<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington D.C 20549
FORM 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Quarterly Period Ended September 30, 1998
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from.......................................
to.............................................
Commission File No. 33-8743
ORANGE NATIONAL BANCORP
(Exact Name of Registrant as Specified in Charter)
1201 East Katella Avenue
Orange, California 92867
California (714) 771-4000 33-0190684
(State of Incorporation) (Address and Telephone Number (I.R.S. Employer
of Principal Executive Offices) Identification No.)
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 periods
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
The Registrant had 1,996,788 shares of common stock outstanding as of
November 2, 1998.
<PAGE>
ORANGE NATIONAL BANCORP
QUARTERLY REPORT ON FORM 10-Q
SEPTEMBER 30, 1998
TABLE OF CONTENTS
PART I . FINANCIAL STATEMENTS
Item 1. Financial statements
Consolidated Balance Sheets as of September 30, 1998 (unaudited)
and December 31, 1997 3
Consolidated Statements of Earnings for the Three and Nine
Months Ended September 30, 1998 and 1997 (unaudited) 4
Consolidated Statements of Comprehensive Income for the Three
And Nine Months Ended September 30, 1998 and 1997 (unaudited) 5
Consolidated Statements of Stockholders' Equity for the
Three Months Ended September 30, 1998 and 1997 (unaudited) 6
Consolidated Statements of Stockholders' Equity for the
Nine Months Ended September 30, 1998 and 1997 (unaudited) 7
Consolidated Statements of Cash Flows for the Three and Nine
Months Ended September 30, 1998 and 1997 (unaudited) 8
Notes to Consolidated Financial Statements 9
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of Operations 10
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 24
Item 2. Changes in Securities 24
Item 3. Defaults Upon Senior Securities 24
Item 4. Submissions of Matters to a Vote of Security Holders 24
Item 5. Other Information 24
Item 6. Exhibits and Reports on Form 8-K 24
SIGNATURES 25
<PAGE>
<TABLE>
ORANGE NATIONAL BANCORP
CONSOLIDATED BALANCE SHEETS
September 30, 1998 (unaudited) and December 31, 1997
<CAPTION>
Sep 30 Dec 31
1998 1997
(unaudited) (audited)
(dollars in thousands)
<S> <C> <C>
Assets
Cash and cash equivalents $ 66,051 $ 81,147
Securities
Held-to-maturity securities (fair value
of $5,179 in 1998 and $8,972 in 1997) 5,171 9,037
Available-for-sale securities 41,886 9,146
Loans, net of allowance for credit losses
of $1,584 in 1998 and $1,581 in 1997 139,125 131,189
Premises and equipment, net 5,560 5,057
Other real estate owned, net 31 126
Accrued interest receivable 957 985
Cash value of life insurance 4,973 4,808
Other assets 982 784
$264,736 $242,279
Liabilities
Deposits $239,720 $218,792
Accrued interest payable and other liabilities 1,874 1,901
Total liabilities 241,594 220,693
Commitments and Contingencies - -
Stockholders' Equity
Common stock, no par value or stated value;
authorized 20,000,000 shares; issued and
outstanding 1,993,788 in 1998
and 1,970,046 in 1997 8,018 7,864
Retained earnings 15,098 13,778
Unrealized gain (loss) on
available-for-sale securities, net 26 (56)
Total stockholders' equity 23,142 21,586
$264,736 $242,279
<FN>
See Notes to Consolidated Financial Statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
ORANGE NATIONAL BANCORP
CONSOLIDATED STATEMENTS OF EARNINGS
Three and Nine Months Ended September 30, 1998 and 1997 (unaudited)
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1998 1997 1998 1997
(in thousands, except per share data)
<S> <C> <C> <C> <C>
Interest Income
Loans $3,555 $3,458 $10,518 $ 9,671
Securities 379 313 821 1,302
Federal funds sold 918 440 2,276 982
Total interest income 4,852 4,211 13,615 11,955
Interest Expense, deposits 1,131 848 3,046 2,435
Net interest income 3,721 3,363 10,569 9,520
Provision for Credit Losses 40 15 60 90
Net interest income after
provision for credit losses 3,681 3,348 10,509 9,430
Other Income 901 1,000 2,661 3,315
Other Expenses 3,116 2,936 9,214 8,931
Earnings before income taxes 1,466 1,412 3,956 3,814
Provision for Income Taxes 577 560 1,546 1,513
Net earnings $ 889 $ 852 $ 2,410 $ 2,301
Basic earnings per share $ 0.44 $ 0.43 $ 1.21 $ 1.17
Weighted average number of common
shares outstanding (in thousands) 1,994 1,961 1,987 1,959
Diluted earnings per share $ 0.42 $ 0.43 $ 1.16 $ 1.16
Weighted average number of common
shares outstanding and diluted
potential common shares
(in thousands) 2,106 2,003 2,071 1,991
<FN>
See Notes to Consolidated Financial Statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
ORANGE NATIONAL BANCORP
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Three and Nine Months Ended September 30, 1998 and 1997 (unaudited)
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1998 1997 1998 1997
(dollars in thousands)
<S> <C> <C> <C> <C>
Net earnings $889 $852 $2,410 $2,301
Other comprehensive income
Net change in unrealized gains
(losses) on available-for-sale
securities, net of tax 58 54 82 56
Comprehensive income $947 $906 $2,492 $2,357
<FN>
See Notes to Consolidated Financial Statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
ORANGE NATIONAL BANCORP
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Three Months Ended September 30, 1998 and 1997 (unaudited)
<CAPTION>
Unrealized
Gain (Loss)
Available-
Common Stock Retained For-Sale
Shares Amount Earnings Securities Total
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Balance, June 30, 1998 1,993 $8,012 $14,408 $(32) $22,388
Net earnings - - 889 - 889
Cash dividend paid
($.10 per share) - - (199) - (199)
Exercise of stock options 1 6 - - 6
Net change in unrealized
gain (loss)
on available-for-sale
securities - - - 58 58
Balance,
September 30, 1998 1,994 $8,018 $15,098 $ 26 $23,142
Balance, June 30, 1997 1,961 $7,751 $12,421 $(121) $20,051
Net earnings - - 852 - 852
Cash dividend paid
($.10 per share) - - (196) - (196)
Exercise of stock options 4 45 - - 45
Net change in unrealized
gain (loss)
on available-for-sale
securities - - - 54 54
Balance,
September 30, 1997 1,965 $7,796 $13,077 $( 67) $20,806
<FN>
