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: MARCH 31, 1999
[ ] 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 April 27, 1999, there were 6,558,453 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 - March 31, 1999 and December 31, 1998
(Unaudited) 1.
Consolidated Statements of Income for the Three Months Ended
March 31, 1999 and 1998 (Unaudited) 2.
Consolidated Statements of Cash Flows for the Three Months Ended March 31,
1999 and 1998 (Unaudited) 3.
Consolidated Statements of Stockholders' Equity and Comprehensive Income
for the Three Months Ended March 31, 1999 and 1998 (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 - None N/A
Item 5. Other Information - None N/A
Item 6. Exhibits and Reports on Form 8-K - None N/A
SIGNATURES 16.
<PAGE>
- -----------------------------------------------------
ITEM 1 - FINANCIAL STATEMENTS
- -----------------------------------------------------
- -----------------------------------------------------
STATE BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
MARCH 31, 1999 AND DECEMBER 31, 1998 (UNAUDITED)
- -----------------------------------------------------
- -----------------------------------------------------
ASSETS: 1999 1998
- ----------------------------------------------------- ----------- -------------
CASH AND DUE FROM BANKS $25,066,510 $19,274,435
SECURITIES PURCHASED UNDER AGREEMENTS TO RESELL 8,500,000 -
------------- -------------
CASH AND CASH EQUIVALENTS 33,566,510 19,274,435
SECURITIES:
HELD TO MATURITY (ESTIMATED FAIR VALUE -
$2,584,621 IN 1999 AND $2,526,401 IN 1998) 2,573,035 2,516,035
AVAILABLE FOR SALE - AT ESTIMATED FAIR VALUE 271,437,189 279,338,611
------------- -------------
TOTAL SECURITIES 274,010,224 281,854,646
LOANS - NET OF ALLOWANCE FOR POSSIBLE LOAN LOSSES
($6,510,499 IN 1999 AND $5,788,440 IN 1998) 431,002,466 414,847,940
BANK PREMISES AND EQUIPMENT - NET 3,884,888 3,878,013
OTHER ASSETS 12,688,296 12,838,476
- -------------------------------------------------- ------------- -------------
TOTAL ASSETS $755,152,384 $732,693,510
- -------------------------------------------------- ============= =============
- --------------------------------------------------
LIABILITIES:
- --------------------------------------------------
DEPOSITS:
DEMAND $133,999,503 $125,327,460
SAVINGS 182,978,867 195,614,058
TIME 293,898,522 276,079,430
------------- -------------
TOTAL DEPOSITS 610,876,892 597,020,948
FEDERAL FUNDS PURCHASED 5,200,000 -
SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE 34,710,000 34,529,000
OTHER SHORT-TERM BORROWINGS 38,500,000 35,000,000
ACCRUED EXPENSES, TAXES AND OTHER LIABILITIES 4,732,411 5,285,670
- -------------------------------------------------- ------------- -------------
TOTAL LIABILITIES 694,019,303 671,835,618
- -------------------------------------------------- ------------- -------------
- --------------------------------------------------
STOCKHOLDERS' EQUITY:
- --------------------------------------------------
PREFERRED STOCK, $.01 PAR VALUE, AUTHORIZED
250,000 SHARES - -
COMMON STOCK, $5.00 PAR VALUE, AUTHORIZED
20,000,000 SHARES; ISSUED 6,634,869 SHARES IN 1999
AND 6,593,340 SHARES IN 1998; OUTSTANDING 6,558,272
SHARES IN 1999 AND 6,512,138 SHARES IN 1998 33,174,345 32,966,700
SURPLUS 24,428,722 24,236,479
RETAINED EARNINGS 6,330,636 4,866,852
TREASURY STOCK (188,375) (188,375)
ACCUMULATED OTHER COMPREHENSIVE INCOME (1,997,050) (364,710)
UNEARNED COMPENSATION (615,197) (659,054)
- -------------------------------------------------- ------------- -------------
TOTAL STOCKHOLDERS' EQUITY 61,133,081 60,857,892
- -------------------------------------------------- ------------- -------------
- --------------------------------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $755,152,384 $732,693,510
- -------------------------------------------------- ============= =============
(1)
<PAGE>
- ------------------------------------------------------------
ITEM 1 - FINANCIAL STATEMENTS (CONTINUED)
- ------------------------------------------------------------
<TABLE>
- -----------------------------------------------------------------------------
STATE BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 1999 AND 1998 (UNAUDITED)
- -----------------------------------------------------------------------------
<CAPTION>
---------------------------------
THREE MONTHS
---------------------------------
--------------- ---------------
1999 1998
--------------- ---------------
- ------------------------------------------------
INTEREST INCOME:
- ------------------------------------------------
<S> <C> <C>
LOANS $ 9,285,996 $ 8,900,250
FEDERAL FUNDS SOLD AND SECURITIES
PURCHASED UNDER AGREEMENTS TO RESELL 357,254 1,153,370
SECURITIES HELD TO MATURITY AND
SECURITIES AVAILABLE FOR SALE:
STATES AND POLITICAL SUBDIVISIONS 162,228 576,369
