FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Quarterly Report Pursuant to Section 13 or 15 (d)
of the Securities Exchange Act of 1934
For quarterly period ended JUNE 30, 1997
Commission File No. 0-14895
GRANITE STATE BANKSHARES, INC.
(Exact name of registrant as specified in its charter)
NEW HAMPSHIRE 02-0399222
(State or other jurisdiction of (I.R.S. Employer identification No.)
incorporation or organization)
122 WEST STREET, KEENE, NEW HAMPSHIRE 03431
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (603) 352-1600
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 ( )
The number of shares outstanding of each of the issuer's classes
of common stock, as of August 12, 1997 was 3,028,437, $1.00 par value
per share.
INDEX
GRANITE STATE BANKSHARES, INC. AND SUBSIDIARY
Part I Financial Information Page
Item 1. Financial Statements:
Consolidated Statements of Financial Condition
June 30, 1997 and December 31, 1996 3
Consolidated Statements of Earnings
Three and Six months ended June 30, 1997 and 1996 4
Consolidated Statements of Stockholders' Equity
Three and Six months ended June 30, 1997 and 1996 5
Consolidated Statements of Cash Flows
Three and Six months ended June 30, 1997 and 1996 6
Notes to Unaudited Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 11
Part II Other Information
Item 1. Legal Proceedings 19
Item 2. Changes in Securities 19
Item 3. Defaults upon Senior Securities 19
Item 4. Submission of Matters to a Vote of Security Holders 19
Item 5. Other Information 19
Item 6. Exhibits and Reports on Form 8-K 20
Signatures 21
<TABLE>
<CAPTION>
GRANITE STATE BANKSHARES, INC. AND SUBSIDIARY
PART I - FINANCIAL INFORMATION
ITEM 1 - FIANCIAL STATEMENTS
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
June 30, December 31,
($ in thousands, except par values) 1997 1996
- ---------------------------------- --------- ----------
(Unaudited)
<S> <C> <C>
ASSETS
Cash and due from banks $ 23,002 $ 18,129
Interest bearing deposits - Federal Home
Loan Bank of Boston 32 17,993
Securities held to maturity
(Market value $15,487 at June 30, 1997 and
$9,493 at December 31, 1996) 15,500 9,500
Securities available for sale, at market value 103,660 99,423
Stock in Federal Home Loan Bank of Boston 3,215 3,215
Loans held for sale 769 1,025
Loans 233,514 206,339
Less: Unearned income (1,749) (1,860)
Allowance for possible loan losses (3,834) (3,676)
---------- ----------
Net Loans 227,931 200,803
Premises and equipment 10,553 10,783
Other real estate owned 1,076 1,512
Other assets 8,291 8,050
---------- ----------
$ 394,029 $ 370,433
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Interest-bearing deposits $ 290,861 $ 272,350
Noninterest-bearing deposits 37,583 31,804
---------- ----------
Total Deposits 328,444 304,154
Securities sold under agreements to repurchase 27,116 31,535
Long-term debt 671 691
Other liabilities 3,595 2,757
---------- ----------
Total Liabilities 359,826 339,137
Common stock, $1.00 par value; authorized
12,500,000 shares; issued 3,948,622* and
2,579,133 shares, respectively 3,948* 2,579
Additional paid-in capital 18,523* 19,518
---------- ----------
22,471 22,097
Unrealized gain (loss) on securities available
for sale,net of related tax effects 2,599 2,006
Retained earnings 15,437 13,193
---------- ----------
40,507 37,296
Less: Treasury stock, at cost, 920,185* and
600,080 shares, respectively (6,304) (6,000)
---------- ----------
Total Stockholders' Equity 34,203 31,296
---------- ----------
$ 394,029 $ 370,433
========== ==========
*Adjusted to reflect the three-for-two stock split declared April 14, 1997
See accompanying notes to unaudited consolidated financial statements.
</TABLE>
<TABLE>
<CAPTION>
GRANITE STATE BANKSHARES, INC. AND SUBSIDIARY
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
CONSOLIDATED STATMENTS OF EARNINGS
Three Months Ended Six Months Ended
June 30, June 30,
------------------ ----------------
($ in thousands, except per share data) 1997 1996 1997 1996
-------- ------- ------- ------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Interest and dividend income:
Interest on loans $ 5,009 $ 4,365 $ 9,680 $ 8,803
Interest on securities held
to maturity 253 124 490 126
Interest on securities available
for sale 1,405 1,563 2,703 2,923
Dividends on Federal Home Loan
Bank of Boston stock 53 52 103 102
Dividends on equity securities
available for sale 121 88 286 200
Other interest 111 51 282 367
------- ------- ------- -------
6,952 6,243 13,544 12,521
Interest expense:
Savings deposits 1,227 1,134 2,414 2,279
Time deposits 1,785 1,424 3,403 2,913
Borrowed funds 285 269 612 553
------- ------- ------- -------
3,297 2,827 6,429 5,745
------- ------- ------- -------
Net interest income 3,655 3,416 7,115 6,776
Provision for possible loan losses 100 225 175 450
------- ------- ------- -------
Net interest income after
provision for possible loan
losses 3,555 3,191 6,940 6,326
Noninterest income:
Mortgage service fees 160 170 325 338
Net gains (losses) on sales of
securities available for sale (10) 100 2,046 289
Net gains on sales of loans 73 160 146 327
Other 329 377 627 704
------- ------- ------- -------
552 807 3,144 1,658
Noninterest expense:
Salaries and employee benefits 1,449 1,286 3,023 2,619
Occupancy and equipment 496 460 1,020 971
Other real estate owned 16 149 39 185
Other 650 666 1,375 1,413
------- ------- ------- -------
2,611 2,561 5,457 5,188
------- ------- ------- -------
Earnings before income taxes 1,496 1,437 4,627 2,796
Income taxes 536 488 1,709 966
------- ------- ------- -------
Net earnings $ 960 $ 949 $ 2,918 $ 1,830
======= ======= ======= =======
Weighted average common shares
outstanding:
Primary 3,086,015* 3,187,631* 3,079,826* 3,199,865*
Fully diluted 3,102,840* 3,187,631* 3,094,410* 3,202,406*
Net earnings per common
share -primary $ 0.31* $ 0.30* $ 0.95* $ 0.57*
Net earnings per common
share -fully diluted $ 0.31* $ 0.30* $ 0.94* $ 0.57*
*Adjusted to reflect the three-for-two stock split declared April 14, 1997
See accompanying notes to unaudited consolidated financial statements.
