<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended September 30, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from ____________________ to ____________________
Commission file number 0-11337
FOOTHILL INDEPENDENT BANCORP
- --------------------------------------------------------------------------------
(Exact name of Registrant as specified in its charter)
CALIFORNIA 95-3815805
- --------------------------------- ----------------------
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification Number)
510 SOUTH GRAND AVENUE, GLENDORA, CALIFORNIA 91741
- -------------------------------------------- ----------------------
(Address of principal executive offices) (Zip Code)
(626) 963-8551 or (909) 599-9351
- --------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
Not Applicable
- --------------------------------------------------------------------------------
(Former name, former address and former fiscal year,
if changed, since last year)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports); and (2) has been subject to such
filing requirements for the past 90 days. YES [XX] NO [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
5,825,777 shares of Common Stock
as of November 4, 1999
<PAGE> 2
FOOTHILL INDEPENDENT BANCORP AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(dollars in thousands)
<TABLE>
<CAPTION>
September 30, December 31,
1999 1998
------------- ------------
<S> <C> <C>
ASSETS
Cash and due from banks $ 26,014 $ 24,482
Federal funds sold 8,502 13,000
--------- ---------
Total Cash and Cash Equivalents 34,516 37,482
--------- ---------
Interest-bearing deposits in other financial
institutions 18,215 15,043
--------- ---------
Investment Securities Held-To-Maturity
(approximate market value $9,280 in 1999 and
$12,908 in 1998):
U.S. Treasury 3,996 6,998
U.S. Government Agencies 2,000 1,999
Municipal Agencies 1,062 1,580
Other Securities 2,250 2,250
--------- ---------
Total Investment Securities Held-To-Maturity 9,308 12,827
--------- ---------
Investment Securities Available-For-Sale 77,228 93,418
--------- ---------
Loans, net of unearned discount and prepaid
points and fees 311,733 290,879
Direct lease financing 2,635 3,704
Less reserve for possible loan and lease losses (6,111) (5,576)
--------- ---------
Total Loans and Leases, net 308,257 289,007
--------- ---------
Bank premises and equipment 6,957 6,970
Accrued interest 2,562 2,891
Other real estate owned, net of allowance for
possible losses of $64 in 1999 and $19 in 1998 1,696 2,876
Cash surrender value of life insurance 4,916 4,578
Prepaid expenses 1,201 1,199
Deferred income taxes 2,288 2,386
Other assets 530 400
--------- ---------
TOTAL ASSETS $ 467,674 $ 469,077
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits
Demand deposits $ 141,316 $ 139,939
Savings and NOW deposits 101,829 99,198
Money market deposits 85,974 79,744
Time deposits in denominations of $100,000 or more 30,374 58,066
Other time deposits 55,890 39,717
--------- ---------
Total deposits 415,383 416,664
--------- ---------
Accrued employee benefits 1,921 1,836
Accrued interest and other liabilities 1,970 2,124
Long-term debt 34 74
--------- ---------
Total Liabilities 419,308 420,698
--------- ---------
Stockholders' Equity
Contributed capital
Capital stock - authorized 12,500,000 shares
without par value; issued and outstanding
5,836,734 shares in 1999 and 5,985,244 in 1998 36,368 36,057
Additional Paid-in Capital 963 963
Retained Earnings 11,701 11,516
Accumulated Other Comprehensive Income (666) (157)
--------- ---------
Total Stockholders' Equity 48,366 48,379
--------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 467,674 $ 469,077
========= =========
</TABLE>
See accompanying notes to financial statements
2
<PAGE> 3
FOOTHILL INDEPENDENT BANCORP AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
(dollars in thousands)
<TABLE>
<CAPTION>
Nine Months Ended Three Months Ended
September 30, September 30,
------------------- ------------------
1999 1998 1999 1998
------- ------- ------ ------
<S> <C> <C> <C> <C>
INTEREST INCOME
Interest and fees on loans $21,643 $22,047 $ 7,199 $ 7,480
Interest on investment securities
U.S. Treasury 365 745 83 218
Obligations of other U.S. government agencies 1,974 1,209 662 583
Municipal agencies 264 270 87 90
Other securities 1,077 660 413 294
Interest on deposits 641 464 233 187
Interest on Federal funds sold 410 1,372 119 491
Lease financing income 133 186 41 58
------- ------- ------- -------
Total Interest Income 26,507 26,953 8,837 9,401
------- ------- ------- -------
INTEREST EXPENSE
Interest on savings and NOW deposits 1,154 1,057 386 369
Interest on money market deposits 2,094 2,082 742 750
Interest on time deposits in denominations
of $100,000 or more 1,174 1,952 360 636
Interest on other time deposits 1,858 2,360 609 780
Interest on borrowings 4 8 1 2
------- ------- ------- -------
Total Interest Expense 6,284 7,459 2,098 2,537
------- ------- ------- -------
Net Interest Income 20,233 19,494 6,739 6,864
PROVISION FOR LOAN AND LEASE LOSSES 485 575 205 200
------- ------- ------- -------
Net Interest Income After Provisions for Loan
and Lease Losses 19,738 18,919 6,534 6,664
------- ------- ------- -------
OTHER INCOME
Fees and service charges 3,309 3,541 1,094 1,168
Gain on sale SBA loans 112 1 12 1
Other 42 67 19 13
------- ------- ------- -------
Total other income 3,463 3,609 1,125 1,182
------- ------- ------- -------
OTHER EXPENSES
Salaries and benefits 7,294 7,850 2,504 2,794
Occupancy expenses, net of revenue of $141
in 1999 and $101 in 1998 1,574 1,604 538 542
Furniture and equipment expenses 1,223 1,258 398 425
Other expenses (Note 2) 5,716 6,025 1,652 1,836
------- ------- ------- -------
Total Other Expenses 15,807 16,737 5,092 5,597
------- ------- ------- -------
INCOME BEFORE INCOME TAXES 7,394 5,791 2,567 2,249
------- ------- ------- -------
PROVISION FOR INCOME TAXES 2,699 2,131 937 827
------- ------- ------- -------
NET INCOME $ 4,695 $ 3,660 $ 1,630 $ 1,422
======= ======= ======= =======
EARNINGS PER SHARE OF COMMON STOCK
Basic $ 0.79 $ 0.62 $ 0.28 $ 0.24
------- ------- ------- -------
