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 JUNE 30, 1999
[ ] 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: 0-12820
-------
AMERICAN NATIONAL BANKSHARES INC.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Virginia 54-1284688
- ------------------------------------ ----------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
628 Main Street
- --------------------------------------------------------------------------------
Danville, Virginia 24541
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(804) 792-5111
- --------------------------------------------------------------------------------
(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 .
----- -----
The number of shares outstanding of the issuer's common stock as of August 5,
1999 was 6,103,466.
<PAGE>
AMERICAN NATIONAL BANKSHARES INC.
INDEX
Part I. Financial Information Page No.
Item 1. Financial Statements (Unaudited)
Consolidated Balance Sheets as of June 30, 1999
and December 31, 1998........................................3
Consolidated Statements of Income for the three months
ended June 30, 1999 and 1998.................................4
Consolidated Statements of Income for the six months
ended June 30, 1999 and 1998.................................5
Consolidated Statements of Cash Flows for the six months
ended June 30, 1999 and 1998.................................6
Notes to Consolidated Financial Statements.....................7-10
Item 2. Management's Discussion and Analysis of the Financial Condition
and Results of Operations.....................................11-17
Part II. Other Information...............................................18
SIGNATURES ................................................................18
EXHIBITS - Financial Data Schedule.........................................19
<PAGE>
<TABLE>
Consolidated Balance Sheets
American National Bankshares Inc. and Subsidiary
(In Thousands)
(Unaudited)
- --------------------------------------------------------------------------------------------------------
<CAPTION>
June 30 December 31
1999 1998
--------- -----------
<S> <C> <C>
ASSETS
Cash and due from banks.........................................................$ 11,831 $ 14,072
Interest-bearing deposits in other banks........................................ 210 706
Investment securities:
Securities available for sale (at market value)............................... 110,238 105,536
Securities held to maturity (market value of $47,188 at
June 30, 1999 and $59,207 at December 31, 1998)............................. 47,427 57,877
--------- ---------
Total investment securities............................................... 157,665 163,413
--------- ---------
Loans .......................................................................... 283,521 269,677
Less--
Unearned income............................................................. (110) (158)
Reserve for loan losses..................................................... (4,021) (3,821)
--------- ---------
Net loans................................................................. 279,390 265,698
--------- ---------
Bank premises and equipment, at cost, less accumulated
depreciation of $7,676 in 1999 and $7,164 in 1998............................. 7,665 7,603
Accrued interest receivable and other assets.................................... 10,353 8,891
--------- ---------
Total assets..................................................................$467,114 $460,383
========= =========
LIABILITIES and SHAREHOLDERS' EQUITY
Liabilities:
Demand deposits -- non-interest bearing.......................................$ 41,406 $ 45,071
Demand deposits -- interest bearing........................................... 51,924 55,883
Money market deposits......................................................... 17,324 18,089
Savings deposits.............................................................. 67,357 68,621
Time deposits................................................................. 183,083 170,661
--------- ---------
Total deposits.............................................................. 361,094 358,325
--------- ---------
Repurchase agreements........................................................... 16,344 31,023
FHLB borrowings................................................................. 31,700 13,000
Accrued interest payable and other liabilities.................................. 2,885 3,174
--------- ---------
Total liabilities............................................................. 412,023 405,522
--------- ---------
Shareholders' equity:
Preferred stock, $5 par, 200,000 shares authorized,
none outstanding............................................................ - -
Common stock, $1 par, 10,000,000 shares authorized,
6,103,466 shares outstanding at June 30, 1999 *
and 3,051,733 shares outstanding at December 31, 1998....................... 6,103 3,052
Capital in excess of par value................................................ 9,892 9,892
Retained earnings............................................................. 40,081 40,799
Accumulated other comprehensive income -
net unrealized (losses) gains on securities available for sale.............. (985) 1,118
--------- ---------
Total shareholders' equity................................................ 55,091 54,861
--------- ---------
Total liabilities and shareholders' equity................................$467,114 $460,383
========= =========
* - Restated to reflect the impact of a 2-for-1 stock split effected in the form of a dividend issued July 1, 1999.
The accompanying notes to consolidated financial statements are an integral part of these balance sheets.
</TABLE>
<PAGE>
<TABLE>
Consolidated Statements of Income
American National Bankshares Inc. and Subsidiary
(In Thousands)
(Unaudited)
- -----------------------------------------------------------------------------------------------------
<CAPTION>
Three Months Ended
June 30
---------------------
1999 1998
-------- --------
<S> <C> <C>
Interest Income:
Interest and fees on loans....................................................$ 5,969 $ 5,822
Interest on federal funds sold and other...................................... 13 12
Income on investment securities:
U S Government.............................................................. 206 698
Federal agencies............................................................ 1,369 1,141
State and municipal......................................................... 428 303
Other investments........................................................... 301 117
-------- --------
Total interest income..................................................... 8,286 8,093
-------- --------
Interest Expense:
Interest on deposits:
Demand...................................................................... 278 310
Money market................................................................ 119 135
Savings..................................................................... 446 491
Time........................................................................ 2,268 2,330
Interest on fed funds and repos .............................................. 178 267
Interest on other borrowings.................................................. 316 54
-------- --------
Total interest expense...................................................... 3,605 3,587
-------- --------
Net Interest Income............................................................. 4,681 4,506
Provision for Loan Losses....................................................... 180 223
-------- --------
Net Interest Income After Provision
For Loan Losses............................................................... 4,501 4,283
-------- --------
Non-Interest Income:
Trust and investment services................................................. 614 548
Service charges on deposit accounts........................................... 240 251
Non-deposit fees and insurance commissions.................................... 68 70
Mortgage banking income....................................................... 88 89
Other income.................................................................. 65 34
-------- --------
Total non-interest income................................................... 1,075 992
-------- --------
Non-Interest Expense:
Salaries...................................................................... 1,338 1,235
Pension and other employee benefits........................................... 230 288
Occupancy and equipment....................................................... 471 468
Postage and printing.......................................................... 120 108
Core deposit intangible amortization ......................................... 113 113
Other......................................................................... 520 548
-------- --------
Total non-interest expense.................................................. 2,792 2,760
-------- --------
Income Before Income Tax Provision.............................................. 2,784 2,515
Income Tax Provision............................................................ 818 764
-------- --------
Net Income......................................................................$ 1,966 $ 1,751
======== ========
- ------------------------------------------------------------------------------------------------------
Net Income Per Common Share *
Basic...........................................................................$ .32 $ .29
Diluted.........................................................................$ .32 $ .29
- ------------------------------------------------------------------------------------------------------
Average Common Shares Outstanding
Basic.........................................................................6,103,466 6,103,466
Diluted.......................................................................6,105,837 6,105,010
- ------------------------------------------------------------------------------------------------------
* - Per share amounts have been restated to reflect the impact of a 2-for-1 stock split effected
in the form of a dividend issued July 1, 1999.
