<PAGE> 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended June 30, 1995
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Commission File Number 0-16595
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SUBURBAN BANCSHARES, INC.
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(Exact name of Registrant as specified in charter)
Delaware 54-1319441
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(State or other juris- (I.R.S. Employer
diction of incorporation) Identification No.)
7505 Greenway Center Drive, Greenbelt, Maryland 20770
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(Address of principal executive offices) (Zip Code)
(301) 474-6694
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(Registrant's telephone number, including area code)
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(Former name, former address and former fiscal year, if changed since
last report)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
----- ------
Common Stock $.01 Par Value Outstanding at August 4, 1995
--------------------------- -----------------------------
(Class)
9,091,663 Shares
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SUBURBAN BANCSHARES, INC.
S.E.C. FORM 10-Q
June 30, 1995
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION PAGE NO.
------------------------------- --------
<S> <C> <C>
Item 1. Condensed Financial Statements
Consolidated Balance Sheets (unaudited)
June 30, 1995 & December 31, 1994 3
Consolidated Statements of Operations
(unaudited)
Six months ended June 30, 1995 and
June 30, 1994 4
Consolidated Statements of Operations
(unaudited)
Three months ended June 30, 1995 and
June 30, 1994 5
Consolidated Statements of Cash Flows
(unaudited)
Six months ended June 30, 1995 and
June 30, 1994 6
Notes to Consolidated Financial Statements 7-13
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 14-22
PART II. OTHER INFORMATION
---------------------------
Item 6. Exhibits and Reports on Form 8-K
</TABLE>
2
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SUBURBAN BANCSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(unaudited)
<TABLE>
<CAPTION>
In thousands June 30, December 31,
1995 1994
<S> <C> <C>
ASSETS
Cash and due from banks $ 7,355 $ 7,005
Interest bearing deposits with banks 22 245
Federal funds sold 14,470 13,560
Investment securities available for sale 14,018 19,252
Investment securities held to maturity 4,846 4,821
(aggregate market value of $4,953 and $4,654
at June 30, 1995 and December 31, 1994)
Loans held for sale 2,384 2,044
Loans 58,214 64,525
Less: Allowance for loan losses (2,229) (2,750)
Loans, net 55,985 61,775
Premises and equipment, net 964 1,156
Other real estate owned 1,463 3,018
Accrued interest receivable 590 645
Other assets 641 708
TOTAL ASSETS $102,738 $114,229
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Noninterest-bearing deposits $ 17,660 $ 24,360
Interest-bearing deposits 74,263 80,042
Total Deposits 91,923 104,402
Securities sold under agreements to repurchase 0 691
Accrued expenses and other liabilities 409 549
Total liabilities 92,332 105,642
Shareholders' equity:
Preferred stock, $.01 par value;
1,000,000 shares authorized;
no shares issued or outstanding --- ---
Common stock, $.01 par value;
20,000,000 shares authorized; shares issued
and outstanding: 9,091,663 at June 30, 1995
and 9,054,459 at December 31, 1994 91 91
Paid-in capital - stock options 534 172
Additional paid-in capital 23,418 23,380
Accumulated deficit (13,645) (14,584)
Net unrealized gain (loss) on securities
available for sale 8 (472)
Total shareholders' equity 10,406 8,587
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $102,738 $114,229
</TABLE>
See accompanying notes to consolidated financial statements
3
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SUBURBAN BANCSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
<TABLE>
<CAPTION>
Six months ended June 30,
In thousands, except per share data 1995 1994
<S> <C> <C>
INTEREST INCOME:
Interest and fees on loans $3,279 $2,514
Taxable interest on securities available for sale 498 367
Taxable interest on securities held to maturity 167 --
Interest on Federal funds sold 230 322
Interest on deposits with banks 4 5
Total interest income 4,178 3,208
INTEREST EXPENSE
Interest on deposits 1,464 1,093
Interest on short-term borrowings 12 9
Total interest expense 1,476 1,102
NET INTEREST INCOME 2,702 2,106
Provision for loan losses 35 130
Net interest income after provision for loan losses 2,667 1,976
NONINTEREST INCOME
Service charges on deposit accounts 223 254
Net realized gains on sales of
available for sale securities -- 117
Net gains on sales of other real estate owned 84 1
Net gains on sales of loans -- 106
Gain on sale of assets and transfer of liabilities 1,000 --
Other income 97 121
Total noninterest income 1,404 599
NONINTEREST EXPENSE
Salaries and employee benefits 1,548 1,162
Occupancy expense 346 337
Furniture and equipment expense 77 97
Other expense 1,161 977
Total noninterest expense 3,132 2,573
Income before income taxes 939 2
Income taxes -- --
NET INCOME $ 939 $ 2
Income Per Common Share
Primary $0.09 $0.00
Fully Diluted 0.09 0.00
</TABLE>
See accompanying notes to consolidated financial statements
4
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SUBURBAN BANCSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
<TABLE>
<CAPTION>
Three months ended June 30,
In thousands, except per share data 1995 1994
<S> <C> <C>
INTEREST INCOME:
Interest and fees on loans $1,647 $1,332
Taxable interest on securities available for sale 237 186
Taxable interest on securities held to maturity 84 --
Interest on Federal funds sold 110 182
Interest on deposits with banks 1 3
Total interest income 2,079 1,703
INTEREST EXPENSE
Interest on deposits 732 569
Interest on short-term borrowings 7 6
Total interest expense 739 575
NET INTEREST INCOME 1,340 1,128
Provision for loan losses (10) 30
Net interest income after provision for loan losses 1,350 1,098
NONINTEREST INCOME
Service charges on deposit accounts 111 127
Net realized gains on sales of
available for sale securities -- (3)
Net gains on sales of other real estate owned 84 --
Net gains on sales of loans -- 106
Gain on sale of assets and transfer of liabilities 1,000 --
Other income 43 63
Total noninterest income 1,238 293
NONINTEREST EXPENSE
Salaries and employee benefits 951 594
Occupancy expense 182 172
Furniture and equipment expense 34 47
Other expense 650 514
Total noninterest expense 1,817 1,327
Income before income taxes 771 64
Income taxes -- --
NET INCOME $ 771 $ 64
Income Per Common Share
Primary $0.08 $0.01
Fully Diluted 0.08 0.01
</TABLE>
