<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(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, 2000
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _________ to _________
Commission file number 1-13213
-------
PREMIER NATIONAL BANCORP, INC.
------------------------------
(Exact name of registrant as specified in its charter)
New York 14-1668718
- ------------------------------ ---------------------------
(State or other jurisdiction of (I.R.S. Employer)
incorporation or organization) Identification No.)
PO Box 310, 1100 Route 55, Lagrangeville, NY 12540
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(914)471-1711
- -------------
(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
------- ------
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
15,835,733 shares of Common Stock outstanding, par value $.80 per share, at
April 28, 2000.
<PAGE>
PREMIER NATIONAL BANCORP, INC. & SUBSIDIARIES
INDEX
Page Reference
--------------
PART I
Item 1 - Financial Statements
Condensed Consolidated Balance Sheets 1
Condensed Consolidated Statements
of Income and Expense 2
Condensed Consolidated Statements
of Cash Flows 3
Condensed Consolidated Statements
of Changes in Stockholders' Equity 4
Condensed Consolidated Statements of
Comprehensive Income 5
Notes to Unaudited Condensed Consolidated
Financial Statements 6
Item 2 - Management's Discussion and Analysis of
Financial Condition and Results of Operations 11
Item 3 - Quantitative and Qualitative Disclosures About
Market Risk 29
PART II -Other Information
Item 6 - Exhibits and Reports on Form 8-K 30
Exhibit Index 31
Signatures 32
<PAGE>
Part 1
Item 1: Financial information
PREMIER NATIONAL BANCORP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(dollars in thousands)
(Unaudited)
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
<S> <C> <C>
ASSETS
Cash and due from banks $34,703 $46,889
Federal funds sold 25,557 31,782
------- -------
Total cash and cash equivalents 60,260 78,671
Securities
Available for sale, at fair value 431,848 452,025
Held to maturity, at cost, (fair value of $18,386 in 2000 18,277 17,014
and $17,168 in 1999)
Regulatory securities (at cost which approximates fair value) 9,726 9,726
Gross loans 1,008,023 993,821
Allowance for loan losses (21,785) (21,786)
------- -------
Net loans 986,238 972,035
Premises and equipment, net 26,507 26,982
Accrued income 12,337 12,111
Deferred Taxes 16,149 16,024
Other real estate owned 1,307 1,369
Intangible assets, net 4,704 4,992
Other assets 2,778 4,717
------------------------------
TOTAL ASSETS $1,570,131 $1,595,666
==============================
LIABILITIES AND STOCKHOLDERS' EQUITY
Non-interest bearing $246,149 $252,166
Interest bearing 1,099,647 1,115,613
------------------------------
Total deposits 1,345,796 1,367,779
Notes payable 75,000 75,300
Other liabilities 10,973 10,549
------------------------------
TOTAL LIABILITIES 1,431,769 1,453,628
STOCKHOLDERS' EQUITY (see notes)
Preferred stock
($.01 par value; 5,000,000 shares authorized; none issued -- --
in 2000 and 1999)
Common stock ($.80 par value; 50,000,000 shares authorized) 13,155 13,142
16,443,894 shares issued in 2000 and 16,429,226 shares
issued in 1999
Additional paid-in capital 95,743 95,755
Retained earnings 42,546 39,789
Accumulated other comprehensive loss (7,057) (6,581)
Treasury stock, at cost, (441,761 shares in 2000 and 3,600 (6,025) (67)
shares in 1999)
------------------------------
TOTAL STOCKHOLDERS' EQUITY 138,362 142,038
------------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $1,570,131 $1,595,666
==============================
</TABLE>
See notes to condensed consolidated financial statements.
-1-
<PAGE>
PREMIER NATIONAL BANCORP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND EXPENSE
(dollars in thousands)
(Unaudited)
<TABLE>
<CAPTION>
Three Three
Months Ended Months Ended
03/31/00 03/31/99
---------------------------------------
<S> <C> <C>
Interest income:
Loans, including fees $21,011 $20,483
Federal funds sold 298 902
Taxable securities 5,672 4,568
Tax-exempt securities 1,185 938
---------------------------------------
Total interest income 28,166 26,891
Interest expense 12,243 10,669
---------------------------------------
Net interest income 15,923 16,222
Provision for loan losses 300 1,000
---------------------------------------
Net interest income
after provision for loan losses 15,623 15,222
---------------------------------------
Noninterest income:
Service charges and fees 2,094 1,962
Trust earnings 317 263
Gains on sales of securities, net (1) 76
Gains on sales of loans, net 11 66
Other income 173 265
---------------------------------------
Total noninterest income 2,594 2,632
---------------------------------------
GROSS OPERATING INCOME 18,217 17,854
---------------------------------------
Noninterest expense:
Salaries and employee benefits 5,288 5,709
Net occupancy and equipment expense 1,847 1,755
Other real estate owned 36 20
Other expenses 3,203 2,984
---------------------------------------
Total noninterest expense 10,374 10,468
---------------------------------------
Income before income taxes 7,843 7,386
Income taxes 2,565 2,654
---------------------------------------
Net income $5,278 $4,732
=======================================
Weighted average common shares outstanding (1)
Basic 16,247,600 17,275,500
Diluted 16,364,900 17,594,500
Per common share data:
Basic earnings $0.32 $0.27
Diluted earnings $0.32 $0.27
Cash dividends declared $0.15 $0.12
Book value at period end $8.65 $8.98
</TABLE>
(1) Adjusted for 10% Stock Dividend declared December 1999.
See notes to consolidated financial statements.
