FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
for the quarterly period ended September 30, 1998
OR
[ ] 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 0-13423
FNB Rochester Corp.
(Exact name of registrant as specified in its charter)
New York 16-1231984
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
35 State St., Rochester. New York 14614
Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (716) 546-3300
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 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.
Class Outstanding at November 6, 1998
Common stock, $1.00 par value 3,624,722
<PAGE>
INDEX
Page No.
Part I Financial Information
Item 1.
Condensed consolidated balance sheets -
September 30, 1998 and De3-4ber 31, 1997
Condensed consolidated statements of
income for the three months and nine months
ended September 30, 1998 and 1997 5
Condensed consolidated statement of changes in
equity for the period ended September 30, 1998 6
Condensed consolidated statements of cash
flows for the nine months ended September
30, 1998 and 1997 7-8
Notes to condensed consolidated financial
statements 9-12
Item 2. Management's discussion and analysis of
financial condition and r13-19s of operations
Item 3. Quantitative and qualitative disclosures about
market risk
This information is incorporated by reference
in Part I, Item 2.
Quantitative and Qualitative Disclosures
About Market Risk 17
Part II Other information 21-22
Item 1. Legal proceedings 21
Item 2. Changes in securities and use of proceeds 21
Item 3. Defaults upon Senior Securities 21
Item 4. Submission of matters to a vote of security holders 21
Item 5. Other information 22
Item 6. Exhibits and reports on form 8-K 22
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
FNB ROCHESTER CORP. AND SUBSIDIARY
Condensed Consolidated Balance Sheets (unaudited)
(In thousands, except per share data)
<TABLE>
<CAPTION>
September 30, December 31,
1998 1997
Assets
<S> <C> <C>
Cash and due from banks $17,962 $17,968
Interest-bearing deposits with other banks 1,086 1,134
Federal funds sold 1,000 12,200
Securities available-for-sale, at fair value 128,981 120,819
Securities held-to-maturity (fair value of $27,459
in 1998 and $28,323 in 1997) 27,146 28,278
Loans:
Commercial 223,510 201,722
Mortgage 101,251 83,113
Home Equity 29,689 23,516
Consumer 22,702 22,886
Total loans 377,152 331,237
Net deferred loan fees 141 283
Allowance for loan losses (5,543) (5,580)
Net loans 371,750 325,940
Premises and equipment, net 11,011 8,813
Accrued interest receivable 4,239 3,761
FHLB and FRB stock 2,188 1,655
Other assets 2,533 1,785
Total assets $567,896 $522,353
Liabilities and shareholders' equity Deposits:
Demand:
Non-interest bearing 83,408 70,831
Interest bearing 74,397 67,852
Savings and money market 103,309 89,224
Certificates of deposit:
Under $100,000 141,451 149,437
$100,000 and over 95,355 92,477
Total deposits 497,920 469,821
Securities sold under agreement to repurchase and
short-term borrowings 17,799 14,236
Accrued interest payable and other liabilities 4,482 4,066
Long-term debt 10,210 210
Total liabilities 530,411 488,333
Shareholders' equity:
Common stock, $1 par value; authorized 5,000,000
shares; issued and outstanding 3,622,903 in 1998
and 3,589,253 in 1997
3,623 3,589
Additional paid in capital 13,675 13,269
Undivided profits 19,023 16,266
Accumulated other comprehensive income 1,164 896
Total shareholders' equity 37,485 34,020
Total liabilities and shareholders' equity $567,896 $522,353
</TABLE>
See accompanying notes to condensed consolidated financial statements
<PAGE>
FNB ROCHESTER CORP. AND SUBSIDIARY
Condensed Consolidated Statements of Income (unaudited)
(In thousands, except for share data)
<TABLE>
<CAPTION>
Nine months ended Three months ended
September 30, September 30,
Interest income: 1998 1997 1998 1997
<S> <C> <C> <C> <C>
Interest and fees on loans:
Commercial $14,688 $13,542 $5,040 $4,681
Mortgage 5,107 4,314 1,804 1,510
Home equity 1,671 1,471 583 503
Consumer 1,509 1,551 521 539
Total interest and fees on loans 22,975 20,878 7,948 7,233
Federal funds sold and time deposits 386 355 94 148
Securities 7,442 6,332 2,510 2,349
Total interest income 30,803 27,565 10,552 9,730
Interest expense:
Savings, checking and money market accounts 2,811 2,374 1,018 826
Certificates of deposit 10,469 9,721 3,413 3,411
Short-term borrowings and other 721 174 316 112
Total interest expense 14,001 12,269 4,747 4,349
Net interest income 16,802 15,296 5,805 5,381
Provision for loan losses 150 0 - -
Net interest income after provision
for loan losses 16,652 15,296 5,805 5,381
Non-interest income:
Service charges on deposit accounts 1,479 1,271 546 452
Credit card fees 523 537 152 163
Gain on sale of mortgages 98 37 40 13
Gain on sale of securities available-for-sale 24 - 13 -
Loan servicing fees 198 197 67 66
Other operating income 753 448 304 155
Total non-interest income 3,075 2,490 1,122 849
Non-interest expense:
Salaries and employee benefits 8,029 7,159 2,825 2,439
Occupancy 2,894 2,778 1,005 922
Marketing and public relations 553 438 158 145
Office supplies, printing and postage 572 467 192 153
Processing fees 887 724 332 225
Legal 125 165 29 51
Other 1,657 1,325 618 481
Total non-interest expenses 14,717 13,056 5,159 4,416
Income before income taxes 5,010 4,730 1,768 1,814
Income tax expense 1,386 1,528 476 589
Net income $3,624 $3,202 $1,292 $1,225
Net income per common share - basic $ 1.00 $ .89 $ .36 $ .34
Net income per common share - diluted $ .95 $ .86 $ .34 $ .33
</TABLE>
See accompanying notes to condensed consolidated financial statements.
