<PAGE>
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1998 Commission File Number: 0-15982
NATIONAL MERCANTILE BANCORP
- --------------------------------------------------------------------------------
(Exact name of small business issuer as specified in its charter)
California 95-3819685
- --------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1840 Century Park East, Los Angeles, California 90067
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Issuer's telephone number, including area code (310) 277-2265
Indicate by check mark whether the issuer (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
--- ---
APPLICABLE ONLY TO CORPORATE ISSUERS:
The number of shares outstanding of the issuer's Common Stock, no par value, as
of May 1, 1998 was 677,048.
<PAGE>
NATIONAL MERCANTILE BANCORP AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1998 1997
---------- ----------
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<S> <C> <C>
ASSETS
Cash and due from banks-demand . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 6,015 $ 4,186
Federal funds sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,700 11,900
---------- ----------
Cash and cash equivalents. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17,715 16,086
Interest-bearing deposits with other financial institutions. . . . . . . . . . . . . . . . 250 250
Securities available-for-sale, at fair value;
aggregate amortized cost of $44,476 and $25,794 at
March 31, 1998 and December 31, 1997, respectively . . . . . . . . . . . . . . . . . . . 44,345 25,832
Securities held-to-maturity, at amortized cost;
aggregate market value of $14,010 at
December 31, 1997. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 14,000
FRB and other stock. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 650 646
Loans receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59,242 61,252
Allowance for credit losses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,953) (2,023)
---------- ----------
Net loans receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57,289 59,229
Premises and equipment, net. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 734 785
Other real estate owned, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 517 777
Accrued interest receivable and other assets . . . . . . . . . . . . . . . . . . . . . . . 1,788 1,800
---------- ----------
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 123,288 $ 119,405
---------- ----------
---------- ----------
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Noninterest-bearing demand . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 36,897 $ 35,399
Interest-bearing demand. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,554 7,431
Money market . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25,643 19,646
Savings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,165 3,524
Time certificates of deposit:
$100,000 or more . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,734 12,402
Under $100,000 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19,542 18,986
---------- ----------
Total deposits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103,535 97,388
Securities sold under agreements to repurchase . . . . . . . . . . . . . . . . . . . . . . 3,000 5,050
Other borrowed funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,500 3,500
Accrued interest payable and other liabilities . . . . . . . . . . . . . . . . . . . . . . 787 1,027
---------- ----------
Total liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 110,822 106,965
Shareholders' equity:
Preferred stock, 6.5% noncumulative convertible preferred stock; $10.00 stated value,
authorized 1,000,000 shares; issued and outstanding 900,000 shares . . . . . . . . . . 7,350 7,350
Common stock, no par value; authorized 10,000,000
shares; issued and outstanding 677,048 shares and 677,144 shares
at March 31, 1998 and December 31, 1997, respectively. . . . . . . . . . . . . . . . . 24,613 24,613
Accumulated deficit. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (19,366) (19,561)
Accumulated other comprehensive income . . . . . . . . . . . . . . . . . . . . . . . . . (131) 38
---------- ----------
Total shareholders' equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,466 12,440
---------- ----------
Total liabilities and shareholders' equity . . . . . . . . . . . . . . . . . . . . . . $ 123,288 $ 119,405
---------- ----------
---------- ----------
</TABLE>
See accompanying notes to consolidated financial statements.
2
<PAGE>
NATIONAL MERCANTILE BANCORP AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED MARCH 31,
1998 1997
------- --------
(DOLLARS IN THOUSANDS EXCEPT
PER SHARE AMOUNTS)
<S> <C> <C>
Interest income:
Loans, including fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,504 $ 1,473
Securities held-to-maturity. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 134 287
Securities available-for-sale. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 524 85
Federal funds sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 187 170
Interest-bearing deposits with other financial institutions. . . . . . . . . . . . . . . 4 -
------- --------
Total interest income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,353 2,015
Interest expense:
Interest-bearing demand. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 19
Money market and savings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 210 139
Time certificate of deposits:
$100,000 or more. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 179 109
Under $100,000. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 279 437
------- --------
Total interest expense on deposits . . . . . . . . . . . . . . . . . . . . . . . . . . 689 704
Securities sold under agreements to repurchase . . . . . . . . . . . . . . . . . . . . . . 59 1
Other borrowed funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50 6
------- --------
Total interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 798 711
------- --------
Net interest income before provision for credit losses . . . . . . . . . . . . . . . . 1,555 1,304
Provision for credit losses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - -
------- --------
Net interest income after provision for credit losses. . . . . . . . . . . . . . . . . . 1,555 1,304
Other operating income:
Net gain on sale of securities available-for-sale . . . . . . . . . . . . . . . . . . . 17 -
International services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 23
Investment division. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 5
Deposit-related and other customer services. . . . . . . . . . . . . . . . . . . . . . . 122 90
Gain on other real estate owned. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59 -
------- --------
Total other operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 231 118
Other operating expenses:
Salaries and related benefits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 763 725
Net occupancy. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 195 209
Furniture and equipment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60 58
Printing and communications. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55 64
Insurance and regulatory assessments . . . . . . . . . . . . . . . . . . . . . . . . . . 79 131
Customer services. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 189 125
Computer data processing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74 84
Legal services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38 65
Other professional services. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72 50
Other real estate owned expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 6
Promotion and other expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61 40
------- --------
Total other operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,591 1,557
------- --------
Net income (loss) before provision for income taxes. . . . . . . . . . . . . . . . . . . 195 (135)
Provision for income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - -
------- --------
Net income (loss). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 195 $ (135)
------- --------
------- --------
Earnings (loss) per share:
Basic. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 0.29 $ (0.20)
------- --------
------- --------
Diluted. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 0.08 $ (0.20)
------- --------
------- --------
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE>
NATIONAL MERCANTILE BANCORP AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOW
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE THREE-MONTHS
ENDED MARCH 31,
------------------------
1998 1997
--------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Net cash flow from operating activities:
Net income (loss). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 195 $ (135)
Adjustments to reconcile net income (loss) to net cash used in
operating activities:
Depreciation and amortization. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52 44
Gain on sale of other real estate owned. . . . . . . . . . . . . . . . . . . . . . . . . (59) -
Net gain on sale of securities available-for-sale. . . . . . . . . . . . . . . . . . . . (17) -
Net amortization of (discounts) premiums on securities . . . . . . . . . . . . . . . . . 8 (14)
Net accretion of discounts on loans purchased. . . . . . . . . . . . . . . . . . . . . . (28) (9)
Decrease (increase)in accrued interest receivable and other assets . . . . . . . . . . . 12 (470)
(Decrease) increase in accrued interest payable and other liabilities. . . . . . . . . . (240) 56
--------- ---------
Net cash used in operating activities. . . . . . . . . . . . . . . . . . . . . . . . . (77) (528)
Cash flows from investing activities:
Purchase of securities held-to-maturity. . . . . . . . . . . . . . . . . . . . . . . . . - (4,971)
Purchase of securities available-for-sale. . . . . . . . . . . . . . . . . . . . . . . . (26,422) (2,105)
Proceeds from sales of securities available-for-sale . . . . . . . . . . . . . . . . . . 3,005 1,000
Proceeds from repayments and maturities of securities available-for-sale . . . . . . . . 4,740 70
Proceeds from repayments and maturities of securities-held-to-maturity . . . . . . . . . 14,000 -
Loan originations and principal collections, net . . . . . . . . . . . . . . . . . . . . 1,968 2,284
Proceeds from sale of other real estate owned. . . . . . . . . . . . . . . . . . . . . . 319 -
Net purchases of premises and equipment. . . . . . . . . . . . . . . . . . . . . . . . . (1) -
--------- ---------
Net cash used in investing activities. . . . . . . . . . . . . . . . . . . . . . . . . (2,391) (3,722)
Cash flows from financing activities:
Net increase (decrease) in demand deposits, money market and savings accounts. . . . . . 6,259 (195)
Net decrease in time certificates of deposit . . . . . . . . . . . . . . . . . . . . . . (112) (6,496)
Net (decrease) increase in securities sold under agreements to repurchase
and federal funds purchased . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,050) 160
--------- ---------
Net cash provided by (used in) financing activities. . . . . . . . . . . . . . . . . . 4,097 (6,531)
--------- ---------
