UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended: JUNE 30, 1998
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to .
STATE BANCORP, INC.
-------------------
(Exact name of registrant as specified in its charter)
NEW YORK 11-2846511
-------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
699 HILLSIDE AVENUE, NEW HYDE PARK, NEW YORK 11040
--------------------------------------------------
(Address of principal executive offices) (Zip Code)
(516) 437-1000
---------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
----- -----
As of July 31, 1998, there were 6,496,819 shares of Common Stock outstanding.
<PAGE>
STATE BANCORP, INC.
FORM 10-Q
INDEX
PART I. FINANCIAL INFORMATION Page
----
Item 1. Consolidated Financial Statements
Consolidated Balance Sheets - June 30, 1998 and December 31, 1997
(Unaudited) 1.
Consolidated Statements of Earnings for the Three and Six Months Ended June 30,
1998 and 1997 (Unaudited) 2.
Consolidated Statements of Cash Flows for the Six Months Ended June 30, 1998 and
1997 (Unaudited) 3.
Consolidated Statements of Stockholders' Equity for the Six Months Ended June
30, 1998 and 1997 (Unaudited) 4.
Notes to Unaudited Consolidated Financial Statements 5.
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings - None N/A
Item 2. Changes in Securities - None N/A
Item 3. Defaults upon Senior Securities - None N/A
Item 4. Submission of Matters to a Vote of Security Holders 16.
Item 5. Other Information - None N/A
Item 6. Exhibits and Reports on Form 8-K N/A
SIGNATURES 17.
<PAGE>
- -----------------------------------------------------
ITEM 1 - FINANCIAL STATEMENTS
- -----------------------------------------------------
- -----------------------------------------------------
STATE BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
JUNE 30, 1998 AND DECEMBER 31, 1997 (UNAUDITED)
- -----------------------------------------------------
- -----------------------------------------------------
ASSETS: 1998 1997
- ----------------------------------------------------- ----------- -------------
CASH AND DUE FROM BANKS $21,596,695 $26,932,820
FEDERAL FUNDS SOLD 4,000,000 0
SECURITIES PURCHASED UNDER AGREEMENTS TO RESELL 0 34,000,000
------------- -------------
CASH AND CASH EQUIVALENTS 25,596,695 60,932,820
SECURITIES:
HELD TO MATURITY (ESTIMATED FAIR VALUE -
$6,121,541 IN 1998 AND $10,644,882 IN 1997) 6,111,035 10,637,143
AVAILABLE FOR SALE - AT ESTIMATED FAIR VALUE 231,682,107 277,577,567
------------- -------------
TOTAL SECURITIES 237,793,142 288,214,710
LOANS - NET OF ALLOWANCE FOR POSSIBLE LOAN LOSSES
($5,374,103 IN 1998 AND $5,123,651 IN 1997) 376,979,877 372,509,616
BANK PREMISES AND EQUIPMENT - NET 3,444,093 3,501,031
OTHER ASSETS 12,337,083 12,930,760
- -------------------------------------------------- ------------- -------------
TOTAL ASSETS $656,150,890 $738,088,937
- -------------------------------------------------- ============= =============
- --------------------------------------------------
LIABILITIES:
- --------------------------------------------------
DEPOSITS:
DEMAND $114,302,094 $107,639,101
SAVINGS 185,611,745 179,958,856
TIME 259,541,178 323,629,963
------------- -------------
TOTAL DEPOSITS 559,455,017 611,227,920
FEDERAL FUNDS PURCHASED 0 6,000,000
SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE 500,000 14,818,000
OTHER SHORT-TERM BORROWINGS 35,000,000 47,000,000
ACCRUED EXPENSES, TAXES AND OTHER LIABILITIES 3,571,328 4,112,754
- -------------------------------------------------- ------------- -------------
TOTAL LIABILITIES 598,526,345 683,158,674
- -------------------------------------------------- ------------- -------------
- --------------------------------------------------
STOCKHOLDERS' EQUITY:
- --------------------------------------------------
PREFERRED STOCK, $.01 PAR VALUE, AUTHORIZED
250,000 SHARES 0 0
COMMON STOCK, $5.00 PAR VALUE, AUTHORIZED
20,000,000 SHARES; ISSUED 6,560,816 SHARES IN 1998
AND 6,503,832 SHARES IN 1997; OUTSTANDING 6,481,564
SHARES IN 1998 AND 6,414,537 SHARES IN 1997 32,804,080 30,970,630
SURPLUS 23,935,703 18,457,388
RETAINED EARNINGS 1,912,552 6,567,744
UNREALIZED NET LOSS ON SECURITIES AVAILABLE
FOR SALE (NET OF DEFERRED INCOME TAX BENEFIT
OF $189,335 IN 1998 AND $149,144 IN 1997) (273,022) (215,067)
UNEARNED COMPENSATION (754,768) (850,432)
- -------------------------------------------------- ------------- -------------
TOTAL STOCKHOLDERS' EQUITY 57,624,545 54,930,263
- -------------------------------------------------- ------------- -------------
- --------------------------------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $656,150,890 $738,088,937
- -------------------------------------------------- ============= =============
(1)
<PAGE>
- ------------------------------------------------------------
ITEM 1 - FINANCIAL STATEMENTS (CONTINUED)
- ------------------------------------------------------------
<TABLE>
- -----------------------------------------------------------------------------
STATE BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF EARNINGS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 1998 AND 1997 (UNAUDITED)
- -----------------------------------------------------------------------------
<CAPTION>
--------------------------------- ---------------------------------
THREE MONTHS SIX MONTHS
--------------------------------- ---------------------------------
--------------- --------------- --------------- ----------------
1998 1997 1998 1997
--------------- --------------- --------------- ----------------
- ------------------------------------------------
INTEREST INCOME:
- ------------------------------------------------
