<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington DC 20549
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For quarter ended September 30, 1998
------------------
Commission file number 0-14506
-------
Pioneer American Holding Company, Corp.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Pennsylvania 23-2319931
---------------- ---------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
41 North Main Street, Carbondale PA 18407
---------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
(717) 282-2662
---------------------------------------------------
(Registrant's telephone number including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by the Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter periods 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 the latest practical date.
Common Stock, $1.00 Par Value--2,904,309 common shares as of September 30, 1998.
<PAGE>
INDEX
PIONEER AMERICAN HOLDING COMPANY, CORP.
<TABLE>
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Consolidated balance sheets--September 30, 1998
and December 31, 1997.-------------------------------------------------------Page 2-3
Consolidated statements of income and comprehensive income--Three and
Nine months ended September 30, 1998 and 1997--------------------------------Page 4
Consolidated statements of cash flows--Nine months
ended September 30, 1998 and 1997.-------------------------------------------Pages 5-6
Notes to consolidated financial statements--
September 30, 1998.----------------------------------------------------------Pages 7-10
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations.-----------------------------------------------------Pages 11-15
PART II. OTHER INFORMATION
Item 1. Legal Proceedings--------------------------------------------------------------Page 16
Item 2. Changes in Securities----------------------------------------------------------Page 16
Item 3. Defaults upon Senior Securities------------------------------------------------Page 16
Item 4. Submission of Matters to a Vote of Security Holders----------------------------Page 16
Item 5. Other Information--------------------------------------------------------------Page 16
Item 6. Exhibits and Reports on form 8-K-----------------------------------------------Page 16
SIGNATURES------------------------------------------------------------------------------Page 17
</TABLE>
1
<PAGE>
PIONEER AMERICAN HOLDING COMPANY CORP.
Consolidated Balance Sheets (Unaudited)
<TABLE>
<CAPTION>
(Dollars in thousands)
- ----------------------------------------------------------------------------------------------------------
September 30, December 31,
Assets 1998 1997
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Cash and due from banks $ 15,465 14,918
Federal funds sold 14,960 0
Securities available for sale (cost of securities of
$84,599 on September 30, 1998 and $95,591 on
December 31, 1997)
U.S. Treasury securities 2,002 1,999
Federal agency mortgage backed obligations 30,006 31,982
Other obligations of Federal agencies 37,605 50,252
Obligations of states and political subdivisions 10,348 8,828
Other securities 6,126 3,635
- ---------------------------------------------------------------------------------------------------------
Total securities available for sale 86,087 96,696
- ---------------------------------------------------------------------------------------------------------
Securities held to maturity(approximate market value
of $51,103 on September 30, 1998 and $37,857 on
December 31, 1997)
Federal agency mortgage backed obligations 39,170 19,083
Other obligations of Federal agencies 1,000 6,000
Obligations of states and political subdivisions 10,259 12,296
- ---------------------------------------------------------------------------------------------------------
Total securities held to maturity 50,429 37,379
- ---------------------------------------------------------------------------------------------------------
Loans, net of unearned discount and deferred loan fees 225,583 212,342
Allowance for loan losses (3,037) (2,759)
- ---------------------------------------------------------------------------------------------------------
Net loans 222,546 209,583
- ---------------------------------------------------------------------------------------------------------
Accrued interest receivable 2,685 3,168
Premises and equipment 6,093 5,334
Other real estate owned 1,182 1,045
Other assets 3,026 1,373
Cost in excess of fair value of net assets acquired
(net of accumulated amortization of $942 September 30,
1998 and $913 December 31, 1997) 601 630
- ---------------------------------------------------------------------------------------------------------
Total assets $403,074 370,126
- ---------------------------------------------------------------------------------------------------------
</TABLE>
2
<PAGE>
PIONEER AMERICAN HOLDING COMPANY, CORP.
Consolidated Balance Sheets, Continued (Unaudited)
<TABLE>
<CAPTION>
(Dollars in thousands)
- ------------------------------------------------------------------------------------------------------------
September 30, December 31,
Liabilities and Stockholders' Equity 1998 1997
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Deposits:
Demand - noninterest bearing $ 45,603 43,740
NOW and Super NOW 33,299 30,679
Savings 54,459 52,783
Money Market 21,901 22,487
Time 148,038 143,954
- ------------------------------------------------------------------------------------------------------------
Total deposits 303,300 293,643
- ------------------------------------------------------------------------------------------------------------
Accrued interest payable 2,119 2,103
Dividends payable 552 544
Federal Funds Purchased 0 2,350
Other borrowed money 59,308 37,073
Other liabilities 2,494 1,015
- ------------------------------------------------------------------------------------------------------------
Total liabilities 367,773 336,728
- ------------------------------------------------------------------------------------------------------------
Stockholders' equity:
Common stock, $1 par value per share,
25,000,000 shares authorized;2,904,309 shares on
September 30, 1998 and 2,862,874 on December 31, 1997
issued and outstanding 2,904 2,863
Additional paid-in capital 11,768 11,472
Undivided profits 19,647 18,334
Net unrealized holding gains on
available for sale securities, net of taxes 982 729
- ------------------------------------------------------------------------------------------------------------
Total stockholders' equity 35,301 33,398
- ------------------------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity $ 403,074 370,126
- ------------------------------------------------------------------------------------------------------------
</TABLE>
3
<PAGE>
PIONEER AMERICAN HOLDING COMPANY, CORP.