</TABLE>
<TABLE>
<CAPTION>
GRANITE STATE BANKSHARES, INC. AND SUBSIDIARY
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
CONSOLIDATED STATMENTS OF STOCKHOLDERS' EQUITY
Three Months Ended Six Months Ended
June 30, June 30,
------------------ ----------------
($ in thousands, except per share data) 1997 1996 1997 1996
------- ------- ------- -------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Balance, beginning of period $32,372 $29,467 $31,296 $29,789
Net earnings 960 949 2,918 1,830
Dividends declared on common stock,
$0.11* per share and $0.22* per
share, respectively, for the
three and six months ended
June 30, 1997 and $0.09* per
share and $0.19* per share,
respectively,for the three and
six months ended June 30, 1996 (336) (281) (677) (563)
Stock options exercised 267 36
Tax benefit associated with the
exercise of stock options 110
Purchase of treasury stock (425) (304) (757)
Increase (decrease) in net
unrealized gains on securities
available for sale, net of related
tax effects 1,207 (221) 593 (846)
------- ------- ------- -------
Net change in stockholders' equity 1,831 22 2,907 (300)
------- ------- ------- -------
Balance, end of period $34,203 $29,489 $34,203 $29,489
======= ======= ======= =======
*Adjusted to reflect the three-for-two stock split declared April 14, 1997
See accompanying notes to unaudited consolidated financial statements.
</TABLE>
<TABLE>
<CAPTION>
GRANITE STATE BANKSHARES, INC. AND SUBSIDIARY
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Months Ended Six Months Ended
June 30, June 30,
------------------ ----------------
Increase (decrease) in cash
(In Thousands) 1997 1996 1997 1996
------- ------- ------- -------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net earnings $ 960 $ 949 $ 2,918 $ 1,830
Adjustments to reconcile net
earnings to net cash provided by
operating activities
Provision for possible loan losses 100 225 175 450
Provision for depreciation and
amortization 322 304 658 606
Net accretion on securities (19) (14) (32) (35)
Realized (gains) losses on sales
of securities available for sale 10 (100) (2,046) (289)
Loans originated for sale (7,841) (7,482) (11,887) (16,252)
Proceeds from sales of loans
originated for sale 7,464 8,147 12,289 17,709
Realized gains on sales of loans (73) (160) (146) (327)
Realization of unearned income (38) (132) (111) (65)
Provision for loss on other real
estate owned 50 86
Realized (gains) losses on sales
of other real estate owned (18) 3 (21) (27)
Deferred income tax expense(benefit) (45) (57) (65) (136)
(Increase) in other assets (254) (488) (417) (274)
Increase (decrease) in other
liabilities (629) (232) 355 144
------- ------- ------- -------
Net cash provided by (used in)
operating activities (61) 1,013 1,670 3,420
Cash flows from investing activities:
Purchase of securities held to
maturity (5,000) (6,000) (8,000)
Proceeds from sales of securities
available for sale 12,768 13,180 29,702 17,016
Proceeds from maturities of
securities available for sale 13,000 24,000 12,000
Purchase of securities available
for sale (25,319) (4,905) (54,666) (45,498)
Loan originations, net of
repayments (22,053) (7,369) (27,463) (5,266)
Purchase of premises and equipment (82) (610) (220) (1,308)
Proceeds from sales of other real
estate owned 275 568 728 1,441
Net decrease in interest-bearing
deposits with Federal Home Loan
Bank of Boston 12,352 4,537 17,961 24,238
Other (1) (80) (32) (189)
------- ------- ------- -------
Net cash provided by (used in)
investing activities (9,060) 321 (15,990) (5,566)
Cash flows from financing activities:
Net increase (decrease) in time
certificates of deposit 3,910 (1,121) 12,550 (210)
Net increase in demand, NOW,
regular savings and money market
deposit accounts 6,936 1,338 11,740 6,501
Net increase (decrease) in
securities sold under agreements
to repurchase 3,820 (786) (4,419) (4,800)
Net increase in short-term borrowings 4,704 4,704
Payments of long-term borrowings (10) (10) (20) (18)
Proceeds from exercise of stock
options 267 36
Purchase of treasury stock (425) (304) (757)
Dividends paid on common stock (336) (283) (621) (527)
------- ------- ------- -------
Net cash provided by financing
activities 14,320 3,417 19,193 4,929
------- ------- ------- -------
Net increase in cash and due
from banks 5,199 4,751 4,873 2,783
Cash and due from banks at beginning
of period 17,803 15,803 18,129 17,771
------- ------- ------- -------
Cash and due from banks at end
of period $ 23,002 $20,554 $23,002 $20,554
======== ======= ======= =======
See accompanying notes to unaudited consolidated financial statements.
</TABLE>
GRANITE STATE BANKSHARES, INC. AND SUBSIDIARY
Part I - Financial Information
Item 1. Financial Statements
Notes to Unaudited Consolidated Financial Statements
June 30, 1997
Note 1. BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have
been prepared in accordance with generally accepted accounting
principles for interim financial information and with the instructions
to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not
include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. In
the opinion of management, all adjustments (consisting only of normal
recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the three and six months ended
June 30, 1997 are not necessarily indicative of the results that may be
expected for the current fiscal year. For further information, refer to
the consolidated financial statements and footnotes thereto included in
the Company's annual report on Form 10-KSB for the year ended December
31, 1996.
Certain information in the 1996 financial statements has been
reclassified to conform with the 1997 presentation.
