UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 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 March 31, 1998
[ ] 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 Identification No.)
incorporation or organization)
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, 6,028,800 shares outstanding as of April 30, 1998
Exhibit index located on page 25.
F&M BANCORP
TABLE OF CONTENTS
PART I: FINANCIAL INFORMATION PAGE
Consolidated Balance Sheets
March 31, 1998 and 1997 (Unaudited), and December 31, 1997 3
Consolidated Statements of Income (Unaudited),
Three Months Ended March 31, 1998 and 1997 5
Consolidated Statements of Comprehensive Income (Unaudited),
Three Months Ended March 31, 1998 and 1997 7
Consolidated Statements of Cash Flows (Unaudited),
Three Months Ended March 31, 1998 and 1997 8
Consolidated Statements of Changes in Shareholders' Equity
(Unaudited), Three Months Ended March 31, 1998 and Twelve
Months Ended December 31, 1997 10
Notes to Consolidated Financial Statements (Unaudited) 11
Management's Discussion and Analysis of Financial Condition
and Results of Operations 16
Quantitative and Qualitative Disclosures about Market Risk 23
PART II: OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 25
Signatures 25
CONSOLIDATED BALANCE SHEETS
F&M Bancorp and Subsidiaries
<TABLE>
<CAPTION>
March 31, March 31, December 31,
(Dollars in thousands, 1998 1997 1997
except per share amounts) (Unaudited) (Unaudited)
- -----------------------------------------------------------------------------
<S> <C> <C> <C>
ASSETS
Cash and due from banks $ 32,474 $ 33,204 $ 30,116
Federal fund sold 17,318 4,000 1,700
Interest-bearing deposits with
banks 6,578 3,886 9,073
- -----------------------------------------------------------------------------
Total cash and cash equivalents 56,370 41,090 40,889
- -----------------------------------------------------------------------------
Loans held for sale 1,348 144 283
- -----------------------------------------------------------------------------
Investment securities
Held-to-maturity, fair value
$93,825, $99,116, and $96,650,
respectively 92,007 99,436 94,940
Available-for-sale, at fair
value 151,527 130,420 136,065
- -----------------------------------------------------------------------------
Total investment securities 243,534 229,856 231,005
- -----------------------------------------------------------------------------
Loans, net of unearned income 715,357 678,404 724,134
Less: Allowance for credit
losses (9,645) (9,434) (9,530)
- -----------------------------------------------------------------------------
Net loans 705,712 668,970 714,604
- -----------------------------------------------------------------------------
Bank premises and equipment, net 24,359 25,376 24,765
Other real estate owned 4,966 6,577 5,055
Interest receivable 6,970 7,081 7,393
Intangible assets 3,592 3,895 3,664
Other assets 16,851 17,963 16,730
- ----------------------------------------------------------------------------
Total assets $1,063,702 $1,000,952 $1,044,388
- ----------------------------------------------------------------------------
</TABLE>
CONSOLIDATED BALANCE SHEETS
F&M Bancorp and Subsidiaries (cont.)
<TABLE>
<CAPTION>
March 31, March 31, December 31,
(Dollars in thousands, 1998 1997 1997
except per share amounts) (Unaudited) (Unaudited)
- ---------------------------------------------------------------------------
<S> <C> <C> <C>
LIABILITIES AND SHAREHOLDERS'
EQUITY
Liabilities
Deposits
Noninterest-bearing $113,829 $ 111,022 $ 113,215
Interest-bearing 726,638 690,290 708,752
- ---------------------------------------------------------------------------
Total deposits 840,467 801,312 821,967
Federal funds purchased
and securities sold under
agreements to repurchase 44,705 34,801 45,051
Other short-term borrowings 18,308 52,683 41,105
Long term borrowings 45,538 6,685 23,454
Accrued interest and other
liabilities 11,129 10,726 11,137
- --------------------------------------------------------------------------
Total liabilities 960,147 906,207 942,714
- --------------------------------------------------------------------------
Shareholders' equity
Common stock, par value $5 per
share; authorized 50,000,000
shares; issued and outstanding
6,023,456 shares 5,691,988 shares,
and 6,004,469 shares,
respectively 30,117 28,460 30,022
Surplus 37,344 29,363 36,957
Retained earnings 35,952 37,576 34,404
Accumulated other comprehensive
income 142 (654) 291
- --------------------------------------------------------------------------
Total shareholders' equity 103,555 94,745 101,674
- --------------------------------------------------------------------------
Total liabilities and
shareholders' equity $1,063,702 $1,000,952 $1,044,388
- --------------------------------------------------------------------------
</TABLE>
CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
F&M BANCORP and Subsidiaries
<TABLE>
<CAPTION>
(Dollars in thousands, Quarter ended March 31,
except per share amounts) 1998 1997
- ----------------------------------------------------------------------------
<S> <C> <C>
Interest Income
Interest and fees on loans $15,621 $14,470
Interest and dividends on
investment securities
Taxable 2,609 2,658
Tax-exempt 835 870
Interest on deposits with banks 91 36
Interest on federal funds sold 86 14
- ----------------------------------------------------------------------------
Total interest income 19,242 18,048
- ----------------------------------------------------------------------------
Interest Expense
Interest on deposits 7,119 6,833
Interest on federal funds purchased and
securities sold under agreements to
repurchase 549 495
Interest on Federal Home Loan Bank
borrowings 903 821
Interest on other short-term borrowings 22 20
- ----------------------------------------------------------------------------
Total interest expense 8,593 8,169
- ----------------------------------------------------------------------------
Net interest income 10,649 9,879
Provision for credit losses 525 450
- ----------------------------------------------------------------------------
Net interest income after provision
for credit losses 10,124 9,429
- ----------------------------------------------------------------------------
Noninterest Income
Trust income 658 611
Service charges on deposit accounts 1,318 1,226
Gains on sales of securities 14 --
Gains on sales of loans 147 43
Losses on sales of property -- (5)
Other operating income 947 1,149
- ----------------------------------------------------------------------------
Total noninterest income 3,084 3,024
- ----------------------------------------------------------------------------
</TABLE>
CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
F&M BANCORP and Subsidiaries (cont.)
