SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(MARK ONE)
[X] Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934.
FOR THE QUARTERLY PERIOD ENDED: JUNE 30, 1998
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: 0-16667
DNB FINANCIAL CORPORATION
(Exact name of registrant as specified in its charter)
Pennsylvania 23-2222567
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
4 Brandywine Avenue - Downingtown, PA 19335
(Address of principal executive offices and Zip Code)
(610) 269-1040
(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.
[X] Yes [ ] N
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Common Stock ($1.00 Par Value) 1,451,961
(Class) (Shares Outstanding as of
August 14, 1998)
- --------------------------------------------------------------------------------
<PAGE>
DNB FINANCIAL CORPORATION AND SUBSIDIARY
INDEX
PART I - FINANCIAL INFORMATION PAGE NO.
ITEM 1. FINANCIAL STATEMENTS:
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
June 30, 1998 (Unaudited) and December 31, 1997 3
CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended June 30, 1998 and 1997 (Unaudited) 4
CONSOLIDATED STATEMENTS OF OPERATIONS
Six Months Ended June 30, 1998 and 1997 (Unaudited) 5
CONSOLIDATED STATEMENTS OF CASH FLOWS
Six Months Ended June 30, 1998 and 1997 (Unaudited) 6
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1998 and December 31, 1997 7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS 10
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS 18
ITEM 2. CHANGE IN SECURITIES 18
ITEM 3. DEFAULTS UPON SENIOR SECURITIES 18
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF 18
SECURITY HOLDERS
ITEM 5. OTHER INFORMATION 18
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 18
SIGNATURES 19
<PAGE>
<TABLE>
<CAPTION>
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CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
- -------------------------------------------------------------------------------------------------
(Unaudited)
June 30, December 31,
1998 1997
------------ ------------
<S> <C> <C>
ASSETS
Cash and due from banks ........................................ $ 13,093,701 $ 7,503,007
Federal funds sold ............................................. 13,987,000 15,889,000
Investment securities available for sale, at market value ...... 14,477,126 13,888,462
Investment securities (market value $51,312,886
in 1998 and $49,863,493 in 1997) ............................ 51,094,458 49,694,161
Loans, net of unearned income .................................. 136,276,017 129,954,114
Allowance for loan losses ................................... (5,119,883) (5,280,958)
------------ ------------
Net loans ...................................................... 131,156,134 124,673,156
------------ ------------
Office property and equipment, net ............................. 3,609,244 3,644,581
Accrued interest receivable .................................... 1,536,078 1,584,213
Other real estate owned ........................................ 206,368 231,187
Deferred income taxes .......................................... 979,170 977,981
Other assets ................................................... 1,539,907 1,365,317
------------ ------------
Total assets ................................................... $ 231,679,186 $ 219,451,065
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Non-interest-bearing deposits ................................. $ 28,878,181 27,149,502
Interest-bearing deposits:
NOW accounts ............................................... 33,507,761 33,386,755
Money market ............................................... 24,826,973 19,289,128
Savings .................................................... 28,952,181 27,714,419
Time ....................................................... 89,844,835 91,697,168
------------ ------------
Total deposits ................................................ 206,009,931 199,236,972
------------ ------------
FHLB advances ................................................. 5,000,000 --
Accrued interest payable ...................................... 675,816 830,533
Other liabilities ............................................. 594,053 1,027,997
------------ ------------
Total liabilities ............................................. 212,279,800 201,095,502
------------ ------------
STOCKHOLDERS' EQUITY
Preferred stock, $10.00 par value;
1,000,000 shares authorized; none issued ................... -- --
Common stock, $1.00 par value;
10,000,000 shares authorized; 1,451,961 and
1,451,661 issued and outstanding, respectively ............. 1,451,961 1,451,661
Surplus ....................................................... 14,882,576 14,607,109
Retained earnings ............................................. 3,051,476 2,276,556
Accumulated other comprehensive income ........................ 13,373 20,237
------------ ------------
Total stockholders' equity .................................... 19,399,386 18,355,563
------------ ------------
Total liabilities and stockholders' equity ......................$ 231,679,186 $ 219,451,065
============ ============
See accompanying notes to consolidated financial statements
</TABLE>
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<TABLE>
<CAPTION>
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CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
- --------------------------------------------------------------------------------
Three Months Ended June 30
--------------------------
1998 1997
------------ ------------
<S> <C> <C>
INTEREST INCOME:
Interest and fees on loans .......................... $2,959,749 $2,923,421
Interest on taxable investment securities ........... 1,104,925 1,110,606
Interest on Federal funds sold ...................... 245,895 55,023
---------- ----------
Total interest income ............................... 4,310,569 4,089,050
---------- ----------
INTEREST EXPENSE:
Interest on time deposits ........................... 1,268,721 1,122,982
Interest on NOW, money market and savings ........... 615,664 509,069
Interest on repurchase agreements ................... -- 14,596
Interest on FHLB advances ........................... 64,323 43,797
Interest on Federal funds purchased ................. -- 2,462
---------- ----------
Total interest expense .............................. 1,948,708 1,692,906
---------- ----------
Net interest income ................................. 2,361,861 2,396,144
Provision for loan losses ........................... -- --
---------- ----------
Net interest income after provision for loan losses . 2,361,861 2,396,144
---------- ----------
NON-INTEREST INCOME:
Service charges ..................................... 160,470 111,904
Trust income ........................................ 99,632 80,888
Other ............................................... 136,414 88,955
---------- ---------
Total non-interest income ........................... 396,516 281,747
---------- ---------
NON-INTEREST EXPENSE:
Salaries and employee benefits ...................... 979,408 977,674
Furniture and equipment ............................. 159,452 171,104
Occupancy ........................................... 112,233 119,346
Advertising and marketing ........................... 75,890 68,204
Professional and consulting ......................... 65,334 74,807
PA shares tax ....................................... 38,031 35,644
Postage ............................................. 37,549 32,647
Printing and supplies ............................... 36,023 42,519
Insurance ........................................... 22,840 23,942
FDIC insurance ...................................... 6,027 18,596
Other ............................................... 195,423 174,908
--------- ---------
Total non-interest expense .......................... 1,728,210 1,739,391
--------- ---------
Income before income taxes .......................... 1,030,167 938,500
Income tax expense .................................. 285,000 218,000
--------- ---------
NET INCOME .......................................... $ 745,167 $ 720,500
========= =========
EARNINGS PER SHARE:
Basic ............................................ $0.51 $0.50
Diluted .......................................... 0.50 0.49
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING:
Basic ............................................ 1,451,961 1,451,661
Diluted .......................................... 1,503,136 1,474,784
CASH DIVIDENDS PER SHARE ............................ $ 0.12 $ 0.10
See accompanying notes to consolidated financial statements
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
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CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
- --------------------------------------------------------------------------------
Six Months Ended June 30
------------------------
1998 1997
---------- -----------
<S> <C> <C>
INTEREST INCOME:
Interest and fees on loans .......................... $5,822,742 $5,649,524
Interest on taxable investment securities ........... 2,224,618 2,279,017
Interest on Federal funds sold ...................... 426,876 89,124
---------- ----------
Total interest income ............................... 8,474,236 8,017,665
---------- ----------
INTEREST EXPENSE:
Interest on time deposits ........................... 2,518,878 2,153,734
Interest on NOW, money market and savings ........... 1,173,498 996,698
Interest on repurchase agreements ................... 673 100,515
Interest on FHLB advances ........................... 102,493 71,797
Interest on Federal funds purchased ................. -- 5,364
---------- ----------
Total interest expense .............................. 3,795,542 3,328,108
---------- ----------
Net interest income ................................. 4,678,694 4,689,557
Provision for loan losses ........................... -- --
---------- ----------
Net interest income after provision for loan losses . 4,678,694 4,689,557
---------- ----------
NON-INTEREST INCOME:
Service charges ..................................... 301,610 202,155
Trust income ........................................ 233,561 172,320
Other ............................................... 199,639 150,317
---------- ----------
Total non-interest income ........................... 734,810 524,792
---------- ----------
NON-INTEREST EXPENSE:
Salaries and employee benefits ...................... 2,057,687 1,954,498
Furniture and equipment ............................. 308,426 336,771
Occupancy ........................................... 212,346 230,062
Advertising and marketing ........................... 120,788 112,969
Professional and consulting ......................... 134,314 138,104
PA shares tax ....................................... 76,048 71,288
Postage ............................................. 65,213 55,425
Printing and supplies ............................... 93,486 94,638
Insurance ........................................... 45,717 46,051
FDIC insurance ...................................... 11,974 36,872
Other ............................................... 356,332 346,840
---------- ----------
Total non-interest expense .......................... 3,482,331 3,423,518
---------- ----------
Income before income taxes .......................... 1,931,173 1,790,831
Income tax expense .................................. 535,000 430,000
---------- ----------
NET INCOME .......................................... $1,396,173 $1,360,831
========== ==========
EARNINGS PER SHARE:
Basic ............................................ $ 0.96 $ 0.94
Diluted .......................................... 0.93 0.93
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING:
Basic ............................................ 1,451,819 1,451,661
Diluted .......................................... 1,501,453 1,470,443
CASH DIVIDENDS PER SHARE ............................ $ 0.24 $ 0.20
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
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CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
- ----------------------------------------------------------------------------------------
Six Months Ended June 30
---------------------------
1998 1997
------------ -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income ............................................. $ 1,396,173 $ 1,360,831
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization .......................... 459,452 176,046
Gain on sale of investments ............................ (507) --
Gain on sale of OREO ................................... (64,349) (6,533)
Decrease in accrued interest receivable ................ 48,135 2,024
Increase in other assets ............................... (174,590) (60,457)
(Decrease) increase in accrued interest payable ........ (154,717) 132,294
(Decrease) increase in current taxes payables .......... (40,000) 43,500
(Decrease) increase in other liabilities ............... (393,944) 600,608
----------- -----------
Net Cash Provided By Operating Activities .............. 1,075,653 2,248,313
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from maturities & paydowns of AFS securities .. 5,667,092 3,299,203
Proceeds from maturities & paydowns of HTM securities .. 15,886,596 9,608,524
Purchase of AFS securities ............................. (7,456,407) --
Purchase of HTM securities ............................. (17,355,833) (3,673,109)
Proceeds from sale of AFS securities ................... 997,656 --
Net increase in loans .................................. (6,687,367) (4,489,524)
Proceeds from sale of OREO ............................. 293,556 626,533
Purchase of office property and equipment .............. (159,725) (36,832)
----------- ----------
Net Cash (Used) Provided By Investing Activities ....... (8,814,432) 5,334,795
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in deposits ............................... 6,772,959 13,450,868
Decrease in repurchase agreements ...................... -- (10,364,076)
Increase in FHLB advances .............................. 5,000,000 3,000,000
Proceeds from exercise of stock options ................ 2,949 --
Dividends paid ......................................... (348,435) (276,569)
----------- -----------
Net Cash Provided By Financing Activities .............. 11,427,473 5,810,223
----------- -----------
Net Change in Cash and Cash Equivalents ................ 3,688,694 13,393,331
Cash and Cash Equivalents at Beginning of Period ....... 23,392,007 11,469,470
----------- -----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD ............. $ 27,080,701 $ 24,862,801
=========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest ............................................ $ 3,950,259 $ 3,195,814
Taxes ............................................... 575,000 350,000
SUPPLEMENTAL DISCLOSURE OF NON-CASH FLOW INFORMATION:
Transfer of loans to OREO ........................... $ 240,404 --
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
DNB FINANCIAL CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1: BASIS OF PRESENTATION AND RESTATEMENT
The accompanying consolidated financial statements of DNB Financial
Corporation (referred to herein as the "Corporation" or "DNB") and its
subsidiary, Downingtown National Bank (the "Bank"), have been prepared in
accordance with the instructions for Form 10-Q and therefore do not include
certain information or footnotes necessary for the presentation of financial
condition, statement of operations and statement of cash flows required by
generally accepted accounting principles. However, in the opinion of management,
the consolidated financial statements reflect all adjustments (which consist of
normal recurring adjustments) necessary for a fair presentation of the results
for the unaudited periods. Prior period amounts not affecting net income are
reclassified when necessary to conform with current year classifications. The
results of operations for the six months ended June 30, 1998 are not necessarily
indicative of the results which may be expected for the entire year. The
consolidated financial statements should be read in conjunction with the Annual
Report and report on Form 10-K for the year ended December 31, 1997.