Net decrease in cash and cash equivalents. . . . . . . . . . . . . . . . . . . . . . . . . 1,629 (10,781)
Cash and cash equivalents, January 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . 16,086 28,113
--------- ---------
Cash and cash equivalents, March 31. . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 17,715 $ 17,332
--------- ---------
--------- ---------
Supplemental cash flow information:
Cash paid for interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 765 $ 693
Increase in unrealized loss on securities
available-for-sale. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 169 $ 38
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE>
NATIONAL MERCANTILE BANCORP AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE YEAR ENDED DECEMBER 31, 1997 AND THREE MONTHS ENDED MARCH 31, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
ACCUMULATED
OTHER
PREFERRED STOCK COMMON STOCK ACCUMULATED COMPREHENSIVE
------------------ ----------------------
SHARES AMOUNT SHARES AMOUNT DEFICIT INCOME TOTAL
------- -------- ---------- --------- ---------- ------ -------
<S> <C> <C> <C> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS EXCEPT SHARE DATA)
Balance at January 1, 1997 . . . . . . . . . - $ - 3,078,146 $ 24,614 $ (19,693) $ (76) $ 4,845
9.09 to 1 reverse stock split
effective June 20, 1997. . . . . . . . . (2,739,516)
Return of fractional common
shares due to reverse stock
split. . . . . . . . . . . . . . . . . . (58) (1) (1)
Issuance of 6.5% noncumulative
convertible preferred stock,
$10.00 stated value, net . . . . . . . . 900,000 7,350 7,350
100% stock dividend declared on
January 8, 1998. . . . . . . . . . . . . 338,572
Comprehensive income:
Other comprehensive income:
Unrealized holding gain during
the period. . . . . . . . . . . . . . 77 77
Add: Reclassification adjustment
for losses included in net income . . 37 37
Net income . . . . . . . . . . . . . . . 132 132
-------
Comprehensive income. . . . . . . . . 246
------- -------- ---------- --------- ---------- ------ -------
Balance at December 31, 1997 . . . . . . . . 900,000 7,350 677,144 24,613 (19,561) 38 12,440
Return of fractional common
shares due to reverse stock
split. . . . . . . . . . . . . . . . . . (96) -
Comprehensive income:
Other comprehensive income:
Unrealized holding losses during
the period. . . . . . . . . . . . . . (152) (152)
Less: Reclassification adjustment
for gains included in net income. . . (17) (17)
Net income . . . . . . . . . . . . . . . 195 195
-------
Comprehensive income. . . . . . . . . 26
------- -------- ---------- --------- ---------- ------ -------
Balance at March 31, 1998. . . . . . . . . . 900,000 $ 7,350 677,048 $ 24,613 $ (19,366) $ (131) $12,466
------- -------- ---------- --------- ---------- ------ -------
------- -------- ---------- --------- ---------- ------ -------
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE>
NATIONAL MERCANTILE BANCORP AND SUBSIDIARY
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1--BASIS OF PRESENTATION AND MANAGEMENT REPRESENTATIONS
The unaudited consolidated financial statements include the accounts of
National Mercantile Bancorp (the "Company") and its wholly owned
subsidiary, Mercantile National Bank (the "Bank"). The unaudited
consolidated financial statements reflect the interim adjustments, all of
which are of a normal recurring nature and which, in management's opinion,
are necessary for the fair presentation of the Company's consolidated
financial position and the results of its operations and cash flows for such
interim periods. The results for the quarter ended March 31, 1998 are not
necessarily indicative of the results expected for any subsequent period or
for the full year ending December 31, 1998. The unaudited consolidated
financial statements should be read in conjunction with the audited
consolidated financial statements included in the Company's Annual Report on
Form 10-K for the year ended December 31, 1997 ("1997 Form 10-K").
NOTE 2--EARNINGS (LOSS) PER SHARE
In February 1997, the Financial Accounting Standards Board "(FASB")
issued Statement of Financial Accounting Standards ("SFAS") No. 128 "Earnings
Per Share" which specifies the computation, presentation and disclosure
requirements for earnings per share ("EPS") for entities with publicly held
common stock or potential common stock. SFAS No. 128 eliminates both
"primary" and "fully diluted" EPS, and requires the computation and
disclosures of "basic" EPS and "diluted" EPS. SFAS No. 128 shall be
effective for financial statements for both interim and annual periods ending
after December 15, 1997, and earlier application is not permitted. EPS
disclosures presented herein have been calculated in accordance with SFAS
No. 128.
Basic earnings (loss) per share is computed using the weighted average
number of common shares outstanding during the period. The weighted average
number of common shares outstanding used in computing basic earnings (loss)
per share for the three months ended March 31, 1998 and 1997 was 677,100 and
677,260, respectively. The weighted average number of common shares and
potential common shares outstanding used in computing diluted earnings per
share for the three months ended March 31, 1998 was 2,555,886. Loss per
share computations, for the three months ended March 31, 1997, exclude
potential common shares, since the effect would be to reduce the loss per
share amount. All periods presented were restated to reflect the 9:09 to 1
reverse stock split effective June 20, 1997 and the 100% common stock
dividend declared January 8, 1998 and paid February 13, 1998. The 100% stock
dividend was accounted for as a 2 for 1 stock split.
6
<PAGE>
The following table is a reconciliation of income (loss) and shares used in
the computation of basic and diluted earnings per share:
<TABLE>
<CAPTION>
NET INCOME PER SHARE
(LOSS) SHARES AMOUNT
---------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C>
FOR THE THREE MONTHS ENDED MARCH 31, 1998:
Basic EPS. . . . . . . . . . . . . . . . . $ 195 677,100 $ 0.29
--------
--------
Effect of dilutive securities:
Options and warrants . . . . . . . . . . 78,786
Convertible preferred stock. . . . . . . 1,800,000
-------- ---------
Diluted EPS. . . . . . . . . . . . . . . . $ 195 2,555,886 $ 0.08
-------- --------- --------
-------- --------- --------
FOR THE THREE MONTHS ENDED MARCH 31, 1997:
Basic and diluted EPS. . . . . . . . . . . $ (135) 677,260 $ (0.20)
-------- --------- --------
-------- --------- --------
</TABLE>
NOTE 3--INVESTMENT SECURITIES
Securities held for investment are classified as investment securities.
Because the Company has the ability and management has the intent to hold
investment securities until maturity, investment securities are stated at
cost, adjusted for amortization of premiums and accretion of discounts.
Investments classified as securities available for sale are recorded at fair
value. Unrealized holding gains or losses for securities available for sale
are excluded from earnings, and reported as a net amount after taxes, in a
separate component of shareholders' equity, until realized.
NOTE 4--CASH AND CASH EQUIVALENTS
For purposes of reporting cash flows, cash and cash equivalents include
cash and amounts due from banks and federal funds sold.
NOTE 5--COMPREHENSIVE INCOME
In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive
Income" ("SFAS 130"). SFAS 130 establishes standards for the reporting and
display of comprehensive income and its components in a full set of general
purpose financial statements. All items that are required to be recognized
under accounting standards as components of comprehensive income are to be
reported in a financial statement that is displayed with the same prominence
as other financial statements. Comprehensive income is defined as the change
in equity during a period from transactions and other events and
circumstances from nonowner sources. The accumulated balance of other
comprehensive income is required to be displayed separately from retained
earnings and additional paid in capital in the consolidated balance sheet.
SFAS No. 130 is effective for fiscal years beginning after December 15, 1997.
7
<PAGE>
The components of other comprehensive income together with total
comprehensive income are reported in the consolidated statement of changes in
shareholders' equity. No income tax benefit related to other comprehensive
income has been recorded due to the uncertainty with respect to the ultimate
realization of such benefit.
NOTE 6--INCOME TAXES
No income tax provision was recorded during the first quarter of 1998
due to the utilization of previously unrecognized tax benefits to offset the
current period tax liability. No income tax benefit was recorded during the
first quarter of 1997, due to the uncertainty with respect to the ultimate
realization of such benefit.
For tax purposes at December 31, 1997, the Company had federal net
operating loss carryforwards of $22.3 million, which begin to expire in the
year 2007. The Company has California net operating loss carryforwards of
$11.1 million, of which $686,000 expire in 1997, $5.5 million expire in 1999
and the remaining expire thereafter. In addition, the Company has an
Alternate Minimum Tax credit at December 31, 1997 of $218,000 which may be
carried forward indefinitely.
NOTE 7--RECLASSIFICATIONS
Certain prior year data have been reclassified to conform with current
year presentation.
8
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
National Mercantile Bancorp (the "Company") is the holding company for
Mercantile National Bank (the "Bank"). Because the Bank constitutes
substantially all of the business of the Company, references to the Company
in this Item 2 reflect the consolidated activities of the Company and the
Bank.
RESULTS OF OPERATIONS
The Company recorded consolidated net income of $195,000, or $.08
diluted earnings per share, during the first quarter of 1998, compared to a
net loss of $135,000, or $.20 loss per share, during the first quarter of
1997. Net income per basic share was $0.29 during the first quarter of 1998.
The change between first quarter of 1998 compared to the first quarter of
1997 resulted primarily from an increase in net interest income of $251,000
and an increase in other operating income of $113,000.
Return on average assets during the first quarter of 1998 was 0.65%
compared with a loss of 0.52% during the first quarter of 1997. Return on
average equity during the first quarter of 1998 was 6.22% compared to a loss
of 11.08% during the first quarter of 1997.
The increase in net interest income resulted primarily from the 16.5%
increase in average interest earning assets to $114.3 million during the
first quarter of 1998 compared to $98.1 million during the first quarter of
1997, and to a lesser extent, an increase in the net interest margin to
5.52% during the first quarter of 1998 compared to 5.39% during the first
quarter of 1997. The increase in average interest earning assets was a
result of the Company's plan to grow following its recapitalization in 1997
which raised net proceeds of $7.35 million. Growth occurred primarily through
the purchase of U.S. Treasury and Agency securities using the excess
liquidity provided by the recapitalization and resulting increase in deposits
and borrowings.