Diluted (Note 3) $ 0.75 $ 0.58 $ 0.26 $ 0.23
------- ------- ------- -------
</TABLE>
See accompanying notes to financial statements
3
<PAGE> 4
FOOTHILL INDEPENDENT BANCORP AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(UNAUDITED)
(dollars in thousands)
NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
<TABLE>
<CAPTION>
NUMBER OF ADDITIONAL ACCUMULATED OTHER
SHARES CAPITAL PAID-IN RETAINED COMPREHENSIVE
OUTSTANDING STOCK CAPITAL EARNINGS INCOME TOTAL
----------- ------- ---------- -------- ----------------- -------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, January 1, 1998 $5,111,993 $22,618 $659 $19,062 $ (298) $42,041
15% stock dividend
distributed 7/7/98 779,314 12,469 (12,469) --
Fractional shares of stock
dividend paid in cash (10) (10)
Exercise of stock options 81,140 661 661
Common stock issued under
employee benefit and
dividend reinvestment plans 13,252 219 219
Comprehensive Income
Net Income 3,660
Unrealized security holding
losses (Net of taxes $165) 698
Total Comprehensive Income 4,358
---------- ------- ---- ------- ----- -------
BALANCE, September 30, 1998 $5,985,699 $35,967 $659 $10,243 $ 400 $47,269
========== ======= ==== ======= ===== =======
BALANCE, January 1, 1999 5,985,244 36,057 963 11,516 (157) 48,379
Cash Dividend
distributed 4/15/99 (1,481) (1,481)
Cash Dividend
distributed 10/27/99 (466) (466)
Exercise of stock options 17,579 124 124
Common stock issued under
employee benefit and dividend
reinvestment plans 13,090 187 187
Common stock repurchased,
cancelled and retired (179,179) (2,563) (2,563)
Comprehensive Income
Net Income 4,659
Unrealized security holding
gains (Net of taxes $194) (509)
Total Comprehensive Income 4,186
---------- ------- ---- ------- ----- -------
BALANCE, September 30, 1999 $5,836,734 $36,368 $963 $11,701 $(666) $48,366
========== ======= ==== ======= ===== =======
</TABLE>
See accompanying notes to financial statements
4
<PAGE> 5
FOOTHILL INDEPENDENT BANCORP AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(dollars in thousands)
NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
<TABLE>
<CAPTION>
1999 1998
----------- -----------
<S> <C> <C>
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
Cash Flows From Operating Activities:
Interest and fees received $ 26,722 $ 26,695
Service fees and other income received 3,128 3,383
Financing revenue received under leases 133 186
Interest paid (6,421) (7,551)
Cash paid to suppliers and employees (15,043) (18,248)
Income taxes paid (2,314) (333)
----------- -----------
Net Cash Provided (Used) by Operating Activities 6,205 4,132
----------- -----------
Cash Flows From Investing Activities:
Proceeds from maturity of investment securities (AFS) 1,730,101 111,416
Purchase of investment securities (AFS) (1,714,638) (163,991)
Proceeds from maturity of investment securities (HTM) 9,563 5,807
Purchase of investment securities (HTM) (6,039) (3,046)
Proceeds from maturity of deposits in other financial
institutions 24,839 15,132
Purchase of deposits in other financial institutions (28,011) (20,181)
Net (increase) decrease in credit card and revolving
credit receivables 352 128
Recoveries on loans previously written off 107 393
Net (increase) decrease in loans (21,619) (8,430)
Net (increase) decrease in leases 1,069 926
Proceeds from property, plant and equipment 20 106
Capital expenditures (970) (521)
Proceeds from sale of other real estate owned 1,134 49
----------- -----------
Net Cash Provided (Used) in Investing Activities (4,092) (62,212)
----------- -----------
Cash Flows From Financing Activities:
Net increase (decrease) in demand deposits, NOW accounts,
savings accounts, and money market deposits 10,213 29,191
Net increase (decrease) in certificates of deposit with
maturities of three months or less 3,245 7,916
Net increase (decrease) in certificates of deposit with
maturities of more than three months (14,764) (12,157)
Proceeds from exercise of stock options 124 661
Proceeds from stock issued under employee benefit and dividend
reinvestment plans 187 219
Stock repurchased and retired (2,563) --
Principal payment on long term debt (40) (36)
Dividends paid (1,481) (10)
----------- -----------
Net Cash Provided by Financing Activities (5,079) 25,784
----------- -----------
Net Increase (Decrease) in Cash and Cash Equivalents (2,966) (32,296)
Cash and Cash Equivalents at Beginning of Year 37,482 69,350
----------- -----------
Cash and Cash Equivalents at September 30, 1999 & 1998 $ 34,516 $ 37,054
=========== ===========
</TABLE>
See accompanying notes to financial statements
5
<PAGE> 6
FOOTHILL INDEPENDENT BANCORP AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(dollars in thousands)
NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
RECONCILIATION OF NET INCOME TO NET CASH PROVIDED BY OPERATING ACTIVITIES
<TABLE>
<CAPTION>
1999 1998
------- -------
<S> <C> <C>
Net Income $ 4,695 $ 3,660
------- -------
Adjustments to Reconcile Net Income to
Net Cash Provided by Operating Activities
Depreciation and amortization 960 971
Provision for possible credit losses 485 575
Provision for possible OREO losses (46)
(Gain)/loss on sale of equipment 3 (13)
Provision for deferred taxes 98 1,875
Increase/(decrease) in taxes payable 287 (90)
(Increase)/decrease in other assets 13 (69)
(Increase)/decrease in interest receivable 329 (99)
Increase/(decrease) in discounts and premiums 19 27
Increase/(decrease) in interest payable (137) (92)
(Increase)/decrease in prepaid expenses (2) (1,769)
Increase/(decrease) in accrued expenses and other liabilities (161) (420)
Gain on sale of other real estate owned (50)
Increase in cash surrender value of life insurance (338) (373)
(Gain)/loss on sale of investments and other assets -- (1)
------- -------
Total Adjustments 1,510 472
------- -------
$ 6,205 $ 4,132
======= =======
</TABLE>
Net Cash Provided (Used) By Operating Activities
DISCLOSURE OF ACCOUNTING POLICY
For purposes of reporting cash flows, cash and cash equivalents include cash on
hand, amounts due from banks and Federal funds sold. Generally, Federal funds
are purchased and sold for one-day periods.
