<PAGE>
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
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended Commission file number
March 31, 1998 0-15645
FCNB Corp
(Exact name of registrant as specified in its charter)
MARYLAND 52-1479635
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer
Identification No.)
7200 FCNB Court, Frederick, Maryland 21703
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (301) 662-2191
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date: Common Stock, $1 par value per
share, 5,915,442 shares outstanding as of April 30, 1998.
1
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PART I FINANCIAL INFORMATION
Item 1. Financial Statements
FCNB Corp and Subsidiary
<TABLE>
<CAPTION>
Consolidated Balance Sheets (Unaudited) (Unaudited)
(dollars in thousands, except per share amounts) March 31, 1998 December 31, 1997
ASSETS
<S> <C> <C>
Cash and due from banks $ 28,986 $ 27,329
Interest-bearing deposits in other banks 811 755
Federal funds sold 19,196 14,231
- -------------------------------------------------------------- ------------------------- -------------------------
Cash and cash equivalents 48,993 42,315
- -------------------------------------------------------------- ------------------------- -------------------------
Loans held for sale 4,379 909
Investment securities held to maturity at amortized
cost-fair value of $45,233 in 1998 and $48,729 in 1997 44,810 48,389
Investment securities available for sale-at fair value 204,098 202,850
- -------------------------------------------------------------- ------------------------- -------------------------
Loans 573,557 574,205
Less: Allowance for credit losses (5,711) (5,713)
Unearned income (65) (100)
- -------------------------------------------------------------- ------------------------- -------------------------
Net loans 567,781 568,392
- -------------------------------------------------------------- ------------------------- -------------------------
Bank premises and equipment 22,416 22,705
Other assets 34,421 32,524
- -------------------------------------------------------------- ------------------------- -------------------------
Total assets $926,898 $918,084
============================================================== ========================= =========================
Liabilities and Shareholders' Equity
LIABILITIES
Deposits:
Noninterest-bearing deposits $ 84,153 $ 85,902
Interest-bearing deposits 548,818 530,610
- -------------------------------------------------------------- ------------------------- -------------------------
Total deposits 632,971 616,512
- -------------------------------------------------------------- ------------------------- -------------------------
Short-term borrowings:
Federal funds purchased and securities sold
under agreements to repurchase 34,449 65,163
Other short-term borrowings 173,137 152,138
Accrued interest and other liabilities 6,694 6,753
- -------------------------------------------------------------- ------------------------- -------------------------
Total liabilities 847,251 840,566
- -------------------------------------------------------------- ------------------------- -------------------------
SHAREHOLDERS' EQUITY
Preferred stock, per share par value $1.00; -- --
1,000,000 shares authorized; none outstanding
Common stock, per share par value $1.00;
20,000,000 shares authorized: 5,915,442
shares in 1998 and 5,912,284 shares in 1997
issued and outstanding 5,915 5,912
Capital surplus 43,445 43,398
Retained earnings 26,134 24,792
Accumulated other comprehensive income 4,153 3,416
- -------------------------------------------------------------- ------------------------- -------------------------
Total shareholders' equity 79,647 77,518
- -------------------------------------------------------------- ------------------------- -------------------------
Total liabilities and shareholders' equity $926,898 $918,084
============================================================== ========================= =========================
</TABLE>
2
<PAGE>
FCNB Corp and Subsidiary
Consolidated Statements of Income and Comprehensive Income (Unaudited)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------ -----------------------------------------------
For the 3 months ended
- ------------------------------------------------------------------ --------------------- -------------------------
(dollars in thousands, except per share amounts) March 31, 1998 March 31, 1997
- ------------------------------------------------------------------ --------------------- -------------------------
<S> <C> <C>
Interest income:
Interest and fees on loans $12,716 $11,350
Interest and dividends on investment securities:
Taxable 3,639 2,956
Tax exempt 67 94
Dividends 228 149
Interest on federal funds sold 144 152
Other interest income 10 33
- ------------------------------------------------------------------ --------------------- -------------------------
Total interest income 16,804 14,734
- ------------------------------------------------------------------ --------------------- -------------------------
Interest expense:
Interest on deposits 5,751 5,267
Interest on federal funds purchased and securities
sold under agreements to repurchase 637 668
Interest on other short-term borrowings 2,208 1,021
- ------------------------------------------------------------------ --------------------- -------------------------
Total interest expense 8,596 6,956
- ------------------------------------------------------------------ --------------------- -------------------------
Net interest income 8,208 7,778
Provision for credit losses 100 231
- ------------------------------------------------------------------ --------------------- -------------------------
Net interest income after provision for credit losses 8,108 7,547
- ------------------------------------------------------------------ --------------------- -------------------------
Noninterest income:
Service fees 756 627
Net securities gains 152 87
Gain on sale of loans 152 148
Other operating income 724 431
- ------------------------------------------------------------------ --------------------- -------------------------
Total noninterest income 1,784 1,293
- ------------------------------------------------------------------ --------------------- -------------------------
Noninterest expenses:
Salaries and employee benefits 3,574 3,103
Occupancy expenses 652 620
Equipment expenses 585 523
Merger-related expenses 4 351
Other operating expenses 1,637 1,621
- ------------------------------------------------------------------ --------------------- -------------------------
Total noninterest expenses 6,452 6,218
- ------------------------------------------------------------------ --------------------- -------------------------
Income before provision for income taxes 3,440 2,622
Income tax expense 1,086 772
- ------------------------------------------------------------------ --------------------- -------------------------
Net income 2,354 1,850
- ------------------------------------------------------------------ --------------------- -------------------------
</TABLE>
3
<PAGE>
<TABLE>
<S> <C> <C>
Other comprehensive income, net of tax:
Unrealized gains (losses) on
securities:
Unrealized holding gains (losses) arising
during period 833 (1,013)
Less: reclassification adjustment for
gains (losses) included in net income,
net of taxes of $56 in 1998 and $32 in 1997 96 55
- ------------------------------------------------------------------ --------------------- -------------------------
Other comprehensive income (loss) 737 (1,068)
- ------------------------------------------------------------------ --------------------- -------------------------
Comprehensive income $ 3,091 $ 782
================================================================== ===================== =========================
