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 September 30, 1999
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
incorporation or organization) (I.R.S. Employer Identification No.)
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 November 9, 1999 was 5,765,667, $1.00 par value per share.
INDEX
Granite State Bankshares, Inc. and Subsidiary
Part I Financial Information Page
Item 1. Financial Statements:
Consolidated Statements of Financial Condition
September 30, 1999 and December 31, 1998 3
Consolidated Statements of Earnings
Three and Nine months ended September 30, 1999 and 1998 4
Consolidated Statements of Comprehensive Income
Three and Nine months ended September 30, 1999 and 1998 5
Consolidated Statements of Cash Flows
Three and Nine months ended September 30, 1999 and 1998 6
Notes to Unaudited Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 12
Item 3. Quantitative and Qualitative Disclosures About Market Risk 20
Part II Other Information
Item 1. Legal Proceedings 20
Item 2. Changes in Securities 20
Item 3. Defaults upon Senior Securities 20
Item 4. Submission of Matters to a Vote of Security Holders 20
Item 5. Other Information 20
Item 6. Exhibits and Reports on Form 8-K 20
Signatures 21
<TABLE>
<CAPTION>
Granite State Bankshares, Inc. and Subsidiary
Part I - Financial Information
Item 1 - Financial Statements
Consolidated Statements of Financial Condition
September 30, December 31,
($ in thousands, except par values) 1999 1998
------------ ------------
<S> <C> <C>
(Unaudited)
ASSETS
Cash and due from banks $ 18,307 $ 23,506
Interest bearing deposits in other banks,
at cost which approximates market value 14,800 19,532
Securities available for sale (amortized cost
$197,519 at September 30, 1999 and $217,186 at
December 31, 1998) 193,792 219,765
Securities held to maturity (market value
$17,427 at September 30, 1999 and $22,548 at
December 31, 1998) 18,019 22,277
Stock in Federal Home Loan Bank of Boston 7,201 7,201
Loans held for sale 718 1,828
Loans 564,580 555,699
Less: Unearned income (1,358) (1,506)
Allowance for possible loan losses (7,063) (7,122)
------- -------
Net loans 556,159 547,071
Premises and equipment 17,142 17,700
Other real estate owned 1,373 1,601
Other assets 23,776 17,666
------- -------
Total assets $ 851,287 $ 878,147
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Interest bearing deposits $ 553,150 $ 576,778
Noninterest bearing deposits 72,462 73,709
------- -------
Total deposits 625,612 650,487
Securities sold under agreements to repurchase 70,010 70,905
Other borrowings 80,574 80,608
Other liabilities 3,796 3,547
------- -------
Total liabilities 779,992 805,547
Preferred stock, $1.00 par value; authorized
7,500,000 shares; none issued
Common stock, $1.00 par value; authorized
12,500,000 shares; 6,789,582 shares issued at
September 30, 1999 and December 31, 1998 6,790 6,790
Additional paid-in capital 37,895 38,018
------- -------
44,685 44,808
Accumulated other comprehensive income (loss) (2,263) 1,583
Retained earnings 38,024 32,998
------- -------
80,446 79,389
Less: Treasury stock, at cost, 1,002,915 and
889,759 shares at September 30, 1999 and
December 31, 1998, respectively (8,652) (6,065)
Unallocated common stock acquired by
the ESOP (71) (71)
Unearned restricted stock (428) (653)
------- -------
Total stockholders' equity 71,295 72,600
------- -------
Total liabilities and stockholders' equity $ 851,287 $ 878,147
======= =======
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 Earnings
Three Months Ended Nine Months Ended
September 30, September 30,
--------------------- ---------------------
($ in thousands, except per share data) 1999 1998 1999 1998
-------- -------- -------- --------
<S> <C> <C> <C> <C>
(Unaudited) (Unaudited)
Interest and dividend income:
Loans $ 11,290 $ 11,515 $ 33,876 $ 34,385
Debt securities available for sale 2,711 2,377 8,249 6,562
Marketable equity securities available for sale 185 165 550 534
Securities held to maturity 288 321 959 1,089
Dividends on Federal Home Loan Bank of Boston stock 117 115 348 345
Other interest 341 349 573 656
------ ------ ------ ------
14,932 14,842 44,555 43,571
Interest expense:
Deposits 5,159 5,664 15,635 16,965
Securities sold under agreements to repurchase 757 809 1,914 2,223
Other borrowings 1,061 688 3,173 1,288
------ ------ ------ ------
6,977 7,161 20,722 20,476
------ ------ ------ ------
Net interest and dividend income 7,955 7,681 23,833 23,095
Provision for possible loan losses 0 250 50 775
------ ------ ------ ------
Net interest and dividend income after provision
for possible loan losses 7,955 7,431 23,783 22,320
Noninterest income:
Customer account fees and service charges 627 591 1,918 1,678
Mortgage service fees 121 137 368 428
Net gains on sales of securities available for sale 404 481 695 2,380
Net gains on sales of loans 174 202 447 526
Other 325 324 811 943
------ ------ ------ ------
1,651 1,735 4,239 5,955
Noninterest expense:
Salaries and benefits 3,038 2,921 8,857 8,892
Occupancy and equipment 999 1,072 3,109 3,149
Other real estate owned 147 (19) 355 183
Other 1,271 1,586 4,055 4,760
------ ------ ------ ------
5,455 5,560 16,376 16,984
------ ------ ------ ------
Earnings before income taxes 4,151 3,606 11,646 11,291