NOTE 2: EARNINGS PER SHARE (EPS)
Basic earnings per share is computed based on the weighted average number
of common shares outstanding during the period. Diluted earnings per share
reflect the potential dilution that could occur from the conversion of common
stock equivalents and is computed using the treasury stock method. Earnings per
share, dividends per share and weighted average shares outstanding have been
adjusted to reflect the effects of the 5% stock dividend paid in December 1997
and the September 1997 two-for-one stock split, effected in the form of a 100%
stock dividend. Net income and weighted average number of shares outstanding for
basic and diluted EPS for the three and six months ended June 30, 1998 and 1997
are reconciled as follows:
<TABLE>
<CAPTION>
Three months ended Three months ended
June 30, 1998 June 30, 1997
---------------------------- ---------------------------
Income Shares Amount Income Shares Amount
------- --------- ------ ------ --------- ------
<S> <C> <C> <C> <C> <C> <C>
Basic EPS:
Income available to common stockholders $ 745,167 1,451,961 $ 0.51 $ 720,500 1,451,661 $ 0.50
Effect of dilutive common stock
equivalents-stock options ............. -- 51,175 0.01 -- 23,123 0.01
------- --------- ---- ------- --------- ----
DILUTED EPS ........................... $ 745,167 1,503,136 $ 0.50 $ 720,500 1,474,784 $ 0.49
======= ========= ==== ======= ========= ====
</TABLE>
<TABLE>
<CAPTION>
Six months ended Six months ended
June 30, 1998 June 30, 1997
------------------------------- ------------------------------
Income Shares Amount Income Shares Amount
--------- --------- ------ --------- --------- ------
Basic EPS:
<S> <C> <C> <C> <C> <C> <C>
Basic EPS:
Income available to common stockholders $1,396,173 1,451,819 $ 0.96 $1,360,831 1,451,661 $ 0.94
Effect of dilutive common stock
equivalents-stock options ............. -- 49,634 0.03 -- 18,782 0.01
--------- --------- ---- --------- --------- ----
DILUTED EPS ........................... $1,396,173 1,501,453 $ 0.93 $1,360,831 1,470,443 $ 0.93
========= ========= ==== ========= ========= ====
</TABLE>
<PAGE>
NOTE 3: COMPREHENSIVE INCOME
On January 1, 1998, DNB adopted SFAS 130, Reporting Comprehensive Income.
This statement establishes standards for reporting comprehensive income, which
includes all changes in stockholders' equity during the period, except those
resulting from investments by owners and distributions to owners. DNB's
comprehensive income for the three months ended June 30, 1998 and 1997 was
$738,303 and $703,262, respectively and consisted of net income and the change
in unrealized gains (losses) on investment securities available for sale.
Comprehensive income for the six months ended June 30, 1998 and 1997 was
$1,389,309 and $1,343,593, respectively.
NOTE 4: RECENT ACCOUNTING PRONOUNCEMENTS
In June 1997, the FASB issued SFAS No. 131, Disclosures About Segments of
an Enterprise and Related Information ("SFAS No. 131"). SFAS No. 131 establishes
standards for the way that public business enterprises report information about
operating segments in annual financial statements and requires that those
enterprises report selected information about operating segments in interim
financial reports issued to shareholders. It also establishes standards for
related disclosures about products and services, geographic areas, and major
customers. SFAS No. 131 is effective for financial statements for periods
beginning after December 15, 1997, but need not be applied to interim financial
statements in the initial year of application. The impact, if any, of this
statement on DNB, would be to require additional disclosures in DNB's financial
statements.
In February 1998, the FASB issued SFAS No. 132, Employers' Disclosures
about Pensions and Other Postretirement Benefits ("SFAS No. 132"). This
statement amends the disclosure requirements of Statements No. 87, Employers'
Accounting for Pensions ("Statement No. 87"), No. 88, Employers' Accounting for
Settlements and Curtailments of Defined Benefit Pensions Plans and for
Termination Benefits ("Statement No. 88"), and No. 106, Employers' Accounting
for Postretirement Benefits Other Than Pensions ("Statement No. 106"). SFAS No.
132 is applicable to all entities. This statement standardizes the disclosure
requirements of Statements No. 87 and No. 106 to the extent practicable and
recommends a parallel format for presenting information about pensions and other
postretirement benefits. SFAS No. 132 only addresses disclosure and does not
change any of the measurement or recognition provisions provided for in
Statements No. 87, No. 88, or No. 106. The statement is effective for fiscal
years beginning after December 15, 1997. Restatement of comparative period
disclosures is required unless the information is not readily available, in
which case the notes to the financial statements should include all available
information and a description of the information not available. The impact, if
any, of this statement on DNB would be to require additional disclosures in
DNB's financial statements.
