<PAGE>
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
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended March 31, 1999
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For transition period from ____________ to _____________
Commission file number: 2-98960A
COMMERCE NATIONAL CORPORATION
(Exact name of Registrant as specified in its charter)
FLORIDA
(State or Other Jurisdiction of Incorporation or Organization)
59-2497676
(I.R.S. Employer Identification No.)
1201 South Orlando Avenue
Winter Park, Florida 32789
(Address of principal executive offices)
(Zip Code)
(407) 741-8900
(Registrant's telephone number, including area code)
NOT APPLICABLE
(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 _______
-------
<PAGE>
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
On May 1, 1999, Commerce National Corporation (the "Company") had 721,019
shares of common stock, par value $0.10 per share, issued and outstanding.
(BALANCE OF PAGE INTENTIONALLY LEFT BLANK)
<PAGE>
PART I. FINANCIAL STATEMENTS
ITEM 1. FINANCIAL STATEMENTS.
The financial statements begin on the following page.
<PAGE>
COMMERCE NATIONAL CORPORATION AND SUBSIDIARY
Condensed Consolidated Financial Statements
March 31, 1999 and December 31, 1998
(Unaudited)
<PAGE>
COMMERCE NATIONAL CORPORATION
AND SUBSIDIARY
Table of Contents
Accountants' Review Report
Condensed consolidated balance sheets (unaudited)--March 31, 1999 and December
31, 1998
Condensed consolidated statements of operations (unaudited)--Three months ended
March 31, 1999 and 1998
Condensed consolidated statements of cash flows (unaudited)--Three months ended
March 31, 1999 and 1998
Selected notes to condensed consolidated financial statements (unaudited)--March
31, 1999
<PAGE>
[LETTERHEAD OF KPMG APPEARS HERE]
The Board of Directors
Commerce National Corporation:
We have reviewed the condensed consolidated balance sheet of Commerce National
Corporation and subsidiary as of March 31, 1999 and the related condensed
consolidated statements of operations and cash flows for the three month periods
ended March 31, 1999 and 1998. These condensed consolidated financial statements
are the responsibility of the Company's management.
We conducted our reviews in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical review
procedures to financial data, and making inquiries of persons responsible for
financial and accounting matters. It is substantially less in scope than an
audit conducted in accordance with generally accepted auditing standards, the
objective of which is the expression of an opinion regarding the financial
statements taken as a whole. Accordingly, we do not express such an opinion.
Based on our reviews, we are not aware of any material modifications that should
be made to the accompanying condensed consolidated financial statements referred
to above for them to be in conformity with generally accepted accounting
principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet of Commerce National Corporation and
subsidiary as of December 31, 1998, and the related consolidated statements of
operations, stockholders' equity, and cash flows for the year then ended not
presented herein; and in our report dated February 4, 1999, we expressed an
unqualified opinion on those consolidated financial statements. In our opinion,
the information set forth in the accompanying condensed consolidated balance
sheet as of December 31, 1998, is fairly presented, in all material respects, in
relation to the consolidated financial statements from which it has been
derived.
/s/ KPMG LLP
Orlando, Florida
April 16, 1999
<PAGE>
COMMERCE NATIONAL CORPORATION AND SUBSIDIARY
Condensed Consolidated Balance Sheets (Unaudited)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
ASSETS 1999 1998
------------------ -------------------
<S> <C> <C>
Cash and due from banks $ 5,984,619 5,221,144
Federal funds sold 800,000 8,100,000
Investment securities available for sale (note 2) 14,386,878 13,492,660
Loans, net (note 3) 130,489,745 122,929,105
Accrued interest receivable 912,199 813,736
Premises and equipment, net 3,621,555 3,698,955
Other real estate owned, net 11,139 --
Federal Reserve Bank stock, at cost 178,500 178,500
Federal Home Loan Bank stock, at cost 468,100 378,600
Deferred tax asset 542,058 458,990
Prepaid expenses and other assets 161,644 168,470
Executive supplemental income plan - cash
surrender value life insurance policies 1,484,590 1,467,332
------------------ -------------------
Total assets $ 159,041,027 156,907,492
================== ===================
</TABLE>
See accompanying accountants' review report.
<PAGE>
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
LIABILITIES AND STOCKHOLDERS' EQUITY 1999 1998
------------------- -------------------
<S> <C> <C>
Deposits (note 4):
Noninterest bearing $ 20,942,765 21,301,512
Interest bearing 117,629,710 115,798,941
------------------- -------------------
Total deposits 138,572,475 137,100,453
Federal Home Loan Bank advances 4,120,834 4,125,534
Other borrowed funds 2,537,116 2,189,251
Accrued interest payable 159,803 191,744
Accounts payable and other liabilities 449,265 333,781
------------------- -------------------
Total liabilities 145,839,493 143,940,763
------------------- -------------------
Common stock, par value $.10 per share (1,000,000 shares authorized; 742,819 and
618,035 shares issued and 721,019 and 596,235 outstanding at March 31, 1998
and December 31, 1998) 74,282 74,282
Additional paid-in capital 7,927,804 7,927,804
Retained earnings 5,480,637 5,182,057
Treasury stock, at cost (21,800 shares at March 31, 1998
and December 31, 1998) (208,640) (208,640)
Accumulated other comprehensive income, net (72,549) (8,774)
------------------- -------------------
Total stockholders' equity 13,201,534 12,966,729
Commitments (note 5)
------------------- -------------------
Total liabilities and stockholders' equity $ 159,041,027 156,907,492
=================== ===================
</TABLE>
<PAGE>
COMMERCE NATIONAL CORPORATION AND SUBSIDIARY
Condensed Consolidated Statements of Operations (Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
------------------------------------
MARCH
1999 1998
--------------- ----------------
<S> <C> <C>
Interest income:
Loans $ 2,737,262 2,264,095
Investment securities 205,183 242,255
Federal funds sold 30,282 49,900
Federal Reserve Bank stock 2,565 2,509
Federal Home Loan Bank stock 7,002 6,101
Due from banks 1,142 2,773
--------------- ----------------
Total interest income 2,983,436 2,567,633
Interest expense 1,333,343 1,122,465
--------------- ----------------
Net interest income 1,650,093 1,445,168
Provision for loan losses 74,881 62,253
--------------- ----------------
Net interest income after provision for loan losses 1,575,212 1,382,915
--------------- ----------------
Other operating income:
Customer service fees 248,901 215,209
Other operating expenses:
Salaries and benefits 586,788 526,811
Occupancy expense 232,064 224,468
Legal and professional fees 80,215 70,812
Other expenses 308,914 312,007
Loss on sale of other real estate owned -- 2,017
--------------- ----------------
1,207,981 1,136,115
--------------- ----------------
Net operating income before taxes 616,132 462,009
Income tax expense 230,652 168,703
--------------- ----------------
Net earnings $ 385,480 293,306
=============== ================
Basic and diluted earnings per share (note 6) $ 0.53 0.43
=============== ================
</TABLE>
See accompanying accountants' review report.