<PAGE>
FNB ROCHESTER CORP. AND SUBSIDIARY
Condensed Consolidated Statement of Changes in Equity
Period Ended September 30, 1998
(in thousands)
<TABLE>
<CAPTION>
Accumulated
Additional Other
Common Paid in Undivided Comprehensive
Stock Capital Profits Income Total
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1997 $ 3,589 $ 13,269 $ 16,266 $ 896 $ 34,020
Comprehensive income
Net income 3,624 3,624
Unrealized gain on securities
available-for-sale, net of
taxes of $178 and net of
reclassification adjustment
(see disclosure) 268 268
Total comprehensive income 3,892
Quarterly common stock cash
dividend - $.08 per share (867) (867)
Option and employee purchase 34 504 538
shares issued
Balance at September 30, 1998 $ 3,623 $ 13,773 $ 19,023 $1,164 $ 37,583
Disclosure of reclassification amount:
Unrealized holding gains arising during period $ 282
Less: reclassification adjustment for gains included in net income 14
Net unrealized gain on securities $ 268
</TABLE>
<PAGE>
FNB ROCHESTER CORP. AND SUBSIDIARY
Condensed Consolidated Statements of Cash Flows (unaudited)
(In thousands)
<TABLE>
<CAPTION>
Nine months ended
September 30,
1998 1997
<S> <C> <C>
Cash flows from operating activities:
Net income $ 3,624 $ 3,202
Adjustments to reconcile net income
to net cash provided by operating
activities:
Provision for loan losses 150 -
Depreciation and amortization 1,208 1,188
Gain on sales of securities (24) -
Increase in mortgage loans held-for-sale (184) (1,664)
Increase in accrued interest receivable (478) (813)
Increase in other assets (1,011) (57)
Increase in accrued interest payable
and other liabilities 485 1,032
Net cash provided by operating activities 3,770 2,888
Cash flows from investing activities:
Securities available-for-sale:
Purchase of securities (51,754) (57,224)
Proceeds from maturities 39,637 11,497
Proceeds from sales 4,427 -
Securities held-to-maturity:
Purchase of securities (4,133) (1,246)
Proceeds from maturities 5,265 3,661
Loan origination and principal collection, net (45,692) (23,688)
Capital expenditures, net (3,406) (475)
Increase in other assets - investing (533) (139)
Net cash used by investing activities (56,189) (67,614)
Cash flows from financing activities:
Net increase demand, savings and money
market accounts 33,207 13,096
Certificates of deposit accepted and repaid, net (5,108) 42,052
Increase in short-term borrowing and securities
sold under agreement to repurchase 3,563 9,894
Increase in long-term debt 10,000 -
Payment of common stock dividend (937) (429)
Employee stock purchase and exercise
of options to purchase common stock 440 186
Net cash provided by financing activities 40,823 64,799
Increase (decrease) in cash and cash equivalents (11,254) 73
Cash and cash equivalents at beginning of year 30,302 21,681
Cash and cash equivalents at end of period $ 19,048 $ 21,754
The Company paid cash during the nine months ended
September 30, 1998 and 1997
as follows:
Interest $ 14,024 $ 11,783
Taxes 657 1,857
</TABLE>
See accompanying notes to condensed consolidated financial statements.
<PAGE>
FNB ROCHESTER CORP. AND SUBSIDIARY
Notes to Condensed Consolidated Financial Statements (unaudited)
(1) Summary of Significant Accounting Policies
Basis of Presentation
FNB Rochester Corp. (the Company) operates as a bank holding company.
Its only subsidiary is First National Bank of Rochester (the Bank). The
consolidated financial statements include the accounts of the Company
and its wholly owned subsidiary, the Bank. All material intercompany
accounts and transactions have been eliminated in the consolidation.
The financial information is prepared in conformity with generally
accepted accounting principles and such principles are applied on a
basis consistent with those reflected in the December 31, 1997 Form
10-K Report of the Company filed with the Securities and Exchange
Commission. The financial information included herein has been prepared
by management without audit by independent certified public
accountants. The information furnished includes all adjustments and
accruals, solely of a normal recurring nature, that are in the opinion
of management necessary for a fair presentation of results for the
interim period ended September 30, 1998. Amounts in prior periods'
financial statements are reclassified whenever necessary to conform
with current presentation.
(2) Allowance for Loan Losses
Changes in the allowance for loan losses for the nine months ended
September 30, 1998 and 1997 are as follows:
1998 1997
Balance at beginning of period $5,580 $5,696
Provisions for loan losses 150 -
Loans charged off (394) (376)
Recoveries on loans previously charged-off 207 206
Balance at end of period $5,543 $5,526
The principal balance of loans not accruing interest totaled $1,989,000
and $2,332,000 at September 30, 1998 and 1997 respectively and
$2,100,000 at December 31, 1997.
At September 30, 1998 and 1997, the recorded investment in loans that
are considered to be impaired totaled $1,119,000 and $3,675,000,
respectively. The average recorded investments in impaired loans during
the nine months ended September 30, 1998 and 1997 was approximately
$1,106,000 and $2,593,000, respectively. For the nine months ended
September 30, 1998 and 1997, the Company recognized $50,000 and
$171,000, respectively, in interest income on the impaired loans during
the period in which they were considered impaired.
(3) Earnings per Common Share
Calculation of Basic Earnings Per Share (Basic EPS) and Diluted
Earnings Per Share (Diluted EPS) is as follows (income in thousands):
<TABLE>
<CAPTION>
Average
Net Income Shares Per Share
<S> <C> <C> <C>
For nine months ended September 30, 1998
Basic EPS
Net income applicable to common shareholders $ 3,624 3,607,598 $ 1.00
Effect of assumed exercise of stock options - 191,765
Diluted EPS
Income available to common shareholders and
assumed exercise of stock options $ 3,624 3,799,363 $ .95
For nine months ended September 30, 1997
Basic EPS
Net income applicable to common shareholders $ 3,202 3,578,518 $ .89
Effect of assumed exercise of stock options - 160,025
Diluted EPS
Income available to common shareholders and
assumed exercise of stock options $ 3,202 3,734,593 $ .86
For three months ended September 30, 1998
Basic EPS
Net income applicable to common shareholders $ 1,292 3,616,234 $ .36
Effect of assumed exercise of stock options - 189,677
Diluted EPS
Income available to common shareholders and
assumed exercise of stock options $ 1,292 3,805,911 $ .34
For three months ended September 30, 1997
Basic EPS
Net income applicable to common shareholders $ 1,225 3,582,818 $ .34
Effect of assumed exercise of stock options - 169,012
Diluted EPS
Income available to common shareholders and
assumed exercise of stock options $ 1,225 3,751,830 $ .33
</TABLE>
(4) Stock Option Plans
The Company has stock option plans under which options to acquire
525,000 shares of its common stock were available to grant to key
employees and options to acquire 25,000 shares of its common stock
were available to grant to directors. At September 30, 1998, options
to purchase 509,662 shares were held by grantees under the plans. The
range of exercise prices of the options is $5.63 to $21.50 per share
with an average exercise price of $13.12 per share. At September 30,
1998, options to acquire 315,956 shares were exercisable. Of the
remaining, options to acquire 23,400 shares become exercisable at
various times through September 2000 and 170,306 become exercisable
when the market price of the Company's common stock reaches certain
levels, ranging from $25.50 to $33.50, and remains there for a 30 day
period. Since inception of the plans, options to acquire 23,025 shares
have been exercised.
