UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1996
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from -- to -- .
Commission file number 0-12638
F&M BANCORP
(Exact name of registrant as specified in its charter)
Maryland 52-1316473
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
110 Thomas Johnson Drive
Frederick, Maryland 21702
(Address of principal executive offices) (zip code)
301-694-4000
(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 [ ]
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Common Stock $5 par value, 4,427,403 shares outstanding as of November 4, 1996.
Exhibit index located on page 19.
<PAGE>
F&M BANCORP
TABLE OF CONTENTS
PART I: FINANCIAL INFORMATION PAGE
Consolidated Balance Sheets (Unaudited),
September 30, 1996 and 1995 and December 31, 1995 3
Consolidated Statements of Income (Unaudited),
Three and Nine Months Ended September 30, 1996 and 1995 4
Consolidated Statements of Cash Flows (Unaudited),
Nine Months Ended September 30, 1996 and 1995 5
Consolidated Statements of Changes in Shareholders'
Equity (Unaudited), Nine Months Ended September 30, 1996
and Twelve Months Ended December 31, 1995 6
Notes to Consolidated Financial Statements (Unaudited) 7
Management's Discussion and Analysis of Financial
Condition and Results of Operations 14
PART II OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 22
Signatures 23
<PAGE>
<TABLE>
CONSOLIDATED BALANCE SHEETS (Unaudited)
F&M Bancorp and Subsidiary
<CAPTION>
(Dollars in thousands, September 30 September 30 December 31
except per share amounts) 1996 1995 1995
- -----------------------------------------------------------------------------
<S> <C> <C> <C>
ASSETS
Cash and due from banks $ 32,009 $ 21,024 $ 26,811
Federal funds sold -- 4,100 18,500
-------- -------- --------
Total cash and cash equivalents 32,009 25,124 45,311
-------- -------- --------
Loans held for sale -- 362 841
-------- -------- --------
Investment securities
Held-to-maturity, fair value
$66,499, $86,385, and $61,299,
respectively 66,117 84,388 60,146
Available-for-sale, at fair value 114,225 82,665 116,988
-------- -------- --------
Total investment securities 180,342 167,053 177,134
-------- -------- --------
Loans, net of unearned income 508,263 496,506 484,694
Less: Allowance for credit losses (6,020) (5,595) (6,164)
-------- -------- --------
Net loans 502,243 490,911 478,530
-------- -------- --------
Bank premises and equipment, net 19,741 15,730 16,391
Other real estate owned 2,646 2,707 2,351
Interest receivable 5,344 5,055 5,357
Intangible assets 4,115 5,404 4,451
Other assets 13,632 9,129 9,488
-------- -------- --------
Total assets $760,072 $721,475 $739,854
======== ======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
Deposits
Noninterest-bearing $ 99,554 $ 86,733 $ 96,266
Interest-bearing 528,168 522,852 524,791
-------- -------- --------
Total deposits 627,722 609,585 621,057
Federal funds purchased and
securities sold under agreements
to repurchase 35,509 36,280 40,158
Other short-term borrowings 16,601 1,853 1,392
Accrued interest and other liabilities 7,192 6,446 7,228
-------- -------- --------
Total liabilities 687,024 654,164 669,835
-------- -------- --------
Shareholders' equity
Common stock, par value $5 per share;
authorized 10,000,000 shares;
issued and outstanding 4,426,934
shares, 4,412,550 shares, and
4,413,600 shares, respectively 22,135 22,063 22,068
Surplus 24,874 24,608 24,625
Retained earnings 26,675 21,617 23,169
Net unrealized gain (loss) on
securities available for sale (636) (977) 157
-------- -------- --------
Total shareholders' equity 73,048 67,311 70,019
-------- -------- --------
Total liabilities and shareholders'
equity $760,072 $721,475 $739,854
======== ======== ========
</TABLE>
<PAGE>
<TABLE>
CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
F&M BANCORP and Subsidiary
<CAPTION>
Nine month period Three month period
(Dollars in thousands, ended September 30 ended September 30
except per share amounts) 1996 1995 1996 1995
- -----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Interest Income
Interest and fees on loans $32,060 $33,335 $10,962 $11,306
Interest and dividends on
investment securities
Taxable 5,028 4,210 1,743 1,399
Tax Exempt 2,737 2,671 899 883
Interest on federal funds sold 425 139 30 118
------- ------- ------- -------
Total interest income 40,250 40,355 13,634 13,706
------- ------- ------- -------
Interest Expense
Interest on deposits 15,932 15,724 5,270 5,533
Interest on federal funds
purchased and securities sold
under agreements to repurchase 1,339 1,683 491 497
Interest on other short-term
borrowings 140 165 105 19
------- ------- ------- -------
Total interest expense 17,411 17,572 5,866 6,049
------- ------- ------- -------
Net interest income 22,839 22,783 7,768 7,657
Provision for credit losses 900 950 300 350
------- ------- ------- -------
Net interest income after
provision for credit losses 21,939 21,833 7,468 7,307
------- ------- ------- -------
Noninterest Income
Trust income 1,304 1,134 448 398
Service charges on deposit
accounts 2,473 2,169 839 763
Gains on sales of property 58 13 23 2
Gains (losses) on sales of
securities (25) 8 -- 8
Other operating income 2,392 2,166 858 693
------- ------- ------- -------
Total noninterest income 6,202 5,490 2,168 1,864
------- ------- ------- -------
Noninterest Expenses
Salaries and employee benefits 10,194 9,929 3,504 3,406
Occupancy and equipment expense 2,703 2,292 939 823
Other operating expense 6,838 7,384 2,347 2,157
------- ------- ------- -------
Total noninterest expenses 19,735 19,605 6,790 6,386
------- ------- ------- -------
Income before provision for
income taxes 8,406 7,718 2,846 2,785
Provision for income taxes 2,130 1,963 738 737
------- ------- ------- -------
Net Income $ 6,276 $ 5,755 $ 2,108 $ 2,048
======= ======= ======= =======
Earnings per Common Share
Based on weighted average shares
outstanding of 4,422,912 for
1996, 4,407,840 for 1995 $ 1.42 $ 1.31 $ .48 $ .47
======= ======= ======= =======
Dividends per Share $ .60 $ .56 $ .20 $ .20
