<PAGE> 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1999
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 000-14553
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F&M Bancorporation, Inc.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Wisconsin 39-1365327
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
One Bank Avenue, Kaukauna, Wisconsin 54130
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(Address of principal executive offices) (Zip Code)
(920) 766-1717
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(Registrant's telephone number, including area code)
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(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
----- -----
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of May 14, 1999.
$1.00 par value common
16,100,864 shares
<PAGE> 2
F & M BANCORPORATION, INC.
AND SUBSIDIARIES
--------------------------
INDEX
-----
<TABLE>
<CAPTION>
Page
Number
------
PART I. FINANCIAL INFORMATION:
- ----------------------------------
<S> <C>
Item l. Financial Statements 3
Condensed Consolidated Balance Sheets
as of March 31, 1999 and December 31,
1998 (Unaudited) 4
Condensed Consolidated Statements of Earnings
for the three months ended March 31, 1999
and 1998 (Unaudited) 5
Condensed Consolidated Statements of Changes in
Stockholders' Equity for the three months ended
March 31, 1999 and 1998 (Unaudited) 6
Condensed Consolidated Statements of Cash Flows
for the three months ended March 31, 1999
and 1998 (Unaudited) 7
Notes to Condensed Consolidated Financial
Statements (Unaudited) 8
Item 2. Managements Discussion and Analysis of Financial
Condition and Results of Operations 11
Item 3. Quantitative and Qualitative Disclosures about Market Risk 19
PART II. OTHER INFORMATION
- -----------------------------
Item 4. Submission of Matters to a Vote of Security Holders 20
Item 6. Exhibits and Reports on Form 8-K 20
</TABLE>
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<PAGE> 3
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
- ------- ---------------------
The condensed consolidated financial statements included herein have been
included by F & M Bancorporation, Inc. (the "Company") pursuant to the rules and
regulations of the Securities and Exchange Commission. Certain information and
footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been condensed or
omitted pursuant to such rules and regulations, although the Company believes
that the disclosures are adequate to make the information presented not
misleading. This information is unaudited but includes all adjustments
(consisting only of normal recurring accruals) which, in the opinion of Company
management, are necessary for a fair presentation of the results for such
periods.
The results of operations for interim periods are not necessarily indicative of
the results of operations for the entire year. It is suggested that these
condensed financial statements be read in conjunction with the financial
statements and the notes thereto included in the Company's 1998 Annual Report.
-3-
<PAGE> 4
F & M BANCORPORATION, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(Dollars in thousands)
<TABLE>
<CAPTION>
March 31, December 31,
1998 1997
------------ -----------
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 59,851 $ 82,061
Investment securities (Note B)
Held to maturity 167,936 160,132
Available for sale - stated at fair value 393,560 354,436
Federal funds sold 15,862 77,548
Loans (Note C) 1,730,399 1,680,195
Less: Allowance for loan losses (23,329) (23,291)
---------- ----------
Net loans 1,707,070 1,656,904
Bank premises and equipment, net 51,189 49,732
Other real estate 3,328 3,243
Other assets 46,921 45,595
---------- ----------
TOTAL ASSETS $2,445,717 $2,429,651
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
Deposits
Non-interest bearing $237,616 $278,314
Interest bearing 1,733,446 1,730,649
Total deposits 1,971,062 2,008,963
Short-term borrowing 94,200 60,847
Other borrowings 111,504 95,234
Accrued expenses and other liabilities 26,856 25,188
---------- ----------
Total liabilities 2,203,622 2,190,232
Shareholders' Equity
Common stock - $1 par value:
Authorized - 50,000,000 shares
Issued - 15,608,657 and
15,608,657 shares, respectively 15,609 15,609
Capital surplus 144,856 144,922
Retained earnings 81,931 77,016
Net unrealized gain on securities available for sale 1,198 3,489
Less-Common stock held in treasury at cost-
44,900 shares and 49,415 shares, respectively (1,499) (1,617)
---------- ----------
Total shareholders' equity 242,095 239,419
---------- ----------
Total liabilities and shareholders' equity $2,445,717 $2,429,651
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
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<PAGE> 5
F & M BANCORPORATION, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(Dollars in thousands)
<TABLE>
<CAPTION>
Three months ended March 31,
1999 1998
----------- -----------
<S> <C> <C>
Interest income
Interest and fees on loans $36,725 $36,635
Interest on investment securities
Taxable 5,391 5,390
Exempt from federal tax 2,256 2,440
Other interest income 612 657
------- -------
Total interest income 44,984 45,122
------- -------
Interest expense
Interest on deposits 18,276 19,877
Interest on short-term borrowing 898 1,052
Interest on other borrowing 1,318 1,123
------- -------
Total interest expense 20,492 22,052
------- -------
Net interest income 24,492 23,070
Provision for loan losses 462 693
------- -------
Net interest income after
provision for loan losses 24,030 22,377
------- -------
Other income
Service charges on deposit accounts 1,566 1,558
Other operating income 2,843 1,941
Net security gain 117 0
------- -------
4,526 3,499
------- -------
Other expenses
Salaries and employee benefits 8,863 8,349
Other operating expense 6,897 6,521
------- -------