<S> <C> <C> <C> <C>
LOANS $ 9,063,145 $ 8,567,751 $ 17,963,395 $ 16,737,162
FEDERAL FUNDS SOLD AND SECURITIES
PURCHASED UNDER AGREEMENTS TO RESELL 837,389 686,340 1,990,759 1,136,123
SECURITIES HELD TO MATURITY AND
SECURITIES AVAILABLE FOR SALE:
STATES AND POLITICAL SUBDIVISIONS 513,900 561,518 1,090,269 1,068,651
MORTGAGE-BACKED SECURITIES 684,416 1,261,962 1,505,030 2,623,993
GOVERNMENT AGENCY SECURITIES 2,219,228 2,124,367 4,641,655 3,126,485
OTHER SECURITIES 48,589 30,551 95,987 64,074
------------ ------------ ------------ -------------
TOTAL INTEREST INCOME 13,366,667 13,232,489 27,287,095 24,756,488
------------ ------------ ------------ -------------
- ------------------------------------------------
INTEREST EXPENSE:
- ------------------------------------------------
TIME CERTIFICATES OF DEPOSIT OF $100,000 OR MORE 2,711,209 2,601,742 6,334,940 4,697,723
OTHER DEPOSITS AND TEMPORARY BORROWINGS 3,099,212 3,337,248 6,209,554 6,173,268
------------ ------------ ------------ -------------
TOTAL INTEREST EXPENSE 5,810,421 5,938,990 12,544,494 10,870,991
------------ ------------ ------------ -------------
NET INTEREST INCOME 7,556,246 7,293,499 14,742,601 13,885,497
PROVISION FOR POSSIBLE LOAN LOSSES 450,000 600,000 900,000 1,050,000
------------ ------------ ------------ -------------
NET INTEREST INCOME AFTER PROVISION
FOR POSSIBLE LOAN LOSSES 7,106,246 6,693,499 13,842,601 12,835,497
------------ ------------ ------------ -------------
- ------------------------------------------------
OTHER INCOME:
- ------------------------------------------------
SERVICE CHARGES ON DEPOSIT ACCOUNTS 269,613 305,099 559,757 625,134
NET SECURITY LOSSES (35,968) (40,529) (44,223) (54,337)
OTHER OPERATING INCOME 118,717 109,578 243,342 218,173
------------ ------------ ------------ -------------
TOTAL OTHER INCOME 352,362 374,148 758,876 788,970
------------ ------------ ------------ -------------
INCOME BEFORE OPERATING EXPENSES 7,458,608 7,067,647 14,601,477 13,624,467
------------ ------------ ------------ -------------
- ------------------------------------------------
OPERATING EXPENSES:
- ------------------------------------------------
SALARIES AND OTHER EMPLOYEE BENEFITS 2,724,075 2,448,490 5,488,778 4,797,574
OCCUPANCY 439,797 398,950 842,678 734,344
EQUIPMENT 180,040 147,936 352,585 286,788
MARKETING AND ADVERTISING 114,000 99,000 228,000 198,000
DEPOSIT ASSESSMENT FEES 38,974 32,632 73,072 63,818
AMORTIZATION OF INTANGIBLES 9,034 151,287 65,486 302,573
OTHER OPERATING EXPENSES 950,696 868,329 1,896,350 1,669,334
------------ ------------ ------------ ------------
TOTAL OPERATING EXPENSES 4,456,616 4,146,624 8,946,949 8,052,431
------------ ------------ ------------ ------------
INCOME BEFORE INCOME TAXES 3,001,992 2,921,023 5,654,528 5,572,036
PROVISION FOR INCOME TAXES 1,047,478 1,021,533 1,965,473 1,958,519
- ------------------------------------------------ ------------ ------------ ------------ ------------
NET INCOME $ 1,954,514 $ 1,899,490 $ 3,689,055 $ 3,613,517
- ------------------------------------------------ ------------ ------------ ------------ ------------
- ------------------------------------------------
BASIC EARNINGS PER COMMON SHARE $ 0.29 $ 0.30 $ 0.57 $ 0.57
- ------------------------------------------------ ------------ ------------ ------------ ------------
- ------------------------------------------------
DILUTED EARNINGS PER COMMON SHARE $ 0.29 $ 0.30 $ 0.57 $ 0.57
- ------------------------------------------------ ------------ ------------ ------------ ------------
- ------------------------------------------------
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 6,471,168 6,361,804 6,451,428 6,348,798
- ------------------------------------------------ ------------ ------------ ------------ ------------
</TABLE>
(2)
<PAGE>
- ----------------------------------------------------------------
ITEM 1 - FINANCIAL STATEMENTS (CONTINUED)
- ----------------------------------------------------------------
- ----------------------------------------------------------------
STATE BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 1998 AND 1997 (UNAUDITED)
- ----------------------------------------------------------------
- ---------------------------------------------------- ----------- ------------
OPERATING ACTIVITIES: 1998 1997
- ---------------------------------------------------- ----------- ------------
NET INCOME $3,689,055 $3,613,517
ADJUSTMENTS TO RECONCILE NET INCOME TO NET
CASH PROVIDED BY OPERATING ACTIVITIES:
PROVISION FOR POSSIBLE LOAN LOSSES 900,000 1,050,000
DEPRECIATION AND AMORTIZATION OF BANK
PREMISES AND EQUIPMENT 322,185 266,134
AMORTIZATION OF INTANGIBLES 65,486 302,573
AMORTIZATION OF NET PREMIUM ON SECURITIES 488,472 726,099
AMORTIZATION OF UNEARNED COMPENSATION 217,208 120,746
NET SECURITY LOSSES 44,223 54,337
GAIN ON SALE OF OTHER REAL ESTATE OWNED ("OREO") 0 (38,055)
DECREASE (INCREASE) IN OTHER ASSETS 893,383 (1,997,543)
DECREASE IN ACCRUED EXPENSES, TAXES
AND OTHER LIABILITIES (858,370) (264,592)
------------ ------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 5,761,642 3,833,216
------------ ------------
- -----------------------------------------------------
INVESTING ACTIVITIES:
- -----------------------------------------------------
PROCEEDS FROM MATURITIES OF SECURITIES HELD
TO MATURITY 9,119,000 25,040,712
PURCHASES OF SECURITIES HELD TO MATURITY (4,594,900) (4,489,000)
PROCEEDS FROM SALES OF SECURITIES AVAILABLE
FOR SALE 104,543,164 81,287,928
PROCEEDS FROM MATURITIES OF SECURITIES AVAILABLE
FOR SALE 158,946,153 41,215,758
PURCHASES OF SECURITIES AVAILABLE FOR SALE (218,222,691)(200,966,342)