======= ======= ======= =======
</TABLE>
<PAGE>
<TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
F&M BANCORP and Subsidiary
<CAPTION>
Nine Months Ended
September 30 September 30
(Dollars in thousands) 1996 1995
- -----------------------------------------------------------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 6,276 $ 5,755
Adjustments to reconcile net income to net
cash provided by operating activities
Provision for credit losses 900 950
Provision for other real estate owned -- 418
Depreciation and amortization 1,058 899
Amortization of intangibles 379 393
Net premium amortization on investment securities 349 87
Decrease (Increase) in interest receivable 13 (298)
Increase in interest payable 25 220
Amortization of net loan origination costs (fees) 97 (81)
Gain on sales of property (58) (13)
Loss (gain) on sales of securities 25 (8)
Decrease (increase) in loans held for sale 841 (213)
Increase in other assets (3,726) (2,621)
Increase (decrease) in other liabilities (204) 320
-------- --------
Net cash provided by operating activities 5,975 5,808
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of investment securities to be
held to maturity (6,056) (3,306)
Purchases of investment securities available
for sale (39,815) (25,029)
Proceeds from calls of securities to be held
to maturity -- 255
Proceeds from sales/calls of securities
available for sale 8,479 6,139
Proceeds from maturing securities available for sale 32,556 23,708
Proceeds from maturing securities to be held
to maturity -- 3,736
Net increase in loans (24,710) (17,174)
Purchases of premises and equipment (4,424) (2,945)
Proceeds from sales of property 128 548
Intangible assets -- (1,296)
Other investing activities (349) (71)
-------- --------
Net cash used in investing activities (34,191) (15,435)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase (decrease) in noninterest-bearing
deposits, interest-bearing checking, savings
and money market accounts 4,078 (27,060)
Net increase in certificates of deposit 2,587 34,466
Net increase (decrease) in federal funds purchased
and securities sold under agreements to repurchase (4,649) 4,321
Net increase (decrease) in other short-term
borrowings 15,352 (80)
Cash dividends paid (2,654) (2,486)
Dividend reinvestment plan (19) (40)
Proceeds from issuance of common stock 219 204
-------- --------
Net cash provided by financing activities 14,914 9,325
-------- --------
Net (decrease) in cash and cash equivalents (13,302) (302)
Cash and cash equivalents at beginning of period 45,311 25,426
-------- --------
Cash and cash equivalents at end of period $ 32,009 $ 25,124
======== ========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash payments for interest $ 17,386 $ 17,352
Cash payments for income tax 3,103 1,974
NON-CASH INVESTING AND FINANCING ACTIVITIES
Fair value adjustment for securities available
for sale, net of deferred income taxes payable
(benefits) (793) 1,996
</TABLE>
<PAGE>
<TABLE>
CONSOLIDATED STATEMENTS OF
CHANGES IN SHAREHOLDERS' EQUITY (Unaudited)
F&M BANCORP and Subsidiary
<CAPTION>
Net
Unrealized
Gain
(Loss) on
Securities
(Dollars in thousands Common Retained Available
except per share amounts) Stock Surplus Earnings for Sale Total
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1994 $21,023 $20,126 $23,706 $(2,973) $61,882
Net income -- -- 8,199 -- 8,199
Dividend reinvestment plan -- -- (46) -- (46)
Stock dividend (196,865 shares) 984 4,257 (5,241) -- --
Cash dividends paid
($.76 per share) -- -- (3,368) -- (3,368)
Stock options exercised
(16,217 shares) 82 262 -- -- 344
Stock consideration for options
exercised (4,108 shares) (21) (20) (81) -- (122)
Fair value adjustment for
securities available
for sale, net -- -- -- 3,130 3,130
------- ------- ------- ------- -------
Balance at December 31, 1995 22,068 24,625 23,169 157 70,019
Net income -- -- 6,276 -- 6,276
Dividend reinvestment plan -- -- (19) -- (19)
Cash dividends paid
($.60 per share) -- -- (2,654) -- (2,654)
Stock options exercised
(18,726 shares) 94 278 -- -- 372
Stock consideration for options
exercised (5,392 shares) (27) (29) (97) -- (153)
Fair value adjustment for
securities available
for sale, net -- -- -- (793) (793)
------- ------- ------- ------- -------
Balance at September 30, 1996 $22,135 $24,874 $26,675 $ (636) $73,048
======= ======= ======= ======= =======
</TABLE>
<PAGE>
Notes to Consolidated Financial Statements
(Unaudited)
Note 1. Summary of Significant Accounting Policies
The accompanying financial statements of F&M Bancorp ("Bancorp") are unaudited;
however, in the opinion of management, all adjustments (comprising only normal
recurring accruals) necessary for a fair presentation of the financial
statements have been included. A summary of Bancorp's significant accounting
policies is set forth in Note 1 to the consolidated financial statements in
its Annual Report on Form 10-K for the year ended December 31, 1995 (Audited).
Certain reclassifications to prior year balances have been made in the
accompanying consolidated financial statements to make disclosures consistent
with those of the current year.
Note 2. Pending Acquisition
On April 2, 1996, Bancorp announced it had reached a definitive agreement to
acquire all of the outstanding capital stock of Home Federal Corporation,
Hagerstown, Maryland, in a tax-free transaction. Under the terms of the
agreement, Home Federal Corporation will merge with and into Bancorp. On the
effective date of the merger, each share of Home Federal Corporation's Common
Stock will be converted into a number of shares of Bancorp's Common Stock whose
aggregate value (based on a per share price for Bancorp's Common Stock of 1.6
times the book value per share of its Common Stock as of October 31, 1996,
determined in accordance with generally accepted accounting principles) is 1.65
times the book value of a share of Home Federal Corporation Common Stock. The
transaction has been approved by federal regulatory authorities, Home Federal
stockholders, and Bancorp stockholders and is expected to be consummated during
the fourth quarter of 1996.
