Activities:
Net change in
Demand and savings deposits $ (4,495) $(13,447)
Certificates of deposit and other time deposits (23,476) 50,553
Borrowings 90,836 64,940
Cash dividends (7,107) (5,837)
Stock issued under employee benifit plans 428 384
Stock issued under dividend reinvestment and stock purchase plan 511 511
Stock options exercised 177 288
Stock repurchased (339)
---------- ---------
Net cash provided by financing activities 56,535 97,392
---------- ---------
Net Change in Cash and Cash Equivalents (41,403) (2,902)
Cash and Cash Equivalents, January 1 80,769 43,720
---------- ---------
Cash and Cash Equivalents, September 30 39,366 $ 40,818
========== =========
See notes to consolidated condensed financial statements.
</TABLE>
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
NOTE 1. General
The significant accounting policies followed by First Merchants Corporation
("Corporation") and its wholly owned subsidiaries for interim financial
reporting are consistent with the accounting policies followed for annual
financial reporting, except for the change in method of accounting or adoption
of accounting pronouncements discussed more fully in Note 2. All adjustments
which are of a normal recurring nature and are in the opinion of management
necessary for a fair statement of the results for the periods reported have been
included in the accompanying consolidated condensed financial statements.
NOTE 2. Change in Methods of Accounting or Adoption of Accounting Pronouncements
ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES - During 1998, the
Financial Accounting Standards Board (FASB) issued Statement No. 133, Accounting
for Derivative Instruments and Hedging Activities. This Statement requires
companies to record derivatives on the balance sheet at their fair value.
Statement No. 133 also acknowledges that the method of recording a gain or loss
depends on the use of the derivative.
The new Statement applies to all entities. If hedge accounting is elected by the
entity, the method of assessing the effectiveness of the hedging derivative and
the measurement approach of determining the hedge's ineffectiveness must be
established at the inception of the hedge.
Statement No. 133 amends Statement No. 52 and supersedes Statements No. 80, 105,
and 119. Statement No. 107 is amended to include the disclosure provisions
about the concentrations of credit risk for Statement No. 105. Several Emerging
Issues Task Force consensuses are also changed or nullified by the provisions of
Statement No. 133.
<PAGE>
FIRST MERCHANTS CORPORATION
FORM 10-Q
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Table dollar amounts in thousands)
(Unaudited)
Statement No. 133 was to be effective for all fiscal years beginning after June
15, 1999. The implementation date has been deferred and FSAS No. 133 will now be
effective for all fiscal quarters for all fiscal years beginning after
June 15, 2000. The Statement may not be applied retroactively to financial
statements of prior periods. The adoption of this Statement will have no
material impact on the Corporation's financial condition or result of
operations.
ACCOUNTING FOR MORTGAGE-BACKED SECURITIES RETAINED AFTER THE SECURITIZATION OF
MORTGAGE LOANS HELD FOR SALE BY A MORTGAGE BANKING ENTERPRISE -Also in 1998, the
FASB issued Statement No. 134, Accounting for Mortgage-Backed Securities
Retained After the Securitization of Mortgage Loans Held for Sale by a Mortgage
Banking Enterprise. It establishes accounting standards for certain activities
of mortgage banking enterprises and for other enterprises with similar mortgage
operations. This Statement amends Statement No. 65.
Statement No. 134, as previously amended by Statements No. 115 and 125, required
a mortgage banking enterprise to classify a mortgage-backed security as a
trading security following the securitization of the mortgage loan held for
sale. This Statement further amends Statement No. 65 to require that after the
securitization of mortgage loans held for sale, an entity engaged in mortgage
banking activities must classify the resulting mortgage-backed security or other
retained interests based on the entity's ability and intent to sell or hold
those investments.
The determination of the appropriate classification for securities retained
after the securitization of mortgage loans by a mortgage banking enterprise now
conforms to Statement No. 115. The only new requirement is that if an entity has
a sales commitment in place, the security must be classified into trading.
This Statement is effective for the first fiscal quarter beginning after
December 15, 1998. On the date this Statement is initially applied, an entity
may reclassify mortgage-backed securities and other beneficial interests
retained after the securitization of mortgage loans held for sale from the
trading category, except for those with sales commitments in place. Those
securities and other interests shall be classified based on the entity's present
ability and intent to hold the investments. The adoption of this Statement had
no material impact on the Corporation's financial condition and result of
operations.
REPORTING ON THE COSTS OF START-UP ACTIVITIES - During 1998, the Accounting
Standards Executive Committee (AcSEC) issued Statement of Position 98-5,
Reporting on the Costs of Start-Up Activities. Statement of Position 98-5 will
affect all non-governmental entities, including not-for-profits, reporting
start-up costs in their financial statements.
Some existing industry practices result in the capitalization and amortization
of start-up costs. This Statement of Position requires that start-up activities
and organizational costs associated with both development stage and established
operating entities.
According to Statement of Position 98-5, start-up activities are "those one-time
activities related to opening a new facility, introducing a new product or
service, conducting business in a new territory, conducting business with a new
class of customer or beneficiary, initiating a new process in an existing
facility, or commencing some new operation. Start-up activities include
activities related to organizing a new entity (commonly referred to as
organizational costs.)"
