<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
--------------------
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended 3/31/00
-------------
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from______to______
Commission file number 0-16143
-------
FIRST ESSEX BANCORP, INC.
-------------------------
(Exact name of registrant as specified in its charter)
Delaware 04-2943217
------------------------------- ------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
71 Main Street, Andover, MA 01810
---------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (978) 681-7500
--------------
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
---- ----
The number of shares outstanding of each of the registrant's classes of common
stock as of March 31, 2000:
Title of Class Shares Outstanding
-------------- ------------------
Common Stock, $.10 par value 7,583,400
<PAGE>
CAUTIONARY STATEMENT FOR PURPOSES OF THE
PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
First Essex Bancorp, Inc. (the Company) desires to take advantage of the "safe
harbor" provisions of the Private Securities Litigation Reform Act of 1995. This
Report contains certain "forward-looking statements" including statements
concerning plans, objectives, future events or performance, assumptions, and
other statements which are other than statements of historical fact. The Company
wishes to caution readers that the following important factors, among others,
may have affected, and could in the future affect, the Company's actual results
and could cause the Company's actual results for subsequent periods to differ
materially from those expressed in any forward- looking statement made by, or on
behalf of, the Company herein: (i) the effect of changes in laws and
regulations, including federal and state banking laws and regulations, with
which the Company and its wholly owned banking subsidiary, First Essex Bank,
FSB, must comply, and the associated costs of compliance with such laws and
regulations, either currently or in the future as applicable; (ii) the effect of
changes in accounting policies and practices, as may be adopted by the
regulatory agencies as well as by the Financial Accounting Standards Board, or
of changes in the Company's organization, compensation and benefit plans; (iii)
the effect on the Company's competitive position within its market area of the
increasing consolidation within the banking and financial services industries,
including increased competition from larger regional and out-of-state banking
organizations as well as nonbank providers of various financial services; (iv)
the effect of unforeseen changes in interest rates; and (v) the effect of
changes in the business cycle and downturns in the local, regional and national
economies.
2
<PAGE>
FIRST ESSEX BANCORP, INC.
INDEX
<TABLE>
<CAPTION>
PART I - FINANCIAL INFORMATION PAGE
<S> <C>
ITEM 1. Financial Statements (unaudited)
Consolidated Balance Sheets as of March 31, 2000
and December 31, 1999 4
Consolidated Statements of Operations for the
three months ended March 31, 2000 and 1999 5
Consolidated Statements of Stockholders' Equity
for the three months ended March 31, 2000 and 1999 6
Consolidated Statements of Cash Flows for the
three months ended March 31, 2000 and 1999 7
Notes to the Consolidated Financial Statements 8
ITEM 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 10
ITEM 3. Quantitative and Qualitative Disclosure
About Market Risk 18
PART II - OTHER INFORMATION
ITEM 4. Submission of Matters to a Vote of Security Holders 20
ITEM 6. Exhibits and Reports on Form 8-K 23
</TABLE>
3
<PAGE>
ITEM 1. FINANCIAL STATEMENTS
FIRST ESSEX BANCORP, INC.
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
2000 2000
------------ ------------
(Dollars in thousands)
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 38,952 $ 41,598
Investment securities available-for-sale 428,521 434,041
Stock in Savings Bank Life Insurance Company 1,194 1,194
Stock in Federal Home Loan BAnk of Boston 19,985 19,985
Mortgage loans held-for-sale 1,344 3,054
Loans receivable, less allowance for loan losses of
$11,344 and $11,339 840,525 797,892
Foreclosed property 525 8,672
Bank premises and equipment 10,482 447
Accrued interest receivable 8,372 10,692
Intangible assets 21,113 21,763
Other assets 38,336 37,980
------------ ------------
$ 1,409,349 $ 1,377,318
============ ============
LIABILITIES
Deposits $ 1,043,427 $ 1,002,761
Borrowed funds 254,364 268,962
Mortgagors' escrow accounts 1,514 1,162
Other Liabilities 7,239 12,855
------------ ------------
Total Liabilities 1,306,544 1,285,740
