<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, 1998
---------------------------------------------------------------
COMMISSION FILE NUMBER 0-16595
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SUBURBAN BANCSHARES, INC.
- --------------------------------------------------------------------------------
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
DELAWARE 54-1319441
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(STATE OR OTHER JURISDICTION (I.R.S. EMPLOYER
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)
(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 3, 1998
- --------------------------- -----------------------------
(CLASS)
10,951,218 SHARES
-----------------------
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SUBURBAN BANCSHARES, INC.
S.E.C. FORM 10-Q
JUNE 30, 1998
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION PAGE NO.
- ------------------------------- --------
<S> <C>
ITEM 1. CONDENSED FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS JUNE 30, 1998 (UNAUDITED)
AND DECEMBER 31, 1997 (AUDITED) 3
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
SIX MONTHS ENDED JUNE 30, 1998 AND JUNE 30, 1997 4
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
THREE MONTHS ENDED JUNE 30, 1998 AND JUNE 30, 1997 5
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
SIX MONTHS ENDED JUNE 30, 1998 AND JUNE 30, 1997 6
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (UNAUDITED)
SIX MONTHS ENDED JUNE 30, 1998 AND JUNE 30, 1997 7
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 8-11
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS 11-18
PART II. OTHER INFORMATION
- ---------------------------
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 19
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 19
</TABLE>
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SUBURBAN BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
June 30, December 31,
(in thousands) 1998 1997
(unaudited) (audited)
ASSETS
<S> <C> <C>
Cash and due from banks $ 14,422 $ 10,759
Federal funds sold 31,732 15,569
Investment securities available for sale 34,785 30,360
Loans 121,777 113,543
Less: Allowance for loan losses (1,514) (1,473)
Loans, net 120,263 112,070
Premises and equipment, net 1,719 1,658
Foreclosed real estate 349 349
Accrued interest receivable 1,249 1,172
Deferred income taxes 2,947 3,299
Other assets 458 430
TOTAL ASSETS $ 207,924 $ 175,666
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Noninterest-bearing deposits $ 31,718 $ 28,856
Interest-bearing deposits 148,155 123,946
Total deposits 179,873 152,802
Securities sold under repurchase agreements 7,511 3,049
Accrued expenses and other liabilities 701 633
Total liabilities 188,085 156,484
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; 10,951,218 shares
issued and outstanding at June 30, 1998 and December 31, 1997 109 109
Paid-in capital - stock options 534 534
Additional paid-in capital 25,259 25,259
Accumulated deficit (6,279) (6,910)
Accumulated other comprehensive income 216 190
Total shareholders' equity 19,839 19,182
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 207,924 $ 175,666
</TABLE>
See accompanying notes to consolidated financial statements
3
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SUBURBAN BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Six months ended June 30,
(in thousands, except per share data) 1998 1997
<S> <C> <C>
INTEREST INCOME
Interest and fees on loans $5,069 $4,056
Taxable interest on securities 1,022 771
Interest on Federal funds sold and deposits with other banks 604 426
Total interest income 6,695 5,253
INTEREST EXPENSE
Interest on deposits 2,849 2,012
Interest on short-term borrowings 85 4
Total interest expense 2,934 2,016
NET INTEREST INCOME 3,761 3,237
Provision for loan losses 195 115
Net interest income after provision for loan losses 3,566 3,122
NONINTEREST INCOME
Service charges on deposit accounts 310 281
Other income 142 83
Total noninterest income 452 364
NONINTEREST EXPENSE
Salaries and employee benefits 1,649 1,464
Occupancy expense 366 327
Furniture and equipment expense 129 102
Other expense 892 934
Total noninterest expense 3,036 2,827
Income before income taxes 982 659
Income tax 351 236
NET INCOME $ 631 $ 423
Basic earnings per common share $ 0.06 $ 0.04
Diluted earnings per common share 0.06 0.04
</TABLE>
See accompanying notes to consolidated financial statements
4
<PAGE> 5
SUBURBAN BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three months ended June 30,
(in thousands, except per share data) 1998 1997
<S> <C> <C>
INTEREST INCOME
Interest and fees on loans $2,568 $2,097
Taxable interest on securities 540 434
Interest on Federal funds sold and deposits with other banks 367 231
Total interest income 3,475 2,762
INTEREST EXPENSE
Interest on deposits 1,515 1,077
Interest on short-term borrowings 49 4
Total interest expense 1,564 1,081
NET INTEREST INCOME 1,911 1,681
Provision for loan losses 95 80
Net interest income after provision for loan losses 1,816 1,601
NONINTEREST INCOME
Service charges on deposit accounts 159 159
Other income 85 34
Total noninterest income 244 193
NONINTEREST EXPENSE
Salaries and employee benefits 833 734
Occupancy expense 184 163
Furniture and equipment expense 66 50
Other expense 453 490
Total noninterest expense 1,536 1,437
Income before income taxes 524 357
Income tax 188 130
NET INCOME $ 336 $ 227