INCREASE IN LOANS - NET (5,695,261) (2,576,000)
PROCEEDS FROM SALE OF OREO 0 929,718
PURCHASES OF BANK PREMISES AND EQUIPMENT - NET (265,247) (370,956)
------------ ------------
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES 43,830,218 (59,928,182)
------------ ------------
- -----------------------------------------------------
FINANCING ACTIVITIES:
- -----------------------------------------------------
INCREASE (DECREASE) IN DEMAND AND SAVINGS DEPOSITS 12,315,882 (13,161,098)
(DECREASE) INCREASE IN TIME DEPOSITS (64,088,785) 40,307,757
DECREASE IN FEDERAL FUNDS PURCHASED (6,000,000) (3,600,000)
(DECREASE) INCREASE IN SECURITIES SOLD UNDER
AGREEMENTS TO REPURCHASE (14,318,000) 5,601,494
DECREASE IN OTHER SHORT-TERM
BORROWINGS (12,000,000) (1,000,000)
CASH DIVIDENDS PAID (1,468,331) (1,203,752)
PROCEEDS FROM SHARES ISSUED UNDER DIVIDEND
REINVESTMENT PLAN 404,550 399,657
PROCEEDS FROM STOCK OPTIONS EXERCISED 226,699 16,029
------------ ------------
NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES (84,927,985) 27,360,087
------------ ------------
- -----------------------------------------------------
NET DECREASE IN CASH AND CASH EQUIVALENTS (35,336,125) (28,734,879)
- -----------------------------------------------------
- -----------------------------------------------------
CASH AND CASH EQUIVALENTS - JANUARY 1 60,932,820 64,676,593
- -----------------------------------------------------
- ----------------------------------------------------- ----------- ------------
CASH AND CASH EQUIVALENTS - JUNE 30 $25,596,695 $35,941,714
- ----------------------------------------------------- ----------- ------------
- -----------------------------------------------------
SUPPLEMENTAL DATA:
- -----------------------------------------------------
INTEREST PAID $12,988,198 $11,005,329
INCOME TAXES PAID $2,313,592 $2,248,779
TRANSFERS FROM LOANS TO OREO $325,000 $0
ADJUSTMENT TO UNREALIZED NET LOSS ON SECURITIES
AVAILABLE FOR SALE ($98,146) $122,751
DIVIDENDS DECLARED BUT NOT PAID AS OF QUARTER
END $1,047,470 $605,543
(3)
<PAGE>
- --------------------------------------------------------
ITEM 1 - FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------
<TABLE>
- --------------------------------------------------------------------
STATE BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE SIX MONTHS ENDED JUNE 30, 1998 AND 1997 (UNAUDITED)
- --------------------------------------------------------------------
<CAPTION>
UNREALIZED
NET LOSS ON
SECURITIES UNEARNED
COMMON RETAINED AVAILABLE COMPEN-
STOCK SURPLUS EARNINGS FOR SALE SATION TOTAL
----- ------- -------- -------- ------ -----
<S> <C> <C> <C> <C> <C> <C>
BALANCE, JANUARY 1, 1998 $ 30,970,630 $ 18,457,388 $ 6,567,744 ($ 215,067) ($ 850,432) $54,930,263
NET INCOME 3,689,055 3,689,055
CASH DIVIDEND
($0.28 PER SHARE) (1,785,275) (1,785,275)
5% STOCK DIVIDEND (312,332 SHARES
AT MARKET VALUE) 1,561,660 4,997,312 (6,558,972) 0
SHARES ISSUED UNDER DIVIDEND
REINVESTMENT PLAN (17,522 SHARES
AT 95% OF MARKET VALUE) 87,610 316,940 404,550
STOCK OPTIONS EXERCISED 184,180 42,519 226,699
AMORTIZATION OF UNEARNED
COMPENSATION 121,544 95,664 217,208
CHANGE IN UNREALIZED NET LOSS
ON SECURITIES AVAILABLE FOR SALE ( 57,955) (57,955)
- ------------------------------------ ------------ ------------ ------------ ------------ ------------ ------------
BALANCE, JUNE 30, 1998 $ 32,804,080 $ 23,935,703 $ 1,912,552 ($ 273,022) ($ 754,768) $57,624,545
- ------------------------------------ ------------ ------------ ------------ ------------ ------------ ------------
BALANCE, JANUARY 1, 1997 $ 25,505,240 $ 22,915,331 $ 2,130,980 ($ 936,100) ($ 1,045,980) $48,569,471
NET INCOME 3,613,517 3,613,517
CASH DIVIDEND
($0.19 PER SHARE) (1,209,295) (1,209,295)
6 FOR 5 STOCK SPLIT (1,026,672
SHARES AT $5.00 PAR VALUE) 5,133,360 (5,133,360) 0
SHARES ISSUED UNDER DIVIDEND
REINVESTMENT PLAN (30,057 SHARES
AT 95% OF MARKET VALUE) 150,285 249,372 399,657
STOCK OPTIONS EXERCISED 11,270 4,759 16,029
AMORTIZATON OF UNEARNED
COMPENSATION 23,546 97,200 120,746
CHANGE IN UNREALIZED NET LOSS
ON SECURITIES AVAILABLE FOR SALE 72,484 72,484
- ------------------------------------ ------------ ------------ ------------ ------------- ------------ -------------
BALANCE, JUNE 30, 1997 $ 30,800,155 $ 18,059,648 $ 4,535,202 ($ 863,616) ($ 948,780) $51,582,609
- ------------------------------------ ------------ ------------ ------------ ------------- ------------ -------------
</TABLE>
(4)
<PAGE>
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
- ----------------------------------------------------
FINANCIAL STATEMENT PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES
- --------------------------------------------------------------------
In the opinion of the management of State Bancorp, Inc. (the "Company"), the
preceding unaudited consolidated financial statements contain all adjustments,
consisting of normal accruals, necessary for a fair presentation of its
consolidated financial condition as of June 30, 1998 and December 31, 1997, its
consolidated earnings for the six months ended June 30, 1998 and 1997 and cash
flows and changes in stockholders' equity for the six months ended June 30, 1998
and 1997. The results of operations for the six months ended June 30, 1998 are
not necessarily indicative of the results of operations to be expected for the
remainder of the year. For further information, refer to the consolidated
financial statements and footnotes thereto included in the Company's 1997 annual
report on Form 10-K. Certain amounts have been reclassified to conform with the
current year's presentation.