Net income - before merger-related expenses $ 2,354 $ 2,065
================================================================== ===================== =========================
Basic and diluted earnings per share $0.40 $0.31
================================================================== ===================== =========================
Basic and diluted earnings - before merger-related expenses $0.40 $0.35
================================================================== ===================== =========================
Basic weighted-average number of shares outstanding 5,914,562 5,899,521
================================================================== ===================== =========================
Diluted weighted-average number of shares outstanding 5,937,324 5,910,848
================================================================== ===================== =========================
</TABLE>
4
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FCNB Corp and Subsidiary
Consolidated Statements of Cash Flows (Unaudited)
For the Three Months Ended March 31, 1998 and 1997
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------- ------------ -----------
(dollars in thousands) 1998 1997
- -------------------------------------------------------------------------- ------------ -----------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $2,354 $1,850
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization 503 402
Provision for credit losses 100 231
Provision for foreclosed properties 50 --
Provision for deferred income taxes (benefits) (92) (62)
Net premium amortization (discount accretion) on investment securities (55) 84
securities
Accretion of net loan origination fees (240) (105)
Net securities gains (152) (87)
Net loss on sale of foreclosed properties 39 --
Decrease (increase) in other assets 1,125 (4,061)
Decrease (increase) in loans held for sale(1) (3,470) 2,830
Increase (decrease in accrued interest and other liabilities (59) 1,117
- -------------------------------------------------------------------------- ------------ -----------
Net cash provided by operating activities 103 2,199
- -------------------------------------------------------------------------- ------------ -----------
Cash flow from investing activities:
Proceeds from sales of investment securities - available for sale 2,733 24,377
Proceeds from maturities of investment securities - available for sale 15,482 6,439
Proceeds from maturities of investment securities - held to maturity 3,605 1,326
Purchases of investment securities - available for sale (17,985) (36,762)
Net decrease (increase) in loans 751 (15,038)
Purchases of bank premises and equipment (182) (588)
Proceeds from dispositions of bank premises and equipment 1 --
Purchase of foreclosed properties (21) (183)
Proceeds from dispositions of foreclosed properties 435 70
Purchase of investments in bank-owned life insurance (4,000) (10,000)
- -------------------------------------------------------------------------- ------------ -----------
Net cash (used in) investing activities 819 (30,359)
- -------------------------------------------------------------------------- ------------ -----------
Cash flows from financing activities:
Net increase (decrease in noninterest-bearing deposits, NOW accounts,
money market accounts and savings accounts 18,895 (8,304)
Net increase (decrease) in time deposits (2,436) 17,129
Net increase (decrease in short-term borrowings (9,715) 18,372
Proceeds from sale of stock 25 26
Repurchase of common stock -- (213)
Dividend reinvestment plan (8) --
Dividends paid (1,005) (802)
- -------------------------------------------------------------------------- ------------ -----------
Net cash provided by financing activities 5,756 26,208
- -------------------------------------------------------------------------- ------------ -----------
Increase (decrease) in cash and cash equivalents 6,678 (1,952)
Cash and cash equivalents:
Beginning of period 42,315 44,526
- -------------------------------------------------------------------------- ------------ -----------
End of period $48,993 $42,574
========================================================================== ============ ===========
</TABLE>
5
(Continued)
<PAGE>
FCNB Corp and Subsidiary
Consolidated Statements of Cash Flows (Unaudited)
<TABLE>
<CAPTION>
For the three months ended March 31, 1998 and 1997
(dollars in thousands) 1998 1997
- -------------------------------------------------------------------------- ------------ -----------
<S> <C> <C>
Supplemental disclosures
Interest paid $8,220 $5,978
- -------------------------------------------------------------------------- ------------ -----------
Income taxes paid (refunds) 1,527 (357)
- -------------------------------------------------------------------------- ------------ -----------
Supplemental schedule of noncash investing and financing activities:
Foreclosed properties acquired in settlement of loans $-- $157
Seller financed disposition of property 725 --
Surplus from stock option transactions 26 55
- -------------------------------------------------------------------------- ------------ -----------
</TABLE>
(1) Loans held for sale are generally held for periods of ninety days or less.
FCNB Corp and Subsidiary
Notes to Consolidated Financial Statements (Unaudited)
Note 1 - The accompanying unaudited consolidated financial statements for FCNB
Corp (the "Company") have been prepared in accordance with the instructions for
Form 10-Q and, therefore, do not include all information and footnotes required
by generally accepted accounting principles for complete financial statements.
The interim financial statements have been prepared utilizing the interim basis
of reporting and, as such, reflect all adjustments which are normal and
recurring in nature and are, in the opinion of management, necessary for a fair
presentation of the results for the periods presented.
Note 2 - Acquisitions: In February 1998, the Company entered into an agreement
to assume the deposit liabilities, and purchase certain assets, relating to four
branches of First Virginia Bank-Maryland located in Gaithersburg, Germantown,
Poolesville and Silver Spring, Maryland, and three branches of its sister bank,
Farmers' Bank of Maryland, located in Catonsville, Pikesville and Reisterstown,
Maryland. The seven branches held approximately $42 million in deposits at
December 31, 1997. This purchase and assumption transaction is expected to be
consummated in June 1998.
Note 3 - Investments: Using the criteria specified in Statement 115, the Company
classifies its investments in debt and equity securities at March 31, 1998 and
December 31, 1997 into two categories: held-to-maturity and available-for-sale.
Securities classified as held-to-maturity are those debt securities the Company
has both the intent and ability to hold to maturity regardless of changes in
market conditions, liquidity needs or changes in general economic conditions.
These securities are carried at cost adjusted for amortization of premium and
accretion of discount, computed using the interest method over their contractual
lives.
Securities classified as available-for-sale are equity securities with readily
determinable fair values and those debt securities that the Company intends to
hold for an indefinite period of time but not necessarily to maturity. Any
decision to sell a security classified as available-for-sale would be based on
various factors, including significant movements in interest rates, changes in
the maturity mix of the Company's assets and liabilities, liquidity needs,
regulatory capital considerations, and other similar factors. These securities
are carried at fair value with any
6
<PAGE>
unrealized gains or losses included in accumulated other comprehensive income, a
component of shareholders' equity, net of the related deferred tax effect.