Basic earnings per common share $ 0.03 $ 0.02
Diluted earnings per common share 0.03 0.02
</TABLE>
See accompanying notes to consolidated financial statements
5
<PAGE> 6
SUBURBAN BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended June 30,
(in thousands) 1998 1997
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 631 $ 423
Adjustments to reconcile net income to net cash (used) provided by operating
activities: 117 80
Depreciation 195 115
Provision for loan losses 351 236
Income tax expense, deferred -- (320)
Originations of loans held for sale (54) (36)
Net accretion on securities (58) (22)
Decrease in deferred loan fees (222) (704)
Net increase in premium on loans purchased (121) 58
(Increase) decrease in accrued income and other assets 68 (63)
Increase (decrease) in accrued expenses and other liabilities -- (4)
Gain on sale of fixed assets (15) --
Gain on sale of foreclosed real estate
892 (237)
Net cash provided (used) by operating activities
CASH FLOWS FROM INVESTING ACTIVITIES: (16,163) (6,732)
Increase in Federal funds sold (8,809) (10,026)
Purchases of available for sale securities 4,450 3,775
Proceeds from maturities of available for sale securities 31 62
Proceeds from prepayments of principal on securities (5,306) (4,297)
Net increase in loans (3,541) (8,868)
Purchases of loans (178) (428)
Net purchases of premises and equipment 755 --
Proceeds from sale of foreclosed real estate
(28,761) (26,514)
Net cash used by investing activities
CASH FLOWS FROM FINANCING ACTIVITIES: 27,071 28,987
Net increase in total deposits 4,461 1,247
Net increase in securities sold under agreements to repurchase
31,532 30,234
Net cash provided by financing activities
3,663 3,483
Net increase in cash and due from banks 10,759 7,848
Cash and due from banks at beginning of period $ 14,422 $ 11,331
Cash and due from banks at end of period
$ 2,904 $ 2,031
Interest paid 16 --
Income taxes paid 740 --
Loans transferred to foreclosed real estate
</TABLE>
See accompanying notes to consolidated financial statements
6
<PAGE> 7
SUBURBAN BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(Unaudited)
<TABLE>
<CAPTION>
(in thousands) Accumulated Other
Accumulate Comprehensive Common Paid-in
Six Months Ended June 30, 1998 Deficit Income Stock Capital Total
<S> <C> <C> <C> <C> <C>
Balance January 1, 1998 $(6,910) $190 $109 $25,793 $19,182
------- ---- ---- ------- -------
Comprehensive income:
Net income 631 631
Other comprehensive income, net of tax
26 26
-------
Unrealized gains on securities available for sale 657
Comprehensive income ------- ---- ---- ------- -------
Balance June 30, 1998 $(6,279) $216 $109 $25,793 $19,839
======= ==== ==== ======= =======
Six Months Ended June 30, 1997
Balance January 1, 1997 $(8,041) $(30) $109 $25,793 $17,831
------- ---- ---- ------- -------
Comprehensive income:
Net income 423 423
Other comprehensive income, net of tax
Unrealized gains on securities
available for sale 36 36
-------
Comprehensive income 459
------- ---- ---- ------- -------
Balance June 30, 1997 $(7,618) $ 6 $109 $25,793 $18,290
======= ==== ==== ======= =======
</TABLE>
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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 subsidiary, 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 three months ended June 30,
1998 are not necessarily indicative of results that may be expected for the
entire year ending December 31, 1998.
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, 1997, which contain the Company's accounting policies and
other data.
NOTE B - INVESTMENT SECURITIES
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, 1998 (in
thousands):
<TABLE>
<CAPTION>
Amortized Gross Gross Estimated Fair
Cost Unrealized Unrealized Value
Gains Losses
<S> <C> <C> <C> <C>
U.S. Treasury notes $ 1,946 $ 16 $ -- $ 1,962
Federal agencies 30,557 341 (8) 30,890
Mortgage-backed obligations of federal agencies 1,044 1 (9) 1,036
Other 885 12 -- 897
Total investment securities $34,432 $370 $(17) $34,785
</TABLE>
The schedule below shows the amortized cost and estimated fair value of
investment securities classified as available for sale at December 31, 1997 (in
thousands):
<TABLE>
<CAPTION>
Amortized Gross Gross Estimated Fair
Cost Unrealized Unrealized Value
Gains Losses
<S> <C> <C> <C> <C>
U.S. Treasury notes $ 4,384 $ 21 $ (1) $ 4,404
Federal agencies 24,695 285 (4) 24,976
Mortgage-backed obligations of federal 89 2 -- 91
agencies 883 7 (1) 889
Other
Total securities available for sale $30,051 $315 $ (6) $30,360
</TABLE>
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The amortized cost and estimated fair value for securities at June 30,
1998, by contractual maturity are shown in the following table. 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.
<TABLE>
<CAPTION>
In thousands Amortized Cost Estimated Fair Value
<S> <C> <C>
Due in one year or less $ 5,130 $ 5,150
Due after one year through 5 years 22,344 22,645
Due after 5 years through 10 years 5,914 5,954
Due after 10 years -- --
Mortgage-backed securities 1,044 1,036
Total $34,432 $34,785
</TABLE>
There were no sales of securities in the six months ended June 30, 1998
or 1997. The net unrealized holding gain on available for sale securities, which
is included in accumulated other comprehensive income and shown as a separate
component of shareholders' equity in the accompanying Consolidated Balance
Sheets, was $216,000 at June 30, 1998 and $6,000 at December 31, 1997.