Consolidated Statements of Income and Comprehensive Income (Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
(Dollars in thousands) (Dollars in thousands)
- --------------------------------------------------------------------------------------------------------------------------------
September 30, September 30, September 30, September 30,
1998 1997 1998 1997
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Interest income:
Interest and fees on loans $ 4,803 4,560 14,277 13,513
Interest on Federal funds sold 162 93 253 263
Interest on investments:
Taxable 1,842 1,722 5,824 5,072
Non-taxable 270 264 828 742
- --------------------------------------------------------------------------------------------------------------------------------
Total interest income 7,077 6,639 21,182 19,590
- --------------------------------------------------------------------------------------------------------------------------------
Interest expense:
Interest on deposits 2,721 2,832 8,002 8,533
Interest on Federal funds purchased 0 0 23 0
Interest on other borrowed money 881 339 2,590 910
- --------------------------------------------------------------------------------------------------------------------------------
Total interest expense 3,602 3,171 10,615 9,443
- --------------------------------------------------------------------------------------------------------------------------------
Net interest income 3,475 3,468 10,567 10,147
Provision for loan losses 150 140 450 415
- --------------------------------------------------------------------------------------------------------------------------------
Net interest income after provision for loan losses 3,325 3,328 10,117 9,732
- --------------------------------------------------------------------------------------------------------------------------------
Other operating income:
Service charges on deposit accounts 345 334 982 1,009
Gain on sale of available for sale securities 0 118 296 154
Gain on call of securities held to maturity 2 1 2 3
ATM fees 156 120 375 299
Other income 150 165 435 437
- --------------------------------------------------------------------------------------------------------------------------------
Total other operating income 653 738 2,090 1,902
- --------------------------------------------------------------------------------------------------------------------------------
Other operating expenses:
Salaries and employee benefits 1,319 1,325 3,989 3,846
Net occupancy expense of bank premises 250 257 769 769
Furniture and equipment expenses 201 171 563 512
Data processing expense 64 60 188 182
Other expenses 908 764 2,621 2,325
- --------------------------------------------------------------------------------------------------------------------------------
Total other operating expenses 2,742 2,577 8,130 7,634
- --------------------------------------------------------------------------------------------------------------------------------
Income before income taxes and cumulative effect
of change in accounting principle 1,236 1,489 4,077 4,000
Income tax expense 329 419 1,109 1,114
- --------------------------------------------------------------------------------------------------------------------------------
Net income $ 907 1,070 2,968 2,886
- --------------------------------------------------------------------------------------------------------------------------------
Other comprehensive income net of tax
Unrealized gain/loss on securities
Unrealized holding gain arising during the period 379 375 446 587
Less reclassification adjustment for gains
included in net income 13 13 (193) 8
Comprehensive income 1,299 1,458 3,221 3,481
- --------------------------------------------------------------------------------------------------------------------------------
Earnings Per Share Data (based on net income):
Basic $ 0.31 0.37 1.03 1.01
Diluted 0.31 0.36 1.01 0.98
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
4
<PAGE>
PIONEER AMERICAN HOLDING COMPANY, CORP
Consolidated Statements of Cash Flows (Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
(Dollars in thousands)
- -----------------------------------------------------------------------------------------------------------------
September 30, September 30,
1998 1997
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 2,968 2,886
Adjustments to reconcile net income to net
cash from operating activities:
Net gain on call of securities (2) (3)
Net gain on sale of securities available for sale (296) (154)
Accretion of discount on securities
and money market investments (32) (49)
Amortization of premium on investment
securities 263 58
Provision for loan losses 450 415
Increase (decrease) in deferred loan fees (73) 12
Decrease (increase) in accrued interest receivable 483 (232)
Depreciation and amortization of premises
and equipment 630 635
Gain on sales of premises and equipment (6) (5)
Loss on sale of other real estate 119 11
Proceeds from the sale of mortgages
and PHEAA loans held for sale 4,238 2,913
Net increase in mortgage and PHEAA loans
held for sale
Gain on sale of mortgages and PHEAA loans (43) (39)
Increase in other assets (1,784) (1,059)
Amortization of goodwill 29 29
Increase in accrued interest payable 16 153
Increase in other liabilities 1,479 1,442
- -----------------------------------------------------------------------------------------------------------------
Total adjustments to reconcile net income to net cash
from operating activities 5,471 4,127
- -----------------------------------------------------------------------------------------------------------------
Net cash from operating activities 8,439 7,013
- -----------------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Proceeds from maturities and calls of securities
held to maturity 12,584 4,873
Proceeds from maturities and calls of
securities available for sale 17,098 24,446
Proceeds from sales of securities available for sale 12,012 17,799
Purchases of securities held to maturity (25,705) (44,593)
Purchases of securities available for sale (17,980) (43,833)
Net increase in loans made to customers, excluding
provision for loan losses and change in
deferred loan fees (13,422) (3,645)
Acquisition of premises and equipment (1,390) (1,037)
Proceeds from sale of premises and equipment 7 35
Proceeds from sale of other real estate 246 284
- -----------------------------------------------------------------------------------------------------------------
Net cash used in investing activities (16,550) (45,671)
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
5
<PAGE>
PIONEER AMERICAN HOLDING COMPANY, CORP.
Consolidated Statements of Cash Flows, Continued (Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
(Dollars in thousands)
- -----------------------------------------------------------------------------------------------------------------
September 30, September 30,
1998 1997
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Cash flows from financing activities:
Net increase(decrease) in demand, NOW and Super NOW,
savings, money market and time deposits. $ 9,657 1,123
Dividends paid (1,646) (1,448)
Exercise of stock options 337 273
Federal funds purchased (2,350) 0
Increase in other borrowed money 22,235 37,984
- -----------------------------------------------------------------------------------------------------------------
Net cash from financing activities 28,233 37,932
- -----------------------------------------------------------------------------------------------------------------
Net increase(decrease) in cash and cash equivalents 15,507 (3,188)
Cash and cash equivalents at beginning of period 14,918 21,028
- -----------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of period $ 30,425 17,840
- -----------------------------------------------------------------------------------------------------------------
Supplemental Disclosure:
Cash payments for interest 10,033 9,290
Cash payments for income taxes 1,350 992
Transfer of assets from loans
to other real estate 502 646
Net unrealized loss (gain) on securities
available for sale (383) (901)
Tax effect on unrealized loss (gain)
on securities available for sale (130) (306)
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to consolidated financial statements.