See Notes to Consolidated Financial Statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
ORANGE NATIONAL BANCORP
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Nine Months Ended September 30, 1998 and 1997 (unaudited)
<CAPTION>
Unrealized
Gain (Loss)
Available-
Common Stock Retained For-Sale
Shares Amount Earnings Securities Total
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1997 1,970 $7,864 $13,778 $(56) $21,586
Net earnings - - 2,410 - 2,410
Cash dividends paid
($.55 per share) - - (1,090) - (1,090)
Exercise of stock options 24 154 - - 154
Net change in unrealized
gain (loss)
on available-for-sale
securities - - - 82 82
Balance, September 30, 1998 1,994 $8,018 $15,098 $ 26 $23,142
Balance, December 31, 1996 1,953 $7,676 $11,403 $(123) $18,956
Net earnings - - 2,301 - 2,301
Cash dividends paid
($.32 per share) - - (627) - (627)
Exercise of stock options 12 120 - - 120
Net change in unrealized
gain (loss)
on available-for-sale
securities - - - 56 56
Balance, September 30, 1997 1,965 $7,796 $13,077 $( 67) $20,806
<FN>
See Notes to Consolidated Financial Statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
ORANGE NATIONAL BANCORP
CONSOLIDATED STATEMENTS OF CASH FLOWS
Three and Nine Months Ended September 30, 1998 and 1997 (unaudited)
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1998 1997 1998 1997
(dollars in thousands)
<S> <C> <C> <C> <C>
Cash Flows from
Operating Activities
Net earnings $ 889 $ 852 $ 2,410 $ 2,301
Adjustments to reconcile
net earnings to net cash
provided by
operating activities:
Depreciation and amortization 147 123 394 393
Provision for credit losses 40 15 60 90
(Gain) on sale of loans (192) (319) (578) (1,110)
Proceeds from loan sales 2,992 4,769 8,774 14,828
Origination of loans
held for sale (2,800) (4,450) (8,196) (13,718)
Decrease (increase) in
other assets 10 75 (196) (37)
(Gain) on cash value of
life insurance (60) (59) (195) (160)
Increase (decrease) in
other liabilities 169 203 (27) 552
Net cash provided
by operating activities 1,195 1,209 2,446 3,139
Cash Flows from
Investing Activities
Proceeds from sales and
maturities of securities 5,018 2,391 10,788 20,951
Purchase of securities (38,797) - (39,524) -
Net (increase) in loans (1,805) (2,054) (8,028) (16,544)
Proceeds from sale of
other real estate owned - 319 126 1,387
Purchase of life insurance - - - (885)
Purchases of premises and
equipment (50) (17) (896) (287)
Net cash provided by (used
in) investing activities (35,634) 639 (37,534) 4,622
Cash Flows from
Financing Activities
Net increase in deposits 14,731 9,943 20,928 8,157
Proceeds from exercise
of stock options 6 45 154 120
Cash dividends paid (199) (196) (1,090) (627)
Net cash provided by
financing activities 14,538 9,792 19,992 7,650
(Decrease) increase in
cash and cash equivalents (19,901) 11,640 (15,096) 15,411
Cash and cash equivalents
at beginning of period 85,952 50,207 81,147 46,436
Cash and cash equivalents
at end of period $66,051 $61,847 $66,051 $61,847
Supplemental Cash Flow
Information
Cash payments for:
Interest $1,120 $833 $3,031 $2,435
Income taxes $ 652 $560 $1,549 $1,403
Non-cash investing activities:
Loans to finance
the sale of real estate $ - $ - $ - $1,077
Loans foreclosed on
by the Company $ - $ - $ 31 $ 145
<FN>
See Notes to Consolidated Financial Statements.
</FN>
</TABLE>
<PAGE>
ORANGE NATIONAL BANCORP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1. Basis of Presentation
The consolidated financial statements include the accounts of Orange
National Bancorp ("Company") and its wholly-owned subsidiary, Orange
National Bank ("Bank").
The consolidated balance sheet (unaudited) as of September 30, 1998,
and the related consolidated statements (unaudited) of earnings,
comprehensive income, stockholders' equity and cash flows for the three
and nine months ended September 30, 1998 and 1997, have been prepared
in accordance with generally accepted accounting principles and the
rules and regulations of the Securities and Exchange Commission. In
the opinion of management, all adjustments (consisting of normal
recurring accruals) considered necessary have been made to present
fairly the financial position, results of operations and cash flows as
of and for the three and nine months ended September 30, 1998.
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted. These
consolidated financial statements should be read in conjunction with
the consolidated financial statements and notes thereto included in the
Company's December 31, 1997, annual report on Form 10-K. The operating
results for the three and nine months ended September 30, 1998, are not
necessarily indicative of the operating results for all of 1998.
<TABLE>
Note 2. Other income and expense
Other income and expense for the three and nine months ended
September 30 consisted of the following:
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1998 1997 1998 1997
(dollars in thousands)
<S> <C> <C> <C> <C>
Other income
Service charges on deposit accounts $352 $ 372 $1,098 $1,179
Fees for other customer services 232 190 639 545
Gain on sale of loans 192 319 578 1,110
Increase in cash value of
life insurance 60 59 195 160
Other 65 60 151 321
$901 $1,000 $2,661 $3,315
Other expense
Salaries, wages and
employee benefits $1,497 $1,522 $4,493 $4,538
Occupancy 335 286 1,011 853
Data processing 241 227 708 687
Furniture and equipment 214 182 561 541
Promotion 169 166 525 570
Legal and professional services 210 187 686 593
Stationery and supplies 53 54 206 168
Telephone and postage 110 116 327 314
Other real estate owned 7 17 14 93
Other 280 179 683 574
$3,116 $2,936 $9,214 $8,931
</TABLE>
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
This filing contains forward-looking statements, which involve risks
and uncertainties. The Company's actual future results may differ
significantly from the results discussed in the forward-looking
statements. Factors that might cause a difference include, but are not
limited to, interest rates, particularly the spread between loan rates
and deposit rates, loan demand, deposit withdrawals, the effect of the
Southern California economy and real estate values, and other general
business risks.