The accompanying notes to consolidated financial statements are an integral part of these statements.
</TABLE>
<PAGE>
<TABLE>
Consolidated Statements of Income
American National Bankshares Inc. and Subsidiary
(In Thousands)
(Unaudited)
- -----------------------------------------------------------------------------------------------------
<CAPTION>
Six Months Ended
June 30
---------------------
1999 1998
-------- --------
<S> <C> <C>
Interest Income:
Interest and fees on loans....................................................$11,796 $11,565
Interest on federal funds sold and other...................................... 19 55
Income on investment securities:
U S Government.............................................................. 550 1,448
Federal agencies............................................................ 2,596 2,163
State and municipal......................................................... 861 591
Other investments........................................................... 626 242
-------- --------
Total interest income..................................................... 16,448 16,064
-------- --------
Interest Expense:
Interest on deposits:
Demand...................................................................... 550 633
Money market................................................................ 242 262
Savings..................................................................... 888 990
Time........................................................................ 4,500 4,644
Interest on fed funds purchased and repos..................................... 447 536
Interest on other borrowings.................................................. 550 54
-------- --------
Total interest expense...................................................... 7,177 7,119
-------- --------
Net Interest Income............................................................. 9,271 8,945
Provision for Loan Losses....................................................... 360 475
-------- --------
Net Interest Income After Provision
For Loan Losses............................................................... 8,911 8,470
-------- --------
Non-Interest Income:
Trust and investment services................................................. 1,238 1,067
Service charges on deposit accounts........................................... 457 438
Non-deposit fees and insurance commissions................................... 139 128
Mortgage banking income....................................................... 204 193
Other income.................................................................. 134 72
-------- --------
Total non-interest income................................................... 2,172 1,898
-------- --------
Non-Interest Expense:
Salaries...................................................................... 2,663 2,441
Pension and other employee benefits........................................... 488 575
Occupancy and equipment....................................................... 925 905
Postage and printing.......................................................... 231 241
Core deposit intangible amortization ......................................... 225 225
Other......................................................................... 1,040 1,056
-------- --------
Total non-interest expense.................................................. 5,572 5,443
-------- --------
Income Before Income Tax Provision.............................................. 5,511 4,925
Income Tax Provision............................................................ 1,621 1,513
-------- --------
Net Income......................................................................$ 3,890 $ 3,412
======== ========
- -----------------------------------------------------------------------------------------------------
Net Income Per Common Share *
Basic...........................................................................$ .64 $ .56
Diluted.........................................................................$ .64 $ .56
- ------------------------------------------------------------------------------------------------------
Average Common Shares Outstanding
Basic.........................................................................6,103,466 6,103,466
Diluted.......................................................................6,106,082 6,107,690
- ------------------------------------------------------------------------------------------------------
* - Per share amounts have been restated to reflect the impact of a 2-for-1 stock split effected
in the form of a dividend issued July 1, 1999.
The accompanying notes to consolidated financial statements are an integral part of these statements.
</TABLE>
<PAGE>
<TABLE>
Consolidated Statements of Cash Flows
American National Bankshares Inc. and Subsidiary
(In Thousands)
(Unaudited)
- -------------------------------------------------------------------------------------------------------
<CAPTION>
Six Months Ended
June 30
-----------------------
1999 1998
--------- ---------
<S> <C> <C>
Cash Flows from Operating Activities:
Net income....................................................................$ 3,890 $ 3,412
Adjustments to reconcile net income to net
cash provided by operating activities:
Provision for loan losses..................................................... 360 475
Depreciation.................................................................. 512 482
Core deposit intangible amortization.......................................... 225 225
Net amortization (accretion) of premiums and discounts
on investment securities.................................................... 49 (40)
Gain on sale of securities.................................................... (8) -
Deferred income taxes benefit................................................. (179) (181)
Increase in interest receivable............................................... (116) (341)
Increase in other assets...................................................... (308) (117)
Increase (decrease) in interest payable....................................... 119 (59)
Decrease in other liabilities................................................. (408) (1)
--------- ---------
Net cash provided by operating activities................................... 4,136 3,855
--------- ---------
Cash Flows from Investing Activities:
Proceeds from maturities, calls, and sales of securities ..................... 30,783 15,488
Purchases of securities available for sale.................................... (23,230) (12,985)
Purchases of securities held to maturity...................................... (5,033) (4,355)
Net increase in loans......................................................... (14,052) (5,896)
Purchases of property and equipment........................................... (574) (235)
--------- ---------
Net cash used in investing activities....................................... (12,106) (7,983)
--------- ---------
Cash Flows from Financing Activities:
Net decrease in demand, money market,
and savings deposits........................................................ (9,653) (6,836)
Net increase in time deposits................................................. 12,422 2,862
Net decrease in federal funds purchased
and repurchase agreements................................................... (14,679) (179)
Net increase in borrowings.................................................... 18,700 9,025
Cash dividends paid........................................................... (1,557) (1,373)
Repurchase of stock........................................................... - -
--------- ---------
Net cash provided by financing activities................................... 5,233 3,499
--------- ---------
Net Decrease in Cash and Cash Equivalents....................................... (2,737) (629)
Cash and Cash Equivalents at Beginning of Period................................ 14,778 13,752
--------- ---------
Cash and Cash Equivalents at End of Period......................................$ 12,041 $ 13,123
========= =========
Supplemental Schedule of Cash and Cash Equivalents:
Cash:
Cash and due from banks.....................................................$ 11,831 $ 13,043
Interest-bearing deposits in other banks.................................... 210 80
--------- ---------
$ 12,041 $ 13,123
========= =========
Supplemental Disclosure of Cash Flow Information:
Interest paid.................................................................$ 7,059 $ 7,129
Income taxes paid.............................................................$ 2,093 $ 1,400
The accompanying notes to consolidated financial statements are an integral part of these statements.