6
<PAGE>
Notes to Condensed Consolidated Financial Statements
(1) Summary of Significant Accounting Policies:
Business--Pioneer American Holding Company Corp. (the "Company") and its
wholly owned subsidiary, Pioneer American Bank, National Association ("Pioneer")
provide a wide range of banking services to individual and corporate customers
through its branch banks in Lackawanna, Luzerne, Wayne, Wyoming, Susquehanna and
Monroe counties in Northeastern Pennsylvania. Pioneer is subject to competition
from other financial institutions and other financial services companies.
Pioneer is subject to the regulations of certain federal agencies and undergoes
periodic examinations by those regulatory authorities.
Basis of Financial Statement Presentation--The accompanying consolidated
financial statements were prepared in accordance with instructions to Form 10-Q,
and therefore, do not include information or footnotes necessary for a complete
presentation of financial position, results of operations and cash flows in
conformity with generally accepted accounting principles. However, all normal,
recurring adjustments which, in the opinion of management, are necessary for a
fair presentation of the financial statements, have been included. These
financial statements should be read in conjunction with the audited financial
statements and the notes thereto included in the Company's Annual Report for the
period ended December 31, 1997. The results for the nine months ended September
30, 1998 are not necessarily indicative of the results that may be expected for
the year ended December 31, 1998. All material intercompany balances and
transactions between the Company and its subsidiary have been eliminated. In
preparing the financial statements, management is required to make estimates and
assumptions that affect the reported amounts of assets and liabilities as of
date of the balance sheet and revenues and expenses for the period. Actual
results could differ significantly from those estimates.
Material estimates that are particularly susceptible to significant change
in the near-term relate to the determination of the allowance for loan losses
and the valuation of real estate acquired in connection with foreclosures or in
satisfaction of loans. In connection with the determination of the allowances
for loan losses and real estate owned, management obtains independent appraisals
for significant properties to the extent considered practical.
Mortgage Loans Held for Sale--The Company has identified certain loans as
held for sale. These loans consist primarily of fixed rate residential mortgages
and are recorded at the lower of cost or estimated market value.
Securities Available for Sale--Securities available for sale are accounted
for at fair value and the unrealized gains and losses are accounted for as a
separate component of stockholders equity, net of tax.
Securities Held to Maturity--Securities held to maturity are carried at
cost, adjusted for the amortization of the related premiums or the accretion of
the related discounts into interest income using a method which approximates
level-yield over the estimated remaining period until maturity. The Company
believes it has the intent and ability to hold to maturity its portfolio of
securities held to maturity as part of its portfolio of long-term interest
earning assets.
Interest Revenue and Expenses--Interest revenue and expenses are accrued on
various methods which approximate a level yield or cost when related to
principal amounts outstanding. Unearned discount on loans is amortized to income
by a method which also approximates a level yield on the principal amounts
outstanding.
Loan Fees--Loan origination fees and direct loan origination costs are
recognized over the life of the related loan as an adjustment of the loan's
yield.
Non-accrual Loans--The accrual of interest on loans is discontinued when
payment of principal or interest is considered doubtful of collection. Loans on
which payments are ninety days or more past due are considered non-accrual
unless the loan is both well secured and in the process of collection. When
interest accrual is discontinued, the interest receivable which was previously
credited to income is reversed.
Allowance for Loan Losses--The provision for loan losses charged to
operating expenses reflects the amount deemed appropriate by management to
produce a reserve adequate to meet the present risk characteristics of Pioneer's
loan portfolio. Management's judgment is based on the evaluation of individual
loans and their overall risk characteristics, past experiences with respect to
the relationship of its loan losses to the loan portfolio, the assessment of
current economic conditions and other relevant factors.
Management believes that the allowance for loan losses is adequate. While
management uses available information to make its evaluations, future
adjustments to the allowance may be necessary if economic conditions differ
substantially from the assumptions used in making the evaluations. In addition,
various regulatory agencies, as an integral part of their examination process,
periodically review Pioneer's allowance for loan losses. Such agencies may
require Pioneer to recognize additions to the allowances based on their
judgments about information available to them at the time of their examination.
7
<PAGE>
Notes to Condensed Consolidated Financial Statements, continued
(1) Summary of Significant Accounting Policies, continued:
Premises and Equipment--Premises and equipment are stated at cost less
accumulated depreciation and amortization. Depreciation is computed on a
straight-line basis over the estimated lives of the related assets as follows:
building 20-33 years; building and land improvements 5-10 years; equipment 3-12
years; and leasehold improvements over 10-15 years. No depreciation is taken on
capital projects-in-progress until such projects are completed and placed in
service. Maintenance and repairs are charged to operations as incurred.
Other Real Estate Owned--Other real estate owned consists of real estate
acquired through foreclosure and is stated at the lower of estimated fair value,
less estimated disposal costs, or cost. Allowances for declines in value
subsequent to acquisition were not necessary at September 30, 1998 and December
31, 1997. While management uses the best information available to make its
evaluations, future adjustments to the valuation of other real estate may be
necessary if economic conditions differ significantly from the assumptions used
in making the evaluation.
Cost in Excess of Fair Value of Net Assets Acquired--Cost in excess of fair
value of net assets acquired arose from an acquisition in 1976 and is being
amortized on a straight-line basis over a period of 40 years.
Income Taxes--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
bases. Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the periods in which those temporary
differences are expected to be recovered or settled.
Cash and Cash Equivalents--For purposes of reporting cash flows, cash and
cash equivalents include cash on hand, amounts due from banks, and Federal funds
sold. Generally, Federal funds are sold for one-day periods.
Impaired Loans--As of September 30, 1998, the Company had impaired loans
with a total recorded investment of $1,692,000 and $1,922,000 on December 31,
1997. The average recorded investment in impaired loans for the nine month
period ended September 30, 1998 was $1,902,000 and $1,914,000 on December 31,
1997. As of September 30, 1998, the amount of recorded investment in impaired
loans for which there is a related allowance for credit losses and amount of the
allowance is $939,000 and $251,000, respectively, and $815,000 and $185,000,
respectively, for December 31, 1997. The amount of the recorded investment in
impaired loans for which there was no related allowance for credit losses at
September 30, 1998 was $753,000 and $1,107,000 on December 31, 1997. For
purposes of applying the measurement criteria for impaired loans under SFAS No.