Results of Operations
Total interest income was $4.9 million in the third quarter of 1998,
an increase of $0.7 million or 15.2% from the $4.2 million in the third
quarter of 1997. Total interest income was $13.6 million in the first
nine months of 1998, an increase of $1.6 million or 13.9% from the
$12.0 million in first nine months of 1997. The average interest-
earning assets were $230.9 million in the third quarter of 1998, an
increase of $41.4 million or 21.8% from the $189.5 million in the third
quarter of 1997. The average interest-earning assets were $213.7
million in the first nine months of 1998, an increase of $31.5 million
or 17.3% from the $182.2 million in the first nine months of 1997. The
average yield on interest-earning assets was 8.4% in the third quarter
of 1998, a decrease of 0.5% from the 8.9% in the third quarter of 1997.
The average yield on interest-earning assets was 8.5% in the first nine
months of 1998, a decrease of 0.3% from the 8.8% in the first nine
months of 1997. The increase in interest income in the third quarter
and the first nine months of 1998 as compared to the similar periods of
1997 resulted from higher levels of interest-earning assets in spite of
slightly lower interest rates.
Interest income on loans was $3.6 million in the third quarter of
1998, an increase of $0.1 million or 2.8% from the $3.5 million in the
third quarter of 1997. Interest income on loans was $10.5 million in
the first nine months of 1998, an increase of $0.8 million or 8.8% from
the $9.7 million in the first nine months of 1997. The increase in
interest income on loans in the third quarter and first nine months of
1998 as compared to the similar periods of 1997 resulted from (1) the
increase in the average size of the loan portfolio, (2) the slightly
lower long-term interest rates during 1998, and (3) the payoff and full
collection of all past-due principal and delinquent interest of certain
nonaccrual loans in 1998. The average size of the loan portfolio was
$138.6 million in the third quarter of 1998, an increase of $2.3
million or 1.7% from the $136.3 million in the third quarter of 1997.
The average size of the loan portfolio was $139.2 million in the first
nine months of 1998, an increase of $10.0 million or 7.8% from the
$129.2 million in the first nine months of 1997. The yield on the loan
portfolio was 10.3% in the third quarter of 1998, an increase of 0.2%
from the 10.1% in the third quarter of 1997. The yield on the loan
portfolio was 10.1% in the first nine months of 1998, an increase of
0.1% from the 10.0% in the first nine months of 1997. The increase in
the average size of the loan portfolio resulted from sustained net loan
fundings throughout 1997 and the first nine months of 1998. The
increase in the yield resulted from the collection of nonaccrual loans
in the first nine months of 1998. The yield on loans moves with
changes in the prime rate as approximately 66% of the loan portfolio
are based on variable rates.
<PAGE>
Interest income on securities was $0.4 million in the third quarter
of 1998, an increase of $0.1 million or 21.4% from the $0.3 million in
the third quarter of 1997. Interest income on securities was $0.8
million in the first nine months of 1998, a decrease of $0.5 million or
36.9% from the $1.3 million in the first nine months of 1997. The
decrease in interest income on securities during the first nine months
of 1998 as compared to the similar period in 1997 resulted from the
decrease in the average size and lower yields of the investment
securities portfolio. However, the increase in interest income on
securities during the third quarter of 1998 as compared to the similar
period of 1997 resulted from the large amount of investment securities
purchased in the third quarter of 1998 in advance of the lower interest
rate environment in the fourth quarter of 1998. The average size of
the securities portfolio was $25.5 million in the third quarter of
1998, an increase of $4.2 million or 19.7% from the $21.3 million in
the third quarter of 1997. The average size of the securities
portfolio was $18.6 million in the first nine months of 1998, a
decrease of $10.0 million or 34.9% from the $28.6 million in the first
nine months of 1997. The yield on securities was 6.0% in the third
quarter of 1998, an increase of 0.1% from the 5.9% in the third quarter
of 1997. The yield on securities was 5.9% in the first nine months of
1998, a decrease of 0.2% from the 6.1% in the first nine months of
1997. The increase in the size and yield of the investment securities
portfolio resulted from purchases of large amounts of investment
securities in the third quarter of 1998 despite several higher yielding
bonds being called throughout 1997 and into the first nine months of
1998.
Interest income on federal funds sold was $0.9 million in the third
quarter of 1998, an increase of $0.5 million or 108.6% from the $0.4
million in the third quarter of 1997. Interest income on federal funds
sold was $2.3 million in the first nine months of 1998, an increase of
$1.3 million or 131.8% from the $1.0 million in the first nine months
of 1997. The increase in interest income on federal funds sold during
the third quarter and first nine months of 1998 as compared to the
similar periods of 1997 resulted from the large increase in the average
size of federal funds sold in 1998. The average balance of federal
funds sold was $66.8 million in the third quarter of 1998, an increase
of $34.9 million or 109.4% from the $31.9 million in the third quarter
of 1997. The average balance of federal funds sold was $55.9 million
in the first nine months of 1998, an increase of $31.5 million or
128.9% from the $24.4 million in the first nine months of 1997. The
yield on federal funds sold was 5.5% in the third quarter of both 1998
and 1997. The yield on federal funds sold was 5.4% in the first nine
months of both 1998 and 1997. The increase in the federal funds sold
resulted from excess funds not being invested in investment securities
throughout 1997 and into the first half of 1998 due to the extremely
flat yield curve. However, portions of federal funds sold were used in
the third quarter of 1998 to purchase investment securities in
anticipation of an interest rate decrease.