See accompanying notes to financial statements
6
<PAGE> 7
FOOTHILL INDEPENDENT BANCORP AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(dollars in thousands)
September 30, 1999 AND 1998
NOTE #1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accompanying financial statements have been prepared in accordance with
generally accepted accounting principles for interim financial information.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
In the opinion of management, all adjustments considered necessary for a fair
statement of the results for the interim periods presented have been included.
For further information, refer to the financial statements and footnotes thereto
included in the Company's Annual Report on Form 10-K for the year ended December
31, 1998.
NOTE #2 - OTHER EXPENSES
The following is a breakdown of other expenses for the nine and three month
periods ended September 30, 1999 & 1998:
<TABLE>
<CAPTION>
Nine Months Ended Three Months Ended
September 30, September 30,
------------------- -------------------
1999 1998 1999 1998
------ ------ ------ ------
<S> <C> <C> <C> <C>
Data processing $ 714 $ 703 $ 246 $ 228
Marketing expenses 878 543 275 166
Office supplies, postage and telephone 847 891 265 273
Bank Insurance 327 425 45 154
Supervisory Assessments 69 81 28 27
Professional Expenses 1,406 995 327 329
Provision for OREO Loss 64 391 18 48
Provision for Y2K Expense -- 250 -- 50
Other Expenses 1,411 1,746 448 561
------ ------ ------ ------
Total Other Expenses $5,716 $6,025 $1,652 $1,836
====== ====== ====== ======
</TABLE>
NOTE #3 - EARNINGS PER SHARE
The following is a reconciliation of net income and shares outstanding to the
income and number of shares used to compute EPS (amounts in thousands):
<TABLE>
<CAPTION>
Nine Months Ended September 30, Three Months Ended September 30,
---------------------------------- -----------------------------------
1999 1998 1999 1998
---------------- --------------- --------------- ----------------
Income Shares Income Shares Income Shares Income Shares
------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net income as reported $4,695 $3,660 $1,630 $1,422
Shares outstanding at period end 5,837 5,986 5,837 5,986
Impact of weighting shares
purchased during the period 73 (53) 34 (3)
------ ----- ------ ----- ------ ----- ------ -----
Used in Basic EPS 4,695 5,910 3,660 5,933 1,630 5,871 1,422 5,983
Dilutive effect of outstanding
stock options 361 419 351 392
------ ----- ------ ----- ------ ----- ------ -----
Used in Dilutive EPS $4,695 6,271 $3,660 6,352 $1,630 6,222 $1,422 6,375
====== ===== ====== ===== ====== ===== ====== =====
</TABLE>
NOTE #4 - INCOME TAXES
The Bank adopted Statement No. 109 of the Financial Accounting Standards Board,
Accounting for Income Taxes, commencing January 1, 1993. This new statement
supersedes Statement No. 96 and among other things, changes the criteria for the
recognition and measurement of deferred tax assets. This adoption does not
create a material change in the financial statements of the Bank or the Company.
7
<PAGE> 8
Notes to Condensed Consolidated Financial Statements (continued)
NOTE #5 - DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
Financial Accounting Standards Board Statement 107 is effective for financial
statements for fiscal years ending after December 15, 1992. The Statement
considers the fair value of financial instruments for both assets and
liabilities.
The following methods and assumptions were used to estimate the fair value of
financial instruments.
Investment Securities
For U.S. Government and U.S. Agency securities, fair values are based on market
prices. For other investment securities, fair value equals quoted market price
if available. If a quoted market price is not available, fair value is estimated
using quoted market prices for similar securities as the basis for a pricing
matrix.
Loans
The fair value for loans with variable interest rates is the carrying amount.
The fair value of fixed rate loans is derived by calculating the discounted
value of the future cash flows expected to be received by the various
homogeneous categories of loans. All loans have been adjusted to reflect changes
in credit risk.
Deposits
The fair value of demand deposits, savings deposits, savings accounts and NOW
accounts is defined as the amounts payable on demand at September 30, 1999. The
fair value of fixed maturity certificates of deposit is estimated based on the
discounted value of the future cash flows expected to be paid on the deposits.
Notes Payable
Rates currently available to the Bank for debt with similar terms and remaining
maturities are used to estimate the fair value of existing debt.
Commitments to Extend Credit and Standby Letter of Credit
The fair value of commitments is estimated using the fees currently charged to
enter into similar agreements, taking into account the remaining terms of the
agreements and the present creditworthiness of the parties involved. For
fixed-rate loan commitments, fair value also considered the difference between
current levels of interest rates and committed rates.
The fair value of guarantees and letters of credit are based on fees currently
charged for similar agreements or on the estimated cost to terminate them or
otherwise settle the obligations with parties involved at September 30, 1999.
8
<PAGE> 9
Notes to Condensed Consolidated Financial Statements (continued)
NOTE #5 - DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)
The estimated fair value of the Bank's financial instruments are as follows:
September 30, 1999
-----------------------------
Carrying Amount Fair Value
--------------- ----------
(dollars in thousands)
Financial Assets
Cash and cash equivalents $ 34,516 $ 34,516
Investment securities and deposits 104,751 102,365
Loans 312,473 315,172
Direct lease financing 2,635 2,554
Financial Liabilities
Deposits 415,383 415,212
Long term debt 34 34
Unrecognized Financial Instruments
Commitments to extend credit 44,321 44,321
Standby letters of credit 712 712
NOTE #6 - NON-PERFORMING LOANS
The following table sets forth information regarding the Bank's non-performing
loans at September 30, 1999 and December 31, 1998.