Home Federal Corporation had total assets at September 30, 1996 of approximately
$228,646,000. Home Federal Savings Bank, the primary subsidiary of Home
Federal Corporation, currently operates eight banking offices and sixteen ATMs
in Washington and Allegany Counties, Maryland.
<PAGE>
Notes to Consolidated Financial Statements (Unaudited)
Note 3. Investment Securities
Investment securities are summarized as follows:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
September 30, 1996
- -------------------------------------------------------------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
(In thousands) Cost Gains Losses Value
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Available-for-sale:
U.S. Treasury securities
and obligations of U.S.
government corporations
and agencies $ 56,888 $ 27 $ 426 $ 56,489
Obligations of states and
political subdivisions 10,243 159 1 10,401
Mortgage-backed securities 40,575 38 696 39,917
- -------------------------------------------------------------------------------
Total-debt securities 107,706 224 1,123 106,807
Equity securities 7,418 -- -- 7,418
- -------------------------------------------------------------------------------
Total available-for-sale: 115,124 224 1,123 114,225
- -------------------------------------------------------------------------------
Held-to-maturity:
U.S. Treasury securities
and obligations of U.S.
government corporations
and agencies 4,947 31 56 4,922
Obligations of states and
political subdivisions 61,170 798 391 61,577
- -------------------------------------------------------------------------------
Total held-to-maturity 66,117 829 447 66,499
- -------------------------------------------------------------------------------
Total investment securities $181,241 $1,053 $1,570 $180,724
===============================================================================
</TABLE>
<PAGE>
<TABLE>
Notes to Consolidated Financial Statements (continued)
(Unaudited)
<CAPTION>
- ------------------------------------------------------------------------
September 30, 1995
- ------------------------------------------------------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
(In thousands) Cost Gains Losses Value
- ------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Available-for-sale:
U.S. Treasury securities
and obligations of U.S.
government corporations
and agencies $ 52,964 $ 161 $288 $ 52,837
Obligations of states and
political subdivisions 3,233 54 7 3,280
Mortgage-backed securities 24,036 41 320 23,757
- ------------------------------------------------------------------------
Total-debt securities 80,233 256 615 79,874
Equity securities 2,791 -- -- 2,791
- ------------------------------------------------------------------------
Total available-for-sale: 83,024 256 615 82,665
- ------------------------------------------------------------------------
Held-to-maturity:
U.S. Treasury securities
and obligations of U.S.
government corporations
and agencies 7,021 301 -- 7,322
Obligations of states and
political subdivisions 66,634 1,417 229 67,822
Mortgage-backed securities 10,733 508 -- 11,241
- ------------------------------------------------------------------------
Total held-to-maturity 84,388 2,226 229 86,385
- ------------------------------------------------------------------------
Total investment securities $167,412 $2,482 $844 $169,050
========================================================================
</TABLE>
<PAGE>
<TABLE>
Notes to Consolidated Financial Statements (continued)
(Unaudited)
<CAPTION>
- -------------------------------------------------------------------------------
December 31, 1995
- -------------------------------------------------------------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
(In thousands) Cost Gains Losses Value
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Available-for-sale:
U.S. Treasury securities
and obligations of U.S.
government corporations
and agencies $ 59,896 $ 245 $118 $ 60,023
Obligations of states and
political subdivisions 16,979 385 1 17,363
Mortgage-backed securities 34,041 63 214 33,890
- -------------------------------------------------------------------------------
Total-debt securities 110,916 693 333 111,276
Equity securities 5,712 -- -- 5,712
- -------------------------------------------------------------------------------
Total available-for-sale: 116,628 693 333 116,988
- -------------------------------------------------------------------------------
Held-to-maturity:
U.S. Treasury securities
and obligations of U.S.
government corporations
and agencies 4,940 57 -- 4,997
Obligations of states and
political subdivisions 55,206 1,185 89 56,302
- -------------------------------------------------------------------------------
Total held-to-maturity 60,146 1,242 89 61,299
- -------------------------------------------------------------------------------
Total investment securities $176,774 $1,935 $422 $178,287
===============================================================================
</TABLE>
<PAGE>
Notes to Consolidated Financial Statements (continued)
(Unaudited)
Bancorp classifies its investments in debt and equity securities into two
categories: held-to-maturity and available-for-sale. Securities classified as
held-to-maturity are those debt securities that Bancorp has both the positive
intent and ability to hold to maturity. These securities are carried at cost,
adjusted for amortization of premiums and accretion of discounts, which are
recognized as adjustments to interest income using the interest method.
Securities classified as available-for-sale are equity securities with readily
determinable fair values and those debt securities that Bancorp intends to hold
for an indefinite period of time but not necessarily to maturity. These
securities may be sold as part of its asset/liability management strategy, or
in response to significant movements in interest rates, liquidity needs,
regulatory capital considerations, and other similar factors. These securities
are carried at fair value, with any unrealized gains and losses reported as a
separate component of shareholders' equity, net of the related deferred tax
effect.
Regardless of the classification, dividend and interest income, including
amortization of premiums and accretion of discounts arising at acquisition, is
included in interest income in the consolidated statements of income. Realized
gains and losses, if any, determined based on the adjusted cost of the specific
securities sold, are reported as a separate line item in noninterest income in
the consolidated statements of income.
<PAGE>
Notes to Consolidated Financial Statements (Continued)(Unaudited)
The amortized cost and estimated fair values of investments at September 30,
1996 are listed below by contractual maturity. Expected maturities may differ
from contractual maturities because borrowers have the right to call or prepay
obligations with or without call or prepayment penalties.