15,760 14,870
------- -------
Income before income taxes 12,796 11,006
Income taxes 4,134 3,309
------- -------
NET INCOME $ 8,662 $ 7,697
======= =======
EARNINGS PER SHARE - BASIC .56 .49
EARNINGS PER SHARE - DILUTED .56 .49
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
-5-
<PAGE> 6
F&M BANCORPORATION, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(Unaudited)
(Dollars in thousands)
<TABLE>
<CAPTION>
Three Months Three Months
Ended Ended
March 31, 1999 March 31, 1998
-------------- --------------
Shares Equity Total Shares Equity Total
------ ------------ ------ ------------
<S> <C> <C> <C> <C>
Balance-beginning of
period 15,608,657 $239,419 13,404,043 $200,933
Acquisition of Bank of South Wayne 143,792 4,443
Acquisition of Financial Management
Services of Jefferson, Inc. 641,854 12,784
Comprehensive income:
Net Income 8,662 7,697
Other comprehensive
income - Change in net
unrealized gain (loss) on
securities available for sale (2,291) 1,746
-------------------------------------------------
Total comprehensive
income 6,371 9,443
-------------------------------------------------
Cash dividends (3,747) (2,685)
Exercise of stock options 52 29
-------------------------------------------------
Totals 15,608,657 $242,095 14,189,689 $224,947
-------------------------------------------------
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
-6-
<PAGE> 7
F & M BANCORPORATION, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Dollars in thousands)
<TABLE>
<CAPTION>
Three months ended
March 31,
1999 1998
--------- ---------
<S> <C> <C>
Increase (decrease) in cash and cash equivalents: Cash flows from operating
activities:
Net income $ 8,662 $ 7,697
Adjustments to reconcile net income to net cash
provided by operating activities:
Provision for depreciation and net amortization 1,320 1,007
Provision for loan losses 462 693
Gain on sale of investment securities (117) 0
Increase in other assets (1,572) (4,001)
Gain on sale of equipment (88) (3)
Increase in other liabilities 3,164 1,424
Provision for other real estate losses 5 1
(Gain) loss on sale of other real estate (43) 6
--------- ---------
Net cash provided by operating activities 11,793 6,824
--------- ---------
Cash flows from investing activities:
Proceeds from sale of investment securities
available for sale 474 0
Proceeds from maturities of investment
securities available for sale 26,750 42,034
Purchase of investment securities
available for sale (67,974) (32,225)
Proceeds from maturities of investment
securities held to maturity 1,119 4,758
Purchase of investment securities
held to maturity (10,938) (2,341)
Net increase in loans (51,051) (26,839)
Capital expenditures (2,643) (1,439)
Proceeds from sale of equipment 222 60
Proceeds from sale of other real estate 325 0
Payment for purchase of stock of
subsidiary banks, net of cash received 0 6,298
--------- ---------
Net cash used in investing activities (103,716) (9,694)
--------- ---------
Cash flows from financing activities:
Net decrease in deposits (37,901) (30,191)
Net increase in short-term borrowings 33,352 10,463
Dividends paid (3,747) (4,351)
Net increase in other borrowings 16,271 8,234
Net proceeds options exercised 52 30
--------- ---------
Net cash provided by (used in) financing activities 8,027 (15,815)
--------- ---------
Net decrease in cash and cash equivalents (83,896) (18,685)
Cash and cash equivalents at beginning of period 159,609 109,228
--------- ---------
Cash and cash equivalents at end of period $ 75,713 $ 90,543
========= =========
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
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<PAGE> 8
F & M BANCORPORATION, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1999
(Unaudited)
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements,
which include the accounts of F&M Bancorporation, Inc. and its subsidiaries,
have been prepared in accordance with generally accepted accounting principles
for interim financial information. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. These statements have been restated to
reflect the acquisition of BancSecurity Corporation, acquired on July 1, 1998,
Bank of South Wayne, acquired on February 9, 1998, and Financial Management
Services of Jefferson, acquired on May 28, 1998, all accounted for using the
pooling of interest method of accounting. The acquisition of Sentry Bancorp,
acquired on January 27, 1998, was accounted for using the purchase method of
accounting; accordingly, the financial data includes results of operations only
since the date of acquisition. All per share information has been adjusted to
reflect the 10% stock dividend, paid to shareholders on September 1, 1998. In
the opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for fair presentation have been included.
NOTE B - INVESTMENT SECURITIES
Carrying amounts and market values of investment securities held to
maturity at March 31, 1999 are as follows:
<TABLE>
<CAPTION>
Carrying Market
Amount Value
-------- ------
(in thousands)
<S> <C> <C>
Exempt obligations of states and political subdivisions $167,936 $175,615
======== ========
</TABLE>
NOTE C - LOANS
At March 31, 1999, loans are as follows:
<TABLE>
<CAPTION>
(in thousands)
<S> <C>
Commercial and industrial $ 420,085
Agricultural 124,824
Real estate construction 58,709
Real estate mortgage 996,200
Installment and other consumer 130,581
----------
1,730,399
Less allowance for loan losses (23,329)
----------
Net loans $1,707,070
==========
</TABLE>
NOTE D - EARNINGS PER SHARE OF COMMON STOCK
Earnings per share are based on weighted average number of common shares
outstanding restated to reflect the 10% stock dividend paid to stockholders on
September 1, 1998. The following shows the computation of the basic and diluted
earnings per share for the three months ended March 31, 1999 and 1998.