Statement of Position 98-5 is effective for fiscal years beginning on or after
December 15, 1998. Earlier application is encouraged in fiscal years during
which annual financial statements have not yet been issued. The adoption of this
Statement did not have a material impact on the Corporation's financial
condition or result of operations.
<PAGE>
FIRST MERCHANTS CORPORATION
FORM 10-Q
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Table dollar amounts in thousands)
(Unaudited)
NOTE 3. Acquisitions
On April 1, 1999, the Corporation issued 1,098,795 shares of its common stock in
exchange for all of the outstanding shares of Jay Financial Corporation
Portland, Indiana. At December 31, 1998, Jay Financial Corporation had total
assets and shareholders' equity of $114,895,000 and $14,903,000, respectively.
The transaction will be accounted for under the pooling -of -interests method of
accounting.
On April 21, 1999, the Corporation issued 810,642 shares of its common stock in
exchange for all of the outstanding shares of Anderson Community Bank, Anderson,
Indiana. At December 31, 1998, Anderson Community Bank had total assets and
shareholders' equity of $77,984,000 and $7,740,000, respectively. The
transaction will be accounted for under the pooling of -interests method of
accounting.
The financial information contained herein reflects the merger and reports the
financial condition and results of operations as though the Corporation had been
combined as of January 1, 1998. Separate operating results of Jay Financial
Corporation and Anderson Community Bank for the periods prior to the merger were
as follows:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1999 1998 1999 1998
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Net interest income:
First Merchants Corporation $13,576 $10,458 $36,488 $30,915
Jay Financial Corporation 1,208 2,250 3,458
Anderson Community Bank 825 1,140 2,285
--------- --------- --------- ---------
Combined $13,576 $12,491 $39,878 $36,658
======= ======= ======= =======
Net income:
First Merchants Corporation 4,863 3,891 13,001 11,513
Jay Financial Corporation 387 703 1,090
Anderson Community Bank 281 451 763
--------- --------- --------- ---------
Combined $ 4,863 $ 4,559 $14,155 $13,366
======= ======= ======= =======
Diluted net income per share:
First Merchants Corporation .40 .33 1.07 .96
Jay Financial Corporation .03 .06 .09
Anderson Community Bank .02 .04 .06
--------- --------- -------- --------
Combined $ .40 $ .38 $ 1.17 $ 1.11
========= ========= ======== ========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FIRST MERCHANTS CORPORATION
FORM 10-Q
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Table dollar amounts in thousands)
(Unaudited)
NOTE 4. Investment Securities
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
----------- ----------- ----------- ----------
<S> <C> <C> <C> <C>
Available for sale at September 30, 1999:
U.S. Treasury $ 11,342 $ 13 $ 41 $ 11,314
Federal agencies 65,064 27 782 64,309
State and municipal 99,800 867 598 100,069
Mortgage-backed securities 146,473 282 3,337 143,418
Other asset-backed securities 22,123 759 21,364
Corporate obligations 10,558 22 66 10,514
Marketable equity securities 1,200 146 1,054
----------- ----------- ----------- ----------
Total available for sale 356,560 1,211 5,729 352,042
----------- ----------- ----------- ----------
Held to maturity at September 30, 1999:
U.S. Treasury 250 1 249
State and municipal 14,357 135 14,492
Mortgage-backed securities 432 1 1 432
Other asset-backed securities 733 78 655
----------- ----------- ----------- ----------
Total held to maturity 15,772 136 80 15,828
----------- ----------- ----------- ----------
Total investment securities $ 372,332 $ 1,347 $ 5,809 $ 367,870
=========== =========== =========== ==========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FIRST MERCHANTS CORPORATION
FORM 10-Q
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Table dollar amounts in thousands)
(Unaudited)
<S> <C> <C> <C> <C>
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
----------- ----------- ----------- ---------
Available for sale at December 31, 1998:
U.S. Treasury $ 22,275 $ 120 $ $ 22,395
Federal agencies 61,605 627 32 62,200
State and municipal 93,198 2,778 21 95,955
Mortgage-backed securities 128,610 440 198 128,852
Other asset-backed securities 265 1 11 255
Corporate obligations 18,624 143 8 18,759
Marketable equity securities 1,200 108 1,092
----------- ----------- ---------- ---------
Total available for sale 325,777 4,109 378 329,508
----------- ----------- ---------- ---------
Held to maturity at December 31, 1998:
U.S. Treasury 249 4 253
Federal agencies 500 1 501
State and municipal 18,335 370 1 18,704
Mortgage-backed securities 864 3 867
Other asset-backed securities 1,761 2 27 1,736
----------- ----------- ---------- ---------
Total held to maturity 21,709 380 28 22,061
----------- ----------- ---------- ---------
Total investment securities $ 347,486 $ 4,489 $ 406 $ 351,569
=========== ========== ========== =========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FIRST MERCHANTS CORPORATION
FORM 10-Q
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Table dollar amounts in thousands)
(Unaudited)
NOTE 5. Loans and Allowance
September 30, December 31,
1999 1998
------------ -----------
<S> <C> <C>
Loans:
Commercial and industrial loans $ 220,838 $ 188,841
Bankers' acceptances and loans to financial institutions 900
Agricultural production financing and other loans to farmers 25,309 21,951
Real estate loans:
Construction 27,843 31,719