MORTGAGE-BACKED SECURITIES 469,622 820,614
GOVERNMENT AGENCY SECURITIES 3,402,921 2,422,427
OTHER SECURITIES 44,786 47,398
------------ ------------
TOTAL INTEREST INCOME 13,722,807 13,920,428
------------ ------------
- ------------------------------------------------
INTEREST EXPENSE:
- ------------------------------------------------
TIME CERTIFICATES OF DEPOSIT OF $100,000 OR MORE 2,742,153 3,623,731
OTHER DEPOSITS AND TEMPORARY BORROWINGS 2,480,524 3,110,342
------------ ------------
TOTAL INTEREST EXPENSE 5,222,677 6,734,073
------------ ------------
NET INTEREST INCOME 8,500,130 7,186,355
PROVISION FOR POSSIBLE LOAN LOSSES 750,000 450,000
------------ ------------
NET INTEREST INCOME AFTER PROVISION
FOR POSSIBLE LOAN LOSSES 7,750,130 6,736,355
------------ ------------
- ------------------------------------------------
OTHER INCOME:
- ------------------------------------------------
SERVICE CHARGES ON DEPOSIT ACCOUNTS 298,097 290,144
NET SECURITY GAINS (LOSSES) 45,552 (8,255)
OTHER OPERATING INCOME 153,856 124,625
------------ ------------
TOTAL OTHER INCOME 497,505 406,514
------------ ------------
INCOME BEFORE OPERATING EXPENSES 8,247,635 7,142,869
------------ ------------
- ------------------------------------------------
OPERATING EXPENSES:
- ------------------------------------------------
SALARIES AND OTHER EMPLOYEE BENEFITS 3,093,520 2,764,703
OCCUPANCY 447,488 402,881
EQUIPMENT 195,786 172,545
MARKETING AND ADVERTISING 144,000 114,000
DEPOSIT ASSESSMENT FEES 38,390 34,098
AMORTIZATION OF INTANGIBLES 9,034 56,452
OTHER OPERATING EXPENSES 1,049,821 945,654
------------ ------------
TOTAL OPERATING EXPENSES 4,978,039 4,490,333
------------ ------------
INCOME BEFORE INCOME TAXES 3,269,596 2,652,536
PROVISION FOR INCOME TAXES 1,020,831 917,995
- ------------------------------------------------ ------------ ------------
NET INCOME $ 2,248,765 $ 1,734,541
- ------------------------------------------------ ------------ ------------
- ------------------------------------------------
BASIC EARNINGS PER COMMON SHARE $ 0.34 $ 0.27
- ------------------------------------------------ ------------ ------------
- ------------------------------------------------
DILUTED EARNINGS PER COMMON SHARE $ 0.34 $ 0.27
- ------------------------------------------------ ------------ ------------
- ------------------------------------------------
AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 6,526,833 6,431,468
- ------------------------------------------------ ------------ ------------
</TABLE>
(2)
<PAGE>
- ----------------------------------------------------------------
ITEM 1 - FINANCIAL STATEMENTS (CONTINUED)
- ----------------------------------------------------------------
- ----------------------------------------------------------------
STATE BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1999 AND 1998 (UNAUDITED)
- ----------------------------------------------------------------
- ---------------------------------------------------- ----------- ------------
OPERATING ACTIVITIES: 1999 1998
- ---------------------------------------------------- ----------- ------------
NET INCOME $2,248,765 $1,734,541
ADJUSTMENTS TO RECONCILE NET INCOME TO NET
CASH PROVIDED BY OPERATING ACTIVITIES:
PROVISION FOR POSSIBLE LOAN LOSSES 750,000 450,000
DEPRECIATION AND AMORTIZATION OF BANK
PREMISES AND EQUIPMENT 199,640 156,787
AMORTIZATION OF INTANGIBLES 9,034 56,452
AMORTIZATION OF NET PREMIUM ON SECURITIES 48,046 375,027
AMORTIZATION OF UNEARNED COMPENSATION 64,914 114,691
NET SECURITY (GAINS) LOSSES (45,552) 8,255
DECREASE IN OTHER ASSETS 1,019,870 1,243,384
DECREASE IN ACCRUED EXPENSES, TAXES
AND OTHER LIABILITIES (559,194) (253,531)
------------ ------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 3,735,523 3,885,606
------------ ------------
- -----------------------------------------------------
INVESTING ACTIVITIES:
- -----------------------------------------------------
PROCEEDS FROM MATURITIES OF SECURITIES HELD
TO MATURITY 200,000 4,227,000
PURCHASES OF SECURITIES HELD TO MATURITY (257,000) (2,702,500)
PROCEEDS FROM SALES OF SECURITIES AVAILABLE
FOR SALE 32,863,181 84,732,324
PROCEEDS FROM MATURITIES OF SECURITIES AVAILABLE
FOR SALE 43,501,398 70,509,942
PURCHASES OF SECURITIES AVAILABLE FOR SALE (70,976,717)(100,613,529)
INCREASE IN LOANS - NET (16,904,526) (789,662)
PURCHASES OF BANK PREMISES AND EQUIPMENT - NET (206,515) (122,257)
------------ ------------
NET CASH (USED IN) PROVIDED BY INVESTING ACTIVITIES (11,780,179) 55,241,318
------------ ------------
- -----------------------------------------------------
FINANCING ACTIVITIES:
- -----------------------------------------------------
DECREASE IN DEMAND AND SAVINGS DEPOSITS (3,963,148) (7,568,130)
INCREASE (DECREASE) IN TIME DEPOSITS 17,819,092 (44,885,069)