<TABLE>
<CAPTION>
September 30, December 31,
1999 1998
------------- ------------
(dollars in thousands)
<S> <C> <C>
Accruing Loans More Than 90 Days Past Due (1)
Aggregate Loan Amounts
Commercial, financial and agricultural $ -- $ 8
Real Estate -- --
Installment loans to individuals -- 12
Aggregate Leases -- 17
Total Loans Past Due More Than 90 Days -- 37
Troubled Debt Restructurings (2) 2,381 3,042
Non-accrual loans (3) 5,958 6,347
------ ------
Total Non-Performing Loans $8,339 $9,426
====== ======
</TABLE>
- ------------------
(1) Reflects loans for which there has been no payment of interest and/or
principal for 90 days of more. Ordinarily, loans are placed on non-accrual
status (accrual of interest is discontinued) when the Bank has reason to
believe that continued payment of interest and principal is unlikely.
(2) Renegotiated loans are those which have been renegotiated to provide a
deferral of interest or principal.
(3) There were 14 loans on non-accrual status totaling approximately $5,958,000
at September 30, 1999 and 16 loans totaling approximately $6,347,000 at
December 31, 1998.
The policy of the Company is to review each loan in the loan portfolio to
identify problem credits. In addition, as an integral part of its review process
of the Bank, the Federal Reserve Bank and the California Department of Financial
Institutions also classifies problem credits. There are three classifications
for problem loans: "substandard," "doubtful," and "loss." Substandard loans have
one defined weaknesses and are characterized by the distinct
9
<PAGE> 10
Notes to Condensed Consolidated Financial Statements (continued)
NOTE #6 - NON-PERFORMING LOANS (CONTINUED)
possibility that the Bank will sustain some loss if the deficiencies are not
corrected. Doubtful loans have the weaknesses of substandard loans with the
additional characteristic that the weaknesses make collection or liquidation in
full, on the basis of currently existing facts, conditions, and values,
questionable. A loan classified as "loss" is considered uncollectible and of
such little value that the continuance as an asset of the institution is not
warranted. Another category designated "special mention" is maintained for loans
which do not currently expose the Bank to a significant degree of risk to
warrant classification as substandard, doubtful or loss, but do possess credit
deficiencies or potential weaknesses deserving management's close attention.
As of September 30, 1999, the Bank's classified loans consisted of approximately
$12,598,646 of loans classified as substandard and $3,054,621 of loans
classified as doubtful. The Bank's $12,598,646 of loans classified as
substandard consisted of approximately $6,640,416 of performing and accruing
loans and approximately $5,958,230 of non-accrual loans.
The $3,054,621 of loans classified as doubtful were all non-accrual loans.
NOTE #7 - RESERVE FOR LOAN AND LEASE LOSSES
The reserve for loan and lease losses is a general reserve established by
Management to absorb potential losses inherent in the entire portfolio. The
level of and ratio of additions to the reserve are based on a continuous
analysis of the loan and lease portfolio and, at September 30, 1999, reflected
an amount which, in Management's judgement, was adequate to provide for known
and inherent loan losses. In evaluating the adequacy of the reserve, Management
gives consideration to the composition of the loan portfolio, the performance of
loans in the portfolio, evaluations of loan collateral, prior loss experience,
current economic conditions and the prospects or worth of respective borrowers
or guarantors. In addition, the Federal Reserve Bank or Department of Financial
Institutions, as an integral part of their examination process, periodically
reviews the Bank's allowance for possible loan and lease losses. The examiners
may require the Bank to recognize additions to the allowance based upon their
judgement of the information available to it at the time of its examination. The
Bank was most recently examined by the Department of Financial Institutions as
of December 31, 1998.
10
<PAGE> 11
Notes to Condensed Consolidated Financial Statements (continued)
NOTE #7 - RESERVE FOR LOAN AND LEASE LOSSES (CONTINUED)
The reserve for loan and lease losses at September 30, 1999, was $6,111,000 or
1.94% of total loans and leases. Additions to the reserve are effected through
the provision for loan losses which is an operating expense of the Company.
The following table provides certain information with respect to the Company's
allowance for loan losses as well as charge-off and recovery activity.
<TABLE>
<CAPTION>
September 30, December 31,
1999 1998
------------- ------------
(Dollars in Thousands)
<S> <C> <C>
Allowance for Loan Losses $5,576 $5,165
------ ------
Balance, Beginning of period
Charge-Offs
Commercial, financial and agricultural (103) (423)
Real estate - construction -- --
Real estate - mortgage (45) (274)
Consumer loans (30) (45)
Lease Financing -- --
Other -- (127)
------ -----
Total Charge-Offs (178) (869)
------ ------
Recoveries
Commercial, financial and agricultural 35 202
Real estate - construction -- --
Real estate - mortgage 188 300
Consumer loans 5 3
Lease Financing -- --
Other -- --
-- --
------ -----
Total Recoveries 228 505
------ ------
Net (Charge-Offs) Recoveries 50 (364)
Provision Charged to Operations 485 775
------ ------
Balance, End of period $6,111 $5,576
====== ======
Net Charge-Offs During the Period to Average
Loans Outstanding During the Period Ended (0.02)% 0.12%
====== =====
Allowance for Loan Losses to Total Loans 1.94% 1.89%
====== =====
</TABLE>
In accordance with SFAS No. 114 (as amended by SFAS No. 118), "Accounting by
Creditors for Impairment of a Loan", loans identified as "impaired" are measured
on the present value of expected future cash flows discounted at the loan's
effective interest rate, except that as a practical expedient, a creditor may
measure impairment based on a loan's observable market price, or the fair value
of the collateral if the loan is collateral dependent. A loan is impaired when
it is probable the creditor will not be able to collect all contractual
principal and interest payments due in accordance with the terms of the loan
agreement. Loan impairment is evaluated on a loan-by-loan basis as part of
normal loan review procedures of the Bank.