NOTE C - IMPAIRED LOANS AND ALLOWANCE FOR LOAN LOSSES
Impaired loans are loans for which it is probable that the creditor will
not collect all principal and interest payments according to the loan's
contractual terms. The impairment of a loan is measured at the present value of
expected future cash flows using the loan's effective interest rate, or as a
practical expedient, at the loan's observable market price or the fair value of
the collateral if the loan is collateral dependent. Interest income on impaired
loans is recognized on a cash basis. Restructured loans are loans on which the
borrower has been granted a concession as to rate or term as a result of
financial difficulty.
Information with respect to impaired loans is as follows:
<TABLE>
<CAPTION>
June 30, December 31,
in thousands 1998 1997
<S> <C> <C>
Impaired loans with a valuation allowance $1,677 $1,763
Impaired loans without a valuation allowance -- --
------ ------
Total impaired loans 1,677 1,763
Allowance for credit losses related to impaired loans 296 274
Allowance for credit losses related to other than impaired loans 1,218 1,199
----- -----
Total allowance for credit losses 1,514 1,473
Average impaired loans for the period $1,493 $1,633
Interest income on impaired loans recognized on the cash basis -- --
</TABLE>
There were no loans that were restructured prior to the adoption of SFAS
No. 114, Accounting by Creditors for Impairment of a Loan, and which were
performing according to the new terms at June 30, 1998 or December 31, 1997.
The provision for loan losses is determined by analyzing the status of
individual loans, reviewing historical loss experience and reviewing the
delinquency of principal and interest payments where pertinent. Management
believes that
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uncollectible amounts have been charged off and that the allowance is adequate
to cover losses inherent in the portfolio at June 30, 1998. Increases and
decreases in the allowance include changes in the measurement of impaired loans.
Activity in the allowance for losses is summarized as follows:
<TABLE>
<CAPTION>
Six Months Ended
in thousands June 30, 1998
-----------------------
<S> <C>
Balance at beginning of period $ 1,473
Provision for loan losses 195
Loans charged off (220)
Recoveries 66
-----------------------
Balance at end of period $ 1,514
=======================
</TABLE>
NOTE D - FORECLOSED REAL ESTATE
Foreclosed real estate is carried at the lower of cost or fair value,
less estimated selling costs, based upon current market conditions and expected
cash flows.
The following schedule presents a breakdown, by type of property, of
foreclosed real estate (in thousands) at June 30, 1998 and December 31, 1997:
<TABLE>
<CAPTION>
June 30, 1998 December 31,
1997
--------------------------------
<S> <C> <C>
Commercial property $402 $402
--------------------------------
Total $402 402
Allowance for losses (53) (53)
--------------------------------
TOTAL FAIR VALUE $349 $349
================================
</TABLE>
NOTE E - REGULATORY MATTERS
The Company is subject to various regulatory capital requirements
administered by the Federal banking agencies. Failure to meet minimum capital
requirements can initiate certain mandatory - and possibly additional
discretionary - actions by regulators that, if undertaken, could have a direct
material effect on the Company's financial statements. Under capital adequacy
guidelines and the regulatory framework for prompt corrective action, the
Company must meet specific capital guidelines that involve quantitative measures
of the Company's assets, liabilities, and certain off-balance-sheet items as
calculated under regulatory accounting practices. The Company's capital amounts
and classifications are also subject to qualitative judgements by the regulators
about components, risk weightings, and other factors.
Quantitative measures established by regulation to ensure capital
adequacy require the Company to maintain amounts and ratios (set forth in the
table below) of total and Tier 1 capital (as defined in the regulations) to
risk-weighted assets (as defined), and of Tier 1 capital (as defined) to average
assets (as defined). Management believes, as of June 30, 1998, that the Company
meets all capital adequacy requirements to which it is subject.
As of June 30, 1998, the most recent notification from the Federal
Deposit Insurance Corporation categorized the Bank as well capitalized under the
regulatory framework for prompt corrective action. To be categorized as well
capitalized the Bank
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must maintain minimum total risk-based, Tier 1 risk-based, and Tier 1 leverage
ratios as set forth in the table. There are no conditions or events since that
notification that management believes have changed the Bank's category.
The actual capital amounts and ratios for the Company and the Bank are
presented in the table below:
<TABLE>
<CAPTION>
FOR CAPITAL TO BE WELL
ACTUAL ADEQUACY CAPITALIZED
PURPOSES
$ in thousands AMOUNT RATIO AMOUNT RATIO AMOUNT RATIO
<S> <C> <C> <C> <C> <C> <C>
As of June 30, 1998:
Total capital (to risk-weighted assets):
Company $20,186 17.42% $9,269 8.00% $11,586 10.00%
Suburban Bank of Maryland 15,578 13.64 9,139 8.00 11,424 10.00
Tier 1 capital (to risk-weighted assets):
Company 18,737 16.17 4,634 4.00 6,951 6.00
Suburban Bank of Maryland 14,149 12.39 4,569 4.00 6,854 6.00
Tier 1 capital (to average assets):
Company 18,737 9.75 7,684 4.00 9,605 5.00
Suburban Bank of Maryland 14,149 7.50 7,550 4.00 9,438 5.00
Tier 1 capital (to average assets):
As of December 31, 1997:
Total capital (to risk-weighted assets):
Company $18,981 18.44% $8,233 8.00% $10,292 10.00%
Suburban Bank of Maryland 14,437 14.25 8,105 8.00 10,132 10.00
Tier 1 capital (to risk-weighted assets):
Company 17,692 17.19 4,117 4.00 6,175 6.00
Suburban Bank of Maryland 13,168 13.00 4,053 4.00 6,079 6.00
Tier 1 capital (to average assets):
Company 17,692 10.82 6,542 4.00 8,178 5.00
Suburban Bank of Maryland 13,168 8.25 6,383 4.00 7,979 5.00
</TABLE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following commentary provides an overview of the financial condition
and significant changes in the results of the operations of Suburban Bancshares,
Inc. and its subsidiary ("Bancshares" or "the Company") for the six months ended
June 30, 1998 and 1997. Throughout this review the subsidiary of Suburban
Bancshares, Inc., Suburban Bank of Maryland, is referred to as "Suburban
Maryland" or "the Bank". This discussion should assist readers in their analysis
of the accompanying consolidated financial statements.