<TABLE>
<CAPTION>
Amortized Fair
(in thousands) Cost Value
- ------------------------------------------------------------------------
<S> <C> <C>
Available-for-sale:
Within 1 year $ 31,656 $ 31,723
After 1 but within 5 years 28,480 28,340
After 5 years but within 10 years 6,995 6,827
Mortgage-backed securities 40,575 39,917
Equity securities 7,418 7,418
- ------------------------------------------------------------------------
Total available-for-sale 115,124 114,225
- ------------------------------------------------------------------------
Held-to-maturity:
After 1 but within 5 years 29,436 29,790
After 5 years but within 10 years 36,573 36,601
After 10 years 108 108
- ------------------------------------------------------------------------
Total held-to-maturity 66,117 66,499
- ------------------------------------------------------------------------
Total investment securities $181,241 $180,724
========================================================================
</TABLE>
The amortized cost of investment securities pledged to secure public deposits,
securities sold under repurchase agreements, and for other purposes as required
and permitted by law, totaled $81,322,000 at September 30, 1996.
Proceeds from sales/calls of debt securities available-for-sale totaled
$8,479,000 for the nine-month period ended September 30, 1996. Gross gains of
$2,000 and gross losses of $27,000 were realized on those sales.
Proceeds from calls of debt securities held-to-maturity for the nine-month
period ended September 30, 1995 were $255,000. No gains or losses were realized
on those calls.
Proceeds from sales/calls of debt securities available-for-sale for the nine-
month period ended September 30, 1995 were $6,139,000. Gross gains of $11,000
and gross losses of $3,000 were recorded on those sales/calls.
<PAGE>
Notes to Consolidated Financial Statements (Continued)(Unaudited)
Note 4. Loans
Loans, net of unearned income, consist of the following:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
September 30, December 31,
- -------------------------------------------------------------------------------
(In thousands) 1996 1995 1995
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Real Estate Loans
Construction and land development $ 17,396 $ 19,921 $ 19,326
Secured by farmland 6,713 6,276 6,212
Secured by 1 to 4 family
residential properties 99,730 114,899 111,109
Other 92,266 88,385 87,706
Loans to farmers 1,207 1,536 1,493
Commercial and industrial loans 56,333 50,615 55,622
Loans to individuals for household,
family, and other personal expenditures 229,983 198,916 197,348
Credit card loans -- 11,027 1,057
All other loans and lease financing
receivables 4,635 4,931 4,821
- -------------------------------------------------------------------------------
Totals $508,263 $496,506 $484,694
===============================================================================
</TABLE>
Loans to states, political subdivisions, and industrial revenue bonds are
included in all other loans in the schedule above and in loans in the statement
of condition.
The allowance for credit losses is maintained at a level which, in management's
opinion, is considered adequate to provide for possible losses on loans
currently held in the loan portfolio.
Note 5. Bank Premises and Equipment
Investments in bank premises and equipment are as follows:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
September 30, December 31,
- -------------------------------------------------------------------------------
(In thousands) 1996 1995 1995
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Bank premises and land $ 18,555 $ 17,223 $ 15,961
Furniture and equipment 9,767 10,651 10,968
Leasehold improvements 1,512 967 993
- -------------------------------------------------------------------------------
Less accumulated depreciation 29,834 28,841 27,922
and amortization (10,093) (13,111) (11,531)
- -------------------------------------------------------------------------------
Net premises and equipment $19,741 $ 15,730 $ 16,391
===============================================================================
</TABLE>
<PAGE>
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
OVERVIEW
Bancorp's net income for the third quarter of 1996 was $2,108,000 or 48 cents
per share, an increase of $60,000 or 2.9 percent compared with the third
quarter of last year. Following recent federal legislation, the current quarter
included a one-time assessment of $196,000 ($.03 per share after tax) for the
Savings Association Insurance Fund ("SAIF") related to deposits acquired through
the purchase of three Standard Federal Savings Association offices in 1994.
Year-to-date net income was $6,276,000 or $1.42 per share through September, an
increase of $521,000 or 9.1 percent compared with the same period last year. The
improvement in earnings was primarily driven by strong increases in noninterest
income.
Return on average assets was 1.14 percent and 1.12 percent, respectively, for
the nine-month and three-month periods ended September 30, 1996 compared with
1.08 percent and 1.13 percent, respectively, for the nine month and three month
periods ended September 30, 1995. Return on average equity was 11.76 percent and
11.61 percent, respectively, for the nine-month and three-month periods ended
September 30, 1996 compared with 11.94 percent and 12.28 percent, respectively,
for the same periods last year.
RESULTS OF OPERATIONS
Net Interest Income.
Net interest income, which is the sum of interest and certain fees generated by
earning assets minus interest paid on deposits and other funding sources, is
the principal source of Bancorp's earnings. Net interest income is impacted by
changes in the volume and mix of earning assets and funding sources, market
interest rates, monetary policy of the Federal Reserve Board and other factors.
Average balances and rates for major categories of interest-earning assets and
interest-bearing liabilities for the third quarter and year-to-date through
September are presented on a year to year comparative basis in Table 1. Net
interest income on a taxable-equivalent basis increased $74,000 or 0.3 percent
for the first nine months compared with the same period last year. Rate related
declines in interest expense exceeded a decline in interest income resulting
from a change in the mix of earning assets from loans to investments and federal
funds sold. Although, average earning assets increased 3.1 percent from
September 30, 1995, the percentage of average loans to average earning assets
declined to 71.4 percent from 74.3 percent. The average yield on earning assets
for the first nine months declined 28 basis points compared with the same period
in 1995.
<PAGE>
Total average interest-bearing liability balances increased 2.6 percent from
1995. The average rate paid on liabilities declined 15 basis points due to
decreases in rates paid on core savings, checking and money market accounts and
on borrowed funds.