Note 2. SECURITIES
Debt securities that the Company has the positive intent and
ability to hold to maturity are classified as held-to-maturity and
reported at amortized cost; debt and equity securities that are bought
and held principally for the purpose of selling in the near term are
classified as trading and reported at fair value, with unrealized gains
and losses included in earnings; and debt and equity securities not
classified as either held-to-maturity or trading are classified as
available-for-sale and reported at fair value, with unrealized gains and
losses excluded from earnings and reported as a separate component of
stockholders' equity, net of related tax effects. At June 30, 1997 and
December 31, 1996, the Company had no securities classified as trading
securities.
The amortized cost, estimated market value and carrying value of
securities at June 30, 1997 and December 31, 1996 were as follows:
<TABLE>
<CAPTION>
Amortized Estimated Carrying
At JUNE 30, 1997 Cost Market Value Value
--------- ------------ --------
(In Thousands)
<S> <C> <C> <C>
Securities held to maturity
US Government agency obligations $ 15,500 $ 15,487 $ 15,500
-------- -------- --------
Total securities held to maturity $ 15,500 $ 15,487 $ 15,500
======== ======== ========
Securities available for sale
US Treasury obligations $ 40,334 $ 40,353 $ 40,353
US Government agency obligations 47,733 47,609 47,609
Other corporate obligations 1,982 1,962 1,962
Mutual Fund 5,400 5,420 5,420
Marketable equity securities 3,978 8,316 8,316
-------- -------- --------
Total securities available for sale $ 99,427 $103,660 $103,660
======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
Amortized Estimated Carrying
AT DECEMBER 31, 1996 Cost Market Value Value
--------- ------------ --------
(In Thousands)
<S> <C> <C> <C>
Securities held to maturity
US Government agency obligations $ 9,500 $ 9,493 $ 9,500
--------- ------- --------
Total securities held to maturity $ 9,500 $ 9,493 $ 9,500
========= ======= ========
Securities available for sale
US Treasury obligations $ 25,847 $25,852 $ 25,852
US Government agency obligations 52,749 52,558 52,558
Other corporate obligations 5,476 5,449 5,449
Mutual Fund 5,239 5,244 5,244
Marketable equity securities 7,073 10,320 10,320
-------- ------- --------
Total securities available for sale $ 96,384 $99,423 $ 99,423
======== ======= ========
</TABLE>
Note 3. LOANS
Loans consist of the following at:
<TABLE>
<CAPTION>
June 30, December 31,
1997 1996
----------- ---------------
(In Thousands)
<S> <C> <C>
Commercial, financial and agricultural $ 9,843 $ 9,849
Real estate-residential 146,654 122,561
Real estate-commercial 59,920 58,302
Real estate-construction and
land development 2,541 3,030
Installment 4,323 4,488
Other 10,233 8,109
-------- --------
Total loans 233,514 206,339
Less:
Unearned income (1,749) (1,860)
Allowance for possible loan losses (3,834) (3,676)
-------- --------
Net loans $227,931 $200,803
======== ========
</TABLE>
Real estate mortgage loans and other loans are stated at the
amount of unpaid principal, less unearned income and the allowance for
possible loan losses.
Interest on loans is accrued and credited to operations based upon
the principal amount outstanding. When management determines that
significant doubt exists as to collectibility of principal or interest
on a loan, the loan is placed on nonaccrual status. In addition, loans
past due 90 days or more as to principal or interest are placed on
nonaccrual status, except those loans which, in management's judgment,
are fully secured and in the process of collection. Interest accrued
but not received on loans placed on nonaccrual status is reversed and
charged against current operations. Interest subsequently received on
nonaccrual loans is either applied against principal or recorded as
income according to management's judgment as to the collectibility of
principal.
Loans considered to be uncollectible are charged against the
allowance for possible loan losses. The allowance is increased by
charges to current operations in amounts sufficient to maintain the
adequacy of the allowance. The adequacy of the allowance is determined
by management's evaluation of the extent of existing risks in the loan
portfolio and prevailing economic conditions.
Changes in the allowance for possible loan losses are as follows:
<TABLE>
<CAPTION>
Three months ended Six months ended
June 30, June 30,
------------------ -----------------
1997 1996 1997 1996
------- ------- ------- -------
(In Thousands)
<S> <C> <C> <C> <C>
Balance, beginning of period $ 3,718 $ 3,727 $ 3,676 $ 3,704
Provision for possible loan
losses 100 225 175 450
Loans charged off (330) (50) (823)
Recoveries of loans previously
charged off 16 79 33 370
------- ------- ------- -------
Balance, end of period $ 3,834 $ 3,701 $ 3,834 $ 3,701
======= ======= ======= =======
</TABLE>
The Company follows Statement of Financial Accounting Standards
("SFAS") No. 114, "Accounting by Creditors for Impairment of a Loan," as
amended by SFAS No. 118, "Accounting by Creditors for Impairment of a
Loan - Income Recognition and Disclosures". This standard requires that
a creditor measure impairment based on the present value of expected
future cash flows discounted at the loan's effective interest rate,
except that as a practical expedient, a creditor may measure impairment
based on a loan's observable market price, or the fair value of the
collateral if the loan is collateral dependent. Regardless of the
measurement method, a creditor must measure impairment based on the fair
value of the collateral when the creditor determines that foreclosure is
probable.
The following presents information on impaired loans at or for the
three and six months ended June 30, 1997 and 1996:
<TABLE>
<CAPTION>
1997 1996
------- -------
(In Thousands)
<S> <C> <C>
Recorded investment in impaired loans $ 929 $ 388
======= =======
Average year-to-date recorded investment
in impaired loans $ 799 $ 660
======= =======
Impaired loans with specific loss allowances $ 929 $ 388
======= =======
Loss allowances reserved on impaired loans $ 212 $ 118
======= =======
Income recognized on impaired loans during
the three months ended June 30 $ 0 $ 0
======= =======
Income recognized on impaired loans during
the six months ended June 30 $ 0 $ 4
======= =======
</TABLE>
The Company's policy for interest income recognition on impaired
loans is to recognize income on impaired loans on the cash basis when
the loans are both current and the collateral on the loan is sufficient
to cover the outstanding obligation to the Company; if these factors do
not exist, the Company does not recognize income.
