<PAGE>
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1997
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _______________ to _______________
Commission File Number: 1-9202
CHOICEONE FINANCIAL SERVICES, INC.
(Exact name of small business issuer as specified in its charter)
MICHIGAN 38-2659066
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
109 EAST DIVISION
SPARTA, MICHIGAN 49345
(Address of principal executive offices)
(616) 887-7366
(Issuer's telephone number, including area code)
1ST COMMUNITY BANCORP, INC.
(Former name, if changed since last report)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 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 _____
As of July 31, 1997, the registrant had outstanding 511,443 shares of
common stock having a par value of $10 per share.
Transitional Small Business Disclosure Format (check one):
Yes ____ No __X__
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS.
ChoiceOne Financial Services, Inc.
<TABLE>
CONSOLIDATED BALANCE SHEETS
June 30, 1997 and December 31, 1996
<CAPTION>
JUNE 30, DECEMBER 31,
1997 1996
----------- ------------
(Unaudited)
<S> <C> <C>
ASSETS
Cash and due from banks $ 3,580,000 $ 4,952,000
Securities available for sale (Note 2) 21,972,000 23,006,000
Loans (Note 3) 118,787,000 110,079,000
Allowance for loan losses (Note 4) (1,650,000) (1,487,000)
------------ -------------
Net loans 117,137,000 108,592,000
Premises and equipment - net 3,731,000 2,987,000
Accrued interest receivable 1,018,000 859,000
Other assets 1,556,000 1,335,000
------------ -------------
Total assets $148,994,000 $ 141,731,000
============ =============
</TABLE>
See accompanying notes to the consolidated financial statements.
-2-
<PAGE>
ChoiceOne Financial Services, Inc.
<TABLE>
CONSOLIDATED BALANCE SHEETS - Continued
June 30, 1997 and December 31, 1996
<CAPTION>
JUNE 30, DECEMBER 31,
1997 1996
----------- ------------
(Unaudited)
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
Deposits
Demand $ 11,238,000 $ 13,188,000
Interest-bearing transaction accounts 22,295,000 22,732,000
Savings 8,905,000 9,158,000
Time (Note 5) 61,326,000 50,528,000
------------ ------------
Total deposits 103,764,000 95,606,000
Federal funds purchased and securities sold under
agreements to repurchase 1,850,000 4,731,000
Accrued interest payable 475,000 435,000
Federal Home Loan Bank advances 25,200,000 25,200,000
Secured loan borrowings 1,672,000 0
Other liabilities 1,083,000 1,222,000
------------ ------------
Total liabilities 134,044,000 127,194,000
COMMITMENTS AND CONTINGENCIES (NOTE 6)
SHAREHOLDERS' EQUITY
Common stock, $10 par value; shares
authorized: 1,000,000; shares outstanding:
511,443 at June 30, 1997 and 482,710 at
December 31, 1996 5,114,000 4,827,000
Surplus 6,182,000 5,292,000
Retained earnings 3,569,000 4,305,000
Net unrealized appreciation on securities
available for sale, net of deferred tax effect 85,000 113,000
------------ ------------
Total shareholders' equity 14,950,000 14,537,000
------------ ------------
Total liabilities and shareholders' equity $148,994,000 $141,731,000
============ ============
</TABLE>
See accompanying notes to the consolidated financial statements.
-3-
<PAGE>
ChoiceOne Financial Services, Inc.
<TABLE>
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
---------------------- -------------------------
1997 1996 1997 1996
------ ------ ------ ------
<S> <C> <C> <C> <C>
INTEREST INCOME
Loans, including fees $ 2,707,000 $ 2,159,000 $ 5,269,000 $ 4,142,000
Securities
Taxable 210,000 231,000 427,000 465,000
Nontaxable 124,000 105,000 252,000 212,000
Other 1,000 1,000 1,000 2,000
------------ ------------- ------------- -------------
Total interest income 3,042,000 2,496,000 5,949,000 4,821,000
INTEREST EXPENSE
Deposits 1,024,000 973,000 1,971,000 1,934,000
Federal Home Loan Bank
advances 403,000 68,000 798,000 88,000
Other 97,000 34,000 178,000 54,000
------------ ------------- ------------- -------------
Total interest expense 1,524,000 1,075,000 2,947,000 2,076,000
------------ ------------- ------------- -------------
NET INTEREST INCOME 1,518,000 1,421,000 3,002,000 2,745,000
PROVISION FOR LOAN LOSSES 156,000 75,000 314,000 165,000
------------ ------------- ------------- -------------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 1,362,000 1,346,000 2,688,000 2,580,000
NONINTEREST INCOME
Service charges on deposit
accounts 77,000 79,000 149,000 157,000
Other service charges and fees 27,000 25,000 59,000 59,000
Mortgage loan sales
and servicing 36,000 23,000 55,000 42,000
Insurance commissions 206,000 180,000 431,000 382,000
Other income 27,000 34,000 69,000 73,000
------------ ------------- ------------- -------------
Total noninterest income 373,000 341,000 763,000 713,000
-4-
<PAGE>
NONINTEREST EXPENSE
Salaries and wages 574,000 530,000 1,084,000 1,015,000
Pension and other employee
benefits (91,000) 95,000 22,000 204,000
Occupancy expense 85,000 60,000 168,000 127,000
Furniture and equipment expense 115,000 90,000 218,000 180,000
Other expenses (Note 7) 421,000 336,000 783,000 640,000
------------ ------------- ------------- -------------
Total noninterest expense 1,104,000 1,111,000 2,275,000 2,166,000
------------ ------------- ------------- -------------
INCOME BEFORE INCOME TAX 631,000 576,000 1,176,000 1,127,000
INCOME TAX EXPENSE (NOTE 8) 208,000 154,000 351,000 311,000
------------ ------------- ------------- -------------
NET INCOME $ 423,000 $ 422,000 $ 825,000 $ 816,000
============ ============= ============= =============
EARNINGS PER SHARE (NOTE 1) $ .83 $ .82 $ 1.61 $ 1.59
============ ============= ============= =============
</TABLE>
See accompanying notes to the consolidated financial statements.