</TABLE>
<PAGE>
AMERICAN NATIONAL BANKSHARES INC. AND SUBSIDIARY
NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
1. Basis of Presentation
---------------------
In the opinion of management, the accompanying unaudited consolidated
condensed financial statements contain all adjustments (consisting of normal
recurring accruals) necessary to present fairly American National Bankshares'
financial position as of June 30, 1999, the results of its operations and its
cash flows for the three and six months then ended. Operating results for the
three and six month periods ended June 30, 1999 are not necessarily indicative
of the results that may be expected for the year ended December 31, 1999.
The consolidated financial statements include the amounts and results of
operations of American National Bankshares Inc. ("the Corporation") and its
wholly owned subsidiary, American National Bank and Trust Company ("the Bank")
and the Bank's subsidiary, Mutual Mortgage of the Piedmont, Inc. A summary of
the Corporation's significant accounting policies is set forth in Note 1 to the
Consolidated Financial Statements in the Corporation's 1998 Annual Report on
Form 10-K.
On June 15, 1999, the Corporation's Board of Directors approved a 2-for-1
stock split effected in the form of a 100% stock dividend to shareholders of
record July 1, 1999 with a distribution date of July 15, 1999. All per share
data and weighted average shares have been restated as appropriate to reflect
the split.
This report contains forward-looking statements with respect to the
financial condition, results of operations and business of the Corporation and
Bank. These forward-looking statements involve risks and uncertainties and are
based on the beliefs and assumptions of management of the Corporation and Bank
and on information available at the time these statements and disclosures were
prepared. Factors that may cause actual results to differ materially from those
expected include the following:
o General economic conditions may deteriorate and negatively impact credit
quality and deposit retention.
o Changes in interest rates could reduce net interest income.
o Competitive pressures among financial institutions may increase.
o Legislative or regulatory changes, including changes in accounting
standards, may adversely affect the businesses that the Corporation and
Bank are engaged.
o New products developed or new methods of delivering products could result
in a reduction in business and income for the Corporation and Bank.
o Adverse changes may occur in the securities market.
o Year 2000 issues could erode public confidence in financial institutions or
present other risks (see separate Year 2000 Issue disclosure).
2. Investment Securities
---------------------
The Bank classifies investment securities in one of three categories: held
to maturity, available for sale and trading.
Debt securities acquired with both the intent and ability to be held to
maturity are classified as held to maturity and reported at amortized cost.
Gains or losses realized from the sale of any securities held to maturity are
determined by specific identification and are included in non-interest income.
Securities which may be used to meet liquidity needs arising from
unanticipated deposit and loan fluctuations, changes in regulatory capital and
investment requirements, or unforeseen changes in market conditions, including
interest rates, market values or inflation rates, are classified as available
for sale.
<PAGE>
Securities available for sale are reported at estimated fair value, with
unrealized gains and losses reported as a separate component of stockholders'
equity, net of tax. Gains or losses realized from the sale of securities
available for sale are determined by specific identification and are included in
non-interest income.
The Corporation does not permit the purchase or sale of trading account
securities. If such securities were permitted, market adjustments, fees, gains
or losses and income earned on trading account securities would be included in
non-interest income. Gains or losses realized from the sale of trading
securities would be determined by specific identification.
Premiums and discounts on investment securities are amortized using the
interest method.
3. Commitments and Contingencies
-----------------------------
The Bank has credit availability in the amount of $68,740,000 with the
Federal Home Loan Bank of Atlanta. Borrowings outstanding under this
availability were $31,700,000 and $13,000,000 respectively, at June 30, 1999 and
December 31, 1998.
Commitments to extend credit, which amount to $63,073,000 at June 30, 1999
and $67,466,000 at December 31, 1998, represent legally binding agreements to
lend to customers with fixed expiration dates or other termination clauses.
Since many of the commitments are expected to expire without being funded, the
total commitment amounts do not necessarily represent future liquidity
requirements.
There were no commitments at June 30, 1999 and $952,000 commitments at
December 31, 1998 to purchase securities when issued.
Standby letters of credit are conditional commitments issued by the Bank
guaranteeing the performance of a customer to a third party. Those guarantees
are primarily issued to support public and private borrowing arrangements. At
June 30, 1999 and December 31, 1998 the Bank had $922,000 and $682,000,
respectively, in outstanding standby letters of credit.
4. Merger and Acquisitions
-----------------------
On March 14, 1996, the Corporation completed the acquisition of Mutual
Savings Bank, F.S.B. (Mutual) upon the approval of the shareholders of each
company. The Corporation exchanged 879,805 common shares, at an exchange ratio
of .705 of a share of the Corporation's common stock, for Mutual's 1,248,100
common shares.
The transaction was accounted for as a pooling of interests. The financial
position and results of operations of the Corporation and Mutual were combined
and the fiscal year of Mutual was conformed to the Corporation's fiscal year.
In October 1996, the Corporation acquired the branch office of FirstSouth
Bank located in Yanceyville, North Carolina. In addition to the branch
facilities and an ATM located in Yanceyville, the Corporation acquired
$4,775,000 in loans and assumed deposits of $21,405,000. This transaction was
accounted for as a purchase. In conjunction with the Yanceyville purchase, the
Corporation recorded a core deposit intangible of $1,516,000, approximately 7%
of the deposits assumed.
5. New Accounting Pronouncements
-----------------------------
The Corporation adopted Statement of Financial Accounting Standards
("SFAS") No. 130, "Reporting Comprehensive Income", during the first quarter of
1998. This statement establishes standards for reporting a measure of all
changes in equity of an enterprise that result from transactions and economic
events of the period other than transactions with owners ("economic income").
SFAS No. 130 requires an enterprise to report comprehensive income in the notes
to the financial statements on an
<PAGE>
interim basis. The following is a detail of comprehensive income for the three
and six months ended June 30, 1999 and 1998:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30 June 30
------------------------- -------------------------
1999 1998 1999 1998
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Net Income $1,966,000 $1,751,000 $3,890,000 $3,412,000
Unrealized holding gains (losses) arising
during period (net of tax expense) (1,468,000) 35,000 (2,103,000) 64,000
----------- ---------- ----------- ----------
Total comprehensive income $ 498,000 $1,786,000 $1,787,000 $3,476,000
=========== ========== ========== ==========
</TABLE>
The FASB also issued SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information", in June 1997, which establishes new
standards for reporting information about operating segments in annual and
interim financial statements. This statement also requires descriptive
information about the way operating segments are determined, the products and
services provided by the segments and the nature of differences between
reportable segment measurements and those used for the consolidated entity. The
disclosure requirements of SFAS No.131 have been adopted and are included in
Note 6 to the Consolidated Condensed Financial Statements.