Table 1 Average Balances, Interest and Average Rates
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
Third Quarter
- -------------------------------------------------------------------------------
1996 1995
- -------------------------------------------------------------------------------
Average Average
(Dollars in thousands) Balance Rate Balance Rate
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Interest-earning assets
Federal funds sold $ 1,903 6.27% $ 7,843 5.97%
- -------------------------------------------------------------------------------
Investment securities(1)(2)
Taxable 114,808 6.08 95,816 5.84
Tax-exempt 71,995 7.56 68,255 7.83
- -------------------------------------------------------------------------------
Total investment securities 186,803 6.65 164,071 6.67
- -------------------------------------------------------------------------------
Loans, net of unearned interest 497,735 8.79 494,127 9.11
- -------------------------------------------------------------------------------
Total interest-earning assets 686,441 8.19 666,041 8.46
- -------------------------------------------------------------------------------
Interest-bearing liabilities
Interest-bearing deposits
Checking 69,337 2.01 67,340 2.11
Savings 110,131 2.58 111,464 2.77
Money Market 87,827 3.12 87,726 3.21
Certificates of deposit 257,472 5.43 258,096 5.67
- -------------------------------------------------------------------------------
Total interest-bearing deposits 524,767 4.00 524,626 4.18
- -------------------------------------------------------------------------------
Short-term borrowings
Federal funds purchased and
securities sold under agreements
to repurchase 39,747 4.90 33,909 5.81
Other 7,659 5.51 1,572 4.80
- -------------------------------------------------------------------------------
Total short-term borrowings 47,406 5.00 35,481 5.77
- -------------------------------------------------------------------------------
Total interest-bearing liabilities 572,173 4.08 560,107 4.28
- -------------------------------------------------------------------------------
Interest-free funds 114,268 105,934
- -------------------------------------------------------------------------------
Total funding 686,441 3.40 666,041 3.60
- -------------------------------------------------------------------------------
Net interest earnings* $ 8,271 $ 8,155
- -------------------------------------------------------------------------------
Net interest spread 4.11% 4.18%
- -------------------------------------------------------------------------------
Net yield on earning assets 4.79% 4.86%
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Nine Months
- -------------------------------------------------------------------------------
1996 1995
- -------------------------------------------------------------------------------
Average Average
(Dollars in thousands) Balance Rate Balance Rate
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Interest-earning assets
Federal funds sold $ 10,304 5.51% $ 3,128 5.94%
- -------------------------------------------------------------------------------
Investment securities(1)(2)
Taxable 112,520 5.97 98,406 5.71
Tax-exempt 72,318 7.66 68,490 7.87
- -------------------------------------------------------------------------------
Total investment securities 184,838 6.62 166,896 6.59
- -------------------------------------------------------------------------------
Loans, net of unearned interest 486,791 8.83 491,435 9.11
- -------------------------------------------------------------------------------
Total interest-earning assets 681,933 8.18 661,459 8.46
- -------------------------------------------------------------------------------
Interest-bearing liabilities
Interest-bearing deposits
Checking 69,888 2.01 67,493 2.26
Savings 110,926 2.61 112,360 2.89
Money Market 85,733 3.09 87,579 3.45
Certificates of deposit 260,438 5.34 243,075 5.44
- -------------------------------------------------------------------------------
Total interest-bearing deposits 526,985 4.04 510,507 4.12
- -------------------------------------------------------------------------------
Short-term borrowings
Federal funds purchased and
securities sold under
agreements to repurchase 36,460 4.91 38,550 5.84
Other 3,478 5.38 3,594 6.14
- -------------------------------------------------------------------------------
Total short-term borrowings 39,938 4.95 42,144 5.86
- -------------------------------------------------------------------------------
Total interest-bearing liabilities 566,923 4.10 552,651 4.25
- -------------------------------------------------------------------------------
Interest-free funds 115,010 108,808
- -------------------------------------------------------------------------------
Total funding 681,933 3.41 661,459 3.55
- -------------------------------------------------------------------------------
Net interest earnings* $ 24,370 $ 24,296
- -------------------------------------------------------------------------------
Net interest spread 4.08% 4.21%
- -------------------------------------------------------------------------------
Net yield on earning assets 4.77% 4.91%
- -------------------------------------------------------------------------------
</TABLE>
*Includes the following taxable-equivalent adjustments: Third quarter - $503
thousand in 1996 and $498 thousand in 1995; nine months - $1,531 thousand in
1996 and $1,513 thousand in 1995. Each represents a pro forma amount of net
interest income (above the amount reported in the income statement) that
adjusts the yield on tax-exempt assets to a basis equivalent to that of taxable
assets.
(1)Excludes fair value adjustments.
(2)Includes interest-bearing deposits with banks.
Net interest income on a taxable-equivalent basis increased $116,000 or 1.4
percent for the third quarter compared with the third quarter last year.
Average yield on earning assets for the quarter declined 27 basis points, while
the average rate paid on interest-bearing liabilities decreased 20 basis points.
Average earning assets for the quarter increased 3.1 percent from 1995 but the
increase was reflected principally in investment securities. Average loans
increased only slightly compared with the prior period. Average interest-bearing
deposits were flat for the current quarter compared with the same quarter last
year but the average rate paid on these deposits declined 18 basis points.
Although interest-bearing deposits were flat, noninterest-bearing deposits
increased 7.9 percent. The balance of the increase in earning assets was funded
by short-term borrowings.
The net interest margin, the ratio of taxable-equivalent net interest income to
earning assets, declined 14 basis points for the first nine months of 1996
compared with the same period last year and declined 7 basis points for the
third quarter of 1996 compared with the third quarter of last year. The net
interest margin declined as the rate of growth in earning assets exceeded the
rate of growth in net interest income.
Management continually monitors Bancorp's balance sheet to insulate net
interest income from significant swings caused by interest rate volatility
using the concept of natural hedges, a process of adjusting balance sheet
positions having individual interest rate risks to control the net interest
rate risk as a whole. Derivative financial instruments such as futures,
forwards, swaps, option contracts, or other financial instruments with similar
characteristics are not currently utilized. As market rates change,
corresponding changes in asset mix, funding sources and pricing are considered
to avoid a negative impact on net interest income.