Income taxes 1,504 1,276 4,172 3,943
------ ------ ------ ------
Net earnings $ 2,647 $ 2,330 $ 7,474 $ 7,348
====== ====== ====== ======
Shares used in computing net earnings per share:
Basic 5,757,767 5,848,765 5,797,538 5,809,599
Diluted 5,914,424 6,001,897 5,953,246 5,990,503
Net earnings per share -basic $ 0.46 $ 0.40 $ 1.29 $ 1.26
Net earnings per share -diluted $ 0.45 $ 0.39 $ 1.26 $ 1.23
Cash dividends declared per share $ 0.14 $ 0.125 $ 0.42 $ 0.375
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 Comprehensive Income
Three Months Ended Nine Months Ended
September 30, September 30,
($ in thousands) ------------------ -------------------
1999 1998 1999 1998
------ ------ ------ ------
<S> <C> <C> <C> <C>
(Unaudited) (Unaudited)
Net earnings $ 2,647 $ 2,330 $ 7,474 $ 7,348
Other comprehensive income (loss):
Unrealized holding losses arising during
the period (2,817) (2,919) (5,611) (2,757)
Related income tax effects 1,108 1,127 2,187 1,065
Net unrealized holding losses, net of ------ ------ ------ ------
related income tax effects (1,709) (1,792) (3,424) (1,692)
------ ------ ------ ------
Less: reclassification adjustment for gains
realized in net earnings:
Realized gains (404) (481) (695) (2,380)
Related income tax effects 161 186 273 919
------ ------ ------ ------
Net reclassification adjustment (243) (295) (422) (1,461)
------ ------ ------ ------
Total other comprehensive loss (1,952) (2,087) (3,846) (3,153)
------ ------ ------ ------
Comprehensive Income $ 695 $ 243 $ 3,628 $ 4,195
====== ====== ====== ======
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 Nine Months Ended
September 30, September 30,
Increase (decrease) in cash ($ In Thousands) -------------------- -------------------
1999 1998 1999 1998
-------- -------- -------- --------
<S> <C> <C> <C> <C>
(Unaudited) (Unaudited)
Cash flows from operating activities:
Net earnings $ 2,647 $ 2,330 $ 7,474 $ 7,348
Adjustments to reconcile net earnings to net cash
provided by operating activities
Provision for possible loan losses 250 50 775
Provision for depreciation and amortization 588 628 1,774 1,832
Net (accretion) amortization of security discounts
and premiums 49 23 170 (9)
Provision for loss on other real estate owned 84 146 43
Realized gains on sales of securities available
for sale, net (404) (481) (695) (2,380)
Loans originated for sale (6,269) (10,431) (20,189) (29,489)
Proceeds from sale of loans originated for sale 6,761 10,220 21,746 29,369
Realized gains on sales of loans (174) (202) (447) (526)
Gains on sales of other assets (11)
Increase (decrease) in unearned income (54) (59) (148) 58
Realized (gain) loss on sales of other real
estate owned (38) (6) 20
Deferred income taxes 26 3 668 969
(Increase) decrease in other assets 9 264 (5,311) (1,363)
Increase (decrease) in other liabilities 519 (122) 177 (1,098)
Decrease in unearned restricted stock 75 225
------ ------ ------ ------
Net cash provided by operating activities 3,857 2,385 5,623 5,549
Cash flows from investing activities:
Purchase of securities held to maturity (15,012) (15,012)
Proceeds from maturities and calls of securities
held to maturity 5,000 4,300 24,765
Proceeds from sales of securities available for sale 780 539 47,616 3,090
Proceeds from maturities and calls of securities
available for sale 10,000 1,000 35,000 29,250
Purchase of securities available for sale (9,014) (33,993) (65,957) (56,073)
Principal payments received on securities available
for sale 734 2,115 3,491 8,278
Loan repayments (originations), net (1,274) 1,585 (9,748) (35,900)
Purchase of premises and equipment (247) (229) (1,148) (1,147)
Proceeds from sales of other assets 760
Proceeds from sales of other real estate owned 126 846 564
Net decrease in interest-bearing deposits in other
banks 6,080 9,223 4,732 16,701
Other 254 28
------ ------ ------ ------
Net cash provided by (used in) investing activities 7,059 (29,646) 20,146 (25,456)
Cash flows from financing activities:
Net increase (decrease) in demand, NOW, money market
deposit and savings accounts (12,327) (1,360) (3,176) 12,870
Net increase (decrease) in time certificates (11,858) 10,743 (21,699) (21,318)
Net increase (decrease) in securities sold under
agreements to repurchase 10,460 4,791 (895) 6,772
Net increase (decrease) in other borrowings (12) (3,766) (34) 15,849
Proceeds from issuance of common stock 18 2,113
Reissuance of common stock from treasury 225
Purchase of treasury stock (1,414) (3,013)
Dividends paid on common stock (819) (737) (2,376) (2,087)
Other (281)
------ ------ ------ ------
Net cash provided by (used in) financing activities (15,970) 9,689 (30,968) 13,918
------ ------ ------ ------
Net decrease in cash and due from banks (5,054) (17,572) (5,199) (5,989)
Cash and due from banks at beginning of period 23,361 40,260 23,506 28,677
------ ------ ------ ------
Cash and due from banks at end of period $ 18,307 $ 22,688 $ 18,307 $ 22,688
====== ====== ====== ======
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
September 30, 1999
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 nine months ended
September 30, 1999 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-K for the year ended December 31, 1998.