<TABLE>
<CAPTION>
(Dollars in thousands, Quarter ended March 31,
except per share amounts) 1998 1997
- -----------------------------------------------------------------------------
<S> <C> <C>
Noninterest Expense
Salaries and employee benefits 4,729 4,605
Occupancy and equipment expense 1,529 1,465
Other operating expense 2,512 2,578
- -----------------------------------------------------------------------------
Total noninterest expense 8,770 8,648
- -----------------------------------------------------------------------------
Income before provision for income taxes 4,438 3,805
Provision for income taxes 1,310 1,081
- -----------------------------------------------------------------------------
Net Income $ 3,128 $ 2,724
- -----------------------------------------------------------------------------
Earnings per Common Share-Basic
Based on weighted average shares
outstanding of 6,016,437 for 1998,
5,969,217 for 1997 $0.52 $0.46
- -----------------------------------------------------------------------------
Earnings per Common Share-Diluted
based on weighted average shares
on weighted average shares
outstanding of 6,058,627 for 1998,
6,009,746 for 1997 $0.51 $0.45
- -----------------------------------------------------------------------------
Dividends per Share $0.25 $0.21
- -----------------------------------------------------------------------------
</TABLE>
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited)
F&M BANCORP and Subsidiaries
<TABLE>
<CAPTION>
(Dollars in thousands, Quarter ended March 31,
except per share amounts) 1998 1997
- -----------------------------------------------------------------------------
<S> <C> <C>
Net income $3,128 $2,724
Other comprehensive income, net of tax:
Unrealized gains (losses) on securities:
Unrealized holding gains (losses) arising
during period (158) (460)
Less: reclassification adjustment for
gains included in net income (9) --
- ------------------------------------------------------------------------------
Comprehensive income $2,979 $2,264
- ------------------------------------------------------------------------------
</TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
F&M BANCORP and Subsidiaries
<TABLE>
<CAPTION>
Three Months Ended March 31,
(Dollars in thousands) 1998 1997
- -----------------------------------------------------------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 3,128 $ 2,724
Adjustments to reconcile net income to net cash
provided by operating activities
Provision for credit losses 525 450
Provision for other real estate owned 1 --
Depreciation and amortization 665 637
Amortization of intangibles 129 127
Net premium amortization on investment
securities 81 135
Decrease (increase) in interest receivable 423 (380)
Increase (decrease) in interest payable 83 (10)
Deferred income tax benefit (22) 133
Accretion of net loan origination fees 30 33
Loss on sales of property -- 5
Gain on sales/calls of securities 14 --
Decrease (increase) in loans held for sale (1,065) 165
Increase in other assets (63) (835)
Decrease in other liabilities (93) (933)
- ----------------------------------------------------------------------------
Net cash provided by operating activities 3,836 2,251
- ----------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of investment securities to be
held to maturity (4,434) (1,110)
Purchases of investment securities available
for sale (48,287) (6,707)
Proceeds from maturities and calls of
securities held to maturity 7,310 1,139
Proceeds from maturities and sales/calls
of securities available for sale 32,545 21,764
Net decrease (increase) in loans 8,338 (8,823)
Purchases of premises and equipment (259) (793)
Proceeds from sales of property -- 6
Other investing activities 89 879
- ------------------------------------------------------------------------------
Net cash used in investing activities (4,698) 6,355
- ------------------------------------------------------------------------------
</TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
F&M BANCORP and Subsidiaries (cont.)
<TABLE>
<CAPTION>
Three Months Ended March 31,
(Dollars in thousands) 1998 1997
- -----------------------------------------------------------------------------
<S> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in noninterest-bearing
deposits, interest-bearing checking,
savings and money market accounts 14,233 9,843
Net increase (decrease) in certificates
of deposit 4,268 (3,281)
Net decrease in securities sold under
agreements to repurchase (346) (7,075)
Net increase (decrease) in long-term
borrowings 22,084 (1)
Net decrease in other short-term borrowings (22,797) (4,728)
Cash dividends paid (1,503) (1,250)
Dividend reinvestment plan (105) (6)
Proceeds from issuance of common stock 509 277
- ---------------------------------------------------------------------------
Net cash provided used by financing activities 16,343 (6,221)
- ---------------------------------------------------------------------------
Net increase in cash and cash equivalents 15,481 2,385
Cash and cash equivalents at beginning of
period 40,889 38,705
- ---------------------------------------------------------------------------
Cash and cash equivalents at end of period $56,370 41,090
- ---------------------------------------------------------------------------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION
Cash payments for interest $8,510 $8,180
Cash payments for income tax 1 483
NON-CASH INVESTING AND FINANCING ACTIVITIES
Fair value adjustment for securities available
for sale, net of deferred income taxes payable
(benefits) (149) (460)
- --------------------------------------------------------------------------
</TABLE>
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (Unaudited)
F&M BANCORP and Subsidiaries
[CAPTION]
<TABLE>
Accumulated
Other
(Dollars in thousands Common Retained Comprehensive
except per share amounts) Stock Surplus Earnings Income Total
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1996 $28,393 $29,148 $36,113 $ (194) $93,460
Comprehensive net income -- -- 12,159 485 12,644
Dividend reinvestment plan -- -- (80) -- (80)
5% Stock dividend (283,322) 1,417 7,012 (8,429) -- --
Stock options exercised
(52,097 shares) 260 856 -- -- 1,116
Cash dividends paid
($.86 per share) -- -- (5,138) -- (5,138)
Stock consideration for options
exercised (9,514 shares) (49) (59) (221) -- (328)
- ------------------------------------------------------------------------------
Balance at December 31, 1997 $30,022 $36,957 $34,404 $291 $101,674
Comprehensive net income -- -- 3,128 (149) 2,979
Dividend reinvestment plan -- -- (8) -- (8)
Cash dividends paid
($.25 per share) -- -- (1,503) -- 1,503)
Stock options exercised
(21,421 shares) 107 402 -- -- 509
Stock consideration for options
exercised (2,434 shares) (12) (15) (69) -- (96)
- ------------------------------------------------------------------------------
Balance at March 31, 1998 $30,117 $37,344 $35,952 $142 $103,555
- ------------------------------------------------------------------------------
</TABLE>
Notes to Consolidated Financial Statements (Unaudited)
Note 1. Summary of Significant Accounting Policies
The foregoing financial statements 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 F&M Bancorp's ("Bancorp's") significant accounting
policies is set forth in Note 1 to the consolidated financial statements in
it's Annual Report on Form 10-K for the year ended December 31, 1997.