TABLE 2. INTEREST RATE SENSITIVITY ANALYSIS AT SEPTEMBER 30, 1996 (1)
<TABLE>
<CAPTION>
Total
Total Greater quarter
(In 1-30 31-90 91-180 181-365 within than end
thousands) days days days days 1 year 1 year balance
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Interest-
earning
Assets:
Investment
securities
(2) $ 7,897 $ 8,396 $ 10,021 $ 28,802 $ 55,116 $122,652 $177,768
Loans, net 81,181 23,059 29,809 66,106 200,155 302,803 502,958
------- -------- -------- --------- -------- -------- --------
Total $89,078 $ 31,455 $ 39,830 $ 94,908 $255,271 $425,455 $680,726
======= ======== ======== ========= ======== ======== ========
Interest-
bearing
Liabilities:
Deposits $50,912 $ 54,045 $ 72,985 $ 99,525 $277,467 $250,701 $528,168
Short-term
borrowings 37,110 5,000 10,000 -- 52,110 -- 52,110
------- -------- -------- --------- -------- -------- --------
Total $88,022 $ 59,045 $ 82,985 $ 99,525 $329,577 $250,701 $580,278
======= ======== ======== ========= ======== ======== ========
Interest
Sensitivity
Gap:
Period $ 1,056 $(27,590) $(43,155) $ (4,617) $ (74,306) $174,754 $100,448
Cumulative 1,056 (26,534) (69,689) (74,306) (74,306) 100,448 100,448
</TABLE>
(1) Excludes nonaccrual loans and other nonrate-sensitive assets.
(2) Reflects fair value adjustments for securities available for sale.
Bancorp attempts to measure the interest rate sensitivity of its assets and
liabilities on the basis of when they will reprice as opposed to when they can
reprice. Since it is difficult to predict the movement of interest rates,
management's objective is to maintain a relatively balanced sensitivity
position, while not foregoing any opportunity to benefit from current rate
conditions. As indicated in Table 2, Bancorp had a net liability sensitive
position of $74,306,000 within the one year horizon at September 30, 1996.
This position would indicate that Bancorp has the potential for decreased
earnings if market rates were to rise in the next twelve months. Conversely,
if market rates were to decline in the next twelve months, an increase in
earnings would be anticipated.
<PAGE>
Due to inherent limitations in this traditional gap analysis technique for
measuring interest rate sensitivity, management also employs more sophisticated
interest sensitivity measurement tools to analyze the volatility of net
interest income as a result of changes in interest rates. Simulation models are
used to subject the current repricing gap position to rising and falling
incremental changes in interest rates of 100, 200, and 300 basis points, and to
forecast how net interest income varies under alternative interest rate and
business activity scenarios. The effects of changes in interest rates on the
market value of assets, liabilities, and off-balance sheet contracts is also
measured. At September 30, 1996, the changes in net interest income and/or
market value calculated under these alternative methods were within limits
established by the Board of Directors.
Noninterest Income.
Noninterest income increased $712,000 or 12.9 percent for the first nine months
of 1996 when compared with the same period last year. Nearly all categories of
noninterest income increased as management continued its focus on business
lines which present opportunities for future revenue enhancement. Contributing
significantly to the increase was income from deposit services, which increased
$304,000 or 14.0 percent, and Trust income, which increased $170,000 or 15.0
percent.
For the three-month period ended September 30, 1996, noninterest income
increased $304,000 or 16.3 percent compared with the same period last year. The
increase was primarily attributable to increases in income from deposit
services, which increased $76,000 or 10.0 percent, and Trust income, which
increased $50,000 or 12.6 percent.
Noninterest Expenses.
Noninterest expenses increased $130,000 or 0.6 percent for the first nine months
of the year and $404,000 or 6.3 percent for the third quarter compared with the
same periods last year. Noninterest expenses increased due to the additional
overhead associated with the continued expansion of the retail delivery system,
merger related expenses, and continued investments in technology. Current year
results reflect the full impact of the two First Union offices acquired in June,
1995 and the addition of a de novo office in March, 1996. Increases in salaries
and employee benefits and occupancy and equipment expenses were partially offset
by decreases in other operating expenses. On a normalized basis, noninterest
expenses for the third quarter of 1996 actually decreased $123,000 as 1996
results include the one-time SAIF assessment of $196,000 while in the same
quarter last year a FDIC insurance refund of $331,000 was received. The Deposit
Insurance Funds Act ("Funds Act") of 1996, enacted on September 30, 1996
provided for the one-time SAIF assessment. The Funds Act also authorized the
Financing Corporation ("FICO") to impose periodic assessments on depository
institutions that are members of the Bank Insurance Fund in order to spread the
cost of the interest payments on the outstanding FICO bonds over a larger number
of institutions. FICO assessments will fluctuate based on a defined rate applied
to deposits held in periods aftern enactment.
<PAGE>
Income Taxes.
The provision for income taxes increased $167,000 and $1,000, respectively,
for the nine-month and three-month periods ended September 30, 1996 compared
with the same periods last year. Tax expense varies from one period to the next
with changes in the level of income before taxes, changes in the amount of
tax-exempt income, and the relationship of these changes to each other.
Bancorp's effective tax rates for the first nine months of 1996 and 1995 were
25.3 percent and 25.4 percent, respectively. For the third quarter of 1996
and 1995, the effective tax rates were 25.9 percent and 26.5 percent,
respectively. Bancorp's income tax expense differs from the amount computed at
statutory rates primarily due to tax-exempt interest from certain loans and
investment securities.
NONPERFORMING ASSETS
Table 3 summarizes Bancorp's nonperforming assets and contractually past due
loans. Total nonperforming assets at September 30, 1996 have declined $288,000
compared with year earlier levels and have increased $233,000 since year-end.
Loans past due 90 or more days as to interest or principal reflected a $178,000
decrease compared with prior year levels but have increased $647,000 since
year-end. Although there is no direct correlation between nonperforming loans
and ultimate loan losses, an analysis of the nonperforming loans may provide
some indication of the quality of the loan portfolio. Management believes that
the amounts of its nonperforming loans and past due loans are modest in relation
to the size of the loan portfolio.