<PAGE>
COMMERCE NATIONAL CORPORATION AND SUBSIDIARY
Condensed Consolidated Statements of Cash Flows (Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
----------------------------------
MARCH 31,
1999 1998
---------------- ---------------
<S> <C> <C>
Cash flows provided by (used in) operating activities:
Net income $ 385,480 293,306
Adjustments to reconcile net income to net cash provided by (used in)
operating activities:
Depreciation of premises and equipment 81,182 79,191
Deferred income taxes (44,595) 93,716
Net amortization of premiums and accretion of
discounts on investment securities held to maturity
and investment securities available for sale 3,534 (12,235)
Provision for loan losses 74,881 62,253
Deferred loan origination fees (13,491) (10,576)
Loss on sale of other real estate owned -- 2,017
Executive supplemental income plan - additional cash
surrender value (17,258) (16,221)
Cash provided by (used in) changes in:
Accrued interest receivable (98,463) (112,867)
Prepaid expenses and other assets 6,826 (47,166)
Accrued interest payable (31,941) 5,835
Accounts payable and other liabilities 115,484 (99,256)
---------------- ----------------
Net cash provided by operating activities 461,639 237,997
---------------- ----------------
Cash flows provided by (used in) investing activities:
Net loans made to customers (7,633,169) (419,291)
Decrease (increase) in federal funds sold 7,300,000 (6,450,000)
Purchases of investment securities available for sale (3,000,000) (2,000,000)
Proceeds from sale of other real estate owned -- 79,079
Proceeds from maturity of investments available for sale 2,000,000 2,000,000
Purchase of premises and equipment (3,782) (9,180)
Purchase of Federal Home Loan Bank stock (89,500) (37,300)
---------------- ----------------
Net cash used in investing activities (1,426,451) (6,836,692)
---------------- ----------------
</TABLE>
(Continued)
<PAGE>
COMMERCE NATIONAL CORPORATION AND SUBSIDIARY
Condensed Consolidated Statements of Cash Flows (Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
-----------------------------------
MARCH 31,
1999 1998
---------------- ----------------
<S> <C> <C>
Cash flows provided by financing activities:
Net increase (decrease) in demand deposits, NOW accounts
and passbook savings accounts 2,746,148 (879,523)
Net (decrease) increase in certificates of deposit (1,274,126) 2,592,308
Principal payment on mortgage note payable (7,410) (6,843)
Increase in repurchase agreements 355,275 1,731,269
Repayments from borrowings from the Federal
Home Loan Bank (4,700) (4,300)
Shareholder dividends paid (86,900) --
Proceeds from employee stock options exercised -- 1,215,000
Proceeds from sale of common stock -- 4,153
---------------- ----------------
Net cash provided by financing activities 1,728,287 4,652,064
---------------- ----------------
Net increase (decrease) in cash and cash equivalents 763,475 (1,946,631)
---------------- ----------------
Cash and cash equivalents at the beginning of the period 5,221,144 6,095,762
---------------- ----------------
Cash and cash equivalents at the end of the period $ 5,984,619 4,149,131
================ ================
Cash paid during the period for:
Interest $ 1,365,284 1,116,630
================ ================
Income taxes $ 176,661 154,346
================ ================
Supplemental disclosures of noncash transactions:
Market value adjustment - investment securities available
for sale:
Investments (116,264) (27,705)
Deferred income tax asset (43,715) (10,417)
---------------- ----------------
Unrealized loss on investment securities available $ (72,549) (17,288)
================ ================
for sale
Dividends declared $ -- 65,586
================ ================
Transfer of loans to other real estate owned $ 11,139 43,496
================ ================
</TABLE>
See accompanying accountants' review report.
<PAGE>
COMMERCE NATIONAL CORPORATION AND SUBSIDIARY
Selected Notes to Condensed Consolidated Financial Statements (Unaudited)
March 31, 1999
(See accompanying review report of KPMG LLP)
(1) BASIS OF PRESENTATION
(A) INTERIM FINANCIAL INFORMATION
The accompanying unaudited condensed consolidated financial statements
of Commerce National Corporation and Subsidiary (the Company) have
been prepared in accordance with generally accepted accounting
principles for interim financial information and with the instructions
to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do
not include all of the information and footnotes required by generally
accepted accounting principles for complete financial information. In
the opinion of management, all adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the three months ended March 31,
1999 are not necessarily indicative of the results that may be
expected for the year ended December 31, 1999. For further
information, refer to the consolidated financial statements and
footnotes thereto included in the Company's annual report on Form 10-K
for the year ended December 31, 1998.
(B) REPORTING INFORMATION FOR OPERATING SEGMENTS
In June 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 131, "Disclosure about
Segments of an Enterprise and Related Information." This Statement
establishes standards for the way that public business enterprises
report information about operating segments in annual financial
statements and requires that those enterprises report selected
information about operating segments in interim financial reports
issued to shareholders. The Statement is required for fiscal years
beginning after December 15, 1997. The Company adopted the statement
effective January 1, 1998, however, the Company has only one
reportable segment.