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. Investment Securities
<TABLE>
<CAPTION>
Investment securities are summarized as follows:
March 31, 1998
- -----------------------------------------------------------------------------
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 $ 87,647 $ 357 $ 90 $ 87,914
Obligations of states and
political subdivisions 760 3 -- 763
Mortgage-backed securities 35,919 227 47 36,099
Other debit securities 16,984 -- 26 16,958
- -----------------------------------------------------------------------------
Total debt securities 141,310 587 163 141,734
Equity securities 9,918 -- 125 9,793
- -----------------------------------------------------------------------------
Total securities available for sale: 151,228 587 288 151,527
- -----------------------------------------------------------------------------
Held-to-maturity:
U.S. Treasury securities and
obligations of U.S. government
corporations and agencies 980 17 -- 997
Obligations of states and political
Subdivisions 70,911 1,656 18 72,549
Mortgage-backed securities 20,116 163 -- 20,279
- ----------------------------------------------------------------------------
Total securities to be held to
maturity 92,007 1,836 18 93,825
- ----------------------------------------------------------------------------
Total investment securities $243,235 $ 2,423 $306 $245,352
- ----------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
March 31, 1997
- --------------------------------------------------------------------------
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 $57,833 $ 31 $ 328 $ 57,536
Obligations of states and
political subdivisions 7,377 72 1 7,448
Mortgage-backed securities $59,643 70 776 58,937
- ---------------------------------------------------------------------------
Total debt securities 124,853 173 1,105 123,921
Equity securities 6,499 -- -- 6,499
- ---------------------------------------------------------------------------
Total securities available
for sale: 131,352 173 1,105 130,420
- ---------------------------------------------------------------------------
Held-to-maturity:
U.S. Treasury securities and
obligations of U.S. government
corporations and agencies 11,950 28 181 11,797
Obligations of states and
political subdivisions 62,976 713 353 63,336
Mortgage-backed securities 24,510 33 560 23,983
- ---------------------------------------------------------------------------
Total securities to be held
to maturity 99,436 774 1,094 99,116
- ---------------------------------------------------------------------------
Total investment securities $230,788 $947 $2,199 $229,536
- ---------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
December 31, 1997
- --------------------------------------------------------------------------
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 $ 79,940 $ 419 $ 39 $ 80,320
Obligations of states and
political subdivisions 1,021 6 -- 1,027
Mortgage-backed securities 41,841 255 76 42,020
- ---------------------------------------------------------------------------
Total-debt securities 122,802 680 115 123,367
Equity securities 12,698 -- -- 12,698
- ---------------------------------------------------------------------------
Total securities available
for sale: 135,500 680 115 136,065
- ---------------------------------------------------------------------------
Held-to-maturity:
U.S. Treasury securities and
obligations of U.S. government
corporations and agencies 4,967 33 -- 5,000
Obligations of states and
political subdivisions 68,079 1,444 10 69,513
Mortgage-backed securities 21,894 243 -- 22,137
- ---------------------------------------------------------------------------
Total securities to be held
to maturity 94,940 1,720 10 96,650
- ---------------------------------------------------------------------------
Total investment securities $230,440 $2,400 $ 125 $232,715
- ---------------------------------------------------------------------------
</TABLE>
Bancorp classifies its investments in debt and equity securities in 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.
The amortized cost and estimated fair values of investments at March 31, 1998
by contractual maturity are shown below. 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 $26,292 $26,277
After 1 but within 5 years 50,923 50,947
After 5 years but within 10 years 28,176 28,411
Mortgage-backed securities 35,919 36,099
Equity securities 9,918 9,793
- ---------------------------------------------------------------------------
Total securities available
for sale 151,228 151,527
- ---------------------------------------------------------------------------
Held-to-maturity:
Within 1 year 5,571 5,623
After 1 but within 5 years 32,392 33,225
After 5 years but within 10 years 31,557 32,327
After 10 years 2,371 2,371
Mortgage-backed securities 20,116 20,279
- ---------------------------------------------------------------------------
Total securities to be held to
maturity 92,007 93,825
- ---------------------------------------------------------------------------
Total investment securities $243,235 $245,352
- ---------------------------------------------------------------------------
</TABLE>
The amortized cost of investment securities pledged to secure public deposits,
securities sold under repurchase agreements, Federal Home Loan Bank advances,
and for other purposes as required and permitted by law, totaled $120.2
million at March 31, 1998.
<PAGE
Note 3. Loans
<TABLE>
<CAPTION>
Loans, net of unearned income, consist of the following:
March 31, December 31,
- ----------------------------------------------------------------------
(In thousands) 1998 1997 1997
- ----------------------------------------------------------------------
<S> <C> <C> <C>
Real Estate Loans
Construction and land development $29,372 $ 30,163 $ 30,621
Secured by farmland 5,840 6,645 5,970
Residential mortgage 184,337 185,538 185,798
Other mortgage 148,902 128,196 146,197
Agricultural 600 808 795
Commercial and industrial loans 77,959 67,278 79,984
Consumer 265,202 255,113 271,721
Other loans 3,145 4,663 3,048
- ----------------------------------------------------------------------
Totals $715,357 $678,404 $724,134
- ----------------------------------------------------------------------
</TABLE>
Loans to states and political subdivisions and industrial revenue bonds are
included in all other loans in the schedule above and in total 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 loan
losses on loans currently held in the loan portfolio.