------------ ------------
Company-obligated mandatorily redeemable trust preferred
securities of subsidiary trust holding solely junior
subordinated debentures of the company 9,665 --
STOCKHOLDERS' EQUITY
Series preferred stock: $.10 par value per share; 5,000,000
shares authorized, no shares issued or outstanding
Common stock, $.10 par value per share; 25,000,000 shares
authorized, 9,746,700 and 9,745,200 shares issued 975 975
Additional paid-in capital 77,869 77,851
Retained earnings 46,026 44,027
Treasury stock, at cost, 2,163,300 and 2,153,300 shares (19,396) (19,244)
Accumulated other comprehensive income (12,334) (12,031)
------------ ------------
Total Stockholders' Equity 93,140 91,578
------------ ------------
$ 1,409,349 $ 1,377,318
============ ============
</TABLE>
4
<PAGE>
FIRST ESSEX BANCORP, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended March 31,
----------------------------
2000 1999
-------- --------
(Dollars in thousands,
except per share amounts)
<S> <C> <C>
Interest and dividend income:
Loans $ 17,917 $ 15,746
Investment securities available-for-sale 7,440 6,685
Short-term investments 145 243
Other earning assets 265 263
--------- ---------
Total interest and dividend income 25,767 22,937
--------- ---------
Interest expense
Deposits 9,776 8,715
Borrowed funds 3,838 3,146
--------- ---------
Total interest expense 13,614 11,861
--------- ---------
Net interest income 12,153 11,076
Provision for loan losses 600 600
--------- ---------
Net interest income after provision for loan losses 11,553 10,476
--------- ---------
Non-interest income
Net gain on sales of mortgage loans 218 315
Net loss on sale of investment securities (18) --
Loan fees 184 176
Other income 1,368 914
--------- ---------
Total non-interest income 1,752 1,405
--------- ---------
Non-interest expense
Salaries and employee benefits 3,722 3,345
Buildings and equipment 1,136 1,179
Professional services 347 297
Information processing 635 596
Insurance 104 74
Expenses, gains and losses on
and write-downs of, foreclosed property 63 192
Other 1,098 936
Amortization of intangible assets 650 666
--------- ---------
Total non-interest expenses 7,755 7,285
--------- ---------
Minority interest 27 --
Income before provision for income taxes 5,523 4,596
Provision for income taxes 2,158 1,725
--------- ---------
Net income $ 3,365 $ 2,871
========= =========
Earnings per share - Basic $ 0.44 $ 0.38
========= =========
Earnings per share - Diluted $ 0.43 $ 0.37
========= =========
Dividends declared per share $ 0.18 $ 0.16
========= =========
Weighted average number of shares - basic 7,592,268 7,613,831
========= =========
Weighted average number of shares - diluted 7,738,746 7,807,966
========= =========
</TABLE>
5
<PAGE>
FIRST ESSEX BANCORP, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE THREE MONTHS ENDED MARCH 31, 2000 AND 1999
(UNAUDITED)
<TABLE>
<CAPTION>
COMPONENTS OF STOCKHOLDERS' EQUITY
-------------------------------------------------------
ACCUMULATED
OTHER
COMPREHENSIVE COMMON PAID IN RETAINED TREASURY COMPREHENSIVE
INCOME STOCK CAPITAL EARNINGS STOCK INCOME TOTAL
------------- --------- --------- --------- --------- ------------- ---------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE AT DECEMBER 31, 1999 $ 975 $ 77,851 $ 44,027 $ (19,244) $ (12,031) $ 91,578
COMPREHENSIVE INCOME:
NET INCOME $ 3,365 3,365 3,365
OTHER COMPREHENSIVE INCOME:
- UNREALIZED SECURITIES LOSSES,
NET OF TAX BENEFIT,
ARISING DURING THE PERIOD (314)
- LESS: RECLASSIFICATION
ADJUSTMENT FOR SECURITY
LOSSES INCLUDED IN NET
INCOME, NET OF TAX BENEFIT 11
---------
TOTAL OTHER COMPREHENSIVE INCOME (303) (303) (303)
---------
TOTAL COMPREHENSIVE INCOME $ 3,062
=========
CASH DIVIDENDS DECLARED (1,366) (1,366)
STOCK OPTIONS EXERCISED 18 18
ACQUISITIONS OF TREASURY STOCK (152) (152)
--------- --------- --------- --------- --------- ---------
BALANCE AT MARCH 31, 2000 $ 975 $ 77,869 $ 46,026 $ (19,396) $ (12,334) $ 93,140
========= ========= ========= ========= ========= =========
Balance at December 31, 1998 $ 971 $ 77,383 $ 36,359 $ (18,335) $ 704 $ 97,082
Comprehensive income:
Net income $ 2,871 2,871 2,871
Other comprehensive income:
- Unrealized securities losses,
net of tax benefit, arising
during the period (1,407)
- Less: reclassification
adjustment for security gains
included in net income, net of
tax expense --
---------
Total other comprehensive income
income (1,407) (1,407) (1,407)
---------
Total Comprehensive income $ 1,464
=========
Cash dividends declared (1,219) (1,219)
Stock options exercised 1 101 102