STOCKHOLDERS' EQUITY
The Company has 250,000 shares of preferred stock authorized. No shares were
issued as of June 30, 1998.
In connection with the rights offering in July 1996, the Bank's Employee Stock
Option Plan (the "ESOP") borrowed $1,200,000 from the Company to purchase
126,000 (adjusted for stock dividends and splits) of the Company's shares. As
such, the Company recognizes a deduction from stockholders' equity to reflect
the unearned compensation for the shares. The unearned ESOP shares, pledged as
collateral for the ESOP loan, are held in a suspense account and legally
released for allocation among the participants as principal and interest on the
loan is repaid annually. Shares are committed to be released monthly from the
suspense account and the Company recognizes compensation expense equal to the
current market price of the common shares. As of June 30, 1998, 46,748 shares
have been released from the suspense account and are considered outstanding for
earnings per share computations.
The Company adopted Statement of Financial Accounting Standards ("SFAS") No.
130, "Reporting Comprehensive Income," effective January 1, 1998. The statement
requires disclosure of amounts from transactions and other events which are
currently excluded from the statement of operations and are recorded directly to
stockholders' equity. Total comprehensive income for the six month periods ended
June 30, 1998 and 1997 amounted to $3,657,214 and $3,718,087, respectively.
EARNINGS PER SHARE
Basic earnings per common share is computed based on the weighted average number
of shares outstanding. Diluted earnings per share is computed based on the
weighted average number of shares outstanding, increased by the number of common
shares that are assumed to have been purchased with the proceeds from the
exercise of stock options (treasury stock method). These purchases were assumed
to have been made at the average market price of the common stock. The average
market price is based on the average closing bid price for the common stock.
Retroactive recognition has been given for stock dividends and splits, as well
as for the adoption of SFAS No. 128.
(5)
<PAGE>
For the Six Months Ended June 30, 1998 1997
- ------------------------------------ ---- ----
Net income $3,689,055 $3,613,517
Average dilutive stock options outstanding 156,995 164,532
Average exercise price per share $10.96 $8.12
Average market price - diluted basis $22.20 $14.91
Average common shares outstanding 6,451,428 6,348,798
Increase in shares due to exercise of options -
diluted basis 19,492 23,780
--------- ---------
Adjusted common shares outstanding - diluted 6,470,920 6,372,578
========= =========
Net income per share-basic $0.57 $0.57
========= =========
Net income per share-diluted $0.57 $0.57
========= =========
UNREALIZED NET LOSS ON SECURITIES AVAILABLE FOR SALE
Securities available for sale are stated at estimated fair value and unrealized
gains and losses are excluded from earnings and reported as a separate component
of stockholders' equity until realized. Securities held to maturity are stated
at amortized cost. Management designates each security, at the time of purchase,
as either available for sale or held to maturity depending upon investment
objectives, liquidity needs and intent.
LOANS
As a result of the Company's evaluation of impaired loans, an allowance for
possible loan losses of $1,503,424 and $953,106 was established for $8,292,004
and $9,085,357 of the total impaired loans at June 30, 1998 and December 31,
1997, respectively, with the balance of impaired loans requiring no specific
allowance. The total average impaired loan balance was $8,609,339 for the
quarter ended June 30, 1998 and $9,575,104 for the year ended December 31, 1997.
Total impaired loans amounted to $8,608,455 at June 30, 1998 and $9,085,357 at
December 31, 1997. At June 30, 1998, the aggregate amount of impaired loans
measured using the present value of expected future cash flows discounted at
each loan's effective interest rate is $5,829,049 and the amount of impaired
collateral-dependent loans, measured based on the fair value of the underlying
collateral, is $2,779,406. Total interest income recognized for impaired,
nonaccrual and restructured loans was $155,326 and $95,372 for the three months
ended June 30, 1998 and 1997, respectively, and $189,326 and $176,678 for the
six months ended June 30, 1998 and 1997, respectively.
(6)
<PAGE>
Activity in the allowance for possible loan losses for the six months ended June
30, 1998 and 1997 is as follows:
1998 1997
---- ----
Balance, January 1 $5,123,651 $5,008,965
Provision charged to income 900,000 1,050,000
Charge-offs, net of recoveries of
$172,238 in 1998 and $72,347 in 1997 (649,548) (838,634)
---------- ----------
Balance, June 30 $5,374,103 $5,220,331
========== ==========
(7)
<PAGE>
ITEM 2. - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
1. Material Changes in Financial Condition - As of June 30, 1998, total assets
of the Company amounted to $656.2 million, a decline of $81.9 million or 11.1%
when compared to December 31, 1997. A reduction in investment securities (down
$50.4 million), primarily within the available for sale classification, coupled
with a $34.0 million reduction in short-term securities purchased under
agreements to resell, utilized to collateralize public funds on deposit,
accounted for the decline in total assets. Somewhat offsetting the foregoing
asset reductions were increases in loans (up $4.5 million) and Federal funds
sold (up $4.0 million). The decrease in holdings of available for sale
securities resulted from principal paydowns in the mortgage-backed portfolio
(down $15.5 million) along with a seasonal decline in short-term municipal
holdings (down $28.8 million) primarily due to maturities of tax anticipation
notes that will be refinancing during the third quarter of 1998. Accounting for
the decline in total assets were reductions in various funding categories,
primarily time deposits (down $64.1 million), mainly large denomination
certificates of deposit, Federal funds purchased (down $6.0 million), securities
sold under agreements to repurchase (down $14.3 million), and other short-term
borrowings (down $12.0 million). This shift in the Company's balance sheet mix
helped to widen the second quarter net interest rate spread to 4.38% in 1998
from 4.27% a year ago. The net interest spread for the first six months of 1998
was 4.16%, lagging the prior year period by 18 basis points. This narrowing of
the spread was largely the result of the flat yield curve during the past 12 to
18 months coupled with the nominal growth in loans experienced thus far in 1998.