Note 4. INTEREST BEARING DEPOSITS
Interst bearing deposits consist of the following at:
<TABLE>
<CAPTION>
June 30, December 31,
1997 1996
-------- ------------
(In Thousands)
<S> <C> <C>
NOW and Super NOW accounts $116,027 $108,941
Savings accounts 35,996 36,217
Money market deposit accounts 10,691 11,595
Time certificates 128,147 115,597
-------- --------
$290,861 $272,350
======== ========
</TABLE>
Note 5. SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
<TABLE>
<CAPTION>
Three months ended Six months ended
June 30, June 30,
------------------- -------------------
1997 1996 1997 1996
-------- -------- -------- --------
(In Thousands)
<S> <C> <C> <C> <C>
Cash paid for interest $ 3,286 $ 2,631 $ 6,407 $ 5,573
Income taxes paid 1,200 1,100 1,200 1,100
Non-cash investing activities:
Real estate acquired in settlement of loans 0 54 271 782
</TABLE>
Note 6. STOCK SPLIT
On April 14, 1997, the Board of Directors of the Company declared
a three-for-two stock split, effected in the form of a 50% stock
dividend, payable on May 9, 1997 to stockholders of record on April 25,
1997. The par value of the common stock was not changed as a result of
the split, therefore the par value of the additional shares was
transferred from additional paid in capital to common stock. All share
and per share information have been restated to reflect this stock
split.
Note 7. PENDING ACQUISITION
On April 29, 1997, the Company and its wholly-owned subsidiary,
Granite Bank, entered into an Agreement and Plan of Reorganization (the
"Agreement") with Primary Bank pursuant to which Primary Bank will be
merged with and into Granite Bank (the "Merger"). As of March 31, 1997
and June 30, 1997, Primary Bank had total assets of approximately $430
million. Upon completion of the Merger, each share of Primary Bank
common stock will be exchanged for shares of Common Stock of the
Company, based on the exchange ratio as set forth in the Agreement. For
further information, refer to Item 5 of this Form 10-Q.
GRANITE STATE BANKSHARES, INC AND SUBSIDIARY
Part I - Financial Information
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
June 30, 1997
GENERAL
All information within this section should be read in conjunction
with the consolidated financial statements and notes included elsewhere
in this Form 10-Q. All references in the discussion to financial
condition and results of operations are to the consolidated financial
position of the Company and its subsidiary taken as a whole.
The principal business of the Company is to serve as a financial
intermediary attracting deposits from the general public and making both
secured and unsecured loans. The operating results of the Company
depend primarily on net interest income earned by the Company's
subsidiary, Granite Bank (the "subsidiary bank"). Net interest income
is the difference between interest and dividend income on interest
earning assets, primarily loans and securities, and interest expense on
interest bearing liabilities, which consist of deposits and borrowings.
Operating results of the Company also depend upon the provision for
possible loan losses, noninterest income and noninterest expense.
On April 14, 1997, the Board of Directors of the Company declared
a three-for-two stock split, effected in the form of a 50% stock
dividend, payable on May 9, 1997 to stockholders of record on April 25,
1997. All share and per share information have been restated to reflect
this stock split.
On April 29, 1997, the Company entered into an Agreement and Plan
of Reorganization (the "Agreement"), with Primary Bank, providing for
the merger of Primary Bank with and into Granite Bank, the Company's
wholly-owned subsidiary (the "Merger"). Upon completion of the Merger,
shares of common stock of the Company will be issued to the shareholders
of common stock of Primary Bank in accordance with the terms of the
Agreement. For further information, refer to Note 7 of Notes to
Unaudited Consolidated Financial Statements and Item 5 of this Form 10-Q.
FINANCIAL CONDITION
Total assets increased by $23,596,000 or 6.37%, from $370,433,000
at December 31, 1996 to $394,029,000 at June 30, 1997.
Cash and due from banks increased by $4,873,000 from $18,129,000
at December 31, 1996 to $23,002,000 at June 30, 1997. The increase was
funded with proceeds from decreases in interest bearing deposits with
the Federal Home Loan Bank of Boston.
Interest bearing deposits with the Federal Home Loan Bank of
Boston decreased $17,961,000, from $17,993,000 at December 31, 1996 to
$32,000 at June 30, 1997. Proceeds from the decrease were primarily
invested in higher yielding 3 to 5 year fixed income securities held to
maturity and available for sale, and were used to fund loan growth
during the first six months of 1997 and the increase in cash and due
from banks.
Securities held to maturity increased $6,000,000, from $9,500,000
at December 31, 1996 to $15,500,000 at June 30, 1997, as proceeds from
decreases in interest bearing deposits with the Federal Home Loan Bank
of Boston were invested in higher yielding instruments.
Securities available for sale increased $4,237,000, from
$99,423,000 at December 31, 1996 to $103,660,000 at June 30, 1997. The
increase relates primarily to investing proceeds from a portion of the
increase in deposit liabilities and proceeds from decreases in interest
bearing deposits with the Federal Home Loan Bank of Boston.
Net loans were $227,931,000 at June 30, 1997, an increase of
$27,128,000 from $200,803,000 at December 31, 1996. The increase
reflects strong loan demand in the residential real estate sector of
the market, including multi-family real estate. Since July 1, 1996, the
subsidiary bank has been originating fifteen year fixed rate residential
real estate loans for its loan portfolio. Such loans had previously been
sold into the secondary mortgage market. Loan growth was funded by an
increase in deposits and proceeds from decreases in interest bearing
deposits with the Federal Home Loan Bank of Boston.
Total deposits increased $24,290,000, from $304,154,000 at
December 31, 1996 to $328,444,000 at June 30, 1997. The increases
primarily came from increases in NOW and Super NOW accounts of
$7,086,000, increases in time certificates of $12,550,000 and increases
in noninterest bearing deposits of $5,779,000. Such increases are the
result of the continued success of one of the subsidiary bank's NOW
account products and the competitive rates offered by the subsidiary
bank on certain time certificates. A portion of the increase in
deposits was used to fund the decrease in securities sold under
agreements to repurchase, with the remainder invested in loans and
securities available for sale.
Securities sold under agreements to repurchase decreased
$4,419,000, from $31,535,000 at December 31, 1996 to $27,116,000 at June
30, 1997. The decrease was funded by an increase in deposits.
