<PAGE> 1
Filed by Century Bancshares, Inc.
Pursuant to Rule 425 of the Securities Act of 1933
Subject Company: GrandBanc, Inc.
Commission File No: 000-16234
THE FOLLOWING COMMUNICATION WILL BE DISSEMINATED TO EMPLOYEES OF GRANDBANC, INC.
BEGINNING ON OCTOBER 16, 2000:
CENTURY BANCSHARES, INC.
ABOUT CENTURY NATIONAL BANK
Century National Bank -- a locally-owned and operated community bank--has been
serving the Washington DC metropolitan area for over 17 years. Century has
remained competitive by offering a wide array of products--comparable to those
at larger banks--while maintaining a high level of personal service.
Century is committed to building strong relationships in order to meet the needs
of area professionals, non-profit organizations and small businesses.
Responsiveness to customer requests and quick turnaround on credit and loan
requests are just a few of the ways that we meet this goal.
At Century, we recognize that each customer's banking needs are unique. That is
why we remain committed to providing the most personalized and friendly service
in town.
FUTURE DIRECTION
Since 1994, part of Century's strategic plan has been seeking out opportunities
to expand our branch network throughout the Washington DC metropolitan area. In
the last six years, Century has opened one branch office in the District of
Columbia, one in Montgomery County, Maryland and three in Northern Virginia.
These new offices have allowed us to reach new customers and provide more
convenient service to our existing customers. As the Washington metro area
continues to grow, it is important for us to bring branches to the communities
where our customers live and work.
In 2000, Century looks forward to opening a new loan production office in
Rockville, Maryland followed by a new full-service branch office in Reston,
Virginia.
In addition to expanding our branch network, Century is always looking for
products to bring to our customers. 1999 saw the expansion of our mortgage
lending department; the development of an insurance agency and a strategic
partnership with Washington Financial, LLC in order to provide insurance
products; and an enhanced credit card program.
In the coming months, Century looks to providing our customers with debit cards
and on-line banking services.
As we grow in branches and services, we look forward to being your bank for the
NEW CENTURY.
<PAGE> 2
CENTURY BANCSHARES, INC.
CHAIRMAN'S MESSAGE
To Our Shareholders and Friends:
As the century came to a close, growth and expansion remained the two defining
trends for Century National Bank. New product lines were added. Existing
products were enhanced. All of these changes were implemented as part of our
continuing effort to improve the quality of service we provide our customers.
During the first quarter of 1999, our mortgage lending department was expanded
to offer a wider variety of loan products. These new products became available
just as interest rates fell to the lowest point in 4 years, and Century was
ready to serve the needs of customers looking to refinance or purchase homes. In
December, our credit card program was enhanced to include many new features,
such as airline miles and purchase points.
In mid-October, Century Insurance Agency, LLC, a subsidiary of Century National
Bank, opened its doors. Offering life, health, disability, and many other types
of insurance, the agency provides these products with the personalized and
friendly service our customers have come to expect. Not only are a number of new
"non-traditional" financial products available at Century, but the
time-consuming process of obtaining additional insurance needed for a loan is
simplified when your banker can also be your insurance agent.
Another milestone in the month of October was the opening of Century's sixth
branch office in Dumfries, Virginia. The acquisition of the former One Valley
branch represents our continuing goal to expand into the Washington, DC metro
area suburbs. Dumfries is the third branch of Century National Bank to open in
Northern Virginia and the first in Prince William County.
Century's net income reached a record $1.2 million in 1999. The increase in
earnings reflects the continued growth in loans and deposits resulting from our
expansion into the Maryland and Virginia suburbs of Washington, DC as well as
the introduction of new fee-based products and services.
As the next century opens, we look forward to bringing new products and services
to our customers, while maintaining the high level of service for which we are
known. A sneak peek at what's ahead: debit cards and Internet banking will be
making their debut in 2000.
Sincerely,
/s/ JOSEPH S. BRACEWELL
Joseph S. Bracewell
Chairman of the Board
<PAGE> 3
CENTURY BANCSHARES, INC.
FINANCIAL HIGHLIGHTS
(In Thousands, except per share amounts)
<TABLE>
<CAPTION>
AVERAGES 1999 1998 1997
-------- ---------- ---------- ----------
<S> <C> <C> <C>
Assets $ 170,157 $ 144,738 $ 114,461
Loans, net 128,419 99,724 75,908
Deposits 138,388 121,543 96,744
Stockholders' equity 15,546 14,189 8,773
</TABLE>
<TABLE>
<CAPTION>
AT YEAR-END 1999 1998 1997
----------- ---------- ---------- ----------
<S> <C> <C> <C>
Assets $ 204,809 $ 151,350 $ 152,640
Loans, net 138,076 115,231 94,171
Deposits 153,900 126,211 129,605
Stockholders' equity 15,668 15,317 13,536
</TABLE>
<TABLE>
<CAPTION>
FOR THE YEAR 1999 1998 1997
------------ ---------- ---------- ----------
<S> <C> <C> <C>
Net income $ 1,189 $ 637 $ 336
Diluted earnings per share 0.42 0.24 0.18
Book value per share 5.76 5.40 5.29
</TABLE>
FINANCIAL HIGHLIGHTS
REFER TO CENTURY BANCSHARES 1999 ANNUAL REPORT ON FORM 10-K FOR A COMPLETE SET
OF CONSOLIDATED FINANCIAL STATEMENTS.
[Graphic of Bar Charts depicting Average Assets, Average Deposits,
Average Loans, Average Equity]
<PAGE> 4
CENTURY BANCSHARES, INC.