11
<PAGE> 12
Notes to Condensed Consolidated Financial Statements (continued)
NOTE #8 - MARKET RISK
The Company's management utilizes the results of a dynamic simulation model to
quantify the estimated exposure of net interest income to sustained interest
rate changes. The simulation model estimates the impact of changing interest
rates on the interest income from all interest earning assets and the interest
expense paid on all interest bearing liabilities reflected on the Company's
balance sheet. This sensitivity analysis is compared to policy limits which
specify maximum tolerance level for net interest income exposure over a one year
horizon assuming no balance sheet growth, given both a 200 basis point upward
and downward shift in interest rates. A parallel and pro rata shift in rates
over a 12-month period is assumed.
The Company does not engage in any hedging activities and does not have
any derivative securities in its portfolio.
The following reflects the Company's net interest income sensitivity
analysis as of September 30, 1999:
<TABLE>
<CAPTION>
ESTIMATED NET MARKET VALUE
SIMULATED INTEREST INCOME --------------------------
RATE CHANGES SENSITIVITY ASSETS LIABILITIES
------------ --------------- -------- -----------
(Dollars in Thousands)
<S> <C> <C> <C>
+200 basis points -7.66% $450,002 $415,648
- -200 basis points +5.75% $492,621 $416,832
</TABLE>
12
<PAGE> 13
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
GENERAL
Our principal operating subsidiary, Foothill Independent Bank, which is
a California state chartered bank (the "Bank"), accounts for substantially all
of our revenues and income. Accordingly, the following discussion focuses
primarily on its operations and financial condition.
RESULTS OF OPERATIONS
OVERVIEW. During the first nine months of 1999, we generated net
earnings of $4,695,000, which represents an increase of $1,035,000, or 28%, over
net earnings in the first nine months of 1998. That increase was due primarily
to a reduction in non-interest expense and, to a lesser extent, an increase in
net interest income. Net earnings for the nine months ended September 30, 1999
represents an annualized return on average assets of 1.35% and an annualized
return on average equity of 13.10%, compared to 1.08% and 11.09%, respectively,
for the same period of 1998.
NET INTEREST INCOME. Net interest income is a principal determinant of
a bank's income. Net interest income represents the difference or "spread"
between the interest earned on interest-earning assets, such as loans and
investment securities, and the interest paid on interest-bearing liabilities,
principally deposits. Net interest income increased by $729,000, or 3.7% in the
nine month period ended September 30, 1999 as compared to the same period of
1998. The increase was primarily attributable to a reduction in interest expense
that more than offset a modest decrease in interest income. In the third quarter
of 1999, net interest income declined by $125,000, or 1.8%, as compared to the
same period of 1998, due primarily to decreases in interest income which were
partially offset by a decrease in interest expense. The decrease in interest
income in the third quarter of 1999 was due primarily to changes in the mix of
interest earning assets and increased competition for loans among lenders in
the Bank's service areas.
The decreases in interest expense in the quarter and nine months ended
September 30, 1999 were due primarily to decreases in the volume of time
certificates of deposits ("time deposits"), including those in denominations of
$100,000 or more ("TCD's"), on which the Bank pays its highest rates of
interest.
RATE SENSITIVITY AND EFFECT ON NET INTEREST INCOME. Like other banks
and bank holding companies, our net interest income is affected by a number of
factors including the relative percentages or the "mix" of (i) our assets,
between loans, on the one hand, on which we are able to obtain higher rates of
interest, and investment securities, federal funds sold and funds held in
interest-bearing deposits with other financial institutions, on the other hand,
on which yields generally are lower; (ii) variable and fixed rate loans in its
loan portfolio; and (iii) demand and savings deposits, on the one hand, and time
deposits, on the other hand. As a general rule, a bank with a relatively high
percentage of fixed-rate loans will experience a decline in interest income
during a period of increasing market rates of interest, because it will be
unable to "reprice" its fixed rate loans to fully offset the increase in the
rates of interest it must offer to retain maturing time deposits and attract new
deposits. Similarly, a bank with a high percentage of time deposits generally
will experience greater increases in interest expense, and therefore, a decrease
in net interest income, during a period of increasing market rates of interest
than a bank with a greater percentage of demand and savings deposits which are
less sensitive to changes in market rates of interest. By contrast, during a
period of declining market rates of interest, a bank with a higher percentage of
variable loans, as a general rule, will experience a decline in net interest
income because such loans usually contain automatic repricing provisions that
are "triggered" by declines in market rates of interest; whereas offsetting
reductions in the rates of interest paid on time deposits cannot be implemented
until they mature, at which time a bank can seek their renewal at lower rates of
interest or allow such deposits to be withdrawn in order to reduce interest
expense.
13
<PAGE> 14
MARKET RISK. Market risk is the risk of loss to future earnings, to
fair values of assets or to future cash flows that may result from changes in
the price or value of a financial instrument. The value of a financial
instrument may change as a result of changes in interest rate and other market
conditions. Market risk is attributed to all market risk sensitive financial
instruments, including loan and investment securities, deposits and borrowings.
We do not engage in trading activities or participate in foreign currency
transactions for our own account. Accordingly, our exposure to market risk is
primarily a function of our asset and liability management activities and of
changes in market rates of interest that can cause or require increases in the
rates we pay on deposits that may take effect more rapidly or may be greater
than the increases in the interest rates we are able to charge on loans and the
yields that we can realize on our investments. The extent of that market risk,
depends on a number of variables, including the sensitivity to changes in market
interest rates and the maturities of our interest earning assets and our
deposits. See "Rate Sensitivity and Effect on Net Interest Income" above.
We use a dynamic simulation model to forecast the anticipated impact of
changes in market interest rates on our net interest income. That model is used
to assist management in evaluating, and in determining and adjusting strategies
designed to reduce, our exposure to these market risks, which may include, for
example, changing the mix of earning assets or interest-bearing deposits. See
Note 8 to our Condensed Consolidated Financial Statements contained in Part I of
this Report for further information with respect to that dynamic simulation
model that, based on certain assumptions, attempts to quantify the impact that
simulated upward and downward interest rate changes would have on our net
interest income.