Commercial and farmland 147,102 137,671
Residential 375,901 361,611
Individuals' loans for household and other personal expenditures 171,849 143,075
Tax-exempt loans 4,374 2,652
Other loans 3,129 2,073
Unearned interest on loans (42) (137)
----------- -----------
Total $ 976,303 $ 890,356
=========== ===========
Nine Months Ended
September 30,
Allowance for loan losses: 1999 1998
----------- -----------
Balances, January 1 $ 9,209 $ 8,429
Provision for losses 1,617 1,551
Recoveries on loans 342 372
Loans charged off (1,015) (1,490)
----------- -----------
Balances, September 30 $ 10,153 $ 8,862
=========== ===========
</TABLE>
NOTE 6. Net Income Per Share
<TABLE>
<CAPTION>
Three Months Ended September 30,
1999 1998
Weighted- Weighted-
Average Per Share Average Per Share
Income Shares Amount Income Shares Amount
------- ---------- --------- ------ ---------
<S> <C> <C> <C> <C> <C> <C>
Basic net income per share:
Net income available to
common stockholders $4,863 12,043,381 $ .40 $4,559 11,950,118 $ .38
======== ========
Effect of dilutive stock options 160,384
------ ---------- ------ ----------
Diluted net income per share:
Net income available to
common stockholders
and assumed conversions $4,863 12,146,080 $ .40 $4,559 12,110,502 $ .38
====== ========== ======== ====== ========== ========
</TABLE>
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<TABLE>
<CAPTION>
FIRST MERCHANTS CORPORATION
FORM 10-Q
Nine Months Ended September 30,
1999 1998
Weighted- Weighted-
Average Per Share Average Per Share
Income Shares Amount Income Shares Amount
<S> <C> <C> <C> <C> <C>
Basic net income per share:
Net income available to
common stockholders $14,155 12,008,890 $ 1.18 $13,366 11,910,215 $ 1.12
======= =======
Effect of dilutive stock options 106,239 171,838
---------- ----------
Diluted net income per share:
Net income available to
common stockholders
and assumed conversions $14,155 12,115,129 $ 1.17 $13,366 12,082,053 $ 1.11
======= ========== ======== ======= ========== =======
</TABLE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
The Corporation's financial data for periods prior to mergers accounted for as
pooling of interests has been restated.
Forward-Looking Statements
Congress passed the Private Securities Litigation Report Act of 1995 to
encourage corporations to provide investors with information about the company's
anticipated future financial performance, goals, and strategies. The act
anticipated future financial performance, goals, and strategies. The act
provides a safe harbor for such disclosure, or in other words, protection from
unwarranted litigation if actual results are not the same as management's
expectations.
First Merchants Corporation desires to provide its shareholders with sound
information about past performance and future trends. Consequently, this
Quarterly Report, including Management's Discussion and Analysis of financial
Condition and Results of Operations, contains forward-looking statements that
are subject to numerous assumptions, risks, and uncertainties. Actual results
could differ materially from those contained in or implied by First Merchants
Corporation's statements due to a variety of factors including: changes in
economic conditions; movements in interest rates; competitive pressures on
product pricing and services; success and timing of business strategies; the
successful integration of acquired businesses; the nature and extent of
governmental actions and reform; and extended disruption of vital
infrastructure. The management of First Merchants Corporation encourages readers
of this report to understand forward-looking statements to be strategic
objectives rather than absolute targets of future performance.
Results of Operations
Net income for the three months ended September 30, 1999, was $4,863,000,
compared to $4,559,000 earned in the same period of 1998, an increase of 6.7
percent. Diluted net income per share was $.40 for the three months ended
September 30, 1999, compared to $.38 for the three months ended September 30,
1998, an increase of 5.3 percent.
Net income for the first nine months of 1999 was $14,155,000 compared to
$13,366,000 earned in the same period of 1998, an increase of 5.9 percent.
Diluted net income per share was $1.17 and $1.11 for the nine months ended
September 30, 1999 and 1998, respectively, an increase of 5.4 percent.
The increase in earnings was primarily due to growth in earning assets and
non-interest income. Net interest income increased $3,220,000 or 8.8 percent
over the first nine months of 1998 due to growth in average earning assets of
11.9 percent. Non-interest income increased $1,604,000 or 17.2 percent over the
first nine months of 1998 due primarily to increased revenues from fiduciary
activities and commission income.
Annualized returns on average assets and average shareholders' equity for
quarter ended September 30, 1999 were 1.38 percent and 12.46 percent,
respectively, compared with 1.44 percent and 12.19 percent for the same period
of 1998. For the nine months ended September 30, 1999, annualized returns on
average assets and shareholder's equity were 1.37 percent and 12.12 percent,
respectively, compared to 1.45 percent and 12.16 percent for the same nine month
period in 1998.
<PAGE>
FIRST MERCHANTS CORPORATION
FORM 10-Q
Capital
The Corporation's capital strength continues to exceed regulatory minimums
and peer group averages. Management believes that strong capital is a distinct
advantage in the competitive environment in which the Corporation operates and
will provide a solid foundation for continued growth.
