<PAGE>
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] Quarterly report under Section 13 or 15(d) of the Securities
Exchange Act of 1934.
For the quarterly period ended June 30, 1999
-------------------
[ ] Transition report under Section 13 or 15(d) of the Exchange Act For
the transition period __________ to __________
Commission file number 0-26486
------------------------
Auburn National Bancorporation, Inc.
(Exact Name of Registrant as Specified in Its Charter)
Delaware 63-0885779
(State or Other Jurisdiction of (I.R.S.Employer
Incorporation or Organization) Identification No.)
165 East Magnolia Avenue, Suite 203, Auburn, Alabama 36830
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(Address of Principal Executive Offices)
(334) 821-9200
- --------------------------------------------------------------------------------
(Issuer's Telephone Number, Including Area Code)
- --------------------------------------------------------------------------------
(Former Name, Former Address and Former Fiscal Year, if Changed
Since Last Report)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or 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
--- ---
APPLICABLE ONLY TO ISSUERS INVOLVED IN
BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports required
to be filed by Section 12, 13 or 15(d) of the Exchange Act after distribution of
securities under a plan confirmed by a court.
Yes No
--- ---
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of
common equity, as of July 30, 1999: 3,924,573 shares of common stock, $.01 par
------------------------------------------
value per share
- ---------------
Transitional Small Business Disclosure Format (check one):
Yes No X
--- ---
<PAGE>
AUBURN NATIONAL BANCORPORATION, INC. AND SUBSIDIARIES
INDEX
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION PAGE
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<S> <C>
Item 1 Financial Information
Consolidated Balance Sheets as of
June 30, 1999 and December 31, 1998 3
Consolidated Statements of Earnings for
the Three Months and Six Months Ended
June 30, 1999 and 1998 4
Consolidated Statements of Changes in
Stockholders' Equity for the Six Months Ended June 30, 1999
and the Year Ended December 31, 1998 and 1997 5
Consolidated Statements of Cash Flows
for the Six Months Ended June 30, 1999
and 1998 6
Notes to Consolidated Financial Statements 7
Item 2 Management's Discussion and Analysis of Financial Condition
and Results of Operations 8
PART II. OTHER INFORMATION
- ------------------------------------------------
Item 5 Other Events 16
Item 6 Exhibits 17
</TABLE>
2
<PAGE>
AUBURN NATIONAL BANCORPORATION, INC. & SUBSIDIARIES
Consolidated Balance Sheets
June 30, 1999 and December 31, 1998
(Unaudited)
<TABLE>
<CAPTION>
ASSETS 6/30/99 12/31/98
------------------------ --------------- ---------------
<S> <C> <C>
Cash and due from banks $ 11,665,979 $ 9,220,225
Federal funds sold 4,015,000 260,000
--------------- ---------------
Cash and cash equivalents 15,680,979 9,480,225
Interest-earning deposits with other banks 2,163,839 133,600
Investment securities held to maturity (fair value of $6,692,179 and
$8,227,385 at June 30, 1999 and December 31, 1998,
respectively): 6,698,605 8,094,283
Investment securities available for sale 59,666,228 63,585,573
Loans:
Loans, less unearned income of $10,449 at June 30, 1999
and $15,494 at December 31, 1998, respectively 250,341,969 218,686,991
Less allowance for loan losses (2,812,499) (2,808,307)
--------------- ---------------
Loans, net 247,529,470 215,878,684
Premises and equipment, net 3,481,925 3,434,964
Rental property, net 1,716,401 1,760,294
Other assets 6,899,503 5,506,649
--------------- ---------------
Total assets $343,836,950 $307,874,272
=============== ===============
LIABILITIES & STOCKHOLDERS' EQUITY
----------------------------------
Deposits:
Noninterest-bearing $ 40,196,006 $ 34,724,182
Interest-bearing 233,153,386 198,780,568
--------------- ---------------
Total deposits 273,349,392 233,504,750
Securities sold under agreements to repurchase 3,300,004 12,944,004
Other borrowed funds 35,931,075 31,000,458
Accrued expenses and other liabilities 2,007,817 1,481,564
--------------- ---------------
Total liabilities 314,588,288 278,930,776
Stockholders' equity:
Preferred stock of $.01 par value; authorized 200,000 shares;
issued shares-none --- ---
Common stock of $.01 par value; authorized 8,500,000 shares;
issued 3,957,135 shares 39,571 39,571
Additional paid-in capital 3,707,472 3,707,472
Retained earnings 26,529,827 25,077,126
Accumulated other comprehensive income (loss) (813,609) 333,926
Less:
Treasury stock, 32,562 shares at June 30, 1999 and
December 31, 1998, at cost (214,599) (214,599)
--------------- ---------------
Total stockholders' equity 29,248,662 28,943,496
--------------- ---------------
Total liabilities and stockholders' equity $343,836,950 $307,874,272
=============== ===============
</TABLE>
See accompanying notes to consolidated financial statements.