-5-
<PAGE>
ChoiceOne Financial Services, Inc.
<TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
------------------------
1997 1996
------ ------
<S> <C> <C>
Cash flows from operating activities
Net income $ 825,000 $ 816,000
Adjustments to reconcile net income to net cash
from operating activities
Net amortization on securities 39,000 42,000
Net gain on sales of loans (6,000) (7,000)
Loans originated for sale (1,020,000) (3,851,000)
Proceeds from loan sales 983,000 1,026,000
Provision for loan losses 314,000 165,000
Depreciation 164,000 139,000
Deferred income tax expense/(benefit) 39,000 (54,000)
Changes in:
Interest receivable and other assets (403,000) (382,000)
Interest payable and other liabilities (99,000) 9,000
------------- -------------
Net cash provided by/(used in) operating activities 836,000 (2,097,000)
Cash flows from investing activities
Securities available for sale:
Proceeds from maturities of securities 1,520,000 1,009,000
Purchase of securities (569,000) (180,000)
Net customer loan activity (10,206,000) (11,589,000)
Loans sold 1,390,000 110,000
Loans purchased 0 (231,000)
Net expenditures for premises and equipment (908,000) (235,000)
------------- -------------
Net cash used in investing activities (8,773,000) (11,116,000)
Cash flows from financing activities
Net increase in deposits 8,158,000 4,968,000
Increase/(decrease) in federal funds purchased and
securities sold under agreements to repurchase (2,881,000) 1,728,000
Increase in Federal Home Loan Bank advances 0 5,000,000
Increase in secured loan borrowings 1,672,000 0
Repurchase of fractional shares from stock dividend (9,000) 0
Cash dividends paid (375,000) (326,000)
------------- -------------
Net cash provided by financing activities 6,565,000 11,370,000
------------- -------------
-6-
<PAGE>
Net change in cash and cash equivalents (1,372,000) (1,843,000)
Cash and cash equivalents at beginning of period 4,952,000 4,806,000
------------- -------------
Cash and cash equivalents at end of period $ 3,580,000 $ 2,963,000
============= =============
Supplemental disclosure of cash flow information
Cash paid during the period for:
Interest $ 2,908,000 $ 2,059,000
Income taxes $ 300,000 $ 394,000
</TABLE>
See accompanying notes to the consolidated financial statements.
-7-
<PAGE>
ChoiceOne Financial Services, Inc.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The consolidated financial statements include the accounts of ChoiceOne
Financial Services, Inc. (the "Registrant") and its direct and indirect
wholly owned subsidiaries, ChoiceOne Bank (the "Bank") and ChoiceOne
Insurance Agencies, Inc., after elimination of significant intercompany
transactions and accounts. The Registrant's name was changed from 1st
Community Bancorp, Inc. to ChoiceOne Financial Services, Inc. on May 30,
1997. The statements have been prepared in accordance with generally
accepted accounting principles for interim financial information,
prevailing practices within the banking industry and the instructions to
Form 10-QSB and Item 310 of Regulation S-B. Accordingly, they do not
include all of the information and footnotes required by generally accepted
accounting principles for complete financial statements.
The accompanying consolidated financial statements reflect all adjustments
ordinary in nature (consisting solely of normal recurring accruals) which
are, in the opinion of management, necessary for a fair presentation of the
Consolidated Balance Sheets as of June 30, 1997, and December 31, 1996, the
Consolidated Statements of Income for the three- and six-month periods
ended June 30, 1997, and June 30, 1996, and the Consolidated Statements of
Cash Flows for the six-month periods ended June 30, 1997, and June 30,
1996. Operating results for the six months ended June 30, 1997, are not
necessarily indicative of the results that may be expected for the year
ending December 31, 1997.
The accompanying consolidated financial statements should be read in
conjunction with the consolidated financial statements and footnotes
thereto included in the Registrant's Annual Report on Form 10-KSB for the
year ended December 31, 1996.
STOCK TRANSACTIONS, EARNINGS AND CASH DIVIDENDS PER SHARE
Effective January 1, 1996, the Registrant issued 20,610 shares of ChoiceOne
Financial Services, Inc. common stock to effect a business combination with
Bradford Insurance Centre, Ltd. (the name was then changed to ChoiceOne
Insurance Agencies, Inc. in May 1996). The Registrant repurchased 2,703
shares of its stock in August 1996. The purchase of the stock coincided
with the Registrant''s plans to adopt an employee stock ownership plan. A
6% stock dividend was declared by the Registrant on April 16, 1997. The
stock dividend was paid on May 16, 1997, to shareholders of record on April
29, 1997.
-8-
<PAGE>
Earnings per share are based on the weighted average number of shares
outstanding during the year. The weighted average number of shares has
been adjusted for the 6% stock dividend declared in April 1997, the
repurchase of stock in August 1996 and the issuance of stock in January
1996. The weighted average number of shares outstanding was 511,443 for
the second quarter of 1997, 511,557 for the first six months of 1997, and
514,538 for the second quarter and first six months of 1996.
Cash dividends per share are based on the number of shares outstanding at
the time the dividend was paid. The number of shares outstanding was
511,673 for the cash dividend paid in the first quarter of 1997, 511,443
for the cash dividend paid in the second quarter of 1997, and 514,538 for
the cash dividends paid in the first and second quarters of 1996.