The net interest margin increased for several reasons beyond the growth
in average shareholders equity of $7.7 million primarily from the
recapitalization and the increase in average non-interest-bearing demand
deposits of $1.2 million, during the first quarter of 1998 compared to the
first quarter of 1997. The weighted average yield on interest-earning assets
increased primarily as a result of an increase in the weighted average yield
on loans from 9.70% during the first quarter of 1997 to 10.15% during the
first quarter of 1998, along with the increase in the weighted average yield
on securities from 6.41% to 6.63% during the same periods. In addition, the
weighted average cost of interest-bearing liabilities decreased from 4.46%
during the first quarter of 1997 to 4.42% during the first quarter of 1998.
This was due primarily to a higher average amount of low cost demand, money
market and savings accounts of $33.7 million during the first quarter of 1998
compared to $26.5 million during the first quarter of 1997, and a lower
average amount of higher-cost time certificates of deposit of $32.0 million
as compared to $38.4 million during the same periods.
Average loans receivable decreased $1.5 million or 2.4% to $60.1 million
during the quarter ended March 31, 1998 compared to $61.6 million during the
quarter ended March 31, 1997. This decrease reflected higher than average
loan payoffs during the first quarter of 1998 of approximately $6.9 million
which were partially offset by loan fundings of approximately $5.2 million
during the same period.
9
<PAGE>
Total average securities available for sale increased by $26.0 million
to $32.1 million during the quarter ended March 31, 1998 compared to $6.1
million during the quarter ended March 31, 1997, while securities held to
maturity decreased $9.3 million during the same periods. This increase in the
overall security portfolio resulted from the investment of excess liquidity
provided by the net proceeds from the capital offerings completed on June 30,
1997 along with the growth of deposits and borrowings.
Total average deposits increased $2.9 million or 3% during the first
quarter of 1998 compared to the first quarter of 1997 due primarily to
increased deposit levels generated by the Bank's business banking,
entertainment and escrow divisions. Total average securities sold under
agreements to repurchase and other borrowed funds increased $6.9 million to
$7.5 million during the quarter ended March 31, 1998 compared to the quarter
ended March 31, 1997.
The provision for credit losses was zero for the quarters ended March
31, 1998 and 1997. Loan charge offs during the first quarter of 1998 were
$88,000, compared to $448,000 during the first quarter of 1997. Recoveries
were $18,000 during the first quarter of 1998, compared to $125,000 during
the first quarter of 1997.
Other operating income excluding gains and losses on the sale of
securities and assets totaled $155,000 during the first quarter of 1998, up
$37,000 or 31.4% from the first quarter of 1997. Service charges on deposit
accounts increased $32,000 or 35.6% during the quarter ended March 31, 1998
compared to the quarter ended March 31, 1997 due primarily to adjustments in
deposit services fee pricing effective December 1, 1997, which were
implemented to align the Bank's deposit services fee schedule with its
competition.
The net gain on sale of securities totaled $17,000 during the first
quarter of 1998 compared to zero during the first quarter of 1997.
Additionally, the Bank recorded a gain of $59,000 on the sale of OREO during
the first quarter of 1998, a single family home acquired through foreclosure
during 1997, compared to zero during the first quarter of 1997.
Other operating expense remained virtually unchanged during the first
quarter of 1998 compared to the first quarter of 1997 totaling $1.6 million
during each period. Salaries and related benefits increased $38,000 or 5.2 %
during the first quarter of 1998 compared to the first quarter of 1997 due
primarily to the personnel added to expand the business banking and
entertainment divisions.
Other operating expense categories, excluding salaries and related
benefits, decreased $4,000 or 0.5% for the quarter ended March 31, 1998 from
the comparable period in 1997. The increases in customer services of
$64,000, primarily as a result of the growth in escrow deposits, along with
increases in other professional services of $22,000 and promotion and other
expenses of $21,000, were offset by reductions in insurance and regulatory
assessments of $52,000, primarily FDIC Insurance, and legal services of
$27,000.
10
<PAGE>
The following table presents the components of net interest income for
the quarters ended March 31, 1998 and 1997.
AVERAGE BALANCE SHEET AND
ANALYSIS OF NET INTEREST INCOME
<TABLE>
<CAPTION>
THREE MONTHS ENDED
------------------------------------------------------------------
MARCH 31, 1998 MARCH 31, 1997
-------------------------------- -------------------------------
WEIGHTED WEIGHTED
INTEREST AVERAGE INTEREST AVERAGE
AVERAGE INCOME/ YIELD/ AVERAGE INCOME/ YIELD/
AMOUNT EXPENSE RATE AMOUNT EXPENSE RATE
--------- ------- -------- -------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Assets:
Federal funds sold . . . . . . . . . . . . . . . . . . . . . $ 13,700 $ 187 5.54% $ 12,993 $ 170 5.31%
Interest-bearing deposits with other financial institutions. 250 4 6.49% - - -
Securities held-to-maturity. . . . . . . . . . . . . . . . . 8,188 134 6.64% 17,463 287 6.67%
Securities available-for-sale. . . . . . . . . . . . . . . . 32,058 524 6.63% 6,081 85 5.67%
Loans receivable (1)(2). . . . . . . . . . . . . . . . . . . 60,106 1,504 10.15% 61,599 1,473 9.70%
--------- ------- -------- ------
Total interest earning assets. . . . . . . . . . . . . . . 114,302 $ 2,353 8.35% 98,136 $2,015 8.33%
------- ------
------- ------
Noninterest earning assets:
Cash and due from banks - demand . . . . . . . . . . . . . 5,193 4,736
Other assets . . . . . . . . . . . . . . . . . . . . . . . 3,286 3,199
Allowance for credit losses. . . . . . . . . . . . . . . . (1,984) (2,976)
--------- --------
Total assets . . . . . . . . . . . . . . . . . . . . . . . $ 120,797 $103,095
--------- --------
--------- --------
Liabilities and shareholders' equity:
Interest-bearing deposits:
Demand . . . . . . . . . . . . . . . . . . . . . . . . . . $ 6,770 $ 21 1.26% $ 6,078 $ 19 1.27%
Money market and savings . . . . . . . . . . . . . . . . . 26,952 210 3.16% 19,463 139 2.90%
Time certificates of deposit:
$100,000 or more . . . . . . . . . . . . . . . . . . . . 12,727 179 5.70% 8,081 109 5.47%
Under $100,000 . . . . . . . . . . . . . . . . . . . . . 19,227 279 5.88% 30,353 437 5.84%
--------- ------- -------- ------
Total time certificates of deposit . . . . . . . . . . . . 31,954 458 5.81% 38,434 546 5.76%
--------- ------- -------- ------
Total interest-bearing deposits. . . . . . . . . . . . . . 65,676 689 4.25% 63,975 704 4.46%
Securities sold under agreements to repurchase . . . . . . . 4,049 59 5.91% 131 1 3.10%
Other borrowed funds . . . . . . . . . . . . . . . . . . . . 3,500 50 5.79% 505 6 4.82%
--------- ------- -------- ------
Total interest-bearing liabilities . . . . . . . . . . . . 73,225 $ 798 4.42% 64,611 $ 711 4.46%
------- ------
------- ------
Noninterest-bearing liabilities:
Noninterest-bearing demand deposits. . . . . . . . . . . . 34,065 32,844
Other liabilities. . . . . . . . . . . . . . . . . . . . . 930 768
Shareholders' equity . . . . . . . . . . . . . . . . . . . . 12,577 4,872
--------- --------
Total liabilities and shareholders' equity . . . . . . . . . $ 120,797 $103,095
--------- --------
--------- --------
Net interest income (spread) . . . . . . . . . . . . . . . . $ 1,555 3.93% $1,304 3.86%
------- ------
------- ------
Net yield on earning assets (2). . . . . . . . . . . . . . . 5.52% 5.39%
</TABLE>
- ------------
(1) Includes average balance of nonperforming loans of $7.0 million and $6.2
million for 1998 and 1997, respectively.
(2) Yields and amounts earned on loans receivable include loan fees of $50,000
and $21,000 for the three months ended March 31, 1998 and 1997,
respectively.
11
<PAGE>
The following tables set forth, for the periods indicated, the changes
in interest earned and interest paid resulting from changes in volume and
changes in rates. Average balances in all categories in each reported period
were used in the volume computations Average yields and rates in each
reported period were used in rate computations.