-3-
<PAGE>
AUBURN NATIONAL BANCORPORATION, INC. & SUBSIDIARIES
Consolidated Statements of Earnings
For The Three Months and Six Months Ended June 30, 1999 and 1998
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended June 30,
----------------------------------------
1999 1998
------------------ -----------------
<S> <C> <C>
Interest income:
Interest and fees on loans $5,012,596 $4,349,754
Interest and dividends on investment securities:
Taxable 1,062,297 905,273
Tax-exempt 19,757 24,641
------------------ -----------------
Total interest and dividends on investment securities 1,082,054 929,914
Interest on federal funds sold 58,569 72,066
Interest on interest-bearing deposits with other banks 23,853 33,819
------------------ -----------------
Total interest income 6,177,072 5,385,553
Interest expense:
Interest on deposits 2,592,863 2,392,717
Interest on federal funds purchased and securities sold under
agreements to repurchase 46,428 42,756
Interest on other borrowings 501,738 311,121
------------------ -----------------
Total interest expense 3,141,029 2,746,594
------------------ -----------------
Net interest income 3,036,043 2,638,959
Provision for loan losses 182,017 390,000
------------------ -----------------
Net interest income after provision for loan losses 2,854,026 2,248,959
Noninterest income:
Service charges on deposit accounts 285,513 238,864
Investment securities gains/(losses), net 8,117 (308)
Other 434,376 357,397
------------------ -----------------
Total noninterest income 728,006 595,953
Noninterest expense:
Salaries and benefits 905,046 756,875
Net occupancy expense 290,652 248,015
Other 850,617 670,891
------------------ -----------------
Total noninterest expense 2,046,315 1,675,781
Earnings before income tax expense 1,535,717 1,169,131
Income tax expense 563,329 515,851
------------------ -----------------
Net earnings $972,388 $653,280
================== =================
Basic earnings per share $0.25 $0.17
================== =================
Weighted average shares outstanding 3,924,573 3,924,573
================== =================
Dividends per share $ 0.06 $ 0.04
================== =================
<CAPTION>
Six Months Ended June 30,
------------------------------------------
1999 1998
------------------ -------------------
<S> <C> <C>
Interest income:
Interest and fees on loans $9,628,094 $8,473,754
Interest and dividends on investment securities:
Taxable 2,199,436 1,803,316
Tax-exempt 40,662 52,157
------------------ -------------------
Total interest and dividends on investment securities 2,240,098 1,855,473
Interest on federal funds sold 114,441 148,178
Interest on interest-bearing deposits with other banks 53,509 61,754
------------------ -------------------
Total interest income 12,036,142 10,539,159
Interest expense:
Interest on deposits 5,012,827 4,768,149
Interest on federal funds purchased and securities sold under
agreements to repurchase 212,527 74,756
Interest on other borrowings 940,404 529,637
------------------ -------------------
Total interest expense 6,165,758 5,372,542
------------------ -------------------
Net interest income 5,870,384 5,166,617
Provision for loan losses 332,017 476,030
------------------ -------------------
Net interest income after provision for loan losses 5,538,367 4,690,587
Noninterest income:
Service charges on deposit accounts 545,887 445,350
Investment securities gains/(losses), net 6,173 6,860
Other 848,598 706,522
------------------ -------------------
Total noninterest income 1,400,658 1,158,732
Noninterest expense:
Salaries and benefits 1,833,560 1,478,936
Net occupancy expense 552,693 502,132
Other 1,518,216 1,313,490
------------------ -------------------
Total noninterest expense 3,904,469 3,294,558
Earnings before income tax expense 3,034,556 2,554,761
Income tax expense 1,110,906 1,047,936
------------------ -------------------
Net earnings $1,923,650 $1,506,825
================== ===================
Basic earnings per share $0.49 $0.38
================== ===================
Weighted average shares outstanding 3,924,573 3,924,573
================== ===================
Dividends per share $ 0.12 $ 0.09
================== ===================
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
AUBURN NATIONAL BANCORPORATION, INC. & SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997 AND THE SIX MONTHS
ENDED JUNE 30, 1999
(Unaudited)
<TABLE>
<CAPTION>
Accumulated
Additional Other
Paid-In Retained Comprehensive
Common Stock Capital Earnings Income/(Loss)
------------ ---------- -------- -------------
<S> <C> <C> <C> <C>
Balance at December 31, 1996 $ 39,571 3,664,718 19,942,980 (146,528)
Net earnings --- --- 3,080,043 ---
Cash dividends paid ($0.16 per share) --- --- (626,562) ---
Other comprehensive income due to unrealized
gain (loss) on investment securities available
for sale, net --- --- --- 321,964
Payment of Employee Stock Ownership Plan Debt --- --- --- ---
Sale of treasury stock (5,488 shares) 42,754
Purchase of treasury stock (368 shares) --- --- --- ---
--------- ------------ ------------- -------------
Balance at December 31, 1997 $ 39,571 3,707,472 22,396,461 175,436
Net earnings --- --- 3,439,417 ---
Cash dividends paid ($0.19 per share) --- --- (758,752) ---
Other comprehensive income due to unrealized
gain (loss) on investment securities available
for sale, net --- --- --- 158,490
Payment of Employee Stock Ownership Plan Debt --- --- --- ---
--------- ------------ ------------- -------------
Balance at December 31, 1998 $ 39,571 3,707,472 25,077,126 333,926
========= ============ ============= =============
Through JUNE 30, 1999:
Net earnings --- --- 1,923,650 ---
Cash dividends paid ($0.12 per share) --- --- (470,949) ---
Other comprehensive income due to unrealized
gain (loss) on investment securities available
for sale, net --- --- --- (1,147,535)
--------- ------------ ------------- -------------
Balance at June 30, 1999 $ 39,571 3,707,472 26,529,827 (813,609)
========= ============ ============= =============
</TABLE>
<TABLE>
<CAPTION>
Employee Stock
Ownership Treasury
Plan debt Stock Total
-------------- -------- -----
<S> <C> <C> <C>
Balance at December 31, 1996 (113,940) (304,009) 23,082,792
Net earnings --- --- 3,080,043
Cash dividends paid ($0.16 per share) --- --- (626,562)
Other comprehensive income due to unrealized
gain (loss) on investment securities available
for sale, net --- --- 321,964
Payment of Employee Stock Ownership Plan Debt 57,006 --- 57,006
Sale of treasury stock (5,488 shares) 98,058 140,812
Purchase of treasury stock (368 shares) --- (8,648) (8,648)
----------- ------------ ----------
Balance at December 31, 1997 (56,934) (214,599) 26,047,407
Net earnings --- --- 3,439,417
Cash dividends paid ($0.19 per share) --- --- (758,752)
Other comprehensive income due to unrealized
gain (loss) on investment securities available
for sale, net --- --- 158,490
Payment of Employee Stock Ownership Plan Debt 56,934 --- 56,934
----------- ------------ ----------
Balance at December 31, 1998 0 (214,599) 28,943,496
=========== ============ ==========
Through JUNE 30, 1999:
Net earnings --- --- 1,923,650
Cash dividends paid ($0.12 per share) --- --- (470,949)
Other comprehensive income due to unrealized
gain (loss) on investment securities available
for sale, net --- --- (1,147,535)
----------- ------------ ----------
Balance at June 30, 1999 0 (214,599) 29,248,662
=========== ============ ==========
</TABLE>
See accompanying notes to consolidated financial statements.