NOTE 2 - SECURITIES
Securities have been classified in the Consolidated Balance Sheets according
to management's intent. The amortized cost and approximate fair value of
securities at June 30, 1997, and December 31, 1996, were as follows:
<TABLE>
<CAPTION>
GROSS GROSS APPROXIMATE
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
--------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
SECURITIES AVAILABLE FOR SALE
JUNE 30, 1997
U.S. Treasury and
U.S. Government agencies $ 4,840,000 $ 22,000 $ (13,000) $ 4,849,000
Obligations of states and
political subdivisions 9,481,000 163,000 (26,000) 9,618,000
U.S. Government agencies
backed by mortgages 4,616,000 28,000 (45,000) 4,599,000
Other 2,907,000 0 (1,000) 2,906,000
------------ -------- ----------- ------------
Total $ 21,844,000 $213,000 $ (85,000) $ 21,972,000
============ ======== =========== ============
DECEMBER 31, 1996
U.S. Treasury and
U.S. Government agencies $ 4,831,000 $ 36,000 $ (14,000) $ 4,853,000
Obligations of states and
political subdivisions 10,276,000 191,000 (39,000) 10,428,000
U.S. Government agencies
backed by mortgages 4,869,000 32,000 (35,000) 4,866,000
Other 2,859,000 0 0 2,859,000
------------ -------- ----------- ------------
Total $ 22,835,000 $259,000 $ (88,000) $ 23,006,000
============ ======== =========== ============
</TABLE>
-9-
<PAGE>
There were no sales of securities for the six months ended June 30, 1997
and 1996.
For the six months ended June 30, 1997, the net unrealized holding gain or
loss on securities available for sale decreased by $43,000 resulting in a
net unrealized gain of $128,000 on securities available for sale as of June
30, 1997.
The book values of securities pledged as collateral at June 30, 1997, and
December 31, 1996, were as follows:
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1997 1996
------------ -------------
<S> <C> <C>
Securities sold under agreements to repurchase $ 1,505,000 $ 2,007,000
Public deposits 502,000 251,000
Federal Home Loan Bank advances 0 5,306,000
------------ ------------
Total $ 2,007,000 $ 7,564,000
============ ============
</TABLE>
NOTE 3 - LOANS
Loans at June 30, 1997, and December 31, 1996, were classified as follows:
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1997 1996
------------- -------------
<S> <C> <C>
Commercial $ 38,511,000 $ 34,583,000
Agricultural 9,665,000 10,113,000
Real estate mortgage - construction 2,798,000 2,215,000
Real estate mortgage - residential 39,781,000 37,168,000
Consumer 28,032,000 26,000,000
------------- -------------
Total $ 118,787,000 $ 110,079,000
============= =============
</TABLE>
Loans held for sale included $93,000 of residential real estate mortgage
loans at June 30, 1997. Loans held for sale were accounted for at the
lower of aggregate cost or market.
-10-
<PAGE>
Certain residential real estate mortgage loans were pledged as collateral
for Federal Home Loan Bank advances. The balance pledged as of June 30,
1997, was $36,577,000.
Information regarding impaired loans as of June 30, 1997, and December 31,
1996, is as follows:
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1997 1996
---------- ------------
<S> <C> <C>
Loans classified as impaired $1,036,000 $ 599,000
Less impaired loans for which no allowance for
loan losses had been established 840,000 450,000
---------- ----------
Impaired loans for which an allowance for loan
losses had been determined $ 196,000 $ 149,000
========== ==========
Allowance determined for above impaired loans $ 183,000 $ 6,000
========== ==========
</TABLE>
Information regarding impaired loans for the six months ended June 30, 1997
and 1996 is as follows:
<TABLE>
<CAPTION>
1997 1996
---------- ----------
<S> <C> <C>
Average balance of impaired loans $ 881,000 $ 350,000
Interest income recognized on impaired loans 15,000 18,000
Interest income recognized on a cash-basis on
impaired loans 11,000 15,000
</TABLE>
NOTE 4 - ALLOWANCE FOR LOAN LOSSES
An analysis of changes in the allowance for loan losses for the six months
ended June 30, 1997 and 1996 is as follows:
-11-
<PAGE>
<TABLE>
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
Balance at beginning of period $ 1,487,000 $ 1,121,000
Provision charged to operating expense 314,000 165,000
Recoveries credited to the allowance 30,000 38,000
Loans charged-off (181,000) (72,000)
----------- -----------
Balance at end of period $ 1,650,000 $ 1,252,000
=========== ===========
</TABLE>
NOTE 5 - TIME DEPOSITS
As of June 30, 1997, time deposits included $7,732,000 obtained from a
national time deposit rate service. The weighted average interest rate on
these deposits was 6.28% as of June 30, 1997. Approximately $6,540,000 of
the deposits had maturities of one year or less while the remainder had a
maximum maturity of two years.
NOTE 6 - COMMITMENTS, CONTINGENCIES, AND CONCENTRATIONS OF CREDIT
RISK
Noninterest-bearing deposits totaling approximately $2,727,000 were held at
NBD Bank at June 30, 1997.
As of June 30, 1997, the Registrant had outstanding commitments to make
loans totaling $18,698,000, the majority of which have variable interest
rates. The Registrant had issued approximately $2,663,000 in unused lines
of credit and $48,000 in letters of credit at June 30, 1997.
NOTE 7 - NONINTEREST EXPENSE
Noninterest expense for the six months ended June 30, 1997 and 1996 was as
follows:
-12-
<PAGE>
<TABLE>
<CAPTION>
1997 1996
---------- ----------
<S> <C> <C>
Supplies and postage $ 117,000 $ 100,000
Legal and professional 118,000 68,000
Computer processing 80,000 79,000
Training and seminars 49,000 27,000
Advertising and marketing 46,000 37,000
State single business tax expense 40,000 59,000
Other 333,000 270,000
---------- ----------
Total $ 783,000 $ 640,000
========== ==========
</TABLE>
NOTE 8 - INCOME TAX EXPENSE
The components of income tax expense for the six months ended June 30, 1997
and 1996 were as follows:
<TABLE>
<CAPTION>
1997 1996
---------- -----------
<S> <C> <C>
Current income tax expense $ 312,000 $ 365,000
Deferred income tax expense/(benefit) 39,000 (54,000)
Income tax expense $ 351,000 $ 311,000
</TABLE>
The difference between the financial statement tax provision and amounts
computed by applying the federal income tax rate to pre-tax income is
principally attributable to tax-exempt interest income.