In February 1998, SFAS No. 132, "Employers' Disclosures about Pension and
Other Post-retirement Benefits", was issued, amending FASB Statements No. 87,
88, and 106. This Statement does not change the measurement or recognition of
pension and post-retirement benefit plans but standardizes disclosure
requirements. The new disclosure requirements of SFAS No. 132 have been adopted
and are included in the Consolidated Financial Statements in the Corporation's
1998 Annual Report on Form 10K.
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities", which establishes accounting and reporting
standards requiring balance sheet recognition of all derivative instruments at
fair value. The statement specifies that changes in the fair value of derivative
instruments be recognized currently in earnings unless specific hedge accounting
criteria are met. Special accounting for qualifying hedges allows derivative
gains and losses to offset related results on hedged items in the income
statement. Companies must formally document, designate and assess the
effectiveness of transactions utilizing hedge accounting. In June, 1999, the
FASB issued SFAS No. 137, "Accounting for Derivative Instruments and Hedging
Activities - Deferral of the Effective Date of FASB Statement No. 133", which
delays the original effective date of SFAS No. 133 until fiscal years beginning
after June 15, 2000. Adoption is not expected to have a material impact on the
Corporation.
6. Segment and Related Information
-------------------------------
The Corporation adopted SFAS No. 131, "Disclosures About Segments of an
Enterprise and Related Information", in 1998. Reportable segments include
community banking and trust and investment services. Community banking involves
making loans to and generating deposits from individuals and businesses in the
markets where the Bank has offices. All assets and liabilities of the Bank are
allocated to community banking. Investment income from fixed income investments
is a major source of income in addition to loan interest income. Service charges
from deposit accounts and non-deposit fees such as automatic teller machine fees
and insurance commissions generate additional income for community banking.
Trust and investment services includes estate and trust planning and
administration and investment management for various entities. The trust and
investment services division of the Bank manages trusts and estates and
purchases equity, fixed income and mutual fund investments for customer
<PAGE>
accounts. The trust and investment services division receives fees for
investment and administrative services. Fees are also received by this division
for individual retirement accounts managed for the community banking segment.
The accounting policies of the segments and the basis of segmentation are
the same as those described in the summary of significant accounting policies
set forth in Note 1 to the Consolidated Financial Statements in the
Corporation's 1998 Annual Report on Form 10-K. All inter-segment sales prices
are market based.
Segment information for the three and six months ended June 30, 1999 and
1998 is shown in the following table (in thousands). The "Other" column includes
corporate related items, results of insignificant operations and, as it relates
to segment profit (loss), income and expense not allocated to reportable
segments.
<TABLE>
Three Months Ended June 30, 1999
- -----------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Trust and
Community Investment Intersegment
Banking Services Other Eliminations Total
--------- ---------- ------- ------------ --------
<S> <C> <C> <C> <C> <C>
Interest income $ 8,286 $ - $ 6 $ (6) $ 8,286
Interest expense 3,605 - 6 (6) 3,605
Non-interest income - external customers 372 614 89 - 1,075
Non-interest income - internal customers - 13 - (13) -
Operating income before income taxes 2,377 435 1,949 (1,977) 2,784
Depreciation and amortization 370 11 4 - 385
Total assets 466,956 - 56,045 (55,887) 467,114
Capital expenditures 281 - - - 281
</TABLE>
<TABLE>
Three Months Ended June 30, 1998
- -----------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Trust and
Community Investment Intersegment
Banking Services Other Eliminations Total
--------- ---------- ------- ------------ --------
<S> <C> <C> <C> <C> <C>
Interest income $ 8,093 $ - $ 8 $ (8) $ 8,093
Interest expense 3,587 - 8 (8) 3,587
Non-interest income - external customers 355 548 89 - 992
Non-interest income - internal customers - 14 - (14) -
Operating income before income taxes 2,174 369 1,736 (1,764) 2,515
Depreciation and amortization 331 12 4 - 347
Total assets 430,530 - 53,349 (53,324) 430,555
Capital expenditures 97 - 4 - 101
</TABLE>
<TABLE>
Six Months Ended June 30, 1999
- ----------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Trust and
Community Investment Intersegment
Banking Services Other Eliminations Total
--------- ---------- ------- ------------ --------
<S> <C> <C> <C> <C> <C>
Interest income $ 16,448 $ - $ 19 $ (19) $ 16,448
Interest expense 7,177 - 19 (19) 7,177
Non-interest income - external customers 730 1,238 204 - 2,172
Non-interest income - internal customers - 26 - (26) -
Operating income before income taxes 4,667 871 3,879 (3,906) 5,511
Depreciation and amortization 707 22 8 - 737
Total assets 466,956 - 56,045 (55,887) 467,114
Capital expenditures 571 - 3 - 574
</TABLE>
<TABLE>
Six Months Ended June 30, 1998
- ----------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Trust and
Community Investment Intersegment
Banking Services Other Eliminations Total
--------- ---------- ------- ------------ --------
<S> <C> <C> <C> <C> <C>
Interest income $ 16,064 $ - $ 17 $ (17) $ 16,064
Interest expense 7,119 - 17 (17) 7,119
Non-interest income - external customers 638 1,067 193 - 1,898
Non-interest income - internal customers - 26 - (26) -
Operating income before income taxes 4,243 704 3,404 (3,426) 4,925
Depreciation and amortization 675 24 8 - 707
Total assets 430,530 - 53,349 (53,324) 430,555
Capital expenditures 229 - 6 - 235
</TABLE>
<PAGE>
AMERICAN NATIONAL BANKSHARES INC. AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
EARNINGS and CAPITAL
The Corporation's net income for the first six months of 1999 was
$3,890,000, an increase of 14.0% over the $3,412,000 earned during the first
half of 1998. On a basic and diluted per share basis, net income totaled $.64
for the first six months of 1999, up 14.3% from $.56 in the 1998 period. On an
annualized basis, return on average total assets was 1.69% for the first half of
1999 compared to 1.59% for the same period in 1998. Return on average common
shareholders' equity increased to 14.0% for the first six months of 1999 from
13.40% for the first half of 1998.