As of March 31, 1998, the gross unrealized losses in the Company's investment
portfolio were $144,000 in the held-to-maturity investment portfolio and
$230,000 in the available-for-sale investment portfolio compared to $212,000 and
$234,000, respectively, as of December 31, 1997. As of March 31, 1998, the gross
unrealized gains in the Company's investment portfolio were $567,000 in the
held-to-maturity investment portfolio and $7.05 million in the
available-for-sale investment portfolio compared to $552,000 and $5.75 million,
respectively, as of December 31, 1997. Since the Company's held-to-maturity
investment portfolio includes fixed rate investment securities that have below
current market interest rates, the future operating results of the Company would
be negatively impacted in an increasing rate environment. This reduction in net
interest income would result because the cost of funding the Company's
operations increases, while the income earned on the held-to-maturity portfolio
remains constant.
The amortized cost and estimated fair value of securities classified as
held-to-maturity at March 31, 1998 are as follows:
Held-to-maturity portfolio
<TABLE>
<CAPTION>
- ----------------------------------------------------- -------------- -------------- -------------- --------------
Gross Gross
March 31, 1998 Amortized Unrealized Unrealized Estimated
(dollars in thousands) Cost Gains Losses Fair Value
- ----------------------------------------------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
U. S. Treasury and other U.S. government
agencies and corporations $25,516 $ 45 $ -- $25,561
State and political subdivision 3,725 378 -- 4,103
Mortgage-backed debt securities 15,569 144 144 15,569
- ----------------------------------------------------- -------------- -------------- -------------- --------------
$44,810 $567 $144 $45,233
- ----------------------------------------------------- -------------- -------------- -------------- --------------
</TABLE>
The amortized cost and estimated fair value of securities classified as
available-for-sale at March 31, 1998 are as follows:
Available-for-sale-portfolio
<TABLE>
<CAPTION>
- ----------------------------------------------------- -------------- -------------- -------------- --------------
Gross Gross
March 31, 1998 Amortized Unrealized Unrealized Estimated
(dollars in thousands) Cost Gains Losses Fair Value
- ----------------------------------------------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
U. S. Treasury and other U.S. government agencies
and corporations $68,045 $ 578 $ -- $68,615
Corporate bonds 16,578 271 15 16,834
Mortgage-backed debt securities 89,739 1,372 203 90,908
Equity securities 22,921 4,824 4 27,741
- ----------------------------------------------------- -------------- -------------- -------------- --------------
$197,283 $7,045 $230 $204,098
- ----------------------------------------------------- -------------- -------------- -------------- --------------
</TABLE>
The gross realized gains on securities sold from the available-for-sale
portfolio for the first three months of 1998 and 1997 are $152,000 and $182,000,
respectively. The gross realized losses on securities sold from the
available-for-sale portfolio for the same periods are $95,000 for the first
three months of 1997 while no losses were realized in 1998.
7
<PAGE>
The amortized cost and estimated fair value of securities classified as
held-to-maturity and available-for-sale at March 31, 1998 summarized by
contractual maturity, are as follows:
<TABLE>
<CAPTION>
Held-to-maturity Available-for-sale
- --------------------------------------- ---------------- ----------------- ---------------- -----------------
March 31, 1998 Amortized Cost Estimated Fair Amortized Cost Estimated Fair
(dollars in thousands) Value Value
- --------------------------------------- ---------------- ----------------- ---------------- -----------------
<S> <C> <C> <C> <C>
Due in one year or less $ 5,241 $ 5,247 $ -- $ --
Due after one through five years 23,498 23,894 42,650 43,017
Due after five through ten years 402 422 40,468 40,923
Due after ten years 100 101 1,505 1,509
Mortgage-backed debt securities 15,569 15,569 89,739 90,908
Equity securities -- -- 22,921 27,741
======================================= ================ ================= ================ =================
$44,810 $45,233 $197,283 $204,098
======================================= ================ ================= ================ =================
</TABLE>
Actual maturities may differ from the contractual maturities reflected in the
preceding table because borrowers may have the right to call or prepay
obligations with or without prepayment penalties. Mortgage-backed securities
have no stated maturity and primarily reflect investments in various
Pass-through and Participation Certificates issued by the Federal National
Mortgage Association and the Federal Home Loan Mortgage Corporation,
respectively. Repayment of mortgage-backed securities is dependent on the
contractual repayment terms of the underlying mortgages collateralizing these
obligations and the current level of interest rates.
The amortized cost and estimated fair value of securities classified as
held-to-maturity at December 31, 1997 are as follows:
Held-to-Maturity Portfolio
<TABLE>
<CAPTION>
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
(Dollars in thousands) Cost Gains Losses Value
- ------------------------------------ ------------- -------------- ----------------- ----------------
<S> <C> <C> <C> <C>
December 31, 1997
U.S. Treasury and other U.S.
government agencies and corporations $25,523 $ 15 $ 29 $25,509
State and political subdivisions 3,690 387 - 4,077
Mortgage-backed debt securities 19,176 150 183 19,143
==================================== ============= ============== ================= ================
$48,389 $552 $212 $48,729
==================================== ============= ============== ================= ================
</TABLE>
The amortized cost and estimated fair value of securities available-for-sale at
December 31, 1997 are as follows:
Available-for-sale-portfolio
<TABLE>
<CAPTION>
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
(Dollars in thousands) Cost Gains Losses Value
- ------------------------------------ ------------- -------------- ----------------- ----------------
<S> <C> <C> <C> <C>
December 31, 1997
U.S. Treasury and other U.S.