The components of deferred tax assets and liabilities at June 30, 1997, and
December 31, 1996, were as follows:
-13-
<PAGE>
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1997 1996
---------- ------------
<S> <C> <C>
Deferred tax assets:
Allowance for loan losses $ 456,000 $ 401,000
Deferred compensation 60,000 62,000
Postretirement benefits obligation 50,000 50,000
Deferred loan fees 49,000 53,000
Other 65,000 68,000
---------- ----------
Total deferred tax assets 680,000 634,000
Deferred tax liabilities:
Depreciation 185,000 188,000
Pension fund asset 185,000 96,000
Unrealized appreciation on securities available
for sale 43,000 58,000
Other 10,000 12,000
---------- ----------
Total deferred tax liabilities 423,000 354,000
---------- ----------
Net deferred tax asset $ 257,000 $ 280,000
========== ==========
</TABLE>
A valuation allowance related to a deferred tax asset is recognized when it
is considered more likely than not that part or all of the deferred tax
benefits will not be realized. Management has determined that no such
allowance was required at June 30, 1997, or December 31, 1996.
-14-
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The following discussion is designed to provide a review of the financial
condition and results of operations of ChoiceOne Financial Services, Inc.
(the "Registrant") and its direct and indirect wholly owned subsidiaries,
ChoiceOne Bank (the "Bank") and ChoiceOne Insurance Agencies, Inc. (the
"Agency"). This discussion should be read in conjunction with the
consolidated financial statements and related footnotes.
NET INCOME AND RETURN ON AVERAGE ASSETS AND SHAREHOLDERS' EQUITY
The Registrant's net income increased $1,000 or less than 1% in the second
quarter of 1997 compared to 1996 and has risen $9,000 or 1% in the first
six months of 1997 compared to the prior year. The slight improvement in
net income in the second quarter and first six months of 1997 was primarily
due to higher net interest income, the effect of which was virtually offset
by growth in the provision for loan losses and noninterest expense.
The increase in net interest income in 1997 was caused by growth in average
interest-earning assets. Part of the effect of such growth was offset by a
reduction in the spread between interest rates earned on interest-earning
assets and interest rates paid on interest-bearing liabilities. The
majority of the higher provision for loan losses was due to higher loan
chargeoffs in 1997 than in 1996. The change in noninterest expense
resulted from expenses related to the Registrant's two new branches which
were not yet open in the first quarter of 1996 and from increases in
various other expenses. The decrease in pension and other employee
benefits in the second quarter of 1997 was due to the recognition of
$249,000 of income, which was the sum of the effects resulting from the
curtailment of the Bank's defined benefit plan.
The Registrant's management expects that the Bank's defined benefit plan
(the "Plan") will be settled in the third or fourth quarter of 1997 and
that the assets of the Plan will be distributed. The estimated net
effect on 1997's net income of the curtailment, settlement and termination
of the Plan will be a negative $187,000. Management believes termination
of the Plan will have a long-term benefit for the Registrant because
management believes that retirement benefits will be offered more
cost-effectively through the Bank's 401(k) plan.
The return on average assets was 1.17% for the first six months of 1997,
compared to 1.44% for the same period in 1996. The return on average
shareholders' equity was 11.32% for the first half of 1997, compared to
11.73% for the comparable period of the prior year.
-15-
<PAGE>
CASH AND STOCK DIVIDENDS
Cash dividends declared in the second quarter of 1997 were $205,000 or $.40
per common share, which represents a $.07 per share or 21% increase
compared to the dividend paid in the same period of the prior year. The
cash dividends paid in the first six months of 1997 were $375,000 or $.73
per share, which was $.10 per share or 16% greater than the dividends paid
in the same period in 1996. The cash dividend payout percentage in the
first six months of 1997 was 45.30%, compared to 39.86% in the same period
of 1996. The Registrant declared a 6% stock dividend on April 16, 1997.
The dividend was payable on May 16, 1997, to shareholders of record on
April 29, 1997. The cash dividend per share amounts for both 1997 and 1996
have been adjusted for the effect of the stock dividend.
INTEREST INCOME AND EXPENSE
Tables 1 and 2 on the following two pages provide information regarding
interest income and expense for the six-month periods ended June 30, 1997,
and June 30, 1996. Table 1 documents average balances and interest income
and expense, as well as the average rates earned or paid on assets and
liabilities. Table 2 documents the effect on interest income and expense
of changes in volume (average balance) and interest rates. These tables
are referred to in the discussion of interest income, interest expense and
net interest income below.
-16-
<PAGE>
<TABLE>
Table 1 - Average Balances and Tax Equivalent Interest Rates
<CAPTION>
FOR THE SIX MONTHS ENDED JUNE 30,
------------------------------------------------------------------------
1997 1996
-------------------------------- ------------------------------
AVERAGE AVERAGE AVERAGE AVERAGE
BALANCE INTEREST RATE BALANCE INTEREST RATE
------- -------- ------- ------- -------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Assets
Loans <F1> $ 112,269 $ 5,285 9.41% $ 85,376 $ 4,162 9.75%
Taxable securities <F2> 12,957 427 6.59 14,584 465 6.38
Nontaxable securities <F1><F2> 9,664 381 7.88 8,291 322 7.77
Other 88 1 2.27 59 2 6.78
--------- --------- ---------- --------
Interest-earning assets 134,978 6,094 9.03 108,310 4,951 9.14
--------- --------
Noninterest-earning assets 7,458 6,253
--------- ----------
Total assets $ 142,436 $ 114,563
========= ==========
Liabilities and shareholders'
equity
Interest-bearing transaction
accounts $ 22,211 352 3.17 $ 25,150 408 3.24
Savings deposits 8,996 82 1.82 9,333 87 1.86
Time deposits 53,296 1,537 5.77 49,148 1,439 5.86
Federal Home Loan Bank advances 25,246 798 6.32 2,956 88 5.95
Other 6,057 178 5.88 1,980 54 5.42
--------- --------- ---------- --------
Interest-bearing liabilities 115,806 2,947 5.09 88,567 2,076 4.69
--------- ---- -------- ----
Noninterest-bearing liabilities 11,905 12,044
Shareholders' equity 14,725 13,952
--------- ----------
Total liabilities and
shareholders' equity $ 142,436 $ 114,563
========= ==========
Net interest income (tax-equivalent
basis) - interest spread 3,147 3.94% 2,875 4.45%
==== ====
Tax equivalent adjustment <F1> (145) (130)
--------- --------
Net interest income $ 3,002 $ 2,745
========= ========
-17-
<PAGE>
Net interest income as a percentage
of earning assets (tax-equivalent
basis) 4.66% 5.31%
==== ====
<FN>
<F1> Interest on nontaxable securities and loans has been adjusted to a fully tax-equivalent basis to facilitate comparison to
the taxable interest-earning assets. The adjustment uses an incremental tax rate of 34% for the years presented.