As previously stated, the Company's loan portfolio increased only 1.2% in the
June Y-T-D period. Principal amortization, normal clean-up activity and the loss
of several large credits due to the acquisition of Company customers largely
offset the new business that was generated during the first half of the year.
Management anticipates that the loan portfolio will expand a somewhat faster
rate during the second half of the year, however, year to year growth of
approximately 3% - 5% is a likely estimate based on current market conditions.
At this point in the economic cycle, management of the Company feels that, more
than ever, it is prudent to carefully evaluate all requests for credit.
Management of the Company has always let growth targets take a back seat to the
need for high credit quality. As such, the Company has substantial collateral
support for its existing loans outstanding and it is not a competitor in either
the subprime or high loan-to-value markets. Depending upon the Company's mix of
deposits during the second half of 1998, this revised loan growth scenario will
possibly result in compression of the net interest rate spread during the last
six months of the year.
Total deposits declined by $51.8 million, or 8.5%, to $559.5 million when
compared to year-end 1997. The reduction in deposits was principally due to a
seasonal reduction in large denomination municipal certificates of deposit.
These deposits were short-term in nature and were being used to arbitrage a
portion of the company's investment portfolio. On a positive note, core demand
(up $6.7 million) and savings balances (up $5.7 million) increased by 4.3% over
year-end 1997 as the result of an expanded business account base. The Company
also experienced decreases in purchased
(8)
<PAGE>
liabilities of $32.3 million in categories previously described. The use of
purchased liabilities is seasonal in nature and is utilized as a replacement for
deposit outflows and to support short-term asset expansion.
Second quarter average assets were 0.4% lower than 1997 at $714.0 million.
Growth in interest-earning assets was moderate (0.9%), however, a shift in the
asset mix from investment securities (average down $28.6 million or 10.8%) into
loans (average up $24.1 million or 6.7% to $380.7 million), primarily commercial
loans and commercial mortgages. In addition, Federal funds sold and SPUARs
increased on average by $10.8 million, largely the result of municipal
collateralization activity. Second quarter average deposits declined by $5.1
million or 0.8% to $616.6 million. Increases in large denomination certificates
of deposit (up $13.1 million) and demand deposits (up $12.8 million or 13.0%)
were offset by declines in money market and savings accounts. Average borrowed
funds during the second quarter of 1998 declined $5.5 million or 14.8%, as
compared to the same period in 1997. Average stockholders' equity increased by
$6.6 million or 13.1% over the same period. The net result of these activities
was a change in the mix of the Company's balance sheet that resulted in an 11
basis point improvement in the second quarter net interest rate spread to 4.38%,
largely due to an 11 basis point decline in the Company's average cost of funds.
The Company's returns on average assets and average stockholders' equity were
1.10% and 13.76% versus 1.06% and 15.14% for the quarter ended June 30, 1998 and
1997, respectively.
The Company's ability to grow its assets and earnings stems, to a large degree,
from the significance of its capital strength. The Company strives to maintain
an optimal level of capital, commensurate with its risk profile, on which an
attractive rate of return to stockholders will be realized over both the short
and long term, while serving the needs of depositors, creditors and regulators.
In determining an optimal capital level, the Company also considers the capital
levels of its peers and the evaluations of its primary regulators. At June 30,
1998, the Company continued to maintain capital adequacy ratios significantly in
excess of those necessary for it to be classified as a "well capitalized"
institution pursuant to the provisions of the Federal Deposit Insurance
Corporation Improvement Act of 1991 (FDICIA). Total stockholders' equity
amounted to $57.6 million at June 30, 1998, an increase of $6.0 million or 11.7%
versus the comparable 1997 date. Excluding valuations related to SFAS No. 115 at
June 30, 1998 and 1997, total stockholders' equity grew at a year to year rate
of 10.4%. The following table (2-1) summarizes the Company's capital ratios as
of June 30, 1998 and compares them to current regulatory guidelines and December
31 and June 30, 1997 actual results.
(9)
<PAGE>
TABLE 2-1
Tier I capital/ Total Capital/
Tier I Risk-Weighted Risk-Weighted
Leverage Assets Assets
Regulatory Minimum 3.00%-5.00% 4.00% 8.00%
Ratios as of:
June 30, 1998 8.05% 13.48% 14.73%
December 31, 1997 7.50% 12.55% 13.73%
June 30, 1997 7.20% 12.78% 14.03%
Regulatory Criteria for
a "Well Capitalized"
Institution 5.00% 6.00% 10.00%
Liquidity management is a fundamental component of the Company's business
strategy. The objective of liquidity management is to ensure the ability of the
Company and its subsidiary to meet their financial obligations. These
obligations include the withdrawal of deposits on demand or at their contractual
maturity, the repayment of borrowings as they mature, the ability to fund new
and existing loan commitments and to take advantage of business opportunities as
they arise. Liquidity is composed of the maintenance of a strong base of core
customer deposits, maturing short-term assets, the ability to sell marketable
securities and access to lines of credit and the capital markets. Liquidity at
the Company is measured and monitored daily, thereby allowing management to
better understand and react to emerging balance sheet trends. After assessing
actual and projected cash flow needs, management seeks to obtain funding at the
most economical cost to the Company. Throughout the first half of 1998, the
Company's liquidity position remained stable and well within acceptable industry
standards. As previously described, low-cost demand deposit balances continued
to grow during the first half of the year, while at the same time, paydowns on
mortgage-backed securities also provided a source of readily available funds to
meet general liquidity needs. In addition, at June 30, 1998, the Company had
access to $47 million in Federal Home Loan Bank lines of credit for overnight or
term borrowings with maturities of up to thirty years. The Company also had
$16.5 million in informal lines of credit extended by correspondent banks to be
utilized, if needed, for short-term funding purposes as well as approximately
$19.4 million in securities available to be pledged to secure repurchase
agreements or Federal Reserve Discount Window borrowings at quarter-end 1998.