<PAGE>
Interest expense was $1.1 million in the third quarter of 1998, an
increase of $0.3 million or 33.4% from the $0.8 million in the third
quarter of 1997. Interest expense was $3.0 million in the first nine
months of 1998, an increase of $0.6 million or 25.1% from the $2.4
million in the first nine months of 1997. The increase in interest
expense resulted from a larger average interest-bearing deposit base,
particularly the money market accounts and certificates of deposit, and
a slight increase in deposit rates. The average interest-bearing
deposits were $150.3 million in the third quarter of 1998, an increase
of $28.0 million or 22.9% from the $122.3 million in the third quarter
of 1997. The average interest-bearing deposits were $138.3 million in
the first nine months of 1998, an increase of $17.2 million or 14.2%
from the $121.1 million in the first nine months of 1997. The average
rate paid on interest-bearing deposits was 3.0% in the third quarter of
1998, an increase of 0.2% over the 2.8% in the third quarter of 1997.
The average rate paid on interest-bearing deposits was 2.9% in the
first nine months of 1998, an increase of 0.2% from the 2.7% in the
first nine months of 1997. The increase in the deposit base reflects
an overall prosperity of the customer base resulting from an improved
economy.
The provision for credit losses was $40,000 in the third quarter of
1998, an increase of $25,000 from the $15,000 in the third quarter of
1997. The provision for credit losses was $60,000 in the first nine
months of 1998, a decrease of $30,000 from the $90,000 in the first
nine months of 1997. The decrease in the provision for credit losses
during the first nine months of 1998 as compared to the first nine
months of 1997 reflects a higher quality loan portfolio resulting from
an improved local economy in Orange County. The Company continued to
experience recoveries in the first nine months of 1998 on amounts
previously charged-off. These recoveries offset the need for
additional provision. Management believes that the current allowance
for credit losses is adequate to provide for potential losses in the
portfolio. The current local economic outlook is promising for the
remainder of 1998. However, an assurance cannot be made as to its
realization and, accordingly, future provisions for credit losses
cannot be estimated at this time. While management is optimistic
about the future, the effects of current economic conditions on the
collectibility of loans cannot be predicted with absolute certainty and
its effects on future profitability cannot be determined.
Other income was $0.9 million in the third quarter of 1998, a
decrease of $0.1 million or 9.9% from the $1.0 million in the third
quarter of 1997. Other income was $2.7 million in the first nine
months of 1998, a decrease of $0.6 million or 19.7% from the $3.3
million in the first nine months of 1997. The decrease in other income
during the third quarter and the first nine months of 1998 primarily
resulted from decreased gains on lower volume of SBA loans sold as
compared to the similar periods of 1997. The gain on sale of SBA loans
was $0.2 million in the third quarter of 1998, a decrease of $0.1
million or 39.8% from the $0.3 million in the third quarter of 1997.
The gain on sale of SBA loans was $0.6 million in the first nine months
of 1998, a decrease of $0.5 million or 48.0% from the $1.1 million in
the first nine months of 1997.
Other expenses were $3.1 million in the third quarter of 1998, an
increase of $0.2 million or 6.1% from the $2.9 million in the third
quarter of 1997. Other expenses were $9.2 million in the first nine
months of 1998, an increase of $0.3 million or 3.2% from the $8.9
million in the first nine months of 1997. The increase in other
expense in the first nine months of 1998 resulted from the relocation
costs associated with moving a branch office and consolidating several
administrative offices, and professional fees.
<PAGE>
The provision for income taxes was $0.6 million in the third quarter
of both 1998 and 1997. The provision for income taxes was $1.5 million
in the first nine months of both 1998 and 1997.
Net earnings were $889,000 in the third quarter of 1998, an increase
of $37,000 or 4.4% from the $852,000 in the third quarter of 1997. Net
earnings were $2,410,000 in the first nine months of 1998, an increase
of $109,000 or 4.8% from the $2,301,000 in the first nine months of
1997.
Financial Condition
The Company experienced growth during the first nine months of 1998.
Total assets were $264.7 million as of September 30, 1998, an increase
of $22.4 million or 9.3% from the $242.3 million as of December 31,
1997.
Total interest-earning assets were $235.7 million as of September
30, 1998, an increase of $35.7 million or 17.9% from the $200.0 million
as of December 31, 1997. The growth resulted in a larger investment
securities portfolio and a larger loan portfolio in spite of a decrease
in the amount of federal funds sold. The Company continues to focus
its efforts on originating quality loans. However, severe competition
and the low interest rate environment have curtailed the amount of new
loan fundings. The new loans originated in the first nine months of
1998 were funded primarily from the use of cash and increased deposits.
The investment securities portfolio was $47.1 million as of
September 30, 1998, an increase of $28.9 million or 158.8% from the
$18.2 million as of December 31, 1997. The increase in the first nine
months of 1998 resulted from the large quantities of investment
securities purchased late in the third quarter of 1998 in anticipation
of lower future interest rates. The Company did not purchase any other
investment securities throughout 1997 and into the first half of 1998
due to the extremely flat yield curve. The Company believes securities
are the best available investment after its liquidity needs are met
through cash, cash due from banks and federal funds sold. Generally,
held-to-maturity securities consist of mortgage-backed securities and
available-for-sale securities consist of U.S. Government Agency debt
and mortgage-backed securities. The market values increased slightly
in the first nine months of 1998 resulting from the decrease in short-
term and especially long-term interest rates. The Company invested
$0.7 million during the second quarter of 1998 to become a member of
the Federal Home Loan Bank of San Francisco ("FHLB").
The loan portfolio was $139.1 million as of September 30, 1998, an
increase of $7.9 million or 6.0% from the $131.2 million as of December
31, 1997. The increase in the first nine months of 1998 resulted from
continued loan demand, primarily SBA lending on commercial real estate.
The quality of the loan portfolio continues to improve resulting from a
healthier Orange County economy.
Total deposits were $239.7 million as of September 30, 1998, an
increase of $20.9 million or 9.6% from the $218.8 million as of
December 31, 1997. The increase in the first nine months of 1998
reflects an improving economic climate amongst the large customers of
the Bank and the increase in new customers of the Bank.