The Corporation's net income for the second quarter of 1999 was $1,966,000,
an increase of 12.3% over the $1,751,000 earned during the second quarter of
1998. On a basic and diluted per share basis, net income totaled $.32 for the
quarter, up 10.3% from $.29 in 1998. On an annualized basis, return on average
total assets was 1.69% for the second quarter of 1999 compared to 1.62% for the
second quarter of 1998. Return on average common shareholders' equity increased
to 14.08% in the second quarter of 1999 from 13.60% for the second quarter of
1998.
Shareholders' equity increased $230,000 during the first half of 1999 from
net income of $3,890,000 less dividends paid of $1,557,000 and less a change in
net unrealized gains (losses) on securities held for sale of $2,103,000. Common
stock at June 30, 1999 has been retroactively increased by $3,052,000 for the
2-for-1 stock split effected in the form of a 100% stock dividend issued July 1,
1999 by transfer from retained earnings.
The Corporation's growth in earnings resulted from four principal factors.
First, net interest income improved $326,000, or 3.6%, for the first half of
1999 compared to the first half of 1998 from growth in average earning assets by
$31,539,000 and related growth in average earning liabilities by $24,287,000
half (see discussion on NET INTEREST INCOME). Second, continued good asset
quality resulted in a reduction in the provision for loan losses by $115,000, or
24.2%, for the fist six months of 1999 compared to 1998. Third, the 14.4% growth
in non-interest income in the first six months of 1999 over the same period in
1998 demonstrates the continued success of the Corporation's expanded trust and
investment services and other fee income areas. Fourth, the Corporation has
controlled non-interest expenses which have grown $129,000, or 2.4%, in the
first half of 1999 over the first half of 1998.
TRENDS and FUTURE EVENTS
During the first six months of 1999, net loans increased $13,692,000 or
5.2%. The increase is the result of good loan demand and indicates the
continuance of a healthy local economy. The increase in loans was funded by
borrowings from the Federal Home Loan Bank of Atlanta. Total investment
securities decreased during the first six months of 1999 by $5,748,000 or 3.5%.
Total deposits increased $2,769,000 or .8% during the first six months of
1999 and repurchase agreements decreased $14,679,000 or 47.3% during the same
period. Repurchase agreements are used by commercial accounts to earn higher
yields on short term funds and are volatile.
On September 29, 1998 the Federal Reserve Board ("FRB") decreased
short-term interest rates by cutting federal funds by 1/4% and the major money
center banks followed by lowering the prime rate by 1/4%. On October 15 and
November 17, 1998 the FRB decreased short-term rates again by cutting federal
funds and the discount rate by 1/4%, and major money center banks followed by
lowering the prime rate by 1/4% on both occasions. Short and intermediate term
U.S. Treasury yields had already preceded the Federal Reserve actions by
declining from June 1998 to October 1998 in response to the global financial
crisis, losses in hedge funds and low inflation. The FRB actions in lowering
interest rates
<PAGE>
were designed to stabilize financial markets and to offset perceived
deteriorating economic conditions caused by the global financial crisis. The FRB
increased short-term interest rates by increasing federal funds 1/4% on June 30,
1999 in response to stabilized global financial markets and tight U.S. labor
conditions, and major money center banks followed by increasing the prime rate
by 1/4%. Treasury yields had already risen in anticipation of FRB tightening.
At the annual meeting of shareholders, held April 22, 1998, the
shareholders approved a Stock Option Plan permitting the Corporation to issue up
to a total of 150,000 shares of common stock (300,000 shares to reflect the
2-for-1 stock split), upon the exercise of options granted under the plan, prior
to December 31, 2006. The Plan is administered by the Stock Option Committee of
the Board of Directors which consists only of the Corporation's non-employee
Directors.
YEAR 2000 ISSUE
The Corporation is aware of the issues associated with the programming
code in existing computer systems as the millennium (Year 2000) approaches. The
"Year 2000" problem is pervasive and complex as virtually every computer
operation and many equipment systems will be affected in some way by the
rollover of the two digit year value to 00. The issue is whether computers and
systems dependent on computer chips will properly recognize date sensitive
information when the year changes to 2000. Systems that do not recognize such
information could generate erroneous data or cause a system to fail.
Technology hardware, software and other systems used by the Corporation are
provided by outside vendors rather than being developed in-house. These outside
vendors have been proactive in making systems Year 2000 ready, in testing
systems for Year 2000 readiness, in submitting their efforts to regulators for
review, and in supplying testing procedures for the Corporation to conduct
independent testing.
The Corporation is utilizing both internal and external resources to
identify, correct or reprogram, and test systems for Year 2000 compliance. The
Corporation's readiness plan encompasses both information technology systems and
computer chip embedded functions, such as elevators, security systems, and
building heating and cooling. A project team has installed corrected hardware
and software and tested systems for Year 2000 readiness. Additional testing of
new or updated systems will be made during 1999. To date, successful Year 2000
testing has been completed on 100% of the Corporation's mission critical
systems.
An educational process has been implemented to assist and assure that major
customers are Year 2000 ready. Approximately 95% of major customers have
responded that they are Year 2000 ready or will be Year 2000 ready in 1999. The
project team will continue to monitor readiness of customers during 1999.
Total Year 2000 project costs will be approximately $125,000 with $103,000
having been spent to date. The remaining expenditures are not expected to have a
material impact on the Corporation's results of operations, liquidity or capital
resources.
The Corporation faces a number of risks related to the Year 2000 date
change including legal risks, project management risk, financial risk and
outside vendor risk. Legal risk involves failure to meet contractual service
agreements, leading to possible punitive actions. Project management risk is
failure to adequately address Year 2000 planning and resource needs with missed
deadlines and improper allocation of resources. Financial risk relates to lost
revenue, asset quality deterioration or even business failure. Outside vendor
risk involves failure of communication systems, power or other important
services which the Corporation depends upon to operate. A contingency plan has
been established to assure readiness in the unlikely event that any critical
operating system fails prior to or after the Year 2000. The contingency plan
specifies actions to be taken by the Year 2000 project team in the event that a
critical system is not timely corrected and tested before Year 2000. Since 100%
of mission critical systems have been successfully tested to date, pre Year 2000
contingency plans are not expected to be
<PAGE>
activated. The contingency plan also assigns responsibility for checking the
proper operation of all systems on January 1, 2000, adopts special liquidity
measures to be taken before and after Year 2000, and describes implementation of
manual processes for lending, deposit operations, and trust services in the
event that systems fail. Responsibilities and detail procedures have been
established for training on manual systems. The Corporation's operations center,
branch office and mortgage banking operation located at Tower Drive are equipped
with a diesel generator in the event that electric power supplies fail prior to
or after Year 2000. The backup power supply has been tested and will continue to
be tested.