OVERVIEW
Suburban Bancshares, Inc. reported earnings of $631,000 for the six
months ending June 30, 1998, an increase of $208,000, or 49.2%, over $423,000
reported for the first half of 1997. Improvement in earnings is attributed to
strong asset growth, offset by a declining net interest margin.
Total assets reached $207.9 million at June 30, 1998, a $51.2 million,
or 32.7%, increase from $156.7 million at June 30, 1997. Asset growth since
December 31, 1997 is $32.3 million, or 18.4%. Loans have increased $28.3
million, or 30.3%,
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since June 30, 1997 and $8.2 million, or 7.3%, since year-end 1997, reaching
$121.8 million at the end of the second quarter of 1998. Deposits, at $179.9
million, rose 31.7% since June 30, 1997 and 17.7% since December 31, 1997.
Average assets were $183.8 million for the first six months of 1998,
$47.5 million, or 34.9%, above average assets of $136.3 million for the same
period of 1997. Average earning assets rose $44.8 million, or 36.3%, and average
deposits rose $41.8 million, or 35.6%.
NET INTEREST INCOME AND NET INTEREST MARGIN
Net interest income, the largest contributor to the Company's earnings,
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 of changes in net
interest income.
Net interest income rose $524,000, or 16.2%, from $3,237,000 for the
first two quarters of 1997 to $3,761,000 in 1998, the net result of higher loan
and deposit volume which offset a falling net interest margin.
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 1998, the net interest margin was
4.50%, falling 78 basis points from 5.28% in the same period of 1997, the result
of a drop of 85 basis points in the yield on loans and an increase of 16 basis
points in funding costs.
Changes in the volume of earning assets and interest bearing funds
impact both interest income and interest expense and volume changes were key
determinants of the increase in net interest income in the first six months of
1998. Both total average earning assets and total average interest bearing funds
rose in the first two quarters of 1998 as compared to 1997. Average earning
assets rose $44.8 million, or 36.3%, from $123.6 million in 1997 to $168.5
million in 1998, and average interest bearing funds increased $40.4 million, or
42.8%, from $94.4 million to $134.8 million for the same periods. As a
percentage of average assets, earning assets rose from 90.7% in the first half
of 1997 to 91.7% in 1998, which resulted in higher interest income. Average
interest-bearing funding sources rose as well, from 80.4% of total funding
sources in the first six months of 1997 to 82.6% in the same period in 1998,
resulting in a higher cost of funds. Because the growth in earning assets
exceeded the growth of interest-bearing funds, the level of net interest income
improved, even though the net interest margin declined.
Combined changes in interest rates received on earning assets and paid
on funding sources negatively affected the net interest margin in the first six
months of 1998. The yield on earning assets fell in 1998 to 8.01% from 8.57% in
1997, as loan yields dropped to 8.94% from 9.79%. The lower yield on loans was
the combined effect of competitive factors in our market, a lower interest rate
environment overall, and a lower rate earned on a portfolio of the guaranteed
portion of SBA loans, which were purchased during the last half of 1997. This
pool, averaging $17,508,000 in the first half of 1998, represents 15.3% of the
average loan portfolio, and because of the reduced risk associated with the
pool, the yield, at 7.06%, is less than loans without the backing of a
government guarantee. The yield on the investment portfolio remained stable as
maturing dollars were reinvested and extended the overall portfolio maturity,
and the return on Federal funds remained higher on average than in the first six
months of 1997. An increase in the cost of funds also reduced the margin, as
rates paid for funds rose to 3.62% for 1998 from 3.46% in 1997, a 16 basis point
increase, primarily the result of changes in the composition of funding sources.
Changes in the mix of both earning assets and funding sources also
impacted net interest income in the first half of both 1998 and 1997; however,
the changes in the mix of earning assets were not significant compared to the
changes in composition of funding sources. Average loans as a percentage of
average earning assets increased slightly from 67.6% in 1997 to 67.8% in 1998;
average investments fell slightly from 19.6% to 19.2%. Short-term investments,
Federal funds sold, rose from 12.8% of earning assets to 13.0%. The impact of
these shifts, though small, helped to moderate the decrease in the yield on
earning assets resulting from rate changes. Changes in the mix of
interest-bearing funds were more pronounced as funds shifted
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<PAGE> 13
to higher-cost deposits from noninterest-bearing funding sources and lower-cost
transaction accounts. Time deposits rose $17.9 million, from 19.4% of funding
sources to 25.0% in 1998, and noninterest-bearing deposits fell from 19.6% to
17.4%; both of these changes in deposit composition resulted in an increase in
the cost of funds. A new product introduced in the second quarter of 1997 offers
a sweep of noninterest-bearing deposits into a repurchase agreement; this shift
of funds from noninterest-bearing to interest-bearing funds was also a negative
impact on the margin.