SELECTED CONSOLIDATED FINANCIAL INFORMATION
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
INCOME STATEMENT DATA 1999 1998 1997 1996 1995
--------------------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Interest income $ 13,220 $ 11,355 $ 9,209 $ 7,690 $ 7,079
Interest expense 4,996 4,537 3,765 2,776 2,562
---------- ---------- ---------- ---------- ----------
Net interest income 8,224 6,818 5,444 4,914 4,517
Provision for credit losses 640 620 336 160 26
---------- ---------- ---------- ---------- ----------
Net interest income after provision
for credit losses 7,584 6,198 5,108 4,754 4,491
Noninterest income 1,669 1,103 922 720 590
Noninterest expense 7,335 6,309 5,460 4,920 4,157
---------- ---------- ---------- ---------- ----------
Income before taxes 1,918 992 570 554 924
Income taxes 729 355 234 275 311
---------- ---------- ---------- ---------- ----------
Net income $ 1,189 $ 637 $ 336 $ 279 $ 613
COMMON SHARE DATA (1)
---------------------
Net income - basic $ 0.42 $ 0.24 $ 0.20 $ 0.20 $ 0.53
Net income - diluted 0.42 0.24 0.18 0.19 0.50
Book value (2) 5.76 5.40 5.29 4.85 4.68
Common shares outstanding - end of period 2,721,902 2,574,219 2,209,229 1,146,028 1,046,047
Weighted average common shares 2,804,994 2,632,787 1,710,316 1,371,940 1,153,943
Diluted weighted average common shares 2,832,683 2,688,583 1,852,683 1,454,483 1,213,698
BALANCE SHEET DATA
------------------
Total assets $ 204,809 $ 151,350 $ 152,640 $ 107,186 $ 101,730
Investments (3) 53,144 23,385 46,632 25,631 21,690
Total loans, net 138,076 115,231 94,171 70,676 69,204
Allowance for credit losses 1,519 1,128 887 826 740
Total deposits 153,900 126,211 129,605 90,985 90,539
Long term debt 11,900 5,301 6,511 6,850 --
Total stockholders' equity 15,668 15,317 13,536 6,750 6,365
PERFORMANCE DATA
----------------
Return on average total assets 0.70% 0.44% 0.29% 0.27% 0.68%
Return on average total equity 7.65 4.49 3.83 4.20 11.49
Net interest margin 5.15 5.07 5.17 5.74 5.42
Loans to deposit 89.7 91.3 72.7 77.7 76.4
ASSET QUALITY RATIOS
--------------------
Nonperforming assets to total assets 0.25% 1.02% 0.49% 0.30% 0.49%
Nonperforming loans to total loans 0.37 1.34 0.74 0.46 0.45
Net loan charge-offs to average loans 0.21 0.38 0.36 0.10 0.04
Allowance for credit losses to total loans 1.10 0.98 0.94 1.17 1.07
Allowance to nonperforming loans 295 73 127 257 240
CAPITAL RATIOS
--------------
Tier 1 risk based capital 9.74% 11.60% 12.27% 8.99% 9.22%
Total risk based capital 10.79 12.56 13.19 10.13 10.34
Tier 1 leverage 7.64 9.46 8.83 6.35 6.80
</TABLE>
Notes:
(1) Per share data has been adjusted to reflect five percent Common Stock
dividends in 1999, 1998, 1997 and 1995, seven percent Common Stock dividends in
1996, and retroactively restated to reflect the five percent Common Stock
dividends declared on February 18, 2000.
(2) Book value per common share is based on stockholders' equity divided by the
number of common shares outstanding, adjusted for stock dividends.
(3) Investments include federal funds sold and interest-bearing deposits in
other financial institutions.
REFER TO CENTURY BANCSHARES 1999 ANNUAL REPORT ON FORM 10-K FOR A COMPLETE SET
OF CONSOLIDATED FINANCIAL STATEMENTS.
<PAGE> 5
CENTURY BANCSHARES, INC.
FINANCIAL REVIEW
This summary annual report presents the financial condition and
operating results of Century Bancshares, Inc. (the Company) and its wholly owned
subsidiary bank, Century National Bank (the Bank). This simplified format is
provided for your information. Shareholders desiring more detailed information
may request a copy of the Company's 1999 Annual Report on Form 10-K. You may
also visit our web site at: http:www.centurybank.com for other information about
your Company.
OVERVIEW
Century Bancshares, Inc. was incorporated in Delaware in 1985. As a
registered bank holding company, the Company conducts most of its business
through its subsidiary, Century National Bank, a full service bank which opened
for business in 1982. The Bank provides a broad line of financial products and
services to small and middle market businesses and individuals in the greater
Washington, DC metropolitan area. As of December 31, 1999, the Company had total
assets of $204.8 million, total loans of $138.1 million, total deposits of
$153.9 million, and total stockholders' equity of $15.7 million. With the
addition of a new Prince William County branch office in Dumfries, Virginia, in
October 1999, the Company operates six banking offices, as follows:
INTERNATIONAL SQUARE BRANCH - MAIN OFFICE
1875 Eye Street, NW, Washington, DC 20006
PENNSYLVANIA AVENUE BRANCH -
1275 Pennsylvania Avenue, NW, Washington, DC 20004
MCLEAN BRANCH -
6832 Old Dominion Drive, McLean, Virginia 22101
TYSONS CORNER BRANCH -
8251 Greensboro Drive, McLean, Virginia 22102
BETHESDA BRANCH -
7625 Wisconsin Avenue, Bethesda, Maryland 20814
DUMFRIES BRANCH -
18116 Triangle Shopping Plaza, Dumfries, Virginia 22026
The Company's principal executive offices are located at 1275
Pennsylvania Avenue, NW, Washington, DC 20004, and its phone number at that
address is (202) 496-4100.
At December 31, 1999, there were approximately 1,000 shareholders of
the Company's common stock.
COMPANY OPERATIONS
[Graphic of twenty dollar bills]
GENERAL
The Company holds deposits for individuals, businesses, and other
organizations, and provides certain services related thereto for the convenience
of its depositors. In most cases, the Company pays interest on funds which it
holds on deposit for customers, and it also charges fees for certain services
that it provides. The interest expense paid on deposits, and the noninterest
income earned from service charges, are primarily related to the volume of
deposits handled by the Company. The Company's primary source of revenue is the
interest income and fees which it earns by lending and investing the funds which
are held on deposit. Because loans generally earn higher rates of interest than
investments, the Company seeks to employ as much of its deposit funds as
possible in the form of loans to individuals, businesses and other
organizations. In the interest of liquidity, however, a portion of the Company's
deposits are maintained in cash, government securities, deposits with other
financial institutions, and overnight loans of excess reserves (known as
"federal funds sold") to large correspondent banks. The revenue which the
Company earns is essentially a function of the amount of the Company's loans and
deposits, as well as the profit margin and fee income which can be generated
thereon.