We attempt to reduce our exposure to market risks associated with
interest rate fluctuations and, thereby, at least to maintain and, if possible,
to increase, our net interest margin or spread by seeking (i) to attract and
maintain a significant volume of demand and savings deposits that are not as
sensitive to interest rate fluctuations as are TCD's and other time deposits,
and (ii) to match opportunities to "reprice" earning assets, particularly loans,
in response to changes in market rates of interest which require or cause
repricing of deposits. Beginning in 1998, we decided to allow maturing TCD's to
"run-off," rather than seeking their renewal, and we also instituted marketing
programs designed to attract additional demand and savings deposits. As a
result, the average volume of demand and savings (including money market)
deposits increased by $27,400,000, or 9.2% in the nine months ended September
30, 1999 compared to the same period in 1998 and, at September 30, 1999, such
deposits represented 78.3% of the Bank's average volume of total deposits as
compared to 73.3% at September 30, 1998.
The Bank's net interest margin (i.e., tax-adjusted net interest income
stated as a percentage of average interest-earning assets) declined in the
quarter and nine-month periods ended September 30, 1999 to 6.39% and 6.44%,
respectively, from 6.50% and 6.48% for the same periods of 1998. However, our
net interest margin continued to exceed the average net interest margin for
California-based, publicly traded banks and bank holding companies with assets
ranging from $250-to-$750 million (the "Peer Group Banks").
The ability to maintain our net interest margin is not entirely within
our control because the interest rates we are able to charge on loans and the
interest rates we must offer to maintain and attract deposits are affected by
national monetary policies established and implemented by the Federal Reserve
Board and by competitive conditions in our service areas. In addition, the
effect on a bank's net interest margins of changes in market rates of interest
will depend on the types and maturities of its deposits and earning assets. For
example, a change in interest rates paid on deposits in response to changes in
market rates of interest can be implemented more quickly in the case of savings
deposits and money market accounts than with respect to time deposits as to
which a change in interest rates generally cannot be implemented until such
deposits mature. In addition, a change in rates of interest paid on deposits can
and often does lead consumers to move their deposits from one type of deposit to
another or to shift funds from deposits to non-bank investments or from such
investments to bank deposit accounts or instruments, which also will affect a
bank's net interest margin.
PROVISION FOR LOAN AND LEASE LOSSES. We follow the practice of
maintaining a reserve for possible losses on loans and leases that occur from
time to time as an incidental part of the banking business. Write-offs of loans
(essentially reductions in the carrying values of non-performing loans due to
possible losses on their ultimate recovery) are charged against this reserve
(the "Loan Loss Reserve"), which is adjusted periodically to reflect changes in
(i) the volume of outstanding loans, and (ii) the risk of potential losses due
to a deterioration in the condition of borrowers or in the value of property
securing non-performing loans or changes in economic conditions. Additions to
the Loan Loss Reserve are made through a charge against income referred to as
the "provision for loan and lease losses." We made provisions for potential loan
and lease losses of $205,000 and $485,000, respectively, in the three and
nine-month periods ended September 30, 1999, as compared to $200,000
14
<PAGE> 15
and $575,000 for the corresponding periods of 1998; and, at September 30, 1999,
the Loan Loss Reserve was approximately $6,111,000 or 1.94% of total loans and
leases outstanding, compared to approximately $5,334,000 or 1.76% of total loans
and leases outstanding at September 30, 1998. In the nine months ended September
30, 1999, recoveries of previously "charged-off" loans exceeded loan charge-offs
by $50,000. By comparison, in the same nine months of 1998, charge-offs exceeded
recoveries by $406,000, which represented fourteen hundredths of one percent
(0.14%) of average loans and leases outstanding.
OTHER INCOME. Other income declined by $57,000 or 4.8% and $146,000 or
4.5%, respectively, in the three and nine-month periods ended September 30,
1999, compared to the same periods of 1998, due primarily to decreases in
transaction fees and service charges collected on deposits and other banking
transactions.
OTHER EXPENSE. Other expense (also often referred to as "non-interest
expense"), consists primarily of (i) salaries and other employee expenses, (ii)
occupancy and furniture and equipment expenses, and (iii) other operating and
miscellaneous expenses that include insurance premiums, marketing expenses, data
processing costs, professional expenses, and charges that are periodically made
against income to establish reserves for possible losses on the disposition or
declines in market values of real properties acquired on or in lieu of
foreclosure of defaulted loans (commonly referred to as "other real estate
owned" or "OREO").
In order to attract a higher volume of non-interest bearing demand and
lower cost savings and money market deposits and, thereby, improve the Bank's
net interest margin, it has been our policy to provide a much higher level of
personal service to our customers than the level of services that are provided
by many of our competitors. As a result, our net interest margin has usually
exceeded the average net interest margin of the Peer Group Banks and has more
than offset the adverse effects that the higher costs of providing such services
would otherwise have had on our profitability.
Nevertheless, during the second half of 1998 and continuing into 1999,
we implemented a number of cost reduction programs designed to reduce
non-interest expenses and, thereby increase operating efficiencies, without
adversely affecting the quality of service we provide to our customers. As a
result of those programs, during the three and nine month periods ended
September 30, 1999, we reduced our operating expenses by $505,000 and $930,000,
respectively, compared to the same periods of 1998. These expense reductions
were accomplished in spite of non-recurring expenses incurred in connection with
an election contest at our Annual Shareholders Meeting held in May 1999. Those
expense reductions resulted in improvements in our efficiency ratio (that is,
basically, the ratio of non-interest expense to the sum of our net interest
income and other income) to 64.8% and 66.7%, respectively, in the three and nine
month periods ended September 30, 1999, from 69.6% and 72.4%, respectively, for
the same three and nine month periods of 1998.
INCOME TAXES. Income taxes increased by approximately $110,000 or 13.3%
and $568,000 or 26.6%, respectively, during the three and nine month periods
ended September 30, 1999 compared to the same periods of 1998, primarily as a
result of the increases in pre-tax income during those the three and nine month
periods ended September 30, 1999.
FINANCIAL CONDITION
Our total average assets increased during the nine months ended
September 30, 1999 by $5,785,000, or 1.3%, when compared to average total assets
at December 31, 1998. Total assets at September 30, 1999 were $1,403,000 or 0.3%
lower that total assets at December 31, 1999.