(C) COMPREHENSIVE INCOME
In June 1997, the Financial Accounting Standards Board established
Statement of Financial Accounting Standards (SFAS) No. 130, "Reporting
Comprehensive Income." This Statement establishes standards for
reporting and display of comprehensive income and its components in a
full set of financial statements. This Statement requires that an
enterprise classify items or other comprehensive income by nature in a
financial statement, and display the accumulated balance of other
comprehensive income separately from retained earnings and additional
paid-in capital in the equity section of a balance sheet.
<PAGE>
COMMERCE NATIONAL CORPORATION AND SUBSIDIARY
Selected Notes to Condensed Consolidated Financial Statements (Unaudited)
March 31, 1999
(See accompanying review report of KPMG LLP)
The Company adopted this Statement effective January 1, 1998. The
Company's other comprehensive income is the unrealized gain/(loss) on
investment securities available for sale. Total comprehensive income
for the three month periods ended March 31, 1999 and 1998 were
$321,705 and $289,176, respectively.
(D) DERIVATIVE FINANCIAL INSTRUMENTS
The Company has interest rate risk exposure relating to its
investments in interest sensitive assets and funding through interest
sensitive liabilities. Management continually monitors the Company's
interest rate risk level by determining the effect of various interest
rate movements on the level of exposure. Management considers the
level of exposure in determining the appropriate duration mix of
interest sensitive assets in relation to interest sensitive
liabilities, and the pricing of such assets and liabilities. The
Company does not have any investment in derivative financial
instruments.
(2) INVESTMENT SECURITIES AVAILABLE FOR SALE
The amortized cost and estimated market value of investment securities
available for sale as of March 31, 1999 and December 31, 1998 are as
follow:
<TABLE>
<CAPTION>
MARCH 31, 1999 DECEMBER 31, 1998
------------------------------ ------------------------------
AMORTIZED ESTIMATED AMORTIZED ESTIMATED
COST MARKET VALUE COST MARKET VALUE
------------- --------------- ------------- ---------------
<S> <C> <C> <C> <C>
U.S. Treasury securities
and municipals $ 14,503,141 14,386,878 13,506,676 13,492,660
============= =============== ============= ===============
</TABLE>
As of March 31, 1999, the Company had securities sold under agreement to
repurchase ("Agreements") of $2,274,082. All agreements were one-day
transactions, thus the carrying value, market value, and borrowings were
equal at quarter end. Fixed-coupon Agreements are treated as financings,
and the obligations to repurchase securities sold are reflected as other
borrowed funds in the condensed consolidated balance sheet. The dollar
amount of securities underlying the Agreements remain in the asset
accounts. At March 31, 1999, all of the Agreements were to repurchase
identical securities. The assets underlying the Agreements, were held in
safekeeping by a third party. During the quarter ended March 31, 1999,
Agreements outstanding averaged approximately $2,504,727 and the maximum
amount outstanding during the quarter ended was $3,986,101. Total interest
expense paid on repurchase Agreements was $25,939 for the quarter ended
March 31, 1999.
<PAGE>
COMMERCE NATIONAL CORPORATION AND SUBSIDIARY
Selected Notes to Condensed Consolidated Financial Statements (Unaudited)
March 31, 1999
(See accompanying review report of KPMG LLP)
(3) LOANS
Major categories of loans included in the loan portfolio at March 31, 1999
and December 31, 1998 are summarized as follows:
<TABLE>
<CAPTION>
MARCH 31, 1999 DECEMBER 31,1998
--------------- ----------------
<S> <C> <C>
Commercial-secured $ 13,097,983 12,471,553
Commercial-unsecured 2,799,882 2,886,847
Real estate - primarily commercial 113,326,237 105,820,828
Other (installment and overdrafts) 3,138,483 3,559,619
--------------- ----------------
132,362,585 124,738,847
Allowance for loan losses (1,399,732) (1,323,143)
Deferred loan origination fees (473,108) (486,599)
----------------- ----------------
$ 130,489,745 122,929,105
----------------- ----------------
</TABLE>
The recorded investment in loans for which an impairment has been
recognized and the related allowance for loan losses at March 31, 1999 and
December 31, 1998 were $3,282,386 and $308,626 and $1,207,759 and
$110,380, respectively. Those loans with a probable loss have a specific
reserve established. All other impaired loans are accounted for in the
general allowance for loan loss. The average recorded investment in
impaired loans during the first quarter 1999 was $2,245,072. No interest
income was recognized during the first quarter 1999 on impaired loans.
The activity in the allowance for loan losses for the three months ended
March 31, 1999 and 1998 is as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
--------------------------------
1999 1998
------------ -----------------
<S> <C> <C>
Balance at the beginning of the period $ 1,323,143 1,013,081
Charge offs (292) (41,600)
Recoveries 2,000 36,781
Provision for loan losses 74,881 62,253
------------ -----------------
Balance at the end of the period $ 1,399,732 1,070,515
------------ -----------------
</TABLE>
<PAGE>
COMMERCE NATIONAL CORPORATION AND SUBSIDIARY
Selected Notes to Condensed Consolidated Financial Statements (Unaudited)
March 31, 1999
(See accompanying review report of KPMG LLP)
At March 31, 1999 and December 31, 1998, certain stockholders, directors
and employees and their related interests were indebted to the Company in
the aggregate amounts of $8,054,007 and $9,733,678, respectively. All such
loans were made in the ordinary course of business.