<PAGE> 6
GROWTH OF OPERATIONS
The Company's current strategic plan is directed toward the enhancement
of its franchise value and operating profitability through a significant
increase in its asset size, the development of new commercial accounts and
loans, and expansion in the nearby Maryland and Virginia markets. The Company
plans to acquire or establish banking offices in high-density commercial
districts, and may in some cases open a temporary loan production office prior
to establishing a full service branch. The Company acquired its first branch
office in downtown Washington, DC in 1994 and in 1996 established an LPO in
Tysons Corner, Virginia, which was replaced by a full service branch in April
1997. In October 1997, the Company purchased a full-service branch in McLean,
Virginia, from Eastern American Bank, FSB. In June 1997, the Company established
an LPO in Bethesda, Maryland, which was replaced by a full service branch in
January 1998. In October 1999, the Company acquired a full-service branch in
Dumfries, Virginia, from One Valley Bancorp.
[Graphic of pencil and receipts]
EMPLOYEES AND PREMISES
At December 31, 1999, the Company employed 60 employees. The Company's
principal executive offices and all of its banking offices are leased under
agreements expiring at various dates, including renewal options, through 2012.
LEGAL MATTERS
The nature of the business of the Company causes it (and the Bank) to
be involved in routine legal proceedings from time to time. Management of the
Company believes that there are no pending or threatened legal proceedings that
upon resolution would have a material adverse impact on the Company.
[Graphic of people's legs and briefcase]
STOCKHOLDER MATTERS
The Company's Common Stock currently trades on the NASDAQ SmallCap
Market under the symbol "CTRY." Continued inclusion of the Common Stock for
quotation on the NASDAQ SmallCap Market requires that the Company satisfy a
minimum tangible net worth or net income standard, and that the Common Stock
satisfy minimum standards as to public float, bid price and market makers. There
can be no assurance, however, that the Company will continue to satisfy these
requirements.
The Company has not paid cash dividends on its shares of Common Stock
to date. The declaration and payment of future cash dividends will depend on,
among other things, the Company's earnings, the general economic and regulatory
climate, the Company's liquidity and capital requirements, and other factors
deemed relevant by the Company's Board of Directors. The Company's ability to
pay dividends is limited in part, by the ability of the Bank to pay dividends to
the Company. The Company has declared stock dividends from time to time in the
past. The most recent stock dividend declared by the Company was a 5% stock
dividend declared on February 18, 2000, payable on April 17, 2000, to holders of
record of shares of Common Stock as of March 15, 2000. The declaration of future
stock dividends is at the discretion of the Board of Directors.
RESULTS OF OPERATIONS
[Graphic of dollar bills]
NET INCOME
Net income was $1,188,622 ($0.42 per diluted common share) for 1999,
compared with net income of $636,884 ($0.24 per diluted common share) for 1998,
an increase of $551,738 or 87%. The increase in net income for 1999 compared
with 1998 resulted principally from a $1,406,044 increase in net interest income
and a $565,864 increase in noninterest income. These increases were the result
of an 18.6% increase in average earning assets and the addition of four new
branch offices during the past three years. Partially offsetting these increases
during 1999 were a corresponding increase in average interest-bearing
liabilities of 18.1%, as well as increases in several noninterest expense
categories resulting from the establishment of the four new branch office
locations, and a $20,000 increase in the provision for credit losses resulting
from increased reserves in relation to loan portfolio growth during the year.
<PAGE> 7
NET INTEREST INCOME
Net interest income was $8,223,952 for 1999, an increase of $1,406,044
or 20.6% compared with net interest income of $6,817,908 for 1998. The Company's
average total interest-earning assets increased to $159.6 million for 1999 from
$134.6 million for 1998, representing an 18.6% increase between the years. The
net interest margin of 5.15% for 1999 increased 8 basis points from 5.07% for
1998, the result of a 30 basis point decline in the average cost of interest
bearing liabilities, which was partially offset by a 16 basis point decline in
the average yield on interest earning assets.
PROVISION FOR CREDIT LOSSES
Provisions for credit losses are charged to income to bring the total
allowance for credit losses to a level deemed appropriate by management based on
such factors as historical experience, the volume and type of lending conducted
by the Company, the amount of nonperforming assets, regulatory policies,
generally accepted accounting principles, general economic conditions, and other
factors related to the collectibility of loans in the Company's portfolio.
The provision for credit losses was $640,000 in 1999, compared with
$620,000 for 1998, increasing $20,000, or 3.2%. The increase was largely the
result of a 19.8% increase in loans, net of unearned income, to $138.1 million
at December 31, 1999 from $115.2 million at year-end 1998. Net charge-offs
decreased to $249,000 in 1999, from $379,000 in 1998, the result of a $134,000
decrease in charge-offs in the commercial loan portfolio accompanied by reduced
charge-offs and recoveries in other loan categories. Management believes the
allowance is adequate to absorb losses inherent in the loan portfolio.
[Graphic of dollar bills and coins]
NONINTEREST INCOME
Noninterest income for 1999 was $1,669,137, an increase of $565,864 or
51.3% compared with noninterest income of $1,103,273 in 1998. This increase
resulted largely from growth of fees earned in the credit card program,
increases in service charges on deposit accounts, commissions from a new
mortgage loan origination program, as well as other commissions and other fee
income.
NONINTEREST EXPENSE
Noninterest expense was $7,335,254 in 1999, compared with $6,309,406 in
1998, representing an increase of $1,025,848 or 16.3%. The increase in 1999 was
due largely to increases in salaries and employee benefits of $782,937 and data
processing services of $422,265. These increases in salaries and employee
benefits reflect the opening of the Dumfries branch office in October 1999, a
full year of compensation expense for the employees at the branch opened in
1998, the addition of personnel to support growth in the loan portfolio, and a
reduction in the amount of loan origination costs deferred in the current year.
The increases in the cost of data processing services were primarily
attributable to growth in the credit card program, additional transaction
volume, and efforts to prepare for and comply with Year 2000 readiness issues.
INCOME TAX EXPENSE
The Company's income tax expense includes federal, state and local
income taxes. The provision for income taxes was $729,213 in 1999 compared to
$354,891 in 1998 and $233,602 in 1997. This reflects effective tax rates of 38.0
percent in 1999, 35.8 percent in 1998, and 41.0 percent in 1997. The effective
tax rate was reduced in 1999 and 1998 from previous years due to the increase in
interest income derived from US agency securities and short term investments
which are not fully taxable for state and local purposes, and a greater portion
of earnings derived from Virginia and Maryland where the local income tax rates
are lower than in Washington, DC.