2. Material Changes in Results of Operations - Net income for the six months
ended June 30, 1998 was $3,689,000, a 2.1% improvement over the comparable 1997
period. The improvement in
(10)
<PAGE>
earnings in 1998 resulted from a 6.2% increase in net interest income and a
lower provision for loan losses. Mitigating these improvements somewhat were
increases in total operating expenses and a decline in other income during the
first six months of 1998.
The higher level of net interest income, up $858 thousand to $14.7 million,
resulted from an expanded interest-earning asset base, principally commercial
loans, commercial mortgages and callable Government Agency securities, and an
increase in loan fees. Loan growth, although basically flat thus far in 1998,
has generally been strong during the past 12 to 24 months. Average loans
outstanding were up by 6.5% during the first six months of 1998 versus the
comparable 1997 period. A strong local economy and continued consolidation in
the local banking market have been the driving forces behind the expansion of
the Company's lending activities during the past two years. Management
anticipates that products such as the Company's small business line of credit
combined with focused calling efforts in targeted markets and industries will
provide opportunity to expand the loan portfolio during the balance of 1998.
Management anticipates average loan growth of 4% - 6% for the full year,
primarily in the commercial and commercial mortgage markets.
The Company's investment portfolio increased, on average, by $17.4 million or
7.4% in 1998 versus 1997. Purchases of callable Agency securities (volume up
$44.5 million) more than offset paydowns on mortgage-backed issues. Also
contributing to growth in the investment portfolio was an increase in short-term
tax-exempt municipal securities (up $3.2 million). Management of the Company has
been an active purchaser of agency securities thus far in 1998 due to their
attractive yields and their pledgeability to secure municipal deposits.
Management anticipates that purchases of local municipal issues will increase
during the second half of 1998 as new relationships with school districts in
Suffolk County are established.
Other income declined by 3.8% during the June 1998 Y-T-D period, mainly due to a
reduction in service charges on deposits. On a positive note, fees from
processing merchant credit card transactions, wire transfers, ATMs and letter of
credit fees all showed year to year gains versus 1997.
During the first six months of 1998, total operating expenses increased by
11.1%, mainly due to increases in salaries and employee benefits arising from
staff expansion in the lending group and product support areas along with an
increases in supplementary compensation costs related to incentive compensation
plans and retirement plan contributions to fund the Company's 401(k) and
employee stock ownership plans. Occupancy costs rose due to additional space
occupied at the Company's regional lending facility in Jericho and the impact of
the Company's new branches in Suffolk county which were opened in December 1997.
Equipment expenses increased by 22.9% due to an expanded personal computer
network and the expansion of the branch network. In addition, other operating
expenses grew due to an increase in marketing and advertising initiatives,
higher costs related to external audits and exams, commercial insurance
policies, credit and collection efforts and computer hardware and software
maintenance. Somewhat offsetting the operating expense increases previously
described was a decline in intangibles amortization expense due to the run-off
of core deposit intangibles incurred in 1992 branch purchases.
(11)
<PAGE>
The Company's operating efficiency ratio (total operating expenses as a
percentage of fully taxable equivalent net interest revenue, excluding
securities transactions) increased to 55.6% from 52.7% during the first half of
1997 versus a year ago. The Company's ratio of total operating expenses to
average total assets was 2.44% and 2.42% during the first six months of 1998 and
1997, respectively. These ratios place the Company in the top 15% of its peer
group for this efficiency measure. Management of the Company is encouraged by
these ratios, however, it continues to be the Company's stated goal to reduce
each of these ratios as part of its efforts to improve efficiencies and,
ultimately, stockholder value.
Nonperforming assets (defined by the Company as nonaccrual loans and other real
estate owned) totaled $5.5 million at June 30, 1998, an increase of $1.0 million
versus December 31, 1997 and a decline of $269 thousand versus June 30, 1997.
The primary reason for the increase in nonperforming assets at June 30, 1998
versus year-end 1997 was due to a $706 thousand increase in nonaccrual loans
coupled with an increase in other real estate owned resulting from foreclosure
proceedings on a residential property during the second quarter of 1998.
Management anticipates that this property will be sold during 1998 with no
material impact on the Company's financial statements. The level of
restructured, accruing loans at June 30, 1998 decreased by $1.1 million when
compared to year-end 1997. Although classified as nonperforming for reporting
purposes, restructured loans continue to accrue and pay interest in accordance
with their revised terms. As outlined in the Company's 1997 Annual Report to
Stockholders, restructured, accruing loans includes $5.0 million related to one
credit which is collateralized by commercial real estate with a current
appraised value in excess of the carrying value of the credit. The restructured
rate on this credit will remain below the contractual rate until cash flows are
again sufficient to support a market rate of interest. The Company is confident
that a market rate of interest will again be in effect on this credit during the
first quarter of 1999.
The provision for possible loan losses declined by $150 thousand (14.3%) versus
the first half of 1997 due to the reduced growth rate in the loan portfolio and
the improved credit quality in the loan portfolio. The allowance for possible
loan losses amounted to $5.4 million or 1.41% of total loans at June 30, 1998
versus $5.2 million and 1.47%, respectively, at the comparable 1997 date. The
allowance for possible loan losses as a percentage of nonaccrual loans amounted
to 108.3%, 120.3% and 93.0% at June 30, 1998, December 31, 1997 and June 30,
1997, respectively. Nonperforming assets (as defined by the Company) as a
percentage of total loans and other real estate owned was 1.43%, 1.18% and 1.62%
at June 30, 1998, December 31, 1997 and June 30, 1997, respectively. Management
of the Company has determined that the current level of the allowance for
possible loan losses is adequate in relation to the risks present in the
portfolio. The Company's loan portfolio is concentrated in commercial and
industrial loans and commercial mortgages, the majority of which are secured by
collateral with a market value in excess of the carrying amounts of the
individual loans. A further review of the Company's nonperforming assets may be
found in Table 2-3 following this analysis.