government agencies and corporations $ 69,713 $ 570 $ 10 $ 70,273
Mortgage-backed debt securities 93,063 1,532 216 94,379
Corporate bonds 15,074 238 3 15,309
Equity securities 19,482 3,412 5 22,889
==================================== ============= ============== ================= ================
$197,332 $5,752 $234 $202,850
==================================== ============= ============== ================= ================
</TABLE>
Note 4 - Per share amounts: On December 31, 1997, the Company adopted FASB
Statement No. 128, "Earnings per Share." Statement 128 establishes standards for
computing and presenting earnings per share ("EPS") that
8
<PAGE>
simplify the standards previously followed in Accounting Principals Board
Opinion No. 15. It replaces the former presentation of primary EPS with a
presentation of basic EPS and, where applicable, requires the dual presentation
of basic and diluted EPS on the face of the income statement. Basic EPS is
generally computed by dividing net income by the weighted-average number of
common shares outstanding for the period, whereas diluted EPS essentially
reflects the potential dilution in basic EPS that could occur if other contracts
to issue common stock were exercised. Per share amounts are based on the
weighted-average number of shares outstanding during each year as follows:
<TABLE>
<CAPTION>
March 31,
--------------------------
1998 1997
<S> <C> <C>
Basic EPS weighted-average shares
outstanding 5,914,562 5,899,521
Effect of dilutive securities - stock options 22,762 11,327
---------- ----------
Diluted EPS weighted-average shares outstanding 5,937,324 5,910,848
---------- ----------
---------- ----------
</TABLE>
Note 5 - Risk Management Instruments: Interest rate swaps used to achieve
interest rate risk management objectives are accounted for in a manner
consistent with the accounting basis of the related asset or liability. An
instrument designated to hedge an asset or liability carried at historical cost
is accounted for on an accrual basis, whereby the interest income or expense of
the related asset or liability is adjusted for the net amount of any interest
receivable or payable generated by the hedging instrument during the reporting
period. For such instruments, no amounts other than any accrued interest
receivable or payable are included in the accompanying consolidated balance
sheets.
Interest rate swaps involve the exchange of payments between counterparties
based on the interest differential between a fixed and a variable interest rate
applied to a notional balance. Under accrual accounting, this interest
differential is recognized as an adjustment to the interest income or expense of
the related asset or liability in the accompanying statements of income.
Upon early termination of derivative instruments accounted for under the accrual
method, the net proceeds received or paid are deferred, if material, in the
accompanying consolidated balance sheets and amortized to the interest income or
expense of the related asset or liability over the lesser of the remaining
contractual life of the instrument or the maturity of the related asset or
liability. At March 31, 1998 and December 31, 1997, there were no deferred gains
or losses in the accompanying consolidated balance sheets arising from the
termination of instruments qualifying for accrual accounting prior to maturity.
Note 6: - Comprehensive Income: On January 1, 1998, the Company adopted
Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive
Income." Comprehensive income, as defined by Statement 130, is the change in
equity of a business enterprise during a reporting period from transactions and
other events and circumstances from non-owner sources. In addition to an
enterprise's net income, change in equity components under comprehensive income
reporting would also include such items as the net change in unrealized gain or
loss on available-for-sale securities and foreign currency translation
adjustments. Statement 130 requires disclosure of comprehensive income and its
components with the same prominence as the Company's other financial statements.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
Overview
This section of the report contains forward looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995, including
statements relating to the Company's beliefs, expectations, anticipations and
plans regarding, among other things, general economic trends, interest rates,
product expansions and other matters. Such statements are subject to numerous
uncertainties, such as federal monetary policy, inflation, employment,
profitability and consumer confidence levels, both nationally and in the
Company's market area, the health of the real estate and construction market in
the Company's market area, the Company's ability to develop and market new
products and to enter new markets, competitive challenges in the Company's
market, legislative changes and other factors, and
9
<PAGE>
as such, there can be no assurance that future events will develop in accordance
with the forward looking statements contained herein.
The following discussion and related financial data for the Company provides an
overview of the financial condition and results of operations of the Company and
its wholly-owned subsidiary, which is presented on a consolidated basis. The
principal subsidiary of the Company is FCNB Bank. For the first three months,
the Company reported earnings of $2.35 million in 1998 and $1.85 million in
1997. However, net income before specific one-time merger related costs was
$2.35 million in 1998 compared to $2.07 million for the same period in 1997.
Return on average assets and return on average equity are key measures of
earnings performance. Return on average assets measures the ability of a bank to
utilize its assets in generating income. Annualized return on average assets for
the three months ended March 31, 1998 was 1.04% compared to 1.05% before
specific one-time merger related costs for the same period in 1997. The
annualized return on average shareholders' equity, which measures the income
earned on the capital invested, for the three months ended March 31, 1998 was
12.11% compared to 11.96% before specific one-time merger related costs for the
three months ended March 31, 1997.
In the ordinary course of its business, the Company routinely explores
opportunities for additional growth and expansion of its core banking business
and related activities, by acquisition of existing branches, by merger with
other institutions, and by de novo branching, both within the Company's existing
market, and in new markets. There can be no assurance that any growth or
expansion will have a positive impact on the Company's earnings, dividends, book
value or market value.
Net Interest Income
Net interest income represents the Company's gross profit from lending and
investment activities, and is the most significant component of the Company's
earnings. Net interest income is the difference between interest and related fee
income on earning assets (primarily loans and investment securities) and the
cost of funds (primarily deposits and short-term borrowings) supporting them. To
facilitate the analysis of net interest income, the table on page 16 is
presented on a taxable equivalent basis to adjust for the tax-exempt status of
certain loans and investment securities. This adjustment, based on the statutory
federal income tax rate of 35%, increases the tax-exempt income to an amount
representing an estimate of what would have been earned if that income were
fully taxable.
Taxable equivalent net interest income for the first three months of 1998
totaled $8.32 million, increasing 6.3% from the $7.83 million recorded for the
same period in 1997. The Company's average interest-earning assets increased
14.9% to $832.36 million from March 31, 1997. This increase was primarily funded
with a 16.4% increase in the Company's average interest-bearing liabilities.