See accompanying notes to consolidated financial statements
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SUBURBAN BANCHSARES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
<TABLE>
<CAPTION>
Six Months ended
June 30,
1995 1994
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 939 $ 2
Adjustments to reconcile net income to net cash (used)
provided by operating activities:
Depreciation 91 115
Provision for loan losses 35 130
Stock option compensation expense 362 79
Originations of loans held for sale (1,305) (2,272)
Proceeds from loan sales 0 2,755
Gain on sale of loans 0 (203)
Net realized gain on available for sale securities 0 (117)
Net accretion on securities (68) (50)
(Decrease) increase in deferred loan fees (39) 59
Decrease in accrued income and other assets 33 153
Decrease in accrued expenses and other liabilities (111) (130)
Income tax refunds received 0 12
Gain on sale of other real estate owned (84) 0
Gain on sale of assets and transfer of liabilities (1,000) 0
Fixed assets charged off on closing of offices 104 0
Net cash (used) provided by operating activities (1,043) 533
CASH FLOWS FROM INVESTING ACTIVITIES:
Net decrease in deposits with other banks 223 302
Increase in federal funds sold (3,200) (2,555)
Purchases of available for sale securities (6,576) (18,082)
Proceeds from sales of available for sale securities 709 5,725
Proceeds from maturities of available for sale securities 9,950 6,000
Proceeds from prepayments of principal on securities 18 543
Net increase in loans (6,205) (2,774)
Net purchases of premises and equipment (47) (82)
Proceeds from sale of other real estate owned 1,638 0
Cash transferred on sale of assets and transfer of
liabilities (1,346) 0
Consideration paid on sale of assets and transfer of
liabilities (752) 0
Net cash used in investing activities (5,588) (10,923)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in total deposits 6,521 10,384
Net increase (decrease) in securities sold under
agreements to repurchase 423 (38)
Net proceeds from sale of issuance of common stock 37 30
Net cash provided by financing activities 6,981 10,376
Net increase (decrease) in cash and due from banks 350 (14)
Cash and due from banks at beginning of period 7,005 7,299
Cash and due from banks at end of period $ 7,355 $ 7,285
SUPPLEMENTAL DISCLOSURES:
Interest paid $ 1,477 $ 1,102
Income taxes paid -- --
Loans transferred to other real estate owned 0 95
Loans transferred to loans held for sale 0 1,488
</TABLE>
See accompanying notes to consolidated financial statements
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SUBURBAN BANCSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
The accompanying unaudited consolidated financial statements, which
include the accounts of Suburban Bancshares, Inc. (Bancshares or the Company)
and its wholly-owned subsidiaries, Suburban Bank of Virginia, N.A., a National
Bank in Liquidation (Suburban Virginia) and Suburban Bank of Maryland (Suburban
Maryland), have been prepared in accordance with the instructions to Form 10-Q
and do not include all of the disclosures required by generally accepted
accounting principles. All adjustments which, in the opinion of management,
are necessary to a fair presentation of the results for the interim periods
presented have been made; all of these adjustments are of a normal and
recurring nature. The results of operations for the six months ended June 30,
1995, are not necessarily indicative of results that may be expected for the
entire year ending December 31, 1995.
NOTE A - ACCOUNTING POLICIES AND OTHER DATA
Reference should be made to the Notes to Consolidated Financial
Statements included in the Company's Annual Report to Shareholders for the year
ended December 31, 1994, which contain the Company's accounting policies and
other data.
NOTE B - INVESTMENT SECURITIES
On January 1, 1994, the Company adopted Statement of Financial
Accounting Standards (SFAS) No. 115, "Accounting for Certain Investments in
Debt and Equity Securities". Under SFAS No. 115, the Company is required to
classify its debt and marketable equity securities in one of three categories:
trading, available for sale, or held to maturity. At the time of purchase,
management determines the appropriate designation for securities.
The following table shows the amortized cost and estimated fair value
of investment securities classified as available for sale at June 30, 1995 (in
thousands):
<TABLE>
<CAPTION> Gross Gross
Amortized Unrealized Unrealized Estimated
Cost Gains Losses Fair Value
<S> <C> <C> <C> <C>
U.S. Treasury Notes $ 8,075 $ 28 $ (18) $ 8,085
Federal Agencies 4,526 25 (9) 4,542
Mortgage-backed obligations
of federal agencies 361 4 (2) 363
Collateralized mortgage
obligations 48 1 --- 49
Other 1,000 --- (21) 979
Total investment securities $14,010 $ 58 $ (50) $14,018
</TABLE>
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The amortized cost and estimated fair value of securities in the held
to maturity classification at June 30, 1995 are shown in the schedule which
follows (in thousands):
<TABLE>
<CAPTION>
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
<S> <C> <C> <C> <C>
U.S. Treasury Notes $ 2,896 $ 56 $ --- $ 2,952
Federal Agencies 1,950 51 --- 2,001
Total investment securities
Held to Maturity $ 4,846 107 $ --- $ 4,953
</TABLE>
The schedule below shows the amortized cost and estimated fair value
of investment securities classified as available for sale at December 31, 1994
(in thousands):
<TABLE>
<CAPTION>
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
<S> <C> <C> <C> <C>
U.S. Treasury Notes $12,080 --- (253) $11,827
Federal Agencies 5,913 --- (134) 5,779
Mortgage-backed obligations
of federal agencies 375 1 (10) 366
Collateralized mortgage
obligations 52 1 --- 53
Other 1,304 --- (77) 1,227
Total securities available
for sale $19,724 2 (474) $19,252
</TABLE>
The amortized cost and estimated fair value of securities in the held
to maturity classification at December 31, 1994 is shown in the schedule which
follows (in thousands):
<TABLE>
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized Estimated
Cost Gains Losses Fair Value
<S> <C> <C> <C> <C>
U.S. Treasury Notes $ 2,878 $ --- $ (96) $ 2,782
Federal Agencies 1,943 --- (71) 1,872
Total investment securities
Held to Maturity $ 4,821 --- $ (167) $ 4,654
</TABLE>
The amortized cost and estimated fair value for securities at June 30,
1995, by contractual maturity are shown in the following tables. Expected
maturities may differ from contractual maturities because borrowers may have
the right to call or prepay certain obligations with or without call premiums
or prepayment penalties.