NET INTEREST INCOME
Net interest income on a fully taxable equivalent ("FTE") basis was
$9,655,000 for the first six months of 1999 compared to $9,202,000 for the first
six months of 1998, an increase of 4.9%. The interest rate spread decreased to
3.75% from 3.85% and the net yield on earning assets decreased to 4.43% from
4.55% in the first six months of 1999 compared to the first six months of 1998,
respectively. These decreases were due to a larger decline in loan yield than
deposit yield as interest rates declined and from increased reliance on more
expensive FHLB borrowings. Net interest income on a FTE basis for the first half
of 1999 grew $453,000 over the first half of 1998 in the face of the yield
decreases because average interest-earning assets increased $31,539,000 while
interest-bearing liabilities only grew $24,287,000. Growth in average
non-interest bearing deposits and retained income were primarily responsible for
the greater growth in interest-earning assets than interest-bearing liabilities
while the $19,343,000 increase in average loans led the growth in average
interest-earning assets during the first half of 1999.
Net interest income on a FTE basis was $4,874,000 in the second quarter of
1999 compared to $4,638,000 in the second quarter of 1998, an increase of 5.1%.
The interest rate spread decreased to 3.76% from 3.84% and the net yield on
earning assets decreased to 4.44% from 4.55% in the second quarter of 1999
compared to the second quarter of 1998, respectively. The reasons for the
increase in net interest income on a FTE basis while experiencing net yield and
spread declines for the three months ended June 30, 1999 were similar to the
those for the six month period ended June 30, 1999.
The following tables demonstrate fluctuations in net interest income and
the related yields for the first six months and second quarter of 1999 compared
to similar prior year periods.
<PAGE>
<TABLE>
The following is an analysis of net interest income, on a taxable equivalent basis. Nonaccrual loans are included in
average balances. Interest income on nonaccrual loans if recognized is recorded on a cash basis. (In thousands,
except rates):
<CAPTION>
Interest
Average Balance Income/Expense Yield/Rate
------------------------ -------------------- ----------------
For Six Months Ended June 30
1999 1998 1999 1998 1999 1998
-------- -------- ------- ------- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Loans:
Commercial $ 84,252 $ 72,554 $ 3,474 $ 3,226 8.25% 8.89%
Mortgage 139,737 133,411 5,767 5,836 8.25 8.75
Consumer 53,309 51,990 2,569 2,520 9.64 9.69
-------- -------- ------- ------- ---- ----
Total loans 277,298 257,955 11,810 11,582 8.52 8.98
-------- -------- ------- ------- ---- ----
Investment securities:
U. S. Government 18,238 47,727 550 1,448 6.03 6.07
Federal agencies 83,231 67,036 2,596 2,163 6.24 6.45
State and municipal 36,273 22,554 1,231 831 6.79 7.37
Other investments 20,136 7,209 626 242 6.22 6.71
-------- -------- ------- ------- ---- ----
Total investment securities 157,878 144,526 5,003 4,684 6.34 6.48
-------- -------- ------- ------- ---- ----
Federal funds sold and other 827 1,983 19 55 4.59 5.55
-------- -------- ------- ------- ---- ----
Total interest-earning assets 436,003 404,464 16,832 16,321 7.72 8.07
------- ------- ---- ----
Other non-earning assets 25,405 24,422
-------- --------
Total assets $461,408 $428,886
======== ========
Interest-bearing deposits:
Demand $53,821 $51,305 550 633 2.04 2.47
Money market 18,192 18,147 242 262 2.66 2.89
Savings 68,178 67,481 888 990 2.60 2.93
Time 177,613 174,727 4,500 4,644 5.07 5.32
-------- -------- ------- ------- ---- ----
Total interest-bearing deposits 317,804 311,660 6,180 6,529 3.89 4.19
Federal funds purchased - 379 - 11 - 5.80
Repurchase agreements 21,976 23,213 447 525 4.07 4.52
Other borrowings 21,664 1,905 550 54 5.08 -
-------- -------- ------- ------- ---- ----
Total interest-bearing
liabilities 361,444 337,157 7,177 7,119 3.97 4.22
------- ------- ---- ----
Demand deposits 41,398 38,156
Other liabilities 2,980 2,650
Shareholders' equity 55,586 50,923
-------- --------
Total liabilities and
shareholders' equity $461,408 $428,886
======== ========
Interest rate spread 3.75% 3.85%
==== ====
Net interest income $ 9,655 $ 9,202
======= =======
Taxable equivalent adjustment $ 384 $ 257
======= =======
Net yield on earning assets 4.43% 4.55%
==== ====
</TABLE>
<PAGE>
<TABLE>
The following is an analysis of net interest income, on a taxable equivalent basis. Nonaccrual loans are included in
average balances. Interest income on nonaccrual loans if recognized is recorded on a cash basis. (In thousands,
except rates):
<CAPTION>
Interest
Average Balance Income/Expense Yield/Rate
------------------------ -------------------- ----------------
For Three Months Ended June 30
1999 1998 1999 1998 1999 1998
-------- -------- ------- ------- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Loans:
Commercial $ 85,960 $ 74,366 $ 1,783 $ 1,651 8.30% 8.88%
Mortgage 141,545 132,961 2,901 2,902 8.20 8.73
Consumer 53,328 52,219 1,292 1,277 9.69 9.78
-------- -------- ------- ------- ---- ----
Total loans 280,833 259,546 5,976 5,830 8.51 8.98
-------- -------- ------- ------- ---- ----
Investment securities:
U. S. Government 13,531 45,932 206 698 6.09 6.08
Federal agencies 87,827 70,819 1,369 1,141 6.23 6.44
State and municipal 36,154 23,186 614 427 6.79 7.37
Other investments 19,315 6,964 301 117 6.23 6.72
-------- -------- ------- ------- ---- ----
Total investment securities 156,827 146,901 2,490 2,383 6.35 6.49
-------- -------- ------- ------- ---- ----
Federal funds sold and other 1,090 884 13 12 4.77 5.43
-------- -------- ------- ------- ---- ----
Total interest-earning assets 438,750 407,331 8,479 8,225 7.73 8.08
------- ------- ---- ----
Other non-earning assets 25,253 24,412
-------- --------
Total assets $464,003 $431,743
======== ========
Interest-bearing deposits:
Demand $54,228 $51,033 278 310 2.05 2.43
Money market 17,743 18,566 119 135 2.68 2.91
Savings 68,079 66,907 446 491 2.62 2.94
Time 180,574 174,790 2,268 2,330 5.02 5.33
-------- -------- ------- ------- ---- ----
Total interest-bearing deposits 320,624 311,296 3,111 3,266 3.88 4.20
Federal funds purchased - 574 - 9 - 6.27
Repurchase agreements 17,509 23,148 178 258 4.07 4.46
Other borrowings 24,692 3,860 316 54 5.12 -
-------- -------- ------- ------- ---- ----
Total interest-bearing
liabilities 362,825 338,878 3,605 3,587 3.97 4.23
------- ------- ---- ----
Demand deposits 42,382 38,545
Other liabilities 2,931 2,835
Shareholders' equity 55,865 51,485
-------- --------
Total liabilities and
shareholders' equity $464,003 $431,743
======== ========
Interest rate spread 3.76% 3.84%
==== ====
Net interest income $ 4,874 $ 4,638
======= =======
Taxable equivalent adjustment $ 193 $ 132
======= =======
Net yield on earning assets 4.44% 4.55%
==== ====
</TABLE>
<PAGE>
ASSET QUALITY
Non-performing assets include loans on which interest is no longer accrued,
loans classified as troubled debt restructurings and foreclosed properties.