<PAGE>
Liquidity
The Company maintains substantial liquid and other short-term assets
to meet the funding of loan demand, deposit withdrawals and maturities,
and operating costs. The Company currently meets its funding needs
from its deposit base, and cash flow from operations, loan sales,
maturities of investment securities and loan principal reductions.
The loan-to-deposit ratio was 57.9% and 60.0% as of September 30,
1998 and December 31, 1997, respectively. The decrease in this ratio
resulted as the deposits increased at a more rapid rate than loans,
primarily due to the increased competition within the loan markets.
The ratio of liquid assets (cash, cash due from banks, federal funds
sold, and investment securities with maturities of one year or less) to
demand deposits was 41.8% and 44.5% as of June 30, 1998 and December
31, 1997, respectively. The decrease of the liquid asset ratio
resulted from the increase in money market demand accounts.
The Company has a relatively stable and significant base of core
deposits. Thus, the Company has not used brokered deposits and avoids
using other wholesale, highly rate-sensitive, short-term funds. Other
funding sources available to the Company include reduction of its
federal funds sold, sale of its available-for-sale securities,
increasing deposits, and borrowing from its established credit
resources. The Company may borrow funds under securities sold with
agreements to repurchase such securities that have not been pledged.
The Company had unpledged securities of $41.1 million as of September
30, 1998. The Company established a borrowing capacity of $14.5
million with the FHLB during the second quarter of 1998. The Company
would need to pledge certain defined collateral, consisting of loans
and/or securities, with the FHLB prior to borrowing. Liquidity can
also be obtained through federal funds purchased from correspondent
banks and/or direct borrowings from the Federal Reserve Bank. The
Company currently has unused Federal Funds borrowing lines of $8.0
million with various banks.
Management believes the Bank has sufficient liquidity to meet its
loan commitments, deposit withdrawals and operating costs.
Loan Portfolio
A major part of the Bank's objective is serving the credit needs of
customers in Orange County and surrounding areas. Credit decisions are
based upon the judgement of the Bank's lending personnel and Loan
Committee. The legal lending limit to each customer is restricted to a
percentage of the Bank's total capital, the exact percentage depends on
the nature of the particular loan and the collateral involved. Credit
risk is inherent to any loan portfolio and it is the management of this
risk, which defines the quality of the portfolio. The Bank has a
policy to obtain collateral for loans under most circumstances. The
Bank has a highly diversified portfolio, a solid underwriting process,
a loan review program and an active loan service function which
management believes serves to minimize the possibility of material loss
in the loan portfolio.
The three broad categories in which the Bank has directed virtually
all of its lending activities are (a) real estate loans, (b) commercial
loans, and (c) loans to individuals. These three categories accounted
for 59.8%, 31.9%, and 7.9%, respectively, of the Bank's loan portfolio
as of September 30, 1998. Commercial real estate loans are originated
for terms of up to 25 years. The Bank's commercial loans are primarily
funded to small- and medium-sized businesses for terms ranging from 30
days to 5 years. Consumer installment loans are for a maximum term of
48 months on unsecured loans and for a term of the depreciable life of
tangible property used as collateral on secured loans.
<PAGE>
Variable interest rate loans comprised 65.8% and 72.0% of the loan
portfolio as of September 30, 1998 and December 31, 1997, respectively.
The Bank had standby letters of credit of $0.5 million and
commitments to extend credit of $24.3 million as of September 30, 1998.
The Bank presently has sufficient liquidity to fund all loan
commitments.
A loan is impaired when it is probable the creditor will be unable
to collect all contractual principal and interest payments due in
accordance with terms of the loan agreement. Impaired loans are
measured based on the present value of expected future cash flows
discounted at the loan's effective interest rate or, as a practical
expedient, at the loan's observable market price or the fair value of
the collateral if the loan is collateral dependent. The amount of
impairment, if any, and any subsequent changes are included in the
allowance for credit losses.
<TABLE>
Loan Portfolio Composition
The composition of the Bank's loan portfolio (all domestic) is
presented in the following table:
<CAPTION>
Sep 30 Dec 31
1998 1997
(dollars in thousands)
<S> <C> <C>
Dollars
Real estate
Commercial $ 81,205 $ 78,534
Construction 3,647 118
Commercial and industrial 45,236 44,301
Loans to individuals 11,248 10,586
Other 442 122
Total 141,778 133,661
Unearned net loan fees and premiums (1,069) (891)
Allowance for credit losses (1,584) (1,581)
Total, net $139,125 $131,189
Percentages
Real estate
Commercial 57.2% 58.8%
Construction 2.6 0.1
Commercial and industrial 31.9 33.1
Loans to individuals 7.9 7.9
Other 0.4 0.1
Total 100.0% 100.0%
</TABLE>
<PAGE>
Credit Risk Management
The Bank manages its loan portfolio through a process designed to
assure acceptable quality of loans entering the portfolio and to bring
any potential losses or potential defaults in existing loans to the
attention of the appropriate management personnel. Each lending
officer has primary responsibility to conduct credit and documentation
reviews of the loans for which he is assigned. The Bank's Senior Vice
President and Senior Credit Officer are responsible for general
supervision of the loan portfolio and adherence by the loan officers to
the loan policies of the Bank. The Bank currently engages an outside
consulting firm to periodically review the loan portfolio to provide
suggested risk rating of selected loans. Bank management reviews the
suggested ratings along with all other available information to
properly monitor the loan portfolio, including all loan evaluations
made during periodic examinations by the OCC.
In accordance with the Bank's loan policies, management presents a
written report to the Bank's Board of Directors at its monthly meeting.
The Directors review the delinquency report listing of all loans 30
days or more past due and the watch list report including loans having
increased credit risk, both delinquency and other factors, over the
rest of the portfolio. Additionally, the Directors review a monthly
report including all loans originated during the prior month.
The Bank maintains an allowance for credit losses to provide for
potential losses in the loan portfolio. Additions to the allowance for
credit losses are either charged to operations in the form of a
provision for possible credit losses, or recovered from loans
previously charged-off. All loans that are judged to be uncollectible
are charged against the allowance. The allowance for credit losses is
maintained at a level determined by management to be adequate, based on
the performance of loans in the Bank's portfolio, evaluation of
collateral for such loans, the prospects or worth of the prospective
borrowers or guarantors, and such other factors which, in the Bank's
judgement, deserve consideration in the estimation of possible losses.