(5) Dividends
The Company declared a quarterly $.08 per share dividend on common
stock on September 29 , 1998, payable October 30, 1998 to shareholders
of record October 15, 1998.
(6) New Accounting Pronouncements
Effective January 1, 1998 the Company adopted the remaining provisions
of SFAS No. 125, Accounting for Transfers and Servicing of Financial
Assets and Extinguishments of Liabilities, which relate to the
accounting for securities lending, repurchase agreements, and other
secured financing activities. These provisions, which were delayed for
implementation by SFAS No. 127, are not expected to have a material
impact on the Company. In addition, the Financial Accounting Standards
Board is considering certain amendments and interpretations of SFAS No
125 which, if enacted in the future, could affect the accounting for
transactions within their scope.
On January 1, 1998, the Company adopted the provisions of Statement of
Financial Accounting Standards (FASB) No. 130, entitled Reporting
Comprehensive Income. This statement establishes standards for
reporting and display of comprehensive income and its components.
Comprehensive income includes the reported net income of a company
adjusted for items that are currently accounted for as direct entries
to equity, such as the mark to market adjustment on securities
available for sale, foreign currency items and minimum pension
liability adjustments. At the Company, comprehensive income represents
net income plus other comprehensive income, which consists of the net
change in unrealized gains or losses on securities available for sale
for the period. Accumulated other comprehensive income represents the
net unrealized gains or losses on securities available for sale as of
the balance sheet dates.
Comprehensive income for the nine-month period ended September 30, 1998
is shown in the consolidated statement of changes in equity.
Comprehensive income for the nine-month period ended September 30, 1997
was $3,780,000.
FASB Statement No. 131 entitled Disclosures about Segments of an
Enterprise and Related Information was issued in June 1997. This
Statement is effective for fiscal years beginning after December 15,
1997. This Statement establishes standards for the way that public
business enterprises report information about operating segments in
annual financial statements and requires that those enterprises report
selected information about operating segments in interim financial
reports issued to shareholders. It also establishes standards for
related disclosures about products, services geographic areas, and
major customers. This Statement may increase the Company's financial
disclosures but will have no impact on operating results.
FASB issued Statement No. 132, Employers' Disclosures about Pensions
and Other Post Retirement Benefits in February 1998. This statement
revises employer's disclosures about pension and other post retirement
benefit plans. It does not change the measurement or recognition of
these plans. The statement is effective for the Company in 1998 and
will not impact the Company's financial position or results of
operations.
FASB Statement No. 133, Accounting for Derivative Instruments and
Hedging Activities was issued in June 1998. This statement establishes
accounting and reporting standards for derivative instruments and for
hedging activities. It requires that all derivatives be recognized as
either assets or liabilities in the balance sheet and that those
instruments be measured at fair value. The accounting for changes in
the fair value of a derivative (that is, gains and losses) depends on
the intended use of the derivative and the resulting designation. This
statement is effective for all fiscal quarters beginning January 1,
2000. Earlier adoption, however, is permitted. The Company anticipates,
based on current activities, that the adoption of SFAS No.
133 will not have a material effect on the results of its operations.
FASB Statement No. 134, Accounting for Mortgage-Backed Securities
Retained after the Securitization of Mortgage Loans Held for Sale by a
Mortgage Banking Enterprise was issued in October 1998. This statement
is an amendment of FASB Statement No. 65, Accounting for
Mortgage-Backed Securities Retained after the Securitization of
Mortgage Loans Held for Sale by a Mortgage Banking Enterprise.
Statement 65, as amended by FASB Statement No. 115, Accounting for
Certain Investments in Debt and Equity Securities, requires that after
the securitization of a mortgage loan held for sale, an entity engaged
in mortgage banking activities classify the resulting mortgage-backed
security as a trading security. This Statement further amends Statement
65 to require that after the securitization of mortgage loans held for
sale, an entity engaged in mortgage banking activities classify the
resulting mortgage-backed securities or other retained interests based
on its ability and intent to sell or hold those investments. This
statement is effective for the first fiscal quarter beginning after
December 15, 1998. Early application is encouraged. The Company
anticipates, based on current activities, that the adoption of SFAS No.
134 will not have a material effect on the results of its operations.
<PAGE>
FNB ROCHESTER CORP. AND SUBSIDIARY
ITEM 2.- MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Forward Looking Statements
Statements included in this Management's Discussion and Analysis of
Financial Condition and Results of Operations and elsewhere in this
document that do not relate to present or historical conditions are
"forward looking statements" within the meaning of that term in Section
27A of the Securities Act of 1933, as amended, and of Section 21F of
the Securities Exchange Act of 1934, as amended. Additional oral or
written forward looking statements may be made by the Company from time
to time, and such statements may be included in documents that are
filed with the Securities Exchange Commission. Such forward looking
statements involve risks and uncertainties which could cause results or
outcomes to differ materially from those expressed in such forward
looking statements. Among the important factors on which such
statements are based are assumptions concerning the business
environment in those counties in New York State where the Bank
operates, changes in interest rates, changes in the banking industry in
general and particularly in the competitive environment in which the
Bank operates, changes in inflation, and assumptions concerning the
year 2000.