--------- ---------- --------- --------- ------- ---------
Balance at March 31, 1999 $ 972 $ 77,484 $ 38,011 $ (18,335) $ (703) $ 97,429
========= ========== ========= ========= ======= =========
</TABLE>
6
<PAGE>
FIRST ESSEX BANCORP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended March 31,
---------------------------
2000 1999
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 3,365 $ 2,871
Adjustments to reconcile net income to net cash provided by
operating activities:
Provision for loan losses 600 600
Depreciation and amortization 510 515
Gain on sales of foreclosed property (7) (12)
Amortization of investment securities discounts and premiums, net 126 202
Amortization of intangible assets 650 666
Proceeds from sales of mortgage loans and mortgage servicing rights 11,629 22,060
Mortgage loans originated for sale (9,701) (22,017)
Realized losses on the sale of investment securities 18 --
Realized gains on the sale of mortgage loans (218) (315)
Decrease in accrued interest receivable 300 309
Increase in other assets (691) (244)
Increase (decrease) in other liabilities (4,860) 2,020
----------- -----------
Net cash provided by operating activities 1,721 6,655
Cash flows from investing activities:
Proceeds from sales of available-for-sale securities 107 --
Proceeds from maturities and principal payments of
available-for-sale securities 8,594 28,377
Purchases of available-for-sale securities (4,384) (142,062)
Loans originated and purchased, net of principal collected (43,824) (1,085)
Proceeds from sales of foreclosed property 520 725
Purchases of bank premises and equipment (300) (344)
----------- -----------
Net cash used in investing activities (39,287) (114,389)
Cash flows from financing activities:
Net increase in demand deposits, NOW accounts and savings accounts 3,963 1,725
Net increase (decrease) in term deposits 36,703 (2,427)
Net increase (decrease) in borrowed funds with maturities of
three months or less (60,007) 24,698
Proceeds from borrowed funds with maturities in excess of three months 130,566 65,000
Repayments of borrowed funds with maturities in excess of three months (85,157) (22,148)
Proceeds from the issuance of Company-obligated trust preferred
securities of subsidiary trust holding solely junior
subordinated debentures of the Company 10,000 --
Net increase in mortgagors' escrow accounts 352 785
Dividends paid (1,366) (1,219)
Stock options exercised 18 102
Common stock repurchases (152) --
----------- -----------
Net cash provided by financing activities 34,920 66,516
----------- -----------
Net decrease in cash and cash equivalents (2,646) (41,218)
Cash and cash equivalents at beginning of period 41,598 90,383
----------- -----------
Cash and cash equivalents at end of period $ 38,952 $ 49,165
=========== ===========
Supplemental disclosure of cash flow information:
Interest paid during the year $ 13,514 $ 11,666
Income taxes paid during the year 758 654
Supplemental schedule of noncash financing and investing activities:
Real estate acquired through, or deeds in lieu of, foreclosure 951 --
</TABLE>
7
<PAGE>
FIRST ESSEX BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2000
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The accompanying consolidated financial statements are unaudited and include the
accounts of the Company and its subsidiary, First Essex Bank, FSB. These
financial statements reflect, in management's opinion, all adjustments
(consisting of normal recurring adjustments) necessary for a fair presentation
of the Company's financial position and the results of its operations and cash
flows for the periods presented. These financial statements should be read in
conjunction with the financial statements and notes thereto included in the
Company's 1999 Form 10-K.
EARNINGS PER SHARE
Basic EPS amounts have been computed by dividing reported earnings available to
common shareholders by the weighted average number of common and common
equivalent shares outstanding during the period. Dilutive EPS amounts have been
computed using the weighted average number of common and common equivalent
shares and the dilutive potential common shares (stock options outstanding and
exercisable) during the period. Included in diluted EPS are 146,478 and 194,135
dilutive potential shares for the quarters ended March 31, 2000 and 1999,
respectively. Excluded from diluted earnings per share were options to purchase
494,344 and 300,566 shares at March 31, 2000 and 1999, respectively. These
shares were excluded as the exercise price was greater than average market price
of the common shares during the respective periods.