Note 2. Earnings Per Share
Basic earnings per share is computed by dividing net earnings by the
weighted average number of common shares outstanding for the period. Diluted
earnings per share reflects the potential dilution that could occur if
securities or other contracts to issue common stock were exercised or converted
into common stock or resulted in the issuance of common stock that then shared
in the earnings of the Company. Information regarding the computation of
earnings per share is as follows:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
--------------------------------------- ---------------------------------------
1999 1998 1999 1998
-------- -------- -------- --------
<S> <C> <C> <C> <C>
($ in Thousands, except per share data) ($ in Thousands, except per share data)
Net earnings $ 2,647 $ 2,330 $ 7,474 $ 7,348
====== ====== ====== ======
Weighted average common
shares outstanding-Basic 5,757,767 5,848,765 5,797,538 5,809,599
Dilutive effect of stock
options computed using
the treasury stock method 156,657 153,132 155,708 180,904
--------- --------- --------- ---------
Weighted average common
shares outstanding-Diluted 5,914,424 6,001,897 5,953,246 5,990,503
========= ========= ========= =========
Net earnings per share-Basic $ 0.46 $ 0.40 $ 1.29 $ 1.26
====== ====== ====== ======
Net earnings per share-Diluted $ 0.45 $ 0.39 $ 1.26 $ 1.23
====== ====== ====== ======
</TABLE>
Weighted average options to purchase 75,000 shares of common stock were
outstanding at September 30, 1999, June 30, 1999, March 31, 1999 and
September 30, 1998, but were not included in the computation of weighted average
common shares outstanding for purposes of computing diluted earnings per share,
because the effect would have been antidilutive. All options to purchase shares
at June 30, 1998 and March 31, 1998 were included in the computation of weighted
average common shares outstanding for purposes of computing diluted earnings per
share.
Note 3. 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 part of accumulated
other comprehensive income, net of related income tax effects. At
September 30, 1999 and December 31, 1998, the Company had no securities
classified as trading securities.
The amortized cost, estimated market value and carrying value of
securities at September 30, 1999 and December 31, 1998 were as follows:
<TABLE>
<CAPTION>
Amortized Estimated Carrying
At September 30, 1999 Cost Market Value Value
--------- ------------ --------
<S> <C> <C> <C>
(In Thousands)
Securities held to maturity
US Government agency obligations $ 13,008 $ 12,630 $ 13,008
Other corporate obligations 5,011 4,797 5,011
------- ------- -------
Total securities held to maturity $ 18,019 $ 17,427 $ 18,019
======= ======= =======
Securities available for sale
US Treasury obligations $ 19,988 $ 20,164 $ 20,164
US Government agency obligations 90,452 88,198 88,198
Other corporate obligations 58,880 57,600 57,600
Mortgage-backed securities:
FNMA 5,108 5,100 5,100
FHLMC 1,596 1,573 1,573
GNMA 886 928 928
SBA 421 422 422
------- ------- -------
Total mortgage-backed securities 8,011 8,023 8,023
Mutual Funds 7,063 7,010 7,010
Marketable equity securities 13,125 12,797 12,797
------- ------- -------
Total securities available for sale $ 197,519 $ 193,792 $ 193,792
======= ======= =======
<CAPTION>
Amortized Estimated Carrying
At December 31, 1998 Cost Market Value Value
--------- ------------ --------
<S> <C> <C> <C>
(In Thousands)
Securities held to maturity
US Government agency obligations $ 17,265 $ 17,495 $ 17,265
Other corporate obligations 5,012 5,053 5,012
------- ------- -------
Total securities held to maturity $ 22,277 $ 22,548 $ 22,277
======= ======= =======
Securities available for sale
US Treasury obligations $ 82,521 $ 83,716 $ 83,716
US Government agency obligations 55,961 55,998 55,998
Other corporate obligations 46,593 46,457 46,457
Mortgage-backed securities:
FNMA 7,045 7,031 7,031
FHLMC 2,876 2,853 2,853
GNMA 1,190 1,246 1,246
SBA 552 568 568
------- ------- -------
Total mortgage-backed securities 11,663 11,698 11,698
Mutual Funds 6,326 6,402 6,402
Marketable equity securities 14,122 15,494 15,494
------- ------- -------
Total securities available for sale $ 217,186 $ 219,765 $ 219,765
======= ======= =======
</TABLE>
Note 4. Loans
Loans consist of the following at:
<TABLE>
<CAPTION>
September 30, December 31,
1999 1998
------------- ------------
<S> <C> <C>
(In Thousands)
Commercial, financial and agricultural $ 42,263 $ 48,418
Real estate-residential 313,629 292,059
Real estate-commercial 137,188 146,093
Real estate-multifamily 38,687 36,184
Real estate-construction and
land development 2,917 2,281
Installment 6,277 7,809
Other 23,619 22,855
------- -------
Total loans 564,580 555,699
Less:
Unearned income (1,358) (1,506)
Allowance for possible loan losses (7,063) (7,122)
------- -------
Net loans $ 556,159 $ 547,071
======= =======
</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 Nine months ended
September 30, September 30,
------------------ -----------------
1999 1998 1999 1998
------ ------ ------ ------
<S> <C> <C> <C> <C>
(In Thousands) (In Thousands)
Balance, beginning of period $ 7,170 $ 7,327 $ 7,122 $ 7,651
Provision for possible loan losses 0 250 50 775
Loans charged off (128) (155) (425) (1,331)
Recoveries of loans previously charged off 21 92 316 419
----- ----- ----- -----
Balance, end of period $ 7,063 $ 7,514 $ 7,063 $ 7,514
===== ===== ===== =====
</TABLE>
Information with respect to impaired loans consisted of the following
at:
<TABLE>
<CAPTION>
September 30, December 31,
1999 1998
------------- ------------
<S> <C> <C>
(In Thousands)
Recorded investment in impaired loans $ 980 $ 1,556
===== ======
Impaired loans with specific loss allowances $ 980 $ 1,556
===== ======
Loss allowances reserved on impaired loans $ 326 $ 233
===== ======
</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 will not recognize income. The average recorded investment in impaired
loans was $1,101,000 and $3,607,000 for the nine months ended September 30, 1999
and 1998, respectively. During the three and nine months ended
September 30, 1999 and 1998, the Company recognized no income on impaired loans.