Note 4. Bank Premises and Equipment
<TABLE>
<CAPTION>
Investments in bank premises and equipment are as follows:
March 31, December 31,
- ----------------------------------------------------------------------
(In thousands) 1998 1997 1997
- ----------------------------------------------------------------------
<S> <C> <C> <C>
Bank premises and land $22,531 $22,407 $22,531
Furniture and equipment 17,931 17,850 17,712
Leasehold improvements 1,763 1,760 1,763
- ----------------------------------------------------------------------
42,225 42,017 42,006
Less accumulated depreciation
and amortization (17,866) (16,641) (17,241)
- -----------------------------------------------------------------------
Net premises and equipment $24,359 $25,376 $24,765
- -----------------------------------------------------------------------
</TABLE>
Note 5. Comprehensive Income
Bancorp adopted Financial Accounting Standards Board ("FASB") Statement No.
130, "Reporting Comprehensive Income," effective January 1, 1998. In
accordance with the requirements of this Statement, comprehensive income and
its components, as recognized under the accounting standards, are displayed in
a financial statement with the same prominence as other financial statements.
As of the March 31, 1998 interim reporting date, unrealized gains (losses) on
securities is the only item included in other comprehensive income.
Note 6. Earnings Per Share
Earnings per share ("EPS") data is computed and presented in accordance with
FASB Statement No. 128, "Earnings Per Share." As prescribed by the Statement,
the presentation of primary EPS has been replaced with the dual presentation
of basic and diluted EPS. Basic EPS excludes dilution and is computed by
dividing net income available to common shareholders ("numerator") by the
weighted-average number of common shares outstanding for the period after
giving retroactive effect to stock dividends and stock splits ("denominator").
Diluted EPS reflects the potential dilution that could occur if stock options
or other contracts to issue common stock or resulted in the issuance of common
stock that then shared in the earnings of Bancorp. Diluted EPS is equal to the
numerator divided by the denominator plus the dilutive effect of outstanding
stock options.
<TABLE>
- --------------------------------------------------------------------------
March 31,
(in thousands except per share amounts) 1998 1997
- --------------------------------------------------------------------------
<S> <C> <C>
Basic EPS
Net income available to common stockholders $3,128 $2,724
Average shares outstanding 6,016 5,969
BasicEPS $ 0.52 $0.46
Diluted EPS
Net income available to common stockholders $3,128 $2,724
Average shares outstanding 6,016 5,969
Effect of dilutive securities (options) 70 41
Average shares outstanding-diluted 6,086 6,010
Diluted EPS $ 0.51 $ 0.45
- --------------------------------------------------------------------------
</TABLE>
Note 7. Future Changes in Accounting Principles
In June 1997, the Financial Accounting Standards Board issued Statement No.
131, "Disclosures About Segments of an Enterprise and Related Information".
This statement requires that public business enterprises report certain
information about operating segments in complete sets of financial statements
of the enterprise and in condensed financial statements of interim periods
issued to shareholders. It also requires that public business enterprises
report certain information about their products and services, the geographic
areas in which they operate, their major customers, and the nature of
differences between reportable segment measurements and those used for the
consolidated entity. This statement is effective for all periods ending after
December 15, 1997. Adoption in interim financial statements is not required
until the year following initial adoption. Once adopted, however, comparative
prior period information is required. Adoption of this Statement is not
expected to have a material impact on Bancorp.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
OVERVIEW
F&M Bancorp's net income for the first quarter of 1998 was $3.128 million, or
$0.52 basic earnings per share, an increase of 15% compared with net income of
$2.724 million, or $0.46 basic earnings per share, for the first quarter of
1997. Per share amounts reported previously have been restated to give effect
to a 5% stock dividend paid in August 1997. Earnings growth was largely
attributed to a 7.8% increase in net interest income compared with the same
period last year, driven by a nearly 6% increase in average interest-earning
assets and a five basis point increase in the net interest margin, coupled
with effective control of overhead costs.
Returns on average assets and average equity were 1.21% and 12.46%,
respectively, for the first quarter of 1998 compared with 1.11% and 11.91%,
respectively, for the first quarter of 1997.
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, representing approximately 75%
of Bancorp's gross revenue. Net interest income is influenced by a number of
external economic and competitive factors such as Federal Reserve Board
monetary policy and its influence on market interest rates; loan demand and
competition from nonbank lenders; and competition with investment managers,
brokerage firms and investment bankers for consumer and commercial business
assets that might otherwise be deposited in banks. Internal factors impacting
levels and changes in net interest income are attributed to Bancorp's interest
rate risk management policies, which address a variety of issues including
loan and deposit pricing strategies, funding alternatives, and maturity
schedules. Bancorp has not made use of derivatives, interest rate hedges, or
similar instruments or transactions to manage interest rate risk.
Average balances and rates for each major category of interest-earning assets
and interest-bearing liabilities for the first quarter are presented on a
year-to-year comparative basis in Table 1. Net interest income on a taxable-
equivalent basis increased $738,000, or 7.1%, compared with the first quarter
of last year. The increase was primarily attributed to an increase in the
volume of loans and average rate earned thereon complemented by successful
funding strategies which limited the overall increase in the average cost of
funds to only three basis points above the prior year. Average earning assets
increased $54.5 million, or 5.9%, for the first quarter of 1998 compared with
the first quarter of 1997. Loan demand was strong, resulting in an increase
in the average loan portfolio balance of $46.1 million, or 6.8%. The average
balance in the investment portfolio declined slightly, however the average
investment in short-term funds, consisting of federal funds sold and interest-
bearing deposits increased $10.3 million as Bancorp positioned itself to meet
forecasted loan demand in the near term. The yield on earning assets across
all sectors increased three basis points to 8.22% compared with the first
quarter of last year.