As described above in the preceding section, beginning in the latter
part of 1998 we reduced the interest rates we offered to pay for time
certificates in order to encourage non-renewals of those higher cost deposits as
a means of reducing interest expense. At the same time, we implemented programs
designed to attract non-interest bearing checking and lower cost savings and
money market deposits. As a result, at September 30, 1999, the volume of demand
deposits and savings deposits at the Bank was $10,238,000, or 3.2%, higher than
at December 31, 1998. By contrast, during the nine months ended September 30,
1999, the Bank was able to reduce the volume of outstanding time certificates,
including TCD's, by $11,519,000, or 11.8%, from the volume of such deposits that
were outstanding at December 31, 1998.
15
<PAGE> 16
LIQUIDITY MANAGEMENT. Liquidity management policies attempt to achieve
a matching of sources and uses of funds in order to enable us to fund our
customers' requirements for loans and for deposit withdrawals. In conformity
with those policies, we maintain a number of short-term sources of funds to meet
periodic increases in loan demand and deposit withdrawals and maturities. At
September 30, 1999, the principal sources of liquidity consisted of $26,014,000
of cash and demand balances due from other banks; $8,502,000 in Federal funds
sold; $12,966,000 in short-term (maturities of 45 days or less) commercial
paper; and $10,000,000 in an overnight repurchase agreement, which, together,
totaled $57,482,000, as compared to $56,846,000 at December 31, 1998. Other
sources of liquidity include $54,261,000 in securities available-for-sale, of
which approximately $13,480,000 mature within one year; and $18,215,000 in
interest bearing deposits at other financial institutions, which mature in 6
months or less. We also have established facilities enabling us to borrow up to
$10,100,000 of Federal funds from other banks and we have an unused $8,500,000
line of credit with the Federal Home Loan Bank. During the third quarter of 1999
we also received approval from the Federal Reserve Bank of San Francisco to
establish an account that will also allow us to borrow at their discount window
should the need arise. Additionally, substantially all of our installment loans
and leases, the amount of which aggregated $10,143,000 at September 30, 1999,
require regular installment payments from customers, providing us with a steady
flow of cash funds. Accordingly, we believe that we have adequate cash and cash
equivalent resources to meet any increases in demand for loans-and leases and
any increase in deposit withdrawals that might occur in the foreseeable future.
CAPITAL RESOURCES. The increases in earnings achieved since January 1,
1997 caused our capital ratios to increase in relation to regulatory capital
requirements. However, those increases in capital also caused our return on
average equity to remain relatively fixed despite the increases in earnings. As
a result, in 1998, our Board of Directors authorized an open market stock
repurchase program to be funded out of earnings. Between the commencement of
that program in late 1998 and September 30, 1999, we had purchased a total of
188,179 shares of our common stock for an aggregate price of approximately
$2,696,200. In addition, in March 1999, the Board declared a $.25 per share cash
dividend that was paid on April 15, 1999 to shareholders of record as of April
5, 1999
In September of 1999 the Board adopted a new cash dividend policy which
provides for the Bank to pay quarterly cash dividends of $.08 per share. The
first such quarterly cash dividend was declared in September 1999, and was paid
on October 27, 1999 to shareholders of record as of October 14, 1999.
It has been and continues to be the objective of our Board of Directors
to retain earnings to meet capital requirements under applicable government
regulations and to support our growth. As a result, the Board may change the
amount or frequency of cash dividends to the extent that it deems necessary or
appropriate to achieve these objectives. For example the retention of earnings
in previous years enabled the Bank, during the past four years, to fund the
opening of four new banking offices and extend the Bank's market areas, which
have contributed to our increased profitability and the maintenance of our
capital adequacy ratios well above regulatory requirements.
We continue to evaluate and explore opportunities to expand our market
into areas such as eastern Los Angeles County, western San Bernardino County,
north Orange County and northern Riverside County, all of which are contiguous
to our existing markets. We believe that the mergers and consolidations of a
number of independent banks that occurred in 1997 and 1998 have created
opportunities for us to increase our market share in those areas. We took
advantage of those opportunities within our existing market areas in 1998,
during which we established a substantial number of new customer relationships
and increased the volume of our demand, savings and money market deposit
balances obtained largely from customers of the merged banks who we disaffected
by the quality of services they were receiving. We believe that there are still
expansion and growth opportunities that we will seek to take advantage of in
1999 and 2000.
At September 30, 1999, our Bank's Tier 1 leverage ratio and Tier 1
risk-based capital ratio were 10.17% and 13.26%, respectively, which were
significantly in excess of minimum bank regulatory requirements. Our Company's
consolidated Tier 1 risk-based capital ratio was 13.45%. The risk-based capital
ratio is determined by weighting the Bank's assets in accordance with certain
risk factors and, the higher the risk profile of a bank's assets, the greater is
the amount of capital that is required to maintain an adequate risk-based
capital ratio, which generally is at least 8%. Our Bank's Tier 1 capital and
Tier 1 risk-based capital ratios compare favorably with those of the Peer Group
Banks.
16
<PAGE> 17
Under accounting principles that address the financial reporting
requirements for investments in certain equity and debt securities held by
financial institutions, any unrealized gain on such securities is required to be
credited to, and any unrealized losses are required to be charged against,
stockholders' equity. At September 30, 1999, we recorded a valuation reserve for
unrealized losses on such securities aggregating approximately $666,000. The
greatest portion of this amount is related to certain investments in mutual
funds, which are classified as investments in marketable equity securities, but
which we have held for several years and intend to continue to hold for the
foreseeable future.
YEAR 2000. In 1998 we commenced a "Y2K" compliance program to identify
and to take the actions necessary to prevent miscalculations and computer
problems or failures in the processing of time sensitive data that could arise
beginning in 2000, because most computer programs were written using two digits
(rather that four) to define the applicable year. Those actions included
upgrading and replacing software used in those systems and testing to confirm
that those systems are Y2K compliant. We have completed the testing phase of our
Y2K compliance program and, as of September 30, 1999, all of our computer
systems had successfully passed the testing phase. It is currently believed that
the costs of addressing potential Y2K problems will not have a material adverse
impact on our financial position, results of operations or liquidity in future
periods. However, Y2K compliance testing involves simulations of the effects of
the change in years from 1999 to 2000 and beyond and, as a result, there can be
no assurance that computer systems that have passed compliance testing will
operate without interruption or failure when the change of year, from 1999 to
2000, actually occurs. In addition, there is no assurance that customers who
utilize computer information systems to effectuate banking transactions, or our
vendors (including other financial institutions) with which we do business, will
not encounter problems that could adversely affect our business. Accordingly, we
are continuing the process of assessing the Y2K readiness of our major customers
and vendors to determine any risks that may exist in those areas.