114, as amended, the Company excludes large groups of smaller-balance
homogeneous loans, primarily consisting of residential real estate loans and
consumer loans, as well as commercial, financial, and agricultural loans with
balances less than $100,000. For applicable loans, the Company evaluates the
need for impairment recognition when a loan becomes nonaccrual, or earlier if
based on management's assessment of the relevant facts and circumstances, it is
probable that a creditor will be unable to collect all assets due according to
the contractual terms of the loan agreement. The Company's policy for the
recognition of interest income on impaired loans is the same as for nonaccrual
loans (described previously). Cash receipts on impaired loans are not recognized
as income, but are applied to principal. Impaired loans are charged off when the
Company determines that foreclosure is probable and the fair value of the
collateral is less than the recorded investment of the impaired loan.
In June 1997, the FASB issued SFAS No. 130, Reporting Comprehensive Income.
This statement establishes standards for the reporting and display of
comprehensive income and its components in a full set of general-purpose
financial statements. SFAS No. 130 requires that all items that are required to
be recognized as components of comprehensive income be reported in a financial
statement that is displayed with the same prominence as other financial
statements. The statement does not require a specific format for that financial
statement but requires that an enterprise display an amount representing total
comprehensive income for the period in that financial statement. SFAS No. 130 is
effective for fiscal years beginning after December 15, 1997. The Company has
included this new reporting information in its 1998 consolidated financial
statements as required.
In June 1997, the FASB issued SFAS No. 131, Disclosures About Segments of
an Enterprise and Related Information. SFAS No. 131 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 and services, geographic areas, and major customers.
SFAS No. 131 is effective for financial statements for periods beginning after
December 15, 1997. Management has not yet determined the impact, if any, of this
statement on the Company's future disclosures.
<PAGE>
In February 1998, the FASB issued SFAS No. 132, Employer's Disclosures about
Pensions and other Post Retirement Benefits. This statement revises employer's
disclosures about pension and other postretirement benefit plans. It does not
change the measurement or recognition of those plans. It standardizes the
disclosure requirements for pensions and other postretirement benefits to the
extent practicable, requires additional information on changes in the benefit
obligations and fair values of plan assets that will facilitate financial
8
<PAGE>
Notes to Condensed Consolidated Financial Statements, continued
(1) Continued:
analysis, and eliminates certain disclosures that are no longer as useful as
they were when FASB Statements No. 87, Employers' Accounting for Pensions, No.
88, Employers' Accounting for Settlements and Curtailments of Defined Benefit
Pension Plans and for Termination Benefits, and No. 106, Employers' Accounting
for Postretirement Benefits Other Than Pensions, were issued. SFAS No. 132
changes in disclosures and would not effect the financial condition, operating
results, or equity of the Corporation. This Statement is effective for fiscal
years beginning after December 15, 1997.
In June 1998, the FASB issued SFAS No. 133, Accounting for Derivative
Instruments and Hedging Activities. This statement establishes accounting and
reporting standards for derivative instruments, including certain derivative
instruments embedded in other contracts, (collectively referred to as
derivatives) and for hedging activities. It requires that an entity recognize
all derivatives as either assets or liabilities in the statement of financial
position and measure those instruments at fair value. The accounting for changes
in the fair value of a derivative depends on the intended use of the derivative
and the resulting designation. If certain conditions are met, a derivative may
be specifically designated as (a) a hedge of certain exposure to changes in the
fair value of a recognized asset or liability or an unrecognized firm
commitment, (b) a hedge of the exposure to variable cash flows of a forecasted
transaction, or (c) a hedge of the foreign currency exposures. This Statement is
effective for all fiscal quarters of fiscal years beginning after June 15, 1999.
Earlier adoption is permitted. The Company has not yet determined the impact, if
any, of this Statement, including its provisions for the potential
reclassifications of investment securities, on earnings, financial condition or
equity.
(2) Securities Portfolio
Securities available for sale at September 30, 1998 and December 31, 1997
are summarized as follows: (000's)
<TABLE>
<CAPTION>
September 30, December 31,
1998 1997
Cost Market Value Cost Market Value
---------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Treasury Securities $ 1,999 2,002 1,998 1,999
Federal agency mortgage based
obligations 29,649 30,006 31,650 31,982
Other obligations of Federal agencies 36,946 37,605 49,835 50,252
Obligations of State and Political subdivisions 9,879 10,348 8,473 8,828
Other securities 6,126 6,126 3,635 3,635
---------------------------------------------------------------------
Securities available for sale: $ 84,599 86,087 95,591 96,696
---------------------------------------------------------------------
</TABLE>
The adjustment in stockholders' equity for the unrealized gain of the
securities available for sale at September 30, 1998, net of tax, was $982,000.
Included in net deferred tax assets is $(506,000) for this same unrealized gain.
Securities held to maturity at September 30, 1998 and December 31, 1997 are
summarized as follows: (000's)
<TABLE>
<CAPTION>
September 30, December 31,
1998 1997
Cost Market Value Cost Market Value
--------------------------------------------------------------------
<S> <C> <C> <C> <C>
Federal agency mortgage based
obligations $ 39,170 39,471 19,083 19,294
Other obligations of Federal agencies 1,000 1,000 6,000 5,977
Obligations of State and Political subdivisions 10,259 10,632 12,296 12,586
--------------------------------------------------------------------
Securities held to maturity: $ 50,429 51,103 37,379 37,857
--------------------------------------------------------------------
</TABLE>
<PAGE>
(3) Stockholders' Equity and Per Share Data
The Company currently has one million shares of authorized, but unissued
preferred stock. At September 30, 1998 there were 25,000,000 shares of common
stock at $1 par value authorized with 2,904,309 shares issued and outstanding.
Through September 30, 1998 the Company has issued and outstanding 102,193
options to purchase shares of the Company, exercisable at between $8.00 to
$13.00 per share. Such options were issued with exercise prices equal to the
market value of the Company's common shares at the time of the grant. In the
first quarter 38,610 options were exercised and in the third quarter 4,325 of
the previously issued options were exercised.