INCREASE (DECREASE) IN FEDERAL FUNDS PURCHASED 5,200,000 (6,000,000)
INCREASE (DECREASE) IN SECURITIES SOLD UNDER
AGREEMENTS TO REPURCHASE 181,000 (8,593,000)
INCREASE (DECREASE) IN OTHER SHORT-TERM
BORROWINGS 3,500,000 (1,000,000)
CASH DIVIDENDS PAID (779,044) (730,526)
PROCEEDS FROM SHARES ISSUED UNDER DIVIDEND
REINVESTMENT PLAN 208,208 212,522
PROCEEDS FROM STOCK OPTIONS EXERCISED 170,623 181,257
------------ ------------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 22,336,731 (68,382,946)
------------ ------------
- -----------------------------------------------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 14,292,075 (9,256,022)
- -----------------------------------------------------
- -----------------------------------------------------
CASH AND CASH EQUIVALENTS - JANUARY 1 19,274,435 60,932,820
- -----------------------------------------------------
- ----------------------------------------------------- ----------- ------------
CASH AND CASH EQUIVALENTS - MARCH 31 $33,566,510 $51,676,798
- ----------------------------------------------------- ----------- ------------
- -----------------------------------------------------
SUPPLEMENTAL DATA:
- -----------------------------------------------------
INTEREST PAID $5,225,059 $6,837,963
INCOME TAXES PAID $503,000 $288,592
ADJUSTMENT TO UNREALIZED NET LOSS ON SECURITIES
AVAILABLE FOR SALE ($2,511,066) ($327,950)
DIVIDENDS DECLARED BUT NOT PAID AS OF QUARTER
END $786,421 $737,805
(3)
<PAGE>
- --------------------------------------------------------
ITEM 1 - FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------
<TABLE>
- -----------------------------------------------------------------------------
STATE BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
AND COMPREHENSIVE INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 1999 AND 1998 (UNAUDITED)
- -----------------------------------------------------------------------------
<CAPTION>
ACCUMULATED
OTHER
COMPRE- UNEARNED COMPRE-
COMMON RETAINED TREASURY HENSIVE COMPEN- HENSIVE
STOCK SURPLUS EARNINGS STOCK INCOME SATION TOTAL INCOME
----- ------- -------- ----- ------ ------ ----- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE, JANUARY 1, 1999 $32,966,700 $24,236,479 $4,866,852 ($188,375) ($364,710) ($659,054) $60,857,892
COMPREHENSIVE INCOME:
NET INCOME 2,248,765 2,248,765 $ 2,248,765
----------
OTHER COMPREHENSIVE INCOME,
NET OF TAX:
UNREALIZED HOLDING LOSSES
ARISING DURING THE PERIOD (1,598,231)
RECLASSIFICATION ADJUSTMENT
FOR GAINS INCLUDED IN NET INCOME (34,109)
----------
TOTAL OTHER COMPREHENSIVE INCOME (1,632,340) (1,632,340) (1,632,340)
----------
TOTAL COMPREHENSIVE INCOME $616,425
----------
CASH DIVIDEND
($0.12 PER SHARE) (784,981) (784,981)
SHARES ISSUED UNDER THE DIVIDEND
REINVESTMENT PLAN (13,485 SHARES
AT 95% OF MARKET VALUE) 67,425 140,783 208,208
STOCK OPTIONS EXERCISED 140,220 30,403 170,623
AMORTIZATION OF UNEARNED
COMPENSATION 21,057 43,857 64,914
----------- ----------- ---------- --------- ------------ ---------- ------------
- -----------------------------
BALANCE, MARCH 31, 1999 $33,174,345 $24,428,722 $6,330,636 ($188,375)($1,997,050) ($615,197) $61,133,081
- -----------------------------
----------- ----------- ---------- --------- ------------ ---------- ------------
BALANCE, JANUARY 1, 1998 $30,970,630 $18,457,388 $6,567,744 - ($215,067) ($850,432) $54,930,263
COMPREHENSIVE INCOME:
NET INCOME 1,734,541 1,734,541 $ 1,734,541
----------
OTHER COMPREHENSIVE INCOME,
NET OF TAX:
UNREALIZED HOLDING LOSSES ARISING
DURING THE PERIOD (178,966)
RECLASSIFICATION ADJUSTMENT
FOR GAINS INCLUDED IN NET INCOME (14,688)
----------
TOTAL OTHER COMPREHENSIVE INCOME (193,654) (193,654) (193,654)
----------
TOTAL COMPREHENSIVE INCOME $1,540,887
-----------
CASH DIVIDEND
($0.11 PER SHARE) (737,805) (737,805)
SHARES ISSUED UNDER THE DIVIDEND
REINVESTMENT PLAN (8,685 SHARES
AT 95% OF MARKET VALUE) 43,425 169,097 212,522
STOCK OPTIONS EXERCISED 153,050 28,207 181,257
AMORTIZATION OF UNEARNED
COMPENSATION 66,481 48,210 114,691
------------ ----------- ---------- ---------- ---------- ---------- -----------
- -----------------------------
BALANCE, MARCH 31, 1998 $31,167,105 $18,721,173 $7,564,480 - ($408,721) ($802,222) $56,241,815
- ----------------------------- ------------ ----------- ---------- ---------- ---------- ---------- -----------
</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 March 31, 1999 and December 31, 1998, its
consolidated earnings for the three months ended March 31, 1999 and 1998 and
cash flows and changes in stockholders' equity and comprehensive income for the
three months ended March 31, 1999 and 1998. The results of operations for the
three months ended March 31, 1999 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 1998 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 March 31, 1999.