Note 5. Interest Bearing Deposits
Interest bearing deposits consist of the following at:
<TABLE>
<CAPTION>
September 30, December 31,
1999 1998
------------- -----------
<S> <C> <C>
(In Thousands)
NOW accounts $ 199,379 $ 203,068
Savings accounts 90,173 87,150
Money market deposit accounts 18,396 19,659
Time certificates 245,202 266,901
------- -------
$ 553,150 $ 576,778
======= =======
</TABLE>
Note 6. Supplemental Disclosures of Cash Flow Information
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30, September 30,
-------------------- -------------------
1999 1998 1999 1998
-------- -------- -------- --------
<S> <C> <C> <C> <C>
(In Thousands) (In Thousands)
Cash paid for interest $ 7,009 $ 7,152 $ 20,804 $ 20,347
Income taxes paid 850 552 2,875 2,807
Non-cash investing activities:
Real estate acquired in settlement of loans 113 384 758 509
</TABLE>
Granite State Bankshares, Inc. and Subsidiary
Part I - Financial Information
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
September 30, 1999
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 and dividend income earned by the Company's subsidiary, Granite
Bank ("the subsidiary bank"). Net interest and dividend 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, noninterest
expense and income taxes.
The Company has made, and may continue to make, various forward-looking
statements with respect to its financial condition and results of operations.
The Company cautions that these forward-looking statements, which are based on
various assumptions (some of which are beyond the Company's control), are
subject to numerous risks and uncertainties and that statements for periods
subsequent to September 30, 1999 are subject to greater uncertainty because of
the increased likelihood of changes in underlying factors and assumptions.
Actual results could differ materially from those set forth in forward-looking
statements due to a variety of factors, including, but not limited to, those
related to the economic environment, particularly in the market areas in which
the Company operates, competitive products and pricing, the ability of the
Company and its competitors, vendors and customers to respond effectively to
issues related to the Year 2000, fiscal and monetary policies of the U.S.
Government, changes in government regulations affecting financial institutions,
including regulatory fees and capital requirements, changes in prevailing
interest rates, acquisitions and the integration of acquired businesses, credit
risk management, asset-liability management, the financial and securities
markets and the availability of and costs associated with sources of liquidity.
The Company does not undertake, and specifically disclaims any obligation, to
publicly release the result of any revisions which may be made to any forward-
looking statements to reflect the occurrence of anticipated or unanticipated
events or circumstances after the date of such statements.
Financial Condition
Total assets decreased by $26,860,000 or 3.06%, from $878,147,000 at
December 31, 1998 to $851,287,000 at September 30, 1999. The decrease in assets
resulted primarily from outflows of deposit liabilities and included decreases
in cash and due from banks, interest bearing deposits in other banks, securities
held to maturity and securities available for sale, partially offset by
increases in net loans and other assets.
Cash and due from banks decreased $5,199,000, from $23,506,000 at
December 31, 1998 to $18,307,000 at September 30, 1999. Additionally, interest
bearing deposits with other banks, which primarily consist of deposits with the
Federal Home Loan Bank of Boston, decreased $4,732,000, from $19,532,000 at
December 31, 1998 to $14,800,000 at September 30, 1999. Interest bearing
deposits with other banks are short-term overnight investments and the level of
the Company's investment in these instruments fluctuates as investments are made
in other interest earning assets such as loans, securities held to maturity and
securities available for sale, and as balances of interest bearing liabilities
such as deposits, securities sold under agreements to repurchase and other
borrowings fluctuate. Proceeds from the decreases in interest bearing deposits
with other banks and cash and due from banks were primarily used to fund
deposit outflows and increases in net loans.
Securities held to maturity decreased $4,258,000, from $22,277,000 at
December 31, 1998 to $18,019,000 at September 30, 1999. Securities available for
sale decreased $25,973,000 from $219,765,000 at December 31, 1998 to
$193,792,000 at September 30, 1999. Proceeds from decreases in securities held
to maturity and securities available for sale were primarily used to fund
deposit outflows as well as increases in net loans.
Net loans were $556,159,000 at September 30, 1999, an increase of
$9,088,000 from $547,071,000 at December 31, 1998. The most significant changes
in the loan portfolio related to residential real estate loans, commercial,
financial and agricultural loans and commercial real estate loans. Residential
real estate loans increased $21,570,000 to $313,629,000 or 55.55% of total loans
outstanding at September 30, 1999 from $292,059,000 or 52.56% of total loans
outstanding at December 31, 1998. The demand for residential real estate loans
was strong during the first six months of 1999 and accounted for most of the
increase in these loans. Loan demand, and therefore the pace of increase in
residential real estate loans slowed during the third quarter of 1999 due
primarily to increases in interest rates. The increase in residential real
estate loans was partially offset by decreases in commercial, financial and
agricultural loans and commercial real estate loans of $6,155,000 and
$8,905,000, respectively. The decrease in commercial, financial and agricultural
loans and commercial real estate loans related primarily to the pace of loan
repayments and the highly competitive environment for attracting loans amongst
financial institutions in the Company's market areas.
Total deposits decreased $24,875,000, or 3.82%, from $650,487,000 at
December 31, 1998 to $625,612,000 at September 30, 1999. The significant changes
in deposits related to a decrease in time certificates and NOW accounts of
$21,699,000 and $3,689,000, respectively, partially offset by an increase in
savings accounts of $3,023,000. The decrease in time certificates related
primarily to depositors looking to achieve higher yields by investing their
funds in alternate investment products. The decrease in NOW accounts and
increase in savings accounts related primarily to the timing of the cash needs
of depositors.