<PAGE>
In June 1998, the FASB issued SFAS No. 133, Accounting for Derivative
Instruments and Hedging Activities ("SFAS No. 133"). This statement standardizes
the accounting for derivative instruments, including certain derivative
instruments embedded in other contracts, and those used for hedging activities,
by requiring that an entity recognize those items as assets or liabilities in
the statement of financial position and measure them at fair value. SFAS No. 133
categorizes derivatives used for hedging purposes as either fair value hedges,
cash flow hedges, foreign currency fair value hedges, foreign currency cash flow
hedges, or hedges of net investments in foreign operations. SFAS No. 133
generally provides for matching of gain or loss recognition on the hedging
instrument with the recognition of the changes in the fair value of the hedged
asset or liability that are attributable to the hedged risk, so long as the
hedge is effective. The statement eliminates the accounting provisions outlined
in SFAS No. 52, "Foreign Currency Translation" related to forward contracts, as
accounting for all foreign currency derivatives will be governed under SFAS 133.
Prospective application of SFAS No. 133 is required for all fiscal years
beginning after June 15, 1999, however earlier application is permitted. DNB has
not yet determined the impact, if any, of this statement on its balance sheet
upon adoption.
NOTE 5: COMMON STOCK
In May 1998, the Corporation's amended Articles of Incorporation were filed
with the State. The amendment to Article 5 was approved by the Board of
Directors and ratified by the shareholders at the Annual Meeting held in April
1998. The amendment (a) increased the number of authorized shares of the
Corporation's Common Stock from 5,000,000 to 10,000,000 shares and (b) changed
the par value of the Common Stock from $10.00 to $1.00. The Common Stock and
Surplus accounts have been adjusted for this change by decreasing Common Stock
and increasing Surplus by $13,067,649. All prior periods presented have been
restated.
<PAGE>
DNB FINANCIAL CORPORATION AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
FINANCIAL CONDITION
DNB's total assets were $231.7 million at June 30, 1998 compared to $219.5
million at December 31, 1997. Total loans were $136.3 million, up $6.3 million
or 5% from $130.0 million at December 31, 1997. The increase was primarily in
the real estate loan portfolio which increased $5.3 million or 8%. Investment
securities (AFS and HTM) increased $2.0 million or 3% to $65.6 million at June
30, 1998. Federal funds sold were $14.0 million at June 30, 1998, down $1.9
million from December. The overall increase in assets was funded by growth in
both deposits and borrowings.
Deposits and other borrowings at June 30, 1998 totaled $211.0 million,
compared to $199.2 million at December 31, 1997. Increases of $5.6 million in
money market accounts, $1.7 million in non-interest bearing accounts and $1.2
million in other deposits were partially offset by a $1.9 million decline in
time deposits. In addition, other borrowings increased $5.0 million as a result
of FHLB advances.
At June 30, 1998, stockholders' equity was $19.4 million or $13.36 per
share, compared to $18.4 million or $12.64 per share at December 31, 1997. The
increase in stockholders' equity was the result of net income of $1.4 million
for the six months ended June 30, 1998, offset by dividends paid of
approximately $348,000 or $.24 per share.
RESULTS OF OPERATIONS
NET INTEREST INCOME
DNB's earnings performance is primarily dependent upon its level of net
interest income, which is the excess of interest revenue over interest expense.
Interest revenue includes interest earned on loans (net of interest reversals on
non-performing loans), investments and Federal funds sold and interest-earning
cash, as well as loan fees and dividend income. Interest expense includes
interest cost for deposits, repurchase agreements, Federal funds purchased, FHLB
advances and other borrowings.
Net interest income decreased $34,000 or 1% to $2.4 million for the three
month period and $11,000 or 0.2% to $4.7 million for the six month period ended
June 30, 1998. As shown in the following tables, the decrease in net interest
income for the three and six month periods ended June 30, 1998 was largely
attributable to the negative effects of rate changes largely offset by positive
effects of volume changes. The negative impact from changes in rates for both
periods was primarily attributable to loans and investments rolling over at
lower yields, reflecting the current interest rate environment. The positive
impact from volume changes during the three and six month periods was
attributable to significant increases in interest-earning assets, which
increased $24 million and $21 million on average for both periods, respectively.
<PAGE>
The following tables sets forth, among other things, the extent to which
changes in interest rates and changes in the average balances of
interest-earning assets and interest-bearing liabilities have affected interest
income and expense during the three and six months ended June 30, 1997 and 1996.
For each category of interest-earning assets and interest-bearing liabilities,
information is provided with respect to changes attributable to (i) changes in
rate (change in rate multiplied by old volume) and (ii) changes in volume
(change in volume multiplied by old rate). The net change attributable to the
combined impact of rate and volume has been allocated proportionately to the
change due to rate and the change due to volume.