-2-
<PAGE>
PREMIER NATIONAL BANCORP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in thousands)
(Unaudited)
<TABLE>
<CAPTION>
Three
Months Ended
OPERATING ACTIVITIES 03/31/00 03/31/99
--------- --------
<S> <C> <C>
Net income $5,278 $4,732
Adjustment to reconcile net income to net
cash provided by operating activities:
Provision for loan losses 300 1,000
Depreciation and amortization 707 776
Amortization of security premiums and
accretion of discounts 107 157
Amortization of goodwill/core deposit intangible/acquisition costs 365 380
Realized gains on sales of securities and loans (10) (142)
Gains on sale of premises and equipment 0 (216)
Deferred income tax benefits 105 (2,510)
Increase in accrued income (226) (2,774)
Other, net 2,354 6,937
-------------------------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 8,980 8,340
-------------------------------
INVESTING ACTIVITIES
Proceeds from sales of securities available for sale 14,018 6,107
Proceeds from maturities of securities available for sale 5,452 36,309
Proceeds from maturities of securities held to maturity 1,135 --
Purchases of securities available for sale (142) (104,304)
Purchases of securities held to maturity (2,363) (2,892)
Sale of loans 810 780
Net (increase) decrease in loans (15,302) 11,529
Purchase of premises and equipment (232) (72)
Proceeds from sales of premises and equipment 0 597
Proceeds from sale of OREO 62 --
-------------------------------
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES 3,438 (51,946)
-------------------------------
FINANCING ACTIVITIES
Net decrease in DDA/MM/NOW/Sav. Accounts (8,163) (42,932)
Net increase (decrease) in other time deposits (13,820) 861
Proceeds from issuance of common stock from treasury 512 1,270
Repurchase of common stock (6,599) (6,328)
Repayment of borrowings (300) (1,725)
Cash dividends-common (2,459) (2,040)
-------------------------------
NET CASH USED IN FINANCING ACTIVITIES (30,829) (50,894)
-------------------------------
DECREASE IN CASH AND CASH EQUIVALENTS (18,411) (94,500)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 78,671 174,330
-------------------------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $60,260 $79,830
===============================
CASH PAID FOR:
Interest $12,193 $10,480
Taxes 0 1,230
NON-CASH ITEMS
Transfer from loans to OREO 34 289
Net change in unrealized gains (losses) recorded
on securities available for sale 706 2,095
Change in deferred taxes on unrealized (gains)
losses recorded on securities available for sale (230) (870)
</TABLE>
See notes to condensed consolidated financial statements.
-3-
<PAGE>
PREMIER NATIONAL BANCORP, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY
(dollars in thousands, except per share data)
(unaudited)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
Accumulated
Additional Other
Common Paid-in Retained Comprehensive Treasury
Stock Capital Earnings Loss Stock Total
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance January 1, 2000 $13,142 $95,755 $39,789 ($6,581) ($67) $142,038
Net Income 5,278 5,278
Cash dividends declared on common stock ($0.15 per share) (2,391) (2,391)
Adjustment on final issuance of 10% stock dividend 13 (13) 0
Dividend reinvestment and stock purchase plan - 24,943 shares 375 375
Options exercised - 17,062 shares 149 149
Cash in lieu issued for fractional shares (12) (12)
Effect of Treasury stock issued at less than cost (117) 117 0
Purchase of treasury stock - 479,581 shares (6,599) (6,599)
Net change in unrealized loss on securities, after tax (476) (476)
---------------------------------------------------------------------
Balance March 31, 2000 $13,155 $95,743 $42,546 ($7,057) ($6,025) $138,362
=====================================================================
Balance January 1, 1999 $12,558 $84,492 $57,621 $1,521 ($38) $156,154
Net Income 4,732 4,732
Cash dividends declared on common stock($0.118 per share) (2,005) (2,005)
Dividend reinvestment and stock purchase plan - 18,796 shares 14 285 299
Options exercised - 90,571 shares 48 749 185 982
Cash in lieu issued for fractional shares (11) (11)
Effect of Treasury stock issued at less than cost (188) 188 0
Purchase of treasury stock - 347,966 shares (6,328) (6,328)
Net change in unrealized gain on securities, after tax (1,225) (1,225)
---------------------------------------------------------------------
Balance March 31, 1999 $12,620 $85,515 $60,160 $296 ($5,993) $152,598
=====================================================================
</TABLE>
See notes to condensed consolidated financial statements
-4-
<PAGE>
PREMIER NATIONAL BANCORP, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(dollars in thousands)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
Three months ended March 31,
2000 1999
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net Income $ 5,278 $ 4,732
Other Comprehensive loss:
Net unrealized losses on securities:
Net unrealized holding losses
arising during year, net of taxes of
($192) and ($441) (593) (1,297)
Less reclassification adjustment for losses included in net income:
net of taxes of ($56) and ($37) 117 72
----------------- -----------------
Other comprehensive loss (476) (1,225)
----------------- -----------------
COMPREHENSIVE INCOME $ 4,802 $ 3,507
================= =================
</TABLE>
See notes to consolidated financial statements
-5-
<PAGE>
FORM 10-Q
PREMIER NATIONAL BANCORP, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Basis of Presentation
- ---------------------
The unaudited condensed consolidated financial statements and related notes of
Premier National Bancorp, Inc. (the "Company") have been prepared in accordance
with Regulation S-X under the Securities Exchange Act of 1934, as amended, and
consequently do not contain all disclosures required by generally accepted
accounting principles. The condensed consolidated financial statements include
the Company's wholly owned subsidiary, Premier National Bank and its
subsidiaries (the "Bank"). These interim financial statements should be read in
conjunction with the Company's audited consolidated financial statements and
note disclosures in the Annual Report on Form 10-K for the year ended December
31, 1999.
In the opinion of management, the accompanying unaudited condensed consolidated
financial statements contain all adjustments (consisting only of normal
recurring accruals) necessary to present fairly the Company's consolidated
financial position as of March 31, 2000 and December 31, 1999 and its
consolidated results of operations, comprehensive income, cash flows and changes
in stockholders' equity for the three months ended March 31, 2000 and 1999.
In preparing such financial statements, management is required to make estimates
and assumptions that affect the reported amounts of assets and liabilities as of
the dates of the consolidated statements of condition and the revenues and
expenses for the periods reported. Actual results could differ significantly
from those estimates.
Estimates that are particularly susceptible to significant change relate to the
determination of the adequacy of the allowance for loan losses and the valuation
of other real estate acquired in connection with foreclosures or in satisfaction
of loan receivables. In connection with the determination of the balances of the
allowance for loan losses and other real estate owned, management obtains
independent appraisals for significant properties, according to Bank policy or
regulation.
The results of operations for the three months ended March 31, 2000 are not
necessarily indicative of the results to be expected for the full year.
Material intercompany items and transactions have been eliminated in
consolidation. Certain reclassifications have been made to conform to the
current presentation.
Forward-Looking Statements
- --------------------------
The Company has made, and may continue to make, various forward-looking
statements with respect to earnings, credit quality and other financial and
business matters for the remainder of 2000 and, in certain instances, subsequent
periods. The Company cautions that these forward-looking statements are subject
to numerous assumptions, risks and uncertainties, and that statements for
subsequent periods are subject to greater uncertainty because of the increased
likelihood of changes in underlying factors and assumptions. Actual results
could differ materially from forward-looking statements.