2. COMPANY-OBLIGATED MANDATORILY REDEEMABLE TRUST PREFERRED SECURITIES
On March 23, 2000, the Company organized a wholly-owned Delaware business trust
which issued $10 million face amount of the trust's 10.875% Fixed Rate Capital
Trust Pass-Through Securities ("Capital Securities") scheduled to mature in 2030
to a private investor. Simultaneously, the trust used the proceeds of that sale
to purchase $10 million principal amount of the Company's 10.875% Fixed Rate
Junior Subordinated Deferrable Interest Debentures due 2030 ("Subordinated
Debt"). Both the Capital Securities and the Subordinated Debt are callable by
the Company at any time after 10 years from the issue date. The Subordinated
Debt is an unsecured obligation of the Company and is junior in right of payment
to all present and future senior indebtedness of the Company. The Capital
Securities are guaranteed by the Company on a subordinated basis. The Company
intends to use the net proceeds of approximately $9.7 million for general
corporate purposes, including the repurchase of shares of the Company's
outstanding common stock.
The Trust Preferred Securities are presented in the consolidated balance sheets
of the Company titled "Company-Obligated Mandatorily Redeemable Trust Preferred
Securities of Subsidiary Trust Holding Solely Junior Subordinated Debentures of
the Company." The Company records distributions payable on the Trust Preferred
Securities as a Minority Interest Expense in its consolidated statements of
income. The cost of issuance of the Trust Preferred Securities totaled $335
thousand and is being accreted on the effective interest rate method.
8
<PAGE>
3. BUSINESS SEGMENTS
In 1998, the Company adopted SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information," which establishes standards for reporting
operating segments of a business enterprise and descriptive information about
the operating segments in financial statements. Operating segments are
components of an enterprise which are evaluated regularly by the chief operating
decision-maker in deciding how to allocate resources and in assessing
performance. The Company's chief operating decision-maker is the Chief
Executive Officer and Chairman of the Board of the Company. The adoption of SFAS
No. 131 did not have a material effect on the Company's primary financial
statements, but did result in the disclosure of segment information contained
herein. The Company has identified its reportable operating business segment as
Community Banking, based on the products and services provided to its customers.
The Company's community banking business segment consists of commercial banking
and retail banking. The community-banking segment is managed as a single
strategic unit and derives its revenues from a wide range of banking services,
including lending activities, and the acceptance of demand, savings and time
deposits.
Nonreportable operating segments of the Company's operations which do not have
similar characteristics to the community banking operations and do not meet the
quantitative thresholds requiring disclosure, are included in the other category
in the disclosure of business segments below. The nonreportable segment
represents the holding company financial information.
The accounting policies used in the disclosure of business segments are the same
as those described in the summary of significant accounting policies. The
consolidation adjustments reflect certain eliminations of intersegment revenue,
cash and investments in subsidiaries.
The following table provides a reconciliation of the community banking segment
information to the consolidated financials.
<TABLE>
<CAPTION>
Consolidation
Community Adjustments
Banking Other and Eliminations Consolidated
----------------------------------------------------------
<S> <C> <C> <C> <C>
March 31, 2000
Investment securities $ 449,700 $ -- $ -- $ 449,700
Net loans 841,869 -- -- 841,869
Total assets 1,409,268 62,998 (62,917) 1,409,349
Total interest income 25,765 44 (42) 25,767
Total interest expense 13,628 28 (42) 13,614
Net interest income 12,137 16 -- 12,153
Net income 3,374 (9) -- 3,365
March 31, 1999
Investment securities 478,296 -- -- 478,296
Net loans 722,645 -- -- 722,645
Total assets 1,315,439 48,878 (47,099) 1,317,218
Total interest income 22,935 4 (2) 22,937
Total interest expense 11,863 -- (2) 11,861
Net interest income 11,072 4 -- 11,076
Net income 2,869 2 -- 2,871
</TABLE>
9
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
FIRST ESSEX BANCORP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
MARCH 31, 2000
GENERAL
First Essex Bancorp, Inc. is a Delaware corporation whose primary activity is to
act as the parent holding company for First Essex Bank, FSB (the "Bank").
The Company's net earnings depend to a large extent upon its net interest
income, which is the difference between interest and dividend income earned on
its loans and investments and interest expense paid on its deposits and borrowed
funds. The Company's net earnings also depend upon its provision for loan loss,
noninterest income, noninterest expense and income tax expense. Interest and
dividend income and interest expense are significantly affected by general
economic conditions. These economic conditions, together with conditions in the
local real estate markets, affect the levels of non-performing assets and
provisions for possible loan losses.