The following is management's discussion and analysis of certain
significant factors which have affected the Company's financial
position and operating results during the periods included in the
accompanying condensed consolidated financial statements. Management's
discussion and analysis supplements management's discussion and
analysis for the year ended December 31, 1997 contained in the
Company's Form 10-K for the period then ended and includes certain
known trends, events and uncertainties that are reasonably expected to
have a material effect on the Company's Financial position or operating
results.
Overview
Total assets increased $45.5 million, or 8.7% in the first nine months
of 1998. Loans increased $45.8 million, or 13.8% as compared to
December 31, 1997 and deposits increased $28.1 million, or 6%. The loan
growth has been primarily in commercial loans, residential mortgages
and home equity loans. Investments in securities available-for-sale
increased by $8.2 million, or 6.8%, over the amount at year end.
Deposits increased to $497.9 million as compared to $469.8 million at
December 31, 1997. $2.9 million of the increase was in certificates of
deposit of $100,000 or more. Other deposit increases from December 31,
1997 were $14.1 million for Savings and Money Market, $12.6 million for
non-interest bearing demand and $6.5 million for interest checking
deposits. Certificates of deposit of less than $100,000 declined $8
million. The number of new demand accounts increased by 1,983, or 17.3%
from December 31, 1997 to September 30, 1998. Securities sold under
agreement to repurchase and short-term borrowings increased $3.5
million or 25%. To help with interest rate sensitivity and match fund
longer term assets, during the third quarter of 1998 the Bank borrowed
$10 million for three years from the Federal Home Loan Bank.
For the nine-month period ended September 30, 1998, net income
increased $422,000, or 13.2%, as compared to the same period in 1997
and diluted income per share increased $.11, from $.89 to $1.00. The
increase is primarily due to increased net interest income. Net
interest income increased $1,506,000, or 9.8% as compared to the same
period in 1997. Other income also contributed to the increased net
income with increases of $585,000 and $273,000 respectively, for the
six-month and three-month periods as compared to the same periods in
1997.
Net income for the three-month period ended September 30, 1998
increased $67,000, or 5.5%, as compared to the same period in 1997.
Diluted income per share increased to $.34, up $.01 in comparison to
$.33 for the three months ended September 30, 1997. As with the nine
month period, the increase is primarily due to increased net interest
income. Net interest income increased $424,000, or 7.9% as compared to
the same period in 1997.
Net Interest Income
Commercial lending and residential mortgage lending continue to provide
much of the Company's loan growth. The increase in net interest income
in the nine-month period ended September 30, 1998 as compared to the
same period in 1997 is primarily the result of the increased lending
activity and increased securities available-for-sale, with offsetting
interest expense from increased certificates of deposit and securities
sold under agreement to repurchase. After remaining fairly stable
during 1997, net interest margin has declined from 4.50% for the
quarter ended December 1997 to 4.33%, 4.26% and 4.33% respectively, for
each of the three month periods through September 30,1998. To help
control interest costs, management has attempted to fund the Bank's
growth with less expensive long-term debt and savings, interest
checking and money market accounts rather than certificates of deposit.
As a result, average certificate of deposit volumes declined in the
three month period from June 30, 1998 to September 30, 1998 by $12.5
million.
Increased loan volume resulted in interest and fees on loans increasing
$2,097,000, or a 10% increase for the nine-month period and $715,000,
or 9.9%, for the three-month period ended September 30, 1998, as
compared to the same periods in 1997. For the nine-month period
interest and fee income on loans was increased $2,632,000 by additional
volumes and was reduced $535,000 by lower rates.
Average commercial loans increased $21.2 million, or 11%, from the
period ended September 30, 1997 to the period ended September 30, 1998.
The increased volume contributed $1,459,000 to income, which was
partially offset by rate declines that reduced income by $313,000.
Average mortgage loans increased $15.2 million, or 19.7%. The increase
in the mortgage portfolio was primarily made up of fixed rate mortgages
with maturities of 15 years or less. The increase in mortgage interest
income of $793,000 was primarily the result of the increased volume.
Average home equity lines of credit outstanding increased $6.9 million
with an increase in income of $200,000. Other consumer loans showed a
small decline.
During the year to date, additional deposits and securities sold under
agreement to repurchase (which are used in conjunction with deposit
sweep accounts) have caused the rate of available funds to grow faster
than loans, and management has sought to maximize earnings by using
excess funds to purchase additional securities available-for-sale.
During the nine-month period ended September 30, 1998, average
securities increased $29.2 million and income from those investments
increased $1,110,000, or 17.5% over the comparable period for the prior
year.
In August 1998 the Bank secured a three year $10 million loan with the
Federal Home Loan Bank. This long-term debt will be used to fund fixed
rate loans and securities available-for-sale.
Interest expense increased $1,732,000, or 14.1%, for the nine-month
period ended September 30, 1998 as compared to the period ended
September 30, 1997, and $398,000, or 9.2% for the comparative
three-month period. The net average balance total of savings, interest
checking, and money market categories have shown an increase of $20.1
million, or 13.8%, as compared to the first nine months of 1997, and
the interest expense associated with those deposits increased $437,000,
or 18.4%. For the same comparative nine-month periods, average balances
for certificates of deposit increased $19.2 million, or 8.3%, resulting
in $800,000 in additional interest expense, which was offset by a
$51,000 decline in interest expense caused by lower rates.
Provision for Loan Losses
The Bank provides for loan losses by a charge to current operations.
The provision is based upon discretionary adjustments which, in the
opinion of management, are necessary to bring the allowance to an
appropriate level considering the character of the loan portfolio,
current economic conditions, analyses of specific loans, and historical
loss experience. A provision for $150,000 was made for the period ended
September 30, 1998 and no provision was made in the period ended
September 30, 1997.