-5-
<PAGE>
AUBURN NATIONAL BANCORPORATION, INC. & SUBSIDIARIES
Consolidated Statements of Cash Flows
For The Six Months Ended June 30, 1999 and 1998
(Unaudited)
<TABLE>
<CAPTION>
1999 1998
-------------------- -------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings $1,923,650 $1,506,825
Adjustments to reconcile net earnings to net cash provided by
operating activities:
Depreciation and Amortization 294,971 343,313
Amortization/(accretion) of investment discounts & loan fees 34,061 (176,079)
Provision for loan losses 332,017 476,030
Loss on sale of premises & equipment 56,019 ---
Increase in interest receivable (560,117) (175,543)
Increase in other assets (309,421) (285,811)
Increase in interest payable 162,605 111,644
Increase/(decrease) in other liabilities 586,266 (548,496)
-------------------- ---------------------
Net cash provided by operating activities 2,520,051 1,251,883
-------------------- ---------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from maturities/calls/paydowns of investment
securities held to maturity 1,388,832 2,331,492
Purchases of investment securities held to maturity --- (425,000)
Proceeds from maturities/calls/paydowns of investment
securities available for sale 12,845,609 4,979,929
Proceeds from sale of investment securities available for sale --- 4,970,457
Purchases of investment securities available for sale (10,866,037) (21,355,538)
Net increase in loans (31,982,803) (18,015,403)
Purchases of premises and equipment (335,605) (99,114)
Proceeds from sale of premises and equipment 5,706 ---
Purchases of rental property (5,070) (44,214)
Net increase in interest-bearing deposits with
other banks (2,030,239) (483,703)
-------------------- ---------------------
Net cash used in investing activities (30,979,607) (28,141,094)
-------------------- ---------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase/(decrease) in non-interest bearing deposits,
NOW accounts and savings accounts 33,366,239 (1,003,835)
Net increase in certificates of deposit 6,478,403 5,869,957
Net (decrease)/increase in securities sold under agreements
to repurchase (9,644,000) 2,785,794
Net increase in borrowings from FHLB 4,940,876 19,940,876
Net decrease in other long-term debt (10,259) (9,130)
Dividends paid (470,949) (366,294)
-------------------- ---------------------
Net cash provided by financing activities 34,660,310 27,217,368
-------------------- ---------------------
Net increase in cash and cash equivalents 6,200,754 328,157
Cash and cash equivalents at beginning of period 9,480,225 14,883,412
-------------------- ---------------------
Cash and cash equivalents at end of period $15,680,979 $15,211,569
==================== =====================
Supplemental information on cash payments:
Interest paid $6,003,153 $5,260,897
==================== =====================
Income taxes paid $1,008,821 $1,212,147
==================== =====================
</TABLE>
6
<PAGE>
AUBURN NATIONAL BANCORPORATION, INC. AND SUBISIDIARIES
Notes to the Consolidated Financial Statements
June 30, 1999
Note 1 - General
The consolidated financial statements in this report have not been
audited. In the opinion of management, all adjustments necessary to present
fairly the financial position and the results of operations for the interim
periods have been made. All such adjustments are of a normal recurring nature.
The results of operations are not necessarily indicative of the results of
operations which the Company may achieve for the entire year. For further
information, refer to the consolidated financial statements and footnotes
included in the Company's annual report on Form 10-KSB for the year ended
December 31, 1998.
Note 2 - Comprehensive Income
In June 1997, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive
Income" (Statement 130). Statement 130 establishes standards for reporting and
displaying comprehensive income and its components in a full set of general
purpose statements. The Company adopted Statement 130 effective January 1, 1998.
The primary component of the differences between net income and comprehensive
income for the Company is unrealized gains/losses on available for sale
securities. Total comprehensive income for the three months ended June 30, 1999
was $310,000 compared to $655,000 for the three months ended June 30, 1998.
Total comprehensive income for the six months ended June 30, 1999 was $776,000
compared to $1,492,000 for the six months ended June 30, 1998.
Note 3 - Derivatives Disclosure
As part of its overall interest rate risk management activities, the
Company utilizes off-balance sheet derivatives to modify the repricing
characteristics of on-balance sheet assets and liabilities. The primary
instruments utilized by the Company are interest rate swaps and interest rate
floor and cap arrangements. The fair value of these off-balance sheet derivative
financial instruments are based on dealer quotes and third party financial
models.
Note 4 - Accounting Pronouncements
In June 1999, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 137, "Accounting for Derivative
Instruments and Hedging Activities - Deferral of the Effective Date of FASB
Statement No. 133 - an amendment of FASB Statement No. 133" (Statement 137).
Statement 137 is effective for financial statements for the first fiscal
quarters of the fiscal years beginning after June 15, 2000.
In June 1998, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities" (Statement 133). Statement 133 was effective
for financial statements for the first fiscal quarters of the fiscal years
beginning after June 15, 1999. This effective date of this statement is
superceded by Statement 137 mentioned above. The Company does not know if the
provisions of Statement 133 will have a significant impact on the financial
statements upon adoption.
7
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion and analysis is designed to provide a better
understanding of various factors related to the Company's results of operations
and financial condition. This discussion is intended to supplement and highlight
information contained in the accompanying unaudited consolidated financial
statements for the three and six months ended June 30, 1999 and 1998.
Summary
Net income of $972,000 for the quarter ended June 30, 1999 represented
an increase of $319,000 (48.9%) from the Company's net income of $653,000 for
the same period of 1998. Basic income per share increased $0.08 (47.1%) to $0.25
during the second quarter of 1999 from $0.17 for the second quarter of 1998. Net
income increased $417,000 (27.7%) to $1,924,000 for the six month period ended
June 30, 1999 compared to $1,507,000 for the same period of 1998. During the six
month period ended June 30, 1999 compared to the same period of 1998, the
Company experienced increases in net interest income, noninterest income and
noninterest expense due to the continued growth of the Company offset by a
decrease in provision for loan losses due to $300,000 additional provision for
loan losses in the second quarter of 1998. The net yield on total
interest-earning assets was 7.85% for the six months ended June 30, 1999
compared to 8.28% for the six months ended June 30, 1998. The decrease in the
net yield on interest-earning assets is due to a decrease in the yield of total
loans, net of unearned income, investment securities, interest-bearing deposits
with other banks and federal funds sold. See the "CONSOLIDATED AVERAGE BALANCES,
INTEREST INCOME/EXPENSE AND YIELDS/RATES" table.