INCREASE (DECREASE) IN INTEREST INCOME/EXPENSE DUE TO CHANGE IN
AVERAGE VOLUME AND AVERAGE RATE
<TABLE>
<CAPTION>
QUARTER ENDED MARCH 31,
1998 VS 1997
---------------------------------
INCREASE (DECREASED) NET
DUE TO(1) INCREASE
--------------------
VOLUME RATE (DECREASE)
------- ------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Interest Income:
Federal funds sold . . . . . . . . . . . . . . . . . . . . . . . . . . $ 10 $ 7 $ 17
Interest-bearing deposits with other financial institutions. . . . . . 4 - 4
Securities held-to-maturity. . . . . . . . . . . . . . . . . . . . . . (123) (30) (153)
Securities available-for-sale. . . . . . . . . . . . . . . . . . . . . 418 21 439
Loans receivable (2) . . . . . . . . . . . . . . . . . . . . . . . . . (36) 67 31
------- ------- -------
Total interest-earning assets. . . . . . . . . . . . . . . . . . . . $ 273 $ 65 $ 338
------- ------- -------
------- ------- -------
Interest Expense:
Interest-bearing deposits:
Demand . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2 $ - $ 2
Money market and savings . . . . . . . . . . . . . . . . . . . . . . 61 10 71
Time certificates of deposit:
$100,000 or more . . . . . . . . . . . . . . . . . . . . . . . . . 65 5 70
Under $100,000 . . . . . . . . . . . . . . . . . . . . . . . . . . (160) 2 (158)
------- ------- -------
Total time certificates of deposit . . . . . . . . . . . . . . . . . (95) 7 (88)
------- ------- -------
Total interest-bearing deposits. . . . . . . . . . . . . . . . . . . (32) 17 (15)
Securities sold under agreements to repurchase and other borrowings 57 1 58
Other borrowed funds . . . . . . . . . . . . . . . . . . . . . . . . 43 1 44
------- ------- -------
Total interest-bearing liabilities . . . . . . . . . . . . . . . . $ 68 $ 19 $ 87
------- ------- -------
------- ------- -------
Net interest income. . . . . . . . . . . . . . . . . . . . . . . . . $ 205 $ 46 $ 251
------- ------- -------
------- ------- -------
</TABLE>
(1) The change in interest income or interest expense that is attributable to
both changes in average volume and average rate has been allocated to the
changes due to (i) average volume and (ii) average rate in proportion to
the relationship of the absolute amounts of changes in each.
(2) Table does not include interest income that would have been earned on
nonaccrual loans.
12
<PAGE>
BALANCE SHEET ANALYSIS
LOAN PORTFOLIO
The following comparative period-end table sets forth certain
information concerning the composition of the loan portfolio.
LOAN PORTFOLIO COMPOSITION
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1998 1997
------------------------- ----------------------
AMOUNT PERCENT AMOUNT PERCENT
----------- ---------- --------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Loan Portfolio Composition:
Real estate construction and land
development. . . . . . . . . . . . . . . $ 3,102 5% $ 3,148 5%
Commercial loans:
Secured by one to four family
residential properties . . . . . . . . 7,187 12% 6,545 11%
Secured by multifamily
residential properties . . . . . . . . 2,483 4% 2,494 4%
Secured by commercial real
properties . . . . . . . . . . . . . . 20,909 36% 22,324 36%
Other - secured and
unsecured. . . . . . . . . . . . . . . 20,659 35% 21,264 35%
Home equity lines of credit. . . . . . . . 240 0% 252 0%
Consumer installment and
unsecured loans to individuals . . . . . 4,948 8% 5,508 9%
--------- ------ --------- -------
Total loans outstanding. . . . . . . . 59,528 100% 61,535 100%
Deferred net loan origination
fees and purchased loan discount . . . . (286) (283)
--------- ------ ---------
Loans receivable, net. . . . . . . . . . . $ 59,242 $ 61,252
--------- ------ ---------
--------- ------ ---------
</TABLE>
Total loans outstanding decreased by $2.0 million to $59.5 million at
March 31, 1998 compared to $61.5 million at December 31, 1997. As indicated in
the table above, the composition of the loan portfolio has remained relatively
unchanged at March 31, 1998 compared to December 31, 1997.
13
<PAGE>
The following comparative period-end table sets forth certain information
concerning nonperforming assets.
NONPERFORMING ASSETS
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1998 1997
---------- ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Nonaccrual loans . . . . . . . . . . . . . . . . . . . . . . . . $ 1,581 $ 1,201
Troubled debt restructurings . . . . . . . . . . . . . . . . . . 62 5,422
Loans contractually past due ninety or more days with respect
to either principal or interest and still accruing interest. . 6,190 -
-------- --------
Nonperforming loans. . . . . . . . . . . . . . . . . . . . . . . 7,833 6,623
Other real estate owned. . . . . . . . . . . . . . . . . . . . . 517 777
-------- --------
Total nonperforming assets . . . . . . . . . . . . . . . . . . . $ 8,350 $ 7,400
-------- --------
-------- --------
Allowance for credit losses as a percent of nonaccrual loans . . 123.5% 168.4%
Allowance for credit losses as a percent of
nonperforming loans. . . . . . . . . . . . . . . . . . . . . . 24.9% 30.5%
Total nonperforming assets as a percent of loans receivable. . . 14.1% 12.1%
Total nonperforming assets as a percent of total
shareholders' equity . . . . . . . . . . . . . . . . . . . . . 67.0% 59.5%
</TABLE>
Nonaccrual loans increased $380,000 during the first quarter of 1998 to
$1.6 million compared with $1.2 million at December 31, 1997, due to
increased delinquencies in the SBA and commercial loan portfolios.
Troubled debt restructurings ("TDR") represent loans for which the
Company has modified the terms of loans to borrowers by reductions in
interest rates or extensions of maturity dates at below-market rates for
loans with similar credit risk characteristics. TDRs totaled $62,000 at March
31, 1998 compared with $5.4 million at December 31, 1997. The reduction in
TDR loans during the first quarter of 1998 is due to the reclassification of
one loan totaling $5.4 million discussed below. At March 31, 1998, all TDR
loans were performing in accordance with their modified terms.
Loans contractually past due 90 days or more with respect to either
principal or interest and still accruing interest increased to $6.2 million
at March 31, 1998 from zero at December 31, 1997. This increase is
represented primarily by two loans, a $5.4 million loan that is secured by a
first deed of trust on a single family residence which, as of January 1998,
had an appraised value of $10 million (previously reported as a TDR loan),
and a $700,000 SBA-guaranteed loan.
Other real estate owned ("OREO") at March 31, 1998 consisted of two
properties totaling $517,000 representing two undeveloped commercially zoned
parcels and one residential parcel.
As a result of these changes, the amount of non-performing assets at
March 31, 1998 was 12.8% greater than the level at December 31, 1997.
Loan delinquencies greater than 30 days past due increased to $6.6
million or 11.2% of loans receivable at March 31, 1998 from $752,000 or 1.2%
of loans receivable at December 31, 1997. This increase in loan
delinquencies during the first quarter of 1998 was primarily the result of
the two loans discussed above.
14
<PAGE>
ALLOWANCE FOR CREDIT LOSSES
The following table sets forth information concerning the Company's
allowance for credit losses for the periods indicated.
ANALYSIS OF CHANGES IN ALLOWANCE FOR CREDIT LOSSES
<TABLE>
<CAPTION>
THREE MONTHS ENDED
--------------------------
MARCH 31, MARCH 31,
1998 1997
---------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Balance, beginning of period . . . . . . . . . . . . . . . . . $ 2,023 $ 2,969
Loan charge offs:
Commercial loans:
Secured by one to four family residential properties.. . . . 4 241
Secured by commercial real properties. . . . . . . . . . . . - 52
Other - secured and unsecured. . . . . . . . . . . . . . . . - 121
Consumer installment and unsecured loans to individuals.. . . 84 34
-------- --------
Total loan charge-offs. . . . . . . . . . . . . . . . . . . . 88 448
Recoveries of loans previously charged off:
Commercial loans:
Other - secured and unsecured. . . . . . . . . . . . . . . . 4 118
Consumer installment and unsecured loans to individuals.. . . 14 7
-------- --------
Total recoveries of loans previously charged off. . . . . . . 18 125
-------- --------
Net charge-offs . . . . . . . . . . . . . . . . . . . . . . . 70 323
Provision for credit losses.. . . . . . . . . . . . . . . . .- -
-------- --------
Balance, end of period. . . . . . . . . . . . . . . . . . . . $ 1,953 $ 2,646
-------- --------
-------- --------
</TABLE>
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1997, the FASB issued SFAS No. 131, "Disclosures about Segments
of an Enterprise and Related Information" ("SFAS 131"). SFAS 131 establishes
standards for the way that public enterprises report information about
operating segments in annual financial statements and requires that selected
information about those operating segments be reported in interim financial
statements. This statement supersedes SFAS 14 "Financial Reporting for
Segments of a Business Enterprise". SFAS No. 131 requires that all public
enterprises report financial and descriptive information about its reportable
operating segments. Operating segments are defined as components regularly
evaluated by the chief operating decision maker in deciding how to allocate
resources and in assessing performance. This statement is effective for
fiscal years beginning after December 15, 1997. At this time the Company has
determined that this Statement will have no significant impact on its
financial position or results of operations for 1998.