The allowance for credit losses is established and maintained after
analyzing loans identified by management with certain unfavorable
features affixing a risk of loss attributable to each loan. An
inherent risk of loss in accordance with industry standards and
economic conditions is then allocated to specific loan pools and to the
remainder of the portfolio on an aggregate basis. While management
uses the best information available to make its evaluation, future
adjustments to the allowance may be necessary if there are significant
changes in economic or other conditions. In addition, the OCC
periodically reviews the Company's allowance for credit losses as an
integral part of their normal recurring examination process, and may
require the Company to make additions to the allowance based on their
judgment about information available to them at the time of their
examinations.
<PAGE>
<TABLE>
The following table presents loans on nonaccrual status or
contractually past due 90 days or more as to interest or principal
payments and still accruing interest:
<CAPTION>
Sep 30 Dec 31
1998 1997
(dollars in thousands)
<S> <C> <C>
Loans on nonaccrual status $1,771 $2,447
Loans past due 90 days or more and
still accruing interest - 660
Total $1,771 $3,107
</TABLE>
Loans are generally placed on nonaccrual status when principal or
interest payments are past due 90 days or more. Certain loans are
placed on nonaccrual status earlier if there is reasonable doubt as to
the collectibility of interest or principal. Loans that are in the
renewal process, have sufficient collateral, or are in the process of
collection continue to accrue interest.
Had the loans on nonaccrual status paid according to their original
terms, the gross interest income to date on such loans would have been
approximately $643,000.
Management does not have knowledge of any additional loans not
disclosed in this section as nonaccrual, past due, or troubled debt
restructuring that may be potential problem loans. The Bank has no
loans to foreign borrowers. The collateral value of certain nonaccrual
loans are large enough that management believes all principal and
interest will be collected on those loans and therefore do not meet the
definition of impaired. A loan is impaired when it is probable the
creditor will be unable to collect all contractual principal and
interest payments due in accordance with the terms of the loan
agreement. Impaired loans are valued primarily at the fair value of
the underlying collateral.
There were no loan concentrations to individual borrowers exceeding
10% of the total loan portfolio and no other interest-bearing assets
that would be required to be in the paragraphs above, if such assets
were classified as loans as of September 30, 1998 and December 31,
1997.
<PAGE>
<TABLE>
The following table presents loans outstanding, the activity of the
allowance for credit losses, and pertinent ratios during the three and
nine months ended and as of September 30:
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1998 1997 1998 1997
(dollars in thousands)
<S> <C> <C> <C> <C>
Average gross loans $139,684 $137,202 $140,218 $129,974
Total gross loans
at end of period $141,778 $138,793 $141,778 $138,793
Allowance for credit losses:
Balance, beginning of period $1,567 $1,480 $1,581 $1,369
Charge-offs (35) (17) (91) (22)
Recoveries 12 87 34 128
Net (charge-offs) recoveries (23) 70 (57) 106
Provisions charged to operations 40 15 60 90
Balance, end of period $1,584 $1,565 $1,584 $1,565
Net (charge-offs) recoveries
during the period to
average gross loans
outstanding during period (0.02%) 0.05% (0.04%) 0.08%
</TABLE>
Included in the Bank's allocation of its allowance for credit losses
are specific reserves on certain identified loans and general reserves
for unknown potential losses. Management classifies loans through its
internal loan review system that is supplemented by an independent
third party reviewer and review of loans from its regulators. None of
these classifications indicate trends or uncertainties, which will
materially impact future operating results, liquidity, or capital
resources. The allowance provides for the potential adverse effects of
current economic conditions. However, the full effects of the economy
on the loan portfolio cannot be predicted with any certainty. Any
loans which management doubts the ability of borrowers to comply with
loan repayment terms are provided for in the allowance.
<PAGE>
Summary of Deposits
Deposits are currently the Bank's sole source of funds. The Bank
can obtain additional funds when needed to meet occasional declines in
deposits or other short-term liquidity needs through the overnight
purchase of federal funds and other borrowing facilities. However,
the Bank does not currently use these sources of funds. Generally,
the Bank has funds in excess of its needs for deposit withdrawals and
other short-term liquidity. The Bank regularly sells such excess funds
as federal funds sold to other financial institutions.
The Bank's deposits are attracted primarily from commercial
enterprises and individuals. The Bank also attracts some deposits from
municipalities and other government agencies. The Bank does not have
foreign deposits, brokered deposits or variable rate fixed-term
deposits, nor does the Bank currently expect to obtain future funding
through these types of deposits. The Bank had noninterest-bearing
demand deposits of $80.4 million, interest-bearing Negotiable Orders of
Withdrawal Accounts ("NOW") and Money Market Deposit Accounts ("MMDA")
of $115.4 million, time deposits of $31.0 million, and savings accounts
of $12.9 million as of September 30, 1998.
The Company had interest-bearing deposits of 66.5% and 60.8% of
total deposits as of September 30, 1998 and December 31, 1997,
respectively. While the Bank does not experience material seasonal
fluctuations in deposit levels, the Bank's relative growth in deposits
and loans and level of liquidity may be affected by seasonal and
economic changes of its customers. Management believes it has
sufficient liquidity to fund loan commitments, deposit demands and
operating costs.