The Company's net interest margin (taxable equivalent net interest income as a
percent of average interest-earning assets) was 4.00% and 4.32% for the first
quarter of 1998 and 1997, respectively. The net interest margin is impacted by
the change in the spread between yields on earning assets and rates paid on
interest-bearing liabilities. This spread decreased by 30 basis points in the
first quarter of 1998 when compared to the same period in the prior year. The
yield on earning assets dropped to 8.13% from 8.16%, while the rates paid on
interest-bearing liabilities increased by 27 basis points to 4.62%.
The rate of interest earned on interest-earning assets and the rate paid on
interest-bearing liabilities, while significantly affected by the actions taken
by the Federal Reserve to control economic growth, are influenced by competitive
factors within the Company's market. Competitive pressures during early 1998 and
late 1997 for both loans and the funding sources needed to satisfy loan demand
within the Company's market area caused its net interest spread to narrow. The
management of the Company feels that the competitive pressures in this market
will cause the net interest spread to continue to be under pressure during 1998.
Therefore, the Company is currently pursuing operating efficiencies through
improved technology and is evaluating new products and services in an effort to
enhance its level of noninterest income. There can be no assurance that these
benefits will be realized.
10
<PAGE>
Market Risk
The Company employs computer model simulations to monitor its interest rate
sensitivity. Interest rate risk ("IRR") management has various sources and it is
not simply the risk from rates rising and falling. In fact, there are four
sources of IRR: repricing risk, basis risk, yield curve risk and option risk.
Gap modeling only focuses on repricing risk. Income simulations that incorporate
cash flow analyses: (1) measure the size and direction of interest rate exposure
under a variety of interest rate and yield curve shape scenarios; (2) provide
the opportunity to capture all critical elements such as volume, maturity dates,
repricing dates, prepayment volumes and hidden options such as caps, floors,
puts and calls; (3) utilize data to clearly focus attention on critical
variables; (4) are dynamic; and (5) reflect changes in prevailing interest rates
which affect different assets and liabilities in different ways. These
simulations are run on a monthly basis using a ramped technique to determine the
effects on the Company's net income and the Market Value of Portfolio Equity
("MVPE"), assuming an immediate increase or decrease in interest rates. The MVPE
simulation is the process of generating multiple forecasts for future interest
rate scenarios and then discounting the estimated cash flows anticipated under
those scenarios. The MVPE is the estimated economic value of the Company based
on the net difference between the value of the interest-earning assets ("IEA")
and the value of the interest bearing liability ("IBL"), using the current
characteristics of each. Some factors that influence the value of the IEA and
the IBL are the rate, maturity, repricing frequency and prepayment options. The
Company has an interest rate risk management policy that limits the amount of
deterioration in net interest income, associated with an assumed interest rate
shock of +/-100, +/-200 and +/-300 basis points change in interest rates, to no
more than 7.5% (+/-100), 10.0% (+/-200) and 12.5% (+/-300) of net interest
income, respectively. The model results as of March 31, 1998 are as follows:
<TABLE>
<CAPTION>
Change in Interest Rate Assumption
- --------------------------- -------------------------------------------------------------------------
- --------------------------- ------------ ----------- ----------- ----------- ------------ -----------
(dollars in thousands) +100 bp +200 bp +300 bp -100 bp -200 bp -300 bp
- --------------------------- ------------ ----------- ----------- ----------- ------------ -----------
- --------------------------- ------------ ----------- ----------- ----------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
Net interest income - $ (564) $ (1,314) $ (1,925) $ 784 $1,526 $1,936
increase (decrease)
- --------------------------- ------------ ----------- ----------- ----------- ------------ -----------
- --------------------------- ------------ ----------- ----------- ----------- ------------ -----------
Net interest income - % 1.70% 3.97% 5.81% 2.37% 4.61% 5.85%
change
- --------------------------- ------------ ----------- ----------- ----------- ------------ -----------
- --------------------------- ------------ ----------- ----------- ----------- ------------ -----------
MVPE - increase (decrease) $(8,224) $(13,749) $(19,188) $1,154 $1,883 $2,012
- --------------------------- ------------ ----------- ----------- ----------- ------------ -----------
- --------------------------- ------------ ----------- ----------- ----------- ------------ -----------
MVPE - % change 10.12% 16.92% 23.62% 1.42% 2.32% 2.48%
- --------------------------- ------------ ----------- ----------- ----------- ------------ -----------
</TABLE>
Noninterest Income
Noninterest income increased $491,000 (38.0%) for the three months ended March
31, 1998, when compared to the same period in 1997. This increase was partially
attributable to the increase in service fee income of $129,000, which was due to
an increase in the volume of deposit accounts maintained. Security gains
increased in 1998 to $152,000 from the $87,000 realized in 1997. The increase in
other operating income includes approximately $140,000 attributable to the
Company's bank-owned life insurance program that generates tax-exempt income to
partially offset the cost of employee benefit programs.
The Company is adding new products and services to strengthen the ratio of
noninterest income to total revenue to mitigate the effect of its decreasing net
interest spread. Some of these products are fee-based and, accordingly, the
income from these products is less sensitive to fluctuations in the level of
interest rates. The Company offers asset management and trust services and in
December, 1997, the Company began to offer Financial Planning and Investment
Services. This new division will offer customers comprehensive financial
planning as well as investment and insurance products.
The Company's management is committed to developing and offering innovative,
market-driven products and services that will generate additional sources of
noninterest income. However, the future results of any of these products or
services cannot be predicted at this time.
Noninterest Expenses
Noninterest expenses, excluding merger related expenses, increased $581,000
(9.9%) for the first three months of 1998, when compared to the first three
months of 1997.
11
<PAGE>
Total salaries and employee benefits increased $471,000 (15.2%) over the first
three months of 1997. The increase in salaries and employee benefits reflects
general merit and cost-of-living adjustments, plus the additional staffing of
the Financial Planning and Investment Services Division in December, 1997.
Additional increased health care costs and pension expenses are the primary
causes for the remaining portion of this increase.
Occupancy expenses increased $32,000 (5.2%) and equipment expenses increased
$62,000 (11.9%) over the first three months of 1997. The increase in equipment
expenses is primarily associated with the additional depreciation expense
incurred as a result of implementing new technology.
Other operating expenses increased $16,000 (1.0%) compared to the first quarter
of 1997.