The Corporation's Tier I capital to average assets ratio was 11.9 percent
at year-end 1998 and 11.2 percent at September 30, 1999. At September 30, 1999,
the Corporation had a Tier I risk-based capital ratio of 15.9 percent, total
risk- based capital ratio of 17.0 percent, and a leverage ratio of 11.2 percent.
Regulatory capital guidelines require a Tier I risk- based capital ratio of 4.0
percent and a total risk-based capital ratio of 8.0 percent. Banks with Tier I
risk-based capital ratios of 6.0 percent and total risk-based capital ratios of
10.0 percent are considered "well capitalized."
Asset Quality/Provision for Loan Losses
The Corporation's asset quality and loan loss experience have consistently
been superior to that of its peer group, as summarized on the following page.
Asset quality has been a major factor in the Corporation's ability to generate
consistent profit improvement.
The allowance for loan losses is maintained through the provision for loan
losses, which is a charge against earnings.
The amount provided for loan losses and the determination of the adequacy
of the allowance are based on a continuous review of the loan portfolio,
including an internally administered loan "watch" list and an independent loan
review provided by an outside accounting firm. The evaluation takes into
consideration identified credit problems, as well as the possibility of losses
inherent in the loan portfolio that cannot be specifically identified.
The following table summarizes the risk elements for the Corporation.
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------
(Dollars in Thousands) September 30, December 31, December 31,
1999 1998 1997
<S> <C> <C> <C>
--------------------------------------------------------------------------------------------------------
Non-accrual loans $ 1,314 $ 1,073 $ 2,777
Loans contractually past due 90 days
or more other than nonaccruing 3,235 2,334 1,699
Restructured loans 970 1,110 1,540
------- ------- -------
Total $ 5,519 $ 4,517 $ 6,016
======= ======= =======
--------------------------------------------------------------------------------------------------------
</TABLE>
Impaired loans included in the table above, totaled $2,391,000 at December
31, 1998. An allowance for losses at December 31, 1998, was not deemed necessary
for impaired loans totaling $7,041,000, but an allowance of $795,000 was
recorded for the remaining balance of impaired loans of $1,956,000. The average
balance of impaired loans for 1997 was $4,155,000.
At September 30, 1999, the allowance for loan losses increased by $944,000,
to $10,153,000, up from year end 1998. As a percent of loans, the allowance was
1.04 percent, up from 1.03 percent at year end 1998.
The third quarter 1999 provision of $590,000 increased from $539,000 for
the same quarter in 1998. Net charge-offs amounted to $295,000 during the
quarter. The provision of $1,617,000 for the nine months ended September 30,
1999 increased $66,000 from the same period in 1998. Net charge offs amounted to
$673,000 during the first nine months of 1998.
<PAGE>
FIRST MERCHANTS CORPORATION
FORM 10-Q
The table below presents loan loss experience for the periods indicated and
compares the Corporation's loss experience to that of its peer group, consisting
of bank holding companies with assets between $1 billion and $3 billion. <TABLE>
<CAPTION>
Nine Months Ended Year Ended
September 30, December 31,
1999 1998 1998 1997
---- ---- ---- ----
(Dollars in Thousands)
<S> <C> <C> <C> <C>
Allowance for loan losses:
Balance at beginning of period $ 9,209 $8,429 $8,429 $8,010
------- ------ ----- ------
Chargeoffs 1,015 1,490 2,231 1,949
Recoveries 342 372 639 633
------- ------ ----- ------
Net chargeoffs 673 1,118 1,591 1,316
Provision for loan losses 1,617 1,551 2,372 1,735
------- ------ ----- ------
Balance at end of period $10,153 $8,862 $9,209 $8,429
======= ======= ====== ======
Ratio of net chargeoffs during the period to average loans
outstanding during the period .10%(1) .15%(1) .18% .16%
Peer Group N/A N/A .29% .26%
(1) First nine months annualized
</TABLE>
Liquidity, Interest Sensitivity, and Disclosures About Market Risk
Asset/Liability management has been an important factor in the
Corporation's ability to record consistent earnings growth through periods of
interest rate volatility and product deregulation. Management and the Board of
Directors monitor the Corporation's liquidity and interest sensitivity positions
at regular meetings to ensure that changes in interest rates will not adversely
affect earnings. Decisions regarding investment and the pricing of loan and
deposit products are made after analysis of reports designed to measure
liquidity, rate sensitivity, the Corporation's exposure to changes in net
interest income given various rate scenarios, and the economic and competitive
environments.
It is the objective of the Corporation to monitor and manage risk exposure
to net interest income caused by changes in interest rates. It is the goal of
the Corporation's Asset Liability function to provide optimum and stable net
interest income. To accomplish this, management uses two asset liability tools.
GAP/Interest Rate Sensitivity Reports and Net Interest Income Simulation
Modeling are both constructed, presented, and monitored quarterly.
The Corporation's liquidity and interest sensitivity position at September
30, 1999, remained adequate to meet the Corporation's primary goal of achieving
optimum interest margins while avoiding undue interest rate risk.
The Corporation had a cumulative negative gap of $147,652,000 in the six
month horizon at September 30, 1999, or just over 10.3 percent of total assets.