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Investment Securities Available for Sale:
<TABLE>
<CAPTION>
Estimated Fair
In thousands Amortized Cost Value
<S> <C> <C>
Due in one year or less $ 4,491 $ 4,488
Due after one year through 5 years 9,110 9,118
Due after 5 years through 10 years -- --
Due after 10 years 48 49
Mortgage-backed securities 361 363
No set maturity -- --
Total $14,010 $14,018
</TABLE>
Investment Securities Held to Maturity:
<TABLE>
<CAPTION>
Estimated
In thousands Amortized Cost Fair Value
<S> <C> <C>
Due after one year through 5 years $ 4,846 $ 4,953
Total $ 4,846 $ 4,953
</TABLE>
Proceeds from the sale of available-for-sale securities in the six
months ended June 30, 1994, were $5,725,000 which included gross gains of
$121,000 and gross losses of $4,000. In the first six months of 1995, proceeds
from sales of available for sale securities were $709,000, including gross
gains of $3,000 and gross losses of $3,000. The net unrealized holding gain on
available for sale securities, which is shown as a separate component of
shareholders' equity in the accompanying Consolidated Balance Sheets, was
$8,000 at June 30, 1995; at December 31, 1994, the net unrealized holding loss
was $472,000.
NOTE C - ALLOWANCE FOR LOAN LOSSES
Activity in the allowance for loan losses is summarized as follows (in
thousands):
<TABLE>
<CAPTION>
Six Months Ended
June 30, 1995
------------------
<S> <C>
Balance at beginning of period $ 2,750
Provision for loan losses 35
Loans charged-off (725)
Recoveries 169
------------------
Balance at end of period $ 2,229
==================
</TABLE>
NOTE D - NONPERFORMING ASSETS
Nonperforming assets consist of loans on which interest is no longer
accrued, real estate acquired through foreclosure and real estate
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on which deeds in lieu of foreclosure have been accepted. Restructured loans
are loans on which the borrower has been granted a concession as to rate or
term as a result of financial difficulty.
Generally, the accrual of interest on a loan is discontinued when the
full collection of principal or interest is in doubt, or when the payment of
principal or interest has become contractually 90 days past due, unless the
obligation is both well secured and in the process of collection. Loans may be
placed on nonaccrual status when past due less than 90 days if collection
becomes uncertain based upon an evaluation of the fair value of the collateral
and the financial strength of the borrower. When a loan is placed on
nonaccrual status, interest income in the current period is reduced by the
amount of any accrued and uncollected interest. Subsequent payments are
applied as a reduction of principal when concern exists as to the ultimate
collection of principal, otherwise such payments are recognized as interest
income. Loans are removed from nonaccrual status when they have demonstrated a
period of performance and when concern no longer exists as to the
collectibility of principal or interest.
Other real estate owned has been written down to fair value less
estimated selling costs, based upon current market conditions and expected cash
flows.
The Company has no obligations to make further extensions of credit
under loans classified as troubled debt restructurings or nonaccrual at June
30, 1995 or December 31, 1994. Nonaccrual and restructured loans are
classified as loans in the accompanying Consolidated Balance Sheets.
The table below shows nonperforming assets and troubled debt
restructurings (in thousands):
<TABLE>
<CAPTION>
June 30, December 31,
1995 1994
----------------------------------------------------------------------------------------------
<S> <C> <C>
Nonaccrual loans $ 2,854 $ 3,720
Other real estate owned 1,463 3,018
----------------------------------------------------------------------------------------------
Total nonperforming assets $ 4,317 $ 6,738
==============================================================================================
Loans classified as nonaccrual but $ 863 $ 2,083
contractually current
----------------------------------------------------------------------------------------------
Restructured loans classified as
nonaccrual 88 713
Restructured loans accruing 1,192 1,312
----------------------------------------------------------------------------------------------
Total restructured loans $ 1,280 $ 2,025
==============================================================================================
</TABLE>
There were no loans past due 90 days or more and still accruing at June 30,
1995 or December 31, 1994.
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The following schedule presents a breakdown, by type of property, of
other real estate owned (in thousands):
<TABLE>
<CAPTION>
June 30, 1995 December 31, 1994
------------------- ----------------------
<S> <C> <C>
Commercial land $ 546 $ 671
Residential land 254 1,416
Commercial property 630 1,098
Residential property,
1-4 family 193 581
------------------- ----------------------
Total 1,623 3,766
Allowance for losses (160) (748)
------------------- ----------------------
TOTAL FAIR VALUE $1,463 $3,018
=================== ======================
</TABLE>
Activity in the allowance for losses on other real estate owned for
the six months ended June 30, 1995 is as follows (in thousands):
<TABLE>
<S> <C>
Beginning balance 748
Provision for OREO losses 0
Dispositions, net (588)
Charge-offs net of recoveries 0
-----
Ending balance 160
</TABLE>
NOTE E - REGULATORY MATTERS
In March, 1994, the Federal Deposit Insurance Corporation ("FDIC") and
the Bank Commissioner of the State of Maryland eliminated an Understanding
which had been in effect since 1991 with Suburban Bank of Maryland. The Bank
was subsequently reclassified as a "well capitalized" financial institution in
accordance with the provisions of the Federal Deposit Insurance Corporation
Improvement Act of 1991 ("FDICIA").
On February 6, 1991, Suburban Virginia consented to the issuance of an
order ("Order") from the Comptroller of the Currency. The Order pertains to
management and board supervision, planning measures, lending policies and
procedures, and additional systems and controls. The Order also requires
Suburban Virginia to maintain the following prescribed capital levels: total
capital at least equal to 9.25% of risk-weighted assets and Tier 1 capital at
least equal to 5% of total average assets.