<TABLE>
<CAPTION>
Weighted
Average
Number of Earnings Per
Net Income Shares Share
- --------------------------------------------------------------------------------
(in Thousands)
1999
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Earnings per share-Basic $8,662 15,560,008 $0.56
Effect of stock options 29,376
- --------------------------------------------------------------------------------
Earnings per share-Diluted $8,662 15,589,384 $0.56
================================================================================
1998
- --------------------------------------------------------------------------------
Earnings per share-Basic $7,697 15,587,855 $0.49
Effect of stock options 50,853
- --------------------------------------------------------------------------------
Earnings per share-Diluted $7,697 15,638,708 $0.49
================================================================================
</TABLE>
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<PAGE> 9
NOTE E - NON-PERFORMING ASSETS
The following table sets forth the amount of non-performing loans, other
real estate owned and non-performing assets, and each of their percentages to
total loans at March 31, 1999:
<TABLE>
<CAPTION>
(in thousands)
<S> <C> <C>
Non-accrual loans $13,701 0.79%
Loans past due 90 days or more 2,395 0.14
Restructured loans 0 0.00
------ ----
Total non-performing loans 16,096 0.93
Other real estate owned 3,328 0.19
------ ----
Total non-performing assets $19,424 1.12%
======= ====
</TABLE>
NOTE F - SUMMARY OF LOAN LOSS EXPERIENCE
The following table summarizes loan balances at March 31, 1999; changes in
the allowance for loan losses arising from loans charged-off and recoveries on
loans previously charged-off, by loan category; and provisions for loan losses
which have been charged to expense:
<TABLE>
<CAPTION>
(in thousands)
<S> <C>
Average balance of loans for period $1,702,736
----------
Allowance for loan losses at
beginning of period 23,291
Loans charged off
Commercial and Industrial 313
Real Estate - Mortgage 27
Installments and Other Consumer Loans 201
-----
Total charge offs 541
Recoveries on loans previously
charged off
Commercial and Industrial 22
Real Estate - Mortgage 36
Installment and Other Consumer Loans 59
-----
Total recoveries 117
Net loans charged off 424
Provisions for loan losses of banks
acquired at date of acquisition 0
Provisions for loan
losses 462
Allowance for loan losses
at end of period $23,329
=======
Ratio of net charge offs
during period to average
loans outstanding (annualized) 0.10%
Allowance for loan
losses to total loans 1.35%
</TABLE>
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<PAGE> 10
NOTE G - ALLOCATION OF ALLOWANCE FOR LOAN LOSSES
The following table summarizes the allocation of allowances for loan losses
and gives a breakdown of the percentage of loans in each category at March 31,
1999:
<TABLE>
<CAPTION>
Percent
of loans
Amount of in each
reserve category
for loan to total
(in thousands) losses loans
- ------------------------------------------------------------
<S> <C> <C>
Commercial,
industrial, and
agricultural $11,175 31.5%
Real estate -
construction 420 3.4
Real estate - mortgage 7,675 57.6
Installment and other
consumer loans 4,059 7.5
------ -----
$23,329 100.0%
======= =====
</TABLE>
-10-
<PAGE> 11
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION
GENERAL
The following discussion and analysis provides information regarding the
Company's results of operations for the three months ended March 31, 1999 and
1998 and financial condition at March 31, 1999. These statements have been
restated to reflect the acquisition of BancSecurity Corporation, acquired on
July 1, 1998, Bank of South Wayne, acquired on February 9, 1998, and Financial
Management Services of Jefferson, acquired on May 28, 1998, accounted for using
the pooling of interests method of accounting. The acquisition of the Sentry
Bancorp, acquired on January 27, 1998, was accounted for using the purchase
method of accounting; accordingly, the Company's financial data includes results
of operations of this entity only since the date of acquisition. All per share
information has been adjusted to reflect the 10% stock dividend, paid to
shareholders on September 1, 1998.
On April 18, 1999, the company signed a definitive Agreement and Plan of
Merger that provides for the acquisition of the Company by Citizens Banking
Corp. of Flint, Michigan ("Citizens"). Under the terms of the Agreement,
Citizens will acquire all of the outstanding shares of the company through a
merger transaction pursuant to which the Company's shareholders will receive
1.303 shares of Citizens in exchange for each share of F&M common stock.
Consummation of the transaction is subject to regulatory approval, approval of
the company's shareholders and the satisfaction of certain other conditions, and
therfore there can be no assurance of completion.
The Company has also announced one pending acquisition, which was completed
on May 14, 1999. CBE, Inc., the holding company for Community Bank of Elkhorn.
This acquisition will be accounted for using the pooling of interests method of
accounting, but is not reflected in this report as the transaction closed after
the quarter's end. CBE had assets of approximately $100 million and one location
in Elkhorn, Wisconsin. F&M issued approximately 525,200 shares of its common
stock in this transaction.
Discussions in this Management's Discussion and elsewhere in this Annual
Report, that are not statements of historical fact (including statements in the
future tense or which include terms such as "believe", "expect", "anticipate" or
"may") are forward-looking statements that involve risks and uncertainties, and
Company's actual future results could materially differ from those discussed.
Factors that could cause or contribute to such differences include, but are not
limited to, the Company's future lending and collections experiences, the
inability to complete announced acquisition transactions, the effects of
acquisitions, and the ability to integrate acquired operations, market
acceptance of the Company's products and services, competition from other
institutions, changes in the banking industry and its regulation, needs for
technological change, and other factors, including those described in this
Management's Discussion and Analysis and elsewhere in this report.
RESULTS OF OPERATIONS
For the three months ended March 31, 1999, net income increased $965,000, or
12.5%, to $8.7 million from $7.7 million in the first quarter of 1998. The
annualized return on average assets was 1.45% for the first quarter of 1999
compared with 1.35% for the first quarter of 1998. Returns on average
stockholders' equity on an annualized basis for the first quarters of 1999 and
1998 were 14.63% and 14.04%, respectively.
Net Interest Income
Net interest income for the three months ended March 31, 1999 increased $1.4
million, or 6.2%, to $24.5 million from $23.0 million in the first quarter of
1998. Total interest income for the first quarter of 1999 decreased $138,000, or
0.3%, to $45.0 million from $45.1 million in the first quarter of 1998. Interest
expense decreased $1.6 million, or 7.1%, to $20.5 million in the first quarter
of 1999 from $22.1 million in the first quarter of 1998.
-11-
<PAGE> 12
Increased net interest income for the three month period is attributable to
the increase in asset volume resulting from the Company's internal growth and
acquisitions, and the slight increase in the Company's net interest margin
(4.57% vs 4.51% at March 31, 1999 and 1998, respectively). Total interest income
decreased slightly for the three month period in 1999 compared to the same
period last year as a result of decreasing interest rates over the past year on
interest earning assets, while total interest expense decreased for the three
month period in 1999 compared to 1998 as a result of decreasing interest rates
paid on deposits and borrowings.
Provision for Loan Losses
The amount charged to provision for loan losses is based on Management's
evaluation of the loan portfolio. Management determines the adequacy of the
allowance for loan losses, both on a bank by bank basis and on an overall basis
for the Company, based on past loan loss experience, current economic
conditions, composition of the loan portfolio (including the historical
performance of, and the F&M subsidiary banks' evaluation of the prospects for,
each of the component loans, and the collateral value therefor) and the
anticipated potential for future loss. Management is also mindful of the
expectations of banking industry regulators for certain levels of allowances,
although no particular regulatory obligations have been imposed on the Company
in this regard.