(4) DEPOSITS
Included in interest bearing deposits are certificates of deposit issued in
amounts of $100,000 or more. These certificates and their remaining
maturities at March 31, 1999 and December 31, 1998 are as follows:
<TABLE>
<CAPTION>
1999 1998
------------- ------------
<S> <C> <C>
Three months or less $ 27,793,969 22,607,438
Three through twelve months 9,306,504 7,950,623
Over one year 1,621,449 1,380,460
------------- ------------
$ 38,721,922 31,938,521
------------- ------------
</TABLE>
(5) COMMITMENTS
In the normal course of business, the Company has various commitments to
extend credit and standby letters of credit which are not reflected in the
condensed consolidated financial statements. At March 31, 1999 and December
31, 1998, the Company had commitments to customers of approximately
$73,281,184 and $68,306,642 and for approved lines of credit, $1,082,289
and $714,583 for standby letters of credit, and $29,044,440 and $29,135,729
for unfunded firm loan commitments, respectively.
<PAGE>
COMMERCE NATIONAL CORPORATION AND SUBSIDIARY
Selected Notes to Condensed Consolidated Financial Statements (Unaudited)
March 31, 1999
(See accompanying review report of KPMG LLP)
(6) BASIC AND DILUTED EARNINGS PER SHARE
Basic and diluted earnings per share are calculated as follows:
<TABLE>
<CAPTION>
INCOME SHARES PER SHARE
(NUMERATOR) (DENOMINATOR) AMOUNT
---------------- ------------------ ----------------
<S> <C> <C> <C>
For the quarter ended March 31, 1999:
BASIC AND DILUTED EARNINGS PER SHARE:
Net income $ 385,480 721,019 $ .53
---------------- ------------------ ----------------
For the quarter ended March 31, 1999:
BASIC AND DILUTED EARNINGS PER SHARE:
Net income $ 293,306 678,083 $ .43
---------------- ------------------ ----------------
</TABLE>
(8) NEW PRONOUNCEMENTS
In June 1998, the FASB issued Statement of Financial Accounting Standards
No.133, "Accounting for Derivative Instruments and Hedge Activities" (FASB
133). This standard which is effective for all fiscal quarters and all
fiscal years beginning after June 15, 1999, requires all derivatives be
measured at fair value and be recognized as assets and liabilities in the
statement of financial position. FASB 133 sets forth the accounting for
changes in fair value of a derivative depending on the intended use and
designation of the derivative. Implementation of FASB 133 is not expected
to have a significant impact on the financial position or operations of the
Company.
In October 1998, the FASB issued Financial Accounting Standards No, 134,
"Accounting for Mortgage-Backed Securities Retained after the
Securitization of Mortgage Loans Held for Sale by a Mortgage Banking
Enterprise." This Statement requires that after the securitization of a
mortgage loan held for sale, an entity engaged in mortgage banking
activities classify the resulting mortgage-backed security as a trading
security. The Statement is effective for the first fiscal quarter beginning
after December 15, 1998. The Company does not expect the adoption of this
Statement to have any impact on its consolidated financial statements.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
Except for historical information contained herein, the matters discussed
in this report contain forward-looking statements within the meaning of Section
27A of the Securities Act of 1933, as amended (the "Securities Act"), and
Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), that involve substantial risks and uncertainties. When used in this
report, or in the documents incorporated by reference herein, the words
"anticipate", "believe", "estimate", "may", "intend", "expect" and similar
expressions identify certain of such forward-looking statements. Actual
results, performance or achievements could differ materially from those
contemplated, expressed or implied by the forward-looking statements contained
herein. These forward-looking statements are based largely on the expectations
of the Company and are subject to a number of risks and uncertainties,
including, but not limited to, economic, competitive and other factors affecting
the Company's operations, markets, products and services, as well as expansion
strategies and other factors discussed elsewhere in this report filed by the
Company with the Securities and Exchange Commission. Many of these factors are
beyond the Company's control.
The accompanying consolidated financial statements of the Company are
primarily affected by the operation of the NATIONAL BANK OF COMMERCE (the
"Bank"), its wholly owned subsidiary.
The following discussion and analysis presents a review of the Company's
Consolidated Financial Condition and Results of Operations. This review should
be read in conjunction with the consolidated financial statements and other
financial data presented herein.
Summary:
- -------
At the end of the first quarter of 1999, the Company had a profit of
$385,480, as compared to a profit of $293,306 for the same period in 1998. This
is primarily the result of interest income on loans increasing to $2,737,262 at
March 31, 1999 compared to the same time period in 1998 of $2,264,095. This
resulted in total interest income of $2,983,436 at the end of the first quarter
of 1999 compared to $2,567,633 at the end of the first quarter of 1998.
Interest expense for the first quarter of 1999 was $1,333,343, compared to
$1,122,465 for the same time period in 1998. While interest-bearing deposits
increased to $117,629,710 as of March 31, 1999, compared to the year-end 1998
figure of $115,798,941, the rates paid on these deposits have remained the same
since the second quarter of 1997.
Two indicators which measure profitability are net income as a percentage
of average assets (ROAA) and net income as a percentage of average stockholder
equity (ROAE). A comparison of these ratios for the first quarter of the last
two years is as follows:
17
<PAGE>
FOR THE THREE MONTHS ENDING
---------------------------------
3/31/99 3/31/98
---------------------------------
ROAA .98% .92%
-----------------------------------------------------
ROAE 11.72% 10.20%
-----------------------------------------------------
NET INCOME $ 385,480 $ 293,306
-----------------------------------------------------
AVERAGE ASSETS $157,470,737 $129,455,636
-----------------------------------------------------
AVERAGE CAPITAL $ 13,156,478 $ 11,499,782
-----------------------------------------------------
Net Interest Income
- -------------------
Net interest income, the difference between interest earned on interest-
earning assets and interest expense incurred on interest-bearing liabilities, is
the most significant component of the Company's earnings. Net interest income is
affected by changes in the volumes and rates of interest-earning assets and
interest-bearing liabilities and the volume of interest-earning assets funded
with interest-bearing deposits, non-interest-bearing deposits, and stockholders'
equity. Net interest income for the first quarter of the last two years is as
follows:
FOR THE THREE MONTHS ENDING
--------------------------------
3/31/99 3/31/98
-----------------------------------------------------
INTEREST INCOME $2,983,436 $2,567,633
-----------------------------------------------------
INTEREST EXPENSE $1,333,343 $1,122,465
----------------------------------------------------
NET INTEREST INCOME $1,650,093 $1,445,168
-----------------------------------------------------
Net interest income of $1,650,093 for the first quarter of 1999 was a 14.2%
increase over the same period in 1998, which had a net interest income of
$1,445,168.