Income Taxes
The Company's effective tax rates for the first three months of 1998 and 1997
were 31.6% and 29.4%, respectively. The Company's income tax expense differs
from the amount computed at statutory rates primarily due to the tax-exempt
earnings from certain loans, investment securities and the bank-owned life
insurance program. Additionally, the Company derives income tax benefits from a
subsidiary located in the state of Delaware that holds and manages a portion of
its investment portfolio.
Allowance for Credit Losses and Problem Assets
The Company follows the guidance of Statement of Financial Accounting Standards
No. 114 (SFAS 114), "Accounting by Creditors for Impairment of a Loan" as
amended by Statement No. 118, "Accounting by Creditors for Impairment of a
Loan-Income Recognition and Disclosures." It requires that impaired loans within
its scope be measured based on the present value of expected future cash flows
discounted at the loan's effective interest rate, except that as a practical
expedient, a creditor may measure impairment based on a loan's observable market
price, or the fair value of the collateral if the loan is collateral dependent.
SFAS 114 excludes smaller balance and homogeneous loans from impairment
reporting. Therefore, the Company has designated consumer, credit card and
residential mortgage loans to be excluded for this purpose. From the remaining
loan portfolio, loans rated as doubtful or worse, classified as nonaccrual, and
troubled debt restructurings are considered to be impaired. Loans are placed on
nonaccrual when a loan is specifically determined to be impaired or when
principal or interest is delinquent for 90 days or more. Any unpaid interest
previously accrued on those loans is reversed from income. Interest income
generally is not recognized on specific impaired loans unless the likelihood of
further loss is remote. Interest payments received on such loans are applied as
a reduction of the loan principal balance. Interest income on other nonaccrual
loans is recognized only to the extent of interest payments received. Up to this
point, the Company considers slow payment on a loan, to only be a minimum delay.
The Company has identified commercial real estate and commercial and industrial
type loans as the major risk classifications to be used in the application of
SFAS 114.
Selected information concerning the Company's recorded investment in impaired
loans and related interest income are summarized as follows:
<TABLE>
<CAPTION>
(dollars in thousands)
March 31, 1998 1997
- ------------------------------------------------------------------------------------ ---------- ----------
<S> <C> <C>
Impaired loans with specific allocation of allowance for credit losses $2,429 $2,020
Specific allocation of allowance for credit losses 1,059 393
Other impaired loans 1,232 753
Average recorded investment in impaired loans 3,605 2,774
Interest income recognized on impaired loans based on cash payments received 99 28
</TABLE>
12
<PAGE>
Additional information concerning the Company's recorded investment in
nonaccrual loans, for which impairment had not been recognized are as follows:
<TABLE>
<CAPTION>
(dollars in thousands)
March 31, 1998 1997
- ------------------------------------------------------------------------------------ ------------ -----------
<S> <C> <C>
Nonaccrual loans $902 $307
Interest income not recognized due to loans in nonaccrual status 19 6
</TABLE>
The Company maintains its allowance for credit losses at a level deemed
sufficient to provide for estimated potential losses in the credit extension
process. Management reviews the adequacy of the allowance each quarter,
considering factors such as current and future economic conditions and their
anticipated impact on specific borrowers and industry groups, the growth and
composition of the loan portfolio, the level of classified and problem assets,
historical loss experience, and the collectability of specific loans. Allowances
for impaired loans are generally determined based on collateral values or the
present value of estimated cash flows.
The provision for credit losses is charged to income in an amount necessary to
maintain the allowance at the level management believes is appropriate.
The allowance for credit losses was $5.71 million, or 1.00% of total loans, net
of unearned income, at March 31, 1998, compared to $5.51 million, or 1.07% as of
March 31, 1997, and $5.71 million, or 1.00% as of December 31, 1997. The
allowance for credit losses to nonperforming loans was 99.5%, 93.7% and 123.7%
as of March 31, 1998, March 31, 1997 and December 31, 1997, respectively.
Total nonperforming assets as of March 31, 1998 were $8.01 million, a $1.23
million decrease from the level of nonperforming assets as of March 31, 1997,
and a $109,000 decrease from the level as of December 31, 1997. Total
nonperforming assets as of March 31, 1998, including properties acquired through
foreclosure, represent .86% of total assets, compared to 1.14% and .88% as of
March 31, 1997 and December 31, 1997, respectively.
Nonperforming assets at March 31, 1998 included $4.64 million of nonaccrual
loans, $1.10 million of loans past due 90 days or more, $1.94 million of
foreclosed commercial properties and $333,000 of foreclosed residential
properties.
13
<PAGE>
Allowance for Credit Losses
<TABLE>
<CAPTION>
- ---------------------------------------------------------------- --------------------- ----------------------
Three months ended
Year ended
March 31, 1998 December 31, 1997
- ---------------------------------------------------------------- --------------------- ----------------------
<S> <C> <C>
Average total loans outstanding during period $574,924 $535,921
- ---------------------------------------------------------------- --------------------- ----------------------
Allowance at beginning of year $5,713 $5,123
- ---------------------------------------------------------------- --------------------- ----------------------
Charge-offs:
Real estate - construction -- 588
Real estate - mortgage -- 12
Commercial and agricultural -- 306
Consumer 164 288
- ---------------------------------------------------------------- --------------------- ----------------------
Total charge-offs 164 1,194
- ---------------------------------------------------------------- --------------------- ----------------------
Recoveries:
Real estate - construction -- 24
Real estate - mortgage 11 4
Commercial and agricultural 20 369
Consumer 31 58
- ---------------------------------------------------------------- --------------------- ----------------------
Total recoveries 62 455
- ---------------------------------------------------------------- --------------------- ----------------------
Net charge-offs (recoveries) 102 739
- ---------------------------------------------------------------- --------------------- ----------------------
Additions to allowance charged to operating expenses 100 1,329
================================================================ ===================== ======================
Allowance at end of period $5,711 $5,713
================================================================ ===================== ======================
Ratio of net charge-offs to average total loans 0.02% 0.14%
================================================================ ===================== ======================
</TABLE>
Allocation of Allowance for Credit Losses
<TABLE>
<CAPTION>
March 31, December 31,
1998 %(1) 1997 %(1)
------------ -------- ----------------- --------
<S> <C> <C> <C> <C>
Real estate - construction $ 621 15% $ 557 14%
Real estate - mortgage 2,864 59 2,703 65
Commercial and agricultural 1,293 11 993 11
Consumer 448 15 380 10
Unallocated 485 -- 1,080 --
- -------------------------------------------- ------------ -------- ----------------- --------
Total Allowance $5,711 100% $5,713 100%
============================================ ============ ======== ================= ========
</TABLE>
(1) Percent of loans in each category to total loans, net of unearned income.