RESULTS OF OPERATIONS
Net income for the three months ended March 31, 2000 was $3.4 million compared
to $2.9 million for same period in 1999, or a 17.2% increase. Net interest
income totaled $12.2 million for the quarter compared to $11.1 million for the
same period in 1999. The increase in net interest income of $1.1 million,
combined with an increase in noninterest income of $347 thousand, offset by
increases in noninterest expense of $470 thousand, accounts for the $927
thousand increase in pretax income.
ANALYSIS OF AVERAGE YIELDS EARNED AND RATES PAID
The following table presents an analysis of average yields earned and rates paid
for the periods indicated:
10
<PAGE>
<TABLE>
<CAPTION>
For the Three Months Ended March 31,
------------------------------------------------------------------
2000 1999
---------------------------------------- ------------------------------------
Interest Average Interest Average
Average Earned/ Yield/ Average Earned/ Yield/
Balance Paid Rate Balance Paid Rate
---------- -------- --------- ---------- --------- ------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Assets
Earning assets
Short-term investments $ 12,295 $ 145 4.72% $ 22,942 $ 243 4.24%
Investment securities 448,284 7,440 6.64% 431,362 6,685 6.20%
Total loans (1) 829,786 17,917 8.64% 732,024 15,746 8.60%
Other earning assets 17,500 265 6.06% 17,398 263 6.05%
----------- --------- ----------- ------
Total earning assets 1,307,865 25,767 7.88% 1,203,726 22,937 7.62%
Allowance for loan losses (11,271) (11,286)
----------- -----------
Total earning assets less allowance
for loan losses 1,296,594 1,192,440
Other assets 85,075 72,624
----------- -----------
Total assets $ 1,381,669 $ 1,265,064
=========== ===========
Liabilities and Stockholders' Equity
Deposits
NOW accounts $ 52,374 $ 104 0.79% $ 50,165 $ 120 0.96%
Money market accounts 94,418 751 3.18% 99,352 770 3.10%
Savings accounts 264,217 2,308 3.49% 222,685 1,679 3.02%
Time deposits 510,172 6,613 5.18% 463,596 6,146 5.30%
----------- -------- ----------- --------
Total interest bearing deposits 921,181 9,776 4.24% 835,798 8,715 4.17%
Borrowed funds 264,144 3,838 5.81% 228,412 3,146 5.51%
----------- -------- ----------- --------
Total interest bearing deposits and
borrowed funds 1,185,325 13,614 4.59% 1,064,210 11,861 4.46%
----------- -------- ----------- --------
Demand deposits 98,279 88,853
Other liabilities 3,812 13,446
----------- -----------
Total liabilities 1,287,416 1,166,509
Trust preferred securities 989 0
Stockholders' equity 93,264 98,555
----------- -----------
Total liabilities, trust preferred
securities and stockholders' equity $ 1,381,669 $ 1,265,064
=========== ===========
Net interest income $ 12,153 $ 11,076
======== ========
Weighted average interest
rate spread 3.29% 3.16%
==== ====
Net yield on average
earning assets (2) 3.72% 3.68%
==== ====
Return on average assets 0.97% 0.91%
==== ====
Return on average equity 14.43% 11.65%
==== ====
</TABLE>
(1) Loans on a non-accrual status are included in the average balance.
(2) Net interest income before provision for loan losses divided by average
earning assets.
NET INTEREST INCOME
Net interest income increased by $1.1 million to $12.2 million for the three
months ended March 31, 2000. This represents an increase of 9.7% from $11.1
million when compared to the same period in 1999.
11
<PAGE>
INTEREST AND DIVIDEND INCOME
Interest and dividend income increased by $2.8 million (12.3%) to $25.8 million
for the three month period ended March 31, 2000, from $22.9 million in the same
period in 1999. The changes primarily relate to volume increases in both loans
and investment securities. The average yield on earning assets also increased to
7.88% as compared to 7.62% for the same period of 1999.
INTEREST EXPENSE
Interest expense increased by $1.8 million (14.8%) to $13.6 million, for the
three months ended March 31, 2000 when compared to the same period in 1999. This
increase is primarily attributable volume increases in both deposits and
borrowed funds. The average cost of funds also increased to 4.59% for the three
months ended March 31, 2000 as compared to 4.46% for the same period in 1999.
PROVISION FOR LOAN LOSSES
Losses on loans are provided for under the accrual method of accounting.