On an annualized basis, the Company's net interest margin was 4.52% through
the first quarter of 1999 compared to 4.79% through the first quarter of 1998.
Changes in net interest income from period to period result from increases
or decreases in the average balances of interest-earning assets and interest-
bearing liabilities, increases or decreases in the average rates earned and paid
on such assets and liabilities, the banks' ability to manage their earning asset
portfolios and the availability of particular sources of funds.
18
<PAGE>
Provision for Loan Losses
- -------------------------
The Company segregates the loan portfolio for loan loss purposes into the
following broad segments such as: commercial real estate; residential real
estate; commercial business; and consumer loan. The Company provides for a
general allowance for losses inherent in the portfolio by the above categories,
which consists of two components. General loss percentages are calculated based
upon historical analyses. A supplemental portion of the allowance is calculated
for inherent losses which probably exist as of the evaluation date even though
they might not have been identified by the more objective processes used for the
portion of the allowance described above. This is due to the risk of error
and/or inherent imprecision in the process. This portion of the allowance is
particularly subjective and requires judgments based on qualitative factors
which do not lend themselves to exact mathematical calculations such as: trends
in delinquencies and nonaccruals; migration trends in the portfolio; trends in
volume, terms, and portfolio mix; new credit products and/or changes in the
geographic distribution of those products; changes in lending policies and
procedures; loan review reports on the efficacy of the risk identification
process; changes in the outlook for local, regional and national economic
conditions; concentrations of credit; and peer group comparisons.
Specific allowances are provided in the event that the specific collateral
analysis on each classified loan indicates that the probable loss upon
liquidation of collateral would be in excess of the general percentage
allocation. The provision for loan loss is debited or credited in order to
state the allowance for loan losses to the required level as determined above.
Regulatory examiners may require the Company to recognize additions to the
allowance based upon their judgments about the information available to them at
the time of their examination.
The Company's allowance for loan losses as of March 31, 1999 was
$1,399,732, a 1.07% reserve on total loans outstanding. This compares to an
allowance of $1,070,515, a 1.08% reserve of total loans outstanding, as of March
31, 1998.
There are currently 15 non-accruing loans totaling $2,002,823 as of March
31, 1999. This compares with non-accruing loans of $1,246,771 as of March 31,
1998. Of the 1999 figure, five (5) loans totaling $778,912 are collateralized
with first mortgages. One loan secured by a first mortgage on a residence is in
the amount of $161,994. The borrower has entered into a stipulation agreement
to make double payments until the loan is brought current. As of this date, the
borrower has met the requirements of the stipulation, and the loan should be
brought current during the second quarter of 1999.
Another non-accrual loan secured by a first mortgage in the amount of
$92,512 was brought current during the first quarter of 1999.
Another non-accrual loan secured by a first mortgage in the amount of
$347,248 is a builder/construction loan on a single-family residence. A
foreclosure suit has been filed; however, in the interim, a sales contract has
been offered. It is anticipated that, if this contract is executed, a
19
<PAGE>
closing would be scheduled for the end of April 1999. The builder has agreed to
sign a deficiency judgment to cover the short-fall should this house sell.
There are two loans totaling $177,158 secured by first mortgages on two
houses to a builder/developer. The houses are 90% complete. These two loans are
currently in the foreclosure process. One house has a foreclosure sale set
during the month of May, and the other house will have a sale during the third
quarter of 1999. It is anticipated that there will be a minimal loss to the
Bank at this time.
There was one unsecured loan in the amount of $2,608 that has been paid
off. There is a second unsecured loan in the amount of $5,773. This loan has
been restructured for minimal monthly payments until such time as the loan is
brought current. There is the potential that a deficiency judgment will be
brought against the borrower to collect on this loan.
There is one loan in the amount of $81,633 secured by business assets and a
custom parasail, boat and trailer. The borrower has entered into a stipulation
agreement, and the loan has been brought current.
There are three loans totaling $810,290 secured by business assets which
have 75-80% guarantees from the Small Business Administration. These three
loans are also secured by a cross-collateralization of mortgages on a personal
residence of the principals. At the same time, there is a fourth loan to the
principals in the amount of $140,839 secured by common stock which is traded on
NASDEC. There is a fifth loan in the amount of $116,685 secured by a second
mortgage on a second personal residence to the principals of the same
corporation. The borrowers have requested a 90-day moratorium of principal and
interest in an attempt to secure private investment funds to bring all loans
current and have working capital in this business. It is anticipated that there
will be a loss to the Bank, which will be determined during the third quarter of
1999.
There is one loan secured by computer equipment in the amount of $6,186.
This is a matured revolving line of credit to a business, which is in the
process of being liquidated. The borrower has agreed to secure this loan by a
second mortgage on their residence. The loan is to be paid out over a five-year
period with no loss anticipated at this time.
There is one loan in the amount of $59,897 secured by an airplane used for
banner towing. An involuntary repossession has been filed, with a public auction
set for May 1999. It is anticipated that there will be minimal loss to the
Bank.
Non-Interest Income
- -------------------
Non-interest income in the first quarter of 1999 increased 15.7% to
$248,901 compared to $215,209 for the same period in 1998. Service charge
income on deposits increased to $27,599 for the first quarter of 1999 compared
to $22,442 for the same period in 1998. Other income on deposit accounts, which
includes collecting penalties on insufficient funds and checks, increased to
$54,663
20
<PAGE>
for the first quarter of 1999 compared to $49,782 for the same time period in
1998. Total other income, which includes income derived from credit cards,
merchant accounts, safe deposit rental fees and wire transfers, increased to
$47,616 through the first quarter of 1999 compared to $42,857 for the same time
period in 1998.