6
<PAGE>
In addition to those factors previously disclosed by the Company and those
factors identified elsewhere herein, the following factors could cause actual
results to differ materially from such forward-looking statements: pricing
pressures on loan and deposit products; level of prepayments of loans; actions
of competitors; changes in economic conditions; the extent and timing of actions
of the Federal Reserve Board; customer deposit disintermediation; changes in
customers' acceptance of the Company's products and services; other normal
business risks such as credit losses, litigation, etc.; continued increases in
the levels of nonperforming assets; the extent and timing of legislative and
regulatory actions and reform, estimated cost savings from recent or anticipated
acquisitions and mergers cannot be fully realized within the expected time
frame, revenues following such transactions are lower than expected, and costs
or difficulties related to the integration of acquired and existing businesses
are greater than expected.
The Company's forward-looking statements speak only as of the date on which such
statements are made. By making any forward-looking statements, the Company
assumes no duty to update them to reflect new, changing or unanticipated events
or circumstances.
7
<PAGE>
Loans
- -----
Major classifications of loans are summarized below (in thousands):
<TABLE>
<CAPTION>
At March 31, 2000 At December 31, 1999
----------------- --------------------
<S> <C> <C>
Commercial and industrial $127,826 $118,492
Consumer installment 140,691 138,256
Real estate - construction 62,158 62,596
Real estate - mortgage (Commercial) 267,170 260,998
Real estate - mortgage 407,511 408,240
(Residential & Home Equity)
Other loans 2,667 5,239
---------- --------
Total $1,008,023 $993,821
========== ========
Deposits
- --------
Major classifications of deposits are summarized below (in thousands):
<CAPTION>
At March 31, 2000 At December 31, 1999
----------------- --------------------
Demand deposits $246,149 $252,166
NOW accounts 58,077 53,045
Money market deposit accounts 272,647 271,518
Savings accounts 240,439 248,746
Time deposits under $100,000 334,388 338,600
Time deposits over $100,000 194,096 203,704
---------- ----------
Total $1,345,796 $1,367,779
========== ==========
</TABLE>
8
<PAGE>
Securities
- ----------
Securities consist of the following (in thousands):
<TABLE>
<CAPTION>
At March 31, 2000 At December 31, 1999
------------------------------------- -------------------------------------
Carrying Amortized Fair Carrying Amortized Fair
Amount Cost Value Amount Cost Value
------------ ------------ ----------- ------------ ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
US Treasury:
Available for Sale $19,898 $20,194 $19,898 $33,975 $34,255 $33,975
US Gov't Agencies:
Available for Sale 78,018 79,507 78,018 80,164 81,558 80,164
Obligations of States and
Political Subdivisions:
Available for Sale 136,146 140,596 136,146 136,443 140,786 136,443
Held to Maturity 17,402 17,402 17,511 16,139 16,139 16,293
Mortgage Backed Securities:
Available for Sale 38,536 39,218 38,536 41,539 42,019 41,539
Other Debt Securities:
Available for Sale 158,987 163,942 158,987 159,625 164,311 159,625
Held to maturity 75 75 75 75 75 75
Equity Securities:
Available for Sale 263 257 263 279 257 279
Held to Maturity 800 800 800 800 800 800
Regulatory Securities 9,726 9,726 9,726 9,726 9,726 9,726
-------------------------------------------------------------------------------
Total Securities $459,851 $471,717 $459,960 $478,765 $489,926 $478,919
===============================================================================
Total Available for Sale $431,848 $443,714 $431,848 $452,025 $463,186 $452,025
Total Held to Maturity 18,277 18,277 18,386 17,014 17,014 17,168
Regulatory Securities 9,726 9,726 9,726 9,726 9,726 9,726
-------------------------------------------------------------------------------
Total Securities $459,851 $471,717 $459,960 $478,765 $489,926 $478,919
===============================================================================
</TABLE>
At March 31, 2000 and December 31, 1999, the net unrealized loss on securities
available for sale (net of tax benefit) of $4,809,000 and $4,580,000,
respectively) that was included in accumulated other comprehensive loss, a
separate component of stockholders' equity, was $(7,057,000) and ($6,581,000),
respectively. Gross realized gains (losses) were $2,000 and ($3,000),
respectively, for the three months ended March 31, 2000.
9
<PAGE>
Earnings per common share 1999 data has been adjusted for the 10% stock dividend
- -------------------------
which the Company declared in December 1999.
Basic earnings per common share is computed as follows (in thousands, except per
share data):
Three months ended
March 31,
--------
2000 1999
---- ----
Weighted average common shares
outstanding 16,248 17,276
====== ======
Total basic shares 16,248 17,276
====== ======
Net income $5,278 $4,732
====== ======
Basic earnings per common share $0.32 $0.27
===== =====
Diluted earnings per common share is computed as follows (in thousands, except
per share data):
Three months ended
March 31,
--------
2000 1999
---- ----
Weighted average common shares
outstanding 16,248 17,276
Effect of dilutive stock options 117 319
------ ------
Total diluted shares 16,365 17,595
====== ======
Net income $5,278 $4,732
====== ======
Diluted earnings per common share $0.32 $0.27
===== =====
Stockholders' Equity
- --------------------
Issued and outstanding shares (net of treasury shares of 441,761 and 3,600) at
March 31, 2000 and December 31, 1999, were 15,993,533 and 16,425,626,
respectively. The Company purchased approximately 479,581 treasury shares during
the first three months of 2000 and reissued 42,005 shares through its dividend
reinvestment plan and stock option exercises. The Company paid a 10% stock
dividend in January 2000 which increased common shares outstanding by 1.4
million. (All 1999 share data has been accordingly restated in the condensed
consolidated balance sheets, statements of income and expense and Stockholders'
Equity.)
10
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Financial Condition
- -------------------
Total assets of the Company decreased slightly to $1,570.0 million at March 31,
2000, from $1,596.0 million at December 31, 1999. Decreases in securities of
$18.9 million to $459.9 million at March 31, 2000 and declines in cash and cash
equivalents of $18.4 million to $60.3 million were offset partially by increases
in net loans of $14.2 million to $986.2 million.