Average interest-bearing deposits increased $26.5 million or 3.8%. Growth
occurred in nearly all deposit products assisted by the introduction of new
deposit products and pricing methods. Additional funding was provided
principally by Federal Home Loan Bank advances, which increased $6.3 million
or 10.9% compared with the first quarter of 1997. This increase was due in
part to a balance sheet leveraging strategy implemented in mid-1997.
TABLE 1. CONSOLIDATED AVERAGE BALANCES, INTEREST AND AVERAGE RATES
(TAXABLE EQUIVALENT BASIS)
<TABLE>
<CAPTION>
March 31,
- ----------------------------------------------------------------------------
1998 1997
- ----------------------------------------------------------------------------
YTD YTD
(Dollars Average Average Average Average
in thousands) Balance Interest Rate Balance Interest Rate
- ----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Interest-earning
assets short-term
funds $ 15,313 $ 177 4.62% $ 5,051 $ 50 3.96%
- -----------------------------------------------------------------------------
Total investment
securities
- Tax-exempt(1) 70,201 1,265 7.21 70,645 1,318 7.46
- -----------------------------------------------------------------------------
Total investment
securities
- Taxable 165,271 2,609 6.31 166,672 2,658 6.38
- ----------------------------------------------------------------------------
Total investment
securities 235,472 3,874 6.58 237,317 3,976 6.70
- ----------------------------------------------------------------------------
Total loans 721,196 15,644 8.80 675,094 14,507 8.71
- ----------------------------------------------------------------------------
Total interest-earning
assets 971,981 19,695 8.22 917,462 18,533 8.19
- ----------------------------------------------------------------------------
Total noninterest-
earning assets 73,455 77,885
- ----------------------------------------------------------------------------
TOTAL ASSETS $1,045,436 $995,347
- ----------------------------------------------------------------------------
LIABILITIES
Interest-bearing
liabilities
Interest-bearing
deposits
Savings $ 109,765 666 2.46% 114,159 717 2.55%
Interest checking 112,194 535 1.93 101,748 508 2.02
Money market savings 125,810 1,013 3.27 113,642 851 3.04
Total time deposits 367,177 4,905 5.42 358,918 4,757 5.38
- ----------------------------------------------------------------------------
Total interest
-bearing deposits 714,946 7,119 4.04 688,467 6,833 4.03
- ----------------------------------------------------------------------------
Borrowed funds
Federal funds purchased
and securities sold
under agreements to
repurchase 43,819 549 5.08 41,458 495 4.84
Other short-term
borrowings 30,327 430 5.75 52,874 742 5.69
- ----------------------------------------------------------------------------
Total short-term
borrowings 74,146 979 5.35 94,332 1,237 5.32
- ----------------------------------------------------------------------------
Long-term borrowings 35,301 495 5.69 6,685 99 6.01
- ----------------------------------------------------------------------------
Total borrowed funds 109,447 1,474 5.46 101,017 1,336 5.36
- ----------------------------------------------------------------------------
Total interest-bearing
liabilities 824,393 8,593 4.23 789,484 8,169 4.20
- ----------------------------------------------------------------------------
Noninterest-bearing
liabilities
Demand deposits 106,617 101,802
Other liabilities 12,632 11,341
Shareholders' equity 101,794 92,720
- ----------------------------------------------------------------------------
TOTAL LIABILITIES
AND EQUITY $1,045,436 101,802
- ----------------------------------------------------------------------------
NET INTEREST INCOME 11,102 $10,364
- ----------------------------------------------------------------------------
NET INTERST SPREAD 3.99% 3.99%
- ----------------------------------------------------------------------------
NET INTEREST MARGIN AS A
PERCENT OF EARNINGS ASSETS 4.63% 4.58%
- ----------------------------------------------------------------------------
</TABLE>
Despite the relative stability of market interest rates for the comparable
periods, the net interest margin, which is the ratio of taxable-equivalent net
interest income to average earning assets, increased five basis points to
4.63% compared with the first quarter of last year.
Provision for Credit Losses.
Bancorp increased the provision for credit losses by 17% to $525,000 for the
first quarter of 1998 compared with $450,000 for the first quarter of 1997.
The increase is largely attributable to a 5.4% increase in total loans.
Noninterest Income.
Noninterest income increased $60,000, or 2.0%, for the first quarter of 1998
compared with the first quarter of 1997. Excluding income from credit card
merchant processing for the first quarter of 1997, noninterest income
increased $446,000, or 17%, driven largely by higher transaction volume. The
merchant processing line of business was sold at a substantial gain in the
third quarter of 1997. Several major sources of noninterest income increased
as management's strategic emphasis on new sources of revenue and innovative
marketing and distribution of products and services continued to develop
revenue enhancement opportunities. Trust income, increased $47,000, or 7.7%,
compared with the first quarter of 1997. The market value of trust assets
under management reached $414 million at March 31, 1998, a 29% increase from
$320 million at March 31, 1997. Trust income for the first quarter of 1997
included a large estate settlement fee. Service charges on deposit accounts
increased $92,000, or 7.5%, attributed to related deposit growth. Gains on
sales of loans also increased $104,000 for the first quarter of 1998 compared
with the same quarter last year due to the favorable rate environment and high
refinance activity.
Noninterest Expense.