The Bank had net charge-offs of $187,000 for the nine-month period
ended September 30, 1998 as compared to net charge-offs of $170,000 for
the same period in 1997. Net charge-offs (annualized) as a percent of
average loans were .07% for both the nine months ended September 30,
1998 and 1997. The ratios of the allowance for possible loan losses as
a percent of period end loans for the comparable periods were 1.47% and
1.68%, respectively. Non performing assets increased $284,000, or 8.5%
to $3,638,000 at September 30, 1998 from $3,354,000 at September 30,
1997. The primary reason for the increase in the delinquencies is an
increased delinquency rate in a pool of mortgage loans. These
mortgages, totaling $8.6 million, were originated from 1995 to 1997
under special underwriting guidelines which targeted certain City of
Rochester neighborhoods and allowed for loan-to-value ratios of up to
115%. The Bank has assigned an allocation of its reserve for loan
losses to these loans and the allocation will be periodically evaluated
and adjusted based on future delinquency rates and loss experience. Non
performing assets as a percent of total loans and other real estate
declined to .96% at September 30, 1998 from 1.02% at September 30,
1997. Management undertakes a quarterly analysis to assess the adequacy
of the allowance for possible loan losses taking into account
non-performing and delinquent loans, internally criticized loans,
historical trends, economic factors, and overall credit administration.
Based on this analysis, the allowance is considered adequate at
September 30, 1998 to absorb anticipated losses. Management believes
that the inherent risk in the current portfolio is being adequately
provided for, and because of credit standards that the Bank has
implemented, new loans are expected to be of high quality.
Internally criticized loans increased $4.3 million from $15.2 million
at December 31, 1997 to $19.5 million at September 30, 1998. The
increase over the December 1997 total was primarily caused by one
lending relationship. The relationship appears to be adequately
collateralized and is not considered impaired.
Non-Interest Income and Non-Interest Expense
Non-interest income of $3,075,000 for the first nine months of 1998
represents an increase of $585,000, or 23.5%, from $2,490,000 for the
comparable period in 1997. Most non-interest income categories showed
increases in the nine-month period. The largest dollar increase was
$208,000, or 16.4%, as a result of increases in service charges on
deposit accounts. The three-month period reflected similar results.
Non-interest expense was $14,717,000 for the first nine months of 1998
as compared to $13,056,000 for the comparable period in 1997, an
increase of $1,661,000, or 12.7%. The largest components of
non-interest expense for the nine-month periods ended September 30,
1998 and 1997 were salaries, employee benefits and occupancy. Salaries
and employee benefits increased $870,000, or 12.2%, while occupancy
expense showed little change. Salaries and employee benefits increased
primarily because of annual increases, a new office which opened in the
City of Rochester in early April and two new offices which opened in
the third quarter of 1998. Both salaries, employee benefits and
occupancy expenses are expected to increase in 1998 as the result of
the new banking offices and as the Bank replaces its core banking
system. While operating expenses have continued to increase, the
Company's operating expense as a percent of average assets has
declined. The ratio declined during the last four years from 5.18% in
1994 to 3.60% in 1997. The ratio for the first nine months of 1998 is
3.57%. With the Company's planned growth, including new offices and new
core banking system, it is expected that this ratio may increase.
Provision for Income Taxes
The provision for income tax was $1,386,000 for the period ended
September 30, 1998 as compared to $1,528,000 at September 30, 1997. The
Company's effective tax rates for the periods were 27.7% and 32.3% for
1998 and 1997 respectively. During each of the periods ended September
30, 1998 and 1997 the Company reduced its effective tax rate by
recognizing deductible temporary differences for which a valuation
allowance had previously been established. Some New York State tax
benefit has also been recognized in 1998 due to tax planning
strategies.
Income taxes are accounted for under the asset and liability method.
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and their
respective tax basis and operating loss and tax credit carry forwards.
Deferred tax assets and liabilities are measured using enacted tax
rates expected to apply to taxable income in the years in which those
temporary differences are expected to be recovered or settled. The
effect on deferred tax assets and liabilities of a change in tax rates
is recognized in income for the period that includes the enactment
date.
The realization of deductible temporary differences depends on the
Company having sufficient taxable income within the carry back period
permitted by the tax law to allow for utilization of deductible
amounts. A valuation allowance has previously been established, and is
adjusted quarterly, for the portion of the Company's net deductible
temporary differences which are not expected to be realized.
Capital Adequacy
Total shareholders' equity was $37,485,000 at September 30, 1998, which
represents an increase of $3,465,000, or 10.2% from $34,020,000 at
December 31, 1997. Shareholders' equity increased as a result of
$3,624,000 in retained earnings and $440,000 in employee stock
purchases, offset by dividends of $867,000 and an increase of $268,000
in the unrealized net holding gain on securities available-for-sale,
net of taxes. At September 30, 1998, the Company and its banking
subsidiary exceeded the minimum guidelines for Tier 1 and Total
Risk-Based Capital of 4% and 8%, respectively. The Company's ratios
were 9.98% and 11.23% respectively, at September 30, 1998. Banking
organizations must also maintain a minimum Tier 1 Leverage Ratio of 3%
of assets, while banking organizations that are not top-rated according
to regulators' "Camels" ratings, must meet leverage ratios of at least
100 basis points above the 3% standard. The Company's Tier 1 Leverage
Ratio at September 30, 1998 was 6.44%. At 5% the Company would be
considered to be well capitalized.
Liquidity
Liquidity measures the ability to meet maturing obligations and
existing commitments, to withstand fluctuations in deposit levels, to
fund operations, and to provide for customers' credit needs. Management
carefully monitors its liquidity position and seeks to maintain
adequate liquidity to meet its needs. The fundamental source of
liquidity will continue to be deposits. Available sources of asset
liquidity include short-term investments, loan repayments, and
securities held in the available-for-sale portfolio. Additionally, the
Bank has the ability to pledge securities to secure short-term
borrowings. The Bank is a member of the Federal Home Loan Bank which
provides an additional source of funding.
The vast majority of the assets of the Company are held by the Bank.
Dividends and cash advances to the Company from the Bank are subject to
standard bank regulatory constraints. An analysis of projected expenses
and cash flows indicates that the Company has sufficient cash to meet
its anticipated cash obligations through 1998.
Quantitative and Qualitative Disclosures About Market Risk
On a quarterly basis, sensitivity to changes in interest rates is
measured using a simulation model. The model estimates changes in net
interest income and net income under a variety of possible interest
rate scenarios. By performing these simulations and comparing them to
established policy limits, management has an opportunity to plan for
changes in the asset/liability mix, or to take other steps that may be
necessary to lessen interest rate risk. Based on management's
assumptions built into the simulation model and the current mix of the
Company's assets and liabilities, management's assessment is that there
will not be a material adverse effect on its operating results or
liquidity in the event of reasonably foreseeable changes in interest
rates through 1999. The simulation indicates a 100 basis point change
in rates would not impact net income by more than .07% and a 200 basis
point change would not have an impact greater than .09%. These
simulations are based on numerous assumptions regarding the timing and
extent of repricing characteristics. Actual results may differ
significantly.