<F2> The average balance includes the effect of unrealized appreciation/depreciation on securities, while the average rate was
computed on the average amortized cost of the securities.
</FN>
</TABLE>
-18-
<PAGE>
<TABLE>
Table 2 - Changes in Tax Equivalent Net Interest Income
<CAPTION>
SIX MONTHS ENDED JUNE 30,
1997 OVER 1996
-------------------------
TOTAL VOLUME RATE
----- ------ ----
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Increase (decrease) in interest income <F1>
Loans <F2> $ 1,123 $ 1,270 $ (147)
Taxable securities (38) (53) 15
Nontaxable securities <F2> 59 54 5
Other (1) 1 (2)
-------- -------- --------
Net change in tax-equivalent income 1,143 1,272 (129)
Increase (decrease) in interest expense <F1>
Interest-bearing transaction accounts (56) (47) (9)
Savings deposits (5) (3) (2)
Time deposits 98 121 (23)
Federal Home Loan Bank advances 710 704 6
Other 124 119 5
-------- -------- --------
Net change in interest expense 871 894 (23)
-------- -------- --------
Net change in tax-equivalent
net interest income $ 272 $ 378 $ (106)
======== ======== ========
<FN>
<F1> The volume variance is computed as the change in volume (average
balance) multiplied by the previous year's interest rate. The rate
variance is computed as the change in interest rate multiplied by the
previous year's volume (average balance). The change in interest due
to both volume and rate has been allocated to the volume and rate
changes in proportion to the relationship of the absolute dollar
amounts of the change in each.
<F2> Interest on nontaxable investment securities and loans has been
adjusted to a fully tax-equivalent basis using an incremental tax rate
of 34% for the periods presented.
</FN>
</TABLE>
NET INTEREST INCOME
As shown in Tables 1 and 2, tax equivalent net interest income
increased $272,000 in the first six months of 1997 compared to 1996.
-19-
<PAGE>
The increase resulted from growth in the Registrant's loan portfolio
from 1996 to 1997. Average loans increased $26,893,000 in the first
half of 1997 over the first half of 1996. This growth caused interest
income from loans to be $1,123,000 higher in the first half of 1997.
Income received from loan fees was $35,000 lower in the first six
months of 1997 than in the same period of 1996. The other interest-earning
asset categories experienced small differences between 1997
and 1996.
The mix of interest-bearing liabilities has changed significantly from
1996 to 1997. The average balance of Federal Home Loan Bank (the
"FHLB") advances increased $22,290,000 in the first half of 1996 as
compared to the same period in 1997. This reflects the extent to
which advances from the FHLB funded the majority of loan growth in the
last three quarters of 1996. The average balance of other interest-bearing
liabilities increased by more than $4,000,000 in the first six
months of 1997 compared to the same period in 1996. The average
balance of total deposits was only $872,000 greater in the first half
of 1997 than the first half of 1996. The increases in FHLB advances
and other interest-bearing liabilities reflect the extent to which
FHLB and short-term borrowings were used to fund loan growth in 1996.
Deposit growth, available funds from securities maturities and
retained earnings were not sufficient to meet the loan demand
experienced in the last three quarters of 1996 and early 1997.
Table 1 documents that the net interest income spread was 3.94% for
the first six months of 1997, compared to 4.45% for the same period of
the prior year. The reduction in net interest income spread was
caused by an 11-basis-point decrease in the average rate earned on
interest-earning assets, while the average rate paid on interest-bearing
liabilities went up 40 basis points. The decrease in the
average rate earned on interest-earning assets was caused by a decline
in the average rate earned on loans. The decline in the rate earned
on loans resulted from loan growth in the last three quarters of 1997
and the first two quarters of 1997 at lower interest rates than had
previously existed in the portfolio. These lower rates were caused by
the competitive interest rate environment in the Registrant's market
areas. The increase in the average rate paid on interest-bearing
liabilities was attributable to the growth in advances from the FHLB
and in other interest-bearing liabilities. The interest rates paid on
these liabilities were higher than that of any of the deposit
categories.
PROVISION AND ALLOWANCE FOR LOAN LOSSES
The allowance for loan losses increased $163,000 from December 31,
1996, to June 30, 1997. The allowance was 1.39% of total loans at June
30, 1997, compared to 1.35% at December 31, 1996. The provision for
loan losses was $149,000 higher in the first six months of 1997 than
-20-
<PAGE>
in the same period of 1996. The majority of the increase in the
provision for loan losses was due to higher net chargeoffs than in the
prior year.