Under the guidelines of FDICIA, a financial institution is considered
"well capitalized" if it has a total risk-based capital ratio of at least 10%,
a Tier 1 risk-based capital ratio of at least 6%, and
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a leverage ratio of 5% or greater, and it is not subject to any written
agreement, order or directive issued by the FDIC. To be considered "adequately
capitalized" an institution must generally have a leverage ratio of at least
4%, a Tier 1 risk-based capital ratio of at least 4%, and a total risk-based
capital ratio of at least 8%.
At June 30, 1995, the Banks' capital ratios exceeded the capital
ratios prescribed by their respective regulatory agencies as shown in the chart
below. In accordance with the provisions of FDICIA, Suburban Virginia is
considered to be adequately capitalized, and Suburban Maryland is classified as
well capitalized.
<TABLE>
<CAPTION>
Suburban Suburban
Maryland Virginia
------------ ------------
<S> <C> <C>
Tier 1/Average Assets 6.44% 20.88%
Tier 1/Risk-weighted Assets 9.32% 96.28%
Total Capital/Risk-Weighted Assets 10.58% 98.05%
</TABLE>
NOTE F - SALE OF ASSETS
On May 12, 1995, Suburban Bancshares, Inc. completed the disposition
of most of the assets and all of the liabilities of its subsidiary, Suburban
Bank of Virginia, N.A. ("Suburban Virginia") to Tysons Financial Corporation
and its subsidiary, Tysons National Bank ("Tysons") in McLean, Virginia.
Assets transferred to Tysons included all cash and cash equivalents,
investments, loans (excluding nonperforming and other loans totalling $3.1
million) and interest receivable associated with those loans, and fixed assets
in one of Suburban Virginia's two branches. Liabilities assumed by Tysons
included all deposit accounts, securities sold under agreements to repurchase,
and interest payable associated with those liabilities.
At closing, Suburban paid Tysons $752,000 in cash, representing (1)
the amount by which the liabilities transferred exceeded the assets
transferred, less (2) the $1 million premium Tysons had agreed to pay Suburban
for the assets acquired.
NOTE G - OTHER EVENTS
Suburban Bancshares, Inc. ("Suburban") and Financial Institutions
Holding Corporation ("FIHC") have announced their agreement for Suburban to
purchase from Irving L. Kidwell, Chairman of FIHC, 24.33% of Financial
Institutions Holding Corporation for $2.26 million to be paid in cash and a
promissory note. The agreement is subject to regulatory approval and other
conditions of closing. Suburban and FIHC plan to discuss acquisition of the
remaining shares of FIHC through an exchange
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of stock based on book values of the two companies. Financial Institutions
Holding Corporation is the parent company of the Bank of Bowie, a small
business community bank in Bowie, Maryland with $37 million in total assets.
NOTE H - SUBSEQUENT EVENTS
The Federal Deposit Insurance Corporation ("FDIC") notified Suburban
on August 3, 1995, that they have approved the application of Suburban Maryland
to merge the remaining assets and liabilities of Suburban Virginia into the
Maryland bank. The merger is expected to be completed by August 18, 1995.
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<PAGE> 14
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following commentary provides an overview of the financial
condition, significant changes in the financial condition, and the results of
operations of Suburban Bancshares, Inc. and its subsidiaries ("Bancshares" or
the "Company") for the six months ended June 30, 1995 and 1994. Throughout
this review, the two subsidiaries of Suburban Bancshares, Inc., Suburban Bank
of Maryland ("Suburban Maryland") and Suburban Bank of Virginia, N.A., a
National Bank in Liquidation ("Suburban Virginia"), are collectively referred
to as the "Banks". This discussion should assist readers in their analysis of
the consolidated financial statements and supplemental financial information
which appear elsewhere in this report.
OVERVIEW
Suburban Bancshares, Inc. reported total assets of $102.7 million at
June 30, 1995, an $11.5 million, or 10.1%, decrease from $114.2 million at
December 31, 1994. The decline was the net result of the sale of most of
Suburban Virginia's assets, a decrease of $24 million from December 31, 1994
and growth in Suburban Maryland of $13.3 million or 15.6%. Loans decreased
from $66.6 million at December 31, 1994 to $60.6 million at June 30, 1995, a
$6.0 million, or 9.0%, decline also attributable to the sale of Suburban
Virginia's loans offset by growth of $8.1 million, or 16.2%, in Suburban
Maryland.
Average assets rose to $104.2 million for the first six months of
1995, a $2.4 million, or 2.4%, increase from average assets of $101.8 million
in the first six months of 1994. Average loans rose to $65.6 million in the
first half of 1995, $7.1 million or 12.2% above the $58.5 million in average
loans in the first half of 1994.
The Company reported a profit of $939,000 for the six months ending
June 30, 1995, a marked improvement over the $2,000 reported in the same period
of 1994. Earnings in the second quarter of 1995 were $771,000, also a
significant increase over earnings of $64,000 recorded in the same period in
1994. The sale of assets and the assumption of liabilities of the Virginia
subsidiary in May 1995 resulted in a premium, net of associated costs, of
$740,000. This one-time gain was partially offset by a charge of $327,000 to
recognize the remainder of compensation expense for options which became
exercisable during the period. Increasing loan volume and improving loan
quality resulted in significantly higher net interest income, a primary
contributor to the profit improvement.
SALE OF ASSETS
On May 12, 1995, Suburban Bancshares, Inc. completed the disposition
of most of the assets and all of the liabilities of its subsidiary, Suburban
Bank of Virginia, N.A. ("Suburban Virginia") to Tysons Financial Corporation
and its subsidiary, Tysons National Bank
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<PAGE> 15
("Tysons") in McLean, Virginia.
Assets transferred to Tysons included all cash and cash equivalents,
investments, loans (excluding nonperforming and other loans totalling $3.1
million) and interest receivable associated with those loans, and fixed assets
in one of Suburban Virginia's two branches. Liabilities assumed by Tysons
included all deposit accounts, securities sold under agreements to repurchase
and interest payable associated with those liabilities.
At closing, Suburban paid Tysons $752,000 in cash, representing (1)
the amount by which the liabilities transferred exceeded the assets
transferred, less (2) the $1 million premium Tysons had agreed to pay Suburban
for the assets acquired.