POTENTIAL PROBLEM LOANS
At September 30, 1996, Bancorp had performing loans amounting to $10,546,000
that were identified as potential problem loans because the borrowers were
currently experiencing financial difficulties such that management had concerns
that such loans might, in the future, become classified as nonaccrual or
delinquent. At December 31, 1995, potential problem loans totaled $21,003,000.
The decrease in the amount of these loans during 1996 is a reflection of an
improvement in credit quality. As of September 30, 1996, management does not
believe that these loans present any significant risk of loss.
At September 30, 1996 Bancorp had loans amounting to approximately $792,000 that
were specifically classified as impaired and included as non-accrual loans in
Table 3. No specific allowance for credit losses related to impaired loans was
required. The average balance of impaired loans for the three and nine month
periods ended September 30, 1996 were $803,000 and $839,000, respectively.
During the first nine months of the year, cash receipts totaling $99,000, of
which $24,000 was received in the third quarter, were applied to reduce the
principal balance of these impaired loans and no interest income was recognized.
<PAGE>
TABLE 3. NONPERFORMING ASSETS AND CONTRACTUALLY PAST DUE LOANS
<TABLE>
<CAPTION>
September 30 September 30 December 31
(Dollars in thousands) 1996 1995 1995
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Nonperforming Assets:
Nonaccrual loans(1) $1,101 $1,328 $1,163
Other real estate owned net of
valuation allowance(2)(4) 2,646 2,707 2,351
- -------------------------------------------------------------------------------
Total nonperforming assets $3,747 $4,035 $3,514
- -------------------------------------------------------------------------------
Loans past due 90 or more days
as to interest or principal(3) $1 391 $1,569 $ 744
- -------------------------------------------------------------------------------
Nonperforming loans to period-end loans 0.22% 0.27% 0.24%
Nonperforming assets to period-end
loans and other real estate owned 0.73% 0.81% 0.72%
Period-end allowance for credit
losses times nonperforming loans 5.47x 4.21x 5.30x
Period-end allowance for credit
losses times nonperforming assets 1.61x 1.39x 1.75x
</TABLE>
(1) Loans are placed on nonaccrual status when, in the opinion of
management, reasonable doubt exists as to the full, timely collection of
interest or principal or a specific loan meets the criteria for nonaccrual
status established by regulatory authorities. When a loan is placed on
nonaccrual status, all interest previously accrued but not collected is
reversed against current period interest income. No interest is taken into
income on nonaccrual loans unless received in cash or until such time the
borrower demonstrates sustained performance over a period of time in accordance
with contractual terms.
(2) Other real estate owned includes: banking premises no longer used
for business purposes and real estate acquired by foreclosure (in partial or
complete satisfaction of debt) or otherwise surrendered by the borrower to
Bancorp's possession. Other real estate owned is recorded at the lower of cost
or fair value on the date of acquisition or transfer from loans. Write-downs
to fair value at the date of acquisition are charged to the allowance for
credit losses. Subsequent to transfer, these assets are adjusted through a
valuation allowance to the lower of the net carrying value or the fair value
(net of estimated selling expenses) based on periodic appraisals.
(3) Nonaccrual loans are not included.
(4) Consists principally of the real estate held in a limited partnership
and includes minority interests totaling $772,000, $712,000, and $727,000 at
September 30, 1996, September 30, 1995, and December 31, 1995, respectively.
ALLOWANCE FOR CREDIT LOSSES
The allowance for credit losses was $6,020,000 or 1.2 percent of loans
outstanding as of September 30, 1996 compared with $6,164,000 or 1.3 percent of
loans outstanding as of December 31, 1995 and $5,595,000 or 1.1 percent of
loans outstanding as of September 30, 1995. The provision for credit losses for
both the third quarter and first nine months of 1996 was $50,000 less than prior
year amounts. As reflected in Table 4, net charge-offs decreased $318,000 and
$104,000, respectively, for the three- and nine-month periods ended September
30, 1996 compared with the same periods last year.
<PAGE>
TABLE 4. ANALYSIS OF ALLOWANCE FOR CREDIT LOSSES
<TABLE>
<CAPTION>
Period ended
- -------------------------------------------------------------------------------
September 30 September 30 December 31
(Dollars in thousands) 1996 1995 1995
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Average loans outstanding
less average unearned income(1) $486,122 $491,074 $491,513
===============================================================================
Allowance for credit losses
at beginning of year $ 6,164 $ 5,793 $ 5,793
- -------------------------------------------------------------------------------
Charge-offs
Real estate 9 338 427
Commercial and industrial 10 14 70
Consumer 2,432 1,957 2,758
- -------------------------------------------------------------------------------
Total loans charged-off 2,451 2,309 3,255
- -------------------------------------------------------------------------------
Recoveries
Real estate 15 21 21
Commercial and industrial 2 8 22
Consumer 1,390 1,132 1,583
- -------------------------------------------------------------------------------
Total recoveries 1,407 1,161 1,626
- -------------------------------------------------------------------------------
Net charge-offs 1,044 1,148 1,629
- -------------------------------------------------------------------------------
Additions charged to operating expense 900 950 2,000
- -------------------------------------------------------------------------------
Allowance for credit losses
at end of period $ 6,020 $ 5,595 $ 6,164
===============================================================================
Ratio of net charge-offs to
average loans outstanding 0.21% 0.23% 0.33%
===============================================================================
</TABLE>
(1) Exclusive of loans held for sale.
Based upon management's analysis and review of the loan portfolio, past loss
experience, and current economic conditions, the amount in the allowance for
credit losses at September 30, 1996 is considered adequate. Management's
estimate of credit losses inherent in the credit extension process and the
related allowance may change in the near term due to uncertainties inherent in
the estimation process.