The provision for loan losses for the three months ended March 31, 1999
decreased $231,000, or 33.4%, to $462,000 from $693,000 in the first quarter of
1998. This decrease in the provision for the first three months was made mainly
to reflect a reduction in net charge offs which decreased from $505,000 in the
first three months of 1998 to $424,000 in the first three months of 1999 and a
decrease in non performing assets of $1.6 million or 7.5%, to $19.4 million from
$21.0 million in the first quarter of 1998.
Non-Interest Income
The Company stresses the importance of growth in non-interest income as
one of its key long-term strategies. Non-interest income for the three months
ended March 31, 1999 increased $1.0 million, or 29.3%, to $4.5 million from $3.5
million in the first quarter of 1998. The increase was due principally to
increases in secondary market commissions, service charges and other fee income.
Non-Interest Expense
Non-interest expense for the three months ended March 31, 1999 increased
$890,000, or 6.0%, to $15.8 million from $14.9 million in the first quarter of
1998. This increase was primarily due to the normal increases in salaries and
employee benefits and additional occupancy expenses associated with opening 5
new offices in 1998 and 1999.
The overhead ratio, which is computed by subtracting non-interest income
from non-interest expense (excluding net securities transactions) and dividing
by average total assets, was 1.90% in the first quarter of 1999 compared with
1.99% in the first quarter of 1998.
Due to the sensitivity of the overhead ratio to changes in the balance
sheet, management also looks at trends in the efficiency ratio to assess the
changing relationship between operating expenses and income. The efficiency
ratio measures the amount of cost expended by the Company to generate a given
level of revenues in the normal course of business. It is computed by dividing
total operating expense by net interest income on a fully-taxable equivalent
basis and non-interest income from ongoing operations, excluding nonrecurring
items. The efficiency ratio was 52.4% in the first quarter of 1999 compared with
53.4% in the first quarter of 1998. The decreases in this ratio and the overhead
ratio resulted from the various factors set forth above.
-12-
<PAGE> 13
Provision for Income Taxes
The Company's provision for income taxes for the three months ended March
31, 1999 increased $825,000, or 24.9%, to $4.1 million from $3.3 million in the
first quarter of 1998. The increase in income tax provision was principally due
to increased taxable income.
Net Income
As a result of the preceding factors, net income for the first quarter of
1999 increased by $965,000, or 12.5%, to $8.7 million from $7.7 million in the
same period for 1998.
Basic net income per common share was $0.56 for the first quarter of 1999
compared with $0.49 in the first quarter of 1998 an increase of 14.3%. The
Company maintains stock option plans for officers and directors. Fully diluted
net income per share was $0.56 for the first quarter of 1999 compared with $0.49
for the first quarter of 1998.
-13-
<PAGE> 14
FINANCIAL CONDITION
Loan Portfolio
At March 31, 1999, total loans increased $50.2 million, or 3.0%, to $1.730
billion from $1.680 billion at December 31, 1998. The loan mix in the Company's
portfolio at March 31, 1999 did not change in any material respect compared with
December 31, 1998. The first quarter's growth resulted primarily from steady
loan demand spread throughout the Company's subsidiary banks.
Non-Performing Assets
Maintaining excellent credit quality continues to be a priority for the
Company. At March 31, 1999, non-performing assets amounted to $19.4 million,
compared to $18.3 million at December 31, 1998. Non-performing loans at March
31, 1999 were $16.1 million, or 0.93% of total loans, compared to $15.0 million
at December 31, 1998. Other real estate owned ("OREO") at March 31, 1999 was
$3.3 million as compared to $3.2 million at December 31, 1998. The ratio of
non-performing assets to total loans at March 31, 1999 was 1.12%. Management
continues to work at reducing the level of non-performing assets. Non-performing
assets increased in the first three months of 1999 because of developments with
respect to a number of separate loans, in different locations and industries.
Management does not believe that there is any common reason or general trend
which accounts for the increase (or that it necessarily is an indication of
expected future developments). However, management continues to make an
aggressive collection effort on these assets, carefully monitors these (and
other) loans, and regularly reviews and evaluates the non-performing credits to
determine appropriate handling and action.
Summary of Loan Loss Experience
For the first three months of 1999, total charge-offs were $541,000 and
total recoveries were $117,000,compared to $654,000 and $149,000 respectively in
the first three months in 1998. The annualized ratio of net charge-offs to
average loans outstanding for the three months ended March 31, 1999 was 0.10%
compared to 0.13% in 1998. The charge-offs were not concentrated in any
particular industry or location.
Allowance for Loan Losses
At March 31, 1999 and December 31, 1998, the allowance for loan losses as
a percentage of total loans were 1.35% and 1.39% respectively. Management
continually reviews the loan portfolio, and other factors, to determine the
appropriate allowance. The allowance for loan losses is an amount that
management believes will be adequate to absorb possible losses on existing loans
that may become uncollectible based on evaluations of the collectibility of
loans and prior loan loss experience. The ultimate recovery of all loans is
susceptible to future market and economic factors beyond the Company's control
as well as factors affecting particular borrowers. Also, the process of setting
loss reserves involves an estimation of future occurrences, and is inherently
uncertain. These factors may result in future losses or recoveries differing
significantly from the allowances and reserves provided in the financial
statements.
Investment Portfolio
At March 31, 1999, the investment portfolio increased $46.7 million, or
9.1%, to $561.5 million from $514.8 million at December 31, 1998. This increase
is attributed to the expanding of the leverage program, where by borrowings are
matched to securities purchased to produce a positive spread. At March 31, 1999
and December 31, 1998, the investment portfolio represented 23.0% and 21.2% of
total assets, respectively.