In the first three months of 2000 the Bank originated $63.1 million of new
loans. Amortization, prepayments and sales into the secondary market were $48.9
million resulting in a net increase from year end 1999 in gross loans
outstanding of $14.2 million at March 31, 2000. The net increase in commercial
mortgages of $6.2 million or 2.4%, commercial and industrial of $9.3 million or
7.9%, and consumer installment loans of $2.4 million or 1.8% was partially
offset by declines in residential mortgage loans (including home equity) of $.7
million or .2%, real estate construction of $.4 million or .7%, and other loans
of $2.6 million or 49.0%. As of March 31, 2000, the Company held approximately
$183.8 million in adjustable rate first lien mortgage loans that are scheduled
to reprice during the remainder of 2000. Although interest rates on fixed rate
mortgage loans have risen recently, customers may still choose to refinance to a
long-term fixed rate mortgage in lieu of maintaining an adjustable rate
mortgage. The Company continues its practice of not retaining significant
balances in long-term fixed rate mortgages in its portfolio. Therefore,
residential mortgage balances may continue to decline as prepayments,
refinancing and sales into the secondary market are expected to exceed new
originations. While the Company continues to emphasize its competitive
advantages in business banking, it also seeks to increase its mortgage and home
equity loan originations and to mitigate the runoff of residential mortgages
through active solicitation of residential mortgage borrowers identified as more
likely to refinance their balances. The interest earned on refinanced loans may
be lower than that currently earned on the existing loans.
Period end total deposits decreased $22.0 million in the first three months of
2000 to $1,345.8 million. Of this amount, total Public (Municipal) Funds
increased $7.4 million or 5.0% to $154.3 million and total non-public funds
decreased by $29.4 million or 2.4% to $1,191.5 million. The declines in
non-public deposit balances principally reflect both seasonal factors as well as
the Company's account pricing policies and management of interest expense paid
on deposits. As a result, some customers seeking the highest rates paid by
competitor institutions or unwilling to pay the Company's fees on lower balances
may withdraw some or all of their account balances.
11
<PAGE>
The following tables summarize the net changes in public (municipal) fund and
non-public fund deposits from December 31, 1999 to March 31, 2000 (in
thousands):
PUBLIC FUNDS
<TABLE>
<CAPTION>
Percent
Change
Balance Balance Net over
12/31/99 3/31/00 Change Y/E`99
-------------------------------------------------------------------
<S> <C> <C> <C> <C>
Demand accounts $3,434 $4,655 $1,221 35.6%
NOW accounts 11,841 12,621 780 6.6
Money market accounts 14,185 26,439 12,254 86.4
Savings accounts 3,541 2,594 (947) (26.7)
Time deposits 113,923 107,994 (5,929) (5.2)
-------------------------------------------------------------------
Total public deposits $146,924 $154,303 $7,379 5.0%
===================================================================
</TABLE>
Public funds balances increased in the first three months of 2000 due
principally to seasonal factors (tax collections).
NON PUBLIC FUNDS
<TABLE>
<CAPTION>
Percent
Change
Balance Balance Net over
12/31/99 3/31/00 Change Y/E`99
------------------------------------------------------------------
<S> <C> <C> <C> <C>
Demand accounts $248,732 $241,494 $(7,238) (2.9)%
NOW accounts 41,204 45,456 4,252 10.3
Money market accounts 257,333 246,208 (11,125) (4.3)
Savings accounts 245,205 237,845 (7,360) (3.0)
Time deposits 428,381 420,490 (7,891) (1.8)
------------------------------------------------------------------
Total non public deposits $1,220,855 $1,191,493 $(29,362) (2.4)%
==================================================================
</TABLE>
Non-public deposits declined $29.4 million compared to December 31, 1999. The
decrease in demand accounts reflects the historical seasonality experienced by
the Bank. Money market, savings and time deposit declines reflect both seasonal
factors and the highly competitive pricing being offered by many financial
institutions and competition for savings dollars with other investment markets,
especially the equity markets. In this regard, a portion of the Bank's decline
in deposit balances is attributable to purchases of mutual funds and annuities
sold by the Bank's relationship managers. It is expected that these sales will
continue as part of the Bank's personal relationship manager program.
12
<PAGE>
Consolidated stockholders' equity at March 31, 2000 was $138.4 million, down
$3.74 million over year end 1999, primarily due to the purchase of approximately
479,581 shares of Treasury stock during the first three months of 2000 ($6.6
million) and by the increase of $.5 million in accumulated other comprehensive
loss due to changes in the net unrealized gains and losses, after tax, in the
market value of available for sale securities. These changes were partially
offset by the Company's net retention of earnings for the first three months of
the year of $2.9 million and by $.5 million of stock issuance proceeds from the
Company's stock option and dividend reinvestment plans. The ratio of
stockholders' equity to total assets remained strong at March 31, 2000 standing
at 8.8%, compared to 8.9% at December 31, 1999. Tier I capital to average assets
was 9.0% and 9.3% at March 31, 2000 and December 31, 1999, respectively.
Results of Operations
- ---------------------
Interest income as reported, for the three months ended March 31, 2000, compared
to the same period in 1999, increased $1.3 million or 4.7% while interest
expense increased by $1.6 million or 14.8%. This resulted in a decrease in net
interest income of $.3 million or 1.8%. The provision for loan losses decreased
by $.7 million. Total non-interest income decreased $38,000 or 1.4%. Total
noninterest expenses decreased by $94,000 or .97% from the first three months of
1999. Net income after tax increased by $.5 million or 11.5% to $5.3 million.
Diluted earnings per common share increased to $.32 for the three months of 2000
compared to $.27 for 1999, or 18.5%.
The net income and earnings per common share data and annualized returns on
average assets and equity is summarized below:
<TABLE>
<CAPTION>
Three months ended
------------------
3/31/00 3/31/99
------- -------
<S> <C> <C>
Net income (in thousands) $5,278 $4,732
Per common share:*
Basic earnings 0.32 0.27
Diluted earnings 0.32 0.27
Return on average assets 1.35 1.23
Return on average stockholders' equity 14.95 12.26
</TABLE>
* Adjusted for the 10% stock dividend declared December 1999.
13
<PAGE>
Interest income
- ---------------
On a tax equivalent basis, gross interest income increased by $1.4 million or
5.3% for the three months ended March 31, 2000 compared to the same period in
1999, due principally to the increase in average earning assets of $46.3
million. Average loans increased by $35.8 million, average securities increased
$65.1 million and average federal funds sold decreased by $54.7 million.
Total interest expense increased by $1.6 million or 14.8% for the three month
period ended March 31, 2000 as compared to the three months ended March 31, 2000
due to higher interest rates paid on deposits and an increase in average
borrowed funds of $74.0 million.