Stockholders' equity increased by $2,907,000 during the first six
months of 1997, from $31,296,000 at December 31, 1996, to $34,203,000 at
June 30, 1997. The increase was due to $2,918,000 of net earnings,
$267,000 relating to the issuance of common stock upon the exercise of
common stock options, a tax benefit of $110,000 associated with the
exercise of the options and an increase of $593,000 in unrealized gains
on securities available for sale, net of related tax effects, partially
offset by $677,000 of common stock dividends declared, and $304,000 in
repurchases of treasury stock.
Stock Repurchase Plan
On August 13, 1996, the Company announced a Stock Repurchase
Program ("Program"), whereby the Company's Board of Directors authorized
the repurchase of up to 10% of its outstanding common shares from time
to time. Shares repurchased under the Program may be held in treasury,
retired or used for general corporate purposes. As of June 30, 1997,
the Company has repurchased 72,549 shares under the Program,
representing 2.44% of common shares outstanding at August 13, 1996.
There were no shares repurchased under the Program during the quarter
ended June 30, 1997, and, as a result of the Agreement and Plan of
Reorganization entered into with Primary Bank on April 29, 1997 (see
Note 7 of Notes to Unaudited Consolidated Financial Statements and Item
5 of this Form 10-Q), the Stock Repurchase Program has been terminated.
RESULTS OF OPERATIONS
Net Earnings
Net earnings for the three and six months ended June 30, 1997 were
$960,000 and $2,918,000, compared to $949,000 and $1,830,000 for the
three and six months ended June 30, 1996. Net earnings for the three
and six months ended June 30, 1997, increased 1.16% and 59.45%,
respectively, over net earnings for the three and six months ended June
30, 1996. Earnings per common share for the three and six months ended
June 30, 1997 were $0.31 and $0.95 ($0.94 fully diluted), compared to
$0.30 and $0.57 for the three and six months ended June 30, 1996. The
increase in net earnings for the three months ended June 30, 1997,
compared to the three months ended June 30, 1996, was primarily due to
an increase in net interest income of $239,000 and a decrease in the
provision for possible loan losses of $125,000 partially offset by a
decrease in noninterest income of $255,000 and an increase in
noninterest expense of $50,000. The increase in net earnings for the
six months ended June 30, 1997, compared to net earnings for the six
months ended June 30, 1996, was primarily due to an increase in net
interest income of $339,000, an increase in noninterest income of
$1,486,000 and a decrease in the provision for possible loan losses of
$275,000, partially offset by an increase in noninterest expense of
$269,000.
Interest and Dividend Income
Interest and dividend income for three and six months ended June
30, 1997 was $6,952,000 and $13,544,000, compared to $6,243,000 and
$12,521,000 for the corresponding periods in 1996. Average interest
earning assets for the three and six months ended June 30, 1997 were
$345,427,000 and $339,889,000, respectively, and for the three and six
months ended June 30, 1996 were $311,108,000 and $311,434,000,
respectively. The yield on interest earning assets was 8.07% and 8.05%,
respectively, for the three and six months ended June 30, 1997, compared
to 8.07% and 8.09%, respectively, for the same periods in 1996.
The increase in interest and dividend income for the three and six
months ended June 30, 1997 compared to the three and six months ended
June 30, 1996 is primarily attributable to an increase in average
interest earning assets for the three and six months ended June 30, 1997
compared to the same periods in 1996.
Interest Expense
Interest expense for the three and six months ended June 30, 1997
was $3,297,000 and $6,429,000, compared to $2,827,000 and $5,745,000 for
the corresponding periods in 1996. Average interest bearing liabilities
for the three and six months ended June 30, 1997 were $314,673,000 and
$310,762,000, respectively, and for the three and six months ended June
30, 1996 were $282,919,000 and $283,340,000, respectively. The rates
paid on interest bearing liabilities were 4.20% and 4.18%, respectively,
for the three and six months ended June 30, 1997, compared to 4.02% and
4.08%, respectively, for the same periods in 1996.
The increase in interest expense for the three and six months
ended June 30, 1997 compared to the same periods in 1996 is primarily
due to an increase in the average balance of interest bearing
liabilities coupled with an increase in the interest rates paid on these
liabilities for the three and six months ended June 30, 1997 compared to
the same periods in 1996.
Net Interest Income
Net interest income increased by $239,000 for the three months
ended June 30, 1997 compared to the same period in 1996 and increased by
$339,000 for the six months ended June 30, 1997 compared to the same
period in 1996. The increase for the three and six months ended June
30, 1997 compared to the same periods in 1996 relates to an increase in
interest earning assets, partially offset by reductions in the interest
rate spread and the net yield on interest earning assets, as the rates
paid for interest bearing liabilities increased for the three and six
months ended June 30, 1997 compared to the same periods in 1996, while
the yields realized on interest earning assets were stable for the three
months ended June 30, 1997 and 1996 and decreased slightly for the six
months ended June 30, 1997 compared to the same period in 1996. The
Company's interest rate spread was 3.87%, for both the three and six
months ended June 30, 1997, compared to 4.05% and 4.01% for the three
and six months ended June 30, 1996. The net yield on interest earning
assets for the three and six months ended June 30, 1997 was 4.24% and
4.22%, compared to 4.42% and 4.38% for the three and six months ended
June 30, 1996.
Provision for Possible Loan Losses
The provision for possible loan losses for the three and six
months ended June 30, 1997 was $100,000 and $175,000, compared to
$225,000 and $450,000 for the three and six months ended June 30, 1996.
The decrease in the provision for the three and six months ended June
30, 1997, compared to the same periods in 1996, relate primarily to a
decrease in net loan charge-offs for the three and six months ended June
30, 1997 compared to the same periods in 1996, as well as management's
evaluation of the adequacy of the level of the allowance in relation to
nonperforming loans and total loans.
Nonperforming loans totaled $2,175,000 at June 30, 1997, an
increase of $153,000 from $2,022,000 at December 31, 1996. The level of
net charge-offs (recoveries) for the three and six months ended June 30,
1997 was ($16,000) and $17,000, compared to $251,000 and $453,000, for
the corresponding periods a year ago.