Chargeoffs and recoveries for those loan categories with activity in
the periods ended June 30, 1997 and 1996 were as follows:
<TABLE>
<CAPTION>
1997 1996
---- ----
CHARGEOFFS RECOVERIES CHARGEOFFS RECOVERIES
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Commercial $ 13,000 $ 1,000 $ 0 $ 3,000
Agricultural 7,000 0 0 10,000
Real estate mortgage -
residential 5,000 0 0 0
Consumer 156,000 29,000 72,000 25,000
---------- ---------- --------- -----------
$ 181,000 $ 30,000 $ 72,000 $ 38,000
========== ========== ========= ===========
</TABLE>
The amount of chargeoffs which the Bank will experience in the
remainder of 1997 will be dependent on the extent to which business
and consumer borrowers are affected by the local economy and on many
other economic factors. As chargeoffs, changes in the level of
nonperforming loans and loan growth occur in the remainder of 1997,
the provision and allowance for loan losses will be reviewed by the
Bank's management and adjusted as believed necessary.
NONINTEREST EXPENSE
Total noninterest expense decreased $7,000 in the second quarter of
1997 compared to the same quarter in 1996. This decrease was due to
the recognition of the curtailment of the Bank's defined benefit plan
(the "Plan") in April 1997. The recognition of the curtailment caused
$249,000 of pension fund income to be recorded in the second quarter
of 1997. Benefits for the Plan participants were frozen in April 1997
as a first step in the termination of the Plan and distribution of the
Plan's assets. It is anticipated that the Plan assets will be
distributed in the third or fourth quarter of 1997. When this
distribution occurs, the $249,000 of pension fund income recorded in
the second quarter of 1997 will be reversed and an additional $283,000
of pension fund expense will be recorded.
Total noninterest expense increased $109,000 in the first six months
of 1997 compared to the same period of 1996. Additional expenses
-21-
<PAGE>
related to the Registrant's two new branches totaled $148,000 in the
first half of 1997. The remaining difference was due to general
expense growth which was offset by the pension fund income described
in the prior paragraph.
SECURITIES
The balance of total securities has decreased $1,034,000 from December
31, 1996, to June 30, 1997. The decrease resulted from $1,520,000 of
maturities in the first half of 1997, which were partially offset by
$569,000 of purchases. The low level of securities purchases has been
caused by continued loan growth in 1997 which has used funds obtained
from deposit growth. Securities will continue to be used as
collateral for public funds and securities sold under agreements to
repurchase. Securities which had been pledged as collateral for
Federal Home Loan Bank advances at the end of 1996 were released in
January 1997 when the Registrant starting using specific residential
real estate mortgage loans for collateral purposes. The Registrant's
securities portfolio may also serve as a source of liquidity for
deposit needs and as collateral for additional advances from the
Federal Home Loan Bank.
LOANS
Total loans grew $6,665,000 in the second quarter of 1997 after
experiencing an increase of $2,043,000 in the first quarter.
Commercial, residential real estate mortgage and consumer loans
experienced increases of $2,476,000, $1,627,000 and $1,968,000,
respectively in the second quarter. The second quarter of the year
has historically been a better period for loan growth than the first
quarter. Other contributing factors to the higher level of loan
growth in the second quarter of 1997 over the previous quarter were a
continued strong economy in the Bank's market areas and increased
business development activities in all loan areas. However, there is
still a great deal of interest rate competition in all loan areas and
management believes this will continue to impact the Bank's ability to
sustain loan growth.
Management believes loan growth in the remainder of 1997 will continue
to be affected by interest rates and by competition within the Bank's
market areas. The Bank's loan officers plan to continue using calling
programs in all loan areas to attempt to continue and stimulate
demand. New marketing strategies are planned to enhance the Bank's
effectiveness in remaining competitive in residential real estate
mortgage lending. The Bank plans to hire one or two more mortgage
loan originators to aid in generation of residential real estate
mortgages. In the consumer loan category, management intends to use
direct mail advertising and telemarketing to stimulate demand for
direct loans while management intends to continue to emphasize
development of its indirect loan portfolio.
-22-
<PAGE>
The Registrant implemented Statement of Financial Accounting Standards
No. 114 ("SFAS 114"), "Accounting by Creditors for Impairment of a
Loan," on January 1, 1995. Information regarding impaired loans can
be found in Note 3 to the consolidated financial statements. SFAS 114
requires that management review the loan portfolio for possible
impaired loans. In addition to this requirement, management also
monitors the portfolio for nonperforming loans. Nonperforming loans
are comprised of (1) loans accounted for on a nonaccrual basis, (2)
loans, not included in nonaccrual loans, which are contractually past
due 90 days or more as to interest or principal payments and (3)
loans, not included in nonaccrual or loans past due 90 days or more,
which are considered troubled debt restructurings. The balances of
the three nonperforming categories as of June 30, 1997, and December
31, 1996, were as follows:
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1997 1996
-------- ------------
<S> <C> <C>
Loans accounted for on a nonaccrual basis $ 1,133,000 $ 288,000
Loans, not included in nonaccrual loans, which are
contractually past due 90 days or more as to
interest or principal payments 149,000 686,000
Loans, not included in nonaccrual or loans past due
90 days or more, which are considered troubled
debt restructurings 29,000 26,000
----------- -----------
Total $ 1,311,000 $ 1,000,000
=========== ===========
</TABLE>
DEPOSITS
Total deposits increased $10,548,000 in the second quarter of 1997, in
contrast to a decline of $2,390,000 in the first quarter. Virtually
all of the growth occurred in time deposits. Little change occurred
in the other deposit categories during the second quarter of 1997.
The growth in time deposits was primarily due to the Bank's entry on a
national time deposit rate service in March 1997. The time deposits
obtained from the service totalled $7,732,000 in the second quarter
of 1997. A $10,000,000 internal limit has been set at this time on
the deposits that can be obtained from the service. Therefore, the
level of activity experienced in the second quarter is not expected to
be maintained in future quarters. The remaining growth in time
deposits was due to a promotion which was held in the second quarter.
The level of core deposits obtained from the Bank's market areas has
grown only $426,000 in the first half of 1997. This continued lack of
-23-
<PAGE>
core deposit growth is a concern for management as funds will be
needed to support loan demand. The Bank's market areas continue to be
very competitive in all deposit areas and especially in time deposit
interest rates. The Bank is continuing to review both the pricing and
the features of its deposit products in an attempt to develop products
that will generate more growth.