Total assets of $343,837,000 at June 30, 1999 reflected an increase of
$35,963,000 (11.7%) over total assets of $307,874,000, at December 31, 1998.
This increase resulted primarily from increases in total loans, net of unearned
income, federal funds sold. This was offset by a decrease in investment
securities available for sale and investment securities held to maturity.
Financial Condition
Investment Securities and Federal Funds Sold
Investment securities held to maturity were $6,699,000 and $8,094,000
at June 30, 1999 and December 31, 1998, respectively. This decrease of
$1,395,000 (17.2%) resulted from scheduled paydowns and calls of principal
amounts. The decrease of $3,920,000 (6.2%) in investment securities available
for sale to $59,666,000 at June 30, 1999 from $63,586,000 at December 31, 1998,
reflects an increase in U.S. government agency securities offset by a decrease
in mortgage backed securities and CMOs. The decrease is also the result of a
decline in the overall market value. The shift into investment securities
available for sale is a deliberate move by management to maintain flexibility in
its liquidity planning.
Federal funds sold increased $3,755,000 (1,444.2%) to $4,015,000 at
June 30, 1999 from $260,000 at December 31, 1998. These fluctuations reflect
normal activity in the Bank's funds management efforts.
Loans
Total loans, net of unearned income, of $250,342,000 at June 30, 1999
reflected an increase of $31,655,000 (14.5%) compared to the total loans of
$218,687,000, net of unearned income, at December 31, 1998. In addition, the
Bank primarily experienced growth in its commercial, financial and agricultural
loans, commercial real estate construction loans, residential real estate
construction loans and commercial real estate loans during the first six months
of 1999 due to strong customer demand and a stable local market. Commercial,
financial and agricultural, residential real estate and commercial real estate
loans represented the majority of the loan portfolio with approximately 32.13%,
30.60% and 33.26% of the Bank's total loans, net of unearned income at June 30,
1999, respectively. The net yield on loans was 8.39% for the six months ended
June 30, 1999 compared to 8.90% for the six months ended June 30, 1998. See the
"CONSOLIDATED AVERAGE BALANCES, INTEREST INCOME/EXPENSE AND YIELDS/RATES" table.
8
<PAGE>
Allowance for Loan Losses and Risk Elements
The allowance for loan losses represents management's assessment of the
risk associated with extending credit and its evaluation of the quality of the
loan portfolio. Management analyzes the loan portfolio to determine the adequacy
of the allowance and the appropriate provision required to maintain the
allowance at a level considered adequate to absorb inherent loan losses. In
assessing the adequacy of the allowance, management reviews the size, quality
and risk of loans in the portfolio. Management also considers such factors as
the Bank's loan loss experience, the amount of past due and nonperforming loans,
specific known risk, the status and amount of nonperforming assets, underlying
collateral values securing loans, current and anticipated economic conditions
and other factors which affect the allowance for credit losses.
The allowance for loan losses was $2,812,000 at June 30, 1999.
Management believes that this level of allowance (1.12% of total outstanding
loans, net of unearned income) is adequate to absorb known risks in the
portfolio. No assurance can be given, however, that adverse economic
circumstances will not result in increased losses in the Bank's loan portfolio.
During the first six months of 1999, the Bank made $332,000 in
provisions to the allowance for loan losses based on management's assessment of
the credit quality of the loan portfolio. For the six months ended June 30,
1999, the Bank had charge-offs of $372,000 and recoveries of $44,000.
Nonperforming assets, comprised of nonaccrual loans, renegotiated loans
and other real estate owned, and accruing loans 90 days or more past due were
$4,824,000 at June 30, 1999 compared to $4,897,000 at December 31, 1998. During
1998, management's assessment of the credit quality of the loan portfolio
indicated deterioration of a large individual credit such that management's
estimate of the necessary level of the allowance increased. This credit is
included in nonaccrual loans and the relationship continues to be monitored as
part of the Bank's overall credit administration procedures.
Other potential problem loans consist of those loans where management
has serious doubts as to the borrower's ability to comply with the present loan
repayment terms. At June 30, 1999, 84 loans totaling $3,897,000, or 1.56% of
total loans outstanding, net of unearned income, were considered potential
problem loans compared to 77 loans totaling $2,654,000, or 1.21% of total loans
outstanding, net of unearned income, at December 31, 1998. At June 30, 1999 and
December 31, 1998, respectively, the amount of impaired loans were $4,098,000,
which included 3 loans to the same borrower resulting from the relationship
mentioned above.
Deposits
Total deposits increased $39,844,000 (17.1%) to $273,349,000 at June
30, 1999, as compared to $233,505,000 at December 31, 1998. Noninterest-bearing
deposits increased $5,472,000 (15.8%) during the first six months of 1999 while
total interest-bearing deposits also increased $34,372,000 (17.3%) to
$233,153,000 at June 30, 1999 from $198,781,000 at December 31, 1998. The growth
in noninterest-bearing deposits is due primarily to an increase in regular
demand deposit accounts. The average rate paid on interest-bearing deposits was
4.63% for the six months ended June 30, 1999 compared to 5.00% for the same
period of 1998. During the first six months of 1999, the Bank experienced a
significant increase in money market accounts of $22,037,000 (52.1%), NOW
accounts of $5,048,000 (23.4%) and certificates of deposits greater than
$100,000 of $8,725,000 (16.8%). These increases were offset by a decrease in
certificates of deposits less than $100,000 of $2,575,000 (3.6%) during the
first six months of 1999. The significant increase in money market accounts is
due to a $14 million increase in public funds and the increase in certificates
of deposits greater than $100,000 is due to a $6 million increase in brokered
deposits. The Company considers the other shifts in the deposit mix to be within
the normal course of business and in line with the management of the Bank's
overall cost of funds. See the "CONSOLIDATED AVERAGE BALANCES, INTEREST
INCOME/EXPENSE AND YIELDS/RATES" table.