In the three months ended June 30, 1998, net interest income was
$1,911,000, $230,000, or 13.7%, above the $1,681,000 recorded for the second
quarter of 1997. This improvement was also the result of volume increases,
mitigated by falling yields and higher costs of funding.
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<PAGE> 14
AVERAGE BALANCES, INTEREST YIELDS AND RATES, AND NET INTEREST MARGIN
(In thousands)
<TABLE>
<CAPTION>
Six Months ended June 30, 1998 1997
AVERAGE AVERAGE
AVERAGE YIELD AVERAGE YIELD
ASSETS BALANCE INTEREST OR RATE BALANCE INTEREST OR RATE
<S> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Loans $114,278 $5,069 8.94% $83,514 $4,056 9.79%
Investment securities 32,281 1,022 6.38% 24,255 771 6.41%
Fed funds sold and other deposits 21,904 604 5.56% 15,846 426 5.42%
Total interest-earning assets 168,463 6,695 8.01% 123,615 5,253 8.57%
Noninterest-earning assets:
Cash and due from banks 9,492 7,332
Bank property and equipment 1,715 1,535
Other assets 5,610 5,304
Less: Allowance for loan losses (1,493) (1,533)
Total noninterest-earning assets 15,324 12,638
TOTAL ASSETS $183,787 $136,253
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest-bearing liabilities:
Checking, money market and savings deposits $89,878 $1,736 3.89% $71,413 $1,390 3.92%
Time deposits 40,767 1,113 5.51% 22,825 622 5.50%
Securities sold under repurchase agreements 4,159 85 4.15% 188 4 4.14%
Total interest-bearing liabilities 134,804 2,934 4.39% 94,426 2,016 4.31%
Noninterest-bearing deposits 28,420 23,036
Total funding sources 163,224 2,934 3.62% 117,462 2,016 3.46%
Other liabilities 997 757
TOTAL LIABILITIES 164,221 118,219
Shareholders' equity 19,566 18,034
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY $183,787 $136,253
Net interest income $3,761 $3,237
Net interest spread 4.39% 5.11%
Net interest margin 4.50% 5.28%
</TABLE>
14
<PAGE> 15
PROVISION FOR LOAN LOSSES
The provision for loan losses is the effect 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 based upon a review of many factors, including historical
loss experience, adverse situations that may affect the borrower's ability to
repay (including the timing of future payments), 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 or reversal necessary to
maintain an appropriate allowance.
In the first six months of 1998, the provision for loan losses was
$195,000. Loans charged off totaled $220,000 and recoveries were $66,000. In the
same period of 1997, the provision was $115,000, loans charged off were $131,000
and recoveries totaled $30,000. The provision in the second quarter of 1998 was
$95,000, an increase of $15,000 over the $80,000 recorded in the same period of
1997.
NONINTEREST INCOME
Noninterest income rose $88,000, or 24.2%, in the first half of 1998 to
$452,000 from $364,000 in the same period of 1997. Deposit account service
charges increased as deposits rose; and fees for the origination of mortgage
loans, a new service in 1998, account for $59,000 of the increase year-to-date
and $50,000 of the increase for the quarter. In the three months ended June 30,
1998, noninterest income was $244,000, $51,000, or 26.4%, higher than in the
same period of 1997.
NONINTEREST EXPENSES
Noninterest expenses increased $209,000, or 7.4%, in the first six
months of 1998 as compared to the same period of 1997, from $2,827,000 to
$3,036,000. Salaries and benefits increased over last year's first half, the
result of merit increases and staffing for a new branch. The new branch in White
Flint and new services offered have pushed other expenses higher, as well. In
the second quarter, noninterest expenses rose from $1,437,000 in 1997 to
$1,536,000 in 1998, a 6.9% increase, for the same reasons.
ASSET QUALITY
Loan impairment applies to loans for which it is probable that the
creditor will not collect all principal and interest payments according to the
loan's contractual terms. The impairment of a loan is measured at the present
value of expected future cash flows using the loan's effective interest rate, or
as a practical expedient, at the loan's observable market price or the fair
value of the collateral if the loan is collateral dependent. Interest income on
impaired loans is recognized on a cash basis. Restructured loans are loans on
which the borrower has been granted a concession as to rate or term as a result
of financial difficulty. Nonaccrual loans are those loans on which the accrual
of interest is discontinued when 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 is 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 of
interest 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.
The recorded investment in loans that were considered impaired was
$1,677,000 and $1,763,000 at June 30, 1998 and December 31, 1997, respectively.
There were no loans that were restructured prior to the adoption of SFAS No.
114, Accounting by Creditors for Impairment of a Loan, and which were performing
according to the new terms at June 30, 1998 or at December 31, 1997.
15
<PAGE> 16
Real estate acquired through foreclosure or deed in lieu of foreclosure
is carried at fair value less estimated selling costs, based upon current market
conditions and expected cash flows. Foreclosed real estate was $349,000 at June
30, 1998, and at December 31,1997.