15
<PAGE>
In February 1998, the FASB issued SFAS No. 132, "Employers' Disclosures
about Pensions and Other Postretirement Benefits (SFAS 132"). This Statement
standardizes the disclosure requirements for defined benefit plans and
recommends a parallel format for presenting information about pensions and
other postretirement benefits. This Statement is effective for fiscal years
beginning after December 15, 1997. At this time, the Company has determined
that this Statement will have no significant impact on it since it has no
defined benefit plans.
CAPITAL ADEQUACY REQUIREMENTS
At March 31, 1998 the Company and the Bank were in compliance with all
applicable regulatory capital requirements and the Bank was "well capitalized"
under the Prompt Corrective Action rules of the Office of the Comptroller of the
Currency. The following table sets forth the regulatory capital standards for
well capitalized institutions, and the capital ratios for the Company and the
Bank as of March 31, 1998 and December 31, 1997.
REGULATORY CAPITAL INFORMATION
OF THE COMPANY AND BANK
<TABLE>
<CAPTION>
WELL CAPITALIZED MARCH 31, DECEMBER 31,
STANDARDS 1998 1997
---------------- ---------- -----------
<S> <C> <C> <C>
COMPANY:
Tier 1 leverage . . . . . . . . . . N/A 10.43% 10.43%
Tier 1 risk-based capital . . . . . N/A 17.52% 16.98%
Total risk-based capital. . . . . . N/A 18.79% 18.25%
BANK:
Tier 1 leverage . . . . . . . . . . 5.00% 6.48% 6.48%
Tier 1 risk-based capital . . . . . 6.00% 10.79% 10.36%
Total risk-based capital. . . . . . 10.00% 12.06% 11.63%
</TABLE>
LIQUIDITY
The Company continues to manage its liquidity through a combination of
core deposits, federal funds purchased, repurchase agreements, collateralized
borrowing lines at the Federal Home Loan Bank of San Francisco, and a
portfolio of securities available for sale. Liquidity is also provided by
maturing investment securities and loans.
Average core deposits (excludes money desk and escrow deposits) and
shareholders' equity comprised 64.4% of total funding during the first
quarter of 1998, compared to 65.4% during the first quarter of 1997. The
following table shows that the Company's cumulative one year interest rate
sensitivity gap indicated a liability sensitive position of $6.5 million at
March 31, 1998, a change from the asset sensitive position of $12.9 million
at March 31, 1997. This change resulted from the Company's effort to lower
its exposure to decreases in net interest income due to a rapid decline in
interest rates. During the last twelve months, the Company has increased its
investment securities portfolio that reprice after one year to $44.3 million
16
<PAGE>
at March 31, 1998 from $21.3 million at March 31, 1997, increased its portfolio
of loans that reprice after one year to $15.9 million at March 31, 1998 from
$6.3 million at March 31, 1997, and increased its interest bearing
transaction deposit accounts and borrowings to $41.9 million from $28.1
million during this same period. The Company's liability sensitive position
during a period of slowly rising interest rates is not expected to have a
significant negative impact on net interest income since rates paid on the
Company's large base of interest-bearing demand, savings and money market
deposit accounts historically have not increased proportionately with
increases in interest rates.
RATE-SENSITIVE ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
MARCH 31, 1998
------------------------------------------------------------------------
MATURING OR REPRICING IN
------------------------------------------------------------------------
LESS AFTER THREE AFTER ONE
THAN MONTHS YEAR
THREE BUT WITHIN BUT WITHIN AFTER NOT RATE
MONTHS ONE YEAR 5 YEARS 5 YEARS SENSITIVE TOTAL
------- ----------- ---------- --------- ---------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Rate-sensitive assets:
Interest-bearing deposits with other . . . . .
financial institutions . . . . . . . . . . . $ - $ 250 $ - $ - $ - $ 250
Federal Funds sold . . . . . . . . . . . . . . 11,700 - - - - 11,700
Securities held-to-maturity. . . . . . . . . . - - - - - -
Securities available-for-sale. . . . . . . . . - - 9,938 34,407 - 44,345
Equity investment-FRB, FHLB & PCBB . . . . . . - - - 650 - 650
Loans receivable . . . . . . . . . . . . . . . 28,174 15,198 14,955 915 - 59,242
------- ------- ------- ------- -------- -------
Total rate-sensitive assets. . . . . . . . . 39,874 15,448 24,893 35,972 - 116,187
Rate-sensitive liabilities:
Interest bearing deposits (1):
Interest-bearing demand, money
market and savings . . . . . . . . . . . . 35,362 - - - - 35,362
Time certificates of deposit . . . . . . . . 6,229 13,737 11,310 - - 31,276
Securities sold under agreements to
repurchase . . . . . . . . . . . . . . . . . - 3,000 - - - 3,000
Other borrowings . . . . . . . . . . . . . . . 3,500 - - - - 3,500
------- ------- ------- ------- -------- -------
Total rate-sensitive liabilities . . . . . . 45,091 16,737 11,310 - - 73,138
Interest rate-sensitivity gap . . . . . . . . (5,217) (1,289) 13,583 35,972 - 43,049
----------------------------------------------------------------------
----------------------------------------------------------------------
Cumulative interest rate-sensitivity gap . . . $ (5,217) $ (6,506) $ 7,077 $ 43,049 43,049
-------- --------- -------- -------- -------
-------- --------- -------- -------- -------
Cumulative ratio of rate sensitive assets to
rate-sensitive liabilities . . . . . . . . . 88% 89% 110% 159%
------- ------- ------- -------
------- ------- ------- -------
</TABLE>
(1) Customer deposits which are subject to immediate withdrawal are presented
as repricing within three months or less. The distribution of other time
deposits is based on scheduled maturities.
17
<PAGE>
RATE-SENSITIVE ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
MARCH 31, 1997
------------------------------------------------------------------------
MATURING OR REPRICING IN
------------------------------------------------------------------------
LESS AFTER THREE AFTER ONE
THAN MONTHS YEAR
THREE BUT WITHIN BUT WITHIN AFTER NOT RATE
MONTHS ONE YEAR 5 YEARS 5 YEARS SENSITIVE TOTAL
------- ----------- ---------- --------- --------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Rate-sensitive assets:
Interest-bearing deposits with other
financial institutions . . . . . . . . . . . $ - $ - $ - $ - $ - $ -
Federal Funds sold . . . . . . . . . . . . . . 12,400 - - - - 12,400
Securities held-to-maturity. . . . . . . . . . - 984 18,395 - - 19,379
Securities held-for-sale . . . . . . . . . . . 2,000 - - 2,895 - 4,895
Equity investment-FRB & PCBB . . . . . . . . . - - - 338 - 338
Loans receivable . . . . . . . . . . . . . . . 34,173 19,514 4,028 2,234 - 59,949
------- ------- ------- ------ ------- -------
Total rate-sensitive assets. . . . . . . . . 48,573 20,498 22,423 5,467 - 96,961
Rate-sensitive liabilities:
Interest bearing deposits (1):
Interest-bearing demand, money
market and savings . . . . . . . . . . . . 27,890 - - - - 27,890
Time certificates of deposit . . . . . . . . 7,124 20,958 6,070 - - 34,152
Securities sold under agreements to
repurchase . . . . . . . . . . . . . . . . . 160 - - - - 160
Other borrowings . . . . . . . . . . . . . . . - - - - - -
------- ------- ------- ------ ------- -------
Total rate-sensitive liabilities . . . . . . 35,174 20,958 6,070 - - 62,202
Interest rate-sensitivity gap. . . . . . . . . 13,399 (460) 16,353 5,467 - 34,759
---------------------------------------------------------
---------------------------------------------------------
Cumulative interest rate-sensitivity gap . . . $ 13,399 $ 12,939 $ 29,292 $ 34,759 34,759
---------------------------------------------------------
---------------------------------------------------------
Cumulative ratio of rate sensitive assets to
rate-sensitive liabilities . . . . . . . . . 138% 123% 147% 156%
---------------------------------------------
---------------------------------------------
</TABLE>
(1) Customer deposits which are subject to immediate withdrawal are presented
as repricing within three months or less. The distribution of other time
deposits is based on scheduled maturities.
18
<PAGE>
CAUTIONARY STATEMENT FOR PURPOSES OF THE "SAFE HARBOR" PROVISIONS OF THE PRIVATE
SECURITIES LITIGATION REFORM ACT OF 1995
The Company wishes to take advantage of the "safe harbor" provisions of the
Private Securities Litigation Reform Act of 1995 as to "forward looking"
statements in this Quarterly Report which are not historical facts. The Company
cautions readers that the following important factors could affect the Company's
business and cause actual results to differ materially from those expressed in
any forward looking statement made by, or on behalf of, the Company.
- - Economic conditions. The Company's results are strongly influenced by
general economic conditions in its market area, Southern California, and a
deterioration in these conditions could have a material adverse impact on
the quality of the Bank's loan portfolio and the demand for its products
and services. In particular, changes in economic conditions in the real
estate and entertainment industries may affect the Company's performance.
- - Interest rates. Management anticipates that short-term interest rate
levels will remain constant in 1998, but if interest rates vary
substantially from this expectation, the Company's results could differ
materially.
- - Government regulation and monetary policy. All forward looking statements
presume a continuation of the existing regulatory environment and U.S.