Net interest income at a financial institution with a negative gap tends to
decrease when rates rise and generally increase as interest rates decline.
The GAP/Interest Rate Sensitive Report is a tool which displays repricing
timing differences between interest sensitive assets and liabilities. The 0-180
day Sensitivity Gap Ratio depicts the institution is liability sensitive 73.4
percent.
<PAGE>
FIRST MERCHANTS CORPORATION
FORM 10-Q
The Corporation places its greatest credence in net interest income
simulation modeling. The GAP/Interest Rate Sensitivity Report is known to have
two major shortfalls. The GAP/Interest Rate Sensitivity Report fails to
precisely gauge how often an interest rate sensitive product reprices nor is it
able to measure the magnitude of potential future rate movements.
The Corporation's asset liability process monitors simulated net interest
income under three separate interest rate scenarios; rising (rate shock),
falling (rate shock) and flat. Net Interest income is simulated over an 18 month
horizon. By policy, the difference between the best performing and the worst
performing rate scenarios are not allowed to show a variance greater than 5
percent.
Assumed interest rate changes are simulated to move incrementally over 18
months. The total rate movement (beginning point less ending point) to
noteworthy interest rate indexes are as follows: <TABLE> <CAPTION>
Rising Falling
----------------------------------------------------
<S> <C> <C>
Prime 300 Basis Points (300) Basis Points
Federal Funds 300 (300)
90 Day T-Bill 310 (275)
One Year T-Bill 290 (270)
Three Year T-Note 290 (265)
Five Year T-Note 290 (255)
Ten Year T-Note 290 (245)
Interest Checking 100 ( 57)
MMIA Savings 150 (100)
Money Market Index 341 (194)
Regular Savings 100 ( 57)
Results for the flat, rising (rate shock), and falling (rate shock)
interest rate scenarios are listed below. The net interest income shown
represents cumulative net interest income over an 18 month time horizon. Balance
sheet assumptions are the same under both scenarios: </TABLE> <TABLE> <CAPTION>
Flat/Base Rising Falling
-------------------------------------------------------
<S> <C> <C> <C>
Net Interest Income (Dollars in Thousands) $81,171 $78,848 $78,859
Change vs. Flat/Base Scenario (2,323) (2,312)
Percent Change (2.86%) (2.85%)
</TABLE>
<PAGE>
FIRST MERCHANTS CORPORATION
FORM 10-Q
Earning Assets
The following table presents the earning asset mix as of September 30,
1999, and December 31, 1998, and December 31, 1997.
Loans grew by over $85 million from December 31, 1998, to September 30,
1998, while investment securities grew by $16.3 million during the same period.
Commercial and industrial loans increased by more than $31,997,000, while
individuals' loans for household and personal expenditures grew by nearly
$28,774,000.
<TABLE>
<CAPTION>
EARNING ASSETS
(Dollars in Millions) September 30, December 31, December 31,
1999 1998 1997
------------- ------------ ------------
<S> <C> <C> <C>
Federal funds sold and interest-bearing deposits $ 1.8 $ 45.3 $ 9.5
Investment securities 367.8 351.2 266.8
Mortgage loans held for sale .2 0.8 0.5
Loans 976.3 890.4 838.7
Federal Reserve and Federal Home Loan Bank stock 5.6 4.5 4.1
---------- ----------- ----------
Total $ 1,351.7 $ 1,292.2 $ 1,079.6
========== =========== ==========
</TABLE>
Deposits, Securities Sold Under Repurchase Agreements, Federal Funds Sold and
Other Short-term Borrowing
The following table presents the level of deposits and borrowed funds
(Federal funds purchased, repurchase agreements with customers, U.S. Treasury
demand notes and Federal Home Loan Bank advances) for the years ended 1998 and
1997 and at September 30, 1999.
<TABLE>
<CAPTION>
(Dollars in Millions) September 30, December 31, December 31,
1999 1998 1997
--------------------------------------------------
<S> <C> <C> <C>
Deposits $1,058.0 $1,086.0 $ 977.0
Securities sold under repurchase agreements 86.7 48.8 15.4
Federal funds purchased and other short-term borrowings 54.3 17.8 13.6
Federal Home Loan Bank advances 63.5 47.1 25.5
</TABLE>
The Corporation has continued to leverage its large capital position with
Federal Home Loan Bank advances, as well as, repurchase agreements which are
pledged against acquired investment securities as collateral for the borrowings.
The interest rate risk is included as part of the Corporation's interest
simulation discussed in Management's Discussion and Analysis under the heading
Liquidity, Interest Sensitivity, and Disclosures about Market Risk. The effect
on the Corporation's capital ratios is minimal as the Corporation remains
adequately capitalized.
<PAGE>
FIRST MERCHANTS CORPORATION
FORM 10-Q
Net Interest Income
Net Interest Income is the primary source of the Corporation's earnings. It
is a function of net interest margin and the level of average earning assets.
The table below presents the Corporation's asset yields, interest expense,
and net interest income as a percent of average earning assets for the three
months and nine months ended September 30, 1999 and 1998.
Net interest income (FTE) for the three months ended September 30, 1999
increased by $1,124,000, or 8.5 percent over the same period in 1998, due to an
increase in earning assets of nearly $124 million. For the same period interest
income and interest expense, as a percent of average earning assets, declined by
.28 and .21 percent respectively, due to lower interest rates and increased
non-deposit funding.