<TABLE>
The following table presents the Bank's average balances of
deposits, as a percentage of average total deposits and average
interest paid by category for the first nine months of 1998 and for the
year 1997:
<CAPTION>
MMDA Total
Demand and NOW Savings Time Deposits
(dollars in thousands)
<S> <C> <C> <C> <C> <C>
September 30, 1998
Average balance $82,731 $99,040 $11,972 $27,265 $221,008
Percent of total 37.5% 44.8% 5.4% 12.3% 100.0%
Average interest
rate paid 0.0% 2.4% 2.0% 5.1% 1.8%
December 31, 1997
Average balance $76,444 $91,931 $11,485 $19,423 $199,283
Percent of total 38.4% 46.1% 5.8% 9.7% 100.0%
Average interest
rate paid 0.0% 2.3% 2.0% 5.0% 1.7%
</TABLE>
<PAGE>
Capital Management
Capital management requires that sufficient capital be maintained
for anticipated growth and to provide depositors assurance that their
funds are on deposit with a solvent institution. The Bank is subject
to various regulatory capital requirements. The Bank must meet
specific capital guidelines that involve certain measurements of the
Bank's assets and certain off-balance sheet items as calculated under
regulatory accounting practices. The Bank's capital amounts and
classification of these assets and certain off-balance sheet items are
also subject to qualitative judgments by the regulators about
components, risk weightings and other factors. Tier 1 capital for the
Bank under the regulations is defined as stockholders' equity before
any unrealized gains or losses on its available-for-sale securities
portfolio, less defined portions of intangible assets. Total capital
is defined as Tier 1 capital plus the allowance for credit losses,
subject to certain limitations. The table below presents the Bank's
actual capital ratios, the minimum capital required for adequacy
purposes and to be categorized as "well capitalized" for the capital
ratios of total risk-based, Tier 1 risk-based and Tier 1 leverage. The
Bank's capital ratios exceeded the "well capitalized" threshold
prescribed in the rules of its principal federal regulator as of
September 30, 1998.
<TABLE>
<CAPTION>
To Be Well
Capitalized Under
For Capital Prompt Corrective
Actual Adequacy Purposes Action Provisions
Amount Ratio Amount Ratio Amount Ratio
(dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
September 30, 1998
Total capital
(to risk-weighted assets) $23,792 13.7% $13,943 8.0% $17,428 10.0%
Tier 1 capital
(to risk-weighted assets) 22,208 12.7% 6,971 4.0% 10,457 6.0%
Tier 1 capital
(to average assets) 22,208 8.6% 10,352 4.0% 12,940 5.0%
December 31, 1997
Total capital
(to risk-weighted assets) $22,563 13.9% $12,962 8.0% $16,202 10.0%
Tier 1 capital
(to risk-weighted assets) 20,982 13.0% 6,481 4.0% 9,721 6.0%
Tier 1 capital
(to average assets) 20,982 9.0% 9,368 4.0% 11,710 5.0%
</TABLE>
Management believes that the Bank is properly and adequately
capitalized, as evidenced by these ratios as of September 30, 1998.
The most recent notification from the Office of the Comptroller of the
Currency categorized the Bank as "well capitalized" as of June 30, 1997
under the regulatory framework for prompt corrective action.
<PAGE>
Interest Rate Sensitivity
The Company uses asset liability management on its balance sheet to
minimize the exposure of interest rate movements on its net interest
income. The principal function of asset liability management is to
manage the interest rate risk in the balance sheet by maintaining a
proper balance, match and mix between rate-sensitive interest-earning
assets and rate-sensitive interest-bearing liabilities. The term
"rate-sensitive" refers to those assets and liabilities that are
"sensitive" to fluctuations in interest rates. When interest rates
fluctuate, earnings may be affected in many ways as the interest rates
of assets and liabilities change at different times or by different
amounts.
The Company minimizes its interest rate risk in the balance sheet by
emphasizing the origination of variable interest rate loans that have
the ability to reprice overnight and maintaining a high balance of
federal funds sold to offset the deposits that may potentially reprice
overnight.
A repricing gap is the difference between total interest-earning
assets and total interest-bearing liabilities available for repricing
during a given time interval. A positive repricing gap exists when
total interest-earning assets exceed total interest-bearing liabilities
within a repricing period and a negative repricing gap exists when
total interest-bearing liabilities are in excess of interest-earning
assets within a repricing period.
Generally, a positive repricing gap increases net interest income in
a rising rate environment and decreases net interest income in a
falling rate environment. A positive repricing gap may increase net
interest income in a falling rate environment depending on the amount
of the excess repricing gap and extent of the drop in interest rates.
A negative repricing gap tends to increase net interest income in a
falling rate environment and decrease net interest income in a rising
rate environment. The net interest income of the Company will benefit
from a rising rate environment based on the positive repricing gap.
<TABLE>
The following table presents the repricing periods for interest-
earning assets and interest-bearing liabilities and the related
repricing gaps as of September 30, 1998:
<CAPTION>
Due Due After one
within within but within After
0-3 4-12 five five
months months years years Total
(dollars in thousands)
<S> <C> <C> <C> <C> <C>
Interest-earning assets (1) $143,382 $21,650 $28,993 $43,465 $237,490
Interest-bearing liabilities 150,282 7,750 1,243 - 159,275
Repricing gap (6,900) 13,900 27,750 43,465 78,215
Cumulative repricing gap $ (6,900) $ 7,000 $34,750 $78,215
Cumulative gap as a
percent of earning assets (2.9)% 2.9% 14.6% 32.9%
<FN>
(1) Includes collateralized mortgage obligations in the one-year to
five-year maturities based on the average expected lives.
</FN>
</TABLE>
The Company had interest-earning assets of $142.5 million and
interest-bearing demand and savings deposits of $128.1 million as of
September 30, 1998 that are able to reprice overnight.
<PAGE>
The held-to-maturity securities are collateralized mortgage
obligations that may be repaid without penalties. The value of these
securities is subject to fluctuation based upon current medium-term and
long-term interest rates.
The estimated effect on net interest income for a 10% decrease from
prevailing interest rates over a one-year period would be a decline of
approximately $1.0 million.
Off-Balance Sheet Analysis
The contractual amounts associated with certain financial
transactions are not recorded as assets or liabilities on the balance
sheet. Off-balance sheet treatment is generally considered appropriate
either where exchange of the underlying asset or liability has not
occurred or is not assured, or where contractual amounts are used
solely to determine cash flows to be exchanged. The Company's off-
balance sheet financial instruments consist of commitments to extend
credit and standby letters of credit. A majority of these commitments
are written with variable interest rates.