Capital Resources and Liquidity
The Company's consolidated stockholders' equity was $29,249,000 at June
30, 1999, compared to $28,943,000 at December 31, 1998. This represents an
increase of $306,000 (1.1%) during the first six months of 1999. Net earnings
for the first six months of 1999 exceeds net earnings for the same period of
1998. In addition,
9
<PAGE>
the Company experienced a change in accumulated other comprehensive income to a
net accumulated loss of $814,000 at June 30, 1999 from a gain of $334,000 at
December 31, 1998. During the first six months of 1999, cash dividends of
$471,000, or $0.12 per share, were declared on Common Stock, compared to
$366,000, or $0.09 per share for the first six months of 1998.
The Company's Tier 1 leverage ratio was 8.74%, Tier I risk-based
capital ratio was 12.19% and Total risk-based capital ratio was 13.33% at June
30, 1999. These ratios exceed the minimum regulatory capital percentages of 3.0%
to 5.0% for Tier 1 leverage ratio, 4.0% for Tier I risk-based capital ratio and
8.0% for Total risk-based capital ratio. Based on current regulatory standards,
the Company believes it is a "well capitalized" bank.
The primary source of liquidity during the first six months of 1999 is
through deposit growth and additional advances from the Federal Home Loan Bank
of Atlanta ("FHLB-Atlanta"). The Company used these funds primarily to fund new
loan growth. Under the advance program with FHLB-Atlanta, the Bank had
outstanding advances totaling approximately $35,699,000, leaving credit
available, net of advances drawn down, of approximately $14,301,000 at June 30,
1999.
Net cash provided by operating activities of $2,520,000 for the six
months ended June 30, 1999, consisted primarily of net earnings. Net cash used
in investing activities of $30,980,000 funded loan growth and investment
securities available for sale purchases of $31,983,000 and $10,866,000,
respectively, offset by proceeds from maturities, calls and paydowns of
investment securities available for sale of $12,845,000. The $34,660,000 in net
cash provided by financing activities resulted primarily from increases of
$33,366,000 in non-interest bearing deposits, NOW accounts and savings accounts
offset by a net decrease in securities sold under agreements to purchase of
$9,644,000.
Interest Rate Sensitivity Management
At June 30, 1999, interest sensitive assets that repriced or matured
within the next 12 months were $152,691,000, compared to interest sensitive
liabilities that reprice or mature within the same time frame totaling
$164,347,000. The cumulative GAP position (the difference between interest
sensitive assets and interest sensitive liabilities) of a negative $11,656,000,
resulted in a GAP ratio (calculated as interest sensitive assets divided by
interest sensitive liabilities) of 93.0%. This compares to a twelve month
cumulative GAP position at December 31, 1998, of a negative $31,480 and a GAP
ratio of 79.0%. A negative GAP position indicates that the Company has more
interest-bearing liabilities than interest-earning assets that reprice within
the GAP period, and that net interest income may be adversely affected in a
rising rate environment as rates earned on interest-earning assets rise more
slowly than rates paid on interest-bearing liabilities. A positive GAP position
indicates that the Company has more interest-earning assets than
interest-bearing liabilities that reprice within the GAP period. The Bank's
Asset/Liability Management Committee ("ALCO") is charged with the responsibility
of managing, to the degree prudently possible, its exposure to "interest rate
risk," while attempting to provide earnings enhancement opportunities. Based on
ALCO's alternative interest rate scenarios used by the Company in modeling for
asset/liability planning purposes and the GAP position at June 30, 1999, the
Company's asset/liability model indicated that the changes in the Company's net
interest income would be less than 5.0% over 12 months.
Results of Operations
Net Income
Net income increased $319,000 (48.9%) to $972,000 for the three month
period ended June 30, 1999 compared to $653,000 for the same period of 1998.
Basic income per share was $0.25 and $0.17 for the second quarter of 1999 and
1998, respectively, an increase of 47.1%. Net income increased $417,000 (27.7%)
to $1,924,000 for the six month period ending June 30, 1999, compared to
$1,507,000 for the same period of 1998. During the six month period ended June
30, 1999 compared to the same period of 1998, the Company experienced increases
in net interest income, noninterest income, and noninterest expense due to the
continued growth of the Company offset by a decrease in provision for loan
losses due to the $300,000 additional provision for loan losses in the second
quarter of 1998.
10
<PAGE>
Net Interest Income
Net interest income was $3,036,000 for the second quarter of 1999. The
increase of $397,000 (15.0%) over $2,639,000 for the same period of 1998,
resulted primarily from the increase in interest and fees on loans and interest
and dividends from investment securities offset by increases in interest on
deposits and interest on other borrowings. Net interest income increased
$703,000 (13.6%) to $5,870,000 for the six months ended June 30, 1999, compared
to $5,167,000 for the six months ended June 30, 1998. Such increases resulted
from overall growth in the Company's average interest-earning assets offset by a
decrease in net taxable yield on the Company's interest-earning assets during
the first six months of 1999 compared to the same period of 1998. Through the
second quarter of 1999, the Company's GAP position remained less liability
sensitive to changes in interest rates as compared to December 31, 1998. The
Company continues to regularly review and manage its asset/liability position in
an effort to reduce the negative effects of changing rates. See "FINANCIAL
CONDITION - INTEREST RATE SENSITIVITY MANAGEMENT" and the "CONSOLIDATED AVERAGE
BALANCES, INTEREST INCOME/EXPENSE AND YIELDS/RATES" table.
Interest Income
Interest income is a function of the volume of interest earning assets
and their related yields. Interest income was $6,177,000 and $5,386,000 for the
three months ended June 30, 1999 and 1998, respectively. This represents an
increase of $791,000 (14.7%) for the second quarter of 1999 compared to 1998.
For the six months ended June 30, 1999 interest income was $12,036,000, an
increase of $1,497,000 (14.2%) compared to $10,539,000 for the same period of
1998. This change for the first six months of 1999 resulted as the average
volume of interest earning assets outstanding increased $52,426,000 (20.4%) over
the same period of 1998, while the Company's yield on interest earning assets
decreased 43 basis points. See the "CONSOLIDATED AVERAGE BALANCES, INTEREST
INCOME/EXPENSE AND YIELDS/RATES" table.