The allowance for loan losses is maintained at a level believed adequate
by management to absorb estimated probable credit losses. Management's periodic
evaluation of the adequacy of the allowance is based on the Company's past loan
loss experience, known and inherent risks in the portfolio, adverse situations
that may affect the borrower's ability to repay (including the timing of future
payments), the estimated value of any underlying collateral, composition of the
loan portfolio, current economic conditions and other relevant factors. This
evaluation is inherently subjective as it requires material estimates including
the amounts and timing of future cash flows expected to be received on impaired
loans that may be susceptible to significant change.
The allowance for loan losses is established through provisions for loan
losses charged against income. Loans deemed to be uncollectible are charged
against the allowance for loan losses, and subsequent recoveries, if any, are
credited to the allowance. The allowance for loan losses related to loans that
are identified as impaired is based on discounted cash flows using the loans'
initial effective interest rate or the fair value of the collateral for certain
collateral dependent loans.
The allowance for loan losses was $1,514,000 at June 30,1998, an
increase of $41,000 from $1,473,000 at December 31, 1997. Activity in the
allowance for loan losses during the first half of 1998 included recoveries of
$66,000, charge-offs of $220,000, and a provision for future losses of
$195,000.
LIQUIDITY AND INTEREST SENSITIVITY
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. Liquidity is provided through readily
marketable assets, maturing loans and investments, and the ability to generate
new deposits or borrowings as needed. The Company's liquidity position is
monitored and managed by the Asset/Liability Management Committee, which has the
overall objective of optimizing income while minimizing and controlling
liquidity and interest rate risk, and maintaining capital adequacy.
Core deposits normally provide a stable source of liquidity for the
Company. These core deposits are composed of noninterest checking accounts,
checking and money market accounts, and savings and individual retirement
accounts. This core deposit base represented 73.8% of total funding sources at
June 30, 1998, compared to 77.6% at the end of 1997. Another indicator of
adequate liquidity is the level of readily marketable assets. These liquid
assets, securities available for sale, overnight federal funds and the
guaranteed portion of SBA loan in the loan portfolio increased to 45.4% of total
assets at June 30, 1998 from 40.5% at December 31, 1997.
As a supplementary source of short-term liquidity, the Bank maintains
$16,000,000 of reverse repurchase lines of credit and unsecured lines of credit
totaling $5,500,000 with correspondent banks. These correspondents meet
regulatory capital requirements for well capitalized financial institutions,
thereby minimizing the risk that might be associated with this level of
interbank exposure. The Bank has not needed to utilize these backup lines as
internally generated liquidity has provided ample resources.
Interest sensitivity pertains to the volatility of earnings resulting
from interest rate fluctuations. The management of interest rate risk has two
goals: to minimize fluctuations in net interest income and net income, and to
identify the potential change in the Company's market value of portfolio equity.
Interest rate risk can be defined or measured as either the change in earnings
that results from changes in interest rates (earnings at risk) or a change in
the theoretical market value of the Company (economic value at risk). Economic
value at risk is essentially the value of equity at risk. The Company recognizes
that with return, there must be risk; however, the levels of risk must be
contained within tolerable limits as established by the Asset/Liability
Management Committee and the Investment Sub-committee.
16
<PAGE> 17
One method of measuring the Company's interest rate sensitivity is the
"gap" report, which measures the mismatch in repricing between
interest-sensitive assets and liabilities and provides a general indication of
the interest sensitivity of the balance sheet at a point in time. By limiting
the size of the gap position, the Company can limit the net interest income at
risk arising from pricing imbalances. The gap schedule that follows reflects the
earlier of the maturity or repricing dates for various interest-earning assets
and interest-bearing liabilities at June 30, 1998.
<TABLE>
<CAPTION>
Interest Rate Sensitivity Analysis
3 months or Over 3 Over 6 Over 1 Total
less months to months to year
in thousands 6 months 1 year
<S> <C> <C> <C> <C> <C>
Interest-earning assets:
Federal funds sold and other deposits $31,732 $ -- $ -- $ $ 31,732
Investment securities available for sale 499 1,399 3,154 -- 34,785
Loans (1) 74,803 6,542 13,578 29,733 121,810
Total interest-earning assets 107,034 7,941 16,732 26,887 188,327
Cumulative rate sensitive assets 107,034 114,975 131,707 56,620 188,327
Interest-bearing liabilities:
Interest checking deposits $ 14,536 $ -- $ -- $ -- $ 14,536
Money market deposits and savings deposits 88,005 -- -- -- 88,005
Time deposits 32,361 1,891 4,371 6,991 45,614
Securities sold under repurchase agreements 7,511 -- -- -- 7,511
Total interest-bearing liabilities 142,413 1,891 4,371 6,991 155,666
Cumulative rate sensitive liabilities 142,413 144,304 148,675 155,666
GAP $ $(35,379) $ 6,050 $12,361 $ 49,629
CUMULATIVE GAP (35,379) (29,329) (16,968) 32,661 $32,661
CUMULATIVE GAP TO TOTAL ASSETS -17.02% -14.11% -8.16% 15.71% 15.71%
</TABLE>
(1) Excludes net deferred fees (costs) of ($33).
The amount of assets and liabilities shown which reprice or mature
during a particular period were determined in accordance with the
earlier of term to repricing or the contractual terms of the asset or liability.