The adequacy of the allowance for possible loan losses is
evaluated by management on a quarterly basis. This review includes an
assessment of problem loans and potential unknown losses based on
current economic conditions, the regulatory environment and historical
experience. The provision for possible loan losses represents charges
to operations necessary to maintain the allowance at a level which
management believes will be adequate to absorb possible losses.
Management believes that the allowance for possible loan losses is
adequate. While management evaluates the allowance for possible loan
losses based upon available information, future additions to the
allowance may be necessary. Additionally, regulatory agencies review
the Company's allowance for possible loan losses as part of their
examination process. Such agencies may require the Company to recognize
additions to the allowance based on judgments which may be different
from those of management.
Noninterest Income
Noninterest income for the three and six months ended June 30,
1997 totaled $552,000 and $3,144,000, compared to $807,000 and
$1,658,000 for the same periods in 1996. The significant changes in the
components of noninterest income for the three and six months ended June
30, 1997 compared to the same periods in 1996 were primarily net gains
(losses) on sales of securities available for sale of $(10,000) and
$2,046,000 for the three and six months ended June 30, 1997, compared to
$100,000 and $289,000 for the three and six months ended June 30, 1996,
and a decrease in net gains on sale of loans which were $73,000 and
$146,000 for the three and six months ended June 30, 1997 compared to
$160,000 and $327,000 for the same periods in 1996. The $1,757,000
increase in net gains on sales of securities available for sale for the
six months ended June 30, 1997 compared to the same period in 1996 was
primarily the result of the Company selling certain of its equity
investments available for sale during the first quarter of 1997, based
on a perceived volatility in the stock markets, as a result of
significant increases in the market values of stocks over the past few
years. The decrease in net gains on sales of loans for the three and
six months ended June 30, 1997 compared to the same periods in 1996,
relates primarily to the decreased volume in the sale of loans into the
secondary mortgage market, as a result of the subsidiary bank
originating fifteen year fixed rate loans for portfolio that were
previously sold into the secondary mortgage market, as well as a
decrease in the volume of thirty year fixed rate loan originations that
are still being sold into the secondary mortgage market.
Noninterest Expense
Noninterest expense for the three and six months ended June 30,
1997 totaled $2,611,000 and $5,457,000, compared to $2,561,000 and
$5,188,000 for the same periods a year earlier. The increase for the
three months ended June 30, 1997, compared to 1996 relates primarily to
an increase of $163,000 associated with salaries and benefit expenses
and an increase of $36,000 in occupancy and equipment expenses,
partially offset by a decrease of $133,000 in costs associated with the
holding and disposition of other real estate owned. The increase for
the six months ended June 30, 1997, compared to 1996 relates primarily
to, an increase of $404,000 associated with salaries and benefit
expenses and an increase of $49,000 in occupancy and equipment expenses,
partially offset by a decrease of $146,000 in costs associated with the
holding and disposition of other real estate owned.
Income Taxes
Income taxes for the three and six months ended June 30, 1997 were
$536,000 and $1,709,000, compared with $488,000 and $966,000 for the
same periods in 1996. The increase in income tax expense for the three
and six months ended June 30, 1997 compared with the same period in 1996
related primarily to the increase in earnings before income taxes and an
increase in state income tax expense. Income tax expense as a
percentage of earnings before income taxes was 35.83% and 36.94% for the
three and six months ended June 30, 1997, compared with 33.96% and
34.55% for the same periods a year earlier.
Risk Elements
Total nonperforming loans increased from $2,022,000 or 0.98% of
total loans, at December 31, 1996, to $2,175,000 or 0.93% of total
loans, at June 30, 1997. During the same period, other real estate
owned, declined from $1,512,000 to $1,076,000. The allowance for
possible loan losses as a percent of total nonperforming loans was
176.28% at June 30, 1997, compared with 181.80% at December 31, 1996.
As shown in the following table, nonperforming assets as a
percentage of total assets were 0.83% and 0.95%, as of June 30, 1997 and
December 31, 1996, respectively.
<TABLE>
<CAPTION>
June 30, 1997 December 31, 1996
-------- --------
($ in Thousands)
<S> <C> <C>
Loans 90 days or more past due
and still accruing $ 299 $ 93
======== ========
Nonaccrual/nonperforming loans $ 2,175 $ 2,022
Other real estate owned 1,076 1,512
-------- --------
Total nonperforming assets $ 3,251 $ 3,534
======== ========
Allowance for possible loan losses $ 3,834 $ 3,676
Nonperforming loans as a percent of total loans 0.93% 0.98%
Allowance for possible loan losses
as a percent of total nonperforming loans 176.28% 181.80%
Nonperforming assets as a percent of total assets 0.83% 0.95%
</TABLE>
Liquidity
The Company's primary sources of liquidity, through its subsidiary
bank, are its borrowing capacity with the Federal Home Loan Bank of
Boston, interest bearing deposits with the Federal Home Loan Bank of
Boston and securities available for sale, particularly short-term
investments. At June 30, 1997, short-term and long-term borrowings from
the Federal Home Loan Bank of Boston were $671,000, with an additional
available borrowing capacity of approximately $170,123,000; interest
bearing deposits with the Federal Home Loan Bank of Boston were $32,000
and securities available for sale were $103,660,000. Included in
securities held to maturity and securities available for sale are debt
securities with a carrying value of $105,424,000, all of which have
remaining maturities of less than five years and a weighted-average
maturity of approximately thirty two months. In addition to these
liquidity sources, the Company has significant cash flow from the
amortization of loans through its subsidiary bank.
Capital Resources
Under the Federal Reserve Board's guidelines, bank holding
companies such as the Company currently are required to maintain a
minimum ratio of qualifying total capital to total assets and off-
balance sheet instruments, as adjusted to reflect their relative credit
risks, of 8.0 percent. At least one-half of total capital must be
comprised of common equity, retained earnings, non-cumulative perpetual
preferred stock, and a limited amount of cumulative perpetual preferred
stock, less goodwill ("Tier I capital").