Average yields on interest earning assets increased (15 basis points) to 7.74%
for the three months ended March 31, 2000 vs. 7.59% as of the same period in
1999 reflecting both increases in yields on taxable securities, fed funds sold
and tax-exempt securities. These increases were partially offset by a decline in
average yield on loans. However, average interest bearing liability rates paid
increased (46 basis points) to 4.18% for the three months ended March 31, 2000
vs. 3.72% for the three months ended March 1999 due primarily to the upward
pressure on interest rates, and the effect (12 basis points on the average cost
of interest-bearing liabilities) of $74.0 million increase in borrowed funds at
an average cost of 6.03%. These borrowed funds were employed primarily in the
increase in securities noted above. Accordingly, net interest margins on a tax
equivalent basis decreased to 4.45% for the three months ended March 31, 2000
compared to 4.63% in 1999. Variances due to changes in rates (primarily higher
deposit costs) produced a $364 thousand overall decrease in net interest income
in the three months of 2000 compared to the same period in 1999. The increase in
average earning assets and liabilities principally contributed to a $65 thousand
volume related increase in net interest income over the same period. The net
effect was that net interest income before provisions for loan losses was $15.9
million for the three months ended March 31, 2000 compared to $16.2 million for
the comparable period in 1999, a decrease of $299,000 or (1.8%). Prior to the
effects of tax equivalent adjustments, net interest income was down only
$132,000. The $167,000 effect from tax savings utilizing tax exempt income is
directly offsetting tax expense. The Bank continues to utilize tax saving
strategies to enhance its overall net income.
14
<PAGE>
The table below sets forth the consolidated average balance sheets for the
Company for the periods indicated. Also set forth is information regarding
weighted average yields on interest-earning assets and weighted average rates
paid on interest-bearing liabilities (dollars in thousands).
<TABLE>
<CAPTION>
Three Months Ended March 31,
2000 1999
---- ----
Average Interest Yield/ Average Interest Yield/
Balance Cost Balance Cost
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Interest-earning assets:
Loans (1) $1,000,427 $21,011 8.40% $964,610 $20,483 8.49%
Taxable Securities 367,129 5,672 6.18 323,771 4,568 5.64
Tax-exempt Securities (2) 98,902 1,823 7.37 77,116 1,409 7.31
Fed Funds Sold 21,622 298 5.51 76,282 902 4.73
------ --- ------ ---
Total Interest Earning Assets 1,488,080 28,804 7.74 1,441,779 27,362 7.59
NonInterest Earning Assets:
Cash & Due from Banks 36,421 55,793
Premises & Equipment 26,792 28,342
Other Assets 37,208 29,845
Allowance for Loan Losses (21,844) (21,009)
-------- ------ --------- -------
Total Assets $1,566,657 $28,804 7.35 $1,534,750 $27,362 7.13
========== ======= ========== =======
LIABILITIES AND STOCKHOLDERS' EQUITY:
Interest-Bearing Liabilities:
Savings Deposits $242,744 $1,601 2.64% $296,295 $2,019 2.73%
NOW Accounts 56,751 155 1.09 62,219 155 1.00
Money Market Accounts 270,715 2,535 3.75 320,831 2,829 3.53
Other Time Deposits 525,296 6,821 5.19 466,068 5,652 4.85
Borrowed Funds 75,010 1,131 6.03 1,035 14 5.41
--------- ------ --------- ------
Total Interest-Bearing Liabilities 1,170,516 12,243 4.18 1,146,448 10,669 3.72
Noninterest-Bearing Liabilities:
Demand Deposits 244,135 223,080
Other 10,758 3.44 10,845 3.09
------ ------
Total Noninterest-Bearing 254,893 233,925
Liabilities
Stockholders' Equity 141,248 154,377
------- -------
Total Liabilities and
Stockholders' Equity $1,566,657 12,243 $1,534,750 10,669
========== ------ ========== ------
Net Interest Margin 16,561 4.45 16,693 4.63
Less Tax Equivalent Adjustments (638) (471)
------- -------
Net Interest Income $15,923 4.28% $16,222 4.50%
======= ==== ======= ====
Excess of interest earning assets
over interest bearing liabilities $317,564 $295,331
======== ========
Ratio of Average Interest-Earning
Assets to Average
Interest-Bearing Liabilities 127.13% 125.76%
======== ========
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Average Balances include non-accrual loans.
(2) Tax Equivalent Yields on tax-exempt securities based on a Federal tax rate
of 35%.
15
<PAGE>
The table below details the changes in interest income and interest expense for
the period indicated due to both changes in average outstanding balances and
changes in average interest rates:
Rate/Volume Analysis (in thousands)
<TABLE>
<CAPTION>
Three Months Ended March 31,
2000 vs. 1999
-----------------------------------------------------------------
Increase (Decrease) due to
-----------------------------------------------------------------
Volume Rate Net(1)
------ ---- ---
<S> <C> <C> <C>
Interest Income:
Loans $760 ($232) $528
Taxable investment securities 611 493 1,104
Tax-exempt investment(2) securities 398 16 414
Federal funds sold (646) 42 (604)
-------------- --------------- --------------
Total interest income 1,123 319 1,442
Interest expense:
Savings deposits (365) (53) (418)
NOW/accounts (14) 14 -
Money market accounts (442) 148 (294)
Other Time Deposits 718 451 1,169
Borrowed funds 1,001 116 1,117
-------------- --------------- --------------
Total interest expense 898 676 1,574
-------------- --------------- --------------
Net interest margin 225 (357) (132)
Less tax equivalent effect (161) (6) (167)
-------------- --------------- --------------
Net interest income $65 ($363) ($299)
=== ====== ======
</TABLE>
(1) The change in interest due to both rate and volume has been allocated to
volume and rate changes in proportion to the relationship of the absolute
dollar amounts of the change in each to the total change.
(2) Yields on tax exempt securities based on a Federal tax rate of 35%.
Provision for loan losses and credit quality
- --------------------------------------------
Provisions for loan losses are based on management's assessment of risk of loss
inherent in the loan portfolio and as such reflect, among other things, both
trends in local economic conditions and the categorization of the credit quality
of individual loans. Such assessment is ongoing, and may not directly reflect
the charge-offs taken in any accounting period, although the trend in
charge-offs is an important element in the evaluation of the adequacy of the
allowance for loan losses.
16
<PAGE>
The provision for loan losses decreased from $1.0 million in 1999 to $.3 million
in 2000.
Net charge-offs for the first three months of 2000 were $301,000 compared to
$728,000 for the same period in 1999. The ratio of net chargeoffs to average
loans, on an annualized basis, decreased to .12% in the first three months of
2000 vs. .32% for the same period of 1999.