<TABLE>
<CAPTION>
Three Months Ended June 30, 1998
Compared to 1997
--------------------------------
Increase (Decrease) Due to
--------------------------------
(Dollars in Thousands) Rate Volume Total
------ ------ -----
<S> <C> <C> <C>
Interest-earning assets:
Loans .................................. $(102) $ 139 $ 37
Investments/interest bearing deposits .. (108) 102 (6)
Federal funds sold ..................... 6 185 191
------ ------ -----
Total ............................. (204) 426 222
====== ====== =====
Interest-bearing liabilities:
Savings deposits ....................... (46) 153 107
Time deposits .......................... 32 114 146
FHLB advances .......................... (5) 25 20
Federal funds purchased ................ (1) (1) (2)
Repurchase agreements .................. (7) (8) (15)
------ ------ -----
Total ............................. (27) 283 256
------ ------ -----
NET INTEREST INCOME/INTEREST RATE SPREAD $(177) $ 143 $ (34)
====== ====== =====
</TABLE>
<TABLE>
<CAPTION>
Six Months Ended June 30, 1998
Compared to 1997
------------------------------
Increase (Decrease) Due to
------------------------------
(Dollars in Thousands) Rate Volume Total
------ ------ -----
<S> <C> <C> <C>
Interest-earning assets:
Loans .................................. $ (158) $ 331 $ 173
Investments/interest bearing deposits .. (88) 34 (54)
Federal funds sold ..................... 4 334 338
------ ------ -----
Total ............................. (242) 699 457
------ ------ -----
Interest-bearing liabilities:
Savings deposits ....................... 87 90 177
Time deposits .......................... 60 305 365
FHLB advances .......................... (7) 38 31
Federal funds purchased ................ (2) (3) (5)
Repurchase agreements .................. (50) (50) (100)
------ ------ -----
Total ............................. 88 380 468
------ ------ -----
NET INTEREST INCOME/INTEREST RATE SPREAD $(330) $ 319 $ (11)
====== ====== =====
</TABLE>
<PAGE>
PROVISION FOR LOAN LOSSES
To provide for potential losses inherent in the loan portfolio, DNB
maintains an allowance for loan losses. In establishing its allowance for loan
losses, management considers the size and risk exposure of each segment of the
loan portfolio, past loss experience, delinquency rates, collateral values, the
potential for losses in future periods, and other relevant factors. In assessing
this risk, management also considers external factors which affect the
portfolio, such as economic and delinquency trends, as well as internal factors
such as underwriting standards, management expertise and concentrations of
credit. In addition, the risk uncertainty contained in the unreviewed portion of
the portfolio has also been considered. Management believes that it makes an
informed judgment based upon available information.
To maintain an adequate allowance, management charges the provision for
loan losses against income. There were no provisions made during the three and
six months ended June 30, 1998, as the quality of DNB's loan portfolio continued
to show improvement, based on available information. Effective workout
strategies, fewer assets classified by internal loan review, sales of OREO
properties and other reductions in non-performing assets have temporarily
eliminated the need to make additional provisions.
The following table summarizes the changes in the allowance for loan losses
for the periods indicated. Real estate includes both residential and commercial
real estate.
<TABLE>
<CAPTION>
6 Months Year 6 Months
Ended Ended Ended
(Dollars in Thousands) 6/30/98 12/31/97 6/30/97
-------- -------- --------
<S> <C> <C> <C>
Beginning balance .......... $ 5,281 $ 5,112 $ 5,112
Provisions ................. -- -- --
Loans charged off:
Real estate ......... 59 -- --
Commercial .......... 135 (32) (24)
Consumer ............ 8 (16) (2)
-------- -------- --------
Total charged off (202) (48) (26)
-------- -------- --------
Recoveries:
Real estate ......... 23 1 1
Commercial .......... 13 167 7
Consumer ............ 5 49 37
-------- -------- --------
Total recoveries 41 217 45
-------- -------- --------
Net (charge-offs) recoveries (161) 169 19
-------- -------- --------
Ending balance ............. $ 5,120 $ 5,281 $ 5,131
======== ======== ========
</TABLE>
NON-INTEREST INCOME
Total non-interest income includes service charges on deposit products,
fees received by DNB's Investment Services and Trust Division, and other less
significant sources of income such as fees for safe deposit box rentals, issuing
travelers' checks and money orders, check cashing and similar activities.
<PAGE>
For the three and six month periods ended June 30, 1998, non-interest income
was $397,000 and $735,000, respectively, compared to $282,000 and $525,000 for
the same periods in 1997. Service charges increased $49,000 and $99,000, to
$160,000 and $302,000 for the three and six month periods ended June 30, 1998.
The increase in service charge income came largely from NSF fees and ATM
charges.
Trust income increased $19,000 and $61,000 to $100,000 and $234,000 for the
three and six month periods ended June 30, 1998. The increase was the result of
several estate settlements along with the implementation of a new fee schedule.
Other non-interest income increased $47,000 and $49,000 to $136,000 and
$200,000 for the three and six month periods ended June 30, 1998. The increase
in other income reflected the gains recognized on the sales of OREO properties.
NON-INTEREST EXPENSE
Non-interest expense includes salaries & employee benefits, furniture &
equipment, occupancy, professional & consulting fees as well as printing &
supplies, insurance, advertising and other less significant expense items.
Non-interest expenses decreased $11,000 to $1.7 million for the three month
period ended June 30, 1998. The decrease during the period resulted primarily
from lower levels of FDIC insurance, furniture & equipment, professional &
consulting, occupancy and printing & supplies expense, partially offset by
increases in other expenses, advertising & marketing, and postage expenses.
Non-interest expenses increased $59,000 to $3.5 million for the six month
period ended June 30, 1998. The increases during the period resulted primarily
from higher levels of salaries and employee benefits, postage, advertising &
marketing, and other expenses, partially offset by decreases in FDIC insurance,
furniture & equipment, occupancy and professional & consulting expenses.
Salaries & employee benefits increased $103,000 or 5% to $2.1 million for
the six months ended June 30, 1998, compared to $2.0 million for the same period
in 1997. The increase in this category was caused by normal salary merit
increases and increases in other benefit/incentive plans offered by DNB.
Furniture & equipment expense decreased approximately $12,000 or 7% to
$159,000 and $28,000 or 8% to $308,000 for the three and six months ended June
30, 1998, respectively, compared to $171,000 and $337,000 for the same periods
in 1997. The decreases for both periods were due to lower levels of depreciation
and maintenance.
Occupancy expense decreased approximately $7,000 or 6% to $112,000 and
$18,000 or 8% to $212,000 for the three and six months ended June 30, 1998,
respectively. This compares to $119,000 and $230,000 for the same periods in
1997. The decreases in this category reflect the higher costs incurred in 1997
for repairs and maintenance of the branch offices.
FDIC insurance decreased $13,000 or 68% to $6,000 and $25,000 or 68% to
$12,000 for the three and six months ended June 30, 1998 compared to the same
periods in 1997, reflecting lower premiums.