Government monetary policies. The banking industry is subject to extensive
federal and state regulations, and significant new laws for changes in, or
repeal of, existing laws may cause results to differ materially. Further,
federal monetary policy, particularly as implemented through the Federal
Reserve System, significantly affects credit conditions for the Bank,
primarily through open market operations in U.S. government securities, the
discount rate for member bank borrowing and bank reserve requirements, and
a material change in these conditions would be likely to have an impact on
results.
- - Competition. The Bank competes with numerous other financial institutions
and non-depository financial intermediaries. Results may differ if
circumstances affecting the nature or level of competition change, such as
the merger of competing financial institutions or the acquisition of
California institutions by out-of-state companies.
- - Credit quality. A significant source of risk arises from the possibility
that losses will be sustained because borrowers, guarantors and related
parties may fail to perform in accordance with the terms of their loans.
The Bank has adopted underwriting and credit monitoring procedures and
credit policies, including the establishment and review of the allowance
for credit losses, that management believes are appropriate to minimize
this risk by assessing the likelihood of nonperformance, tracking loan
performance and diversifying the Bank's credit portfolio, but such policies
and procedures may not prevent unexpected losses that could adversely
affect the Company's results.
19
<PAGE>
- - Other risks. From time to time, the Company details other risks to its
businesses and/or its financial results in its filings with the Securities
and Exchange Commission.
While management believes that its assumptions regarding these and other factors
on which forward looking statements are based are reasonable, such assumptions
are necessarily speculative in nature, and actual outcomes can be expected to
differ to some degree. Consequently, there can be no assurance that the results
described in such forward looking statements will, in fact, be achieved.
20
<PAGE>
PART II--OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None.
ITEM 2. CHANGES IN SECURITIES
None.
Item 3. DEFAULTS UPON SENIOR SECURITIES
None.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a) On April 23, 1998, the Company held its annual meeting of shareholders.
(b) At the annual meeting, the following directors were elected: Donald E.
Benson, Robert E. Gipson, Alan Grahm, Joseph W. Kiley III, Scott A. Montgomery,
Dion G. Morrow and Robert E. Thomson.
(c) The following proposals were considered at the annual meeting and the
number of shares voting for or against such proposals are listed below.
Proposal #1--Election of Directors
<TABLE>
<CAPTION>
VOTES
NAME VOTES FOR WITHHELD
---- --------- --------
<S> <C> <C>
Donald E. Benson. . . . . . . 1,945,855 60,068
Robert E. Gipson. . . . . . . 1,945,855 60,068
Alan Grahm. . . . . . . . . . 1,945,757 60,166
Joseph W. Kiley III . . . . . 1,945,525 60,398
Scott A. Montgomery . . . . . 1,945,635 60,288
Dion G. Morrow. . . . . . . . 1,945,305 60,618
Robert E. Thomson . . . . . . 1,945,635 60,288
</TABLE>
21
<PAGE>
Proposal #2--Approval of an amendment to the 1996 Stock Incentive
Plan, to increase the number of shares authorized under the Plan from
110,000 shares to 283,510 shares.
<TABLE>
<CAPTION>
VOTES FOR VOTES AGAINST ABSTENTIONS BROKER NON-VOTES
--------- ------------- ----------- ----------------
<S> <C> <C> <C>
1,457,956 134,176 13,400 400,391
</TABLE>
Proposal #3--Ratification of Appointment of Deloitte & Touche LLP as
the Company's independent public accountants for the fiscal year ending
December 31, 1998.
<TABLE>
<CAPTION>
VOTES FOR VOTES AGAINST ABSTENTIONS
--------- ------------- -----------
<S> <C> <C>
1,929,425 354 76,144
</TABLE>
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS.
10.1 National Mercantile Bancorp Amended 1996 Stock Incentive Plan
27 Financial Data Schedule
(b) REPORTS ON FORM 8-K.
None.
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.
NATIONAL MERCANTILE BANCORP
(Registrant)
DATE: May 13, 1998 /s/ SCOTT A. MONTGOMERY
------------------------------------
SCOTT A. MONTGOMERY
Chief Executive Officer
DATE: May 13, 1998 /s/ JOSEPH W. KILEY III
------------------------------------
JOSEPH W. KILEY, III
Chief Financial Officer
22
<PAGE>
NATIONAL MERCANTILE BANCORP
AMENDED 1996 STOCK INCENTIVE PLAN
---------------------------------
Section 1. PURPOSE
The purpose of the 1996 Stock Incentive Plan (the "1996 Plan") of
National Mercantile Bancorp, a California corporation and a registered bank
holding company under the Bank Holding Company Act of 1956, as amended (the
"Company"), is to enable the Company to attract, retain and motivate its
employees and independent contractors by providing for or increasing the
proprietary interests of such employees and independent contractors in the
Company, and to enable the Company to attract, retain and motivate its
nonemployee directors and further align their interest with those of the
shareholders of the Company by providing for or increasing the proprietary
interest of such directors in the Company.
2. PERSONS ELIGIBLE
Each of the following persons (each, a "Participant") shall be eligible
to be considered for the grant of an Award (as hereinafter defined)
hereunder: (a) any employee of the Company or any of its subsidiaries,
including any director who is also such an employee; and (b) any independent
contractor of the Company or any of its subsidiaries. Any director of the
Company who is not also an employee of the Company (a "Nonemployee Director")
shall receive Nonemployee Director Options (as hereinafter defined) pursuant
to Section 10 hereof, but shall not otherwise participate in the 1996 Plan.
3. AWARDS
(a) The Committee (as hereinafter defined) responsible for
administration of the 1996 Plan is authorized to enter into any type of
arrangement on behalf of the Company with a Participant that is not
inconsistent with the provisions of the 1996 Plan and that, by its terms,
involves or might involve the issuance of (i) shares of common stock of the
Company ("Common Shares") or (ii) Derivative Security (as such term is
defined in Rule 16a-1 promulgated under the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), as such rule may be amended from time to
time) with an exercise or conversion privilege at a price related to the
Common Shares or with a value derived from the value of the Common Shares.
The entering into of any such arrangement is referred to herein as the grant
of an "Award."
(b) Awards are not restricted to any specified form or structure and
may include, without limitation, sales or bonuses of stock, restricted stock,
stock options, reload stock options, stock purchase warrants, other rights to
acquire stock, securities convertible into or
1
<PAGE>
redeemable for stock, stock appreciation rights, phantom stock, dividend
equivalents, performance units or performance shares, and an Award may
consist of one such security or benefit, or two or more of them in tandem or
in the alternative.
(c) Awards may be issued, and Common Shares may be issued pursuant to
an Award, for any lawful consideration as determined by the Committee,
including, without limitation, services rendered by the recipient of such
Award.
(d) Subject to the provisions of the 1996 Plan, the Committee, in its
sole and absolute discretion, shall determine all of the terms and conditions
of each Award granted hereunder, which terms and conditions may include,
among other things:
(i) a provision permitting the recipient of such Award,
including any recipient who is a director or officer of the Company,
to pay the purchase price of the Common Shares or other property
issuable pursuant to such Award, or such recipient's tax withholding
obligation with respect to such issuance, in whole or in part, by any
one or more of the following:
(A) the delivery of cash;
(B) the delivery of other property deemed acceptable by the
Committee;
(C) the delivery of previously owned shares of capital stock
of the Company (including "pyramiding"); or
(D) a reduction in the amount of Common Shares or other
property otherwise issuable pursuant to such Award.
(ii) a provision conditioning or accelerating the receipt of
benefits pursuant to such Award, either automatically or in the
discretion of the Committee, upon the occurrence of specified events,
including, without limitation, a change of control of the Company (as
defined by the Committee), an acquisition of a specified percentage of
the voting power of the Company, the dissolution or liquidation of the
Company, a sale of substantially all of the property and assets of the
Company or an event of the type described in Section 7 hereof; or
(iii) a provision required in order for such Award to qualify
as an incentive stock option (an "Incentive Stock Option") under
Section 422 of the Internal Revenue Code of 1986, as amended (the
"Code"); PROVIDED, HOWEVER, that no Award issued to any Nonemployee
Director or any independent contractor of the Company shall qualify as
an Incentive Stock Option.
2
<PAGE>
Section 4. STOCK SUBJECT TO THE 1996 PLAN
(a) At any time, the aggregate number of Common Shares issued or
issuable pursuant to all Awards (including all Incentive Stock Options)
granted under the 1996 Plan shall not exceed 283,510 shares subject to
adjustment as provided in Section 7 hereof.