Total non-performing assets were approximately $10.2 million at the end of March
2000, down $1.9 million from $12.1 million at March 1999. Period end
non-performing loans of $8.9 million at March 2000 were down $2.3 million from
March 1999 but were up $1.4 million over the December 31, 1999 level of $7.5
million. OREO balances were up $.4 million from March 31, 1999 but were down $.1
million from December 31, 1999 levels.
Nonperforming assets represent 135 loans or OREO properties of which on1y 7 have
balances in excess of $300,000 of which one loan has a balance of $1.5 million
and is secured by real estate, and another is an OREO property with a balance of
$500,000. Of the total nonperforming loans, 32% are collateralized by
residential property, 52% by commercial property, and 16% by other assets or
unsecured.
Management believes that the allowance for loan losses is adequate to cover the
risk of loss inherent in the portfolio. However, no assurance can be given that
the very favorable current economic conditions of the Company's overall market
area will not be unsettled by future events. Any such developments would be
expected to adversely affect the financial performance of the Company.
17
<PAGE>
The table below summarizes the Company's allowance for loan losses and its loan
loss experience for the periods indicated (dollars in thousands):
<TABLE>
<CAPTION>
For the three months For the year
ended March 31, ended December 31,
2000 1999 1999 1998 1997
---- ---- ---- ---- ----
------------------------- ------------------------------------
<S> <C> <C> <C> <C> <C>
Balance at beginning of period $21,786 $21,270 $21,270 $19,331 $18,533
Chargeoffs:
Commercial & industrial 160 28 368 406 1,448
Consumer installment & other 386 377 1,461 1,620 1,146
Real estate mortgage 172 461 1,308 3,344 2,164
------------------------- ------------------------------------
Total charge-offs 718 866 3,137 5,370 4,758
Recoveries:
Commercial & industrial 152 20 322 462 164
Consumer installment & other 235 118 533 481 160
Real estate mortgage 30 - 798 437 757
------------------------- ------------------------------------
Total recoveries 417 138 1,653 1,380 1,081
------------------------- ------------------------------------
Net charge-offs (301) (728) (1,484) (3,990) (3,677)
Provision for loan losses 300 1,000 2,000 5,929 4,475
----------- ------------- ----------- ---------- -------------
Balance at end of period $21,785 $21,542 $21,786 $21,270 $19,331
========================= ====================================
Ratio of net charge-offs to average
loans outstanding during the period
(annualized)
.12% .32% .15% .40% .35%
Allowance for loan losses as a
percent of period-end loans 2.16% 2.24% 2.19% 2.18% 1.85%
Allowance as a percent of
non-performing loans 245% 192% 290% 226% 214%
Nonperforming loans and OREO
to total loans and OREO 1.01% 1.25% .89% 1.03% 1.00%
</TABLE>
18
<PAGE>
The table below summarizes the Company's nonperforming assets and restructured
loans at the dates indicated (dollars in thousands):
<TABLE>
<CAPTION>
At March 31, At December 31,
------------ ---------------
2000 1999 1999 1998 1997
---------------------------- -----------------------------------------
<S> <C> <C> <C> <C> <C>
Nonaccrual loans: (1)
Real estate mortgage $7,513 $10,407 $6,289 $8,282 $7,602
Commercial & Industrial 805 689 921 558 164
Consumer & other 159 40 106 83 123
---------------------------- -----------------------------------------
Total nonaccrual loans 8,477 11,136 7,316 8,923 7,889
Loans 90 days or more past due and
still accruing:
Real estate mortgage 396 - - 224 129
Commercial & industrial - 23 129 205 188
Consumer & other - 11 35 68 126
---------------------------- -----------------------------------------
Total 90 days past due accruing 396 34 164 497 443
Restructured - real estate 24 27 25 28 682
---------------------------- -----------------------------------------
Total non-performing and restructured
loans 8,897 11,197 7,505 9,448 9,014
Other real estate owned (2) 1,307 863 1,369 628 1,366
---------------------------- -----------------------------------------
Total non-performing assets $10,204 $12,060 $8,874 $10,076 $10,380
============================ =========================================
Non-performing and re-
structured loans as a
percent of total loans .88% 1.17% .76% .96% .87%
============================ =========================================
Nonperforming assets as a percent of
total assets .65% .79% .56% .64% .64%
============================ =========================================
</TABLE>
(1) Nonaccrual status denotes loans on which, in the opinion of management, the
collection of interest is unlikely, or loans that meet other nonaccrual criteria
as established by regulatory authorities. Payments received on loans classified
as nonaccrual are either applied to the outstanding principal balance or
recorded as interest income, depending upon management's assessment of the
collectibility of the loan.
(2) Other real estate owned totals $1,307,000 at March 31, 2000 and includes 10
properties acquired through foreclosure: 5 residences, 4 non-farm nonresidential
properties, and one vacant parcel of land.
19
<PAGE>
In addition to the nonperforming loans and other nonperforming assets noted
above, at March 31, 2000, the Company had approximately $23.0 million in loans
requiring special attention (substandard) compared to $22.9 million of similar
loans at December 31, 1999. Such loans are being monitored so that if present
concerns about the borrowers' ability to comply with repayment terms becomes
evident, management will be able to quickly assess impairment. Further
deterioration in such borrowers' financial position may result in reclassifying
them as nonperforming assets.
The following table summarizes impaired loans for the periods indicated (in
thousands):
<TABLE>
<CAPTION>
March 31, 2000 December 31, 1999
-------------- -----------------
<S> <C> <C>
Impaired loans with allowance established $2,546,000
and $3,793,000, respectively) $11,587 $11,515
Impaired loans which have been written down
$456,000 and $219,000, respectively) 928 431
------- -------
Total $12,515 $11,946
======= =======
Average amount of impaired loans
for the period $12,230 $10,407
======= =======
</TABLE>
The following table shows, at the dates indicated, the allocation of the
allowance for loan losses, by category, and the percentage of loans in each
category to total gross loans (dollars in thousands):
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999 1999 1998 1997
---------------------------------------- ----------------------------------------------------------------
Balance at end of % of % of % of % of % of
period applicable to: Amount total Amount total Amount total Amount total Amount total
loans loans loans loans loans
---------------------------------------- ----------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Commercial &
industrial $4,148 12.7% $2,102 11.8% $ 4,426 11.9% $ 2,472 11.7% $2,131 9.0%
Consumer & other 3,047 14.2 2,709 13.8 3,399 14.4 3,530 14.4 3,699 15.2
Real estate - mortgage 10,609 73.1 11,050 74.4 11,871 73.7 11,679 73.9 12,124 75.8
Unallocated 3,981 - 5,681 - 2,090 - 3,589 - 1,377 -
---------------------------------------- ----------------------------------------------------------------
Total $21,785 100% $21,542 100% $21,786 100% $ 21,270 100% $19,331 100%
======================================== ================================================================
</TABLE>
20
<PAGE>
Noninterest Income
- ------------------
Total noninterest income decreased by $38,000 or 1.5% to $2.6 million during the
first three months of 2000 compared to the same period of 19998. Specifically,
service charges and fees increased $151,000 as a result of the implementation of
a singular fee schedule for the merged bank. Trust income increased by $54,000.