The Company makes real estate-construction, real estate-mortgage, commercial and
agricultural, and consumer loans. The real estate-construction loans are
generally secured by the construction project financed, and have a term of one
year or less. The real estate-mortgage loans are generally secured by the
property with a maximum loan to value ratio of 75% and generally a term of one
to five years. The commercial and agricultural loans consist of secured and
unsecured loans. The unsecured commercial loans are made based on the financial
strength of the borrower and usually require personal guarantees from the
principals of the business. The collateral for the secured commercial loans may
be equipment, accounts receivable, marketable securities or deposits in the
subsidiary bank of the Company. These loans have a maximum loan to value ratio
of 75% and a term of one to five years. The consumer loan category consists of
secured and unsecured loans. The unsecured consumer loans are made on the
financial strength of the individual borrower. The collateral for the secured
consumer loans may be marketable securities, automobiles,
14
<PAGE>
recreational vehicles or deposits in the Company's subsidiary bank. The usual
term for these loans is three to five years.
As of March 31, 1998, the Company had loans totaling $15.56 million that were
current but as to which there are concerns as to the ability of the borrowers to
comply with present loan repayment terms. While management of the Company does
not anticipate any loss not previously provided for on these loans, changes in
the financial condition of these borrowers may necessitate future modifications
in their loan repayment terms.
At March 31, 1998, the Company had no concentrations of loans in any one
industry exceeding 10% of its total loan portfolio. An industry for this purpose
is defined as a group of counterparts that are engaged in similar activities and
have similar economic characteristics that would cause their ability to meet
contractual obligations to be similarly affected by changes in economic or other
conditions.
There were no other interest-bearing assets at March 31, 1998, classifiable as
nonaccrual, past due, restructured or problem assets.
15
<PAGE>
Distribution of Assets, Liabilities and Shareholders' Equity;
Interest Rates and Interest Differentials
The following table shows average balances of asset and liability categories,
interest income and paid, and average yields and rates for the periods
indicated:
<TABLE>
<CAPTION>
- ------------------------------------------- --------------------------------------- --------------------------------------
Three months ended Three months ended
March 31, 1998 March 31, 1997
--------------------------------------- --------------------------------------
-------------- ------------ ----------- ------------- ----------- ------------
Average Interest Average Average Interest Average
Daily Income(1)/ Yield/ Daily Income(1)/ Yield/
(dollars in thousands) Balance Paid Rate Balance Paid Rate
- ------------------------------------------- -------------- ------------ ----------- ------------- ----------- ------------
Assets
<S> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Interest-bearing deposits $ 1,339 $ 10 2.99% $ 3,831 $ 33 3.45%
- ------------------------------------------- -------------- ------------ ----------- ------------- ----------- ------------
Federal funds sold 9,098 144 6.33 11,386 152 5.34
- ------------------------------------------- -------------- ------------ ----------- ------------- ----------- ------------
Loans held for sale 1,964 30 6.11 1,839 30 6.53
- ------------------------------------------- -------------- ------------ ----------- ------------- ----------- ------------
Investment securities:
Taxable 241,335 3,914 6.49 196,860 3,105 6.31
Tax exempt 3,702 103 11.14 5,074 142 11.23
- ------------------------------------------- -------------- ------------ ----------- ------------- ----------- ------------
Total investment securities 245,037 4,017 6.56 201,934 3,247 6.43
- ------------------------------------------- -------------- ------------ ----------- ------------- ----------- ------------
Loans(2) 574,924 12,711 8.84 505,418 11,321 8.96
- ------------------------------------------- -------------- ------------ ----------- ------------- ----------- ------------
Total interest-earning assets 832,362 16,912 8.13 724,408 14,783 8.16
Noninterest-earning assets 69,468 59,140
Net Effect of SFAS 115 3,549 407
- ------------------------------------------- -------------- ------------ ----------- ------------- ----------- ------------
Total assets $905,379 $783,955
- ------------------------------------------- -------------- ------------ ----------- ------------- ----------- ------------
- ------------------------------------------- -------------- ------------ ----------- ------------- ----------- ------------
Liabilities and Shareholders' Equity
- ------------------------------------------- -------------- ------------ ----------- ------------- ----------- ------------
Interest-bearing liabilities:
Interest-bearing deposits $531,328 5,751 4.33% $509,868 5,267 4.13%
Other short-term borrowings 212,652 2,845 5.35 129,306 1,689 5.22
- ------------------------------------------- -------------- ------------ ----------- ------------- ----------- ------------
Total interest bearing liabilities 743,980 8,596 4.62 639,174 6,956 4.35
- ------------------------------------------- -------------- ------------ ----------- ------------- ----------- ------------
Noninterest-bearing deposits 77,319 69,464
Noninterest-bearing liabilities 6,316 6,275
- ------------------------------------------- -------------- ------------ ----------- ------------- ----------- ------------
Total liabilities 827,615 714,913
- ------------------------------------------- -------------- ------------ ----------- ------------- ----------- ------------
Shareholders' equity 74,215 68,635
Accumulated other comprehensive income 3,549 407
- ------------------------------------------- -------------- ------------ ----------- ------------- ----------- ------------
Total shareholders' equity 77,764 69,042
- ------------------------------------------- -------------- ------------ ----------- ------------- ----------- ------------
- ------------------------------------------- -------------- ------------ ----------- ------------- ----------- ------------
Total liabilities and shareholders'
equity $905,379 $783,955
- ------------------------------------------- -------------- ------------ ----------- ------------- ----------- ------------
Net interest income $ 8,316 $ 7,827
- ------------------------------------------- -------------- ------------ ----------- ------------- ----------- ------------
Net interest spread 3.51% 3.81%
- ------------------------------------------- -------------- ------------ ----------- ------------- ----------- ------------
Net interest margin 4.00% 4.32%
- ------------------------------------------- -------------- ------------ ----------- ------------- ----------- ------------
</TABLE>
1 Taxable equivalent adjustments of $108,000 for 1998 and $49,000 for 1997
are included in the interest income for total interest-earning assets.