FORWARD LOOKING INFORMATION AND UNCERTAINTIES REGARDING FUTURE PERFORMANCE
This Report, including Management's Discussion and Analysis of
Financial Condition and Results of Operations, contains certain forward-looking
information, which reflects management's current views of future financial
performance. The forward-looking information is subject to certain risks and
uncertainties, including but not limited to the following:
INCREASED COMPETITION. Increased competition from other financial
institutions, mutual funds and securities brokerage and investment banking firms
that offer competitive loan and investment products could require the Bank to
reduce interest rates and loan fees to attract new loans or to increase interest
rates that it offers on time deposits, either or both of which could, in turn,
reduce interest income and net interest margins.
POSSIBLE ADVERSE CHANGES IN LOCAL ECONOMIC CONDITIONS. Adverse changes
in local economic conditions could (i) reduce loan demand which could, in turn,
reduce interest income and net interest margins; (ii) adversely affect the
financial capability of borrowers to meet their loan obligations which, in turn,
could result in increases in loan losses and require increases in reserves for
possible loan losses, thereby adversely affecting earnings; and (iii) lead to
reductions in real property values that, due to our reliance on real property to
secure many of our loans, could make it more difficult for us to prevent losses
from being incurred on non-performing loans through the sale of such real
properties.
POSSIBLE ADVERSE CHANGES IN NATIONAL ECONOMIC CONDITIONS AND FRB
MONETARY POLICIES. Changes in national economic conditions, such as increases in
inflation or declines in economic output often prompt changes in Federal Reserve
Board monetary policies that could increase the cost of funds to us and reduce
net interest margins, particularly if we are unable, due to competitive
pressures or the rate insensitivity of earning assets, to effectuate
commensurate increases in the rates we are able to charge on existing or new
loans.
CHANGES IN REGULATORY POLICIES. Changes of federal and state bank
regulatory policies, such as increases in capital requirements or in loan loss
reserves, or changes in asset/liability ratios, could adversely affect earnings
by reducing yields on earning assets or increasing operating costs.
17
<PAGE> 18
EFFECTS OF GROWTH. It is our intention to take advantage of
opportunities to increase our business, either through acquisitions of other
banks or the establishment of new banking offices. If we do acquire any other
banks or open any additional banking offices we are likely to incur additional
operating costs that may adversely affect our operating results, at least on an
interim basis, until any acquired bank is integrated into our operations or the
new banking offices are able to achieve profitability.
YEAR 2000. The costs of resolving potential Y2K data processing problem
could prove to be greater than is currently anticipated or efforts to resolve
that problem in a timely manner could prove to be unsuccessful.
Due to these and other possible uncertainties and risks, readers are
cautioned not to place undue reliance on the forward-looking statements, which
speak only as of the date of this Quarterly Report, or to make predictions based
solely on historical financial performance.
PART II - OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) Exhibits:
27 -- Financial Data Schedule
(B) Reports on Form 8-K:
None
18
<PAGE> 19
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.
Date: November 11, 1999 FOOTHILL INDEPENDENT BANCORP
By: /s/ CAROL ANN GRAF
-----------------------------------------
Carol Ann Graf
Senior Vice President and Chief
Financial Officer and Assistant Secretary
S-1
<PAGE> 20
INDEX TO EXHIBITS
EXHIBIT SEQUENTIALLY
NUMBER DESCRIPTION NUMBERED PAGE
------- ----------- -------------
27* Financial Data Schedule
- -------------
* This Schedule contains summary financial information extracted from the
Registrant's balance sheet as of September 30, 1999, and the statement of
income for the nine months ended September 30, 1999, and is qualified in
its entirety by reference to such balance sheet and statement of income and
the notes thereto contained elsewhere in this Report.
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
REGISTRANT'S BALANCE SHEET AS OF SEPTEMBER 30, 1999 AND THE STATEMENT OF INCOME
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH BALANCE SHEET AND STATEMENT OF INCOME AND THE NOTES THERETO.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> SEP-30-1999
<CASH> 26,014
<INT-BEARING-DEPOSITS> 18,215
<FED-FUNDS-SOLD> 8,502
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 77,228
<INVESTMENTS-CARRYING> 9,308
<INVESTMENTS-MARKET> 9,280
<LOANS> 314,368
<ALLOWANCE> (6,111)
<TOTAL-ASSETS> 467,674
<DEPOSITS> 415,383
<SHORT-TERM> 0
<LIABILITIES-OTHER> 3,891
<LONG-TERM> 34
0
0
<COMMON> 36,368
<OTHER-SE> 11,998
<TOTAL-LIABILITIES-AND-EQUITY> 467,674
<INTEREST-LOAN> 21,776
<INTEREST-INVEST> 3,680
<INTEREST-OTHER> 1,051
<INTEREST-TOTAL> 26,507
<INTEREST-DEPOSIT> 6,280
<INTEREST-EXPENSE> 6,284
<INTEREST-INCOME-NET> 20,233
<LOAN-LOSSES> 485
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 15,807
<INCOME-PRETAX> 7,394
<INCOME-PRE-EXTRAORDINARY> 7,394
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,695
<EPS-BASIC> .79
<EPS-DILUTED> .75
<YIELD-ACTUAL> 0
<LOANS-NON> 5,958
<LOANS-PAST> 0
<LOANS-TROUBLED> 2,381
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 5,576
<CHARGE-OFFS> 178
<RECOVERIES> 228
<ALLOWANCE-CLOSE> 6,111
<ALLOWANCE-DOMESTIC> 6,111
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