Year 2000
For quite some time, First National has been aware of the complexity
and magnitude of the Year 2000 (Y2K) issue. As a result, First
National, with the support and direction of its Board of Directors and
Senior Management, has dedicated resources and formally adopted
strategies to work towards resolving all potential Year 2000 issues.
Since October 1996, First National has been developing its strategy to
address the data processing and business impacts that are expected to
be encountered. First National is also including environmental systems
in its analysis. As is the case with many other financial institutions,
First National has opted to follow the five phase format suggested by
the Federal Financial Institutions Examination Council. These phases
are discussed below.
Awareness Phase - This is an ongoing phase to educate employees and
customers and to determine which systems and services will be affected.
First National created a Y2K task force in October 1996 which consists
of the Electronic Data Processing Auditor, Senior Vice President of
Operations, Vice President of Information Services and the Year 2000
Project Coordinator. This task force is charged with developing and
implementing an overall strategy to review systems, services and
conduct continuing education. In March, First National held a Year 2000
seminar for customers of the Business & Professional Lending division.
Each customer attending was given a "Year 2000 Awareness Kit."
Assessment Phase - In this phase, First National has determined the
size and complexity of the problem by identifying all hardware,
software, networks, ATMs and other devices that may be affected by the
Y2K date change. An initial inventory was taken starting in October
1996. At the same time, preliminary correspondence was sent to vendors
advising the vendors of First National's concerns about the Y2K issue
and the possible impact of Y2K on the vendors. In July 1997, a second
(updated) inventory was performed and a second letter with an attached
survey was sent to vendors as part of continuing efforts to assess the
Y2K preparedness of vendors. Based on the results of the inventory
process, First National has prioritized its list of applications and
systems to be addressed in the Y2K project. To date, First National
believes that substantially all possible Year 2000 situations have been
identified. First National has started a "due diligence process" for
assessing the Year 2000 customer impact.
Renovation Phase - First National does not write programs or create its
own software. Therefore, it must rely on vendors and software suppliers
to provide appropriate enhancements in a timely manner. As First
National continues to monitor the progress of vendors, it has also
begun the process of creating contingency plans for all applications
that do not meet First National's deadline for compliance. First
National has implemented an aggressive vendor contact schedule and
maintains all vendor correspondence to monitor vendor progress.
Validation Phase - This is the most labor intensive and critical phase
and requires a written test plan for each system that will be in use
at the turn of the century. First National has opted not to rely on
vendor or third party certification as acceptable validation for
systems processed in-house. As vendors provide upgraded software or
enhancements, testing will be conducted to determine if the software
or enhancements meet First National's requirements for Year 2000
readiness. Test plans have been written for all mission critical
systems and testing is in process. First National intends to review
proxy testing completed for service bureau arrangements and use those
results to the extent proxy testing is appropriate and reliable.
Additional independent critical testing will be completed as necessary
based on proxy test results. The validation phase for these mission
critical systems is targeted to be substantially complete by December
31, 1998, except for the core processing system as discussed below.
First National's core processing system is expected to be converted to
a new system prior to year end 1998. After conversion, management
expects to perform Y2K tests on the new system as well. The tests would
be expected to be completed in the first quarter of 1999 and during the
same time frame further tests will be made of critical systems that
integrate with the new system.
Implementation Phase - By the time we reach January 1, 2000, First
National will have tested each mission critical application. In
addition, First National will have contingency plans in place for any
application that does not meet Year 2000 compliance. The contingency
plans will address key dates such as 12/31/1999, 1/01/2000 and
2/29/2000. Throughout the year 2000, First National will be conducting
a quality review to insure that its systems are functioning properly.
Management has successfully completed organizational planning
guidelines and business impact analysis concerning the Y2K business
resumption contingency plan. The actual plan documentation for each
critical business function is expected to be completed by year end 1998
and validation of the plan is scheduled to be completed by end of the
first quarter of 1999.
A Year 2000 uncertainty that could have a material effect on the Bank's
results of operations or financial condition is the risk associated
with large commercial borrowers. A risk assessment for large commercial
borrowers is substantially complete. Management received a 78% response
rate for surveys sent to large commercial borrowers. All respondents
are risk rated as high, moderate or low risk. All non respondents are
to be contacted and until the information is received they will be
rated high risk. Of the respondents, 14 totaling $12.4 million were
rated high risk. Management intends to follow the progress of each high
and moderate risk customer and to update risk ratings throughout the
remainder of 1998 and 1999. New and renewed commercial borrowers are
also being assigned a risk rating and are being required to sign a Y2K
addendum where the borrower agrees to take all measures necessary to
assure information technology utilized by the borrower is Y2K
compliant.
A large deposit outflow in the year 2000 could impact First National's
liquidity. A review of large depositors indicates approximately $40
million in balances that could be at risk due to Y2K. However, First
National does not believe that the loss of any one single deposit
balance could have a material impact on liquidity. First National has
borrowing lines and unencumbered investments that could be used to
offset these deposits should they leave the Bank.
Management continues to quantify the expenses of resolving Year 2000
problems, including problems relating to its own systems and those
relating to third party customers and vendors, or the materiality of
the effect of such expenses on its results of operations, capital
resources or liquidity. To date management has identified expenses for
the years of 1998, 1999 and 2000 of approximately $146,000, $454,000,
and $67,000, respectively. Of the identified 1998 expense,
approximately $110,000 was expended through September. The $67,000
expense for the year 2000 is primarily for contingency planning. Of
the total projected expense of $667,000, testing, remediation and
staff expense is projected to be $279,000, or 41.8%. Software and
equipment purchases are expected to be approximately $192,000, or
28.8% of the total and contingency planning is projected at $196,000,
or 29.4%. All expenses related to the year 2000 are expected to be
paid out of First National's earnings.
First National's objective is to migrate to the year 2000 with minimal
impact on its customers and to achieve compliance with the ultimate
deadline of January 1, 2000.