<PAGE>
Other expenses include such items as OREO expense, satisfaction fees,
appraisal fees, telephone & fax expense, ATM expense and other miscellaneous
expenses. Other expenses increased $21,000 or 12% to $195,000 and $9,000 or 3%
to $356,000 for the three and six months ended June 30, 1998 compared to the
same periods in 1997. The increase in this category was caused by costs incurred
in sales of OREO properties, as well as increased ATM processing fees and
telephone & fax expenses.
INCOME TAXES
Income tax expense was $285,000 and $535,000 for the three and six months
ended June 30, 1998 and $218,000 and $430,000 for the three and six months ended
June 30, 1997. The rates used for income taxes for both periods were less than
the statutory rate as a result of tax exempt interest income.
ASSET QUALITY
Non-performing assets are comprised of nonaccrual loans, loans delinquent
over ninety days and still accruing, troubled debt restructurings ("TDRs") and
Other Real Estate Owned ("OREO"). Nonaccrual loans are loans for which the
accrual of interest ceases when the collection of principal or interest payments
is determined to be doubtful by management. It is the policy of DNB to
discontinue the accrual of interest when principal or interest payments are
delinquent 90 days or more (unless the loan principal and interest are
determined by management to be fully secured and in the process of collection),
or earlier, if considered prudent. Interest received on such loans is applied to
the principal balance, or may in some instances, be recognized as income on a
cash basis.
OREO consists of real estate acquired by foreclosure or deed in lieu of
foreclosure. OREO is carried at the lower of cost or estimated fair value, less
estimated disposition costs.
Any significant change in the level of nonperforming assets is dependent to
a large extent on the economic climate within DNB's markets and to the efforts
of management to reduce the level of such assets.
The following table sets forth those assets that are: (i) on nonaccrual
status, (ii) contractually delinquent by 90 days or more and still and (iii)
other real estate owned as a result of foreclosure or voluntary transfer to DNB.
<TABLE>
<CAPTION>
June 30 Dec. 31 June 30
(Dollars in Thousands) 1998 1997 1997
------- ------- -------
<S> <C> <C> <C>
Nonaccrual Loans
Residential mortgage ................ $ 250 $ 676 $ 846
Commercial mortgage ................. 886 1,301 982
Commercial .......................... 950 821 845
Consumer ............................ 93 107 140
----- ----- -----
Total nonaccrual loans ................... 2,179 2,905 2,813
----- ----- -----
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Loans 90 days past due and still accruing:
Residential mortgage ................ 160 -- --
Commercial mortgage ................. 550 -- --
Commercial .......................... 16 -- --
Consumer ............................ 34 70 21
----- ----- -----
Total non-performing loans ............... 2,939 2,975 2,834
Other real estate owned .................. 206 231 391
----- ----- -----
TOTAL NON-PERFORMING ASSETS .............. $3,145 $3,206 $3,225
===== ===== =====
</TABLE>
The following table sets forth the DNB's asset quality and allowance
coverage ratios at the dates indicated:
<TABLE>
<CAPTION>
June 30 Dec. 31 June 30
1998 1997 1997
------ ------- ------
<S> <C> <C> <C>
Non-performing Loans/Total Loans ................... 2.2% 2.3% 2.2%
Non-performing Assets/Total Loans and OREO ......... 2.3 2.5 2.5
Allowance for Loan Losses/Total Loans .............. 3.8 4.1 4.1
Allowance for Loan Losses/Total Loans and OREO ..... 3.7 4.0 4.1
Allowance for Loan Losses/Non-performing Assets .... 162.9 164.7 159.1
Allowance for Loan Losses/Non-performing Loans ..... 174.3 177.5 181.0
</TABLE>
If interest income had been recorded on nonaccrual loans and trouble debt
restructurings, interest would have been increased as shown in the following
table:
<TABLE>
<CAPTION>
6 Months Year 6 Months
Ended Ended Ended
(Dollars in thousands) 6/30/98 12/31/97 6/30/97
------- -------- -------
<S> <C> <C> <C>
Interest income which would have been recorded
under original terms .................. $ 89 $ 243 $ 118
Interest income recorded during the period ... (36) (71) (16)
---- ----- -----
NET IMPACT ON INTEREST INCOME ................ $ 53 $ 172 $ 102
==== ===== =====
</TABLE>
As of June 30, 1998, DNB had impaired loans with a total recorded
investment of $1.3 million and an average recorded investment for the six month
period ended June 30, 1998 of $1.7 million. As of June 30, 1998, there was no
related allowance for credit losses necessary for these impaired loans. Total
cash collected on impaired loans was credited to the outstanding principal
balance in the amount of $115,000 during the six months ended June 30, 1998. No
interest income was recorded on such loans.
As of December 31, 1997, DNB had impaired loans with a total recorded
investment of $1.8 million and an average recorded investment for the year ended
December 31, 1997 of $1.6 million. As of December 31, 1997, there was no related
allowance for credit losses necessary for these impaired loans. Total cash
collected on impaired loans was credited to the outstanding principal income in
the amount of $35,000 during the six months ended June 30, 1997. No interest
income was recorded on such loans.
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
For a financial institution, liquidity is a measure of the ability to fund
customers' needs for loans and deposit withdrawals. Management regularly
evaluates economic conditions in order to maintain a strong liquidity position.
One of the most significant factors considered by management when evaluating
liquidity requirements is the stability of DNB's core deposit base. In addition
to cash, DNB maintains a portfolio of short term investments to meet its
liquidity requirements. DNB has historically relied on cash flow from operations
and other financing activities. Liquidity is provided by investing activities,
including the repayment and maturing of loans and investment securities.