SHAREHOLDERS' EQUITY
Total shareholders' equity increased $303,000 in the second quarter of
1997 and has grown $413,000 since December 31, 1996. The equity
growth in 1997 was caused by retained earnings, which was offset by a
small decrease in net unrealized appreciation on securities available
for sale. As a result of the stock dividend, $1,186,000 of retained
earnings were reclassified as stated capital and surplus. The
decrease in the market value adjustment for securities was
attributable to higher medium- and long-term interest rates, the
effect of which caused a decline in the market value of portfolio
securities.
Shareholders' equity as a percentage of assets was 10.03% as of June
30, 1997, compared to 10.26% as of December 31, 1996. Management
intends to further decrease the equity to assets ratio to more
effectively use shareholders' equity by leveraging it through asset
growth. Based on risk-based capital guidelines established by the
Bank's regulators, the Registrant's risk-based capital was categorized
as well capitalized at June 30, 1997.
CAPITAL RESOURCES
The Registrant issued 20,610 shares of its common stock effective
January 1, 1996, to facilitate the business combination with Bradford
Insurance Centre, Ltd. (now ChoiceOne Insurance Agencies, Inc.). The
Bank completed the construction of its new branch office in Cedar
Springs in March 1997. The cost of land, building and equipment
approximated $750,000.
Management believes that the current level of capital is adequate to
take advantage of potential opportunities that may arise for the
Registrant or the Bank.
LIQUIDITY AND RATE SENSITIVITY
Cash and cash equivalents increased $525,000 in the second quarter of
1997 after decreasing $1,897,000 in the previous quarter. Management
believes that the current level of liquidity is sufficient to meet the
Bank's normal operating needs. This belief is based upon the
availability of deposit growth from both the local and national
markets, maturities of securities, normal loan repayments, income
-24-
<PAGE>
retention, federal funds which can be purchased from correspondent
banks and advances available from the Federal Home Loan Bank of
Indianapolis.
Table 3 presents the maturity and repricing schedule for the
Registrant's rate-sensitive assets and liabilities for selected time
periods. The Registrant's cumulative rate-sensitive liabilities
exceeded its cumulative rate-sensitive assets by $12,588,000 at the
one-year repricing point as of June 30, 1997. The negative amount at
the end of the second quarter was due primarily to the classification
of all interest-bearing transaction accounts and savings deposits in
the 0-to-3-month repricing category. The rates paid on these deposit
types can be immediately repriced. Management believes that these
types of accounts are not as sensitive to changes in interest rates in
the short term as this presentation would indicate and that the
positive funding gap in the 1 to 5 year period is more reflective of
the Registrant's experience. Management will determine the rates
necessary based on competitive rates and the need for deposited funds.
Management is aware of the inherent interest rate risk associated with
gap management. As interest rate fluctuations occur, the relationship
between rate-sensitive assets and liabilities will be monitored by
management and changes in assets and liabilities will be made when
deemed necessary. It is the goal of the Registrant's Asset/Liability
Management Committee to maintain a desired interest rate spread
through its pricing of both loans and deposits.
-25-
<PAGE>
<TABLE>
Table 3 - Maturities and Repricing Schedule
<CAPTION>
AS OF JUNE 30, 1997
-----------------------------------------------------
0 - 3 3 - 12 1 - 5 OVER
MONTHS MONTHS YEARS 5 YEARS TOTAL
------ ------ ----- ------- -----
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Assets
Loans $ 36,772 $ 21,174 $ 37,462 $ 23,379 $ 118,787
Interest-bearing deposits
with banks 15 0 0 0 15
Taxable securities 2,359 2,632 6,902 842 12,735
Nontaxable securities 250 528 3,962 4,497 9,237
--------- -------- -------- --------- ----------
Rate-sensitive assets 39,396 24,334 48,326 28,718 140,774
Liabilities
Interest-bearing transaction
accounts 22,295 0 0 0 22,295
Savings deposits 8,905 0 0 0 8,905
Time deposits 8,818 29,510 22,869 129 61,326
Federal funds purchased and
securities sold under
agreements to repurchase 1,850 0 0 0 1,850
Federal Home Loan Bank
advances 0 4,544 19,405 1,251 25,200
Secured loan borrowings 317 79 1,276 0 1,672
--------- -------- -------- --------- ----------
Rate-sensitive liabilities 42,185 34,133 43,550 1,380 121,248
--------- -------- -------- --------- ----------
Rate-sensitive assets less
rate-sensitive liabilities
Asset (liability) gap
for the period $ (2,789) $ (9,799) $ 4,776 $ 27,338 $ 19,526
========= ======== ======== ========= ==========
Cumulative asset
(liability) gap $ (2,789) $(12,588) (7,812) $ 19,526
========= ======== ======== =========
Cumulative rate-
sensitive assets as a
percentage of
cumulative rate-
sensitive liabilities 93.39% 83.51% 93.48% 116.10%
========= ======== ======== =========
</TABLE>
-26-
<PAGE>
PART II. OTHER INFORMATION
Item 2 CHANGES IN SECURITIES
On April 29, 1997, the Registrant's shareholders approved and adopted
Amended and Restated Articles of Incorporation for the Registrant (the
"Restated Articles"). The Restated Articles, among other things,
affect the rights of holders of shares of the Registrant's Common
Stock, $10.00 par value, by changing the name of the Registrant to
"ChoiceOne Financial Services, Inc.," authorizing up to 100,000 shares
of preferred stock, enumerating specific powers of the Board of
Directors, requiring indemnification of directors and executive
officers under certain circumstances, requiring that shareholder
nominations of directors be submitted within specified times before
meetings at which directors will be elected, defining "cause" for
purposes of removing a director from office, prohibiting the Board of
Directors from recommending or initiating certain tender or exchange
offers, mergers, consolidations and sales of assets without first
considering and evaluating the terms of any offer, determining that
the offer would comply with all applicable laws and determining that it
would be in the best interests of the Registrant and its shareholders,
requiring a supermajority vote of the shareholders to amend certain
provisions of the Restated Articles and eliminating the supermajority
vote required under the former Articles of Incorporation to change the
amount of authorized capital of the Registrant.