Non-Interest Expense
- --------------------
Operating expenses increased $71,866 to $1,207,981 for the three (3) months
ended March 31, 1999, compared with the same period for 1998, which had
operating expenses of $1,136,115. Personnel expense, consisting of salaries,
other compensation and employment benefits, increased $59,977 over the
aforementioned period. This is a result of additional loan officers being hired
during the third quarter of 1998, along with a support staff for these loan
officers, and annual salary adjustments which went into effect during the first
quarter of this year.
Occupancy expense in the first quarter of 1999 increased 3.4% to $232,064
compared to $224,468 for the same period in 1998. Also, equipment expense,
which is included under occupancy expense, increased $11,485 through the first
quarter of 1999 compared to the same time period in 1998. This is a result of
increased depreciation expense on both software and hardware on new computer
systems, plus the maintenance and repair expense to maintain the computer
systems. The investment in equipment will continue to grow due to the Company's
commitment to maintain state-of-the-art capabilities and computer software
information as it heads toward the year 2000. Conversion activities on the
computer systems for the year 2000 are in process, and the Bank expects the
conversion and testing to be completed by the second quarter of 1999.
Expenditures in 1999 for the year 2000 project have amounted so far to $25,000.
Liquidity
- ---------
The liquidity of a banking institution reflects its ability to provide
funds to meet loan requests, to accommodate possible outflows in deposits and to
take advantage of interest rate market opportunities. Funding of loan requests,
providing for liability outflows, and management of interest rate fluctuations,
require continuous analysis in order to match the maturities of specific
categories of specific short-term loans and investments with specific types of
deposits and borrowings. The objective of liquidity management is to maintain a
balance between sources and uses of funds such that the cash flow needs of the
Company are met in the most economical manner. On the asset side, the Company's
liquidity is provided by Federal funds sold, loan principal repayments, and by
investment securities of which 100% have maturities of five years or less.
Moreover, liquidity is provided by an investment portfolio that is readily
marketable.
Closely related to the concept of liquidity is the management of interest-
earning assets and interest-bearing liabilities, which focuses on maintaining
stability in the net interest spread, an important factor in earnings' growth
and stability. The interest rate volatility of recent years and rate
deregulation have significantly affected the way in which banks manage their
business and have highlighted the importance of asset and liability management.
For the Company, the most important
21
<PAGE>
objectives in assets and liability management include: (1) controlling interest
rate exposure, (2) ensuring adequate liquidity, and (3) maintaining strong
capital foundation.
Capital Resources
- -----------------
On January 27, 1989, the Office of the Comptroller of the Currency ("OCC")
issued an amendment to 12 CFR Part 3 adopting final risk based capital
guidelines for national banks. Developed in conjunction with the Federal Deposit
Insurance Corporation and the Board of Governors of the Federal Reserve System,
these guidelines provide an additional measure of a bank's capital adequacy and
are intended to reflect the relative degree of credit risk associated with
various assets by setting different capital requirements for assets having less
credit risk than others. Banks are required to systematically hold capital
against such off-balance sheet activities as loans sold with recourse, loan
commitments, guarantees and standby letters of credit. The guidelines
strengthen the quality of capital by increasing the emphasis on common equity
and restricting the amount of loss reserves and other forms of equity, such as
preferred stock, that can be counted as capital.
Under the terms of the guidelines, banks must meet minimum capital adequacy
based upon both total assets and risk adjusted assets. To the extent that an
institution has a favorable risk based capital ratio, it would more likely be
permitted to operate at or near minimum primary capital levels. On December 31,
1992, the guidelines took effect in their final form whereupon all banks are
required to maintain a risk based capital ratio of 8.0%. At March 31, 1999, the
Bank had a total risk based capital ratio (i.e. Tier One plus Tier Two capital)
of 10.14% (10.60% for the Company on a consolidated basis). The Bank and the
Company are well capitalized.
The Company stands ready to infuse additional capital into the Bank should
it be warranted.
Impact of Inflation
- -------------------
The condensed consolidated financial statements and related financial data
and notes presented herein have been prepared in accordance with Generally
Accepted Accounting Principles ("GAAP"), which require the measurement of
financial position and operating results in terms of historical dollars, without
considering changes in the relative purchasing power of money over time due to
inflation. Unlike most industrial companies, virtually all of the assets and
liabilities of the Company and the Bank are monetary in nature. As a result,
interest rates have a more significant impact on the performance of the Company
and the Bank than the effects of general price levels. Although interest rates
generally move in the same direction as inflation, the magnitude of such changes
varies.
Competition
- -----------
All areas of the Company's business are highly competitive. The Company
faces heavy competition, both from local and national financial institutions and
from various other providers of
22
<PAGE>
financial services. By industry standards, the Company relies heavily on large
deposit customers. In the opinion of management, this factor is a result of its
customer base and local demographics.
Year 2000 (Y2K)
- ---------------
The Bank is aware of the potential risks involved in its technology-guided
equipment that has been identified by the coming of the year 2000 ("Y2K") The
Board of Directors has been pro-active in appointing a committee and
coordinator, approving a budget and contingency plan for the Y2K. The Board of
Directors monitors the Bank's Y2K progress on a monthly basis.
The Bank does not write its own software or perform programming. Instead,
it uses the services of M&I Data Services, Inc. ("M&I") for customer item
processing, CORE application, ATM services, voice response unit, and other
related Bank services. The other direct software link is with Independent
Bankers' Bank of Florida, a correspondence bank for customer wire transfers and
federal funds transfers. Both of these entities have provided the Bank with
adequate responses to the Bank's inquiries as to the status of their Y2K plans.
Ongoing monitoring will continue until all pieces are in place.
The Bank's Y2K Action Plan consists of five phases: awareness, assessment,
renovation, validation and implementation.
The awareness phase defines the Y2K problem and commits the necessary
resources to perform the required compliance responsibilities. The Bank
has successfully concluded the awareness phase.