Results of Operations
Net Earnings
Net earnings for the three and nine months ended September 30, 1999 were
$2,647,000 and $7,474,000, compared to $2,330,000 and $7,348,000 for the three
and nine months ended September 30, 1998. Basic earnings per share were $.46 and
$1.29 for the three and nine months ended September 30, 1999, compared to $.40
and $1.26 for the three and nine months ended September 30, 1998. Diluted
earnings per share were $.45 and $1.26 for the three and nine months ended
September 30, 1999 compared to $.39 and $1.23 for the three and nine months
ended September 30, 1998. Included in net earnings were gains on sales of
securities available for sale of $404,000 and $695,000, respectively, for the
three and nine months ended September 30, 1999 compared to $481,000 and
$2,380,000 for the three and nine months ended September 30, 1998. Earnings
before income taxes, excluding gains on sales of securities available for sale,
were $3,747,000 and $10,951,000 for the three and nine months ended September
30, 1999 compared to $3,125,000 and $8,911,000 for the three and nine months
ended September 30, 1998, representing increases of 19.90% and 22.89%,
respectively.
Interest and Dividend Income
Interest and dividend income for the three and nine months ended
September 30, 1999 was $14,932,000 and $44,555,000 compared to $14,842,000 and
$43,571,000 for the corresponding periods in 1998. The increase in interest and
dividend income for the three and nine months ended September 30, 1999 compared
to the three and nine months ended September 30, 1998 is primarily attributable
to an increase in the average balance of interest earning assets of $44,733,000
and $71,152,000 for the three and nine months ended September 30, 1999 compared
to the same periods in 1998, partially offset by a decrease in overall yield on
interest earning assets to 7.30% and 7.40% for the three and nine months ended
September 30, 1999 compared with 7.68% and 7.93% for the same periods in 1998.
The decrease in overall yield on interest earning assets resulted from a
continued decrease in the yield on loans to 8.00% and 8.12% for the three and
nine months ended September 30, 1999 compared to 8.43% and 8.65% for the three
and nine months ended September 30, 1998 and a decrease in the yield on
securities and interest earning investments to 5.75% and 5.76% for the three and
nine months ended September 30, 1999 compared to 5.88% and 6.06% for the three
and nine months ended September 30, 1998. The decrease in loan yield is
primarily due to a shift in the mix of loans from commercial real estate and
commercial and industrial loans which comprised 31.78% and 36.39% of the loan
portfolio at September 30, 1999 and September 30, 1998, respectively, to lower
yielding residential real estate loans which comprised 55.55% and 50.52% of the
loan portfolio at September 30, 1999 and September 30, 1998, respectively. The
decrease in the yield on securities and interest earning assets was primarily
the result of the continued low interest rate environment, which caused proceeds
from securities which matured or were called, to be reinvested at lower rates.
Interest Expense
Interest expense for the three and nine months ended September 30, 1999
was $6,977,000 and $20,722,000 compared to $7,161,000 and $20,476,000 for the
corresponding periods in 1998. The decrease in interest expense for the three
months ended September 30, 1999 compared to the same period in 1998 is primarily
due to a decrease in the cost of interest bearing liabilities to 3.88% for the
three months ended September 30, 1999 compared to 4.18% for the three months
ended September 30, 1998, partially offset by an increase in the average balance
of total interest bearing liabilities of $34,062,000. The increase in interest
expense for the nine months ended September 30, 1999 compared to the same period
in 1998 is primarily due to an increase in the average balance of total interest
bearing liabilities of $52,674,000, partially offset by a decrease in the cost
of those liabilities to 3.91% for the nine months ended September 30, 1999
compared to 4.17% for the nine months ended September 30, 1998. Average balances
of savings deposits increased $12,524,000 and $11,895,000 while average time
deposits decreased $14,201,000 and $9,394,000 for the three and nine months
ended September 30, 1999 compared to the same periods in 1998. The average cost
of savings deposits decreased to 2.41% and 2.39%, for the three and nine months
ended September 30, 1999 compared to 2.61% and 2.63%, for the three and nine
months ended September 30, 1998, while the cost of time deposits was 5.18% and
5.25%, respectively, for the three and nine months ended September 30, 1999
compared to 5.55% and 5.57% for the same periods in 1998. The average balance of
other borrowed funds increased $35,739,000 and $50,173,000 for the three and
nine months ended September 30, 1999 compared to the same periods in 1998,
partially offset by a decrease in the cost of those borrowings to 4.71% for both
the three and nine months ended September 30, 1999 compared to 5.06% and 4.98%
for the same periods in 1998.
Net Interest and Dividend Income
Net interest and dividend income increased by $274,000 and $738,000 for
the three and nine months ended September 30, 1999 compared to the same periods
in 1998. The increase for the three and nine months ended September 30, 1999
compared to the same periods in 1998 is primarily due to an increase in net
interest earning assets of $10,671,000 and $18,477,000 for the three and nine
months ended September 30, 1999 compared to the same periods in 1998, partially
offset by a decrease in net interest rate spread from 3.50% and 3.77% for the
three and nine months ended September 30, 1998 to 3.42% and 3.49% for the three
and nine months ended September 30, 1999. The net yield on interest earning
assets decreased from 3.98% and 4.21% for the three and nine months ended
September 30, 1998 to 3.89% and 3.96% for the three and nine months ended
September 30, 1999.
Provision for Possible Loan Losses
The provision for possible loan losses for the three and nine months
ended September 30, 1999 was $0 and $50,000, compared to $250,000 and $775,000
for the three and nine months ended September 30, 1998. The decrease in the
provision for the three and nine months ended September 30, 1999, compared to
the same periods in 1998, is primarily related to a change in the mix of loans
to residential real estate loans, which accounted for 55.55% of the total loan
portfolio at September 30, 1999 compared to 50.52% at September 30, 1998, while
commercial real estate and commercial and industrial loans accounted for 31.78%
of the total loan portfolio at September 30, 1999 compared to 36.39% at
September 30, 1998. Also contributing to the decrease in the provision was a
decrease of $4,132,000 in nonperforming loans to $2,012,000 at September
30, 1999 compared to $6,144,000 at September 30, 1998. Additionally, the level
of net charge-offs for the three and nine months ended September 30, 1999 was
$107,000 and $109,000, compared to $63,000 and $912,000, for the corresponding
periods a year ago.