The Company has assumed that its savings, interest checking and money market
accounts reprice daily. At June 30, 1998, the Company's one-year interest
sensitivity gap (the difference between the amount of interest-earning assets
anticipated by the Company, based on certain assumptions, to mature or reprice
within one year and the amount of interest-bearing liabilities anticipated by
the Company, based on certain assumptions, to mature or reprice within one year)
as a percentage to total assets was negative 8.16%. This negative gap position
means that the Company had $16,968,000 more liabilities than assets repricing
within one year. At December 31, 1997 the gap as a percentage of assets was
negative 8.17%. A negative gap generally indicates that in a period of rising
interest rates, the Company's net interest income may be adversely affected.
Conversely, in a declining interest rate environment, the Company's net interest
income may improve.
Another tool used to assess interest rate risk reflects the adverse
changes that would occur assuming an instantaneous, parallel shift of 200 basis
points in the Treasury Yield Curve is introduced over a one-year forecast
horizon. This interest shock simulation measures the potential changes in
simulated earnings and the potential changes in market value of portfolio equity
as rates are shifted at each point on the yield curve upward and downward. The
methodology is based upon an initial forecast assumption of a constant balance
sheet and constant market interest rates and utilizes present value computations
on cash flows as well as duration analysis to produce measurements of earnings
and economic value at risk. The analyses are prepared using current call report
data from the Bank and incorporate both management assumptions and trend
analyses based upon the
17
<PAGE> 18
Company's historical data as well as market trends in pricing spreads,
prepayment patterns and other rate-driven parameters which affect the level and
timing of cash flows. Finally, the impact of planned growth is factored into the
simulation model.
The Asset/Liability Committee has established limits or guidelines on
earnings and economic value at risk and monitors the Company's performance
against these guidelines, as well as peer results, on a quarterly basis. The
Company's policy is to limit the percentage change in annual net interest income
to -15% and in economic value to -20% from an immediate and sustained parallel
shift in interest rates of 200 basis points. As of December 31, 1997, the
estimated sensitivity profile for the Company showed a change in annual net
interest income of -12.5% and a change in economic value of -14.1% for a
downward shift of 200 basis points in interest rates. At the end of the first
quarter of 1998, the profile showed a change in annual net interest income of
- -11.8% and a change in economic value of -20.3% for the same downward shift.
Based on the mix of assets and liabilities and the current interest rate
environment, management does not believe there has been a significant change in
the second quarter of 1998.
Both of the above tools used to assess interest rate risk have strengths
and weaknesses. Because the gap reflects a static position at a single point in
time, it is limited in quantifying the total impact of market rate changes which
do not affect all earning assets and interest-bearing liabilities equally or
simultaneously. In addition, gap reports depict the existing structure,
excluding exposure arising from new business. While the simulation process is a
powerful tool in analyzing interest rate sensitivity, many of the assumptions
used in the process are both highly qualitative and subjective and subject to
the risk that past historical activity may not generate accurate predictions of
the future. Both measurement tools, however, provide a comprehensive evaluation
of the Company's exposure to changes in interest rates, enabling management to
control the volatility of earnings.
CAPITAL RESOURCES AND ADEQUACY
Shareholders' equity increased $657,000, or 3.4%, in the first six
months of 1998 to $19,839,000 at June 30, 1998 from $19,182,000 at December 31,
1997. Earnings of $631,000 and an increase of $26,000 in the accumulated other
comprehensive income accounted for the change in equity.
A combination of a leverage capital ratio and risk-based capital ratios
is used to categorize banks as well capitalized, adequately capitalized, or
under capitalized financial institutions under the guidelines established by
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 a written agreement, order or directive. At December 31, 1997 and
June 30, 1998, the Company was considered to be a well capitalized financial
institution.
One measure of capital adequacy is the risk-based capital ratio or the
ratio of total capital to risk-adjusted assets. Total capital is composed of
both core capital (Tier 1) and supplemental capital (Tier 2). The Bank's Tier 1
capital consists of common equity, excluding unrealized gains or losses on
available for sale securities, and a disallowed portion of the deferred tax
asset, 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 from
0 to 100%. Financial institutions 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. At June 30, 1998, the Company
reported at Tier 1 risk-based capital ratio of 16.17% and a ratio of 17.42%
based on total capital. Both ratios were well above the general regulatory
minimums of 4% and 8%, respectively.
Another capital adequacy measure is the leverage capital ratio, which is
calculated by dividing average total assets for the most recent quarter into
core (Tier 1) capital. The regulatory minimum of this ratio is 3%, with most
financial institutions required to maintain a ratio of at least 4% to 5%,
depending upon risk profiles and other factors. At June 30, 1998, the leverage
capital ratio for the Company was 9.75%.
18
<PAGE> 19
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
An annual meeting of the shareholders (the "Meeting") was
held on May 20, 1998. The following matters were submitted to a
vote of shareholders either by proxy or in person:
1. Four directors were elected to the class of directors
whose terms expired at the Meeting to serve for terms
expiring at the 2001 annual meeting of shareholders or until
their successors are elected and qualify (the "2001 Class").
Samuel Y. Botts, Stephen A. Horvath, Winfield M. Kelly,
Jr. and Kenneth J. Michael were elected to the 2001 Class. Mr.