Non-performing assets increased to $821,000 at June 30, 1999 from $575,000 at
December 31, 1998.
Foreclosed properties of $385,000 at June 30,1999 and December 31, 1998
include two commercial real estate properties.
Loans in a non-accrual status at June 30, 1999 were $436,000 compared with
$190,000 at December 31, 1998. Loans on accrual status and past due 90 days or
more at June 30, 1999 were $277,000 compared with $249,000 at December 31, 1998.
Total non-performing loans and loans past due 90 days or more as a
percentage of net loans were .26% at June 30, 1999 and .17% at December 31,
1998. Total non-performing loans and loans past due 90 days or more, on an
accrual status, are considered low by industry standards. Net charge-offs for
the first six months as a percentage of average loans increased to .06% in 1999
from .04% in the first half of 1998. These charge-off ratios are low by industry
standards. The net charge-off ratio for the first half of 1999, annualized,
while up from the first half of 1998, was less than any of the past three
calendar years.
During the first six months of 1999 the gross amount of interest income
that would have been recorded on non-accrual loans and restructured loans at
June 30, 1999, if all such loans had been accruing interest at the original
contractual rate, was $22,000. No interest payments were recorded during the
reporting period as interest income for all such non-performing loans.
PROVISION and RESERVE FOR LOAN LOSSES
The provision for loan losses was $360,000 for the first half and $180,000
for the second quarter of 1999 versus $475,000 and $223,000, respectively, for
the 1998 periods. The reserve for loan losses totaled $4,021,000 at June 30,
1999 an increase of 5.2% over the $3,821,000 recorded at December 31, 1998. The
ratio of reserves to loans, less unearned discount, was 1.42% at June 30, 1999
and December 31, 1998. In Management's opinion, the current reserve for loan
losses is adequate.
NON-INTEREST INCOME
Non-interest income for the first six months of 1999 was $2,172,000, an
increase of 14.4% from the $1,898,000 reported in the first six months of 1998.
The major reason for the 1999 first half growth in non-interest income was a
16.0% increase in trust and investment services to $1,238,000 due to growth in
managed investment accounts. All other non-interest categories showed slight
increases from the first half of 1998 to 1999.
Non-interest income for the second quarter of 1999 was $1,075,000, an
increase of 8.4% from the $992,000 reported in the second quarter of 1998. The
major reason for the 1999 second quarter growth in non-interest income was a
12.0% increase in trust and investment services to $614,000 due to growth in
managed investment accounts.
NON-INTEREST EXPENSE
Non-interest expense for the first six months of 1999 was $5,572,000, a
2.4% increase from the $5,443,000 reported for the same period last year.
Salaries increased 9.1% from the same period last year to $2,663,000 in 1999
while pension and other employee benefits decreased 15.1% to $488,000, largely
from lower medical insurance expense and reduced deferred compensation costs.
Core deposit intangible amortization of $225,000 for the first half of 1999 and
1998 represents the amortization of the premiums paid for deposits acquired at
Gretna in August 1995 and Yanceyville in 1996.
Non-interest expense for the second quarter of 1999 was $2,792,000, a 1.2%
increase from $2,760,000 reported for the second quarter in 1998. Salaries
increased 8.3% to $1,338,000 in the second quarter of 1999 from the same period
in 1998. Pension and other employee benefits decreased 20.1%
<PAGE>
from a year ago to $230,000 in the second quarter of 1999 due to reduced medical
insurance expense and lower deferred compensation costs.
INCOME TAX PROVISION
The income tax provision for the first six months of 1999 was $1,621,000,
an increase of $108,000 from $1,513,000 reported a year earlier. The effective
tax rate for the first six months of 1999 was 29.4% compared to 30.7% for the
first half of 1998. The reduction in the effective tax rate resulted from
increased investment in tax exempt securities.
CAPITAL MANAGEMENT
Federal regulatory risk-based capital ratio guidelines require percentages
to be applied to various assets including off-balance-sheet assets in relation
to their perceived risk. Tier I capital includes shareholders' equity and Tier
II capital includes certain components of nonpermanent preferred stock and
subordinated debt. The Corporation has no nonpermanent preferred stock or
subordinated debt. Banks and bank holding companies must have a Tier I capital
ratio of at least 4% and a total ratio, including Tier I and Tier II capital, of
at least 8%. As of June 30, 1999 the Corporation had a ratio of 16.87% for Tier
I and a ratio of 18.12% for total capital. At December 31, 1998 these ratios
were 16.79% and 18.04%, respectively.
During the second quarter of 1999, the Corporation declared and paid a
quarterly cash dividend of $.27 per share ($.135 to reflect the 2-for-1 stock
split) which was an increase over the $.24 per share ($.12 to reflect the
2-for-1 stock split) declared and paid in the first quarter of 1999. The second
quarter dividend totaled $824,000. The Corporation declared a 2-for-1 stock
split effected in the form of a 100% stock dividend to shareholders of record
July 1, 1999. The number of shares outstanding after the 100% stock dividend was
6,103,466 and per share amounts have been restated to reflect the stock
dividend.