The assessment phase requires the Bank to determine the size and complexity
of potential problems. This phase has been completed.
The renovation phase includes software, hardware enhancements, upgrades or
replacements as deemed necessary for Y2K readiness. The Bank has replaced
all computer hardware that was evaluated as impossible to enhance or
upgrade to become Y2K compliant. Computer software has been enhanced or
replaced as necessary.
The validation phase involves testing the renovated or replaced hardware
and software components for Y2K readiness. The Bank is in this validation
stage and will continue until all components are deemed compliant.
The final stage of implementation is the certification of the validation of
Y2K compliancy and the use of the validated resources. As the Bank
completes various stages of the validation stage, the implementation stage
will be completed.
Through the various phases mentioned above, the Bank has identified that
power, telephone, and CORE application are the components that are "mission
critical" to the operation of the Bank
23
<PAGE>
and the standards it has set. The Board of Directors has approved a contingency
plan for each mission critical component. These contingency plans are in line
with the Bank's established disaster contingency plan, and management is
confident of their performance.
The Board of Directors has approved a Y2K budget as prepared by the Y2K
committee in the approximate amount of $70,000. Any substantive increases the
committee deems necessary will be submitted to the Board of Directors for
approval.
The Bank's regulatory agency, the OCC, has frequently visited or telephoned
the Bank's committee coordinator for continual oversight of the Bank's progress
in the Y2K compliancy. The FRB and the Office of Thrift Supervision review the
progress of M&I for assurance that M&I is progressing satisfactorily with M&I's
Y2K action plan.
Accounting Pronouncements
- -------------------------
SFAS No. 131
In June 1997, the FASB issued Statement of Financial Accounting Standards
No. 131, "Disclosure about Segments of an Enterprise and Related Information."
This Statement establishes standards for the way that public business
enterprises report information about operating segments in annual financial
statements and requires that those enterprises report selected information about
operating segments in interim financial reports issued to shareholders. The
Statement is required for fiscal years beginning after December 15, 1997.
The adoption of this standard did not have a significant impact on the
consolidated financial statements.
SFAS No. 133
In June 1998, the FASB issued Statement of Financial Accounting Standards
No. 133, "Accounting for Derivative Instruments and Hedge Activities" (FASB
133). This standard, which is effective for all fiscal quarters and all fiscal
years beginning after June 15, 1999, requires all derivatives be measured at
fair value and be recognized as assets and liabilities in the statement of
financial position. FASB 133 sets forth the accounting for changes in fair
value of a derivative depending on the intended use and designation of the
derivative. Implementation of FASB 133 is not expected to have a significant
impact on the financial position or results of operations of the Company.
SFAS No. 134
In October 1998, the FASB issued Financial Accounting Standards No. 134,
"Accounting for Mortgage-Backed Securities Retained after the Securitization of
Mortgage Loans Held for Sale by a Mortgage Banking Enterprise." This statement
requires that, after the securitization of a
24
<PAGE>
mortgage loan held for sale, an entity engaged in mortgage banking activities
classify the resulting mortgage backed security as a trading security. The
statement is effective for the first fiscal quarter beginning after December 15,
1998. The Company does not expect the adoption of this standard to have any
impact on its consolidated financial statements.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
----------------------------------------------------------
The business of the Company and the composition of its balance sheet
consists of investments in interest-earning assets (primarily loans and
investment securities) which are primarily funded by interest-bearing
liabilities (deposits). Such financial instruments have varying levels of
sensitivity to changes in market interest rates resulting in market risk.
INTEREST RATE RISK MEASUREMENT
Interest rate risk results when the maturity or repricing intervals and
interest rate indices of the interest-earning assets and interest-bearing
liabilities are different. In an attempt to manage its exposure to changes in
interest rates, management monitors the Company's interest rate risk.
Management's asset/liability committee meets monthly to review the Company's
interest rate risk position and profitability, and recommend adjustments for
consideration by the Board of Directors. Management also reviews the Bank's
securities portfolio, formulates investment strategies, and oversees the timing
and implementation of transactions to assure attainment of the Board's
objectives in the most effective manner. Notwithstanding the Company's interest
rate risk management activities, the potential for changing interest rates is an
uncertainty that can have an adverse effect on net income.
In adjusting the Company's asset/liability position, the Board and
management attempt to manage the Company's interest rate risk while enhancing
net interest margins. The rates, terms and interest rate indices of the
Company's interest-earning assets result primarily from the Company's strategy
of investing in loans and securities which permit the Company to limit its
exposure to interest rate risk, together with credit risk, while at the same
time achieving a positive interest rate spread from the difference between the
income earned on interest-earning assets and the cost of interest-bearing
liabilities.
One method of measuring interest rate risk is to determine the earnings-at-
risk for a given change in interest rates which is done on a monthly basis. The
impact on value (earnings) is significant because reduced earnings will affect
capital. The change in interest rates does not necessarily represent an
immediate or parallel shift.
ECONOMIC VALUE OF EQUITY
The interest rate risk ("IRR") component is a dollar amount that is
deducted from total capital for the purpose of calculating an institution's
risk-based capital requirement and is measured in terms of the sensitivity of
its economic value of equity ("EVE") to changes in interest rates. An
25
<PAGE>
institution's EVE is calculated as the net discounted cash flows from assets,
liabilities, and off-balance sheet contracts. An institution's IRR component is
measured as the change in the ratio of EVE to the net present value of total
assets as a result of a hypothetical 200 basis point change in market interest
rates. A resulting decline in this ratio of more than 2% of the estimated
present value of an institution's total assets prior to the hypothetical 200
basis point change will require the institution to deduct from its regulatory
capital 50% of that excess decline. Based on quarterly calculations, the Bank
experienced no such decline.
Although certain assets and liabilities may have similar maturities or
periods to repricing, they may react in different degrees to changes in market
interest rates. Also, the interest rates on certain types of assets and
liabilities may fluctuate in advance of changes in market interest rates, while
interest rates on other types may lag behind changes in market rates.