Net Interest income (FTE) for the nine months ended September 30, 1999
increased $3,382,000, or 8.7 percent over the same period in 1998, due to an
increase in earning assets of over $138 million. Net interest income (FTE), as a
percent of average earning assets, during the same period declined 12 basis
points due primarily to declining interest rates and increased non-deposit
funds. <TABLE> <CAPTION>
(Dollars in Thousands)
- ------------------------------------------------------------------------------------------------------------------------
Interest Income Interest Expense Net Interest Income Net Interest Income
(FTE) as a Percent as a Percent (FTE) as a Percent Average on a
of Average of Average of Average Earning Fully Taxable
Earning Assets Earning Assets Earning Assets Assets Equivalent Basis
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
For the three months
ended September 30,
1999 7.86% 3.55% 4.31% $1,329,464 $14,314
1998 8.14 3.76 4.38 $1,205,742 13,190
For the nine months
ended September 30,
1999 7.81 3.50 4.31 $1,302,931 42,087
1998 8.19 3.76 4.43 1,164,641 38,705
Average earning assets include the average balance of securities classified as
available for sale, computed based on the average of the historical amortized
cost balances without the effects of the fair value adjustment.
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
FIRST MERCHANTS CORPORATION
FORM 10-Q
Other Income
The Corporation has placed emphasis on the growth of non-interestincome in
recent years by offering a wide range of fee-based services. Fee schedules are
regularly reviewed by a pricing committee to ensure that the products and
services offered by the Corporation are priced to be competitive and profitable.
Other income in the third quarter of 1999 exceeded the same quarter in the
prior year by $441,000, or 13.4 percent.
Three major areas account for most of the increase:
1. Service charges on deposit accounts increased by $287,000, or 31.9
percent due primarily to increased pricing.
2. Other customer fees increased by $138,000, or 21.1 percent, due to
increased card related activity and increased pricing.
3. Commission income increased by $66,000, or 18.7 percent due to increased
market synergies.
Other income for the nine months ended September 30, 1999 exceeded the same
period in the prior year by $1,604,000, or 17.2 percent.
Four major areas account for most of the increase:
1. Commission income increased $410,000, due to the acquisition of First
Merchants Insurance Services, Inc., on April 1, 1998.
2. Revenues from fiduciary activities grew $280,000, or 8.9 percent, due to
strong new business activity and markets.
3. Other customer fees increased $320,000, or 16.5 percent, due to
increased card related activity and increased pricing.
4. Service charges on deposit accounts increased $466,000, or 16.5 percent
due to increased pricing.
Other Expense
Total other expenses represent non-interest operating expenses of the
Corporation. Third quarter other expense in 1999 exceeded the same quarter of
the prior year by $1,048,000, or 12.8 percent.
Two major areas account for most of the increase:
1. Salaries and benefit expense grew $373,000, or 8.1 percent, due to
normal salary increases and staff additions.
2. Equipment expense increased by $262,000, or 34.3 percent, reflecting the
Corporation's efforts to improve efficiency and provide electronic
service delivery to its customers.
Total other expenses represent non-interest operating expenses of the
Corporation. Other expenses for the nine month period ended September 30, 1999
exceeded the same period of the prior year by $3,562,000, or 14.9 percent.
Four major areas account for most of the increase:
1. Salaries and benefit expense grew $1,527,000, or 11.5 percent, due to
normal salary increases and staff additions.
2. Merger related costs of $734,000 resulted from the acquisitions of Jay
Financial Corporation and Anderson Community Bank in April 1999.
3. Equipment expense increased $427,000, or 18.6 percent, reflecting the
Corporation's efforts to improve efficiency and provide electronic
service delivery to its customers.
4. Computer processing expense increased by $181,000, or 16.9 percent.
<PAGE>
FIRST MERCHANTS CORPORATION
FORM 10-Q
Income Taxes
Income tax expense, for the three months ended September 30, 1999,
increased by $123,000 over the same period in 1998, due to a $427,000 increase
in pre-tax net income, mitigated somewhat by a $61,000 increase in tax-exempt
income. Likewise, the increase of $407,000 for the nine months ended September
30, 1999, as compared to the same period in 1998, results from a $1,196,000
increase in pre-tax net income, mitigated somewhat by a $302,000 increase in tax
exempt income.
Year 2000
The Corporation has conducted a comprehensive review of its computer
systems to identify the systems that could be affected by the Year 2000 Issue
and has developed an implementation plan to resolve the issue. The Year 2000
Issue is the result of computer programs being written using two digits rather
than four to define the applicable year. Any of the Corporation's programs that
have time-sensitive software may recognize a date using "00" as the year 1900
rather than the year 2000. This could result in a sytem failure or
miscalculations. The Corporation is utilizing both internal and external
resources to identify, correct and test the systems for the Year 2000
compliance. The Corporation began the testing phase during the third quarter of
1998. Core application testing was completed as of June 30, 1999. The
Corporation's contingency plan was also completed on June 30, 1999.