Impact of Inflation and Changing Prices
The financial statements and related data presented herein have been
prepared in accordance with generally accepted accounting principles,
which require the measurement of financial position and operating
results in terms of historical dollars without considering changes in
the relative purchasing power of money over time due to inflation.
Unlike most industrial companies, virtually all of the assets and
liabilities of a financial institution are monetary in nature. As a
result, interest rates have a more significant impact on a financial
institution's performance than the effects of general levels of
inflation. Interest rates do not necessarily move in the same
direction or in the same magnitude as the price of goods and services.
In the current interest rate environment, the liquidity and the
maturity structure of the Company's assets and liabilities are critical
to the maintenance of acceptable performance levels.
Year 2000 Issue
The Company conducted a comprehensive review of its computer,
including third-party vendors, and environmental systems identifying
the systems that could be affected by the "Year 2000" issue and
developed an implementation and monitoring plan to resolve the issue.
The Year 2000 is the result of computer programs being written using
two digits (rather than four) to define the applicable year. Any of
the vendor programs that have time-sensitive software may recognize a
date using "00" as the year 1900 rather than the year 2000. This could
result in a major system failure or miscalculations. The Company
presently believes that, with modifications to existing vendor software
and upgrading to new software packages, the Year 2000 problem will not
pose significant operational problems for the Company's computer
systems as so modified and converted. The Company is also actively
monitoring the Year 2000 progress of its third-party data processing
vendor. The Company presently estimates the costs of these
modifications and upgrading at $0.3 million, which will be expensed as
incurred. These costs are based on management's best estimates, which
were derived using numerous assumptions of future events. There can be
no guarantee that these estimates will be achieved and actual results
could differ materially from those anticipated. Additionally, should
such modifications and upgrades not be completed timely, the Year 2000
may have a material impact on the operations of the Company.
<PAGE>
Impact of Recently Issued or Adopted Accounting Standards
In June 1997, FASB issued Statement of Financial Accounting
Standards No. 131, "Disclosures About Segments of an Enterprise and
Related Information" ("SFAS 131"). SFAS 131 requires a publicly-held
entity to disclose financial and descriptive information about all of
its operating segments. SFAS 131 will require disclosure of net
earnings or loss, certain specific revenue and expense items, and
assets for each segment presented and disclosure of a reconciliation of
this information with the corresponding amounts recognized in the
financial statements of the entity. SFAS 131 will also require
disclosure of other pertinent segment information, including the
products and services provided by its operating segments and the method
by which the operating segments were determined. SFAS 131 is effective
for years beginning after December 15, 1997 and will require
comparative information of earlier years presented to be restated. The
Company has not determined if the adoption of SFAS 131 will require it
to report segment information.
In February 1998, FASB issued Statement of Financial Accounting
Standards No. 132, "Employers' Disclosure About Pensions and Other
Postretirement Benefits" ("SFAS 132"). SFAS 132 standardizes the
annual disclosure requirements for pensions and other postretirement
benefits. SFAS 132 does not affect the results of operations or
financial position of the Company. SFAS 132 is effective for years
beginning after December 15, 1997.
In June 1998, FASB issued Statement of Financial Accounting
Standards No. 133, "Accounting for Derivative Instruments and Hedging
Activities" ("SFAS 133"). SFAS 133 establishes accounting and
reporting standards for derivative instruments, including certain
derivative instruments embedded in other contracts, (collectively
referred to as derivatives) and for hedging activities. SFAS 133 is
effective for all fiscal quarters of fiscal years beginning after June
15, 1999. Earlier application is encouraged, but it is permitted only
as of the beginning of any quarter that begins after June 1998. The
impact of the adoption of the provisions of SFAS 133 on the results of
operations or the financial position of the Company has not been
determined.
Management does not believe the application of these Statements to
transactions of the Company that have been typical in the past will
materially affect the Company's financial position and results of
operations.
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None
ITEM 2. CHANGES IN SECURITIES
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS FOR VOTE OF SECURITIES HOLDERS
None
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
None
<PAGE>
Signatures
Pursuant to the requirements of Section 13 or 25(d) 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.
ORANGE NATIONAL BANCORP
By: /s/ KENNETH J. COSGROVE Date: NOVEMBER 3, 1998
Kenneth J. Cosgrove, President
and Chief Executive Officer
By: /s/ ROBERT W. CREIGHTON Date: NOVEMBER 3, 1998
Robert W. Creighton, Secretary
and Chief Financial Officer
By: /s/ JERRO M. OTSUKI Date: NOVEMBER 3, 1998
Jerro M. Otsuki, Vice President
and Controller
<TABLE> <S> <C>
<ARTICLE> 9
<CIK> 0000801443
<NAME> ORANGE NATIONAL BANCORP
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 16326
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 49725
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 41886
<INVESTMENTS-CARRYING> 5171
<INVESTMENTS-MARKET> 5179
<LOANS> 140709
<ALLOWANCE> 1584
<TOTAL-ASSETS> 264736
<DEPOSITS> 239720
<SHORT-TERM> 0
<LIABILITIES-OTHER> 1874
<LONG-TERM> 0
0
0
<COMMON> 8018
<OTHER-SE> 15124
<TOTAL-LIABILITIES-AND-EQUITY> 23142
<INTEREST-LOAN> 10518
<INTEREST-INVEST> 821
<INTEREST-OTHER> 2276
<INTEREST-TOTAL> 13615
<INTEREST-DEPOSIT> 3046
<INTEREST-EXPENSE> 3046
<INTEREST-INCOME-NET> 10569
<LOAN-LOSSES> 60
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 9214
<INCOME-PRETAX> 3956
<INCOME-PRE-EXTRAORDINARY> 3956
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2410
<EPS-PRIMARY> 1.21
<EPS-DILUTED> 1.16
<YIELD-ACTUAL> 8.49
<LOANS-NON> 1771
<LOANS-PAST> 0
<LOANS-TROUBLED> 621
<LOANS-PROBLEM> 479
<ALLOWANCE-OPEN> 1581
<CHARGE-OFFS> 91
<RECOVERIES> 34
<ALLOWANCE-CLOSE> 1584
<ALLOWANCE-DOMESTIC> 1584
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