9
<PAGE>
Notes to Condensed Consolidated Financial Statements, continued
(3) Stockholders' Equity and Per Share Data, continued
In February 1997, the FASB issued SFAS No. 128, Earnings Per Share, which
was required to be adopted in both interim and annual financial statements for
periods ending after December 15, 1997. Accordingly, the Company has changed its
methodology for computing earnings per share and restated all prior period
amounts. SFAS 128 replaced primary and fully diluted earnings per share with
basic and diluted earnings per share. Under the new requirements for calculating
earnings per share, the dilutive effect of stock options will be excluded from
basic earnings per share but included in the computation of diluted earnings per
share.
The following table sets forth the computation of basic and diluted
earnings per share (in thousands, except per share data):
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Numerator:
Net income $ 907 1,070 2,968 2,886
=========== =========== ============ ===========
Denominator:
Denominator for basic earnings per share -
weighted average shares 2,901 2,862 2,890 2,845
Effect of dilutive securities:
Employee stock options 55 83 63 94
----------- ----------- ------------ -----------
Denominator for diluted earnings per share -
adjusted weighted average shares and
assumed conversion 2,956 2,945 2,953 2,939
=========== =========== ============ ===========
Basic earnings per share $ 0.31 0.37 1.03 1.01
=========== =========== ============ ===========
Diluted earnings per share $ 0.31 0.36 1.01 0.98
=========== =========== ============ ===========
</TABLE>
The market value of the common shares of the Company at September 30, 1998
was $23.25.
10
<PAGE>
Financial Review Management's Discussion and Analysis of Financial Condition
and Results of Operation
Highlights
Total Assets were $403,074,000 at September 30, 1998 and $370,126,000 at
December 31, 1997 which is an increase of $32,948,000 or 8.9 %. Deposits
increased by $9,657,000 from $293,643,000 at December 31, 1997 which is a
increase of 3.3 % at September 30, 1998. Total net loans as of December 31, 1997
stood at $209,583,000, increasing by $12,963,000 or 6.2% to $222,546,000 at
September 30, 1998.
The average earning assets were $366,630,000 during the nine months ended
September 30, 1998 and $330,504,000 during the nine months ended September 30,
1997. This is an increase of $36,126,000 or 10.9%. For the third quarter average
earning assets were $371,023,000 for 1998 and $333,611,000 for 1997, an increase
of $37,412,000 or 11.2%.
Average total assets during the nine months ended September 30, 1998 were
$390,083,000 and $353,576,000 for the nine months ended September 30, 1997 and
$395,552,000 and $357,567,000 for the three months ended September 30, 1998 and
1997, respectively. The return on average total assets was 1.0% for both nine
months and three months ended September 30, 1998. The return on average total
assets for 1997 was 1.1% and 1.2% for nine and three months ended September 30,
1997. Return on average equity for nine and three months ended September 30,
1998 were 11.7% and 10.6%, respectively and for the same periods in 1997 were
12.4% and 13.5%. Average equity was $33,689,000 for the first nine months and
$34,125,000 for the third quarter of 1998 and $30,962,000 for the first nine
months and $31,800,000 for the third quarter of 1997.
Net income increased $82,000 or 2.8% comparing the first nine months of 1998
to the first nine months of 1997. The increase in 1998 was driven by an increase
in total other operating income as well as an increase in net interest income.
These increases were offset by a lesser increase in total other operating
expense. Net income for the third quarter of 1998 decreased $163,000 or 15.2%
compared to the same period of 1997. The decrease in 1998 was driven by an
increase in total other operating expense.
Net income per diluted share was $1.01 for the first nine months of 1998 and
$0.98 for the first nine months of 1997. Net income per diluted share for three
months ended September 30, 1998 and September 30, 1997 was $0.31 and $0.36,
respectively. Earnings per basic share were $1.03 and $1.01 for the nine months
ended September 30, 1998 and 1997, and $0.31 and $0.37 for the three months
ended September 30, 1998 and 1997, respectively.
Available for Sale and Securities Held to Maturity
A major factor in the increase of total assets at September 30, 1998 is the
increase in the Bank's securities portfolio of $2,441,000 or 1.8%. There was an
increase of $20,087,000 or 105.3% over December 31, 1997 in Federal agency
mortgage backed obligation securities held to maturity. Money used to purchase
these securities was borrowed from Federal Home Loan Bank of Pittsburgh.
Offsetting this increase was a decrease in the Bank's securities available for
sale of $10,609,000 or 11.0 %. Management believed it was necessary to sell
securities as part of its program of constantly monitoring the securities and
loan portfolios in response to changes in the various risks that are applicable
to these assets and changes in the Company's asset/liability strategy. This also
put the Bank in a position to sell Federal funds of $14,960,000 at September 30,
1998 as compared to December 31, 1997 when the Bank purchased Federal funds of
$2,350,000.
Net Loans
Net loans increased by $12,963,000 or 6.2% over December 31, 1997. This was
the second major factor in the increase of total assets. This increase in net
loans was primarily driven by a $14.3 million increase in Home Equity loans as a
result of a special promotion offered by the Bank in the first quarter of 1998.
Money used to finance these loans was funded from a portion of the securities
available for sale sold in the first quarter of 1998. All other loan areas
stayed fairly constant for the first nine months of 1998.
Total Deposits
Total Deposits were $303,300,000 at September 30, 1998 and $293,643,000 at
December 31, 1997 which is an increase of $9,657,000 or 3.3%. During the first
nine months of 1998 Now and Super Now increased $2,620,000 due to large deposits
in local school district accounts during the third quarter of 1998. Time
deposits also increased by $4,084,000 or 2.8% over December 31, 1997 which was
attributed to a special certificate of deposit promotion offered in June of
1998. This was one of the major factors in the increase of total liabilities.
Other Borrowed Money
Total liabilities were $367,773,000 at September 30, 1998 and $336,728,000
at December 31, 1997 which is an increase of $31,045,000 or 9.2%. The largest
increase in total liabilities was the result of an increase in Other borrowed
money of $22,235,000 over December 31, 1997. Management borrowed $25,000,000 in
January of 1998 from Federal Home Loan Bank of Pittsburgh (which will
11
<PAGE>
Financial Review Management's Discussion and Analysis of Financial Condition
and Results of Operation, continued
Other Borrowed Money, continued
mature in January 2008). The money borrowed was invested in mortgage backed
securities. Bank management believes that it was appropriate to take advantage
of borrowing at a rate lower than the rate received in investing in Federal
agency mortgage backed obligation and securities held to maturity.