[Graphic of calculator, coffee, paper]
LOANS
The Company presently is, and in the future expects to remain, a middle
market banking organization serving professionals and businesses with interests
in and around the Washington, DC metropolitan area. As of December 31, 1999 and
1998, approximately $90.0 million (65%) and $73.8 million (64%) of the Company's
total loan portfolio, respectively, consisted of loans secured by real estate,
of which one-to-four-family residential mortgage loans and home
<PAGE> 8
equity lines of credit represented $34.7 million (25%) and $34.9 million (30%),
respectively, of the Company's total loan portfolio.
Loan concentrations are defined as aggregate credits extended to a
number of borrowers engaged in similar activities or resident in the same
geographic region, which would cause them to be similarly affected by economic
or other conditions. The Company, on a routine basis, evaluates these
concentrations for purposes of policing its concentrations and making necessary
adjustments in its lending practices to reflect current economic conditions,
loan to deposit ratios, and industry trends. As a result of the Company's
existing branch locations, the Company has significant concentrations of
customers and assets in the Washington, DC metropolitan area.
ASSET QUALITY
NONPERFORMING ASSETS
Generally, interest on loans is accrued and credited to income based
upon the principal balance outstanding. It is the Company's policy to
discontinue the accrual of interest income and classify a loan as non-accrual
when principal or interest is past due 90 days or more and the loan is not well
secured and in the process of collection, or when, in the opinion of management,
principal or interest is not likely to be paid in accordance with the terms of
the obligation. The Company will generally charge-off loans after 120 days of
delinquency unless adequately collateralized and in the process of collection. A
loan is considered in the process of collection if, based on a probable specific
event, management believes that the loan will be repaid or brought current
within a reasonable period of time. Loans will not be returned to accrual status
until the loan has been brought current and future payments of principal and
interest appear certain. Interest accrued and unpaid at the time a loan is
placed on non-accrual status is charged against interest income. Subsequent
payments received are applied to the outstanding principal balance until the
status of the loan has changed.
The following table sets forth certain information with respect to the
Company's non-accrual loans, OREO, and accruing loans which are contractually
past due 90 days or more as to principal or interest, for the periods indicated:
<TABLE>
<CAPTION>
NONPERFORMING ASSETS
(DOLLARS IN THOUSANDS) Year Ended December 31,
------------------------------------------
1999 1998 1997
---------- ---------- ----------
<S> <C> <C> <C>
Non-accrual loans $ 515 $ 1,163 $ 624
Accruing past due 90 days or more -- 383 76
---------- ---------- ----------
Total nonperforming loans 515 1,546 700
Other real estate owned -- -- 52
Total nonperforming loans $ 515 $ 1,546 $ 752
---------- ---------- ----------
Nonperforming loans to total loans 0.37% 1.34% 0.74%
Nonperforming to total assets 0.25% 1.02% 0.49%
</TABLE>
ALLOWANCE FOR CREDIT LOSSES
The Company maintains an allowance for credit losses based upon, among
other things, such factors as historical experience, the volume and type of
lending conducted by the Company, the amount of nonperforming assets, regulatory
policies, generally accepted accounting principles, general economic conditions,
and other factors related to the collectibility of loans in the Company's
portfolio. Although management believes it uses the best information available
to make determinations with respect to the allowance for credit losses, future
adjustments may be necessary if such factors and conditions differ from the
assumptions used in making the initial determinations. Based upon criteria
consistently applied during the periods, the Company's allowance for credit
losses was $1,519,000 (1.10% of total loans), $1,128,000 (0.98% of total loans)
and $887,000 (0.94% of total loans) as of
<PAGE> 9
December 31, 1999, 1998 and 1997, respectively. The allowance for credit losses
as a percentage of nonperforming loans was 295%, 73% and 127% as of December 31,
1999, 1998 and 1997, respectively.
The following table sets forth an analysis of the Company's allowance
for credit losses for the periods indicated:
<TABLE>
<CAPTION>
ALLOWANCE FOR CREDIT LOSSES
(DOLLARS IN THOUSANDS) Year Ended December 31,
1999 1998 1997
------ ------ ------
<S> <C> <C> <C>
Beginning balance of allowance $1,128 $ 887 $ 826
Loans charged-off 270 487 452
Recoveries of previous charge-offs 21 108 177
------ ------ ------
Net loans charged-off 249 379 275
Provision for credit losses 640 620 336
------ ------ ------
Balance at end of period $1,519 $1,128 $ 887
------ ------ ------
Net charge-offs to average loans 0.19% 0.38% 0.36%
Allowance as % of total loans 1.10 0.98 0.94
Nonperforming loans as % of total loan 0.37 1.34 0.74
Allowance as % of nonperforming loan 295 73 127
</TABLE>
INVESTMENT ACTIVITIES
The Company's investment portfolio of $22.5 million as of December 31,
1999 consisted mostly of U.S. government agency obligations. This represented an
increase of $13.2 million compared to the investment securities of $9.3 million
at December 31, 1998.
Investment securities available-for-sale are stated at fair value.
These securities may be sold, retained until maturity, or pledged as collateral
for liquidity and borrowing in response to changing interest rates, changes in
prepayment risk, and other factors as a part of the Company's overall asset
liability management strategy.
Investment securities held-to-maturity are stated at cost, adjusted for
amortization of premium and accretion of discount. The Company has the intent
and ability to hold these securities until maturity, and they are also available
to be pledged as collateral for liquidity and borrowing needs if and when such
needs may occur.
DEPOSIT ACTIVITIES
The Company's total deposits at year-end 1999 were $153.9 million, an
increase of $27.7 million, or 22%, compared to the year-end 1998 balance. Total
average deposits were $138.4 million for the year ended December 31, 1999, an
increase of $16.8 million, or 14% compared with average deposits of $121.5
million for the year ended December 31, 1998. The Company views deposit growth
as a significant challenge in its effort to increase its asset size. Thus, the
Company is focusing on its branching program with increased emphasis on
commercial accounts, and the offering of more competitive interest rates and
products to stimulate deposit growth.
BORROWINGS
Borrowings consist of advances from the Federal Home Loan Bank of
Atlanta ("FHLBA"), deposits received in the Company's U.S. Treasury Tax and Loan
Account, and securities sold under repurchase agreements. Such borrowings were
$33.3 million and $8.5 million at December 31, 1999 and 1998 respectively.