Additionally, certain assets, such as adjustable-rate mortgage loans, have
features that restrict changes in interest rates on a short-term basis and over
the life of the loan. Further, in the event of a change in interest rates,
prepayment and early withdrawal levels could deviate significantly. Finally,
the ability of many borrowers to service their debt may decrease in the event of
a significant interest rate increase.
The repricing of certain categories of assets and liabilities are subject
to competitive and other pressures beyond the Company's control. As a result,
certain assets and liabilities indicated as maturing or otherwise repricing
within a stated period may in fact mature or reprice at different times and at
different volumes. There were no substantial changes in the Company's
asset/liability position in the quarter ended March 31, 1999.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Neither the Company nor the Bank is involved at this time in any
claims or lawsuits other than routine maters arising out of the normal day-to-
day banking business.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
None.
ITEM 3. DEFAULTS UNDER SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
26
<PAGE>
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
--------
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------
EXHIBIT DESCRIPTION LOCATION
- ----------------------------------------------------------------------------------
<S> <C> <C>
3.2 First Amended and Restated Incorporated by reference from
Bylaws of Commerce National Exhibit 3.2 to the Company's
Corporation effective January 14, Report on Form 10-K for the fiscal
1988 year ended December 31, 1992
- ----------------------------------------------------------------------------------
3.3 First Amendment to First Incorporated by reference from
Amended and Restated Bylaws of Exhibit 3.3 to the Company's
Commerce National Corporation Report on Form 10-Q for the fiscal
dated effective May 26, 1998 quarter ended June 30, 1998
- ----------------------------------------------------------------------------------
3.4 Articles of Restatement of the Incorporated by reference from
Articles of Incorporation of Exhibit 3.4 to the Company's
Commerce National Corporation, Report on Form 10-Q for the fiscal
and Amended and Restated quarter ended June 30, 1998
Articles of Incorporation, filed
June 22, 1998
- ----------------------------------------------------------------------------------
4.1 Specimen copy of common stock Incorporated by reference from
certificate for Common Stock of Exhibit 4.1 to the Company's
Commerce National Corporation Report on Form 10-K for the fiscal
year ended December 31, 1992
- ----------------------------------------------------------------------------------
4.2 Article IV of Articles of Incorporated by reference from
Incorporation of Commerce Exhibit 3.1 to Registration No.
National Corporation included in 2-98960-A
the Articles of Incorporation of
Commerce National Corporation
- ----------------------------------------------------------------------------------
4.3 Stock Redemption/Repurchase Incorporated by reference from
Policy Exhibit 4.3 to the Company's
Report on Form 10-Q for the
fiscal quarter ended June 30, 1993
- ----------------------------------------------------------------------------------
</TABLE>
27
<PAGE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------
EXHIBIT DESCRIPTION LOCATION
- ----------------------------------------------------------------------------------
<S> <C> <C>
10.1 First Amendment to Amended Incorporated by reference from
and Restated 1985 Commerce Exhibit 10.1 to the Company's
National Corporation Directors' Report on Form 10-K for the
Stock Plan dated October 20, fiscal year ended December 31,
1997 1997
- ----------------------------------------------------------------------------------
27 Article 9 Financial Data Schedule Attached
(for SEC use only).
- ----------------------------------------------------------------------------------
</TABLE>
(b) FORM 8-K
--------
No reports on Form 8-K were filed by the Company for the fiscal quarter
ended March 31, 1999.
[BALANCE OF PAGE INTENTIONALLY LEFT BLANK]
28
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
COMMERCE NATIONAL CORPORATION
Dated: May 14, 1999
By:/s/ Guy D. Colado
-----------------------------------------
GUY D. COLADO, President and
Chief Executive Officer
Dated: May 14, 1999
By:/s/ Alan M. Scarboro
-----------------------------------------
ALAN M. SCARBORO,
Secretary/Treasurer
29
<PAGE>
EXHIBIT INDEX
-------------
<TABLE>
<CAPTION>
- ----------------------------------------------------------------
EXHIBIT DESCRIPTION
- ----------------------------------------------------------------
<S> <C>
27 Article 9 Financial Data Schedule (for SEC use only).
- ----------------------------------------------------------------
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) FOR COMMERCE NATIONAL CORPORATION
AND SUBSIDIARY DATED MARCH 31, 1999 AND DECEMBER 31, 1998.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 5,984,619
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 800,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 14,386,878
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 130,489,745
<ALLOWANCE> 1,399,732
<TOTAL-ASSETS> 159,041,027
<DEPOSITS> 138,572,475
<SHORT-TERM> 2,129,357
<LIABILITIES-OTHER> 609,068
<LONG-TERM> 4,528,593
0
0
<COMMON> 74,282
<OTHER-SE> 13,127,252
<TOTAL-LIABILITIES-AND-EQUITY> 159,041,027
<INTEREST-LOAN> 2,737,262
<INTEREST-INVEST> 205,183
<INTEREST-OTHER> 40,991
<INTEREST-TOTAL> 2,983,436
<INTEREST-DEPOSIT> 1,233,260
<INTEREST-EXPENSE> 1,333,343
<INTEREST-INCOME-NET> 1,650,093
<LOAN-LOSSES> 74,881
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 1,207,981
<INCOME-PRETAX> 616,132
<INCOME-PRE-EXTRAORDINARY> 616,132
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 385,480
<EPS-PRIMARY> 0.53
<EPS-DILUTED> 0.53
<YIELD-ACTUAL> 0.045
<LOANS-NON> 2,002,823
<LOANS-PAST> 0
<LOANS-TROUBLED> 864,091
<LOANS-PROBLEM> 1,693,782
<ALLOWANCE-OPEN> 1,323,143
<CHARGE-OFFS> 292
<RECOVERIES> 2,000
<ALLOWANCE-CLOSE> 1,399,732
<ALLOWANCE-DOMESTIC> 1,399,732
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 903,378
</TABLE>