At June 30, 1998 DNB has $6.9 million in commitments to fund commercial
real estate, construction and land development. In addition, DNB had commitments
to fund $1.4 million in home equity lines of credit and $18.1 million in other
unused commitments. Management anticipates the majority of these commitments
will be funded by means of normal cash flows. In addition, $32.1 million of time
deposits at DNB are scheduled to mature during the six months ending December
31, 1998. Management believes that the majority of such deposits will be
reinvested with DNB and that certificates that are not renewed will be funded by
maturing loans and investments.
Stockholders' equity increased to $19.4 million at June 30, 1998 as a
result of the $1,396,000 profit reported for the six months then ended and after
dividends paid totaling approximately $348,000 year-to-date. The Bank's common
equity position at June 30, 1998 exceeds the 1998 regulatory required minimums.
The following table summarizes data and ratios pertaining to the Bank's capital
structure. To Be Well Capitalized Under For Capital Prompt Corrective Actual
Adequacy Purposes Action Provisions
<TABLE>
<CAPTION>
(Dollars in thousands) Amount Ratio Amount Ratio Amount Ratio
------ ----- ------ ----- ------ -----
<S> <C> <C> <C> <C> <C> <C>
As of June 30, 1998:
- -------------------
Total risk-based capital $21,348 13.88% $12,305 8.00% $15,382 10.00%
Tier 1 capital .......... 19,386 12.60 6,153 4.00 9,299 6.00
Tier 1 (leverage) capital 19,386 8.47 9,160 4.00 11,450 5.00
</TABLE>
In addition, the Federal Reserve Bank (the "FRB") leverage ratio rules
require bank holding companies to maintain a minimum level of "primary capital"
to total assets of 5.5% and a minimum level of "total capital" to total assets
of 6%. For this purpose, (i) "primary capital" includes, among other items,
common stock, contingency and other capital reserves, and the allowance for loan
losses, (ii) "total capital" includes, among other things, certain subordinated
debt, and "total assets" is increased by the allowance for loan losses. DNB's
primary capital ratio and its total capital ratio are both 10.4%, well in excess
of FRB requirements.
REGULATORY MATTERS
DIVIDENDS - Dividends payable to the Corporation by the Bank are subject to
certain regulatory limitations. Under normal circumstances, the payment of
dividends in any year without regulatory permission is limited to the net
profits (as defined for regulatory purposes) for that year plus the retained net
profits for the preceding two calendar years.
<PAGE>
YEAR 2000 - Year 2000 compliance has been defined by DNB as the point at
which each organizational function, system, application, file, program and
database will correctly process, provide and/or receive date data within and
between the 20th and 21st centuries. DNB has developed a comprehensive approach
to solving Year 2000 issues. Headed up by DNB's Technology Steering Committee,
the Bank has conducted an in-depth review of its systems to identify and assess
the risks posed by the Year 2000. The committee has worked with the Bank's
primary software and hardware vendors to prepare the computer operating
environment. Testing has been scheduled for all systems. For the systems that
are not Year 2000 compliant or do not meet the deadline set for compliance (or
fail testing), alternative products will be evaluated in the event that a system
change is necessary. DNB, while not completely Year 2000 compliant, is working
diligently to achieve this goal. Year 2000 issues could result in a material
financial risk to a company such as DNB if the company and third party vendors
upon which it relies were unable to address this issue in a timely manner.
However, management currently expects DNB and its third party vendors to be Year
2000 compliant in all material respects before December 31, 1999.
Management currently estimates that the costs of Year 2000 compliance will
be approximately $60,000 during the two years ended December 31, 1999, of which
approximately $30,000 has been expended through June 30, 1998. To date,
management has succeeded in implementing its Year 2000 effort with existing
staff and internal resources, and has not been obligated to expend significant
funds in the process. It is anticipated that this will be possible for the
balance of the Year 2000 project, except that in 1999 management plans to
upgrade all personal computers that are not Year 2000 compliant. As a
consequence, manage-ment anticipates that the Year 2000 costs will be funded
from periodic income rather than from special reserves.
FORWARD-LOOKING STATEMENTS - Certain statements in this Form 10-Q,including
any which are not statements of historical fact, may constitute "forward-looking
statements" within the meaning of Section 27A of the Securities Act and Section
21E of the Exchange Act. Without limiting the foregoing, the words "expect",
"anticipate", "plan", "believe", "seek", "estimate", "predict", "internal" and
similar words are intended to identify expressions that may be forward-looking
statements. Forward-looking statements involve certain risks and uncertainties,
and actual results may differ materially from those contemplated by such
statements. For example, actual results may be adversely affected by the
following possibilities: (1) competitive pressure among depository institutions
may increase; (2) changes in interest rates may reduce banking interest margins;
(3) general economic conditions an real estate values may be less favorable than
contemplated; (4) adverse legislation or regulatory requirements may be adopted;
(5) the impact of the Year 2000 issue may be more significant than currently
anticipated; and (6) other unexpected contingencies may arise. Many of such
factors are beyond DNB's ability to control or predict. Readers of this Form
10-Q are accordingly cautioned not to place undue reliance on forward-looking
statements. DNB disclaims any intent or obligation to update publicly any of the
forward-looking statements herein, whether in response to new information,
future events or otherwise.
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Not Applicable
ITEM 2. CHANGES IN SECURITIES
In May 1998, the Corporation's amended Articles of Incorporation were filed
with the State. The amendment to Article 5 was approved by the Board of
Directors and ratified by the shareholders at the Annual Meeting held in April
1998. The amendment (a) increased the number of authorized shares of the
Corporation's Common Stock from 5,000,000 to 10,000,000 shares and (b) changed
the par value of the Common Stock from $10.00 to $1.00.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not Applicable
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not Applicable
ITEM 5. OTHER INFORMATION
Not Applicable
ITEM 6.
(a) EXHIBITS:
Not Applicable
(b) REPORTS ON FORM 8-K
Not Applicable
<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.