LIQUIDITY
The Company's Asset/Liability Management Policy is intended to maintain
adequate liquidity for the Company and thereby enhance its ability to raise
funds to support asset growth, meet deposit withdrawals and lending needs,
maintain reserve requirements and otherwise sustain operations. The Company
accomplishes this
<PAGE> 10
primarily through management of the maturities of its interest-earning assets
and interest-bearing liabilities. The Company believes that its present
liquidity position is adequate to meet its current and future needs.
Asset liquidity is provided by cash and assets which are readily
marketable, or which can be pledged, or which will mature in the near future.
The asset liquidity of the Bank is maintained in the form of vault cash, demand
deposits with commercial banks, federal funds sold, interest bearing deposits
with other financial institutions, short- term investment securities, other
investment securities available-for-sale, and short-term loans. The Company has
defined "cash and cash equivalents" as those amounts included in cash and due
from banks and federal funds sold. As of December 31, 1999, the Bank had cash
and cash equivalents of $20.2 million, an increase of $7.0 million, when
compared with the $13.2 million at December 31, 1998.
Liability liquidity is provided by access to core funding sources,
principally various customers' deposit accounts in the Company's market area. As
a member of the Federal Home Loan Bank of Atlanta, the Company is authorized to
borrow funds secured by a blanket pledge of its portfolio of 1-to-4-family
residential mortgage loans and other collateral. The Company also has approved
lines of credit from larger correspondent banks to borrow excess reserves on an
overnight basis (known as "federal funds purchased") in the amount of $5.7
million. As of December 31, 1999, the Company had no federal funds purchased,
repurchase agreements amounting to $6.4 million, and was utilizing $26.3 of its
available FHLBA borrowings in the form of advances with an average cost of
5.27%. The Company utilizes fixed-rate term credit advances from the FHLBA to
fund fixed-rate real estate loans of comparable terms and maturities.
CAPITAL RESOURCES
Total stockholders' equity as of December 31, 1999 was $15.7 million,
an increase of $0.4 million in 1999 and $1.8 million in 1998, compared to
stockholders' equity of $15.3 million and $13.5 million as of December 31, 1998
and 1997, respectively. In 1999, additional capital was raised from the exercise
of stock options amounting to $60,760, and 136,500 treasury shares were acquired
at a cost of $789,863. In 1998, additional capital was raised from the exercise
of warrants and stock options amounting to $1.1 million. Net income was
$1,188,622 in 1999 and $636,884 in 1998.
The OCC has established certain minimum risk-based capital standards
that apply to national banks, and the Company is subject to certain capital
requirements imposed on bank holding companies by the Federal Reserve Board. At
December 31, 1999, the Bank exceeded all applicable regulatory capital
requirements for classification as a "well capitalized" bank, and the Company
satisfied all applicable regulatory requirements imposed on it by the Federal
Reserve Board.
YEAR 2000 COMPLIANCE
General. The "Year 2000 problem" arose because many existing computer
programs use only the last two digits to refer to a year. Therefore, these
computer programs do not properly recognize a year that begins with "20" instead
of the familiar "19." If not corrected, many computer applications could fail or
create erroneous results. The failure of the Company, its vendors or its
borrowers to address these issues could have a material effect on the Company's
business, results of operations, or financial condition. In December 1997, the
Company adopted a plan for the assessment of its exposure to the Year 2000
problem, completion of any required remediation, and testing of systems
compliance. The costs to address the Company's Year 2000 issues have not had a
significant impact on the financial position or results of operations of the
Company.
Transition Into the Year 2000. The Company suffered no failures in any
system or product upon the date change from December 31, 1999 to January 1,
2000. Management is not aware of any vendor used by the Company for data
processing or related services which experienced a material failure of its
product or service due to a Year 2000 related problem. In addition, management
is not aware of any customer which suffered losses related to a Year 2000
problem which would adversely affect that customer's financial condition or its
ability to repay any outstanding loan it has from the Bank.
Ongoing Plans. Although many of the critical dates have passed, some
experts predict that Year 2000 related failures could occur throughout the year.
Accordingly, the Company's project team will continue to monitor
<PAGE> 11
the Company's IT and non-IT systems and attempt to identify any potential
problems during the course of the year. In addition, the Company will continue
to monitor the Year 2000 compliance of the third parties with which the Company
transacts business. The Company continues to maintain its contingency plans with
respect to Year 2000 related issues and believes that if its own systems should
fail, it could temporarily convert to manual systems for mission critical
business functions.
[Graphic of adding machine]
INDEPENDENT AUDITORS' REPORT
THE BOARD OF DIRECTORS
CENTURY BANCSHARES, INC.
We have audited, in accordance with generally accepted auditing
standards, the consolidated balance sheets of Century Bancshares, Inc. and
subsidiary as of December 31, 1999 and 1998, and the related consolidated
statements of income, shareholders' equity and cash flows for each of the years
in the three-year period ended December 31, 1999 (not presented herein); and in
our report dated January 31, 2000, we expressed an unqualified opinion on those
consolidated financial statements.
In our opinion, the information set forth in the accompanying condensed
consolidated balance sheets as of December 31, 1999 and 1998 and the related
condensed consolidated statements of income for each of the years in the
three-year period ended December 31, 1999 (included on pages 12 and 13 herein)
is fairly stated, in all material respects, in relation to the consolidated
financial statements from which it has been derived.