Stock held in treasury by the Company is accounted for using the cost method,
which treats stock held in treasury as a reduction to total stockholders'
equity.
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 March 31, 1999, 61,403 shares
have been released from the suspense account and are considered outstanding for
earnings per share computations.
During 1998, the Company adopted the Financial Accounting Standards Board's
Statement of Financial Accounting Standards ("SFAS") No. 130, "Reporting
Comprehensive Income." SFAS No. 130 requires an entity to present, as a
component of comprehensive income, the amounts from transactions and other
events which currently are excluded from the statement of income and are
recorded directly to stockholders' equity. The adoption of SFAS No. 130, which
concerns disclosure standards only, did not have a material impact on the
Company's financial position and results of operations.
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
(5)
<PAGE>
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, "Earnings Per Share."
For the Three Months Ended March 31, 1999 1998
- --------------------------------------- ---- ----
Net income $2,248,765 $1,734,541
Average dilutive stock options outstanding 258,087 193,711
Average exercise price per share $8.56 $8.48
Average market price - diluted basis $17.27 $23.05
Average common shares outstanding 6,526,833 6,431,468
Increase in shares due to exercise of options -
diluted basis 101,913 109,996
--------- ---------
Adjusted common shares outstanding - diluted 6,628,746 6,541,464
========= =========
Net income per share-basic $0.34 $0.27
========= =========
Net income per share-diluted $0.34 $0.27
========= =========
UNREALIZED NET GAIN (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 approximately $1,349,000 and $1,420,000 was established
for $8,352,709 of the total impaired loans at March 31, 1999 and December 31,
1998, respectively, with the balance of impaired loans requiring no specific
allowance. The total average impaired loan balance was $8,663,601 for the
quarter ended March 31, 1999 and $8,437,893 for the year ended December 31,
1998. Total impaired loans amounted to $8,662,116 at March 31, 1999 and December
31, 1998. At March 31, 1999, 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 $5,529,049 and the amount of impaired
collateral-dependent loans, measured based on the fair value of the underlying
collateral, is $3,133,067. Total interest income recognized for impaired,
nonaccrual and restructured loans was $20,166 and $34,000 for the three months
ended March 31, 1999 and 1998, respectively.
(6)
<PAGE>
Activity in the allowance for possible loan losses for the three months ended
March 31, 1999 and 1998 is as follows:
1999 1998
---- ----
Balance, January 1 $5,788,440 $5,123,651
Provision charged to income 750,000 450,000
Charge-offs, net of recoveries of
$136,961 in 1999 and $165,311 in 1998 (27,941) (222,900)
---------- ----------
Balance, March 31 $6,510,499 $5,350,751
========== ==========
(7)
<PAGE>
ITEM 2. - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Overview - State Bancorp, Inc. (the "Company") is a one-bank holding company
which was formed on June 24, 1986. The Company operates as the parent for its
wholly-owned subsidiary, State Bank of Long Island and subsidiaries (the
"Bank"), a New York State chartered commercial bank founded in 1966. The income
of the Company is derived through the operation of the Bank and its
subsidiaries, SB Portfolio Management Corp. ("SB Portfolio"), SB Financial
Services Corp. ("SB Financial"), New Hyde Park Leasing Corporation and SB ORE
Corp.
Material Changes in Financial Condition - Total assets of the Company amounted
to $755.2 million at March 31, 1999, an increase of $22.5 million or 3.1% when
compared to December 31, 1998, primarily due to an increase in commercial loans
and mortgages. Scheduled amortization and normal clean up activity partially
offset the new business that was generated during the first three months of the
year. The loan portfolio grew approximately 4.0% during the first quarter and
management anticipates continued expansion of the loan portfolio throughout the
balance of the year.