Assessing the adequacy of the allowance for loan losses involves substantial
uncertainties and is based upon management's evaluation of the amount required
to meet estimated losses inherent in the loan portfolio after weighing various
factors. Among the factors management may consider are the quality of specific
loans, risk characteristics of the loan portfolio generally, the level of
non-accruing loans, current economic conditions trends in delinquencies and
charge-offs and collateral values of the underlying security. Ultimate losses
may vary significantly from the current estimates. Losses on loans, including
impaired loans, are charged against the allowance when management believes the
collectability of principal is doubtful.
The provisions for loan losses totaled $600 thousand for both of the three month
periods ended March 31, 2000 and 1999. Provisions result from management's
continuing internal review of the loan portfolio as well as its judgement as to
the adequacy of the reserves in light of the condition of the regional real
estate and other markets, and the economy in general. As a result of increased
loans, there is an expectation that the Bank will continue to find it necessary
to make provisions for loan losses in the future. See "Financial Condition -
Non-Performing Assets."
NONINTEREST INCOME
Noninterest income consists of net gains from the sales of mortgage loans and
mortgage loan servicing rights and gains on the sale of investment securities,
together with fee and other noninterest income.
Noninterest income increased by $347 thousand (24.7%) to $1.8 million for the
three months ended March 31, 2000 compared to $1.4 million for the same period
in 1999. The increase in noninterest income for the three months ended March 31,
2000 is primarily attributable to income of approximately $230 thousand
recognized on bank-owned life insurance policies purchased during the third
quarter of 1999 and a special dividend received from the Depositors Insurance
Fund of Massachusetts of $86 thousand.
NONINTEREST EXPENSE
Noninterest expense increased to $7.8 million for the three months ended March
31, 2000, compared to $7.3 million for the same period in 1999. Of this $470
thousand increase (6.5%), approximately $377 thousand is represented by higher
salary and benefit costs. At March 31, 2000, the Company had 312 full-time
equivalent employees compared to 301 at March 31, 1999. The remaining increase
was spread throughout the components of noninterest expense, offset by
reductions in costs associated with foreclosed properties.
12
<PAGE>
FINANCIAL CONDITION
Total assets amounted to $1,409.3 million at March 31, 2000, an increase of
$32.0 million or 2.3% from $1,377.3 million at December 31, 1999.
LOANS
At March 31, 2000, the loan portfolio, including mortgage loans held for sale,
and before consideration of the allowance for loan losses, was $853.2 million,
representing 60.5% of total assets, compared to $812.3 million or 59.0% of total
assets at December 31, 1999.
The following table sets forth information concerning the Company's loan
portfolio at the dates indicated. The balances shown in the table are net of
unadvanced funds and unearned discounts and fees.
<TABLE>
<CAPTION>
March 31, 2000 December 31, 1999
-------------------- -------------------------
(Dollars in thousands)
<S> <C> <C> <C> <C>
Real Estate:
Residential $136,774 16.0% $144,021 17.7%
Commercial 110,280 12.9 111,272 13.7
Construction 57,693 6.8 51,353 6.3
------------ --------- --------- -------
Total Real Estate Loans 304,747 35.7 306,646 37.7
------------ --------- --------- -------
Owner occupied Commercial Real Estate 67,031 7.9 63,367 7.8
Commercial loans 104,478 12.2 98,701 12.1
Aircraft loans 128,989 15.1 107,007 13.2
Consumer loans
Home Equity, Home Improvement
& Second Mortgage 51,808 6.1 51,622 6.4
Automobile 191,656 22.5 180,075 22.2
Other 4,505 0.5 4,867 0.6
------------ --------- --------- -------
Total consumer loans 247,969 29.1 236,564 29.2
Total loans $853,214 100.0% $812,285 100.0%
============ ========= ========= =======
</TABLE>
13
<PAGE>
ALLOWANCE FOR LOAN LOSSES
The allowance for loan losses is maintained at a level determined by management
to be adequate to provide for probable losses inherent in the loan portfolio
including commitments to extend credit. The allowance for loan losses is
maintained through the provision for loan losses, which is a charge to
operations. The potential for loss in the portfolio reflects the risks and
uncertainties inherent in the extension of credit.