KPMG LLP
McLean, VA
February 18, 2000
<PAGE> 12
CENTURY BANCSHARES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, 1999 AND 1998 1999 1998
ASSETS:
------------- -------------
<S> <C> <C>
Cash and due from banks $ 9,222,000 $ 8,950,733
Federal funds sold 11,015,000 4,285,000
Interest bearing deposits in other banks 19,667,075 9,847,315
Investment securities:
Available for sale, at fair value 16,495,049 6,811,356
Held to maturity, at amortized cost - fair value of
$5,837,867 (1999) and $2,449,680 (1998) 5,966,403 2,441,537
Loans 138,076,486 115,231,298
Less: allowance for credit losses (1,518,911) (1,128,147)
------------- -------------
Loans, net 136,557,575 114,103,151
Leasehold improvements, furniture and equipment, net 1,372,267 1,372,370
Accrued interest receivable 1,034,270 742,721
Loans held for sale 439,600 --
Deposit premium 1,675,813 1,546,232
Net deferred taxes 767,893 683,113
Other assets 595,948 566,373
------------- -------------
Total Assets $ 204,808,898 $ 151,349,901
------------- -------------
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
Deposits:
Noninterest bearing $ 36,571,508 $ 31,676,194
Interest bearing 117,328,222 94,535,082
------------- -------------
Total deposits 153,899,730 126,211,276
Federal funds purchased and securities sold under
agreement to repurchase 6,358,654 1,359,330
Other borrowings 26,900,223 7,101,911
Other liabilities 1,982,184 1,360,710
------------- -------------
Total Liabilities 189,140,791 136,033,227
------------- -------------
STOCKHOLDERS' EQUITY:
Common stock, $1 par value; 5,000,000 shares authorized;
2,858,402 and 2,574,219 shares issued at
December 31, 1999 and 1998, respectively 2,858,402 2,574,219
Additional paid in capital 13,700,452 12,343,631
Retained earnings -- 392,384
Treasury stock, at cost, 136,500 shares (789,863) --
Other comprehensive income (loss), net of tax effect (100,884) 6,440
------------- -------------
Total Stockholders' Equity 15,668,107 15,316,674
------------- -------------
Commitments and contingencies
Total Liabilities and Stockholders' Equity $ 204,808,898 $ 151,349,901
------------- -------------
</TABLE>
<PAGE> 13
CENTURY BANCSHARES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997 1999 1998 1997
INTEREST INCOME:
----------- ----------- -----------
<S> <C> <C> <C>
Interest and fees on loans $11,542,779 $ 9,393,33 $ 7,554,812
Interest on federal funds sold 264,204 350,846 258,311
Interest on deposits in other banks 646,800 708,431 749,568
Interest on securities available for sale 574,836 718,829 529,963
Interest on securities held to maturity 191,570 184,035 116,220
----------- ----------- -----------
Total interest income 13,220,189 11,355,480 9,208,874
INTEREST EXPENSE:
Interest on deposits:
Savings accounts 884,150 818,417 210,928
NOW accounts 221,816 298,423 282,169
Money market accounts 640,427 771,400 773,799
Certificates under $100,000 1,385,414 1,254,993 1,216,180
Certificates $100,000 and over 1,021,854 894,004 764,576
----------- ----------- -----------
Total interest on deposits 4,153,661 4,037,237 3,247,652
----------- ----------- -----------
Interest on other borrowings 842,576 500,335 517,644
----------- ----------- -----------
Total interest expense 4,996,237 4,537,572 3,765,296
----------- ----------- -----------
Net interest income 8,223,952 6,817,908 5,443,578
Provision for credit losses 640,000 620,000 336,200
----------- ----------- -----------
Net interest income after provision for credit losses 7,583,952 6,197,908 5,107,378
NONINTEREST INCOME:
Service charges on deposit accounts 660,942 447,105 409,747
Other operating income 1,008,195 625,745 512,637
Gain on sale of securities -- 14,570 --
Gain on sale of other real estate owned -- 15,853 --
----------- ----------- -----------
Total noninterest income 1,669,137 1,103,273 922,384
NONINTEREST EXPENSE:
Salaries and employee benefits 2,858,900 2,075,963 2,201,299
Occupancy and equipment expense 842,263 825,839 649,846
Professional fees 696,113 925,664 691,501
Depreciation and amortization 445,381 471,591 502,556
Amortization of deposit premiums 198,052 189,538 68,477
Data processing 1,155,809 733,544 533,794
Communications 355,242 278,611 200,456
Federal deposit insurance premiums 20,124 17,678 13,996
Other operating expenses 763,370 790,978 598,077
----------- ----------- -----------
Total noninterest expense 7,335,254 6,309,506 5,460,002
----------- ----------- -----------
Income before income tax expense 1,917,835 991,775 569,760
Income tax expense 729,213 354,891 233,602
----------- ----------- -----------
NET INCOME 1,188,622 636,884 336,158
----------- ----------- -----------
Basic income per common share $ .42 $ 0.24 $ 0.20
Diluted income per common share $ .42 $ .24 $ 0.18
Weighted average common shares outstanding 2,804,994 2,632,787 1,710,316
</TABLE>
<PAGE> 14
CENTURY BANCSHARES, INC.
DIRECTORS OFFICERS
<TABLE>
<S> <C> <C>
Joseph S. Bracewell(B)(C) Joseph S. Bracewell(1) Martha J. MacLeod
Chairman of the Board Chairman, President & CEO Vice President
Century National Bank
Ali Mahmood
Assistant Vice President
George Contis, M.D., M.P.H.(B)(C) Michael M. Amin Karmen Mangasarian
President, Medical Service Assistant Vice President Assistant Vice President
Corporation International
John R. Cope(B)(C) Shaza L. Anderson Mary Ann Michniak
Partner, Law Firm of Bracewell & Patterson, Senior Vice President Internal Auditor
L.L.P.
Bernard J. Cravath(B) Scot R. Browning Johanne M. Mullarkey
President, Reality Properties, Inc. Senior Vice President Assistant Vice President
Marvin Fabrikant(C) David S. Cohen Catherine Upshur Purnell
Senior Loan Executive, Vice President & Controller Assistant Vice President
Century National Bank
Neal R. Gross(B)(C) George W. Connors M. Evelyn Reed
Chairman and President, Senior Vice President Assistant Vice President
Neal R. Gross and Company, Inc.
Thomas B. Hoppin(C) Kathleen M. Curtis, CRCM F. Kathryn Roberts
Executive Vice President, Senior Vice President Vice President &
SPRY Foundation Corporate Secretary
Roger C. Johnson(C) Loren C. Geisler Rita M. Schumer
Founding Partner, Law Firm of Senior Vice President Assistant Vice President
Koonz, McKenney, Johnson,
DePaolis & Lightfoot
Michael E. Kossak, D.D.S.(C) Marvin Fabrikant Deborah B. Thompson
Private Practice of Periodontics Senior Loan Executive Assistant Vice President
William S. McKee(B) Robert W. Hutchins William J. Thompson
Partner, Law Firm of Executive Vice President Vice President
McKee, Nelson, Ernst & Young
William C. Oldaker(B)(C) Charles V. Joyce III(1) Linda W. Townsend
Founding Parner, Law Firm of Senior Vice President & CFO Senior Vice President
Oldaker & Harris, L.L.P.