Net Interest Income
Net interest income for the first nine months of 1998 increased $420,000 or
4.1% compared with the same period of 1997. While net interest income for the
third quarter of 1998 increased $7,000 or .2% over the third quarter of 1997.
Total interest income increased $1,592,000 and $438,000 for nine and three
months ended September 30, 1998. The increase in interest income was the result
of an increase in the total average of interest earning assets. Interest earning
assets were up $36,126,000 and $37,412,000 for the nine and three months of 1998
compared to the same periods in 1997. The security portfolio provided $838,000
of the increase and the loan portfolio provided $764,000 for the nine months
ended September 30, 1998. Total interest expense also increased $1,172,000
resulting in a net increase of $420,000 or 4.1% in net interest income. During
1997 and the first quarter of 1998 the Bank borrowed $65,000,000 from Federal
Home Loan Bank of Pittsburgh. The money borrowed was invested in mortgage backed
securities and also used to increase our loan portfolio. Offsetting the increase
of interest income for the nine and three months ended September 30, 1998 was
interest expense on other borrowed money which was up $1,680,000 and $542,000,
respectively for the same period in 1997. Total interest expense on deposits
decreased for both the quarter and nine months ended September 30, 1998 as
compared to the prior year. This was attributable to a decrease in the rate paid
on interest bearing deposits as well as a $204,000 one-time charge taken in the
second quarter of 1997 relating to the under accrual of interest expense on
certain interest bearing deposit accounts.
In addition to gap management, the Company also uses simulation analysis to
help monitor and manage interest rate risk. In this analysis the Company
examines the result of a 200 basis point change in market interest rates and the
effect on net interest income. It is assumed that the change is instantaneous
and that all rates move in a parallel manner. Assumptions are also made
concerning prepayment speeds on mortgage loans and mortgage securities as well
as growth rates of deposit and loan portfolios. The results of this rate shock
are a useful tool to assist the Company in assessing interest rate risk inherent
in their balance sheet. Below are the results of this ratio shock analysis as of
September 30, 1998.
Net Interest Rate Percentage Change in
Change in Rates Income Change Net Interest Income
--------------- ----------------- --------------------
+200 766 5.40%
Static - -
-200 (1,737) (12.40%)
A 200 basis point rise in interest rates results in a 5.4% increase in
interest income. A 200 basis point decrease in interest rates results in a
decrease in interest income due to optionality in the Company's securities
portfolio. In a falling rate environment it is assumed that certain of the
Company's securities would be called and the resulting cash flows would be
reinvested at the lower prevailing rates.
Provision / Reserve for Loan Losses and Nonperforming Loans
Quarter Ended Year Ended
September 30, December 31,
1998 1997
------------------------------------
Balance at beginning of period $ 2,759,000 2,750,000
Recoveries 35,000 73,000
Less: Charge Offs 207,000 599,000
Provision for Loan Losses 450,000 535,000
- ------------------------------------------------------------------------------
Balance at end of period $ 3,037,000 2,759,000
- ------------------------------------------------------------------------------
The provision for loan losses for the first nine months of 1998 amounted to
$450,000 and $150,000 for the three months ended September 30, 1998. It was
$535,000 at Decemberr 31, 1997 and $415,000 for the nine months ended 1997, and
$140,000 for the three months ended September 30, 1997. Net charge offs for the
first nine months of 1998 totaled $172,000 while net charge offs for December
31, 1997 were $526,000. The significant increase in charge offs in 1997 was due
to three specific loans that were not fully collateralized. The ratio of net
charge offs during the first nine months of 1998 to average loans outstanding
during the same period was .08% and for the twelve months ended 1997 was .26%.
12
<PAGE>
Financial Review Management's Discussion and Analysis of Financial Condition
and Results of Operation, continued
Provision / Reserve for Loan Losses and Nonperforming Loans, continued
The reserve for loan losses at September 30, 1998 totaled $3,037,000,
increasing $278,000,10.1% from $2,759,000 at December 31, 1997. The Company
ratio of reserve for loan losses to total loans outstanding was 1.3% at
September 30, 1998, and the same ratio as of December 31, 1997 was 1.3%.
Non-performing loans are listed as follows:
9/30/98 12/31/97
------------- -------------
Non Accrual $ 2,240,000 $ 2,596,000
90 Days and More Past Due 877,000 2,026,000
Restructured 1,114,000 890,000
------------- -------------
$ 4,231,000 $ 5,512,000
The Company generally places a loan on a non-accrual status when, in the
opinion of management the borrower does not have the ability to meet the
original terms of the loan. The Company reserves the accrued interest on all
commercial loans over ninety days past due and these loans are included in the
non-accrual totals. Mortgages past due 90 days or more are placed in non-accrual
status unless the Bank considers the loan to be well secured and in the process
of collection. Consumer loans that are not secured by real estate are generally
charged off after 120 days past due.
There are no impaired loans under SFAS No. 114 which are not included in the
above table.
The loan loss reserve as of September 30, 1998 has been deemed adequate by
management. This amount is sufficient to cover inherent losses given the present
past due, nonperforming and classified levels. Determination of loan loss
reserve adequacy follows the guidelines in the Comptroller's Banking Circular
No.201(revised), including risk loss analysis, specific allocations for
problematic credits and provision for class loans, and the requirements of SFAS
No. 114, as amended.