Loans are the main component of the Bank's earning assets. Interest and
fees on loans were $5,013,000 and $4,350,000 for the second quarter of 1999 and
1998, respectively. This reflects an increase of $663,000 (15.2%) during the
three months ended June 30, 1999 over the same period of 1998. For the six month
period ended June 30, 1999, interest and fees on loans increased $1,154,000
(13.6%) to $9,628,000 from $8,474,000 for the same period of 1998. The average
volume of loans increased $39,191,000 (20.4%) as of June 30, 1999 compared to
the same period of 1998, while the Company's yield on loans decreased 51 basis
points comparing these same periods.
For the three month period ended June 30, 1999, interest income on
investment securities increased $152,000 (16.3%) to $1,082,000 from $930,000 for
the same period of 1998. Interest income on investment securities for the six
month period ended June 30, 1999, increased $385,000 (20.8%) to $2,240,000 from
$1,855,000 for the same period of 1998. The Company's average volume of
investment securities increased by $13,660,000 (23.6%) for the first six months
of 1999, compared to the same period of 1998, while the net yield on these
average balances decreased 18 basis points. See the "CONSOLIDATED AVERAGE
BALANCES, INTEREST INCOME/EXPENSE AND YIELDS/RATES" table.
Interest Expense
Total interest expense increased $394,000 (14.3%) to $3,141,000 for the
second quarter of 1999 compared to $2,747,000 for the same period of 1998. Total
interest expense increased $793,000 (14.8%) to $6,166,000 from $5,373,000 for
the six months ended June 30, 1999 and 1998, respectively. This change resulted
as the Company's average interest-bearing liabilities increased 22.4% while the
rates paid on these liabilities decreased 31 basis points during the first six
months of 1999 compared to the same period of 1998. See the "CONSOLIDATED
AVERAGE BALANCES, INTEREST INCOME/EXPENSE AND YIELDS/RATES" table.
Interest on deposits, the primary component of total interest expense,
increased $200,000 (8.4%) to $2,593,000 for the second quarter of 1999 compared
to $2,393,000 for the same period of 1998. Interest on deposits were $5,013,000
and $4,768,000 for the six months ended June 30, 1999 and 1998, respectively.
The increase for the six month period ended June 30, 1999 is due to a 13.4%
increase in the average volume offset by a 37 basis point decrease in the rate
paid on interest-bearing deposits.
11
<PAGE>
Interest expense on other borrowed funds, was $502,000 and $311,000 for
the second quarter of 1999 and 1998, respectively. This represents an increase
of $191,000 or 61.4%. For the six months ended June 30, 1999, interest expense
on borrowed funds increased $410,000 (77.4%) to $940,000 from $530,000 for the
same period of 1998. This increase for the six month period ended June 30, 1999
is due to a 89.0% increase in the average volume offset by a 33 basis point
decrease in the rate paid on other borrowed funds. The increase in the average
volume is primarily from the increase in FHLB-Atlanta advances.
Provision for Loan Losses
The provision for loan losses is based on management's assessment of
the risk in the loan portfolio, the growth of the loan portfolio and the amount
of recent loan losses. The provision for loan losses was $332,000 for the six
months ended June 30, 1999 compared to $476,000 for the six months ended June
30, 1998. The decrease in the provision for loan losses during the first six
months of 1999 compared to the same period of 1998, is due to an additional
provision for possible loan losses of $300,000 during the second quarter of 1998
which reflected the significant growth in the loan portfolio during 1998 and the
identification of potential problems loans to a commercial customer. In
addition, the level of monthly provision has increased during 1999 due to loan
growth. See "---ALLOWANCE FOR LOAN LOSSES AND RISK ELEMENTS."
Noninterest Income
Noninterest income increased $132,000 (22.1%) to $728,000 for the
second quarter of 1999 from $596,000 for the same period of 1998. Noninterest
income was $1,401,000 and $1,159,000 for the six months ended June 30, 1999 and
1998, respectively. This increase for the second quarter is due to increases in
service charges on deposit accounts and other noninterest income.
Service charges on deposit accounts for the second quarter of 1999
increased $47,000 (19.7%) to $286,000 from $239,000 for the second quarter of
1998. Service charges on deposit accounts was $546,000 and $445,000 for the six
months ended June 30, 1999 and 1998, respectively These increases are primarily
due to increases in nonsufficient funds and overdraft charges due to an increase
in nonsufficient fund items.
Other noninterest income increased $77,000 (21.6%) to $434,000 for the
second quarter of 1999 from $357,000 for the same period of 1998. Other
noninterest income was $849,000 and $707,000 for the six months ended June 30,
1999 and 1998, respectively. This increase primarily resulted from an increase
in Mastercard/VISA discounts and fees due to the Auburn University's acceptance
of Mastercard/VISA for tuition and an increase in stock dividends from stock
owned in other companies offset by a loss on premises and equipment primarily
for computer equipment that was not Year 2000 compliant.
Noninterest Expense
Total noninterest expense was $2,046,000 and $1,676,000 for the second
quarter of 1999 and 1998, respectively, representing an increase of $370,000 or
22.1%. For the six months ended June 30, 1999, total noninterest expense
increased $609,000 (18.5%) to $3,904,000 from $3,295,000 for the same period of
1998. This increase was due to increases in salaries and benefits expense, net
occupancy expense and other noninterest expense.
Salaries and benefits expense was $905,000 and $757,000 for the three
months ended June 30, 1999 and 1998, respectively. This represents an increase
of $148,000 (19.6%) in the second quarter of 1999 compared to the second quarter
of 1998. For the six months ended June 30, 1999, total salaries and benefits
expense increased $355,000 (24.0%) to $1,834,000 from $1,479,000 for the same
period of 1998. This increase is primarily due to the increase in overall
employee levels from the same period of 1998.
Net occupancy expense was $291,000 and $248,000 for the second quarter
of 1999 and 1998, respectively, representing an increase of $43,000 or 17.3%.