Susan Peterson(C) Padma Kapadia Donald D. Wipf
President, Susan Peterson Assistant Controller Vice President
Productions, Inc.
Ellen B. Safir(C) Patrick D. Krop
Managing Director of Investments, Assistant Vice President
The Howard Hughes Medical Institute
James M. Lull
Senior Vice President
</TABLE>
(B) Director of Century Bancshares, Inc.
(C) Director of Century National Bank
(1) Executive officers of Century Bancshares, Inc. and Century National Bank
<PAGE> 15
ADVISORY BOARD
<TABLE>
<S> <C>
Hedy M. Ablard James P. Muldoon
METCOR Ltd.
Lewis D. Andrews, Jr. Sean Murphy, Esq.
President Muldoon, Murphy & Faucette
Glass Packaging Institute
Mark Burdett Ann C. Page
Vice President
Nova Commercial Realty
Vann Canada, Jr., Esq. Daniel M. Press, Esq.
Miles & Stockbridge Chung & Press, PC
Philip Chung, Esq. Thomas J. Raffa
Chung & Press, PC President
Raffa & Associates, PC
Lawrence J. Gaffey Benjamin Schlesinger, Ph.D.
Murphy, Dean & Gaffey Benjamin Schlesinger &
Associates, Inc.
Robert W. Haas, Esq. Bernard J. Wunder, Esq.
Haas & Anderson, PC Wunder, Knight, Thelen,
Forscey & Devierno, PLLC
Dr. Sharon G. Hadary Thomas Zaucha
Executive Director President & CEO
National Foundation for National Grocers Association
Women Business Owners
Barbara G. Harris
Envision Corporation
Thomas P. Langan, CPA, CFP
Ross, Langan & McKendree, L.L.P.
Debora E. May
May & Barnhard, PC
Larry D. Meyers
President
Meyers & Associates
</TABLE>
<PAGE> 16
CORPORATE INFORMATION
<TABLE>
<S> <C>
Corporate Name and Address: Century Bancshares, Inc.
1275 Pennsylvania Avenue, NW
Washington, DC 20004
202-496-4100
Place and Date of Incorporation: Delaware, 1985
Security Description Common Stock, $1.00 par value
CUSIP No.: 156436
Ticker Symbol: CTRY
Where Traded: NASDAQ SmallCap Market
Market Makers: Ferris, Baker, Watts & Co. 410-685-2600
Koonce Securities, Inc. 301-897-9700
M. H. Meyerson & Co., Inc. 800-333-3113
Scott & Stringfellow, Inc. 703-836-9755
Trident Securities, Inc. 919-781-8900
Transfer Agent ChaseMellon Shareholder Services
1-800-851-9677
Auditors: KPMG LLP
Legal Counsel: Bracewell & Patterson, L.L.P.
Fiscal Year: December 31
Annual Meeting: June 2, 2000
11:00 AM
JW Marriott Hotel, Washington, DC
Dividend History: 1993-1995 5% per year (Stock)
1996 7% Stock
1997-2000 5% per year (Stock)
Form 10-K: Copies of the Company's 1999 Annual
Report on Form 10-K are available upon
request.
</TABLE>
<PAGE> 17
BRANCH OFFICES
WASHINGTON, DC
International Square Branch
1875 Eye Street, NW
Washington, DC 20006
Pennsylvania Avenue Branch
1275 Pennsylvania Avenue, NW
Washington, DC 20004
NORTHERN VIRGINIA
Tysons Corner Branch
8251 Greensboro Drive [Graphic of Washington D.C. metropolitan
McLean, VA 22102 area indicating branch locations]
McLean Branch
6832 Old Dominion Drive
McLean, VA 22101
Dumfries Branch
18116 Triangle Shopping Plaza
Dumfries, VA 22026
MARYLAND
Bethesda Branch
7625 Wisconsin Avenue
Bethesda, MD 20814
Rockville Loan Production Office
1680 East Gude Drive, Suite 201
Rockville, MD 20851
BRANCH HOURS TELEPHONE & CONTACT
Monday - Friday 9:00 a.m. to 5:00 p.m. Main Number 202-496-4000
(Except for the McLean and Dumfries Fax 202-496-4004
Branches.) Toll Free 800-262-9816
McLean Branch Hours TeleBanc 800-364-0468
Monday - Thursday 9:00 a.m. to 4:30 p.m. E-Mail [email protected]
Friday 9:00 a.m. to 6:00 p.m. Web www.centurybank.com
Saturday 9:00 a.m. to Noon
Dumfries Branch Hours
Lobby Hours
Monday - Thursday 9:00 a.m. to 5:00 p.m.
Friday 9:00 a.m. to 6:00 p.m.
Drive Thru Hours
Monday - Friday 8:30 a.m. to 6:00 p.m.
Saturday 8:30 a.m. to Noon
<PAGE> 18
CENTURY BANCSHARES, INC.