(b) For purposes of Section 4(a) hereof, the aggregate number of Common
Shares issued or issuable pursuant to Awards granted under the 1996 Plan
shall at any time be deemed to be equal to the sum of the following:
(i) the number of Common Shares that were issued prior to
such time pursuant to Awards granted under the 1996 Plan, other than
Common Shares that were subsequently reacquired by the Company
pursuant to the terms and conditions of such Awards and with respect
to which the holder thereof received no benefits of ownership such as
dividends; plus
(ii) the number of Common Shares that were otherwise issuable
prior to such time pursuant to Awards granted under the 1996 Plan, but
that were withheld by the Company as payment of the purchase price of
the Common Shares issued pursuant to such Awards or as payment of the
recipient's tax withholding obligation with respect to such issuance;
plus
(iii) the maximum number of Common Shares that are or may be
issuable at or after such time pursuant to Awards granted under the
1996 Plan prior to such time.
Section 5. DURATION
Unless sooner terminated pursuant to Section 8 below, the 1996 Plan
shall terminate on March 28, 2006. No Awards shall be granted under the 1996
Plan while the 1996 Plan is suspended or after it is terminated.
Section 6. ADMINISTRATION
(a) The 1996 Plan shall be administered by a committee (the
"Committee") of the Board of Directors of the Company (the "Board")
consisting of two or more directors, each of whom: (i) is a "disinterested
person" (as such term is defined in Rule 16b-3 promulgated under the Exchange
Act, as such Rule may be amended from time to time); and (ii) is an "outside
director" within the meaning of Section 162(m) of the Code. Members of the
Committee shall serve at the pleasure of the Board, and the Board may from
time to time remove members from or add members to, the Committee.
3
<PAGE>
(b) Subject to the provisions of the 1996 Plan, the Committee shall be
authorized and empowered to do all things necessary or desirable in
connection with the administration of the 1996 Plan, including, without
limitation, the following:
(i) adopt, amend and rescind rules and regulations relating
to the 1996 Plan;
(ii) determine which persons are Participants and to which of
such Participants, if any, Awards shall be granted hereunder;
(iii) grant Awards to Participants and determine the terms and
conditions thereof, including the number of Common Shares issuable
pursuant thereto;
(iv) determine the terms and conditions of the Nonemployee
Director Options that are automatically granted hereunder, other than
the terms and conditions specified in Section 10 hereof;
(v) determine whether, and the extent to which adjustments
are required pursuant to Section 7 hereof; and
(vi) interpret and construe the 1996 Plan and the terms and
conditions of any Award granted hereunder.
Section 7. ADJUSTMENTS
If the outstanding shares of the class of Company stock then subject to
the 1996 Plan are increased, decreased or exchanged for or converted into
cash, property or a different number or kind of securities, or if cash,
property or securities are distributed in respect of such outstanding
securities, in either case as a result of a reorganization, merger,
consolidation, recapitalization, restructuring, reclassification, dividend
(other than a regular cash dividend) or other distribution, stock split,
reverse stock split or the like, or if substantially all of the property and
assets of the Company are sold, then, unless the terms of such transaction
shall provide otherwise, the Committee shall make appropriate and
proportionate adjustments in: (i) the number and type of shares or other
securities or cash or other property that may be acquired pursuant to Awards
theretofore granted under the 1996 Plan; and (ii) the maximum number and type
of shares or other securities that may be issued pursuant to Awards
thereafter granted under the 1996 Plan. The determination of the Committee
as to what adjustments shall be made pursuant to this section, and the extent
thereof, shall be final and conclusive. No fractional shares of stock shall
be issued under the 1996 Plan on account of any such adjustment.
4
<PAGE>
Section 8. AMENDMENT AND TERMINATION
The Board may suspend or terminate the 1996 Plan at any time; PROVIDED,
HOWEVER, that no such suspension or termination shall deprive the recipient
of any Award theretofore granted under the 1996 Plan, without the consent of
such recipient, of any of his or her rights thereunder or with respect
thereto.
The Board may amend the 1996 Plan at any time and in any manner subject
to the following limitations:
(a) No such amendment shall deprive the recipient of any Award
theretofore granted under the 1996 Plan, without the consent of such
recipient, of any of his or her rights thereunder or with respect thereto;
(b) Except as otherwise provided in Section 7 relating to adjustments
upon changes in stock, no such amendment shall be effective unless approved
by the affirmative vote of the holders of a majority of the outstanding
shares of the Company present, represented and entitled to vote at a
shareholders meeting or by the written consent of a majority of the
outstanding shares of the Company where such shareholder approval is required
by law or pursuant to the Articles of Incorporation or Bylaws of the Company;
and
(c) Section 10 hereof shall not be amended more than once every six (6)
months, other than to comport with changes in the Code, the Employee
Retirement Income Security Act, or the rules and regulations thereunder.
Section 9. EFFECTIVE DATE
The 1996 Plan shall be effective as of June 18, 1997, the date upon
which it was approved by the shareholders of the Company; PROVIDED, HOWEVER,
that no Common Shares may be issued under this Plan until it has been
approved, director or indirectly, by the affirmative vote of the holders (the
"Shareholders") of a majority of the outstanding shares of the Company
present, or represented, and entitled to vote at a meeting duly held in
accordance with the laws of the State of California.
Section 10. NONEMPLOYEE DIRECTOR OPTIONS
(a) Any person elected or appointed to serve as a Nonemployee Director
who has not previously served as a Nonemployee Director of the Company on or
prior to October 1, 1996, shall be granted, on the first business day
following the later of the date of such election or appointment or the date
the 1996 Plan is approved by the Shareholders, an option to purchase 1,100
Common Shares without the requirement of any further action by the Committee.
On the first business day following the date of the annual meeting of
shareholders of the Company held
5
<PAGE>
in 1998, or any adjournment thereof (the "1998 Meeting"), any person who was
a Nonemployee Director on or after the effective date of the 1996 Plan and
who is re-elected to the Board at the 1998 Meeting shall be granted an option
to purchase 550 Common Shares without the requirement of any further action
by the Committee. Options that may be granted to newly-elected Nonemployee
Directors or to re-elected Nonemployee Directors under this Section 10 shall
be referred to collectively as the "Nonemployee Director Options." The date
on which a Nonemployee Director Option is granted shall be the Date of Grant
for such option.
(b) If, on any date upon which Nonemployee Director Options are to be
automatically granted pursuant to this Section 10, the number of Common
Shares remaining available for options under the 1996 Plan is insufficient
for the grant to each Nonemployee Director entitled thereto of a Nonemployee
Director Option to purchase the entire number of Common Shares specified in
this Section 10, then a Nonemployee Director Option to purchase a
proportionate amount of such available number of Common Shares (rounded to
the nearest whole share) shall be granted to each Nonemployee Director
entitled thereto on such date.
(c) Each Nonemployee Director Option granted under the 1996 Plan shall
become fully exercisable one year from the Date of Grant, provided that in
the event that a Change of Control (as defined below) shall occur, such
granted Nonemployee Director Option shall be immediately exercisable.
(d) Each Nonemployee Director Option granted under the 1996 Plan shall
expire upon the sixth anniversary of the Date of Grant.
(e) Each Nonemployee Director Option shall have an exercise price equal
to the aggregate Fair Market Value on the Date of Grant of the Common Shares
subject thereto.
(f) Payment of the exercise price of any Nonemployee Director Option
granted under the 1996 Plan shall be made in full in cash concurrently with
the exercise of such option; PROVIDED HOWEVER, that, in the discretion of the
Board, the payment of such exercise price may instead be made:
(i) in whole or in part, with Common Shares delivered
concurrently with such exercise (such shares to be valued on the basis
of the Fair Market Value of such shares on the date of such exercise),
provided that the Company is not then prohibited from purchasing or
acquiring Common Shares; or
(ii) in whole or in part, by the delivery, concurrently with
such exercise and in accordance with Section 220.3(e)(4) of Regulation
T promulgated under the Exchange Act, of a properly executed exercise
notice for such option and irrevocable instructions to a broker
promptly to deliver to the Company a specified dollar amount of the
proceeds of a sale of or a loan secured by the Common Shares issuable
upon exercise of such option.
6
<PAGE>
(g) For purposes of this Section 10, the "Fair Market Value" of a
Common Share or other security on any date (the "Determination Date") shall
be equal to the average of the high bid and low asked prices per Common Share
or unit of such other security on the business day immediately preceding the
Determination Date in the market where the security is traded, or, if the
Common shares or such other security were not quoted by any such organization
on such immediately preceding business day, as determined by the Board. for
purposes of this Section 10, the term "Change of Control" shall mean the
occurrence of either of the following events: (a) the Company consolidates
with or merges with or into any person or conveys, transfers or leases all or
substantially all of its assets to any person, or any corporation
consolidates with or merges into or with the Company in any event pursuant to
a transaction in which the outstanding voting stock or units of the Company
is changed into or exchanged for cash, securities or other property, other
than any such transaction where the outstanding voting stock or units of the
Company is not changed or exchanged at all (except to the extent necessary to
reflect a change in the jurisdiction of incorporation or organization of the
Company) or where the outstanding voting stock or units of the Company is
changed into or exchanged for voting stock or units of the surviving
corporation or organization which is not redeemable, or no "person" or
"group" owns immediately after such transaction, directly or indirectly, an
amount of outstanding voting stock or units necessary to effect the change of
control of, or influence over, the surviving corporation or organization, as
the case may be, or (b) the Company is liquidated or dissolved or adopts a
plan of liquidation or dissolution.