For the six month period ended June 30, 1999, net occupancy expense increased
$51,000 (10.2%) to $553,000 from $502,000 for the same period of 1998. The
increase is primarily due to increases in lease payments for computer equipment,
lease payments on building due to the addition of the Wal-Mart branch and
depreciation on furniture and equipment offset by a decrease in small furniture
12
<PAGE>
and equipment purchases.
For the second quarter of 1999, other noninterest expense increased
$180,000 (26.8%) to $851,000 from $671,000 for the second quarter of 1998. Other
noninterest expense was $1,518,000 and $1,313,000 for the six months ended June
30, 1999 and 1998, respectively. This increase is mainly due to the expenses
associated with Auburn University's acceptance of Mastercard/VISA for tuition
mentioned above and legal fees on loans related to certain nonaccrual loans.
Income taxes
Income tax expense was $563,000 and $516,000 for the second quarter of
1999 and 1998, respectively. For the six months ended June 30, 1999, income tax
expense increased $63,000 (6.0%) to $1,111,000 from $1,048,000 for the six
months ended June 30, 1998. These levels represent an effective tax rate on
pre-tax earnings of 36.6% for the six months ended June 30, 1999 which is
consistent with the Company's annual effective rate.
Year 2000
The Company is aware of the issues associated with the programming code
in existing computer systems as the millennium ("Year 2000") approaches. The
Company has conducted a comprehensive review of its computer systems to identify
the systems that could be affected by the Year 2000 issue and has developed a
plan to resolve the mission critical modifications necessary in order to be
prepared for the new millennium. The Company has reviewed both information
technology (IT) systems and non-IT systems. All mission critical systems have
been upgraded, as needed, and tested. The majority of the remaining systems have
been tested and modified. The Company has received certification of Year 2000
compliance from their critical vendors used in the major operations of the
Company. The Company has followed the Federal Reserve guidelines for preparing
for Year 2000. The Company also reports quarterly to its Board of Directors the
progress of the Year 2000 project. Accordingly, the Company does not expect the
Year 2000 issue to pose any significant operational problems and has not
discovered any Year 2000 problems with significant counter-parties that it
believes will have material effect on the financial position or results of
operations of the Company. However, the Company has not fully evaluated the
effect of any Year 2000 problems on its loan and deposit customers. No assurance
can be given that potential Year 2000 problems of those with whom the Company
does business will not occur, and if they occur, that the consequences to the
Company will not be material.
The total cost of the Year 2000 project is estimated not to exceed
$250,000, of which $100,750 was expensed through 1998, and the remaining
expenses are estimated to be funded through operating cash flows. Contingency
Plans have been developed to ensure direction in the event a non-compliant
system or component is detected. The Company currently has in place a disaster
recovery plan. A business resumption plan and a remediation plan have been
developed based upon certain circumstances. Part of the business resumption plan
includes an agreement with a third-party vendor which would enable the Bank to
use the third-parties' computer systems as a worst case scenario. These plans
will provide the Company direction in the event an unforeseen circumstance
arises due to the Year 2000. The Bank has held Year 2000 Customer Awareness
Seminars, mailed Year 2000 information to all customers, requested copies of the
status of loan customers' Year 2000 plan and examined all large loan customers
for potential impacts on the customer's creditworthiness. All plans will be
finalized and implemented by September 30, 1999.
Impact of Inflation and changing prices
Virtually all of the assets and liabilities of the Company are monetary
in nature. As a result, interest rates have a more significant impact on the
Company's performance than the effects of general levels of inflation. Interest
rates do not necessarily move in the same direction or with the same magnitude
as the price of goods and services since such prices are affected by inflation.
In the current interest rate environment, liquidity and the maturity structure
of the Company's assets and liabilities are critical to the maintenance of
desired performance levels. However, relatively low levels of inflation in
recent years have resulted in a rather insignificant effect on the Company's
operations.
13
<PAGE>
AUBURN NATIONAL BANCORPORATION, INC. & SUBSIDIARIES
Consolidated Average Balances, Interest Income/Expense and Yields/Rates
Taxable Equivalent Basis
<TABLE>
<CAPTION>
Six Months Ended June 30,
--------------------------------------------------
1999
--------------------------------------------------
Average Yield/
ASSETS Balance Interest Rate
------ ------- -------- ------
(Dollars in thousands)
<S> <C> <C> <C>
Interest-earning assets:
Loans, net of unearned income (1) $ 231,283 9,628 8.39%
Investment securities:
Taxable 69,883 2,199 6.35%
Tax-exempt (2) 1,627 62 7.70%
-----------------------------------
Total investment securities 71,510 2,261 6.38%
Federal funds sold 4,777 114 4.81%
Interest-bearing deposits with other banks 2,035 54 5.35%
-----------------------------------
Total interest-earning assets 309,605 12,057 7.85%
Allowance for loan losses (2,808)
Cash and due from banks 9,282
Premises and equipment 3,514
Rental property, net 1,759
Other assets 5,908
------------------
Total assets $ 327,260
==================
<CAPTION>
LIABILITIES & STOCKHOLDERS' EQUITY
<S> <C> <C> <C>
Interest-bearing liabilites:
Deposits:
Demand $ 25,059 286 2.30%
Savings and money market 67,517 1,381 4.12%
Certificates of deposits less than $100,000 70,317 2,026 5.81%
Certificates of deposits and other time deposits of $100,000 or more 55,245 1,320 4.82%
-----------------------------------
Total interest-bearing deposits 218,138 5,013 4.63%
Federal funds purchased and securities sold under agreements to
repurchase 8,769 213 4.90%
Other borrowed funds 35,029 940 5.41%
Employee stock ownership plan debt 0 0 0.00%
-----------------------------------
Total interest-bearing liabilities 261,936 6,166 4.75%
Noninterest-bearing deposits 33,553
Accrued expenses and other liabilities 2,081
Stockholders' equity 29,690
------------------
Total liabilities and stockholders' equity $ 327,260
==================
Net interest income $5,891
=================
Net yield on total interest-earning assets 3.84%
===============
<CAPTION>
Six Months Ended June 30,
----------------------------------------------
1998
----------------------------------------------
Average Yield/
ASSETS Balance Interest Rate
------ ------- -------- ------
<S>
Interest-earning assets:
Loans, net of unearned income (1) 192,092 8,474 8.90%
Investment securities:
Taxable 56,077 1,803 6.48%
Tax-exempt (2) 1,773 79 8.99%
------------------------------
Total investment securities 57,850 1,882 6.56%
Federal funds sold 5,324 148 5.61%
Interest-bearing deposits with other banks 1,913 62 6.54%
------------------------------
Total interest-earning assets 257,179 10,566 8.28%
Allowance for loan losses (2,214)
Cash and due from banks 7,661
Premises and equipment 3,482
Rental property, net 1,795
Other assets 4,349
------------
Total assets 272,252
============
<CAPTION>
LIABILITIES & STOCKHOLDERS' EQUITY
<S> <C> <C> <C>
Interest-bearing liabilites:
Deposits:
Demand 20,912 222 2.14%
Savings and money market 60,837 1,358 4.50%
Certificates of deposits less than $100,000 71,593 2,190 6.17%
Certificates of deposits and other time deposits of $100,000 or more 39,021 998 5.16%
------------------------------
Total interest-bearing deposits 192,363 4,768 5.00%
Federal funds purchased and securities sold under agreements to
repurchase 2,990 75 5.06%
Other borrowed funds 18,538 528 5.74%
Employee stock ownership plan debt 56 2 7.10%
------------------------------
Total interest-bearing liabilities 213,947 5,373 5.06%
Noninterest-bearing deposits 29,341
Accrued expenses and other liabilities 1,141
Stockholders' equity 27,823
------------
Total liabilities and stockholders' equity 272,252
============
Net interest income 5,193
=============
Net yield on total interest-earning assets 4.07%
============
</TABLE>
- -------------------
(1) Loans on nonaccrual status have been included in the computation of average
balances.