Noninterest expense increased $122,000, or 1.4%, for the first quarter of 1998
compared with the first quarter of last year. Excluding expenses associated
with credit card merchant processing for the first quarter of 1997,
noninterest expense increased $436,000, or 5.2%. Salaries and benefits
increased $124,000, or 2.7%, largely due to merit-based compensation
increases. Occupancy and equipment expense increased $64,000, or 4.4%. Other
operating expense, excluding the credit card merchant processing expense
recorded last year, increased $248,000, or 11%, reflecting continued
investments in product and service delivery, information technology, and
market research. Bancorp's efficiency ratio (the ratio of adjusted
noninterest expense to the sum of net interest income and recurring
noninterest income) declined from 63.2% for the period ended March 31, 1997,
to 60.6% for the period ended March 31, 1998, evidencing improved control of
operating expenses.
Income Taxes.
The provision for income taxes increased 21.2% to $1.3 million for the first
quarter of 1998, from $1.1 million for the first quarter of 1997, largely
related to a 17% increase in income before taxes. 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 rate for the first quarter of 1998 was
29.5% compared with 28.4% for the first quarter of 1997. 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. As net
income increased from 1997 to 1998 and the percentage of tax-exempt interest
declined relative to net income before taxes, the effective tax rate
increased.
NONPERFORMING ASSETS
Table 3 summarizes Bancorp's nonperforming assets and contractually past-due
loans. Total nonperforming assets at March 31, 1998 declined $3.5 million
compared with year earlier levels and declined $326,000 since year-end 1997.
Loans past due 90 days or more as to interest or principal decreased $920,000
compared with prior year levels and increased $325,000 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
POTENTIAL PROBLEM LOANS
At March 31, 1998, Bancorp had $11.0 million in loans to borrowers who were
currently experiencing financial difficulties such that management had
reasonable concerns that such loans might become contractually past due or be
classified as a nonperforming asset. These loans are subject to the same close
attention and regular credit reviews as extended to loans past due 90 days or
more and nonperforming assets. At December 31, 1997, potential problem loans
totaled $11.2 million. As of March 31, 1998, management does not believe that
these loans present any significant risk of loss.
TABLE 3. NONPERFORMING ASSETS AND CONTRACTUALLY PAST-DUE LOANS
<TABLE>
<CAPTION>
March 31, December 31
- ----------------------------------------------------------------------------
(Dollars in thousands) 1998 1997 1997
- ----------------------------------------------------------------------------
<S> <C> <C> <C>
Nonperforming assets:
Nonaccrual loans(1) $ 5,159 $ 7,032 $ 5,396
Other real estate owned
net of valuation allowance(2) 4,966 6,577 5,055
- ----------------------------------------------------------------------------
Total nonperforming assets $10,125 $13,609 $10,451
- ----------------------------------------------------------------------------
Loans past due 90 or more days
as to interest or principal(3) $ 863 $ 1,783 $ 538
- ----------------------------------------------------------------------------
Nonperforming loans to total loans 0.72% 1.04% 0.75%
Nonperforming assets to total loans
and other real estate owned 1.41% 1.99% 1.43%
Nonperforming assets to total
assets 0.95% 1.36% 1.00%
Allowance for credit losses times
nonperforming loans 1.87x 1.34x 1.77x
Allowance for credit losses times
nonperforming assets 0.95x 0.69x 0.91x
(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.
</TABLE>
ALLOWANCE FOR CREDIT LOSSES
The allowance for credit losses is maintained at a level, which in
management's judgement, is adequate to absorb losses inherent in the loan
portfolio. The adequacy of the allowance for credit losses is reviewed
regularly by management. Additions to the allowance are made by charges to
the provision for credit losses. On a quarterly basis, a comprehensive review
of the adequacy of the allowance is performed considering factors such as
historical relationships among loans outstanding, loss experience, delinquency
levels, individual loan reviews, and evaluation of the present and future
local and national economic environment. While management believes the
allowance for credit losses is adequate at March 31, 1998, the estimate of
losses and related allowance are subject to change due to economic and other
uncertainties inherent in the estimation process.
As reflected in Table 4, the allowance for credit losses as a percentage of
total loans decreased, principally attributed to improved credit quality as
evidenced by the decline in both nonperforming loans, as referenced above, and
net chargeoffs.
Bancorp had loans amounting to approximately $4.2 million and $5.8 million at
March 31, 1998 and March 31, 1997, respectively, that were specifically
classified as impaired and included in nonaccrual loans in Table 3. The
average balance of impaired loans for the three months ended March 31, 1998
and 1997 amounted to $3.9 million and $6.0 million, respectively. Cash
receipts for these same periods were $178,000 and $162,000, respectively. All
cash receipts were applied to reduce the principal balance of those impaired
loans, and no interest income was recognized. The specific allowance for
credit losses related to these impaired loans was $778,000 and $334,000, at
March 31, 1998 and March 31, 1997, respectively.
<PAGE>
TABLE 4. ANALYSIS OF ALLOWANCE FOR CREDIT LOSSES
<TABLE>
<CAPTION>
Period ended
- -----------------------------------------------------------------------------
March 31, December 31,
- -----------------------------------------------------------------------------
(Dollars in thousands) 1998 1997 1997
- -----------------------------------------------------------------------------
<S> <C> <C> <C>
Average loans outstanding less average
unearned income (1) $720,554 $674,570 $694,898
- -----------------------------------------------------------------------------
Allowance for credit losses at
beginning of year $ 9,530 $ 9,639 $ 9,639
- -----------------------------------------------------------------------------
Charge-offs:
Real estate 96 122 371
Commercial and industrial -- -- 24
Consumer 958 1,260 4,345
- -----------------------------------------------------------------------------
Total loans charged-off 1,054 1,382 4,740
- -----------------------------------------------------------------------------
Recoveries
Real estate 8 74 416
Commercial and industrial -- -- 7
Consumer 636 653 2,408
- -----------------------------------------------------------------------------
Total recoveries 644 727 2,831
- -----------------------------------------------------------------------------
Net charge-offs 410 655 1,909
- -----------------------------------------------------------------------------
Additions charged to operating expense 525 450 1,800
- -----------------------------------------------------------------------------
Allowance for credit losses at end of
period $9,645 $ 9,434 $ 9,530
- -----------------------------------------------------------------------------
Ratio of net charge-offs to average
loans outstanding 0.06% 0.10% 0.27%
- -----------------------------------------------------------------------------
(1) Exclusive of loans held for sale.