The allowance for possible loan losses is maintained through provisions
for possible loan losses based upon management's ongoing evaluation of the risks
inherent in the loan portfolio. The methodology for determining the amount of
the allowance for possible loan losses consists of several elements.
Nonperforming, impaired and delinquent loans are reviewed individually and the
value of any underlying collateral is considered in determining estimates of
possible losses associated with those loans. Another element involves estimating
losses inherent in categories of loans, based primarily on historical
experience, industry trends and trends in the real estate market and the current
economic environment in the Company's primary market areas. The last element is
based on management's evaluation of various conditions, and involves a higher
degree of uncertainty because they are not identified with specific problem
credits or portfolio segments. The conditions evaluated in connection with this
element include the following: industry and regional conditions; seasoning of
the loan portfolio and changes in the composition of and growth in the loan
portfolio; the strength and duration of the current business cycle; existing
general economic and business conditions in the lending areas; credit quality
trends; historical loan charge-off experience; and the results of bank
regulatory examinations.
Noninterest Income
Noninterest income for the three and nine months ended September 30,
1999 totaled $1,651,000 and $4,239,000, compared to $1,735,000 and
$5,955,000 for the same periods in 1998. The decrease of $84,000 and $1,716,000
for the three and nine months ended September 30, 1999 compared to the same
periods in 1998 relates primarily to a decrease in net gains on sales of
securities available for sale of $77,000 and $1,685,000 for the three and nine
months ended September 30, 1999 compared to the same periods in 1998.
Noninterest Expense
Noninterest expense for the three months ended September 30, 1999
decreased $105,000 or 1.89% to $5,455,000 compared to $5,560,000 for the same
period a year earlier. Noninterest expense for the nine months ended September
30, 1999 decreased $608,000 or 3.58% to $16,376,000 compared to $16,984,000 for
the same period a year earlier. The decrease for the three months ended
September 30, 1999 compared to the same period in 1998 related primarily to a
decrease in other noninterest expenses of $315,000, partially offset by an
increase in salaries and benefits expense of $117,000 and other real estate
owned expense of $166,000. The decrease for the nine months ended September 30,
1999, compared to the same period in 1998 relates primarily to a decrease of
$705,000 in other noninterest expenses, partially offset by an increase in other
real estate owned expense of $172,000. The decrease in other noninterest
expenses for the three and nine months ended September 30, 1999 compared to the
same periods in 1998 related primarily to additional efficiencies realized from
the merger with Primary Bank, which was completed after the close of business on
October 31, 1997 and the related data processing system conversion completed
during the first quarter of 1998. The increase in salaries and benefits expense
for the three months ended September 30, 1999 compared to the same period in
1998 related primarily to an increase in health care costs for 1999. The
increase in other real estate owned expense for the three and nine months ended
September 30, 1999 compared to the same periods in 1998 is primarily the result
of writedowns and other costs associated with the disposal of certain properties
held in other real estate owned.
Income Taxes
Income tax expense for the three and nine months ended September 30,
1999 was $1,504,000 and $4,172,000, compared with $1,276,000 and $3,943,000 for
the same periods in 1998. Income tax expense as a percentage of earnings before
income taxes was 36.23% and 35.82% for the three and nine months ended September
30, 1999 and 35.39% and 34.92% for the three and nine months ended September 30,
1998.
Risk Elements
Total nonperforming loans decreased from $3,013,000 or 0.54% of total
loans, at December 31, 1998, to $2,012,000 or 0.36% of total loans, at September
30, 1999. During the same period, other real estate owned, decreased from
$1,601,000 to $1,373,000. The allowance for possible loan losses as a percent of
total nonperforming loans was 351.04% at September 30, 1999, compared with
236.38% at December 31, 1998.
As shown in the following table, nonperforming assets as a percentage of
total assets were 0.40% and 0.53%, as of September 30, 1999 and December 31,
1998, respectively.
<TABLE>
<CAPTION>
September 30, 1999 December 31, 1998
------------------ -----------------
<S> <C> <C>
($ in Thousands)
Loans 90 days or more past due
and still accruing $ 162 $ 146
===== =====
Nonaccrual/nonperforming loans $ 2,012 $ 3,013
Other real estate owned 1,373 1,601
----- -----
Total nonperforming assets $ 3,385 $ 4,614
===== =====
Allowance for possible loan losses $ 7,063 $ 7,122
Nonperforming loans as a percent of
total loans 0.36% 0.54%
Allowance for possible loan losses
as a percent of total nonperforming
loans 351.04% 236.38%
Nonperforming assets as a percent of
total assets 0.40% 0.53%
</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 other banks and securities available for sale,
particularly short-term investments. At September 30, 1999, short-term and long-
term borrowings from the Federal Home Loan Bank of Boston were $80,574,000, with
an additional available borrowing capacity of approximately $252,814,000;
interest bearing deposits with other banks were $14,800,000 and securities
available for sale were $193,792,000. Included in securities held to maturity
and securities available for sale are debt securities with a carrying value of
$192,004,000. The weighted average maturity for debt securities held to maturity
and available for sale, excluding mortgage-backed securities with a carrying
value of $8,023,000, is approximately 54 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 September 30, 1999 and
December 31, 1998.
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 September 30, 1999 and December 31, 1998, the
subsidiary bank was in compliance with all regulatory capital requirements.