Other Operating Income
Other operating income for the first nine months of 1997 was $1,902,000
increasing 9.9% to $2,090,000 reported for the first nine months of 1998. There
was a gain recognized for the sale of securities available for sale in 1998 for
the first nine months of $296,000 compared to $154,000 for the same period of
1997. ATM fees were up for both nine and three months ended September 30, 1998.
Ten additional ATM machines were placed in service after the first quarter of
1997, on which a surcharge per transaction has been collected. As of September
1998 the Bank has a total of 40 ATM machines. Other operating income for the
three months ended 1998 decreased $85,000 or 11.5%. The Company did not
recognize any gain or loss on the sale of securities available for sale in the
third quarter of 1998. There were gains of $118,000 in 1997 for the same period.
Other Operating Expenses
Total other operating expenses were $7,634,000 in the first nine months of
1997 while other operating expenses were $8,130,000 in the first nine months of
1998 reflecting an increase of $496,000 or 6.5% for the first nine months of
1998. For the third quarter of 1998 total other operating expense was up
$165,000 or 6.4% over the same period in 1997. The 1998 increase in salaries for
the nine months ended September 30, 1998 was 3.7% which was attributable to
normal salary increases. Furniture and equipment expense for both nine and three
months ended September 30, 1998 was up 10% and 17.5%. This increase was due to
an increase in maintenance contracts on our expanded ATM network. Other expense
increased by 12.7% for the nine months ended September 30, 1998 and 18.8% for
the third quarter. Holding company expenses were up $40,000 for both nine and
three months ended September 30, 1998 as a result of legal expenses. One of the
largest increases for nine months ended September 30, 1998 was in total
professional fees. This expense was up $63,000 due to timing differences when
services were provided. The expense for automated teller machines and related
cardholder services increased $55,000 due to the growth in automated teller
machines. Other areas with increases over 1997 were postage up $15,000,
information services up $11,000 and advertising expense up $20,000. Net
occupancy expense of bank premises and data processing expense for the nine and
three months ended September 30, 1998 remained fairly constant with a slight
increase or decrease in each of the categories as compared to the same period of
1997.
Income Taxes
The provision for income taxes for the first nine months of 1998 was
$1,109,000 and $1,114,000 for the first nine months of 1997. The effective rate
for the first nine months of 1998 was 27.2% and 27.9% for the same period of
1997. The effective rate for the third quarter was 26.6% for 1998 and 28.0% for
1997. The fluctuation in the Company's tax expense and effective tax rate is
primarily due to management's strategy in investing in tax free securities.
13
<PAGE>
Financial Review Management's Discussion and Analysis of Financial Condition
and Results of Operation, continued
Other Operating Expenses, continued
Capital Management and Liquidity and Rate Sensitivity
The objectives of the Corporation's capital management policy place an
emphasis on both current financial positioning and future capital needs based on
anticipated growth. These objectives are maintained by management which monitors
its liquidity requirements through its asset/liability management program. This
program, with other management analysis, enables the bank to meet its cash flow
requirements and adapt to the changing needs of the Corporation's customers and
the requirements of regulatory agencies. As of September 30, 1998, the most
recent notification from the Office of the Comptroller of the Currency
categorized the Bank as well capitalized under the regulatory framework for
prompt corrective action. To be categorized as well capitalized the Bank must
maintain minimum total risk-based, Tier 1 risk-based, and Tier 1 leverage ratios
of greater than or equal to 10%, 6%, and 5%, respectively.
The Corporation's principal source of liquidity has been short-term U.S.
Government and U.S. Agency obligations, and various corporate notes. Money
market investments and portfolio investments are kept liquid in order to
effectively match our current deposit structure. The Corporation is affected by
changes in the level of rates of interest. Earnings will be sensitive to
interest rate changes to the degree that the average yield on assets responds
differently to a change in interest rates than does average cost of funds.
Adequate liquidity affords the Corporation flexibility in meeting consumer loan
demand and deposit fluctuations.
The Corporation actively manages the interest rate sensitivity
characteristics of its assets and liabilities to control the effects of changes
in the general level of interest rates upon net interest revenue. This is
accomplished by the asset/liability committee which consists of senior
management and the board of directors, who are responsible for management
decisions as to the asset/liability maturity mix.
Effects of Inflation
Economic conditions are reviewed by management in a continuing effort to
adjust to the changing economic environment. The effects of these changes on the
banking industry as a whole in the Company's market area are reviewed by
management in order to compete at a level consistent with the goals of
profitability and sound management policy.
Increases in the rate of inflation can increase longer term interest rates,
which can reduce the value of securities held to maturity, mortgage loans and
other fixed rate and term assets. Inflationary periods also may tend to increase
the borrowing needs of consumers, leading to requests for additional funds,
which can expand total loans above expected levels and therefore require
increased efforts to ensure the maintenance of adequate capital.
The banking industry is affected by inflation in a different manner than
other industries, although certain changes have similar effects on both banks
and other business enterprises. Current economic indicators are moving in the
direction of possible inflationary changes. Interest rates have been fluctuating
in response to economic changes, which will affect the asset/liability policy of
the bank. Rates on deposits and loans are changed as necessary with
consideration of economic and market conditions. Our continuing efforts to
monitor all phases of the financial condition of all assets which can be
affected by inflation include the pricing of collateral on a regular basis.
Year 2000
Year 2000 issues result from the inability of many computer programs or
computerized equipment to accurately calculate, store or use a date after
December 31, 1999. The erroneous date can be interpreted in a number of
different ways, the most common being Year 2000 represented as the year 1900.
Correctly identifying and processing Year 2000 as a leap year may also be an
issue. These misinterpretations of various dates in the Year 2000 could result
in a system failure or miscalculations causing disruptions of normal business
operations including, among other things, a temporary inability to process
transactions, track important customer account information, or provide
convenient access to this information.
The Company has completed an assessment of its financial and operational
software systems in accordance with the various regulatory agency guidance
documents. The Company is maintaining an inventory of hardware and software
systems, which ranges from mission critical software systems and personal
computers to security and video equipment, and general office equipment. The
Company has prioritized its hardware and software systems to focus on the most
critical systems first. In connection with the Company's assessment, a number of
the less significant third party vendors advised the Company that their software
is Year 2000 compliant, and the Company intends to fully test that software by
June 30, 1999.