The determination of the adequacy of the allowance of loan losses is based
upon management's assessment of risk elements in the portfolio, factors
affecting loan quality and assumptions about the economic environment in
which the Company operates. The methodology includes a formula allowance
based on identification and analysis of loss potential in various portfolio
segments utilizing a credit risk grading process and specific reviews and
evaluations of significant individual problem credits, a valuation allowance
for impaired loans and an unallocated allowance. The unallocated allowance,
based in part on credit policy, approximates 20% to 25% of the formula and
valuation allowances. In addition, it reflects management's review of overall
portfolio quality and analysis of current levels and trends in charge-off,
delinquency and nonaccruing loan data, forecasted economic conditions and the
overall banking environment. These reviews are of necessity dependent upon
estimates, appraisals and judgments, which may change quickly because of
changing economic conditions and the Company's perception as to how these
factors may affect the financial condition of debtors. When an evaluation of
these conditions signifies a change in the level of risk, the Company adjusts
the formula allowance. Periodic credit reviews enable further adjustment to
the allowance through the risk-rating of loans and identification of loans
requiring a valuation allowance. In, addition, the formula model is designed
to be self-correcting by taking into account recent loss experience. The
provision for loan losses is set based on the factors discussed above. In
addition, it is management's intent to maintain the allowance at a level
consistent with the Company's peers in the banking industry.
The following table summarizes the activity in the allowance for loan losses
(including amounts established for impaired loans) for the three months ended
March 31, 2000.
<TABLE>
<CAPTION>
(Dollars in Thousands)
<S> <C>
Balance at beginning of period $ 11,339
Provision for loan losses 600
Charge-offs (758)
Recoveries 163
-----------
Net charge-offs (595)
-----------
Balance at end of period $ 11,344
===========
Total loans at end of period $ 853,214
Average loans for the period 829,786
Allowance to loans ratio 1.33%
Net charge-offs to average loans ratio (annualized) 0.29%
</TABLE>
14
<PAGE>
NONPERFORMING ASSETS
Nonperforming assets consist of nonaccruing loans (including loans impaired
under SFAS No. 114), and foreclosed property. Nonperforming assets totaled $3.6
million at March 31, 2000 and $3.9 million at December 31, 1999.
The Bank's policy is to discontinue the accrual of interest on all loans
(including loans impaired under SFAS No. 114), for which payment of interest or
principal is 90 days or more past due or for such other loans as considered
necessary by management if collection of interest and principal is doubtful.
When a loan is placed on nonaccrual status, all previously accrued but
uncollected interest is reversed against the current period interest income.
Restructured loans are loans (1) on which concessions have been made in light of
the debtor's financial difficulty with the objective of maximizing recovery and
(2) with respect to which the renegotiated payment terms continue to be met.
The following table indicates the recorded investment of nonperforming assets
and the related valuation allowance for impaired loans.
<TABLE>
<CAPTION>
March 31, 2000 December 31, 1999
------------------------------------ -------------------------------
Impaired Loan Impaired Loan
Recorded Valuation Recorded Valuation
Investment Allowance Investment Allowance
----------- -------------- ---------- -------------
<S> <C> <C> <C> <C>
Non-accruing Loans
Impaired Loans
Requiring a valuation allowance $ 343 $ 247 $ 312 $ 229
Not requiring a valuation allowance 15 -- 242 --
----------- -------------- ----------- -------------
358 247 554 229
Restructured Loans 301 75 303 75
----------- -------------- ----------- ------------
Total impaired 659 $ 322 857 $ 304
============== ============
Residential Mortgage 1,054 1,187
Other 1,314 1,381
----------- -----------
Total non-accruing 3,027 3,425
Foreclosed property, net 525 447
----------- -----------
Total non-performing assets $ 3,552 $ 3,872
=========== ===========
Percentage of non-performing assets
to total assets 0.25% 0.28%
Percentage of allowance for loan
losses to non-accruing loans 374.8% 331.1%
</TABLE>
The valuation allowance for impaired loans is included in the allowance for loan
losses on the balance sheet.
15
<PAGE>
INVESTMENTS
At March 31, 2000, the investment portfolio, consisting of short-term
investments, investment securities, mortgage-backed securities, Federal Home
Loan Bank ("FHLB") stock and stock in the Savings Bank Life Insurance Company of
Massachusetts, totaled $449.7 million or 31.9% of total assets, compared to
$455.2 million or 33.1% of total assets at December 31, 1999. Interest and
dividend income on the investment portfolio generated 30.5% of total interest
and dividend income for the three months ended March 31, 2000 compared to 31.4%
for the same period in 1999.
To identify and control market risks associated with the investment portfolio,
the Company has established policies and procedures, which include stop loss
limits and stress testing on a periodic basis.
DEPOSITS
Deposits are the primary source of funds for lending and investment activities.