At March 31, 1999, total deposits increased by $13.9 million to $610.9 million
when compared to December 31, 1998. This increase was primarily due to an
increase of $8.7 million in demand deposits and a $17.8 million increase in
certificates of deposit, predominantly certificates of deposit over $100,000
("Jumbo certificates of deposit"), offset by a decrease in savings deposits of
$12.6 million. Growth in core deposits (demand, NOW, savings and money market
accounts) of individuals, partnerships and corporations remains strong, due
largely to the Company's two new branch locations in Suffolk County. These
locations accounted for $7 million and $5.9 million of the increases in demand
deposits and Jumbo certificates of deposits, respectively. These locations also
provided an additional $41.4 million in average deposits in the first quarter
1999 compared to the same period in 1998. The Company also experienced an
increase in short-term borrowings of $8.9 million during the first quarter, due
to higher levels of Federal funds purchased and other short-term borrowings.
Average assets for the first quarter of 1999 were down slightly by $4.9 million
or 0.6% to $760.7 million from the comparable 1998 period. The decrease is
directly related to a $62.2 million decline in cash and cash equivalents, mainly
Securities Purchased Under Agreements to Resell (down $58.1 million), which are
used to collateralize municipal deposits. Sources of asset expansion included
growth in the loan portfolio (up on average $49.0 million or 13.0%) and growth
in investment securities (up on average $5.9 million or 2.2%). Funding this
growth were increases in demand deposits, money fund accounts and Jumbo
certificates of deposit. Average borrowed funds, primarily Federal Home Loan
Bank advances, decreased by $1.7 million during the first quarter of 1999,
compared to 1998. The net result of these activities was a shift in the mix of
the Company's balance sheet that yielded a 67-basis point improvement in the
first quarter net interest margin to 4.61%. Management anticipates that growth
in loans during the balance of 1999 coupled with a continued increase in core
deposit balances will serve to widen the net interest rate spread during the
last three quarters of the year.
(8)
<PAGE>
The Company's capacity to grow its assets and earnings stems, in part, 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 March 31,
1999, management believes that the Company and the Bank meet all capital
adequacy requirements to which they are subject. The Bank's capital adequacy
ratios are 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 $61.1 million at March 31, 1999, an increase of
$4.9 million or 8.7% versus the comparable 1998 date. Excluding valuations
related to SFAS No. 115 at March 31, 1999 and 1998, total stockholders' equity
grew at a year-to-year rate of 11.4%. The Company has no plans or commitments
for capital utilization or expenditures that would affect its current capital
position or would impact its future financial performance. The following table
(2-1) summarizes the Company's capital ratios as of March 31, 1999 and compares
them to current regulatory guidelines and December 31, and March 31, 1998 actual
results.
TABLE 2-1
Tier I capital/ Total Capital/
Tier I Risk-Weighted Risk-Weighted
Leverage Assets Assets
Regulatory Minimum 3.00%-4.00% 4.00% 8.00%
Ratios as of:
March 31, 1999 8.22% 12.75% 14.00%
December 31, 1998 8.05% 12.82% 14.04%
March 31, 1998 7.34% 13.22% 14.47%
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 assure 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 funds, 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
(9)
<PAGE>
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 quarter of 1999, the
Company's liquidity position remained stable and well within acceptable industry
standards. As previously described, low-cost demand and money fund deposit
balances continued to grow during the first quarter of 1999, 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 March 31, 1999,
the Company had access to $28.5 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 $6.5 million in formal and $10.0 million in informal lines
of credit extended by correspondent banks to be utilized, if needed, for
short-term funding purposes as well as approximately $5.8 million in securities
available to be pledged to secure repurchase agreements or other borrowings at
March 31, 1999.
Material Changes in Results of Operations - Despite a 67% increase in the
provision for loan losses during 1999 versus 1998, net income for the three
months ended March 31, 1999 was $2.2 million, a 29.6% improvement over the
comparable 1998 period. The higher level of earnings in 1999 resulted from an
18.3% improvement in net interest income, an increase in noninterest income,
higher security gains and a lower effective income tax rate. Somewhat offsetting
these improvements were increases in total operating expenses and the provision
for loan losses during the first quarter of 1999.
The increase in net interest income, up $1.3 million to $8.5 million, resulted
from an expanded interest-earning asset base, principally commercial loans and
callable Government agency securities. The Company's average loan portfolio grew
by $49.0 million or 13.0% during the first quarter, with $42.1 million
attributable to increases in commercial loans and mortgages. The strength of the
Long Island economy and the ongoing consolidation of the local banking market
continue to provide opportunity for the Company to increase the loan portfolio.