TABLE 5. ALLOCATION OF ALLOWANCES FOR CREDIT LOSSES
<TABLE>
<CAPTION>
September 30, December 31,
1996 1995 1995
- -------------------------------------------------------------------------------
% Gross % Gross % Gross
(Dollars in thousands) Amount Loans(1) Amount Loans(1) Amount Loans(1)
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Real estate
Construction and
land development $ 593 3.4% $ 722 4.0% $ 694 4.0%
Residential mortgage 209 19.6 109 23.1 69 22.9
Other mortgage 953 18.2 902 17.8 969 18.1
Commercial and industrial 1,511 11.1 1,014 10.2 954 11.5
Consumer 2,393 45.2 2,069 42.3 1,946 40.9
Unallocated 361 2.5 779 2.6 1,532 2.6
- -------------------------------------------------------------------------------
Total allowance for
credit losses $6,020 100.0% $5,595 100.0% $6,164 100.0%
===============================================================================
</TABLE>
(1) Excludes loans held for sale.
<PAGE>
Table 5 presents an allocation of the allowance for credit losses to various
loan categories. This allocation does not limit the amount of the allowance
available to absorb losses from any type of loan and should not be viewed as an
indicator of the specific amount or specific loan categories in which future
charge-offs may ultimately occur.
CAPITAL RESOURCES
Shareholders' equity totaled $73,048,000 at September 30, 1996, an increase of
4.3 percent compared with the 1995 year end level of $70,019,000 and an increase
of 8.5 percent from the year earlier level of $67,311,000. The fair value
adjustment of the available for sale portfolio decreased $793,000 (net of
deferred taxes) since year end. Capital levels are considered sufficient to
absorb anticipated future price volatility in the available-for-sale portfolio.
Bancorp's risk-based capital and leverage capital ratios continue to exceed
regulatory guidelines as of September 30, 1996, as follows:
TABLE 6. CAPITAL RATIOS
<TABLE>
<CAPTION>
Risk-based Capital
-------------------
Tier 1 Total Leverage
Capital Capital Ratio
------- ------- --------
<S> <C> <C> <C>
Actual 12.56% 13.63% 9.47%
Minimum 4.00% 8.00% 3.00%
------ ------ -----
Excess 8.56% 5.63% 6.47%
====== ====== =====
</TABLE>
Fair value adjustments to shareholders' equity for changes in the fair value of
securities classified as available-for-sale are excluded from the calculation
of these capital ratios in accordance with regulatory guidelines. Risk-based
capital ratios and leverage ratios will continue to exceed regulatory
guidelines after the Home Federal acquisition is finalized.
<PAGE>
Item 6 Exhibits and Reports on Form 8-K Page
(a) Exhibits
11 Statement Re: Computation of per share earnings. 24
27 Financial Data Schedule
(b) A report on Form 8-K Item 4. Changes in Registrant's Certifying
Accountant was filed on July 15, 1996 to announce that on July 9, 1996,
F&M Bancorp dismissed its independent auditors, Keller Bruner & Company,
LLC and selected Arthur Anderson, LLP as its new independent auditors.
<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.
F&M BANCORP
-----------
(Registrant)
November 13, 1996 /s/Kenneth M. Sabanosh
- ----------------- ----------------------------
Date KENNETH M. SABANOSH
VICE PRESIDENT AND TREASURER
<PAGE>
Exhibit 11
STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS
<TABLE>
<CAPTION>
Nine Month Period Ended, Quarter Ending
September 30, September 30,
1996 1995 1996 1995
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Earnings Per share:
Primary $1.41 $1.29 $ .47 $ .46
Fully diluted $1.41 $1.29 $ .47 $ .46
</TABLE>
Primary and fully diluted earnings per share are calculated using the following
number of adjusted weighted average shares outstanding:
<TABLE>
<CAPTION>
Nine Month Period Ended, Quarter Ending
September 30, September 30,
1996 1995 1996 1995
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Primary 4,457,158 4,451,522 4,448,152 4,451,621
Fully diluted 4,457,067 4,451,538 4,452,708 4,451,733
</TABLE>
The weighted average number of shares outstanding is adjusted to recognize the
dilutive effect, if any, of outstanding employee stock options on both a
primary and fully diluted basis.
The calculations of earnings per share above are based on the weighted average
number of shares outstanding including all common stock and common stock
equivalents in conformity with the instructions for Item 601 of Regulation S-K.
The calculation of earnings per share for financial reporting purposes is based
on the weighted average number of shares outstanding of 4,422,912 and 4,407,840
at September 30, 1996 and September 30, 1995, respectively, without giving
effect to the common stock equivalents resulting from the assumed exercise of
stock options, which do not dilute earnings per share by more than 3 percent, in
conformity with generally accepted accounting principles.
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 32,009
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 114,225
<INVESTMENTS-CARRYING> 66,117
<INVESTMENTS-MARKET> 66,449
<LOANS> 508,243
<ALLOWANCE> 6,020
<TOTAL-ASSETS> 760,072
<DEPOSITS> 627,722
<SHORT-TERM> 16,601
<LIABILITIES-OTHER> 7,192
<LONG-TERM> 0
0
0
<COMMON> 22,135
<OTHER-SE> 50,913
<TOTAL-LIABILITIES-AND-EQUITY> 760,072
<INTEREST-LOAN> 32,060
<INTEREST-INVEST> 7,765
<INTEREST-OTHER> 425
<INTEREST-TOTAL> 40,250
<INTEREST-DEPOSIT> 15,932
<INTEREST-EXPENSE> 17,411
<INTEREST-INCOME-NET> 22,839
<LOAN-LOSSES> 900
<SECURITIES-GAINS> (25)
<EXPENSE-OTHER> 19,735
<INCOME-PRETAX> 8,406
<INCOME-PRE-EXTRAORDINARY> 8,406
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,276
<EPS-PRIMARY> 1.41
<EPS-DILUTED> 1.41
<YIELD-ACTUAL> 4.77
<LOANS-NON> 1,101
<LOANS-PAST> 1,391
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 10,546
<ALLOWANCE-OPEN> 6,164
<CHARGE-OFFS> 2,451
<RECOVERIES> 1,407
<ALLOWANCE-CLOSE> 6,020
<ALLOWANCE-DOMESTIC> 5,659
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 361
</TABLE>