Botts was elected with 9,311,033 votes for and 37,125 votes
withheld, Mr. Horvath was elected with 9,316,183 votes for and
31,975 votes withheld, Mr. Kelly was elected with 9,316,183 votes
for and 31,975 votes withheld and Mr. Michael was elected with
9,316,183 votes for and 31,975 votes withheld.
Other directors whose terms continued after the Meeting
were Barbara M. DiNenna-Corboy, Marlin K. Husted, Raymond G.
LaPlaca and Lawrence A. Shulman, members of the class whose term
expires at the end of the 1999 annual meeting of shareholders and
Vincent D. Palumbo and Albert W. Turner, members of the class
whose term expires at the 2000 annual meeting of shareholders or
until their successors are elected and qualify.
2. The shareholders ratified the selection of Stegman &
Company as the Company's independent public accountants
for 1998 with 9,310,594 votes for, 20,950 votes against and
16,614 abstentions.
Item 6. Exhibits and Reports on Form 8-K
(a) The following documents are filed as part of this report.
Exhibit # Description
--------- -----------
11.0 Computation of per share earnings
27.0 Financial Data Schedule
(b) No reports on Form 8K were filed in the quarter ended June
30, 1998.
19
<PAGE> 20
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)
<TABLE>
<S> <C> <C>
Date: August 12, 1998 Stephen A. Horvath
----------------- -------------------------------------------------
Stephen A. Horvath
President and Chief Operating Officer
Date: August 12, 1998 Sibyl S. Malatras
--------------- --------------------------------------------------
Sibyl S. Malatras
Senior Vice President and Chief Financial Officer
(Principal Financial Officer)
</TABLE>
20
<PAGE> 1
SUBURBAN BANCSHARES, INC. EXHIBIT 11
EARNINGS PER SHARE CALCULATION
June 30, 1998
INFORMATION FOR COMPUTATION OF DILUTION
<TABLE>
<CAPTION>
Market Price per Share: Daily Average
<S> <C> <C>
First Quarter 1998 $3.6508 61 trading days
Second Quarter 1998 $4.2398 65 trading days
Third Quarter 1998
Fourth Quarter 1998
Average Price for the Period Ended June 30, 1998 $3.9546 126 trading days
(a) 350,000 Management Stock Options exercisable at $0.10
and outstanding for the entire year
(b) 12,600 options granted 1/22/97 exercisable at $2.625
First Quarter 1998 Diluted
12,600 - ((12,600*2.625)/avg price) = 3,540
Second Quarter 1998 Diluted
12,600 - ((12,600*2.625)/avg price) = 4,799
(c) 178,000 options granted 1/21/98 exercisable at $3.50
First Quarter 1998 Diluted
178,000 - ((178,000*3.50)/avg price) = 7,352
Second Quarter 1998 Diluted
178,000 - ((178,000*3.50)/avg price) = 31,059
</TABLE>
<PAGE> 2
SUBURBAN BANCSHARES, INC. EXHIBIT 11
EARNINGS PER SHARE CALCULATION
June 30, 1998
EARNINGS PER SHARE CALCULATION - 1998
<TABLE>
<CAPTION>
Income Shares
Basic Earnings per Share: (Numerator) (Denominator) EPS
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Income $631,282
Common Shares Outstanding 10,951,218
Basic EPS $631,282 10,951,218 $0.06
</TABLE>
<TABLE>
<CAPTION>
Income Shares
Diluted Earnings per Share: (Numerator) (Denominator) EPS
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Income $631,281.52 10,951,218
Additional shares to be issued upon assumed 350,000
exercise of management stock options
Shares hypothetically repurchased at the average (8,850)
market price with the proceeds
Additional shares to be issued upon assumed 12,600
exercise of incentive options (b)
Shares hypothetically repurchased at the average (8,364)
market price with the proceeds
Additional shares to be issued upon assumed 178,000
exercise of incentive stock options (c)
Shares hypothetically repurchased at the average (157,536)
market price with the proceeds
Diluted EPS $631,282 11,317,068 $0.0558
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
<CASH> 14,422
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 31,732
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 34,785
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 121,777
<ALLOWANCE> 1,514
<TOTAL-ASSETS> 207,924
<DEPOSITS> 179,873
<SHORT-TERM> 7,511
<LIABILITIES-OTHER> 701
<LONG-TERM> 0
0
0
<COMMON> 109
<OTHER-SE> 19,730
<TOTAL-LIABILITIES-AND-EQUITY> 207,924
<INTEREST-LOAN> 5,069
<INTEREST-INVEST> 1,022
<INTEREST-OTHER> 604
<INTEREST-TOTAL> 6,695
<INTEREST-DEPOSIT> 2,849
<INTEREST-EXPENSE> 2,934
<INTEREST-INCOME-NET> 3,761
<LOAN-LOSSES> 195
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 3,036
<INCOME-PRETAX> 982
<INCOME-PRE-EXTRAORDINARY> 631
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 631
<EPS-PRIMARY> 0.06
<EPS-DILUTED> 0.06
<YIELD-ACTUAL> 4.50
<LOANS-NON> 1,822
<LOANS-PAST> 0
<LOANS-TROUBLED> 44
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 1,473
<CHARGE-OFFS> 220
<RECOVERIES> 66
<ALLOWANCE-CLOSE> 1,514
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