Additionally, at September 30, 1999, the subsidiary bank was considered "well
capitalized" for purposes of the FDIC's prompt corrective action regulations.
At September 30, 1999 the Company's and the subsidiary bank's regulatory
capital ratios as a percentage of assets are as follows:
<TABLE>
<CAPTION>
September 30, 1999
----------------------
Subsidiary
Bank Company
---------- ---------
<S> <C> <C>
Tier I leverage capital to average assets 8.21% 8.33%
Tier I capital to risk-weighted assets 12.96% 13.15%
Total capital to risk-weighted assets 14.21% 14.40%
</TABLE>
Year 2000
The Company is aware of the issues associated with the programming code
in existing computer systems and non-computer related embedded technology as the
millennium ("Year 2000") approaches. The Year 2000 problem is pervasive and
complex as virtually every computer operation will be affected in some way by
the rollover of the two digit year value to 00. The issue is whether computer
systems will properly recognize date sensitive information when the year changes
to 2000. Systems that do not properly recognize such information could generate
erroneous data or cause a system to fail.
The Company has developed a Year 2000 Policy Statement which was
approved by the Company's Board of Directors and is utilizing both internal and
external resources to identify, correct and test the systems for Year 2000
compliance. The Year 2000 Policy Statement contains a phases approach which
includes the following phases: awareness, inventory, assessment, renovation,
validation, implementation and post implementation. As of September 30, 1999,
the Company has substantially completed the assessment, renovation, validation
and implementation phases. The Company has substantially completed any necessary
corrections, vendor reprogramming and testing efforts which will allow adequate
time for any potential modifications in 1999. The Company is currently in the
final stages of the post-implementation phase. During this phase of the Plan,
the contingency plans will be tested in order to determine if the established
alternative operating procedures will work during a worst case scenario. To
date, the Company has received a warranty of compliance from its processing
vendor for loans, deposits and related products. Additionally, letters have been
received from the Company's remaining critical vendors that plans have been
developed to address the Year 2000 issue. All of these efforts are being
coordinated through a Year 2000 committee which is chaired by the Company's
Chief Operations Officer and includes a representative from the subsidiary
bank's Board of Directors. The Chief Operations Officer reports periodically to
the Company's and the subsidiary bank's Board of Directors with respect to the
Year 2000 committee's efforts. Management's estimate of the incremental costs
related to the Year 2000 compliance are approximately $200,000 to $240,000, of
which approximately $160,000 has been incurred through September 30, 1999. The
remaining Year 2000 costs are expected to be incurred in the last quarter of
1999.
The Company reviewed its loan relationships over $250,000 and assessed a
Year 2000 compliance risk for each customer. The risk assessment consisted of a
detailed questionnaire relating to the customer's Year 2000 efforts and resulted
in the assignment of risk levels of low, medium and high risk for noncompliance
with the Year 2000. The review of borrowers included the respective borrower's
customer base and the likelihood of their noncompliance. The Company has
completed a review of all borrowing relationships assigned with a medium or high
risk for noncompliance with Year 2000 issues. As a result of this review, it was
determined that there was no specific risk or significant loss exposure that
could be identified at this time resulting from the Year 2000. The Company has
also incorporated this review into the approval process for all new borrowing
relationships. In addition to the analyses of the loan relationships, the
Company's subsidiary bank has also identified deposit customers and customers
from whom the Company borrows short-term funds in the form of securities sold
under agreements to repurchase with balances greater than $250,000 in order to
determine an estimate of additional liquidity that may be needed as a result of
the Year 2000 project. Although no assurances can be given, based on the
Company's review of significant deposit and borrowing relationships as of
September 30, 1999, management believes these relationships will not have a
material adverse affect on the Company's liquidity, financial condition or
results of operations.
The most significant risk anticipated by the Company is the possibility
of interruption to its customer account processing systems. Due to the progress
described above, the Company does not presently foresee any interruptions to
these systems, but cannot predict consequences of interruptions to these systems
from outside factors, such as the loss of telecommunication and electrical power
(worst case scenario). The Company's business resumption contingency plan
addresses resumption of business should the Company lose its telecommunications
or electrical power.
Consolidated Quarterly Average Balances and Interest Rates
The table on the following page presents, for the periods indicated,
average balances of assets and liabilities, as well as yields on interest
earning assets and the cost of interest bearing liabilities.