Deposits
Total deposits at March 31, 1999 decreased $37.9 million, or 1.9%, to
$1.971 billion from $2.009 billion at December 31, 1998. Interest-bearing
deposits at March 31, 1999 increased $2.8 million, or 0.2%, to $1.733 billion
from $1.731 billion at December 31, 1998. The decrease in deposits is
attributable to internal decreases in deposits. Historically, deposits have
typically increased at year end and then gradually returned to prior levels,
typically resulting in a first quarter decrease in deposits.
-14-
<PAGE> 15
Borrowings
Short-term borrowings at March 31, 1999 were $94.2 million, as compared to
$60.8 million at December 31, 1998. Short-term borrowings consist primarily of
federal funds purchased and repurchase agreements. The Company has used
short-term borrowings to assist in funding its increasing loan demand. Use of
short-term funds at quarter end March 31, 1999, reflect the attractiveness of
rates for those funds, and the effect of the historically typical reduction of
deposits in the first quarter. Going forward, continued reliance on short-term
funds may be required if loan demand continues to outpace deposit growth, and,
therefore, short-term borrowings are expected to vary from time to time.
Several of the Company's subsidiary banks, as members of the Federal Home
Loan Bank (FHLB), had borrowings from the FHLB as of March 31, 1999. These
borrowings are secured by pledges of mortgage loans, and totaled $111.5 million
at March 31, 1999, compared to $95.2 million at December 31, 1998. These FHLB
borrowings had original maturities of one month to fifteen years at March 31,
1999. The increase in other borrowings in 1998 and early 1999 was due primarily
to attractiveness in longer term rates and the Company's expansion of the
leverage program in which FHLB borrowings are matched to securities purchased.
CAPITAL ADEQUACY
During the three months ended March 31, 1999, stockholders' equity
increased $2.7 million due to net income of $8.7 million in the first quarter,
offset by dividends paid to stockholders and a decrease in net unrealized gains
on securities. At March 31, 1999, the Company's risk-based Tier 1 capital ratio
was 11.80%. The total risk-based capital ratio was 13.00% and the leverage ratio
was 9.53%. All such ratios exceed regulatory minimums of 4.0%, 8.0% and 3.0%,
respectively. The average equity to average assets ratio was 9.93% at March 31,
1999, compared with 9.61% at March 31, 1998.
F & M's common stock dividend payout ratio was 43.3% in the first three
months of 1999 as compared to 28.3% in the comparable 1998 period. These numbers
do not include the dividends historically paid by BancSecurity Corporation,
Financial Management Services of Jefferson, and Bank of South Wayne prior to
their acquisitions by the Company.
At March 31, 1999, each of the Company's subsidiary banks was in compliance
with all applicable capital requirements, and management believes that the
capitalization of those banks is adequate.
During the first quarter the Company incurred approximately $2 million
dollars in capital expenditures for replacement and renovation of facilities.
The Company to date has not committed to any additional major commitments to
build or purchase in 1999, but also expects to finance any such expenditures
through earnings and existing capital resources.
At March 31, 1999, the Company had loaned its officers an aggregate of $1.7
million to fund their purchase of company owned stock pursuant to a stock
ownership plan approved by the Company shareholders in 1996.
LIQUIDITY
As shown in the Company's Consolidated Statements of Cash Flows for the
three months ended March 31, 1999, cash and cash equivalents decreased by $83.9
million during the period to $75.7 million at March 31, 1999. The decrease
primarily reflected $11.8 million in net cash provided by operating activities,
and $8.0 million in net cash provided by investing activities, which was more
than offset by $103.7 million in net cash used by financing activities. Net cash
provided by operating activities primarily consisted of the Company's net income
in the period increased by adjustments for non-cash credits. Net cash provided
by financing activities principally reflected a decrease in deposits offset by
an increase in short-term and other borrowings. Net cash used in investing
activities consisted primarily of a net increase in loans plus necessary capital
expenditures.
-15-
<PAGE> 16
The Company manages its liquidity to provide adequate funds to support the
borrowing requirements and deposit flow of its customers. Management views
liquidity as the ability to raise cash at a reasonable cost or with a minimum of
loss and as a measure of balance sheet flexibility to react to marketplace,
regulatory and competitive changes. The primary sources of the Company's
liquidity are investment securities available for sale and other marketable
assets maturing within one year. The Company attempts, when possible, to match
relative maturities of assets and liabilities, while maintaining the desired net
interest margin. The Company can also utilize borrowing capacities if
appropriate. Although the percentage of earning assets represented by loans is
increasing, management believes that its sources of liquidity are adequate.
Year 2000
Like other financial institutions (and businesses of all kinds), F&M must assure
that its computers and other systems are "year 2000 compliant." "Year 2000
compliant" means being capable of operating, and accurately recognizing dates
and processing information, in and after the year 2000, and recognizing the leap
year which will occur in 2000. To help assure that F&M's systems are year 2000
compliant on a timely basis, F&M began a focused compliance program primarily
using F&M personnel. As the program has continued, F&M has identified certain
functions and roles in which the use of outside consultants or experts would
help F&M address year 2000 issues on a more expedited basis or in more depth.
Therefore, in addition to the designation of particular F&M employees to
coordinate F&M's year 2000 compliance efforts, F&M has retained outside
assistance.
Federal financial institution regulators, which are coordinating efforts to
assure year 2000 compliance, have identified five major phases to the Year 2000
compliance efforts. The phases are generally summarized as: Awareness,
Assessment, Renovation, Validation (testing), and Implementation. F&M is keying
its compliance efforts to those phases. Currently, F&M has completed its review
process, and has begun testing and implementing solutions where necessary.
Further information as to F&M's Year 2000 expected schedule for efforts by
phase, and its estimates of the percentage of completion of those phases at
March 31, 1999, is set forth in the following chart:
Estimated Estimated
Completion Completion
Phase Schedule Percentage
- --------------------------------------------------------------------------------
Awareness 09/30/97 100%
Assessment 09/30/97 100%
Renovation 12/31/98 100%
Validation 06/30/99 85%
Implementation 10/30/99 45%
F&M has to date budgeted $1.5 million for its compliance efforts, and has
expended approximately $1.0 million dollars through March 31, 1999.