(12)
<PAGE>
Year 2000 Compliance
The Year 2000 problem centers on the inability of certain computer systems to
recognize the Year 2000. Many existing computer programs may incorrectly
identify a four digit date field ending in "00" as the year 1900 rather than the
year 2000. The Company, like other banks and financial services firms that rely
on date-sensitive information in their calculations, may be negatively impacted
by the Year 2000 problem. If computer systems are not corrected to properly
identify the Year 2000, computer systems applications may fail or produce
erroneous results which could impact the Company's ability to transact normal
business activities. In addition, in certain instances, failure to adequately
address the Year 2000 problem could adversely impact Company's suppliers,
creditors and the creditworthiness of its borrowers.
The Company has had a Year 2000 (Y2K) Action Team in place since 1996 to address
this problem. The Y2K Action team has completed the first two phases of the
Company's Y2K project: the Awareness and Assessment phases. The renovation
phase, which includes upgrading all noncompliant hardware and software, is
expected to be completed during the third quarter of 1998. Upon completion of
the Renovation phase, the Action team will embark on the most important phase of
the project: the Validation phase. The Company is on schedule to have all
critical applications tested prior to year-end 1998.
The Company has also sent out Year 2000 awareness literature to all of its
deposit customers, and, in addition, Y2K questionnaires have been sent to each
of the Company's commercial and municipal customers to assess their awareness of
the Year 2000 problem. The Company, in certain instances, relies on outside
vendors and other third party service providers to perform various services.
Before proceeding with any new contracts or extensions of existing contracts,
the Company will require each of these service providers to provide written
proof of their Y2K compliance.
Management of the Company anticipates that all of the Company's date-sensitive
hardware, software and other systems will be tested and founds to be Y2K
compliant prior to year-end 1998. The Company has not developed any of its own
computer programs internally nor does it employ a programming staff. All of the
programs utilized by the Company have been purchased from third party vendors.
The cost to identify and ensure compliance with Y2K issues has not yet been
completely determined, however, it is not expected to be material to the
Company's consolidated financial statement in either 1998 or 1999.
(13)
<PAGE>
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONTINUED)
<TABLE>
===============================================================================
JUNE 30, 1998
- -----------------
TABLE 2-2 LIQUIDITY AND INTEREST RATE SENSITIVITY
- ----------------- ===============================================================================
<CAPTION>
==================================================================
SENSITIVITY TIME HORIZON
($ IN THOUSANDS)
- --------------------------------------------------------- Over Noninterest
INTEREST - SENSITIVE ASSETS : 1) 0-6 Months 6-12 Months 1-5 Years 5 Years Sensitive Total
- --------------------------------------------------------- ========== =========== ========= ========= =========== =========
<S> <C> <C> <C> <C> <C> <C>
Loans (net of unearned income) 2) $ 251,279 $ 15,860 $ 62,570 $ 47,681 $ 4,964 $ 382,354
Securities Purchased Under Agreements to Resell
and Federal Funds Sold 4,000 0 0 0 0 4,000
Securities Held to Maturity 5,671 342 0 98 0 6,111
Securities Available for Sale 3) 105,929 76,839 25,902 21,106 2,368 232,144
--------- --------- --------- --------- --------- ---------
Total Interest-Earning Assets 366,879 93,041 88,472 68,885 7,332 624,609
Unrealized Net Loss on Securities Available for Sale (462) 0 0 0 0 (462)
Cash and Due from Banks 21,597 0 0 0 0 21,597
All Other Assets 7) 4,848 2,616 0 0 2,943 10,407
--------- --------- --------- --------- --------- ---------
Total Assets $ 392,862 $ 95,657 $ 88,472 $ 68,885 $ 10,275 $ 656,151
--------- --------- --------- --------- --------- ---------
- ---------------------------------------------------------
INTEREST - SENSITIVE LIABILITIES : 1)
- ---------------------------------------------------------
Savings Accounts 4) $ 10,879 $ 10,879 $ 87,036 0 $ 0 $ 108,794
Money Fund and Now Accounts 5) 39,225 7,429 30,164 0 0 76,818
Time Deposits 6) 206,958 23,071 29,226 $ 286 0 259,541
--------- --------- --------- --------- --------- ---------
Total Interest-Bearing Deposits 257,062 41,379 146,426 286 0 445,153
Securities Sold Under Agreements to Repurchase,
Federal Funds Purchased, and Other Borrowings 25,500 10,000 0 0 0 35,500
--------- --------- --------- --------- --------- ---------
Total Interest-Bearing Liabilities 282,562 51,379 146,426 286 0 480,653
All Other Liabilities, Equity and Demand Deposits 7) 3,116 365 90 0 171,927 175,498
--------- --------- --------- --------- --------- ---------
Total Liabilities and Equity $ 285,678 $ 51,744 $ 146,516 $ 286 $ 171,927 $ 656,151
--------- --------- --------- --------- --------- ---------
Cumulative Interest-Sensitivity Gap 8) $ 84,317 $ 125,979 $ 68,025 $ 136,624 $ 143,956
Cumulative Interest-Sensitivity Ratio 9) 129.8% 137.7% 114.2% 128.4% 130.0%
Cumulative Interest-Sensitivity Gap
As a % of Total Assets 12.9% 19.2% 10.4% 20.8% 21.9%
<FN>
1) Allocations to specific interest sensitivity periods are based on the
earlier of the repricing or maturity date.
2) Nonaccrual loans are shown in the non-interest sensitive category.
3) Estimated principal reductions have been assumed for mortgage-backed
securities based upon their current constant prepayment rates.
4) Savings deposits are assumed to decline at a rate of 20% per year over a
five-year period based upon the nature of their historically stable core
deposit relationships.
5) Money Fund and NOW accounts of individuals, partnerships and corporations
are assumed to decline at a rate of 33% per year over a three-year period
based upon the nature of their historically stable core deposit
relationships. Money Fund and NOW accounts of municipalities are included
in the 0 - 6 months category.
6) Reflected as maturing in each instrument's period of contractual maturity.
7) Other Assets and Liabilities are shown according to payment schedule or a
reasonable estimate thereof.
8) Total interest-earning assets minus total interest-bearing liabilities.
9) Total interest-earning assets as a percentage of total interest bearing
liabilities.
</FN>
</TABLE>
(14)
<PAGE>
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONTINUED)
- -----------------------
TABLE 2 - 3
- -----------------------
- -----------------------------------------------------------------------------
STATE BANCORP, INC.