NET INTEREST INCOME AND NET INTEREST MARGIN
Net interest income is defined as the difference between income on
assets and the cost of funds supporting those assets. Earning assets are
composed primarily of loans and investments while deposits and short-term
borrowings, in the form of securities sold under repurchase agreements,
represent interest-bearing liabilities. Noninterest bearing checking deposits
are another component of funding sources. Variations in the volume and mix of
these assets and liabilities, as well as changes in the yields earned and rates
paid, are determinants in changes in net interest income.
Net interest income increased $596,000 or 28.3%, to $2,702,000 in the
first six months of 1995 from $2,106,000 in the same period of 1994. This
increase was the result of higher volume, higher rates and changes in the
composition of earning assets and funding sources.
The net interest margin represents the Company's net yield on its
earning assets and is calculated as net interest income divided by average
earning assets. In the first six months of 1995, the net interest margin was
5.69%, rising 104 basis points from 4.65% in the same period of 1994, a result
of the change in the mix of earning assets and higher rates.
Changes in the volume of earning assets and interest bearing funds
impact both interest income and interest expense. In the first half of 1995,
growth of earning assets was a primary factor in producing higher interest
income; an increase in funding sources, however, did not result in an
equivalent increase in interest expense. Average earning assets rose $4.4
million, or 4.9%, from $91.3 million in 1994 to $95.7 million in 1995; as a
percent of average total assets, earning assets increased to 91.8% in the first
half of 1995, from 89.6% in 1994. Average interest bearing liabilities, on the
other hand, increased only $1.4 million, or 2.0%, reaching $74.3 million in the
first six months of 1995 from $72.9 million in the same period of 1994.
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<PAGE> 16
Changes in the mix of earning assets were key determinants of the
change in net interest income in the first six of 1995 as compared to the same
period in 1994. The mix of funding sources remained fairly stable. During
1995, average loans were 68.5% of average earning assets, rising 4.5 percentage
points from 64.0% in 1994; average investment securities and Federal funds sold
fell correspondingly, to 31.5% of average earning assets in the first six
months of 1995 from 36.0% in 1994. This increased volume of loans, which earn
higher yields than bank investments, resulted in substantially higher interest
income.
Shifts in the interest rate environment impacted the margin
significantly. In 1994, interest rates rose throughout the year and continued
into early 1995, as the Federal Reserve attempted to keep inflation under
control. Loan yields rose 141 basis points on average, from 8.67% in the first
six months of 1994 to 10.08% in 1995, as national prime rates, on which most
loans are priced, increased significantly. The yield produced by Federal funds
sold and deposits with other banks rose 233 basis points, from 3.59% in the
first half of 1994 to 5.92% in 1995. As the yields on earning assets rose, the
cost of funds followed, though at a slower pace, creating a wider spread
between the income earned on assets and the cost to fund those assets. The net
interest spread (the difference between the earning asset yield and the cost of
funds) rose to 5.65% in the first half of 1995 from 4.69% in the same period of
1994.
Net interest income rose $212,000 or 18.8%, from $1,128,000 in the
quarter ending June 30, 1994 to $1,340,000 in the same period of 1995. This
improvement is the result of higher market interest rates and a higher
percentage of average earning assets in loans, which earn higher yields than
other earning assets.
16
<PAGE> 17
DISTRIBUTION OF ASSETS, LIABILITIES AND SHAREHOLDERS' EQUITY
AVERAGE BALANCES AND NET INTEREST EARNING ANALYSIS
(In thousands)
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30, 1995 1994
ASSETS AVERAGE AVERAGE
AVERAGE YIELD AVERAGE YIELD
BALANCE INTEREST OR RATE BALANCE INTEREST OR RATE
--------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
INTEREST-EARNING ASSETS:
LOANS $ 65,589 $3,279 10.08% $ 58,451 $2,514 8.67%
INVESTMENT SECURITIES 22,149 665 6.05% 14,455 367 5.13%
FED FUNDS SOLD & OTHER DEPOSITS 7,969 234 5.92% 18,357 327 3.59%
TOTAL INTEREST EARNING ASSETS 95,707 4,178 8.80% 91,263 3,208 7.09%
NON-INTEREST EARNING ASSETS:
CASH AND DUE FROM BANKS 5,998 6,713
BANK PROPERTY AND EQUIPMENT 1,082 1,236
OTHER ASSETS 3,845 5,189
LESS: ALLOWANCE FOR LOAN LOSSES (2,422) (2,585)
TOTAL NON-INTEREST EARNING ASSETS 8,503 10,553
TOTAL ASSETS $104,210 $101,816
--------------------------------------------------------------------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
INTEREST-BEARING LIABILITIES:
CHECKING, MONEY MARKET & SAVINGS 49,553 832 3.39% $ 49,058 $ 601 2.47%
TIME DEPOSITS 24,264 632 5.25% 23,194 492 4.28%
OTHER BORROWINGS 526 12 4.83% 645 9 2.97%
TOTAL INTEREST-BEARING LIABILITIES 74,343 1,476 4.00% 72,897 1,102 3.05%
NON-INTEREST BEARING LIABILITIES:
NON-INTEREST BEARING DEPOSITS 19,993 19,809
TOTAL FUNDING SOURCES 94,336 1,476 3.16% 92,706 1,102 2.40%
OTHER LIABILITIES 593 760
TOTAL LIABILITIES 94,929 93,466
SHAREHOLDERS' EQUITY 9,281 8,350
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY $104,210 $101,816
--------------------------------------------------------------------------------------------------------------------------------
NET INTEREST INCOME $2,702 $2,106
NET INTEREST SPREAD 5.65% 4.69%
NET INTEREST INCOME AS A % OF
AVERAGE EARNING ASSETS 5.69% 4.65%
</TABLE>
17
<PAGE> 18
PROVISION FOR LOAN LOSSES
The provision for loan losses is the annual cost of maintaining an
allowance or reserve for anticipated future losses on loans. The allowance for
loan losses reflects management's judgment as to the level considered
appropriate to absorb such losses and is based upon a review of many factors,
including historical loss experience, economic conditions and trends, loan
portfolio volume and mix, loan performance trends, the value and adequacy of
collateral, and the Company's internal credit review process. Based on this
ongoing evaluation, management determines the provision expense necessary to
maintain an appropriate allowance.