The Company, offering superior service and response time coupled with
competitive product pricing, has been able to steadily improve its market share
through conservative underwriting and credit standards. Products such as the
Small Business Line of Credit have been extremely well received by the local
business community and are generating loan volume and creating new cross sell
opportunities for the Company's full range of deposit and credit products. In
addition, management has added full time staff who will concentrate on the
marketing and sales efforts of new and existing retail products. Management of
the Company has also targeted the Suffolk and Queens County markets as the most
obvious candidates for expansion of the loan portfolio during 1999.
The Company's investment portfolio expanded, on average, by 2.2% in 1999 versus
1998, primarily through growth in callable Government agency securities (up on
average $68.4 million) offset by a decrease in tax-exempt local municipal notes
(down on average $44.0 million). Management of the Company continues to be an
active purchaser of agency securities due to their attractive yields and their
pledgeability to secure municipal deposits.
Other income increased by 22.4% in the first quarter of 1999 due to an increase
in service charges on deposit accounts and a higher level of security gains.
Excluding the impact of securities
(10)
<PAGE>
transactions, other income increased by 9.0% in 1999. Annuity sales, wire
transfer fees and ATM fees were the primary drivers behind this growth.
Management expects that other income will grow at an annualized rate of 5.0% to
10.0 % during 1999. Improved deposit service and return item charges, growth in
annuity sales and wire transfer fees and the imposition of an ATM surcharge on
non-customers are all expected to contribute to this growth.
Total operating expenses rose by 10.9% during the first quarter of 1999, mainly
due to increases in salaries and employee benefits arising from staff expansion
in product support areas. In addition, other operating expenses increased due to
higher marketing and advertising costs coupled with increases in credit and
collection fees and computer-related depreciation costs. Somewhat offsetting the
foregoing expense increases was a decline in core deposit intangibles
amortization expense and a reduction in costs related to maintenance on
foreclosed properties.
The increase in operating expenses during the first quarter of 1999 was offset
by an increase in net revenue, resulting in a lower operating efficiency ratio
(total operating expenses as a percentage of fully taxable equivalent net
interest revenue, excluding securities transactions). The 1999 efficiency ratio
decreased to 54.5% from 56.9% a year ago. The Company's other primary measure of
expense control, the ratio of total operating expenses to average total assets,
increased during the first three months of 1999 to 2.65% from a level of 2.38%
in 1998. This ratio still places the Company in the top 15% of its peer group
for this efficiency measure. 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 $5.9 million at March 31, 1999, an increase of $1.5
million versus December 31, 1998 and $1.6 million versus the comparable 1998
date. The level of restructured, accruing loans at March 31, 1999 declined by
$5.1 million when compared to year-end 1998. Although classified as
nonperforming for reporting purposes, restructured loans continue to accrue and
pay interest in accordance with their revised terms. The reduction in
restructured, accruing loans that took place during the first quarter of 1999
resulted from the shift of a $5.0 million credit to the ninety days past due and
still accruing category. As outlined in the Company's 1998 Annual Report to
Stockholders, this credit 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
allowance for possible loan losses amounted to $6.5 million or 1.49% of total
loans at March 31, 1999 versus $5.4 million and 1.41%, respectively, at the
comparable 1998 date. The allowance for possible loan losses as a percentage of
nonaccrual loans, restructured and accruing loans and loans 90 days or more past
due and still accruing improved to 60.8% at March 31, 1999 from 54.7% and 47.5%
at December 31, 1998 and March 31, 1998, respectively. The higher 1999 provision
for possible loan losses during the first quarter reflects the increase in
nonperforming loans. A further review of the Company's nonperforming assets may
be found in Table 2-3 following this analysis.
(11)
<PAGE>
Year 2000 Compliance
The Year 2000 ("Y2K") 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 Y2K 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 Y2K problem could adversely impact Company's suppliers,
creditors and the creditworthiness of its borrowers.
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. Responses to these questionnaires are currently being
documented and reviewed. 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 requires each of these service providers to provide written proof of
their Y2K compliance.
The Company's Y2K Action Team, formed in 1996 to address this problem, completed
the first three phases of the Company's Y2K project: the Awareness, Assessment
and Renovation phases. The Renovation phase for all mission-critical systems,
which includes upgrading all noncompliant hardware and software, was completed
in the fourth quarter of 1998. The Action team is embarking on the most
important phase of the project: the Validation phase. The Company tested all
critical applications as of the end of the first quarter 1999. Based on these
tests, management anticipates that all of the Company's mission critical
date-sensitive hardware, software and other systems will be Y2K compliant;
however, the probability of such likelihood cannot be determined. The Company
has not developed any of its own computer programs internally nor does it employ
a programming staff. All of the software related to its major application
systems has been purchased from third party vendors. Generally, software
provided by third parties and included in the Company's systems is developed by
leading software suppliers with Y2K programs underway and a majority of these
vendors have certified that their products are Y2K compliant. As part of its
assessment procedures, the Company assessed and continues to monitor the action
plans of each major outside vendor. There can, however, be no guarantee that the
software of other companies, on which the Company's systems rely, will be timely
converted or that failure to properly convert by another company would not have
a material adverse effect on the Company. The Company presently believes that,
with continued modifications to existing software and conversions to new
software, the Y2K problems will be mitigated without causing a material adverse
effect upon the operations of the Company and that its internal systems and
equipment will be Y2K compliant in a timely manner.