2 Nonaccruing loans, which include impaired loans, are included in the average
balances. Net loan fees included in interest income totaled $357,000 in 1998
and $283,000 in 1997 and 1996.
16
<PAGE>
Capital Resources
The following table shows the risk-based capital and the leverage ratios for the
Company as of March 31, 1998:
<TABLE>
<CAPTION>
To Be Well
For Capital Capitalized Under
Actual Adequacy Purposes Prompt Corrective
Action Provisions:
- ---------------------------------------------------------------------------------------------------------------------------
(dollars in thousands) Amount Ratio Amount Ratio Amount Ratio
<S> <C> <C> <C> <C> <C> <C>
As of March 31, 1998:
Total Capital
(to Risk-Weighted Assets):
FCNB Corp $77,899 11.95% $52,135 8.0% N/A N/A
FCNB Bank $64,441 10.03% $51,396 8.0% $64,245 10.0%
Tier I Capital
(To Risk-Weighted Assets):
FCNB Corp $72,188 11.08% $26,067 4.0% N/A N/A
FCNB Bank $58,730 9.14% $25,698 4.0% $38,547 6.0%
Tier I Capital
(To Average Assets):
FCNB Corp $72,188 8.03% $26,956 3.0% N/A N/A
FCNB Bank $58,730 6.61% $26,655 3.0% $44,425 5.0%
</TABLE>
Inflation
The effect of changing prices on financial institutions is typically different
than on non-banking companies since virtually all of a bank's assets and
liabilities are monetary in nature. In particular, interest rates are
significantly affected by inflation, but neither the timing nor magnitude of the
changes are directly related to price level indices; therefore, the Company can
best counter inflation over the long term by managing net interest income and
controlling net increases in noninterest income and expenses.
Year 2000
The Company is currently addressing the many areas affected by the Year 2000
computer issue. A Year 2000 plan has been prepared which includes contacting all
of the software vendors that maintain the computer programs that the Company
relies upon. This plan provides that the Company will obtain assurances from
these software vendors that their product will be Year 2000 compliant. All
systems potentially affected will be evaluated. The plan also includes
contacting large commercial loan customers to determine their readiness for this
issue. At this time, it is anticipated that many, if not all of these changes,
should be ready for testing by December 31, 1998. Since many of the programs
used by the Company are "off-the-shelf" as compared to "highly customized," the
cost to address these matters is not expected to have a material impact on
future operating results or financial condition. This area is changing very
rapidly and the actual results may differ from what has been anticipated.
17
<PAGE>
Web Site
The Securities and Exchange Commission maintains a web site that contains
reports, proxy and information statements and other information regarding
registrants that file electronically with the Commission, including the Company;
that address is: http:\\www.sec.gov.
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
No. 11 Statement Regarding Computation of Per Share Earnings
No. 27 Financial Data Schedule
(b) Report on Form 8-K. None filed during the first quarter of 1998.
18
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
FCNB CORP
(Registrant)
April 30, 1998 By: /s/ Patrick Linton
------------------
A. Patrick Linton,
President, Chief Executive Officer and Director
April 30, 1998 By: /s/ Mark A. Severson
---------------------
Mark A. Severson
Senior Vice President and Treasurer
19
<PAGE>
<TABLE>
<CAPTION>
Exhibit No. 11
Statement Regarding the Computation of Per Share Earnings
March 31,
1998 1997
-------------------
<S> <C> <C>
Basic earnings per common share $0.40 $0.31
Basic weighted average number of shares
outstanding 5,914,562 5,899,521
Diluted earnings per common share $0.40 $0.31
Diluted weighted average number of shares
outstanding 5,937,324 5,910,848
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<CIK> 0000803644
<NAME> FCNB CORP
<MULTIPLIER> 1,000
<CURRENCY> US DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<EXCHANGE-RATE> 1
<CASH> 28,986
<INT-BEARING-DEPOSITS> 811
<FED-FUNDS-SOLD> 19,196
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 204,098
<INVESTMENTS-CARRYING> 44,810
<INVESTMENTS-MARKET> 45,233
<LOANS> 573,492
<ALLOWANCE> 5,711
<TOTAL-ASSETS> 926,898
<DEPOSITS> 632,971
<SHORT-TERM> 207,586
<LIABILITIES-OTHER> 6,694
<LONG-TERM> 0
0
0
<COMMON> 5,915
<OTHER-SE> 73,732
<TOTAL-LIABILITIES-AND-EQUITY> 926,898
<INTEREST-LOAN> 12,716
<INTEREST-INVEST> 3,934
<INTEREST-OTHER> 154
<INTEREST-TOTAL> 16,804
<INTEREST-DEPOSIT> 5,751
<INTEREST-EXPENSE> 8,596
<INTEREST-INCOME-NET> 8,208
<LOAN-LOSSES> 100
<SECURITIES-GAINS> 152
<EXPENSE-OTHER> 6,452
<INCOME-PRETAX> 3,440
<INCOME-PRE-EXTRAORDINARY> 3,440
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,354
<EPS-PRIMARY> 0.40
<EPS-DILUTED> 0.40
<YIELD-ACTUAL> 8.13
<LOANS-NON> 4,637
<LOANS-PAST> 1,101
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 15,560
<ALLOWANCE-OPEN> 5,713
<CHARGE-OFFS> 164
<RECOVERIES> 62
<ALLOWANCE-CLOSE> 5,711
<ALLOWANCE-DOMESTIC> 5,711
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