For a more detailed description of the changes implemented by the
Restated Articles, see the description of the Restated Articles
contained under the heading "Approval and Adoption of Restated
Articles of Incorporation" in the Registrant's Definitive Proxy
Statement filed with respect to its Annual Meeting of Shareholders
held on April 29, 1997, which is here incorporated by reference.
Item 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On April 29, 1997, the Annual Meeting of Shareholders of the
Registrant was held. The following directors were elected by the
shareholders to serve for three-year terms to expire at the annual
meeting to be held in the year 2000:
<TABLE>
<CAPTION>
BROKER
VOTES FOR VOTES WITHHELD NON-VOTES
--------- -------------- ---------
<S> <C> <C> <C>
William F. Cutler, Jr. 375,192 2,804 0
L. Edmond Eary, Jr., M.D. 377,546 450 0
Andrew W. Zamiara 377,546 450 0
</TABLE>
-27-
<PAGE>
Directors Frank G. Berris, Lawrence D. Bradford, Lewis G. Emmons and
Stuart Goodfellow have terms of office that continue until the 1998
Annual Meeting. The terms of directors Jae M. Maxfield, Jon E. Pike
and Linda R. Pitsch continue through the 1999 Annual Meeting.
At that meeting, the shareholders also approved and adopted Restated
Articles of Incorporation. A total of 348,991 shares were voted for
the proposal, 15,822 shares were voted against the proposal, 989
shares abstained from voting, and there were 12,194 shares not voted
by brokers.
At that meeting, the shareholders also approved the Executive Stock
Incentive Plan of 1997. A total of 344,099 shares were voted for the
proposal, 25,905 shares were voted against the proposal, 7,992 shares
abstained from voting, and there were 0 shares not voted by
brokers.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K.
1. Exhibits. The following exhibits are filed or incorporated
by reference as part of this report:
EXHIBIT
NUMBER DOCUMENTS
3.1 Amended and Restated Articles of Incorporation of the
Registrant. Previously filed as Appendix A to the
Registrant's Definitive Proxy Statement with respect to
its Annual Meeting of Shareholders held on April 29,
1997. Here incorporated by reference.
3.2 Bylaws of the Registrant as currently in effect and any
amendments thereto - previously filed as an exhibit to
the Registrant's Form 10-KSB Annual Report for its
fiscal year ended December 31, 1993. Incorporated
herein by reference.
10.1 Executive Stock Incentive Plan of 1997. Previously
filed as Appendix B to the Registrant's Definitive
Proxy Statement with respect to its Annual Meeting of
Shareholders held on April 29, 1997. Here incorporated
by reference.
27 Financial Data Schedule.
2. Reports on Form 8-K. No reports on Form 8-K were filed
during the three months ended June 30, 1997.
-28-
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the
Registrant has caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
CHOICEONE FINANCIAL SERVICES, INC.
Date AUGUST 8, 1997 /S/JAE M. MAXFIELD
Jae M. Maxfield
President and Chief Executive\
Officer
Date AUGUST 8, 1997 /S/THOMAS L. LAMPEN
Thomas L. Lampen
Chief Financial Officer and
Treasurer
(Principal Financial and Accounting
Officer)
-29-
<PAGE>
INDEX TO EXHIBITS
The following exhibits are filed or incorporated by reference as part
of this report:
EXHIBIT
NUMBER DOCUMENTS
3.1 Amended and Restated Articles of Incorporation of the
Registrant. Previously filed as Appendix A to the
Registrant's Definitive Proxy Statement with respect to
its Annual Meeting of Shareholders held on April 29,
1997. Here incorporated by reference.
3.2 Bylaws of the Registrant as currently in effect and any
amendments thereto - previously filed as an exhibit to
the Registrant's Form 10-KSB Annual Report for its
fiscal year ended December 31, 1993. Incorporated
herein by reference.
10.1 Executive Stock Incentive Plan of 1997. Previously
filed as Appendix B to the Registrant's Definitive
Proxy Statement with respect to its Annual Meeting of
Shareholders held on April 29, 1997. Here incorporated
by reference.
27 Financial Data Schedule.
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND> THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM THE CONSOLIDATED BALANCE SHEET AND INCOME STATEMENT OF
CHOICEONE FINANCIAL SERVICES, INC. INCLUDED IN THE JUNE 30, 1997, FORM
10-QSB FILING AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 3,580
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 21,972
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 118,787
<ALLOWANCE> 1,650
<TOTAL-ASSETS> 148,994
<DEPOSITS> 103,764
<SHORT-TERM> 1,850
<LIABILITIES-OTHER> 1,558
<LONG-TERM> 26,872
<COMMON> 5,114
0
0
<OTHER-SE> 9,836
<TOTAL-LIABILITIES-AND-EQUITY> 148,994
<INTEREST-LOAN> 5,269
<INTEREST-INVEST> 679
<INTEREST-OTHER> 1
<INTEREST-TOTAL> 5,949
<INTEREST-DEPOSIT> 1,971
<INTEREST-EXPENSE> 2,947
<INTEREST-INCOME-NET> 3,002
<LOAN-LOSSES> 314
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 2,275
<INCOME-PRETAX> 1,176
<INCOME-PRE-EXTRAORDINARY> 825
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 825
<EPS-PRIMARY> 1.61
<EPS-DILUTED> .00
<YIELD-ACTUAL> 4.66
<LOANS-NON> 1,133
<LOANS-PAST> 149
<LOANS-TROUBLED> 29
<LOANS-PROBLEM> 691
<ALLOWANCE-OPEN> 1,487
<CHARGE-OFFS> 181
<RECOVERIES> 30
<ALLOWANCE-CLOSE> 1,650
<ALLOWANCE-DOMESTIC> 1,267
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 383
</TABLE>