Stock Repurchase Plan
On September 8, 1998 the Company's Board of Directors approved a stock
repurchase program. The Board of Directors believes the Company's
common stock is undervalued at current market prices. The program
authorizes the repurchase of up to 200,000 shares of common stock over
the next year at appropriate prices. It is expected these purchases
will be made primarily through open market transactions.
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 2. Changes in Securities
None
Item 3. Defaults upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits
<TABLE>
<CAPTION>
<S> <C>
Exhibit Incorporation by Reference or page in
sequential numbering where exhibit may be
found:
(3.1) Certificate of Incorporation as Exhibits 4.2-4.5 to Registration Statement
amended, of the Registrant No. 33-7244, filed July 22, 1986
(3.2) Amendment to Certificate of Exhibit 3 to Form 10-Q for period ended
Incorporation of Registrant dated August 6, 1992 June 30, 1992
(3.3) By-laws of the Registrant, as Exhibit 3.3 to Annual Report on Form 10-K
amended for the year ended December 31, 1992
(10.1) Commercial Line of Credit Note Page 25
between James D. Ryan and First National
Bank of Rochester
(27) Financial Data Schedule Page 27
</TABLE>
(b) Reports on Form 8-K:
None
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
FNB ROCHESTER CORP.
Date November 10 , 1998 s\s Stacy C. Campbell
Stacy C. Campbell
Senior Vice President and
Chief Financial Officer
(Principal Financial Officer
and Duly Authorized Officer)
<PAGE>
INDEX OF EXHIBITS
Exhibit Incorporation by Reference or page in
sequential numbering where exhibit may be
found:
(3.1) Certificate of Incorporation Exhibits 4.2-4.5 to Registration
as amended, of the Registrant. Statement No.33-7244, filed July 22, 1986
(3.2) Amendment to Certificate of Exhibit 3 to Form 10-Q for period ended
Incorporation of Registrant dated June 30, 1992
August 6, 1992.
(3.3) By-laws of the Registrant, Exhibit 3.3 to Annual Report on Form 10-K
as amended. for the year ended December 31, 1992
(10.1) Commercial Line of Credit Note Page 25
between James D. Ryan and First
National Bank of Rochester
(27) Financial Data Schedule Page 27
FIRST NATIONAL BANK OF ROCHESTER
COMMERCIAL LINE OF CREDIT NOTE
Account Name: JAMES D. RYAN
Dated: APRIL 28, 1998
Maximum Credit Amount: ONE HUNDRED THOUSAND AND NO/100 DOLLARS ($100,000.00)
FOR VALUE RECEIVED, the undersigned (individually a "Borrower") (if
more than one, jointly and severally) promises to pay to the order of FIRST
NATIONAL BANK OF ROCHESTER, a national banking association having its chief
executive office at 35 State Street, Rochester, New York 14614, ("Bank") at any
of the banking offices of the Bank in lawful money of the United States and in
immediately available funds, the outstanding principal sum on the line of credit
made available to the Borrower pursuant to the terms and conditions hereof (the
"Credit) plus interest on such principal sum in accordance with the terms and
conditions set forth in the following paragraphs.
Obtaining Advances on Credit. The Borrower may obtain advances on the Credit in
multiples of the lesser of (a) $1,000.00 or (b) the unused balance of the
Maximum Credit Amount indicated above (the "Maximum Credit") by making written
or oral requests for such advances to Bank through any of its authorized
Commercial Lending Officers. The decision to make such an advance or to refuse
to make such an advance shall be subject to the discretion of Bank. Such
requests may be made by the Borrower, by any authorized agent of the Borrower
(including any partner or officer of the Borrower) or by any other person
designated by Borrower as a person having authority to authorize an advance
under this Note. Bank shall be entitled to rely upon the request of any person
it in good faith believes to be authorized by Borrower to borrow under this Note
and Bank shall not be liable to Borrower as a result of making or failing to
make any advance hereunder. Advances on the Credit will be deposited by Bank to
a demand deposit account of Borrower with Bank. Bank reserves the right, at its
sole discretion, to make advances on the Credit to cover either overdrafts by
Borrower on a deposit account with Bank or any drawings by Borrower against
uncollected funds in a deposit account with Bank.
Statement of Balance Due. Bank shall provide periodic statements to Borrower
describing, as of the effective date of such statement, the outstanding
principal balance, the interest owing, any other charges owing and the advances
and payments made during the period covered by the statement. The Bank's records
shall be presumptive evidence of the balances owing with respect to the Credit.
Out of Debt Period. During each twelve-month period that the Credit is
available to Borrower, there shall be at least one thirty-day period when
Borrower is not indebted to Bank pursuant to the Credit.
Interest Rate; Interest Payments. Borrower shall pay interest on the
outstanding principal sum of the Credit from and including the date of this Note
to but not including the date such sum is paid in full (including each day on
which Bank is closed) at a variable rate per year that shall on each day be
0.50% above the rate per year in effect such day as that designated by Bank as
the prime rate of interest of Bank, with such interest to be calculated on the
basis of a 360-day year for the actual number of days of each year.
Notwithstanding the foregoing, the rate of interest per year on and after
maturity of the outstanding principal balance, because of Bank's demand for
immediate payment in full of such outstanding principal balance, shall on each
day be 3% per year above the rate described in the preceding sentence. Interest
will be billed to Borrower monthly on the outstanding principal sum.
Notwithstanding the generality of the foregoing, in no event shall interest be
payable at a rate in excess of the maximum rate permitted by applicable law.
Credit Facility Fees. [not applicable]
Late Charges. Borrower shall pay a late charge equal to 6% of the amount of any
scheduled payment with respect
to each payment not received by Bank on or before the 10th day after it is due.
Application of Payments; Charging Deposit Accounts for Payments. All payments
received by Bank shall be applied on the date received first to late charges, if
any, second to accrued interest and third to Principal. Borrower agrees that
Bank may, at its option and in addition to the right of offset, charge any
demand deposit account of Borrower at Bank for any amount that has become due
and owing to Bank hereunder.
Use of Proceeds. Borrower represents and warrants to Bank that the advances to
be made hereunder shall be used solely for business or commercial purposes.