</TABLE>
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.
TABLE 5. ALLOCATION OF ALLOWANCES FOR CREDIT LOSSES
<TABLE>
<CAPTION>
March 31, December 31,
- ------------------------------------------------------------------------------
1998 1997 1997
- ------------------------------------------------------------------------------
(Dollars % Gross % Gross % Gross
in thousands) Amount Loans(1) Amount Loans(1) Amount Loans(1)
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Real estate;
Construction and land
development $1,528 4.1% $2,153 4.4% $1,479 4.2%
Residential mortgage 554 25.8 561 27.3 600 25.7
Other mortgage 1,983 20.8 1,283 18.9 1,795 20.2
Commercial and
industrial 787 10.9 593 9.9 714 11.0
Consumer 3,748 37.1 3,291 37.7 4,084 37.6
Unallocated 1,045 1.3 1,553 1.8 858 1.3
- ------------------------------------------------------------------------------
Total allowance for
credit losses $9,645 100.0% $9,434 100.0% $9,530 100.0%
- ------------------------------------------------------------------------------
(1) Excludes loans held for sale.
</TABLE>
YEAR 2000 COMPUTER READINESS
In July 1997, management initiated an enterprise-wide Assurance Plan ("Plan")
to prepare Bancorp's computer systems and applications for the Year 2000.
Approved and monitored by Bancorp's Board of Directors and overseen by senior
management, the Plan is administered by a task team representing every
relevant area of the company and sets forth a detailed time line that is
intended to address all critical issues in a timely and prudent manner.
At March 31, 1998 Bancorp's Plan was on schedule and calls for testing of
internal and external systems to be substantially complete by December 31,
1998. Contingency plans are being developed for vendors who service mission-
critical applications and have indicated they may not be Year 2000 compliant
within an acceptable time frame.
The assessment and resolution of internal and external Year 2000 issues under
the Plan, and within the control of Bancorp, is not expected to have a
material adverse impact on Bancorp or on its ability to conduct business.
There can be no assurance, however, that there would be no adverse impact on
Bancorp if vendors, service providers, major borrowers, or others with whom
Bancorp conducts business, fail to achieve full Year 2000 compliance.
CAPITAL RESOURCES
Shareholders' equity totaled $103.6 million at March 31, 1998, an increase of
1.9% compared with the 1997 year-end level of $101.7 million, and an increase
of 9.3% from the year earlier level of $94.7 million. The fair value of the
available-for-sale portfolio declined $149,000 (net of deferred taxes) since
year-end. Capital levels were 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 March 31, 1998, as follows:
TABLE 6. CAPITAL RATIOS
<TABLE>
<CAPTION>
Risk-based Capital
- -----------------------------------------------------------------------------
Tier 1 Total Leverage
Capital Capital Ratio
- -----------------------------------------------------------------------------
<S> <C> <C> <C>
Actual 13.00% 14.14% 9.67%
Minimum 4.00% 8.00% 3.00%
- -----------------------------------------------------------------------------
Excess 9.00% 6.14% 6.67%
- -----------------------------------------------------------------------------
</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.
Item 3. Quantitative and Qualitative Disclosures about Market Risk.
Market risk is defined as the future changes in market prices that increase or
decrease the value of financial instruments, i.e. cash, investments, loans,
deposits and debt. Included in market risk are interest rate risk, foreign
currency exchange rate risk, commodity price risk, and other relevant market
risks. Bancorp's primary source of market risk is interest rate risk. Market
risk sensitive financial instruments are entered into for purposes other than
trading.
Interest rate risk refers to the exposure of Bancorp's earnings and capital to
changes in interest rates. The magnitude of the effect of changes in market
rates depends on the extent and timing of such changes and on Bancorp's
ability to adjust. The ability to adjust is controlled by the time remaining
to maturity on fixed-rate obligations, the contractual ability to adjust rates
prior to maturity, competition, and customer actions.
There are several common sources of interest rate risk that must be
effectively managed if there is to be minimal impact on Bancorp's earnings and
capital. Repricing risk arises largely from timing differences in the pricing
of assets and liabilities. Reinvestment risk refers to the reinvestment of
cash flows from interest payments and maturing assets at lower rates. Basis
risk exists when different yield curves or pricing indices do not change at
precisely the same time or in the same magnitude such that assets and
liabilities with the same maturity are not all affected equally. Yield curve
risk refers to unequal movements in interest rates across a full range of
maturities.
In determining the appropriate level of interest rate risk, Bancorp considers
the impact on earnings and capital of the current outlook on interest rates,
potential changes in interest rates, regional economies, liquidity, business
strategies, and other factors. To effectively measure and manage interest rate
risk, traditional cumulative gap and simulation analysis are used to determine
the impact on net interest income and the market value of portfolio equity
("MVE"). Bancorp attempts to manage interest rate sensitivity on the basis of
when assets and liabilities will reprice as opposed to when then can reprice.
Cumulative gap analysis presents the net amount of assets and liabilities that
will most likely reprice through specified periods if there are no changes in
balance sheet mix. Using that analysis, the effect of changes in market
interest rates, both rising and falling, on net interest income can be
calculated. Bancorp had a cumulative net liability position of $63.4 million
within the one-year timeframe at March 31, 1998. This position indicated that
Bancorp was exposed to the potential for decreased earnings if interest rates
were to rise in the next twelve months. In that case, the Asset/Liability
Management Committee ("ALCO") would consider actions to change Bancorp's asset
mix, funding sources, and interest rates to mitigate any negative impact on
net interest income.