The Federal Reserve Board also has established an additional
capital adequacy guideline referred to as the Tier I leverage capital
ratio, which measures the ratio of Tier I capital to total assets less
goodwill. Although the most highly-rated bank holding companies will be
required to maintain a minimum Tier I leverage capital ratio of 3.0
percent, most bank holding companies will be required to maintain Tier I
leverage capital ratios of 4.0 percent to 5.0 percent or more. The
actual required ratio will be based on the Federal Reserve Board's
assessment of the individual bank holding company's asset quality,
earnings performance, interest rate risk, and liquidity. The Company
was in compliance with all regulatory capital requirements at June 30,
1997 and December 31, 1996.
Substantially similar rules have been issued by the FDIC with
respect to state-chartered banks which are not members of the Federal
Reserve System such as the subsidiary bank. At June 30, 1997 and
December 31, 1996, the subsidiary bank was in compliance with all
regulatory capital requirements. Additionally, at June 30, 1997, the
subsidiary bank was considered "well capitalized" for purposes of the
FDIC's prompt corrective action regulations.
At June 30, 1997 the Company's and the subsidiary bank's
regulatory capital ratios as a percentage of assets are as follows:
<TABLE>
<CAPTION>
June 30, 1997
----------------------
Subsidiary
Bank Company
------- -------
<S> <C> <C>
Tier I leverage capital 7.27% 7.55%
Tier I capital to risk-weighted assets 12.57% 12.95%
Total capital to risk-weighted assets 13.69% 14.05%
</TABLE>
Consolidated Quarterly Average Balances and Interest Rates
The table on the following page presents, for the periods
indicated, average balances of assets and liabilities, as well as yields
on interest earning assets and the cost of interest bearing liabilities.
<TABLE>
<CAPTION>
GRANITE STATE BANKSHARES, INC. AND SUBSIDIARY
CONSOLIDATED QUARTERLY AVERAGE BALANCES AND INTEREST RATES
(Dollars in Thousands)
1997 QTD 1996 QTD
---------------------------------- ----------------------------------
Second Quarter First Quarter Fourth Quarter Third Quarter
Avg. bal. Rate Avg. bal. Rate Avg. bal. Rate Avg. bal. Rate
--------- ----- --------- ----- --------- ----- --------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Assets:
Loans $ 219,004 9.17% $ 205,810 9.23% $ 200,089 9.37% $ 195,834 9.26%
Securities and
interest earning investments 126,423 6.16% 128,480 6.08% 128,462 5.91% 124,191 5.93%
--------- --------- --------- ---------
Total interest earning assets 345,427 8.07% 334,290 8.02% 328,551 8.02% 320,025 7.97%
Noninterest earning assets 39,971 39,482 39,690 38,101
Allowance for loan losses (3,755) (3,667) (3,849) (3,715)
--------- --------- --------- ---------
Total Assets $ 381,643 $ 370,105 $ 364,392 $ 354,411
========= ========= ========= =========
Liabilities and stockholders' equity:
Savings deposits $ 162,011 3.04% $ 159,350 3.03% $ 159,587 3.06% $ 157,093 3.00%
Time Deposits 127,867 5.60% 118,938 5.53% 112,948 5.45% 106,790 5.53%
Other borrowed funds 24,795 4.61% 28,520 4.68% 27,606 4.58% 28,486 4.68%
--------- --------- --------- ---------
Total int. bearing liabilities 314,673 4.20% 306,808 4.15% 300,141 4.10% 292,369 4.09%
Noninterest bearing deposits 31,419 29,039 31,376 30,303
Other liabilities 2,743 2,190 2,420 1,905
Stockholders' equity 32,808 32,068 30,455 29,834
--------- --------- --------- ---------
Total liab. and stockholders' equity $ 381,643 $ 370,105 $ 364,392 $ 354,411
========= ========= ========= =========
Interest rate spread 3.87% 3.87% 3.92% 3.88%
===== ===== ===== =====
Net average earning balance /
Net yield on interest earning assets $ 30,754 4.24% $ 27,482 4.20% $ 28,410 4.27% $ 27,656 4.23%
========= ===== ========= ===== ========= ===== ========= =====
<CAPTION>
1996 QTD 1995 QTD
---------------------------------- ----------------------------------
Second Quarter First Quarter Fourth Quarter Third Quarter
Avg. bal. Rate Avg. bal. Rate Avg. bal. Rate Avg. bal. Rate
--------- ----- --------- ----- --------- ----- --------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Assets:
Loans $ 187,531 9.36% $ 188,026 9.49% $ 188,881 9.79% $ 191,865 9.64%
Securities and
interest earning investments 123,577 6.11% 123,735 5.98% 122,756 5.76% 112,649 5.89%
--------- --------- --------- ---------
Total interest earning assets 311,108 8.07% 311,761 8.10% 311,637 8.20% 304,514 8.25%
Noninterest earning assets 37,090 36,913 36,036 33,800
Allowance for loan losses (3,708) (3,733) (3,602) (3,742)
--------- --------- --------- ---------
Total Assets $ 344,490 $ 344,941 $ 344,071 $ 334,572
========= ========= ========= =========
Liabilities and stockholders' equity:
Savings deposits $ 155,830 2.93% $ 153,937 2.99% $ 151,261 3.13% $ 145,659 3.05%
Time Deposits 105,344 5.44% 105,626 5.67% 105,370 5.75% 105,489 5.63%
Other borrowed funds 21,745 4.98% 24,198 4.72% 23,425 4.85% 24,599 5.24%
--------- --------- --------- ---------
Total int. bearing liabilities 282,919 4.02% 283,761 4.14% $ 280,056 4.26% 275,747 4.24%
Noninterest bearing deposits 29,410 27,953 30,139 28,083
Other liabilities 2,089 2,240 4,113 1,961
Stockholders' equity 30,072 30,987 29,763 28,781
--------- --------- --------- ---------
Total liab. and stockholders' equity $ 344,490 $ 344,941 $ 344,071 $ 334,572
========= ========= ========= =========
Interest rate spread 4.05% 3.96% 3.94% 4.01%
===== ===== ===== =====
Net average earning balance /
Net yield on interest earning assets $ 28,189 4.42% $ 28,000 4.33% $ 31,581 4.34% $ 28,767 4.38%
========= ===== ========= ===== ========= ===== ========= =====
</TABLE>
GRANITE STATE BANKSHARES, INC. AND SUBSIDIARY
Part II - Other Information
June 30, 1997
Item 1. Legal Proceedings
The Company is a defendant in ordinary and routine pending
legal actions incident to its business, none of which is believed by
management to be material to the financial condition of the Company.