(h) Each Nonemployee Director Option shall be nontransferable by the
optionee other than by will or the laws of descent and distribution, and
shall be exercisable during the optionee's lifetime only by the optionee or
the optionee's guardian or legal representative.
(i) Nonemployee Director Options are not intended to qualify as
Incentive Stock Options.
April 23, 1998
7
Options/1996Plan
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM MARCH 31,
1998 CONSOLIDATED BALANCE SHEET, PROFIT & LOSS AND CHANGES IN SHAREHOLDERS'
EQUITY STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 6,015
<INT-BEARING-DEPOSITS> 250
<FED-FUNDS-SOLD> 11,700
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 44,345
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 59,242
<ALLOWANCE> 1,953
<TOTAL-ASSETS> 123,288
<DEPOSITS> 103,535
<SHORT-TERM> 6,500
<LIABILITIES-OTHER> 787
<LONG-TERM> 0
0
7,350
<COMMON> 24,613
<OTHER-SE> (19,497)
<TOTAL-LIABILITIES-AND-EQUITY> 123,288
<INTEREST-LOAN> 1,504
<INTEREST-INVEST> 658
<INTEREST-OTHER> 191
<INTEREST-TOTAL> 2,353
<INTEREST-DEPOSIT> 689
<INTEREST-EXPENSE> 798
<INTEREST-INCOME-NET> 1,555
<LOAN-LOSSES> 0
<SECURITIES-GAINS> 17
<EXPENSE-OTHER> 1,591
<INCOME-PRETAX> 195
<INCOME-PRE-EXTRAORDINARY> 195
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 195
<EPS-PRIMARY> 0.29
<EPS-DILUTED> 0.08
<YIELD-ACTUAL> 5.52
<LOANS-NON> 1,581
<LOANS-PAST> 6,190
<LOANS-TROUBLED> 62
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 2,023
<CHARGE-OFFS> 88
<RECOVERIES> 18
<ALLOWANCE-CLOSE> 1,953
<ALLOWANCE-DOMESTIC> 1,953
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C> <C> <C> <C>
<PERIOD-TYPE> YEAR 3-MOS 6-MOS 9-MOS
<FISCAL-YEAR-END> DEC-31-1995 DEC-31-1996 DEC-31-1996 DEC-31-1996
<PERIOD-START> JAN-01-1995 JAN-01-1996 JAN-01-1996 JAN-01-1996
<PERIOD-END> DEC-31-1995 MAR-31-1996 JUN-30-1996 SEP-30-1996
<CASH> 9,272 7,522 4,614 6,669
<INT-BEARING-DEPOSITS> 0 0 0 0
<FED-FUNDS-SOLD> 21,000 20,500 15,700 13,200
<TRADING-ASSETS> 0 0 0 0
<INVESTMENTS-HELD-FOR-SALE> 20,417 19,778 19,199 15,832
<INVESTMENTS-CARRYING> 0 0 0 0
<INVESTMENTS-MARKET> 0 0 0 0
<LOANS> 82,012 75,790 69,278 64,871
<ALLOWANCE> 3,805 3,837 3,064 3,052
<TOTAL-ASSETS> 131,992 122,705 108,920 100,301
<DEPOSITS> 120,243 114,238 100,495 93,240
<SHORT-TERM> 4,497 1,056 1,101 434
<LIABILITIES-OTHER> 1,241 1,604 2,254 1,674
<LONG-TERM> 0 0 0 0
0 0 0 0
0 0 0 0
<COMMON> 24,614 24,614 24,614 24,614
<OTHER-SE> (18,603) (18,807) (19,544) (19,661)
<TOTAL-LIABILITIES-AND-EQUITY> 131,992 122,705 108,920 100,301
<INTEREST-LOAN> 9,299 1,800 3,530 5,179
<INTEREST-INVEST> 1,395 282 560 795
<INTEREST-OTHER> 940 263 483 720
<INTEREST-TOTAL> 11,634 2,345 4,573 6,694
<INTEREST-DEPOSIT> 3,869 884 1,656 2,368
<INTEREST-EXPENSE> 3,979 892 1,673 2,391
<INTEREST-INCOME-NET> 7,655 1,453 2,900 4,303
<LOAN-LOSSES> 2,307 0 0 0
<SECURITIES-GAINS> (1,233) (1) (1) (1)
<EXPENSE-OTHER> 11,233 1,757 4,596 6,305
<INCOME-PRETAX> (7,200) (136) (1,412) (1,594)
<INCOME-PRE-EXTRAORDINARY> 0 0 0 0
<EXTRAORDINARY> 0 0 0 0
<CHANGES> 0 0 0 0
<NET-INCOME> (7,200) (136) (833) (1,015)
<EPS-PRIMARY> (10.63) (0.20) (1.23) (1.50)
<EPS-DILUTED> (10.63) (0.20) (1.23) (1.50)
<YIELD-ACTUAL> 5.52 4.96 5.14 5.25
<LOANS-NON> 573 1,868 805 869
<LOANS-PAST> 221 23 111 78
<LOANS-TROUBLED> 5,167 5,059 5,054 5,034
<LOANS-PROBLEM> 1,649 219 0 0
<ALLOWANCE-OPEN> 3,063 3,805 3,805 3,805
<CHARGE-OFFS> 2,632 54 1,124 1,190
<RECOVERIES> 1,067 86 383 437
<ALLOWANCE-CLOSE> 3,805 3,837 3,064 3,052
<ALLOWANCE-DOMESTIC> 2,762 3,004 2,247 2,063
<ALLOWANCE-FOREIGN> 0 0 0 0
<ALLOWANCE-UNALLOCATED> 1,043 833 817 989
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C> <C> <C> <C>
<PERIOD-TYPE> YEAR 3-MOS 6-MOS 9-MOS
<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1997 DEC-31-1997 DEC-31-1997
<PERIOD-START> JAN-01-1996 JAN-01-1997 JAN-01-1997 JAN-01-1997
<PERIOD-END> DEC-31-1996 MAR-31-1997 JUN-30-1997 SEP-30-1997
<CASH> 5,113 4,932 4,325 6,325
<INT-BEARING-DEPOSITS> 0 0 0 19
<FED-FUNDS-SOLD> 23,000 12,400 20,300 8,200
<TRADING-ASSETS> 0 0 0 0
<INVESTMENTS-HELD-FOR-SALE> 4,235 5,233 3,188 25,212
<INVESTMENTS-CARRYING> 14,395 19,379 19,392 17,923
<INVESTMENTS-MARKET> 14,355 19,094 19,348 17,908
<LOANS> 62,547 59,949 59,560 56,669
<ALLOWANCE> 2,969 2,646 2,546 2,589
<TOTAL-ASSETS> 109,416 102,768 106,962 114,817
<DEPOSITS> 103,854 97,163 93,300 96,419
<SHORT-TERM> 0 160 61 5,057
<LIABILITIES-OTHER> 717 773 1,619 1,207
<LONG-TERM> 0 0 0 0
0 0 0 0
0 0 7,350 7,350
<COMMON> 24,614 24,614 24,614 24,612
<OTHER-SE> (19,769) (19,942) (19,905) (19,828)
<TOTAL-LIABILITIES-AND-EQUITY> 109,416 102,768 106,962 114,817
<INTEREST-LOAN> 9,743 1,473 2,950 4,435
<INTEREST-INVEST> 990 372 741 1,264
<INTEREST-OTHER> 1,024 170 320 540
<INTEREST-TOTAL> 11,757 2,015 4,011 6,239
<INTEREST-DEPOSIT> 3,054 704 1,351 2,045
<INTEREST-EXPENSE> 3,079 711 1,365 2,069
<INTEREST-INCOME-NET> 5,678 1,304 2,646 4,170
<LOAN-LOSSES> 0 0 0 0
<SECURITIES-GAINS> (3) 0 0 (12)
<EXPENSE-OTHER> 8,003 1,557 3,086 4,623
<INCOME-PRETAX> (1,823) (135) (212) (118)
<INCOME-PRE-EXTRAORDINARY> 0 0 0 0
<EXTRAORDINARY> 0 0 0 0
<CHANGES> 0 0 0 0
<NET-INCOME> (1,244) (135) (212) (118)
<EPS-PRIMARY> (1.84) (0.20) (0.31) (0.17)
<EPS-DILUTED> (1.84) (0.20) (0.31) (0.17)
<YIELD-ACTUAL> 5.31 5.39 5.59 5.66
<LOANS-NON> 928 871 1,271 1,399
<LOANS-PAST> 300 14 2 0
<LOANS-TROUBLED> 5,016 5,004 5,487 5,480
<LOANS-PROBLEM> 409 0 0 0
<ALLOWANCE-OPEN> 3,805 2,969 2,969 2,969
<CHARGE-OFFS> 1,300 449 650 695
<RECOVERIES> 464 126 227 315
<ALLOWANCE-CLOSE> 2,969 2,646 2,546 2,589
<ALLOWANCE-DOMESTIC> 2,091 1,698 1,948 2,349
<ALLOWANCE-FOREIGN> 0 0 0 0
<ALLOWANCE-UNALLOCATED> 878 948 598 240
</TABLE>