Because of inherent limitations in traditional cumulative gap analysis, ALCO
also employs more sophisticated interest rate risk measurement techniques.
Simulation analysis is used to subject the current repricing positions to
rising and falling interest rates in increments and decrements of 100, 200,
and 300 basis points, and to determine how net interest income varies under
alternative interest rate and business activity scenarios. ALCO also measures
the effects of changes in interest rates on the MVE, i.e. the net present
value of all the future cash flows from Bancorp's financial instruments
expressed as the percentage change in portfolio value of equity for any given
change in prevailing interest rates. Table 7 presents Bancorp's MVE at March
31, 1998.
TABLE 7. EFFECTS OF CHANGES IN INTEREST RATES ON MVE AT March 31, 1998
<TABLE>
<CAPTION>
(Dollars in thousands)
- -----------------------------------------------------------------------------
Percent Change
- -----------------------------------------------------------------------------
Hypothetical
Change in Market Value Change Hypothetical
Interest of Portfolio Increase Increase Board
Rates Equity (Decrease) (Decrease) Limit(1)
- -----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
300 bp rise $ 96,252 $ (19,780) (17.0)% (30.0)%
200 bp rise 103,121 (12,911) (11.1) (20.0)
100 bp rise 109,442 (6,590) (5.7) (10.0)
Base scenario 116,032 -- -- --
100 bp decline 121,467 5,435 4.7 (10.0)
200 bp decline 127,229 11,197 9.6 (20.0)
300 bp decline 133,852 17,820 15.4 (30.0)
(1) Established by Bancorp's Board of Directors
</TABLE>
PART II - Other Information
Item 6 Exhibits and Reports on Form 8-K Page
(a) Exhibits
11 Statement Re: Computation of per share earnings 26
27 Financial Data Schedule 27
(b) No reports on Form 8-K were filed by the Corporation during the
quarter ended March 31, 1998.
Items 1 through 5 have been omitted since the item is either inapplicable or
the answer is negative.
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)
April 14, 1998 /s/ David L. Spilman
- ------------------ --------------------------
Date DAVID L. SPILMAN
TREASURER
Exhibit 11
Statement re: Computation of Per Share Earnings
Earnings per share ("EPS") is calculated on a Basic EPS and Diluted EPS basis.
Basic EPS excludes dilution and is computed by dividing income available to
common shareholders (the numerator) by the weighted-average number of common
shares outstanding (the denominator) during the period. Income available to
common shareholders is Net Income in the table below and as reported in
Bancorp's income statement. No adjustments were required to net income for any
EPS calculations.
Diluted EPS is calculated by adjusting the denominator for all dilutive
potential common shares that were outstanding during the period. Bancorp had
stock options outstanding during the periods presented below which had a
dilutive effect on EPS. Therefore, the number of additional common shares that
would have been outstanding if the options had been exercised is added to the
denominator to arrive at the dilutive number of shares.
<TABLE>
<CAPTION>
For the Three Months Ended March 31,
(Dollars in thousands 1998 1997
- ---------------------------------------------------------------------
<S> <C> <C>
Net income $ 3,128 $ 2,724
- ---------------------------------------------------------------------
Basic EPS
Shares 6,016,437 5,969,217
EPS $ 0.52 $ 0.46
Dilutive shares
Stock options 69,190 40,529
EPS $ 0.01 $ 0.01
Dilutive EPS
Shares including options
6,085,627 6,009.746
EPS $ 0.51 $ 0.45
Exhibit 27
9 Financial Data Schedule for the First Quarter
[MULTIPLIER] 1000
[PERIOD-TYPE] 3-MOS
[FISCAL-YEAR-END] DEC-31-1998
[PERIOD-START] JAN-01-1998
[PERIOD-END] MAR-31-1998
[CASH] 32,474
[INT-BEARING-DEPOSITS] 6,578
[FED-FUNDS-SOLD] 7,318
[TRADING-ASSETS] 0
[INVESTMENTS-HELD-FOR-SALE] 151,527
[INVESTMENTS-CARRYING] 92,007
[INVESTMENTS-MARKET] 93,825
[LOANS] 715,357
[ALLOWANCE] 9,645
[TOTAL-ASSETS] 1,063,702
[DEPOSITS] 840,467
[SHORT-TERM] 63,013
[LIABILITIES-OTHER] 11,129
[LONG-TERM] 45,538
[PREFERRED-MANDATORY] 0
[PREFERRED] 0
[COMMON] 30,117
[OTHER-SE] 73,438
[TOTAL-LIABILITIES-AND-EQUITY] 1,063,702
[INTEREST-LOAN] 15,621
[INTEREST-INVEST] 3,444
[INTEREST-OTHER] 104
[INTEREST-TOTAL] 19,242
[INTEREST-DEPOSIT] 7,119
[INTEREST-EXPENSE] 8,593
[INTEREST-INCOME-NET] 10,649
[LOAN-LOSSES] 525
[SECURITIES-GAINS] 14
[EXPENSE-OTHER] 8,770
[INCOME-PRETAX] 4,438
[INCOME-PRE-EXTRAORDINARY] 3,128
[EXTRAORDINARY] 0
[CHANGES] 0
[NET-INCOME] 3,128
[EPS-PRIMARY] 0.52
[EPS-DILUTED] 0.51
[YIELD-ACTUAL] 4.63
[LOANS-NON] 5,159
[LOANS-PAST] 853
[LOANS-TROUBLED] 0
[LOANS-PROBLEM] 10,978
[ALLOWANCE-OPEN] 9,530
[CHARGE-OFFS] 1,054
[RECOVERIES] 644
[ALLOWANCE-CLOSE] 9,645
[ALLOWANCE-DOMESTIC] 8,600
[ALLOWANCE-FOREIGN] 0
[ALLOWANCE-UNALLOCATED] 1,045
</TABLE>