The Corporation has contacted the companies that supply or service its
material operations to certify that their respective computer systems are Year
2000 compliant. In addition to possible expenses related to the Corporation's
systems and those of the Corporation's service providers, the Corporation could
incur losses if Year 2000 problems affect any of its depositors or borrowers.
Such problems could include delayed loan payments, due to Year 2000 problems
affecting any of its significant borrowers or impairing the payroll systems of
large employers in its market area. Because the Corporation's loan portfolio to
corporate and individual borrowers is diversified and its market area does not
depend significantly upon one employer or industry, the Corporation does not
expect any such Year 2000 related difficulties that may affect its depositors
and borrowers to significantly affect its net earnings or cash flows.
The Board of Directors reviews, on a quarterly basis, the progress in
addressing Year 2000 issues. The Corporation believes that its costs related to
upgrading systems and software for Year 2000 compliance will not exceed
$1,025,000. As of June 30, 1999, the Corporation has spent approximately
$860,000 in connection with Year 2000 compliance. Of the $860,000, approximately
$650,000 has been capitalized as the Corporation replaced and upgraded
non-compliant systems. Although the Corporation believes it is taking the
necessary steps to address the Year 2000 compliance issue, no assurances can be
given that some problems will not occur or that the Corporation will not incur
significant additional expenses in future periods.
Other
The Securities and Exchange Commission maintains a Web site that contains
reports, proxy and information statements and other information regarding
registrants that file electronically with the Commission, including the
Corporation, and that address is (http://www.sec.gov).
Item 3. Quantitative and Qualitative Disclosures About Market Risk
The information required under this item is included as part of Management's
Discussion and Analysis under the heading Liquidity, Interest Sensitivity, and
Disclosures About Market Risk.
<PAGE>
FIRST MERCHANTS CORPORATION
FORM 10-Q
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
Exhibit No.: Description of Exhibit:
27 Financial Data Schedule, Period Ending September 30, 1999
27 Financial Data Schedule, Period Ending June 30, 1999
27 Financial Data Schedule, Period Ending March 31, 1999
27 Financial Data Schedule, Period Ending December 31, 1998
27 Financial Data Schedule, Period Ending September 30, 1998
27 Financial Data Schedule, Period Ending June 30, 1998
27 Financial Data Schedule, Period Ending March 31, 1998
27 Financial Data Schedule, Period Ending December 31, 1997
27 Financial Data Schedule, Period Ending December 31, 1996
27 Financial Data Schedule, Period Ending December 31, 1995
(b) Reports on Form 8-K:
None
<PAGE>
FIRST MERCHANTS CORPORATION
FORM 10-Q
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.
First Merchants Corporation
(Registrant)
Date November 11, 1999 by /s/ Michael L. Cox
----------------------- --------------------------------------------
Michael L. Cox
President and Chief Executive Officer
Date November 11, 1999 by /s/ James L. Thrash
----------------------- --------------------------------------------
James L. Thrash
Chief Financial & Principal
Accounting Officer
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 37,566
<INT-BEARING-DEPOSITS> 1,631
<FED-FUNDS-SOLD> 1,800
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 352,042
<INVESTMENTS-CARRYING> 15,772
<INVESTMENTS-MARKET> 15,828
<LOANS> 976,303
<ALLOWANCE> 10,153
<TOTAL-ASSETS> 1,428,837
<DEPOSITS> 1,057,981
<SHORT-TERM> 0
<LIABILITIES-OTHER> 214,103
<LONG-TERM> 0
0
0
<COMMON> 1,506
<OTHER-SE> 155,247
<TOTAL-LIABILITIES-AND-EQUITY> 1,428,837
<INTEREST-LOAN> 57,744
<INTEREST-INVEST> 15,499
<INTEREST-OTHER> 823
<INTEREST-TOTAL> 74,066
<INTEREST-DEPOSIT> 28,160
<INTEREST-EXPENSE> 34,188
<INTEREST-INCOME-NET> 39,878
<LOAN-LOSSES> 1,617
<SECURITIES-GAINS> 169
<EXPENSE-OTHER> 27,413
<INCOME-PRETAX> 21,774
<INCOME-PRE-EXTRAORDINARY> 14,155
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 14,155
<EPS-BASIC> 1.18
<EPS-DILUTED> 1.17
<YIELD-ACTUAL> 4.31
<LOANS-NON> 1429
<LOANS-PAST> 3,235
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 9,209