DNB FINANCIAL CORPORATION (Registrant)
DATE: August 14, 1998 /S/ Henry F. Thorne
-------------------
Henry F. Thorne, President
and Chief Executive Officer
DATE: August 14, 1998 /S/ Bruce E. Moroney
--------------------
Bruce E. Moroney
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 9
<CIK> 0000713671
<NAME> DNB FINANCIAL CORP.
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
<CASH> 13,093,701
<INT-BEARING-DEPOSITS> 6,191,150
<FED-FUNDS-SOLD> 13,987,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 14,477,126
<INVESTMENTS-CARRYING> 51,094,458
<INVESTMENTS-MARKET> 51,312,886
<LOANS> 136,276,017
<ALLOWANCE> 5,119,883
<TOTAL-ASSETS> 231,679,186
<DEPOSITS> 206,009,931
<SHORT-TERM> 0
<LIABILITIES-OTHER> 1,269,869
<LONG-TERM> 5,000,000
0
0
<COMMON> 1,451,961
<OTHER-SE> 17,947,425
<TOTAL-LIABILITIES-AND-EQUITY> 231,679,186
<INTEREST-LOAN> 5,822,742
<INTEREST-INVEST> 2,224,618
<INTEREST-OTHER> 426,876
<INTEREST-TOTAL> 8,474,236
<INTEREST-DEPOSIT> 3,692,376
<INTEREST-EXPENSE> 3,795,542
<INTEREST-INCOME-NET> 4,678,694
<LOAN-LOSSES> 0
<SECURITIES-GAINS> 507
<EXPENSE-OTHER> 3,482,331
<INCOME-PRETAX> 1,931,173
<INCOME-PRE-EXTRAORDINARY> 1,396,173
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,396,173
<EPS-PRIMARY> .96
<EPS-DILUTED> .93
<YIELD-ACTUAL> 7.91
<LOANS-NON> 2,179,130
<LOANS-PAST> 759,348
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 6,100,000
<ALLOWANCE-OPEN> 5,280,958
<CHARGE-OFFS> 201,843
<RECOVERIES> 40,768
<ALLOWANCE-CLOSE> 5,119,883
<ALLOWANCE-DOMESTIC> 5,119,883
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<RESTATED>
<CIK> 0000713671
<NAME> DNB FINANCIAL CORP.
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 7,905,263
<INT-BEARING-DEPOSITS> 457,538
<FED-FUNDS-SOLD> 16,500,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 18,400,809
<INVESTMENTS-CARRYING> 42,922,633
<INVESTMENTS-MARKET> 43,111,549
<LOANS> 126,080,574
<ALLOWANCE> 5,130,967
<TOTAL-ASSETS> 215,058,307
<DEPOSITS> 191,874,431
<SHORT-TERM> 3,861,197
<LIABILITIES-OTHER> 2,039,641
<LONG-TERM> 0
0
0
<COMMON> 1,451,661
<OTHER-SE> 15,831,377
<TOTAL-LIABILITIES-AND-EQUITY> 215,058,307
<INTEREST-LOAN> 5,649,524
<INTEREST-INVEST> 2,279,017
<INTEREST-OTHER> 89,124
<INTEREST-TOTAL> 8,017,665
<INTEREST-DEPOSIT> 3,150,432
<INTEREST-EXPENSE> 3,328,108
<INTEREST-INCOME-NET> 4,689,557
<LOAN-LOSSES> 0
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 3,423,518
<INCOME-PRETAX> 1,790,831
<INCOME-PRE-EXTRAORDINARY> 1,360,831
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,360,831
<EPS-PRIMARY> .94
<EPS-DILUTED> .93
<YIELD-ACTUAL> 8.24
<LOANS-NON> 2,813,243
<LOANS-PAST> 21,619
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 5,846,138
<ALLOWANCE-OPEN> 5,112,486
<CHARGE-OFFS> 26,792
<RECOVERIES> 45,273
<ALLOWANCE-CLOSE> 5,130,967
<ALLOWANCE-DOMESTIC> 5,130,967
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<RESTATED>
<CIK> 0000713671
<NAME> DNB FINANCIAL CORP.
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 9,415,894
<INT-BEARING-DEPOSITS> 2,230,519
<FED-FUNDS-SOLD> 1,293,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 16,507,896
<INVESTMENTS-CARRYING> 49,569,088
<INVESTMENTS-MARKET> 48,726,802
<LOANS> 115,958,821
<ALLOWANCE> 5,524,700
<TOTAL-ASSETS> 197,028,396
<DEPOSITS> 173,780,977
<SHORT-TERM> 6,960,897
<LIABILITIES-OTHER> 1,263,811
<LONG-TERM> 0
0
0
<COMMON> 1,451,661
<OTHER-SE> 13,727,024
<TOTAL-LIABILITIES-AND-EQUITY> 197,028,396
<INTEREST-LOAN> 5,270,518
<INTEREST-INVEST> 1,905,942
<INTEREST-OTHER> 218,043
<INTEREST-TOTAL> 7,394,503
<INTEREST-DEPOSIT> 2,945,456
<INTEREST-EXPENSE> 3,135,206
<INTEREST-INCOME-NET> 4,259,297
<LOAN-LOSSES> 0
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 3,350,253
<INCOME-PRETAX> 1,293,341
<INCOME-PRE-EXTRAORDINARY> 1,050,341
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,050,341
<EPS-PRIMARY> .72
<EPS-DILUTED> .72
<YIELD-ACTUAL> 8.13
<LOANS-NON> 3,039,563
<LOANS-PAST> 324,531
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 6,674,000
<ALLOWANCE-OPEN> 5,514,600
<CHARGE-OFFS> 307,581
<RECOVERIES> 38,681
<ALLOWANCE-CLOSE> 5,245,700
<ALLOWANCE-DOMESTIC> 5,245,700
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