Despite its best efforts to ensure Y2K compliance, it is possible that system
failures may occur. The Company has developed contingency plans, which involve,
among other actions, utilization of an alternate service provider or alternate
products available through existing vendors. The contingency
(12)
<PAGE>
plans, which are constantly reviewed, also address a temporary disruption of
electric or communication services.
Monitoring and managing the Y2K Project will result in additional direct and
indirect costs to the Company. Direct charges include potential charges by third
party software vendors for product enhancements, costs involved in testing
software products for Y2K compliance, training, and any resulting costs for
developing and implementing contingency plans for critical software products
that are not enhanced. Indirect costs will principally consist of the time
devoted by employees in monitoring software vendor progress, testing enhanced
software products and implementing any contingency plans. The Company estimates
that the total costs related to the Y2K problem are $225,000, of which $80,000
is primarily related to the costs to enhance or replace software and hardware
problems. The balance is not likely to be incremental costs, but rather will
represent the redeployment of existing resources. Two of the Company's other
information technology projects, document and check imaging and personal
computer banking, have been delayed due to the implementation of the Y2K
project. Both direct and indirect costs of addressing the Y2K problem will be
charged to earnings as incurred. To date, $80,000 of the total estimated costs
associated with the Y2K problem have been expended, most of which was expended
prior to the first quarter of 1999. Funds are provided by operations and are
included in existing operating budgets.
The preceding Y2K issue discussion contains various forward-looking statements
which represent the Company's beliefs or expectations regarding future events.
When used in the Y2K discussion, the words "believes," "expects," "estimates"
and similar expressions are intended to identify forward-looking statements. All
forward-looking statements involve a number of risks and uncertainties. The
anticipated impact and costs of the Y2K project, as well as the date on which
the Company expects to complete the remediation and validation phases and the
contingency plan of its Y2K project, are based on management's best estimates
using information currently available and numerous assumptions about future
events. However, there can be no guarantee that these estimates will be achieved
and actual results could differ materially from those plans. Differences
include, but are not limited to, the availability of qualified personnel and
other information technology; the ability to identify and remediate all date
sensitive lines of computer code or to replace computer chips in affected
systems or equipment; and the actions of governmental agencies or other third
parties with respect to Y2K problems. Based on its current estimates and
information currently available, costs associated to ensure compliance with Y2K
issues are not expected to have a material adverse effect on the Company's
consolidated financial statements in 1999.
(13)
<PAGE>
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONTINUED)
<TABLE>
===============================================================================
MARCH 31, 1999
- -----------------
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) $ 265,829 $ 15,251 $ 77,405 $ 73,857 $ 5,171 $ 437,513
Securities Purchased Under Agreements to Resell 8,500 - - - - 8,500
Securities Held to Maturity 2,079 153 257 84 - 2,573
Securities Available for Sale 3) 27,522 17,251 34,380 193,017 2,368 274,538
--------- --------- --------- --------- --------- ---------
Total Interest-Earning Assets 303,930 32,655 112,042 266,958 7,539 723,124
Unrealized Net Loss on Securities Available for Sale (3,101) - - - - (3,101)
Cash and Due from Banks 25,067 - - - - 25,067
All Other Assets 7) 4,673 1,529 - - 3,860 10,062
--------- --------- --------- --------- --------- ---------
Total Assets $ 330,569 $ 34,184 $ 112,042 $ 266,958 $ 11,399 $ 755,152
--------- --------- --------- --------- --------- ---------
- ---------------------------------------------------------
INTEREST - SENSITIVE LIABILITIES : 1)
- ---------------------------------------------------------