<TABLE>
<CAPTION>
Granite State Bankshares, Inc. and Subsidiary
Consolidated Quarterly Average Balances and Interest Rates
($ in Thousands)
1999 QTD 1998 QTD
----------------------------------------------------------- -----------------
Third Quarter Second Quarter First Quarter Fourth Quarter
Avg. Bal. Rate Avg. Bal. Rate Avg. Bal. Rate Avg. Bal. Rate
--------- ----- --------- ----- --------- ----- --------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Assets:
Loans $ 560,027 8.00% $ 556,014 8.14% $ 557,245 8.22% $ 550,627 8.25%
Securities and
interest earning
investments 251,276 5.75% 241,779 5.74% 250,600 5.78% 250,425 5.72%
------- ------- ------- -------
Total interest
earning assets 811,303 7.30% 797,793 7.42% 807,845 7.47% 801,052 7.46%
Noninterest earning
assets 58,521 59,725 56,931 60,832
Allowance for possible
loan losses (7,164) (7,198) (7,133) (7,565)
------- ------- ------- -------
Total Assets $ 862,660 $ 850,320 $ 857,643 $ 854,319
======= ======= ======= =======
Liabilities and
stockholders' equity:
Savings deposits $ 307,948 2.41% $ 309,037 2.38% $ 302,555 2.37% $ 302,579 2.47%
Time deposits 251,675 5.18% 259,576 5.22% 264,321 5.36% 267,443 5.49%
Other borrowed funds 153,121 4.71% 133,366 4.72% 146,797 4.69% 135,860 4.64%
------- ------- ------- -------
Total int. bearing
liabilities 712,744 3.88% 701,979 3.88% 713,673 3.96% 705,882 4.03%
Noninterest bearing
deposits 75,088 72,709 67,801 71,709
Other liabilities 2,546 2,144 2,998 3,248
Stockholders' equity 72,282 73,488 73,171 73,480
------- ------- ------- -------
Total liab. and
stockholders' equity $ 862,660 $ 850,320 $ 857,643 $ 854,319
======= ======= ======= =======
Interest rate spread 3.42% 3.54% 3.51% 3.43%
===== ===== ===== =====
Net average earning
balance / Net yield on
interest earning assets $ 98,559 3.89% $ 95,814 4.01% $ 94,172 3.97% $ 95,170 3.90%
====== ===== ====== ===== ====== ===== ====== =====
<CAPTION>
1998 QTD 1997 QTD
----------------------------------------------------------- -----------------
Third Quarter Second Quarter First Quarter Fourth Quarter
Avg. Bal. Rate Avg. Bal. Rate Avg. Bal. Rate Avg. Bal. Rate
--------- ----- --------- ----- --------- ----- --------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Assets:
Loans $ 542,139 8.43% $ 539,783 8.62% $ 513,365 8.91% $ 499,316 8.93%
Securities and
interest earning
investments 224,431 5.88% 182,375 5.91% 200,856 6.40% 232,678 6.23%
------- ------- ------- -------
Total interest
earning assets 766,570 7.68% 722,158 7.93% 714,221 8.20% 731,994 8.07%
Noninterest earning
assets 65,235 77,019 79,945 77,425
Allowance for possible
loan losses (7,385) (7,532) (7,749) (7,248)
------- ------- ------- -------
Total Assets $ 824,420 $ 791,645 $ 786,417 $ 802,171
======= ======= ======= =======
Liabilities and
stockholders' equity:
Savings deposits $ 295,424 2.61% $ 299,353 2.63% $ 289,066 2.65% $ 288,095 2.60%
Time deposits 265,876 5.55% 258,483 5.54% 279,405 5.63% 290,428 5.67%
Other borrowed funds 117,382 5.06% 88,977 4.94% 76,021 4.90% 79,722 5.03%
Total int. bearing ------- ------- ------- -------
liabilities 678,682 4.18% 646,813 4.11% 644,492 4.21% 658,245 4.25%
Noninterest bearing
deposits 70,014 69,895 66,622 70,227
Other liabilities 3,130 3,108 5,787 7,095
Stockholders' equity 72,594 71,829 69,516 66,604
------- ------- ------- -------
Total liab. and
stockholders' equity $ 824,420 $ 791,645 $ 786,417 $ 802,171
======= ======= ======= =======
Interest rate spread 3.50% 3.82% 3.99% 3.82%
===== ===== ===== =====
Net average earning
balance / Net yield on
interest earning assets $ 87,888 3.98% $ 75,345 4.25% $ 69,729 4.41% $ 73,749 4.25%
====== ===== ====== ===== ====== ===== ====== =====
</TABLE>
Granite State Bankshares, Inc. and Subsidiary
Part I Item 3 and Part II - Other Information
September 30, 1999
Item 3. Quantitative and Qualitative Disclosures About Market Risk
There has been no material changes in the Company's assessment of its
sensitivity to market risk since its presentation in the 1998 annual report
filed with the SEC.
Part II -Other Information
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
None
Item 5. Other Information
None
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: November 10, 1999 By: Charles W. Smith
Chairman and
Chief Executive Officer
/s/ William G. Pike
________________________________________
Dated: November 10, 1999 By: William G. Pike
Executive Vice President and
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
This schedule 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> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> SEP-30-1999
<CASH> 18,307
<INT-BEARING-DEPOSITS> 14,800
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 193,792<F1>
<INVESTMENTS-CARRYING> 18,019
<INVESTMENTS-MARKET> 17,427
<LOANS> 563,222<F2>
<ALLOWANCE> 7,063
<TOTAL-ASSETS> 851,287
<DEPOSITS> 625,612
<SHORT-TERM> 70,010<F3>
<LIABILITIES-OTHER> 3,796
<LONG-TERM> 80,574<F4>
0
0
<COMMON> 6,790
<OTHER-SE> 64,505
<TOTAL-LIABILITIES-AND-EQUITY> 851,287
<INTEREST-LOAN> 33,876
<INTEREST-INVEST> 9,758
<INTEREST-OTHER> 921
<INTEREST-TOTAL> 44,555
<INTEREST-DEPOSIT> 15,635
<INTEREST-EXPENSE> 20,722
<INTEREST-INCOME-NET> 23,833
<LOAN-LOSSES> 50
<SECURITIES-GAINS> 695
<EXPENSE-OTHER> 16,376
<INCOME-PRETAX> 11,646
<INCOME-PRE-EXTRAORDINARY> 7,474
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,474
<EPS-BASIC> 1.29
<EPS-DILUTED> 1.26
<YIELD-ACTUAL> 3.96
<LOANS-NON> 2,012
<LOANS-PAST> 162
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 7,122
<CHARGE-OFFS> 425
<RECOVERIES> 316
<ALLOWANCE-CLOSE> 7,063
<ALLOWANCE-DOMESTIC> 5,641
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 1,422
<FN>
<F1>Securities available for sale, at market value
<F2>Loans net of unearned income, gross of allowance for possible loan losses
and excluding loans held for sale
<F3>Securities sold under agreements to repurchase of $70,010
<F4>Includes other borrowings with the Federal Home Loan Bank of Boston of
$80,574
</FN>
</TABLE>