Lower levels of sales of loans into the secondary market resulted in a decrease
in gains on sales of loans of $55,000, while lower levels of gains on sales of
securities of $77,000 and "other" income of $92,000 (principally one time
property sales) offset these improvements.
Other Expenses
- --------------
In total, noninterest expense decreased by $94,000 or .9% to $10.4 million for
the first three months of 2000 compared to the same period of 1999. Salaries and
employee benefits expense decreased $421,000 to $5.3 million at March 31, 2000
vs. $5.7 million in the first three months of 2000 as a result of initiatives to
lower headcount in certain areas of the Bank. Occupancy and equipment expense
increased over the same period in 1999 by $92,000 due to renovations and repairs
on bank-owned premises. Other real estate owned expenses were $16,000 higher due
to more properties under management. Other expenses increased by $219,000.
Net Income
- ----------
Pretax income increased by $.5 million. The Company's effective tax rate
decreased to 32.7% from 35.9% as a result of higher levels of investments in tax
preferenced securities and the higher levels of utilization of a State tax
advantaged investment subsidiary. Thus, net income was $5.3 million for the
three months ended March 31, 2000 vs. $4.7 million for the same period in 1999,
an increase of $.5 million or 11.6%.
Asset/Liability Management
- --------------------------
The primary functions of asset/liability management are to assure adequate
liquidity and maintain an appropriate balance between interest-sensitive earning
assets and interest-bearing liabilities and capital resources. The Company's
Investment Committee of the Board monitors, and the Bank, through its treasury
division, controls the rate sensitivity of the balance sheet while seeking to
maintain an appropriate level of net interest income contribution to the
operations of the Company.
The Company's net interest income is affected by fluctuations in market interest
rates as a result of timing differences in the repricing of its assets and
liabilities. These repricing differences are quantified in specific time
intervals and are referred to as interest rate sensitivity gaps. The Company
manages the interest rate risk of current and future earnings to a level that is
consistent with its mix of businesses and seeks to limit such risk exposure to
appropriate percentages of both earnings and the imputed value of stockholders'
equity. The objective in managing interest rate risk is to support the
achievement of business strategies, while controlling earnings variability and
ensuring appropriate liquidity. Further, the historical level of demand deposits
(greater than 15% of total assets) serves to mitigate the effects of increases
in interest rates and reduce the average cost of total liabilities. By the end
of the third quarter in 1999, the Company implemented a leverage strategy,
whereby it purchased investment assets of $100 million and funded such increased
assets with a portion of its available line of credit with the Federal Home Loan
Bank, borrowings under repurchase agreements and municipal deposits. Although
the
21
<PAGE>
related funding costs were have risen through the last nine months, the high
levels of floating rate assets used in the strategy allowed the Company to
benefit from a pretax net interest income during the quarter of approximately 1%
per annum on the assets acquired. The component securities and funding sources
utilized in the transaction (a combination of fixed and floating rate securities
funded primarily with variable rate liabilities) is not expected to raise
significantly the Company's overall exposure to fluctuations in market interest
rates.
The following chart (in thousands) provides a quantification of the Company's
interest rate sensitivity gap as of March 31, 2000, based upon the known
repricing dates of certain assets, at amortized cost, and liabilities and the
assumed repricing dates of others. As shown in the chart below, at March 31,
2000, assuming no management action, the Company's principal interest rate risk
is to a rising rate environment and particularly within one year time frame.
That is, net interest revenue would be expected to be adversely affected by an
increase in interest rates (on a one-for-one basis) above the rates embedded in
the current yield curve, principally due to the higher level of liabilities
($1,050 million) that would reprice relative to similarly categorized assets
($676 million) in that time frame.
This exposure would be mitigated over the longer term as the Company has
$696 million more in repriceable interest earning assets than interest bearing
liabilities beyond one year.
22
<PAGE>
This chart displays only a static view of the Company's interest rate
sensitivity gap and does not capture the dynamics of balance sheet, rate and
spread movements or management actions that may be taken to manage this risk (in
thousands).
<TABLE>
<CAPTION>
Greater
Total than
Maturity Repricing 3 months or 4 months to within One yr. five
Date (1)(2) less one yr. one yr. to 5 yrs. yrs. Total
-------------- -------------- --------------- -------------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
Securities (3) $126,725 $39,616 $166,341 $185,302 $120,076 $471,719
Fed Funds 25,557 25,557 25,557
Fixed rate loans 78,213 79,282 157,495 239,199 49,177 445,871
Floating rate loans (3) 157,066 169,450 326,516 225,060 2,112 553,688
--------- ---------- --------- -------- -------- --------
Total interest
earning assets (1) 387,561 288,348 675,909 649,561 171,365 1,496,835
--------- ---------- --------- -------- -------- ---------
Other interest bearing
deposits (4) 293,768 242,027 535,795 35,368 571,163
Time/Other (5) 242,994 196,376 439,370 87,250 1,864 528,484
Borrowings 75,000 75,000 75,000
--------- ---------- --------- -------- -------- --------
Total interest-bearing
liabilities 611,762 438,403 1,050,165 122,618 1,864 1,174,647
--------- ---------- --------- -------- -------- ---------
Interest Sensitivity
gap (6) $(224,201) $ (150,055) $(374,256) $526,943 $169,501 $322,188
===================================================================================
Gap as a percent of earnings
assets (14.98)% (10.02)% (25.00)% 35.20% 11.32% 21.52%
===================================================================================
</TABLE>
(1) Interest rate sensitivity gaps are defined as the fixed rate positions
(assets less liabilities) for a given time period. The gaps measure the
time weighted dollar equivalent volume of positions fixed for a particular
period. The gap positions reflect a repricing date at which date funds are
assumed to "mature" and reprice to a current market rate for the asset or
liability. The table does not include loans on nonaccrual status or net
unrealized losses recorded on available-for-sale securities as of March 31,
2000.