MARKET RISK MANAGEMENT
The effective management of market risk is essential to achieving the
Corporation's objectives. As a financial institution, interest rate risk and its
impact on net interest income is the primary market risk exposure. The
Asset/Liability Investment Committee ("ALCO") is primarily responsible for
establishing asset and liability strategies and for monitoring and controlling
liquidity and interest rate risk. ALCO uses computer simulation analysis to
measure the sensitivity of earnings and market value of equity to changes in
interest rates.
The projected changes in net interest income and market value of portfolio
equity ("MVE") to changes in interest rates are calculated and monitored by ALCO
as indicators of interest rate risk. The projected changes in net interest
income and MVE to changes in interest rates at June 30,1999 were not materially
different from December 31, 1998.
The Bank's net liquid assets to net liabilities ratio was 21.9% at June 30,
1999 and 24.0% at December 31, 1998. Both of these ratios are considered to
reflect adequate liquidity for the respective periods.
Management constantly monitors and plans the Corporation's liquidity
position for future periods. Liquidity is provided from cash and due from banks,
federal funds sold, interest-bearing deposits in other banks, repayments from
loans, seasonal increases in deposits, lines of credit from two correspondent
banks and two federal agency banks and a planned structured continuous maturity
of investments. Management believes that these factors provide sufficient and
timely liquidity for the foreseeable future.
<PAGE>
PART II
OTHER INFORMATION
Item:
1. Legal Proceedings
The nature of the business of the Corporation's banking
subsidiary ordinarily results in a certain amount of litigation. The subsidiary
of the Corporation is involved in various legal proceedings, all of which are
considered incidental to the normal conduct of business. Management believes
that the liabilities arising from these proceedings will not have a material
adverse effect on the consolidated financial position or consolidated results of
operations of the Corporation.
2. Changes in securities
None
3. Defaults upon senior securities
None
4. Results of votes of security holders
None
5. Other information
None
6. Exhibits and Reports on Form 8-K
(a) Exhibits - Financial Data Schedule EX-27
(b) Reports on Form 8-K
On June 30, 1999, the Corporation filed a current report on
Form 8-K under Item 5 to report the 2- for-1 stock split effected in the form of
a 100% stock dividend distributed on July 15, 1999 to shareholders of record
July 1, 1999.
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.
AMERICAN NATIONAL BANKSHARES INC.
/s/ Charles H. Majors
---------------------------------
Charles H. Majors
Date - August 13, 1999 President and Chief Executive Officer
/s/ T. Allen Liles
---------------------------------
T. Allen Liles
Senior Vice-President and
Date - August 13, 1999 Secretary-Treasurer (Chief Financial Officer)
<TABLE> <S> <C>
<ARTICLE> 9
<CIK> 0000741516
<NAME> American National Bankshares Inc.
<MULTIPLIER> 1000
<S> <C> <C> <C>
<PERIOD-TYPE> 3-MOS 6-MOS YEAR
<FISCAL-YEAR-END> DEC-31-1999 DEC-31-1999 DEC-31-1999
<PERIOD-START> JAN-01-1999 APR-01-1999 JAN-01-1999
<PERIOD-END> MAR-31-1999 JUN-30-1999 JUN-30-1999
<CASH> 12,367 11,831 11,831
<INT-BEARING-DEPOSITS> 19 210 210
<FED-FUNDS-SOLD> 0 0 0
<TRADING-ASSETS> 0 0 0
<INVESTMENTS-HELD-FOR-SALE> 108,209 110,238 110,238
<INVESTMENTS-CARRYING> 46,379 47,427 47,427
<INVESTMENTS-MARKET> 47,337 47,188 47,188
<LOANS> 278,430 283,521 283,521
<ALLOWANCE> 3,910 4,021 4,021
<TOTAL-ASSETS> 458,331 467,114 467,114
<DEPOSITS> 363,228 361,094 361,094
<SHORT-TERM> 3,540 5,700 5,700
<LIABILITIES-OTHER> 23,146 2,885 2,885
<LONG-TERM> 13,000 26,000 26,000
0 0 0
0 0 0
<COMMON> 3,052 6,103 6,103
<OTHER-SE> 52,365 48,988 48,988
<TOTAL-LIABILITIES-AND-EQUITY> 458,331 467,114 467,114
<INTEREST-LOAN> 5,827 5,969 11,796
<INTEREST-INVEST> 2,329 2,304 4,633
<INTEREST-OTHER> 6 13 19
<INTEREST-TOTAL> 8,162 8,286 16,448
<INTEREST-DEPOSIT> 3,069 3,111 6,180
<INTEREST-EXPENSE> 3,572 3,605 7,177
<INTEREST-INCOME-NET> 4,590 4,681 9,271
<LOAN-LOSSES> 180 180 360
<SECURITIES-GAINS> 8 0 8
<EXPENSE-OTHER> 2,780 2,792 5,572
<INCOME-PRETAX> 2,727 2,784 5,511
<INCOME-PRE-EXTRAORDINARY> 2,727 2,784 5,511
<EXTRAORDINARY> 0 0 0
<CHANGES> 0 0 0
<NET-INCOME> 1,924 1,966 3,890
<EPS-BASIC> .32<F1> .32 .64
<EPS-DILUTED> .32<F1> .32 .64
<YIELD-ACTUAL> 4.41 4.44 4.43
<LOANS-NON> 405 436 436
<LOANS-PAST> 246 277 277
<LOANS-TROUBLED> 0 0 0
<LOANS-PROBLEM> 0 0 0
<ALLOWANCE-OPEN> 3,821 3,910 3,821
<CHARGE-OFFS> 167 90 257
<RECOVERIES> 76 21 97
<ALLOWANCE-CLOSE> 3,910 4,021 4,021
<ALLOWANCE-DOMESTIC> 2,812 2,986 2,986
<ALLOWANCE-FOREIGN> 0 0 0
<ALLOWANCE-UNALLOCATED> 1,098 1,035 1,035
<FN>
<F1>
Restated to reflect the impact of a 2-for-1 stock split effected in the form of
a dividend to shareholders of record July 1, 1999.
</FN>
</TABLE>