<CHARGE-OFFS> 1015
<RECOVERIES> 342
<ALLOWANCE-CLOSE> 10,153
<ALLOWANCE-DOMESTIC> 10,153
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 35,948
<INT-BEARING-DEPOSITS> 791
<FED-FUNDS-SOLD> 32,500
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 359,050
<INVESTMENTS-CARRYING> 17,055
<INVESTMENTS-MARKET> 17,165
<LOANS> 920,824
<ALLOWANCE> 9,858
<TOTAL-ASSETS> 1,407,815
<DEPOSITS> 1,091,489
<SHORT-TERM> 82,480
<LIABILITIES-OTHER> 9,710
<LONG-TERM> 68,696
0
0
<COMMON> 1,502
<OTHER-SE> 153,938
<TOTAL-LIABILITIES-AND-EQUITY> 1,407,815
<INTEREST-LOAN> 37,896
<INTEREST-INVEST> 10,122
<INTEREST-OTHER> 668
<INTEREST-TOTAL> 48,686
<INTEREST-DEPOSIT> 18,680
<INTEREST-EXPENSE> 22,384
<INTEREST-INCOME-NET> 26,302
<LOAN-LOSSES> 1,027
<SECURITIES-GAINS> 157
<EXPENSE-OTHER> 18,187
<INCOME-PRETAX> 14,289
<INCOME-PRE-EXTRAORDINARY> 9,292
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 9,292
<EPS-BASIC> 0.78
<EPS-DILUTED> 0.77
<YIELD-ACTUAL> 4.31
<LOANS-NON> 1526
<LOANS-PAST> 2,723
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 9,209
<CHARGE-OFFS> 601
<RECOVERIES> 223
<ALLOWANCE-CLOSE> 9,858
<ALLOWANCE-DOMESTIC> 9,858
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 32,782
<INT-BEARING-DEPOSITS> 1,183
<FED-FUNDS-SOLD> 11,132
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 380,767
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 900,165
<ALLOWANCE> 9,556
<TOTAL-ASSETS> 1,365,570
<DEPOSITS> 1,040,306
<SHORT-TERM> 0
<LIABILITIES-OTHER> 169,533
<LONG-TERM> 0
0
0
<COMMON> 1,498
<OTHER-SE> 154,233
<TOTAL-LIABILITIES-AND-EQUITY> 1,365,570
<INTEREST-LOAN> 18,633
<INTEREST-INVEST> 4,805
<INTEREST-OTHER> 332
<INTEREST-TOTAL> 23,770
<INTEREST-DEPOSIT> 9,341
<INTEREST-EXPENSE> 10,931
<INTEREST-INCOME-NET> 12,839
<LOAN-LOSSES> 505
<SECURITIES-GAINS> 15
<EXPENSE-OTHER> 8,690
<INCOME-PRETAX> 7,072
<INCOME-PRE-EXTRAORDINARY> 4,643
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,643
<EPS-BASIC> 0.39
<EPS-DILUTED> 0.38
<YIELD-ACTUAL> 4.30
<LOANS-NON> 1014
<LOANS-PAST> 3,463
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 9,209
<CHARGE-OFFS> 321
<RECOVERIES> 163
<ALLOWANCE-CLOSE> 9,556
<ALLOWANCE-DOMESTIC> 9,556
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 35,474
<INT-BEARING-DEPOSITS> 1,008
<FED-FUNDS-SOLD> 45,295
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 351,217
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 891,132
<ALLOWANCE> 9,209
<TOTAL-ASSETS> 1,362,527
<DEPOSITS> 1,085,952
<SHORT-TERM> 0
<LIABILITIES-OTHER> 122,684
<LONG-TERM> 0
0
0
<COMMON> 1,497
<OTHER-SE> 152,394
<TOTAL-LIABILITIES-AND-EQUITY> 1,362,527
<INTEREST-LOAN> 76,029
<INTEREST-INVEST> 16,502
<INTEREST-OTHER> 1,454
<INTEREST-TOTAL> 93,985
<INTEREST-DEPOSIT> 39,873
<INTEREST-EXPENSE> 44,465
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<LOAN-LOSSES> 2,372
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<EXPENSE-OTHER> 32,741
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<INCOME-PRE-EXTRAORDINARY> 17,907
<EXTRAORDINARY> 0
<CHANGES> 0
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<EPS-BASIC> 1.50
<EPS-DILUTED> 1.48
<YIELD-ACTUAL> 4.40
<LOANS-NON> 1073
<LOANS-PAST> 2,334
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 8,429
<CHARGE-OFFS> 2230
<RECOVERIES> 639
<ALLOWANCE-CLOSE> 9,209
<ALLOWANCE-DOMESTIC> 9,556
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 33,247
<INT-BEARING-DEPOSITS> 556
<FED-FUNDS-SOLD> 7,571
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 332,772
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 881,833
<ALLOWANCE> 8,862
<TOTAL-ASSETS> 1,294,906
<DEPOSITS> 1,014,078
<SHORT-TERM> 0
<LIABILITIES-OTHER> 129,256
<LONG-TERM> 0
0
0
<COMMON> 1,495
<OTHER-SE> 150,077
<TOTAL-LIABILITIES-AND-EQUITY> 1,294,906
<INTEREST-LOAN> 56,743
<INTEREST-INVEST> 11,637
<INTEREST-OTHER> 1,132
<INTEREST-TOTAL> 69,512
<INTEREST-DEPOSIT> 30,043
<INTEREST-EXPENSE> 32,854
<INTEREST-INCOME-NET> 36,658
<LOAN-LOSSES> 1,551
<SECURITIES-GAINS> 127
<EXPENSE-OTHER> 23,851
<INCOME-PRETAX> 20,578
<INCOME-PRE-EXTRAORDINARY> 13,366
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 13,366
<EPS-BASIC> 1.12
<EPS-DILUTED> 1.11
<YIELD-ACTUAL> 4.43
<LOANS-NON> 1678
<LOANS-PAST> 2737
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 8,429
<CHARGE-OFFS> 1490
<RECOVERIES> 372
<ALLOWANCE-CLOSE> 8,862
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