<PAGE>
The Company has completed an assessment of its core financial and
operational software systems and has taken the necessary steps to bring them
into compliance. Our Year 2000 project plan is in place and is progressing on
schedule with the testing of our core applications for critical dates. The
Company will have tested past the Year 2000 prior to December 31, 1998 and plans
to be fully completed by June 30, 1999.
14
<PAGE>
Financial Review Management's Discussion and Analysis of Financial Condition
and Results of Operation, continued
Year 2000, continued
Based on preliminary information, costs of addressing potential problems are
estimated to be $550,000. This cost is primarily associated with purchasing new
equipment and software which will be capitalized and amortized over a 5 year
period.
Systems outside of the direct control of the Company, such as ATM networks,
credit card processors, and the Fed Wire System, pose a more problematic issue.
A theoretical problem scenario would involve a temporary inability of customers
to access their funds through automated teller machines, point of service
terminals at retailer locations, or other shared networks. For this reason
alone, banks and their governing agencies are closely scrutinizing the progress
of our major industry service providers.
Successful and timely completion of the Year 2000 project is based on
management's best estimates, which were derived from numerous assumptions of
future events, which are inherently uncertain, including the availability of
certain resources, third party modification plans and other factors.
Forward Looking Statements
Within these financial statements we have included certain "forward looking
statements" concerning the future operations of the Corporation. It is
management's desire to take advantage of the "safe harbor" provisions of the
Private Securities Litigation Reform Act of 1995. This statement is for the
express purpose of availing the Corporation of the protections of such safe
harbor with respect to all "forward looking statements" contained in our
financial statements. We have used "forward looking statements" to describe the
future plans and strategies including our expectations of the Corporation's
future financial results. Management's ability to predict results or the effect
of future plans and strategy is inherently uncertain. Factors that could affect
results include interest rate trends, competition, the general economic climate
in Pennsylvania, and the country as a whole, loan delinquency rates, and changes
in federal and state regulation. These factors should be considered in
evaluating the "forward looking statements", and undue reliance should not be
placed on such statements.
15
<PAGE>
Part II.
Item 1. Legal Proceedings
The nature of the business of Pioneer American Holding Company Corp. and its
subsidiary, Pioneer American Bank, N.A., generates a certain amount of
litigation involving matters arising in the ordinary course of business.
However, in the opinion of management, there are no proceedings pending to which
Pioneer American or its subsidiary are parties or to which their property is
subject, which, if determined adversely, would be material in relation to
Pioneer American's results of operation, stockholder's equity, or financial
condition. In addition, no material proceedings are pending or are known to be
threatened or contemplated against Pioneer American or its subsidiary by
governmental authorities or other parties.
Item 2. Changes in Securities
None
Item 3. Default Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
Pursuant to recent amendments to the proxy rules under the Securities Exchange
Act of 1934, as amended, (the "Exchange Act"), the Company's stockholders are
notified that the deadline for providing the Company timely notice of any
stockholder proposal to be submitted outside of the Rule 14a-8 process for
consideration at the Company's 1999 Annual Meeting of Stockholders (the "Annual
Meeting") will be March 28, 1999. As to all such matters which the company does
not have notice on or prior to March 28, 1999, discretionary authority shall be
granted to the persons designated in the Company's proxy related to the Meeting.
A stockholder proposal regarding the Meeting must be submitted to the Company at
its office located at 41 N. Main Street, Carbondale, Pennsylvania by January 12,
1999, to receive consideration for inclusion in the Company's 1999 proxy
materials. Any such proposal must also comply with the proxy rules under the
Exchange Act, including Rule 14a-8.
Item 5. Other Information
Donald A. Hoyle, Jr.'s contract as President and Chief Executive Officer of the
Company expired on September 30, 1998 and his employment terminated with the
Company on October 12, 1998. John W. Reuther was named President and Chief
Executive Officer of the Company on October 13, 1998.
Item 6. Exhibits and Reports on Form 8-K
None
16
<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.
PIONEER AMERICAN HOLDING COMPANY, CORP.
Date: November 7, 1998 By /s/ John W. Reuther
----------------- ---------------------------------------
John W. Reuther
President & C.E.O.
Date: November 7, 1998 By /s/ Patricia Cobb Esq.
---------------- ---------------------------------------
Patricia Cobb Esq.
Senior Vice President/In-House Counsel
17
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<CURRENCY> US DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<EXCHANGE-RATE> 1.000
<CASH> 15,465
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 14,960
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 86,087
<INVESTMENTS-CARRYING> 50,429
<INVESTMENTS-MARKET> 51,103
<LOANS> 225,583
<ALLOWANCE> 3,037
<TOTAL-ASSETS> 403,074
<DEPOSITS> 303,300
<SHORT-TERM> 0
<LIABILITIES-OTHER> 5,165
<LONG-TERM> 59,308
0
0
<COMMON> 2,904
<OTHER-SE> 32,397
<TOTAL-LIABILITIES-AND-EQUITY> 403,074
<INTEREST-LOAN> 14,277
<INTEREST-INVEST> 6,652
<INTEREST-OTHER> 253
<INTEREST-TOTAL> 21,182
<INTEREST-DEPOSIT> 8,002
<INTEREST-EXPENSE> 10,615
<INTEREST-INCOME-NET> 10,567
<LOAN-LOSSES> 450
<SECURITIES-GAINS> 298
<EXPENSE-OTHER> 8,130
<INCOME-PRETAX> 4,077
<INCOME-PRE-EXTRAORDINARY> 2,968
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,968
<EPS-PRIMARY> 1.03
<EPS-DILUTED> 1.01
<YIELD-ACTUAL> 3.74
<LOANS-NON> 2,240
<LOANS-PAST> 877
<LOANS-TROUBLED> 1,114
<LOANS-PROBLEM> 196
<ALLOWANCE-OPEN> 2,759
<CHARGE-OFFS> 207
<RECOVERIES> 35
<ALLOWANCE-CLOSE> 3,037
<ALLOWANCE-DOMESTIC> 853
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 2,184
</TABLE>