Financial Information. Borrower agrees to provide Bank, promptly upon Bank's
request, with (a) periodic financial statements in form satisfactory to Bank,
(b) copies of federal and state income tax returns and (c) all other financial
information requested by Bank from time to time.
Termination of Credit. Borrower may terminate its rights to take advances
under the Credit at any time by giving written notice to Bank of its desire to
do so. Notice should be directed to the "Commercial Lending Department" at the
address above or at any other address provided to Borrower by Bank for the
purposes of such notices. The Credit shall become unavailable after Bank has
received such notice and has had a reasonable time to act thereon. The Credit
may be terminated by Bank at any time for any or no reason without prior notice
to Borrower. The Credit is also subject to Bank's continuing rights of
modification, restriction or suspension, provided, however, that Bank may not
modify the interest rate applicable to outstanding balances or other fees or
charges except as specified in this Note. Termination of the Credit shall not
affect the Borrower's obligation to pay the outstanding balance under the Credit
and all interest and other applicable charges.
Demand Obligation; Demands for Payment. All amounts owing pursuant to this Note
but not yet paid shall, without any notice, demand, presentment or protest of
any kind (each of which is waived by Borrower), automatically become immediately
due if Borrower commences or has commenced against it any bankruptcy or
insolvency proceeding. This Note is payable "ON DEMAND" and Bank may demand
immediate payment in full of all amounts owing hereunder in its sole discretion.
Without limiting Bank's rights as described in the previous sentence, all
amounts owing pursuant to this Note but not yet paid may become immediately due
at the sole option of Bank if (a) any amount owing pursuant to this Note is not
paid when due, (b) Borrower or any guarantor or endorser of this Note (a
"Guarantor") is dissolved, dies or becomes incompetent or insolvent (however
such insolvency is evidenced), (c) any Guarantor commences or has commenced
against it any bankruptcy or insolvency proceeding, (d) Bank in good faith deems
itself insecure with respect to any amount owing pursuant to this Note or is of
the opinion that any guaranty, endorsement, collateral or other security now or
hereafter securing the payment of or otherwise applicable to any amount owing
pursuant to this Note is not sufficient or has declined or may decline in value,
(e) there occurs or exists any event or condition of default for purposes of any
mortgage, security agreement, collateral assignment agreement or other agreement
now or hereafter in effect between Bank and any Borrower or (f) there occurs or
exists any event or condition of default for purposes of any mortgage, security
agreement, collateral assignment agreement, guaranty or other agreement that
secures or applies to the payment of any amount owing pursuant to this Note and
that is now or hereafter in effect between Bank and any person or entity other
than any Borrower. Borrower waives any and all rights to any notice, demand,
presentment for payment, notice of protest and protest with respect to this
Note.
Collection Expenses. Borrower shall pay all costs and expenses incurred by Bank
in endeavoring to collect any amount owing pursuant to this Note or to otherwise
protect its rights with respect to this Note (including, but not limited to,
reasonable attorneys' fees for legal advice, litigation or other representation
of Bank).
New York Law; Consent to Jurisdiction and Venue; Waiver of Trial by Jury. This
Note shall be governed by and interpreted and enforced in accordance with the
internal law of the State of New York, without regard to principles of conflict
of laws. Borrower consents to the jurisdiction of the courts of the State of New
York and agrees that any court located in the county in which Bank has its chief
executive office shall be the proper forum for any action or proceeding between
Borrower and Bank unless either (a) Bank in its sole discretion chooses another
forum or (b) applicable law requires another forum. BORROWER AND BANK WAIVE THE
RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING BETWEEN THEM BASED UPON,
ARISING OUT OF, OR IN ANY WAY CONNECTED TO, THIS NOTE.
s/James D. Ryan
James D. Ryan
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> YEAR YEAR
<FISCAL-YEAR-END> DEC-31-1998 DEC-31-1997
<PERIOD-END> SEP-30-1998 SEP-30-1997
<CASH> 17,962 20,044
<INT-BEARING-DEPOSITS> 1,086 1,110
<FED-FUNDS-SOLD> 1,000 1,600
<TRADING-ASSETS> 0 0
<INVESTMENTS-HELD-FOR-SALE> 128,981 119,011
<INVESTMENTS-CARRYING> 27,146 27,116
<INVESTMENTS-MARKET> 27,459 27,128
<LOANS> 377,293 328,832
<ALLOWANCE> 5,543 5,526
<TOTAL-ASSETS> 567,896 507,509
<DEPOSITS> 497,920 459,919
<SHORT-TERM> 17,799 10,680
<LIABILITIES-OTHER> 4,482 3,753
<LONG-TERM> 10,210 210
0 0
0 0
<COMMON> 3,623 3,585
<OTHER-SE> 33,862 29,362
<TOTAL-LIABILITIES-AND-EQUITY> 567,896 507,509
<INTEREST-LOAN> 22,975 20,878
<INTEREST-INVEST> 7,442 6,332
<INTEREST-OTHER> 386 355
<INTEREST-TOTAL> 30,803 27,565
<INTEREST-DEPOSIT> 13,280 12,095
<INTEREST-EXPENSE> 721 12,269
<INTEREST-INCOME-NET> 16,802 15,296
<LOAN-LOSSES> 150 0
<SECURITIES-GAINS> 24 0
<EXPENSE-OTHER> 14,717 13,056
<INCOME-PRETAX> 5,010 4,730
<INCOME-PRE-EXTRAORDINARY> 3,624 3,202
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 3,624 3,202
<EPS-PRIMARY> 1.00 0.89
<EPS-DILUTED> 0.95 0.86
<YIELD-ACTUAL> 4.31 4.54
<LOANS-NON> 1,989 2,332
<LOANS-PAST> 1,564 1,017
<LOANS-TROUBLED> 0 0
<LOANS-PROBLEM> 0 0
<ALLOWANCE-OPEN> 5,580 5,696
<CHARGE-OFFS> 394 376
<RECOVERIES> 207 206
<ALLOWANCE-CLOSE> 5,543 5,526
<ALLOWANCE-DOMESTIC> 5,543 5,526
<ALLOWANCE-FOREIGN> 0 0
<ALLOWANCE-UNALLOCATED> 0 0
</TABLE>