ANALYSIS OF NONPERFORMING ASSETS AND THE ALLOWANCE FOR POSSIBLE LOAN LOSSES
JUNE 30, 1998 VERSUS DECEMBER 31, 1997 AND JUNE 30, 1997
(DOLLARS IN THOUSANDS)
- -----------------------------------------------------------------------------
NONPERFORMING ASSETS BY TYPE: PERIOD ENDED:
----------------------------------
6/30/98 12/31/97 6/30/97
--------- ---------- ---------
NONACCRUAL LOANS $4,964 $4,258 $5,612
OTHER REAL ESTATE OWNED 514 189 135
-------- ---------- ---------
TOTAL NONPERFORMING ASSETS $5,478 $4,447 $5,747
-------- ---------- ---------
RESTRUCTURED, ACCRUING LOANS $5,550 (1) $6,696 (1) $6,166 (1)
LOANS 90 DAYS OR MORE PAST DUE
AND STILL ACCRUING $1,234 $1,590 $2,388
GROSS LOANS OUTSTANDING $382,354 $377,633 $355,120
TOTAL STOCKHOLDERS' EQUITY $57,625 $54,930 $51,583
ANALYSIS OF THE ALLOWANCE FOR QUARTER ENDED:
----------------------------------
POSSIBLE LOAN LOSSES: 6/30/98 12/31/97 6/30/97
--------- ---------- ---------
BEGINNING BALANCE $5,351 $5,152 $5,009
PROVISION 450 450 600
NET CHARGE-OFFS (427) (478) (389)
--------- ---------- ---------
ENDING BALANCE $5,374 $5,124 $5,220
--------- ---------- ---------
KEY RATIOS AT PERIOD-END:
ALLOWANCE AS A % OF TOTAL LOANS 1.41% 1.36% 1.47%
NONACCRUAL LOANS AS A % OF TOTAL LOANS 1.30% 1.13% 1.58%
NONPERFORMING ASSETS (2) AS A % OF TOTAL
LOANS AND OTHER REAL ESTATE OWNED 1.43% 1.18% 1.62%
ALLOWANCE FOR POSSIBLE LOAN LOSSES AS
A % OF NONACCRUAL LOANS 108.26% 120.34% 93.01%
ALLOWANCE FOR POSSIBLE LOAN LOSSES AS A %
OF NONACCRUAL LOANS, RESTRUCTURED,
ACCRUING LOANS AND LOANS 90 DAYS OR
MORE PAST DUE AND STILL ACCRUING 45.74% 40.85% 36.85%
(1) INCLUDES ONE CREDIT TOTALING $5.0 MILLION WHICH IS COLLATERALIZED BY
COMMERCIAL REAL ESTATE WITH A CURRENT APPRAISED VALUE IN EXCESS OF THE
CARRYING VALUE OF THE CREDIT. THE RESTRUCTURED RATE ON THIS CREDIT WILL
REMAIN BELOW THE CONTRACTUAL RATE UNTIL CASH FLOWS ARE AGAIN SUFFICIENT TO
SUPPORT A MARKET RATE OF INTEREST.
(2) EXCLUDES RESTRUCTURED, ACCRUING LOANS AND LOANS 90 DAYS OR MORE PAST DUE
AND STILL ACCRUING INTEREST.
(15)
<PAGE>
PART II
-------
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The annual meeting of the shareholders of the Company was held on April 28, 1998
to elect four directors. The proxy statement for this meeting was filed with the
Securities and Exchange Commission.
PROPOSAL
Election of Directors
NOMINEE TERM FOR WITHHELD
- ------- ---- --- --------
J. Robert Blumenthal 3 years 4,872,482 32,524
Arthur Dulik, Jr. 3 years 4,873,558 31,448
Joseph F. Munson 3 years 4,873,558 31,448
Daniel T. Rowe 3 years 4,873,558 31,448
The proposal was passed.
(16)
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
STATE BANCORP, INC.
8/14/98 s/Daniel T. Rowe
- -------- -------------------------
Date Daniel T. Rowe, President
8/14/98 s/Brian K. Finneran
- -------- ----------------------------
Date Brian K. Finneran, Secretary
(Principal Financial Officer)
(17)
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 9
<CIK> 0000723458
<NAME> STATE BANCORP INC.
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-1-1998
<PERIOD-END> JUN-30-1998
<EXCHANGE-RATE> 1
<CASH> 21,466,416
<INT-BEARING-DEPOSITS> 130,279
<FED-FUNDS-SOLD> 4,000,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 232,144,464
<INVESTMENTS-CARRYING> 6,111,035
<INVESTMENTS-MARKET> 6,121,541
<LOANS> 382,353,980
<ALLOWANCE> 5,374,103
<TOTAL-ASSETS> 656,150,890
<DEPOSITS> 559,455,017
<SHORT-TERM> 35,500,000
<LIABILITIES-OTHER> 3,571,328
<LONG-TERM> 0
0
0
<COMMON> 32,804,080
<OTHER-SE> 24,820,465
<TOTAL-LIABILITIES-AND-EQUITY> 656,150,890
<INTEREST-LOAN> 17,963,395
<INTEREST-INVEST> 7,320,846
<INTEREST-OTHER> 2,002,854
<INTEREST-TOTAL> 27,287,095
<INTEREST-DEPOSIT> 11,409,149
<INTEREST-EXPENSE> 12,544,494
<INTEREST-INCOME-NET> 14,742,601
<LOAN-LOSSES> 900,000
<SECURITIES-GAINS> (44,223)
<EXPENSE-OTHER> 8,946,949
<INCOME-PRETAX> 5,654,528
<INCOME-PRE-EXTRAORDINARY> 3,689,055
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,689,055
<EPS-PRIMARY> 0.57
<EPS-DILUTED> 0.57
<YIELD-ACTUAL> 7.73
<LOANS-NON> 4,963,612
<LOANS-PAST> 1,233,911
<LOANS-TROUBLED> 5,550,140
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 5,123,651
<CHARGE-OFFS> 821,786
<RECOVERIES> 172,238
<ALLOWANCE-CLOSE> 5,374,103
<ALLOWANCE-DOMESTIC> 5,165,617
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 208,486
</TABLE>