The provision for loan losses for the first six months of 1995 was
$35,000, a decrease from the provision of $130,000 set aside for the same
period of 1994. The lower provision is the result of an improved general
economy and steadily improving loan quality. Nonaccruing loans fell $764,000,
or 21.1%, to $2.8 million at June 30, 1995 from $3.6 million at June 30, 1994.
As the quality of the loan portfolio improved, the reserve requirement abated
and, therefore, the addition to the reserves through the provision was reduced.
NONINTEREST INCOME
Noninterest income increased $805,000, or 134.4%, in the first six
months of 1995 to $1,404,000 from $599,000 in the same period of 1994. A
significant portion of the increase is the $1,000,000 premium paid for the
Virginia assets and a net gain on the sale of other real estate owned of
$84,000 during the first half of 1995. In the same period of 1994, gains of
$117,000 and $106,000, respectively, were realized from the sale of available
for sale securities and from the sale of loans in the secondary market, neither
of which recurred in 1995. Fee income declined $31,000 as the earnings credit
for deposit accounts increased, offsetting a larger amount of service charges.
In the second quarter, noninterest income rose $945,000 from $293,000
in 1994 to $1,238,000 in 1995, also the result of the premium recognized on the
sale of Suburban Virginia assets.
NONINTEREST EXPENSES
Noninterest expenses increased in the first six months of 1995 as
compared to the same period of 1994, from $2,573,000 to $3,132,000, an increase
of $559,000 or 21.7%. Salaries and benefits increased $386,000 or 33.2%, the
result of merit increases in 1995 and a $327,000 charge to compensation expense
as stock options became exercisable in the second quarter. Other expenses rose
$184,000, or 18.8%, when comparing the first six months of 1995 to 1994,
primarily due to the costs associated with the sale f the Virginia bank's
assets and the closing of the McLean, Virginia office.
18
<PAGE> 19
Noninterest expenses were $490,000, or 36.9%, higher in the second
quarter of 1995 compared to the same period in 1994, also the result of the
stock option compensation expense and the costs associated with the sale of
Suburban Virginia assets.
ASSET QUALITY
NONPERFORMING ASSETS
Nonperforming assets are loans on nonaccrual status and real estate
acquired through foreclosure or deed in lieu of foreclosure. Troubled debt
restructurings are loans which contain concessions as to rate or term, or both.
At June 30, 1995, nonperforming assets were $4.3 million, a
substantial decrease of $2.4 million or 35.9%, from $6.7 million at December
31, 1994. Nonaccrual loans were $2.8 million and $3.7 million at June 30, 1995
and December 31, 1994, respectively. Of the amount on nonaccrual status on
those dates, approximately $863,000 and $2.1 million, respectively, were not
contractually past due as to principal or interest. Other real estate owned
decreased $1,555,000, or 51.5%, from sales of properties in the first six
months of 1995 to $1,463,000 from $3,018,000 at December 31, 1994.
Troubled debt restructurings were $1.3 million at June 30, 1995, and
$2.0 million at December 31, 1994, a decrease of approximately $745,000, or
36.8%, the result of principal paydowns.
ALLOWANCE FOR LOAN LOSSES
The allowance for loan losses is maintained at a level that management
believes is adequate to absorb the losses on existing loans, based upon their
evaluation of many factors, including actual credit losses during the period,
loan performance measures and trends, volume and mix of loans within the
portfolio, and other internal and external factors which may affect the quality
and loss experience within the portfolio.
The allowance at June 30, 1995 was $2,229,000, a decrease of $521,000
from $2,750,000 at December 31, 1994. Activity in the allowance for loan
losses for the first six months of 1995 included a provision of $35,000,
charge-offs of $725,000 and recoveries of $169,000. As a percentage of total
loans, the allowance was 3.7% and 4.1% at June 30, 1995 and December 31, 1994,
respectively.
Based on current expectations relative to loan portfolio performance
and loss projections, management believes that the level of the allowance for
loan losses is adequate. Internal loan review procedures will continue to be
utilized by the Company in order to insure that potential problem loans are
identified early, thereby lessening any negative impact on the allowance and/or
earnings, and the
19
<PAGE> 20
special assets group will continue to focus on further reductions of
nonperforming assets.
LIQUIDITY MANAGEMENT
Liquidity is the ability to generate and maintain sufficient cash
flows to fund operations and to meet financial obligations to depositors and
borrowers promptly and in a cost-effective manner. Asset liquidity is provided
primarily by maturing loans and investments and by cash received from
operations. Other sources of asset liquidity include readily marketable assets
that can serve as collateral for borrowings, and sales of loans and other real
estate owned. On the liability side of the balance sheet, liquidity is
affected by the timing of maturing liabilities and the ability to generate new
deposits or borrowings as needed.
In the first half of 1995, the Company's liquidity position changed
somewhat as loan volume increased and marketable securities declined. As a
percentage of total average earning assets, loans were 68.5% for the first six
months of 1995 and 64.0% in the same period of 1994, while marketable
securities and overnight investments were 31.5% and 36.0%, respectively. This
shift in the mix of earning assets to a lower percentage of readily marketable
assets has reduced the Company's overall liquidity slightly on average.
A typically stable source of liquidity is the core deposit base. Core
deposits are normally noninterest checking accounts, interest checking and
money market accounts, and savings accounts. The stability of these core
deposits is reflected in the ratio of these deposits to total funding sources,
which averaged 73.7% in the first half of 1995 and 74.3% in 1994. Time
deposits under $100,000, which are also considered to be stable funding
sources, were 22.5% of funding sources in the first half of 1995 and 20.7% in
1994. Additional funding is generated from short-term borrowings (securities
sold under repurchase agreements) and large CDs. These funds, which are
considered to be volatile or rate sensitive, even though they are provided by
local customers, have decreased as a percentage of average total funding
sources from 5.0% in the first two quarters of 1994 to 3.8% in 1995.