(2) Variable rate balances are reported based on their repricing formulas.
Fixed rate balances are reported based on their scheduled contractual
maturity dates, except for certain investment securities and loans secured
by 1-4 family residential properties that are based on anticipated cash
flows.
(3) Prime-priced loans and investments are considered as 1 to 3 month assets.
(4) Other interest-bearing deposits include Money Market accounts (three months
or less) and Savings and NOW accounts (four months to one year) reflecting
the lagging period that historically exists in Savings and NOW account
interest rate movements. The remainder of other interest-bearing deposits
are "Merit" accounts (savings accounts whose yield is repriced directly
with the Federal Reserve Discount Rate). This discount rate changes less
frequently than other market rates. As a result, management places these
balances at one-half in the three month to six month category and the
balance beyond one year repricing category. The interest rate sensitivity
assumptions presented for these deposits are based on historical and
current experiences regarding balance retention and interest rate repricing
behavior.
(5) Time/Other: Time deposits $528.5 million and other interest-bearing
liabilities ($75 million) are classified by contractual maturity or
repricing frequency.
(6) Non-interest bearing deposit liabilities were approximately $246.1 million
at March 2000.
23
<PAGE>
Capital Resources and Liquidity
- -------------------------------
The following summarizes the minimum capital requirements and capital position
at March 31, 2000:
<TABLE>
<CAPTION>
To be Well Capitalized Under
Capital Position at "Prompt Corrective Action"
March 31, 2000 Provision of FDICIA
------------------- -------------------
Bank Only Consolidated
--------- ------------
<S> <C> <C> <C>
Total Capital
to Risk-Weighted Assets 12.52% 13.42% 10%
Tier 1 Capital
to Risk-Weighted Assets 11.26 12.17 6
Tier 1 Capital to Average
Assets (Leverage Ratio) 8.38 9.00 5(1)
</TABLE>
(1) Regulatory authorities require all but the most highly rated banks and bank
holding companies to have a leverage ratio of at least between 4.0% - 5.0%.
At March 31, 2000, the Bank met the requirements for a "well capitalized"
institution based on its capital ratios as of such date.
The Company believes that its cash and cash equivalents of $60.3 million in
addition to its securities available for sale of $432.0 million at March 31,
2000 are sufficient to meet both the funding needs of its borrowers and the
liquidity requirements of its depositors.
The Company's total capital to assets level is 8.8% at March 31, 2000. As such,
management believes that the Company has ample capital available for future
expansion and diversification and regularly evaluates appropriate business
opportunities to efficiently deploy its capital resources. The Company also has
available lines of credit with the Federal Home Loan Bank, Federal Reserve and
other commercial banks.
Item 3. Quantitative and Qualitative Disclosure About Market Risk.
Quantitative and qualitative disclosure about market risk is presented at
December 31, 1999 in Item 7A in the Company's Annual Report on Form 10-K filed
with the Securities and Exchange Commission on March 31, 2000. The following is
an update of the discussion provided therein:
General. The Company's largest component of market risk continues to be interest
rate risk. The Company is not subject to foreign currency exchange or commodity
price risk. At March 31, 2000, neither the Company nor the Bank owned any
trading assets, nor did they utilize hedging transactions such as interest rate
swaps and caps.
24
<PAGE>
GAP Analysis. The one-year and five-year cumulative interest sensitivity gap as
a percentage of total assets have changed marginally from (24.5%) and 45.5% at
December 31, 1999, respectively, to (25.0%) and 46.5% at March 31, 2000,
respectively, utilizing similar assumptions as at December 1999.
Interest Rate Risk Compliance. The Bank continues to monitor the impact of
interest rate volatility upon net interest income and net portfolio value in the
same manner as at December 31, 1999. There have been no changes in the board
approved limits of acceptable variance in net interest income and net portfolio
value change at March 31, 2000 compared to December 31, 1999, and the impact of
possible changes within the Company's models continue to fall within all board
approved limits for potential interest rate volatility.
See also Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations "Asset/Liability Management".
25
<PAGE>
Part II
Item 6. Exhibits and Reports on Form 8-K
- -----------------------------------------
a. Exhibits
27 Financial Data Schedule (with EDGAR filings included)
Item 6(b). Reports on Form 8-K
- ---------- -------------------
None.
26
<PAGE>
EXHIBIT INDEX
Exhibit
Number Description
- ------- -----------
27 Financial Data Schedule (with EDGAR filings included)
27
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has caused this report to be signed in its behalf by the undersigned
thereunto duly authorized.
Premier National Bancorp, Inc.
(Registrant)
Date: May 10, 2000 /s/ Paul A. Maisch
------------------
Paul A. Maisch
Duly Authorized Officer and
Principal Financial Officer
28
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 34,703
<INT-BEARING-DEPOSITS> 1,099,647
<FED-FUNDS-SOLD> 25,557
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 431,848
<INVESTMENTS-CARRYING> 18,277
<INVESTMENTS-MARKET> 18,386
<LOANS> 1,008,023
<ALLOWANCE> 21,785
<TOTAL-ASSETS> 1,570,131
<DEPOSITS> 1,345,796
<SHORT-TERM> 50,000
<LIABILITIES-OTHER> 10,973
<LONG-TERM> 25,000
0
0
<COMMON> 13,155
<OTHER-SE> 125,207
<TOTAL-LIABILITIES-AND-EQUITY> 1,570,131
<INTEREST-LOAN> 21,011
<INTEREST-INVEST> 7,155
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 28,166
<INTEREST-DEPOSIT> 11,112
<INTEREST-EXPENSE> 12,243
<INTEREST-INCOME-NET> 15,923
<LOAN-LOSSES> 300
<SECURITIES-GAINS> (1)
<EXPENSE-OTHER> 10,374
<INCOME-PRETAX> 7,843
<INCOME-PRE-EXTRAORDINARY> 7,843
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,278
<EPS-BASIC> .32
<EPS-DILUTED> .32
<YIELD-ACTUAL> 7.74
<LOANS-NON> 8,477
<LOANS-PAST> 396
<LOANS-TROUBLED> 24
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 21,786
<CHARGE-OFFS> 718
<RECOVERIES> 417
<ALLOWANCE-CLOSE> 21,785
<ALLOWANCE-DOMESTIC> 21,785
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 3,981
</TABLE>