As part of its effort, F&M is monitoring year 2000 compliance efforts by its
suppliers, because many of F&M's affected systems (such as data processing) are
contracted from third parties. Therefore, a significant part of F&M being year
2000 compliant requires such compliance by the third parties, and F&M is subject
to their achievement of appropriate year 2000 compliance on a timely basis. F&M
regularly receives updates from its "mission-critical" suppliers (such as data
processors) as to their year 2000 compliance efforts. F&M has identified its
data processing function as one particularly critical function. Based upon
information obtained from its two primary data processing suppliers, F&M
believes that these systems are year 2000 compliant. In the event that one or
both of these processors would not achieve year 2000 compliance on a timely
basis (which F&M believes unlikely), F&M has written business resumption plans
to address possible problems in the future and expects to monitor developments
carefully and adjust and reform its plans accordingly. F&M's plans also include
contingency plans, developed by F&M's outside processors, which provides
alternative operating procedures in the event unforeseen problems arise.
-16-
<PAGE> 17
In addition, F&M has completed its review of internal computers and data
processing equipment and systems. As a result of the pending affiliation with
Citizens Banking Corporation, F&M expects to alter its plans for certain third
party data processing conversions to facilitate the ultimate conversion to
Citizens' processor; however, the Company does not expect these
changes to impact its Y2K compliance.
F&M's internal and third party reviews also include areas which are not
specifically "technology-related" but are also affected by year 2000 compliance
issues. For example, much of F&M's equipment (including building equipment and
systems such as security systems, HVAC, elevators, vaults and the like) includes
imbedded microchips which could be affected by year 2000 related problems. As to
equipment owned by F&M, F&M has assessed and identified non-compliant equipment
and is in the process of working on solutions to correct them. As to services
supplied to F&M, F&M has contacted service providers and suppliers and obtained
assurance from them. Further testing with suppliers and providers will be done
in 1999. In particular, F&M has monitored compliance efforts by utilities and
others who provide services to large areas or customer groups including F&M. In
many of these cases, F&M is not sufficiently large a customer or user that it
can demand special treatment, assurances or information from the providers. In
those cases, F&M employees have monitored public statements by those providers
for their state of readiness, attempted to identify any clear issues, and
attempted to make appropriate arrangements to the extent any reasonable concerns
have been identified.
The credit-worthiness of F&M's customers could also be affected by the year 2000
compliance efforts and failures. F&M loan officers and others are continuing to
review year 2000 efforts and compliance levels of F&M's commercial credit
customers. The failure of these customers to be year 2000 compliant could
adversely affect those businesses, which would, in turn, pose credit risks which
could have a material effect on F&M. F&M has reviewed information obtained from
approximately 50% of its commercial credit customers, which is a level of
inquiry F&M believes is appropriate. Specific guidelines were used to identify
which customers were selected for the review. Based upon that review, F&M
believes that further review and careful monitoring of customers will be
required in the future. While F&M also recognizes that loans to individuals
could be affected by year 2000 issues (for example, loss of employment due to an
employer's year 2000 related failure), F&M does not believe there is any
practical means to gather such information, which would provide little practical
benefit even if it could be obtained. F&M is also attempting to meet customer
needs stemming from possible year 2000 related disruptions by creating awareness
now to help resolve their potential future problems.
Because of their concern for the integrity of the financial institutions
systems, federal regulators such as the Federal Reserve Board (which regulates
F&M and most of its subsidiary banks) and the FDIC (which insures deposits at
all F&M banks) have paid close attention to institutions' year 2000 compliance
efforts. F&M and its subsidiaries have had such examinations, and have had to
address the personnel and other needs to facilitate the examinations. Because of
the regulators' stated desire that acquisition activity not interfere with year
2000 readiness, F&M believes that it is possible that regulators may become more
reticent to approve additional acquisitions prior to 2000, which could
particularly affect F&M due to its historically active pattern of acquisitions.
Other than those possible effects, F&M does not believe that it has had, or is
likely to have, other material projects or initiatives delayed or affected
because of the need to focus on year 2000 compliance.
Like many businesses, F&M is making contingency plans for year 2000 related
disruptions. The precise plans utilized would, of course, depend upon the exact
problems which develop. Disruptions could range from discreet
application-specific problems, which can be easily resolved, to systematic
failures affecting the banking industry (or other industries) as a whole, or all
persons in large geographical areas. F&M cannot identify every disruption that
may affect it, but it has identified critical problems that may arise. Loss of
electricity or disruption of computer systems if F&M is not able to successfully
complete its year 2000 remediation plans are the most likely "worst case"
scenarios identified by F&M. F&M has developed and adopted business resumption
plans to operate off line or without certain services to minimize disruption of
services provided to our customers. Contingency plans of F&M would include,
depending upon the magnitude of the problems actually experienced: the
processing plans discussed above; additional vault cash reserves; additional
funding lines of credit for liquidity; preparing pre 2000 documents on paper to
verify post 2000 validity of information; and paper-based systems for the
-17-
<PAGE> 18
short-term until corrected. Occurrences such as area-wide utility failures may
cause businesses, including F&M, to temporarily cease operations at affected
locations until the problem is rectified.
F&M's year 2000 compliance efforts are ongoing, and certain matters and issues
remain to be addressed, reviewed, tested and/or finally implemented. However,
based in part upon information being received from the third parties providing
services to F&M, F&M currently believes that it will be year 2000 compliant in a
timely basis to avoid material operational disruptions and to comply in material
respects with the requirements of its regulators. To date, F&M has not
identified material extraordinary expenditures which will be required to become
year 2000 compliant, although further expenditures remain to be incurred and the
use of outside personnel or other factors may increase the costs of year2000
compliance beyond F&M's current budget.
As indicated, certain year 2000 remediation efforts remain to be completed. Some
are under F&M's control, but many efforts are those of third parties (such as
suppliers or customers), which are not under F&M's control. The failure to
successfully complete year 2000 remediation efforts by F&M, or by third parties,
could materially adversely affect F&M. While F&M has attempted to monitor
efforts by others, those efforts may not ultimately be satisfactory, and
information given to F&M may not be accurate.