Item 2. Changes in Securities
None.
Item 3. Defaults upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
On April 15, 1997, the Company held its Annual Meeting of
Stockholders. The matters which were submitted to a vote of the
security holders and the results of the voting at such meeting were as
follows.
<TABLE>
<CAPTION>
Results of Stockholder Vote
-------------------------------------------
Abstentions
and Broker
Matter Submitted For Against Withheld Non-Votes
- ---------------- ---------- --------- --------- ---------
<S> <C> <C> <C> <C>
1) Election of the following directors
for three year terms or until their
successors are qualified and elected:
A) Philip M. Hamblet 1,831,199 0 5,441 0
B) James L. Koontz 1,829,260 0 7,380 0
2) Ratification of Grant Thornton as the Company's
auditors for the fiscal year ended December 31, 1997 1,828,579 5,028 0 3,032
</TABLE>
Item 5. Other Information
On April 29, 1997, the Company and its wholly-owned subsidiary,
Granite Bank, entered into an Agreement and Plan of Reorganization (the
"Agreement") with Primary Bank pursuant to which Primary Bank will be
merged with and into Granite Bank (the "Merger"). As of March 31, 1997
and June 30, 1997, Primary Bank had total assets of approximately $430
million. Upon completion of the Merger, each share of Primary Bank
common stock will be exchanged for shares of Common Stock of the
Company, based on the exchange ratio as set forth in the Agreement.
Pursuant to the Agreement, and based on the bid price per share of the
Company's Common Stock at 12:00 noon on April 29, 1997 of $16.917 (as
adjusted for the three-for-two stock split, effected in the form of a
50% stock dividend, which was paid to stockholders on May 9, 1997), each
outstanding share of Primary Bank common stock would be converted into
1.4926 shares of Company Common Stock, representing a per share
consideration of $25.25, and an aggregate consideration of approximately
$58.0 million. The exchange ratio remains fixed until the Company's
Common Stock is above $18.185 per share. If the average bid price of
the Company's Common Stock for the twenty trading days preceding the
fifth day prior to the effective date of the Merger is above $18.185 per
share, the exchange ratio will float down from 1.4926 shares. If the
average bid price per share of the Company's Common Stock for such
twenty day period is below $16.917, the exchange ratio floats between
1.4926 shares and 1.8658 shares. Primary Bank may terminate the
Agreement if the average price per share of the Company's Common Stock
is below $13.533. The exchange ratios above have been adjusted for the
three-for-two stock split, effected in the form of a dividend, paid to
Company stockholders on May 9, 1997.
The Agreement also provides the Company with an option to acquire
up to 269,088 shares of the common stock of Primary Bank, at a purchase
price of $22.75 per share, which option is exercisable upon the
occurrence of certain events.
Three Primary Bank directors will join the Company's Board of
Directors, and four Primary Bank directors will join the Granite Bank
Board of Directors. The Merger is intended to be tax-free to the
stockholders of Primary Bank and is subject to regulatory approval and
the approval of the stockholders of both Primary Bank and the Company.
It is anticipated that the Merger will be accounted for under the
pooling-of-interest method of accounting. The Merger is expected to be
completed in the fourth quarter of 1997.
The foregoing discussion of the terms of the Merger is qualified
in its entirety by the exact provisions of the Agreement and related
exhibits, which are incorporated herein by reference from Exhibit 2 to
the Company's Form 10-Q for the quarter ended March 31, 1997.
Item 6. Exhibits and Reports on Form 8-K
1. Exhibits
27 Financial Data Schedule
2. Reports on Form 8-K
None.
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.
GRANITE STATE BANKSHARES, INC.
/s/ Charles W. Smith
____________________________________
Dated : August 13, 1997 By: Charles W. Smith
Chairman and
Chief Executive Officer
/s/ William G. Pike
____________________________________
Dated : August 13, 1997 By: William G. Pike
Executive Vice President and
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
This scedule contains summary financial information extracted from the
Form 10-Q and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 23,002
<INT-BEARING-DEPOSITS> 32
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 103,660<F1>
<INVESTMENTS-CARRYING> 15,500
<INVESTMENTS-MARKET> 15,487
<LOANS> 231,765<F2>
<ALLOWANCE> 3,834
<TOTAL-ASSETS> 394,029
<DEPOSITS> 328,444
<SHORT-TERM> 27,116<F3>
<LIABILITIES-OTHER> 3,595
<LONG-TERM> 671
0
0
<COMMON> 3,948
<OTHER-SE> 30,255
<TOTAL-LIABILITIES-AND-EQUITY> 394,029
<INTEREST-LOAN> 9,680
<INTEREST-INVEST> 3,582
<INTEREST-OTHER> 282
<INTEREST-TOTAL> 13,544
<INTEREST-DEPOSIT> 5,817
<INTEREST-EXPENSE> 6,429
<INTEREST-INCOME-NET> 7,115
<LOAN-LOSSES> 175
<SECURITIES-GAINS> 2,046
<EXPENSE-OTHER> 5,457
<INCOME-PRETAX> 4,627
<INCOME-PRE-EXTRAORDINARY> 2,918
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,918
<EPS-PRIMARY> .95
<EPS-DILUTED> .94
<YIELD-ACTUAL> 4.24
<LOANS-NON> 2,175
<LOANS-PAST> 299
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 3,676
<CHARGE-OFFS> 50
<RECOVERIES> 33
<ALLOWANCE-CLOSE> 3,834
<ALLOWANCE-DOMESTIC> 3,834
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
<FN>
<F1> Securities available for sale, at market value
<F2> Loans net of unearned income and gross of allowance for possible loan
losses. Excludes loans held for sale
<F3> Securities sold under agreements to repurchase
</FN>
</TABLE>