Other sources of liquidity and cash flow in the first six months of
1994 were from the sales of available for sale securities which generated
proceeds of $5.7 million and the sales of SBA loans in the secondary market,
generating cash inflow of $2.8 million. The proceeds from these sales were
reinvested in similar liquid instruments. In the first half of 1995, no loans
were sold in the secondary market and securities sold generated only $709,000;
however, sales of properties obtained through foreclosure generated cash of
$1.6 million during the period.
Further, $11 million of reverse repurchase lines of credit are
currently maintained by the Banks as an additional source of short-term
liquidity. All of the Banks' correspondents meet regulatory capital
20
<PAGE> 21
requirements for adequately or well capitalized financial institutions, thereby
minimizing the risk that might be associated with this level of interbank
exposure. The Banks have not needed to utilize these backup lines as
internally generated liquidity has provided sufficient resources.
CAPITAL RESOURCES AND ADEQUACY
Shareholders' equity increased $1,819,000, or 21.2%, from $8,587,000
at December 31, 1994 to $10,406,000 at June 30, 1995. The increase was a
combination of earnings of $939,000 for the six months, improvement in the
estimated fair value of the available for sale securities of $480,000,
increases in paid-in capital from the stock options, and the exercise of 37,000
warrants.
One measure of capital adequacy is the ratio of regulatory capital to
risk-adjusted assets. Total capital is composed of both core capital (Tier 1)
and supplemental capital (Tier 2). The Banks' Tier 1 capital consists of
common equity and Tier 2, of a qualifying portion of the allowance for loan
losses. Assets, both on- and off- balance sheet items, are weighted according
to the underlying risk associated with the item and are assigned a risk
weighting ranging from 0 to 100%. Banks are expected to meet a minimum ratio
of total qualifying capital to risk-weighted assets of 8%, with at least half
of that percentage (4%) in the form of core capital. This minimum capital
requirement applies to each of the Company's bank subsidiaries and will apply
to Bancshares at such time as its total assets reach $150 million. At June 30,
1995, Suburban Maryland reported at Tier 1 risk-based capital ratio of 9.32%
and a ratio of 10.58% based on total capital. Suburban Virginia's risk-based
ratios at June 30, 1995, were 96.28% for Tier 1 capital and 98.05% for total
capital. Both Banks' ratios were well above the regulatory minimums of 4% and
8%, respectively, and above the higher regulatory minimum required of Suburban
Virginia (see Note E).
Other capital adequacy measures are the leverage capital ratio and the
tangible equity ratio. These ratios are calculated by dividing average total
assets for the most recent quarter into core capital (Tier 1) for the leverage
ratio or into tangible capital (core capital less goodwill) for the tangible
equity ratio. The Banks' core capital and tangible capital are the same. The
regulatory minimum for these ratios is 3%, with most banks required to maintain
a ratio of at least 4% to 5%, depending upon risk profiles and other factors.
At June 30, 1995, the Tier 1 and tangible capital ratios for Suburban Maryland
were 6.44% and for Suburban Virginia, 20.88%. Both Banks exceeded the
regulatory minimum and also the higher minimum ratio required by the Suburban
Virginia's regulatory agreement (see Note E to the Consolidated Financial
Statements).
A combination of the leverage ratio and the risk-based capital ratio
is used to categorize banks as well-capitalized, adequately-capitalized, or
under-capitalized financial institutions under the
21
<PAGE> 22
guidelines of FDICIA. A financial institution is considered "well capitalized"
if it has a total risk-based capital ratio of at least 10%, a Tier 1 risk-based
capital ratio of at least 6%, and a leverage ratio of 5% or greater, and it is
not subject to any written agreement, order or directive. To be considered
"adequately capitalized", an institution must generally have a leverage ratio
of at least 4% and a total risk-based capital ratio of at least 8%. At June
30, 1995, Suburban Virginia was considered to be in the "adequately
capitalized" category and, Suburban Maryland was in the "well capitalized"
category.
Transferrable warrants to purchase 2,014,705 shares of common stock at
$1.00 per share were issued in conjunction with the stock offering in 1993.
These warrants were exercisable during two windows in 1994 and one window in
the second quarter of 1995, in which 90,294 shares were issued. The remaining
warrants expire on December 15, 1995 and may be exercised from November 15 to
December 15 in 1995.
OTHER EVENTS
Suburban Bancshares, Inc. ("Suburban") and Financial Institutions
Holding Corporation ("FIHC") have announced their agreement for Suburban to
purchase from Irving L. Kidwell, Chairman of FIHC, 24.33% of Financial
Institutions Holding Corporation for $2.26 million to be paid in cash and a
promissory note. The agreement is subject to regulatory approval and other
conditions of closing. Suburban and FIHC plan to discuss acquisition of the
remaining shares of FIHC through an exchange of stock based on book values of
the two companies.
Financial Institutions Holding Corporation is the parent company of
the Bank of Bowie, a small business community bank in Bowie, Maryland with $37
million in total assets.
SUBSEQUENT EVENTS
The Federal Deposit Insurance Corporation ("FDIC") notified Suburban
on August 3, 1995, that they have approved the application of Suburban Maryland
to merge the remaining assets and liabilities of Suburban Virginia into the
Maryland bank. The merger is expected to be completed by August 18, 1995.
22
<PAGE> 23
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) The following documents are filed as part of this report.
<TABLE>
<CAPTION>
Exhibit # Description
--------- -----------
<S> <C>
11.0 Computation of per share earnings
27.0 Financial Data Schedule
</TABLE>
(b) Two reports on Form 8K were filed in the quarter ended
June 30, 1995:
(1) A Current Report on Form 8K was filed on May 25, 1995
relating to the completion of the disposition of most
of the assets and all of the liabilities of Suburban
Bank of Virginia, N.A.
(2) A Current Report on Form 8K was filed on June 7,
1995, relating to an announcement of an agreement for
Suburban to purchase 24.33% of the shares of
Financial Institutions Holding Corporation.
23
<PAGE> 24
PART II. OTHER INFORMATION (continued)
SIGNATURES
Pursuant to the requirement 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.
SUBURBAN BANCSHARES, INC.