No one, including F&M, can conclusively predict exactly what year 2000 related
problems will eventually occur, or the degree of their impact. However, it is
all but certain that there will be at least some year 2000 related problems that
are not solved on a timely basis, and some of these will affect F&M. The nature
and the degree of impact on F&M would, of course, vary according to the problem
or problems which develop. For example, failure of mission-critical functions
such as data processing or year 2000 failures affecting large groups, such as
utility failures or failures by others affecting the banking industry as a
whole, could cause F&M to limit (or even curtail) its operations in affected
areas until such time as the problems are cured. Similarly, failures either
particular to customers or affecting geographical areas or business segments
generally would affect customers, and the degree of disruption would affect
credit losses. F&M is unable to predict the magnitude of any such disruptions,
or the period of time during which they would affect F&M, although it expects
the effects would be most pronounced in the period of time shortly after January
1, 2000.
Statements which are not historical fact (including completion schedules,
expectations of future developments, results or scenarios, and cost estimates)
are forward-looking statements, and actual results may differ due to factors
including those discussed above.
OTHER
Future Accounting Changes
In June 1998, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 133, "Accounting for
Derivative Instruments and Hedging Activities." This statement establishes
accounting and reporting standards for derivative instruments and for hedging
activities. This statement requires an entity to recognize all derivatives as
either assets or liabilities in the balance sheet and measure those instruments
at fair value. The accounting for changes in the fair value of a derivative
depends on the intended use of the derivative and the resulting designation. The
statement is effective for fiscal years beginning after June 15, 1999.
Management, at this time, cannot determine the effect adoption of this statement
may have on the consolidated financial statements of the Company as the
accounting for derivatives is dependent on the amount and nature of derivatives
in place at the time of adoption.
-18-
<PAGE> 19
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Interest rate risk is the most significant market risk affecting the
Company. Other types of market risk, such as foreign currency exchange rate risk
and commodity price risk do not arise in the normal course of the Company's
business activities. Managing interest rate risk is fundamental to banking.
Banking institutions manage the inherently different maturity and repricing
characteristics of the lending and deposit-taking lines of business to achieve a
desired interest rate sensitivity position and to limit their exposure to
interest rate risk, the Company manages its balance sheet to achieve maximum
shareholder value within the constraints of its interest rate risk discipline,
the maintenance of high credit quality, and sound leverage and liquidity
positions. Both the interest rate sensitivity and liquidity position of the
Company are reviewed regularly. The primary objective of interest rate
sensitivity management is to maintain net interest income growth while reducing
exposure to the risks inherent in interest rate movements.
The Company's Asset and Liability Management Committee ("ALCO") attempts
to structure the Company's balance sheet to provide for an approximately equal
amount of rate sensitive assets and rate sensitive liabilities. In addition to
facilitating liquidity needs, this strategy assists management in maintaining
relative stability in net interest income despite unexpected fluctuations in
interest rates. The Company believes its market risk exposure, based on the
potential of near-term losses in future earnings, fair values, and cash flows
from reasonably possible near-term changes in market rates or prices is
acceptable at this time.
The Company employs various strategies to reduce its exposure to interest
rate fluctuations. These strategies include: selling longer term maturity
mortgages to the secondary market, utilizing the Federal Home Loan Bank and
other sources to fund assets, and applying various asset positioning strategies
consistent with the overall needs of the Company at any given time. Management
has chosen to sell 15 year and 30 year mortgages to the secondary market as a
means of removing such a long original stated maturity asset off of the bank's
balance sheet and reduce the accompanying interest rate risk associated with the
assets. Instead, member banks are encouraged to retain adjustable rate mortgages
with 1-5 year rate locks on their balance sheets. Federal Home Loan Bank
membership by affiliate banks has enabled banks to diversify their funding
maturity options as well as employ match funding strategies for longer duration
assets. Depending on the interest rate risk position of the Company, the ALCO,
which meets quarterly, implements strategies to re-balance the Company to its
desired position. When the Company is overly liability sensitive,
floating/variable rate commercial loans by subsidiary banks are encouraged by
management. Furthermore, the purchase of floating/variable rate investment
securities are directly coordinated through the Company's Investment Department
when loan demand for this loan type is not present. To help offset longer
assumed maturity core deposits or to extend the duration of the Company's assets
at any given time, longer term securities are purchased directly through the
Company's Investment Department. In addition to these strategies, the Company
has chosen to offer a premium rate money market deposit product to customers
maintaining average balances exceeding $10,000. The rate on the product is tied
directly to the weekly average auction rate on the 3 month United States
Treasury Bill, which management believes positions the Company competitively in
the market.
The method of analysis presented is "earnings at risk" ("EAR"). While the
model employed by the Company is capable of both EAR and "value at risk"
("VAR"), it has chosen to place greater emphasis on EAR because the measurement
is believed to be of greatest concern to Company shareholders, as evidenced by
the marketplace's focus on quarterly and annual earnings. Furthermore, an
immediate rate shock of up or down 100-200 basis points is likely to have a more
visible immediate impact on the Company's earnings as compared to its market
value. Nevertheless, EAR has shortcomings inherent in its analysis. First, the
whole issue as to what maturity should be assigned to the Company's core
deposits is one that can vastly impact the results that the model produces. The
model employed assumes a longer duration assignment to these liabilities based
off of historical experience. Second, the model assumes a normal bell-shaped
curve distribution, although this assumption is elusive in volatile financial
markets. Frequently, the extreme may be the reality as evidenced by the
experience seen in the early 1980s. Third, the model assumes fairly normal
correlation patterns. In reality, however, correlation structures are unstable
over time. Fourth, most EAR approaches measure risk over less than two years.
However, this is likely not enough time to detect structural relationships
between
-19-
<PAGE> 20
variables. And fifth, the model assumes theoretical pricing based off of a
linear relationship between market rates and earnings. This relationship
actually has more of a curvature relationship based off of the inherent
convexity present in all fixed rate instruments having a defined maturity; in
other words, a fixed rate instrument will appreciate by a greater amount than it
will decline.