Savings Accounts 4) $ 11,237 $ 11,237 $ 89,898 $ - $ - $ 112,372
Money Fund and Now Accounts 5) 33,270 7,378 29,959 - - 70,607
Time Deposits 6) 241,714 26,819 24,865 501 - 293,899
--------- --------- --------- --------- --------- ---------
Total Interest-Bearing Deposits 286,221 45,434 144,722 501 - 476,878
Securities Sold Under Agreements to Repurchase,
Federal Funds Purchased, and Other Borrowings 78,410 - - - - 78,410
--------- --------- --------- --------- --------- ---------
Total Interest-Bearing Liabilities 364,631 45,434 144,722 501 - 555,288
All Other Liabilities, Equity and Demand Deposits 7) 3,379 1,281 72 - 195,132 199,864
--------- --------- --------- --------- --------- ---------
Total Liabilities and Equity $ 368,010 $ 46,715 $ 144,794 $ 501 $ 195,132 $ 755,152
--------- --------- --------- --------- --------- ---------
Cumulative Interest-Sensitivity Gap 8) ($ 60,701) ($ 73,480)($ 106,160) $ 160,297 $ 167,836
Cumulative Interest-Sensitivity Ratio 9) 83.4% 82.1% 80.9% 128.9% 130.2%
Cumulative Interest-Sensitivity Gap
As a % of Total Assets (8.0%) (9.7%) (14.1%) 21.2% 22.2%
<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
MARCH 31, 1999 VERSUS DECEMBER 31, 1998 AND MARCH 31, 1998
(DOLLARS IN THOUSANDS)
- -----------------------------------------------------------------------------
NONPERFORMING ASSETS BY TYPE: PERIOD ENDED:
----------------------------------
3/31/99 12/31/98 3/31/98
--------- ---------- ---------
NONACCRUAL LOANS $5,171 $3,676 $4,062
OTHER REAL ESTATE OWNED 704 704 189
-------- ---------- ---------
TOTAL NONPERFORMING ASSETS $5,875 $4,380 $4,251
-------- ---------- ---------
RESTRUCTURED, ACCRUING LOANS $ 492 $5,545 (1) $ 805
LOANS 90 DAYS OR MORE PAST DUE
AND STILL ACCRUING $5,039 (1) $1,352 $6,401 (1)
GROSS LOANS OUTSTANDING $437,513 $420,636 $378,200
TOTAL STOCKHOLDERS' EQUITY $61,133 $60,858 $56,242
ANALYSIS OF THE ALLOWANCE FOR QUARTER ENDED:
----------------------------------
POSSIBLE LOAN LOSSES: 3/31/99 12/31/98 3/31/98
--------- ---------- ---------
BEGINNING BALANCE $5,788 $5,479 $5,124
PROVISION 750 450 450
NET CHARGE-OFFS (28) (141) (223)
--------- ---------- ---------
ENDING BALANCE $6,510 $5,788 $5,351
--------- ---------- ---------
KEY RATIOS AT PERIOD-END:
ALLOWANCE AS A % OF TOTAL LOANS 1.49% 1.38% 1.41%
NONACCRUAL LOANS AS A % OF TOTAL LOANS 1.18% 0.87% 1.07%
NONPERFORMING ASSETS (2) AS A % OF TOTAL
LOANS AND OTHER REAL ESTATE OWNED 1.34% 1.04% 1.12%
ALLOWANCE FOR POSSIBLE LOAN LOSSES AS
A % OF NONACCRUAL LOANS 125.89% 157.45% 131.73%
ALLOWANCE FOR POSSIBLE LOAN LOSSES AS A %
OF NONACCRUAL LOANS, RESTRUCTURED,
ACCRUING LOANS AND LOANS 90 DAYS OR
MORE PAST DUE AND STILL ACCRUING 60.83% 54.74% 47.49%
(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>
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.
5/13/99 s/Daniel T. Rowe
- -------- -------------------------
Date Daniel T. Rowe, President
5/13/99 s/Brian K. Finneran
- -------- ----------------------------
Date Brian K. Finneran, Secretary
(Principal Financial Officer)
(16)
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 9
<CIK> 0000723458
<NAME> STATE BANCORP INC.
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-1-1999
<PERIOD-END> MAR-31-1999
<EXCHANGE-RATE> 1
<CASH> 24,869,049
<INT-BEARING-DEPOSITS> 197,461
<FED-FUNDS-SOLD> 8,500,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 274,538,420
<INVESTMENTS-CARRYING> 2,573,035
<INVESTMENTS-MARKET> 2,584,621
<LOANS> 437,512,965
<ALLOWANCE> 6,510,499
<TOTAL-ASSETS> 755,152,384
<DEPOSITS> 610,876,892
<SHORT-TERM> 78,410,000
<LIABILITIES-OTHER> 4,732,411
<LONG-TERM> 0
0
0
<COMMON> 33,174,345
<OTHER-SE> 27,958,736
<TOTAL-LIABILITIES-AND-EQUITY> 755,152,384
<INTEREST-LOAN> 9,285,996
<INTEREST-INVEST> 4,075,332
<INTEREST-OTHER> 361,479
<INTEREST-TOTAL> 13,722,807
<INTEREST-DEPOSIT> 4,629,036
<INTEREST-EXPENSE> 5,222,677
<INTEREST-INCOME-NET> 8,500,130
<LOAN-LOSSES> 750,000
<SECURITIES-GAINS> 45,552
<EXPENSE-OTHER> 4,978,039
<INCOME-PRETAX> 3,269,596
<INCOME-PRE-EXTRAORDINARY> 2,248,765
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,248,765
<EPS-PRIMARY> 0.34
<EPS-DILUTED> 0.34
<YIELD-ACTUAL> 7.49
<LOANS-NON> 5,171,402
<LOANS-PAST> 5,039,124
<LOANS-TROUBLED> 491,887
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 5,788,440
<CHARGE-OFFS> 164,902
<RECOVERIES> 136,961
<ALLOWANCE-CLOSE> 6,510,499
<ALLOWANCE-DOMESTIC> 5,854,555
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 655,944
</TABLE>