(Registrant)
Date: August 7, 1995 William R. Johnson
---------------- ------------------------------
William R. Johnson
President and
Chief Operating Officer
Date: August 7, 1995 Sibyl S. Malatras
---------------- ------------------------------
Sibyl S. Malatras
Senior Vice President and Treasurer
(Principal Financial Officer)
24
<PAGE> 1
Exhibit 11.0
Computation of per share earnings (loss)
<PAGE> 2
SUBURBAN BANCSHARES, INC.
EARNINGS PER SHARE CALCULATION EXHIBIT 11
JUNE 30, 1995 Page 1
STOCK PRICES - Closing Bid
<TABLE>
<CAPTION>
Daily End of
Average Quarter
<S> <C> <C>
First quarter 1995 1.34 1.25
Second quarter 1995 1.43 1.63
For Warrants exercised:
April 1 thru May 17, 1995 1.32 1.44
</TABLE>
20% TEST
<TABLE>
<CAPTION>
# of Shares (1) 20%
<S> <C> <C>
First quarter 1995 9,054,459 1,810,892
Second quarter 1995 9,091,663 1,818,333
</TABLE>
(1) Outstanding at end of period
EQUIVALENT SHARES - Description
(A) WARRANTS - 2,014,705 outstanding at January 1, 1994
exercisable at $1.00 per share April 15 - May 15
and November 15 - Dec 15 in 1994 and 1995
- 28,105 exercised and issued 5/20/94
- 1,400 exercised and issued 6/20/94
- 23,585 exercised and issued 12/15/94
- 37,204 exercised and issued 5/17/95
(B) OPTIONS - 350,000 exercisable at $0.10 per share when Company
attains a net income of $500,000 (i.e.
contingent shares, the conditions of which
are currently being met)
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING
First quarter 1995: 9,054,459 for 90 days = 9,054,459
Second quarter 1995: 9,054,459 for 46 days = 4,576,979
9,091,663 for 45 days = 4,495,877
---------
9,072,857
Weighted average common shares outstanding year-to-date 9,063,709
<PAGE> 3
SUBURBAN BANCSHARES, INC. EXHIBIT 11
EARNINGS PER SHARE CALCULATION PAGE 2
JUNE 30, 1995
INCREMENTAL SHARE CALCULATIONS
WEIGHTED AVERAGE WARRANTS (w) AND OPTIONS (o) OUTSTANDING:
First Qtr 1995: 1,961,615 (w) for 90 days = 1,961,615
350,000 (o) for 90 days = 350,000
Second Qtr 1995: 1,961,615 (w) for 46 days = 991,586
issued 5/17 1,924,411 (w) for 45 days = 951,632
350,000 (o) for 91 days = 350,000
INCREMENTAL SHARES (2)
<TABLE>
<S> <C> <C>
First Qtr 1995:
Common and equivalent shares (primary)
Unexercised warrants thru period 497,723
497,723
Fully diluted
Unexercised warrants thru period 392,323
392,323
Second Qtr 1995:
Common and equivalent shares (primary)
Unexercised warrants thru period 298,169
Warrants exercised 5/17 230,699
528,868
Fully diluted
Unexercised thru period 383,251
Exercised 5/17 290,776
674,027
</TABLE>
-------------------------------
<TABLE>
<S> <C> <C>
(2) Calculation of incremental shares: (a) average market price
primary = ((a-b)/a)*d (b) exercise price
fully diluted = ((c-b)/c)*d (c) market price at end of period
(d) weighted average common stock equivalent shares
</TABLE>
<PAGE> 4
SUBURBAN BANCSHARES, INC.
EARNINGS PER SHARE CALCULATION EXHIBIT 11
JUNE 30, 1995 Page 3
EARNINGS PER SHARE CALCULATION
<TABLE>
<CAPTION>
1995
COMMON AND EQUIVALENT SHARES (PRIMARY) 2QTR95 YEAR-TO-DATE
<S> <C> <C>
EARNINGS 770,868 938,803
SHARES & EQUIVALENT SHARES
Common Shares 9,072,857 9,063,709
Incremental Shares (warrants) 528,868 513,296
Contingent Shares (options) 350,000 350,000
--------- ---------
TOTAL 9,951,725 9,927,005
EPS 0.077461 0.094571
FULLY DILUTED
EARNINGS 770,868 938,803
SHARES & EQUIVALENT SHARES
Common Shares 9,072,857 9,063,709
Incremental Shares (warrants) 674,027 533,175
Contingent shares (options) 350,000 350,000
--------- ---------
TOTAL 10,096,884 9,946,884
EPS 0.076347 0.094382
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
EXHIBIT 27.0
Financial Data Schedule
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> JUN-30-1995
<CASH> 7,355
<INT-BEARING-DEPOSITS> 22
<FED-FUNDS-SOLD> 14,470
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 0
<INVESTMENTS-CARRYING> 4,846
<INVESTMENTS-MARKET> 14,018
<LOANS> 60,598
<ALLOWANCE> 2,229
<TOTAL-ASSETS> 102,738
<DEPOSITS> 91,923
<SHORT-TERM> 0
<LIABILITIES-OTHER> 409
<LONG-TERM> 0
<COMMON> 91
0
0
<OTHER-SE> 10,315
<TOTAL-LIABILITIES-AND-EQUITY> 102,738
<INTEREST-LOAN> 3,279
<INTEREST-INVEST> 665
<INTEREST-OTHER> 234
<INTEREST-TOTAL> 4,178
<INTEREST-DEPOSIT> 1,464
<INTEREST-EXPENSE> 1,476
<INTEREST-INCOME-NET> 2,702
<LOAN-LOSSES> 35
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 3,132
<INCOME-PRETAX> 939
<INCOME-PRE-EXTRAORDINARY> 939
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 939
<EPS-PRIMARY> 0.09
<EPS-DILUTED> 0.09
<YIELD-ACTUAL> 5.69
<LOANS-NON> 2,854
<LOANS-PAST> 0
<LOANS-TROUBLED> 1,280
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 2,750
<CHARGE-OFFS> 725
<RECOVERIES> 169
<ALLOWANCE-CLOSE> 2,229
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