Based on the model utilized, the interest rate risk of the Company
expressed as a percentage change in net interest income over a one-year time
horizon due to changes in interest rates, at March 31, 1999, is as follows:
<TABLE>
<CAPTION>
Basis Point Change
--------------------------------------
<S> <C> <C> <C> <C>
+200 +100 -100 -200
Percentage change in net interest
income due to an immediate change
in interest over a one-year time
horizon (6.79%) (3.39%) 2.40% 3.64%
</TABLE>
Management continues to closely monitor the company's interest rate
position by utilizing both EAR and traditional RSA/RSL measurements. Because EAR
remains a relatively new measurement for the Company, no target ranges have yet
been established.
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
At the annual meeting of the Company's shareholders on April 27, 1999,
pursuant to Proposal 1 (the only matter voted upon), management's nominees named
below were elected as directors, of the class whose term expires in the year
2002, by the indicated votes cast for and withheld with respect to each nominee.
Of the 10,201,299 shares of Common Stock which were represented at the meeting,
the shares voting were voted for the election of each of management's nominees
as follows:
<TABLE>
<CAPTION>
Name of Nominee FOR WITHHELD
--------------- --- --------
<S> <C> <C>
Otto L. Cox 10,130,763 70,536
Glenn Schilling 10,033,506 167,793
Douglas A. Martin 10,145,040 56,259
</TABLE>
There were no abstentions or broker non votes with respect to the election of
directors. In addition to the directors elected at the 1999 annual meeting, the
Company's continuing directors are Ronald E. Fenton, Paul J. Hernke, Gail E.
Janssen, John W. Johnson, Robert C. Safford and Joseph F. Walsh.
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits: See Exhibit Index, which follows the signature page
hereof.
(b) Reports on Form 8-K: The Company did not file any reports on
Form 8-K during the quarter. However, The Company filed a
report on form 8-K dated April 18, 1999 reporting the signing
of an Agreement and Plan of Merger with Citizens Banking
Corporation.
-20-
<PAGE> 21
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.
F & M BANCORPORATION, INC.
(Registrant)
Date May 14, 1999 /s/ John W. Johnson
------------------- ----------------------------------------
John W. Johnson
President and Chief Executive Officer
(Principal Executive Officer)
Date May 14, 1999 /s/ Daniel E. Voet
------------------- ----------------------------------------
Daniel E. Voet
Chief Financial Officer and Treasurer
(Principal Financial Officer)
<PAGE> 22
EXHIBIT INDEX
F&M BANCORPORATION, INC.
Form 10-Q for Quarter Ended March 31, 1999
Exhibit No. Description
----------- -----------
27 Financial Date Schedule
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 59,655
<INT-BEARING-DEPOSITS> 196
<FED-FUNDS-SOLD> 15,862
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 393,560
<INVESTMENTS-CARRYING> 167,936
<INVESTMENTS-MARKET> 175,615
<LOANS> 1,730,399
<ALLOWANCE> 23,329
<TOTAL-ASSETS> 2,445,717
<DEPOSITS> 1,971,062
<SHORT-TERM> 94,200
<LIABILITIES-OTHER> 26,856
<LONG-TERM> 111,504
0
0
<COMMON> 15,609
<OTHER-SE> 226,486
<TOTAL-LIABILITIES-AND-EQUITY> 2,445,717
<INTEREST-LOAN> 36,725
<INTEREST-INVEST> 7,648
<INTEREST-OTHER> 611
<INTEREST-TOTAL> 44,984
<INTEREST-DEPOSIT> 18,276
<INTEREST-EXPENSE> 20,492
<INTEREST-INCOME-NET> 24,492
<LOAN-LOSSES> 462
<SECURITIES-GAINS> 117
<EXPENSE-OTHER> 15,780
<INCOME-PRETAX> 12,796
<INCOME-PRE-EXTRAORDINARY> 12,796
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8,662
<EPS-PRIMARY> 0.56
<EPS-DILUTED> 0.56
<YIELD-ACTUAL> 4.5
<LOANS-NON> 13,701
<LOANS-PAST> 2,395
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 23,291
<CHARGE-OFFS> 541
<RECOVERIES> 117
<ALLOWANCE-CLOSE> 23,329
<ALLOWANCE-DOMESTIC> 23,329
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1998
<EXCHANGE-RATE> 1
<CASH> 55,805
<INT-BEARING-DEPOSITS> 196
<FED-FUNDS-SOLD> 34,738
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 311,949
<INVESTMENTS-CARRYING> 203,187
<INVESTMENTS-MARKET> 211,533
<LOANS> 1,649,194
<ALLOWANCE> 23,226
<TOTAL-ASSETS> 2,328,957
<DEPOSITS> 1,908,737
<SHORT-TERM> 85,733
<LIABILITIES-OTHER> 26,578
<LONG-TERM> 82,961
0
0
<COMMON> 14,190
<OTHER-SE> 223,529
<TOTAL-LIABILITIES-AND-EQUITY> 2,328,957
<INTEREST-LOAN> 36,635
<INTEREST-INVEST> 7,830
<INTEREST-OTHER> 657
<INTEREST-TOTAL> 45,122
<INTEREST-DEPOSIT> 19,877
<INTEREST-EXPENSE> 22,051
<INTEREST-INCOME-NET> 23,070
<LOAN-LOSSES> 693
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 14,869
<INCOME-PRETAX> 11,006
<INCOME-PRE-EXTRAORDINARY> 11,006
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,697
<EPS-PRIMARY> .49
<EPS-DILUTED> .49
<YIELD-ACTUAL> 4.51
<LOANS-NON> 19,220
<LOANS-PAST> 2,703
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 21,099
<CHARGE-OFFS> 654
<RECOVERIES> 149
<ALLOWANCE-CLOSE> 23,226
<ALLOWANCE-DOMESTIC> 23,226
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