2000 SECOND QUARTER REPORT
CENTURY BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
JUNE 30, 2000 AND 1999 (UNAUDITED)
<TABLE>
<CAPTION>
JUNE 30,
2000 1999
-------------- --------------
<S> <C> <C>
ASSETS
Cash and due from bank $ 8,104,150 $ 5,058,255
Federal funds sold 10,205,537 10,000,000
Interest bearing deposits in other banks 5,250,650 18,379,479
Investment securities available-for-sale, at fair value 24,919,726 9,104,036
Investment securities held-to-maturity, at cost, fair value
of $20,463,896 and $1,970,114 at June 30, 2000
and June 30, 1999, respectively 20,461,073 2,054,782
Loans, net of unearned income 153,947,331 130,197,206
Less allowance for credit losses (1,743,332) (1,408,621)
-------------- --------------
Loans, net 152,203,999 128,788,585
Leasehold improvements, furniture, and equipment, net 1,336,500 1,212,123
Accrued interest receivable 1,382,348 940,203
Loans held for sale 649,600 180,000
Deposit premium, net 1,560,608 1,451,463
Net deferred taxes 772,707 707,616
Other assets 873,497 561,737
-------------- --------------
Total Assets $ 227,720,395 $ 178,438,279
-------------- --------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits:
Noninterest-bearing $ 38,978,437 $ 32,327,729
Interest-bearing 128,775,932 113,471,967
-------------- --------------
Total deposits 167,754,369 145,799,696
Federal funds purchased and securities sold under
agreements to repurchase 11,277,842 2,888,086
</TABLE>
<PAGE> 19
<TABLE>
<CAPTION>
June 30,
2000 1999
-------------- --------------
<S> <C> <C>
Long term debt:
Federal Home Loan Bank advances 20,845,361 12,057,742
Preferred securities of subsidiary trust 8,800,000 --
Other borrowings 586,643 583,582
Other liabilities 1,933,022 1,320,734
-------------- --------------
Total Liabilities 211,197,237 162,649,840
-------------- --------------
STOCKHOLDERS' EQUITY:
Common stock, $1 par value; 5,000,000 shares
authorized; 2,875,188 and 2,721,116 shares issued
at June 30, 2000 and June 30, 1999, respectively 2,875,188 2,721,116
Treasury stock, at cost, 141,500 and 5,000 shares at
June 30, 2000 and June 30, 1999, respectively (819,863) (30,303)
Additional paid in capital 13,756,298 13,030,553
Retained earnings 821,361 121,026
Other comprehensive income (loss), net of tax effect (109,826) (53,953)
-------------- --------------
Total Stockholders' Equity 16,523,158 15,788,439
Commitments and contingencies
Total Liabilities and Stockholders' Equity $ 227,720,395 $ 178,438,279
-------------- --------------
</TABLE>
<PAGE> 20
DIRECTORS
Joseph S. Bracewell (B) (C)
Chairman of the Board
Century National Bank
George Contis, M.D., M.P.H. (B)(C)
President, Medical Service Corporation International
John R. Cope (B) (C)
Partner, Law Firm of Bracewell & Patterson, L.L.P.
Bernard J. Cravath (B)
President, Reality Properties, Inc.
Marvin Fabrikant (C)
Senior Loan Executive, Century National Bank
Neal R. Gross (B) (C)
Chairman and President, Neal R. Gross and Company, Inc.
Thomas B. Hoppin (C)
Executive Vice President, SPRY Foundation
Roger C. Johnson (C)
Founding Partner, Law Firm of Koonz, McKenney, Johnson,
DePaolis & Lightfoot
Michael E. Kossak, D.D.S. (C)
Private Practice of Periodontics
William S. McKee (B)
Partner, Law Firm of McKee, Nelson, Ernst & Young
William C. Oldaker (B) (C)
Founding Parner, Law Firm of Oldaker & Harris, L.L.P.
Susan Peterson (C)
President, Susan Peterson Productions, Inc.
Ellen B. Safir (C)
Managing Director of Investments, The Howard Hughes Medical Institute
(B) Director of Century Bancshares, Inc.
(C) Director of Century National Bank
<PAGE> 21
CENTURY NATIONAL BANK
BRANCH OFFICES
WASHINGTON, DC
International Square Branch
1875 Eye Street, NW
Washington, DC 20006
Pennsylvania Avenue Branch
1275 Pennsylvania Avenue, NW
Washington, DC 20004
NORTHERN VIRGINIA
Tysons Corner Branch
8251 Greensboro Drive
McLean, VA 22102
McLean Branch
6832 Old Dominion Drive
McLean, VA 22101
Dumfries Branch
18116 Triangle Shopping Plaza
Dumfries, VA 22026
MARYLAND
Bethesda Branch
7625 Wisconsin Avenue
Bethesda, MD 20814
Rockville Loan Production Office
1680 East Gude Drive, Suite 201
Rockville, MD 20851
TELEPHONE & CONTACT
Main Number 202-496-4000
Fax 202-496-4004
Toll Free 800-262-9816
TeleBanc 800-364-0468
E-Mail [email protected]
Web www.centurybank.com
CENTURY BANCSHARES, INC.
1275 Pennsylvania Avenue, NW
Washington, DC 20004
Tel: 202-496-4100
<PAGE> 22
CENTURY BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
SIX MONTHS ENDED JUNE 30, 2000 AND 1999
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
2000 1999
------------ ------------
<S> <C> <C>
INTEREST INCOME:
Interest and fees on loans $ 6,615,784 $ 5,510,757
Interest on federal funds sold 373,900 116,589
Interest on deposits in other banks 302,505 271,490
Interest on securities available-for-sale 531,407 225,433
Interest on securities held-to-maturity 326,748 71,662
------------ ------------
Total interest income 8,150,344 6,195,931
INTEREST EXPENSE:
Interest on deposits:
Savings accounts 388,883 427,127
NOW accounts 101,248 115,222
Money market accounts 448,410 328,021
Certificates under $100,000 694,367 663,330
Certificates $100,000 and over 729,720 461,896
------------ ------------
Total interest on deposits 2,362,628 1,995,596
------------ ------------
Interest on borrowings 931,872 315,339
------------ ------------
Total interest expense 3,294,500 2,310,935
------------ ------------
Noninterest income 4,855,844 3,884,996
Provision for credit losses 380,000 325,000
------------ ------------
Net interest income after provision for credit losses 4,475,844 3,559,996
Noninterest income:
Service charges on deposit accounts 442,656 328,624
Other operating income 604,708 507,383
------------ ------------
Total noninterest income 1,047,364 836,007
------------ ------------
</TABLE>
<PAGE> 23
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
2000 1999
------------ ------------
<S> <C> <C>
Noninterest expense:
Salaries and employee benefits 1,597,577 1,384,446
Occupancy and equipment expense 475,218 420,552
Professional fees 497,165 348,198
Depreciation and amortization 226,531 227,446
Amortization of deposit premiums 115,204 94,768
Data processing 692,861 545,486
Communications 193,874 169,928
Federal deposit insurance premiums 14,692 8,656
Other operating expenses 367,966 382,204
------------ ------------
Total noninterest expense 4,181,088 3,581,684
------------ ------------
Income before income tax expense 1,342,120 814,319
Income tax expense 519,798 309,877
------------ ------------
Net income $ 822,322 $ 504,442
------------ ------------
Basic income per common share $ 0.30 $ 0.18
Diluted income per common share $ 0.30 $ 0.18
Weighted average common shares outstanding 2,754,782 2,847,408
Diluted weighted average common shares outstanding 2,770,998 2,875,342
</TABLE>