(2) Yields on tax-exempt securities have been computed on a tax-equivalent basis
using an income tax rate of 34%.
<PAGE>
SIGNATURES
In accordance with 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.
AUBURN NATIONAL BANCORPORATION, INC.
(Registrant)
Date: August 12, 1999 By: /s/ E. L. Spencer, Jr.
----------------------- ----------------------------------
E. L. Spencer, Jr.
President, Chief Executive
Officer and Director
Date: August 12, 1999 By: /s/ Linda D. Fucci
----------------------- ----------------------------------
Linda D. Fucci
Chief Financial Officer and
Principal Accounting Officer
15
<PAGE>
PART II OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Annual Meeting of Shareholders of the Company was held at the
AuburnBank Center in Auburn, Alabama, on Tuesday May 11, 1999, at 3:00 in the
afternoon. This meeting was held for the purpose of considering the election of
five directors to the Board of Directors to serve one year terms expiring at the
Company's 2000 Annual Meeting of Shareholders and until their successors have
been elected and qualified, and to ratify the appointment of KPMG, LLP as the
independent auditors for the Company.
As to the election of five directors, Messers E.L Spencer, Jr., Emil F.
Wright, Jr., J.E. Evans, Terry Andrus and Anne M. May were all elected to the
Board of Directors with 3,154,301 votes cast FOR and 5,795 votes cast WITHHOLD
AUTHORITY all nominees.
As to the ratification of the appointment of KPMG, LLP as the independent
auditors for the Company, the ratification was approved. There were 3,147,351
votes cast FOR, and 12,745 votes cast ABSTAIN.
ITEM 5. OTHER EVENTS
The proxy statement solicited by the Company's Board of Directors with
respect to the Company's 2000 Annual Meeting of Shareholders will confer
discretionary authority to vote on any proposals of shareholders intended to be
presented for consideration at such Annual Meeting that are submitted to the
Company after February 27, 2000.
16
<PAGE>
AUBURN NATIONAL BANCORPORATION, INC.
Item 6(a)
EXHIBIT INDEX
Exhibit Sequentially
Number Description Numbered Page
- ------ ----------- -------------
4.A Certificate of Incorporation of Auburn National
Bancorporation, Inc. * ---
4.B Bylaws of Auburn National Bancorporation, Inc. * ---
10.A Auburn National Bancorporation, Inc. 1994
Long-term Incentive Plan. * ---
10.B Lease and Equipment Purchase Agreement, Dated
September 15, 1987. * ---
27 Financial Data Schedule 18
- ----------------
* Incorporated by reference from Registrant's Registration Statement on Form
SB-2.
(b) Reports filed on Form 8-K for the quarter ended June 30, 1999:
none
17
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<LEGEND>
This schedule contains summary financial information extracted from the 10-Q for
June 30, 1999 and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 11,666
<INT-BEARING-DEPOSITS> 2,164
<FED-FUNDS-SOLD> 4,015
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 59,666
<INVESTMENTS-CARRYING> 6,699
<INVESTMENTS-MARKET> 6,692
<LOANS> 250,342
<ALLOWANCE> 2,812
<TOTAL-ASSETS> 343,837
<DEPOSITS> 273,349
<SHORT-TERM> 0
<LIABILITIES-OTHER> 2,008
<LONG-TERM> 35,931
0
0
<COMMON> 40
<OTHER-SE> 29,208
<TOTAL-LIABILITIES-AND-EQUITY> 343,837
<INTEREST-LOAN> 9,628
<INTEREST-INVEST> 2,240
<INTEREST-OTHER> 168
<INTEREST-TOTAL> 12,036
<INTEREST-DEPOSIT> 5,013
<INTEREST-EXPENSE> 6,166
<INTEREST-INCOME-NET> 5,870
<LOAN-LOSSES> 332
<SECURITIES-GAINS> 6
<EXPENSE-OTHER> 3,904
<INCOME-PRETAX> 3,035
<INCOME-PRE-EXTRAORDINARY> 3,035
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,924
<EPS-BASIC> 0.49
<EPS-DILUTED> 0.49
<YIELD-ACTUAL> 3.84
<LOANS-NON> 4,734
<LOANS-PAST> 90
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 3,897
<ALLOWANCE-OPEN> 2,808
<CHARGE-OFFS> 372
<RECOVERIES> 44
<ALLOWANCE-CLOSE> 2,812
<ALLOWANCE-DOMESTIC> 2,812
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