Deposit flows vary significantly and are influenced by prevailing interest
rates, market conditions, economic conditions and competition. At March 31, 2000
the Bank had total deposits of $1,043.4 million representing a net increase of
$40.7 million compared to total deposits of $1,002.8 million at December 31,
1999.
While deposit flows are by nature unpredictable, the Bank attempts to manage its
deposits through selective pricing. Due to the uncertainty of market conditions,
it is not possible for the Bank to predict how aggressively it will compete for
deposits in future quarters or the likely effect of any such decision on deposit
levels, interest expense and net interest income. Strategies are currently in
place to aggressively market more stable deposit sources in products such
accounts as savings accounts.
BORROWED FUNDS
The Bank is a member of the FHLB and is entitled to borrow from the FHLB by
pledging certain assets. The Bank also utilizes short term repurchase agreements
with maturities less than three months, as an additional source of funds.
Repurchase agreements are secured by U.S. government and agency securities.
These borrowings are an alternative source of funds compared to deposits and
decreased from $269.0 million at December 31, 1999 to $254.4 million at March
31, 2000.
REGULATORY CAPITAL REQUIREMENTS
The Bank is subject to various regulatory capital requirements administered by
the federal banking agencies. Failure to meet minimum capital requirements can
initiate certain mandatory, and possibly additional discretionary, actions by
regulators that, if undertaken, could have a direct material effect on the
Bank's financial statements. Under capital adequacy guidelines and the
regulatory framework for prompt corrective action, the Bank must meet specific
capital guidelines that involve quantitative measures of the Bank's assets,
liabilities, and certain off-balance-sheet items as calculated under regulatory
accounting practices. The Bank's capital amounts and classification are also
subject to qualitative judgments by the regulators about components, risk
weightings, and other factors.
Quantitative measures established by regulation to ensure capital adequacy
require the Bank to maintain minimum amounts and ratios (set forth in the
following table) of total and Tier I capital (as defined in the regulations) to
risk-weighted assets (as defined), and of Tier I capital (as defined) to average
assets (as defined). Management believes, as of March 31, 2000, that the Bank
meets all capital adequacy requirements to which it is subject.
The most recent notification from the Office of Thrift Supervision ("OTS")
categorized the Bank as well capitalized under the regulatory framework for
prompt corrective action. To be categorized as well capitalized the Bank must
maintain minimum total risk-based, Tier I risk-based, Tier I leverage ratios as
set forth in the table.
The Bank's actual capital amounts and ratios are also presented in the table. As
of March 31, 2000, the OTS did not deem it necessary for an interest-rate risk
component to be deducted from capital in determining risk-based capital
requirements.
The Bank may not declare or pay cash dividends on its shares of common stock if
the effect thereof would cause stockholders' equity to be reduced below
applicable capital maintenance requirements or if such declaration and payment
would otherwise violate regulatory requirements.
The following table displays the Bank's capital calculations as defined under
prompt corrective action for the periods indicated:
16
<PAGE>
<TABLE>
<CAPTION>
TO BE WELL
FIRST ESSEX BANK, FSB FOR CAPITAL CAPITALIZED UNDER PROMPT
ACTUAL ACTUAL ADEQUACY PURPOSES CORRECTIVE ACTION PROVISION:
--------------------- ----------------- ----------------------------
AMOUNT RATIO AMOUNT RATIO AMOUNT RATIO
--------------------- ----------------- ----------------------------
<S> <C> <C> <C> <C> <C> <C>
MARCH 31, 2000 (UNAUDITED)
GREATER
THAN
OR EQUAL
TANGIBLE CAPITAL ( TO TANGIBLE ASSETS) $ 84,190 5.97% $ 21,146 TO 1.50% N/A
GREATER THAN
OR EQUAL
TIER 1 (CORE) CAPITAL (TO ADJUSTED ASSETS) 84,190 5.97 56,390 4.00 $ 70,488 TO 5.00%
TIER 1 (CORE) (TO RISK WEIGHTED ASSETS) 84,190 8.89 37,865 4.00 56,797 6.00
TOTAL RISK BASED CAPITAL
(TO RISK WEIGHTED ASSETS) 95,222 10.06 75,730 8.00 94,662 10.00
December 31, 1999
GREATER
THAN
OR EQUAL
Tangible Capital ( to Adjusted Assets) $ 81,565 5.93 $ 20,648 TO 1.50% n/a
GREATER
THAN OR
EQUAL
Tier 1 (Core) Capital (to Adjusted Assets) 81,565 5.93 55,061 4.00 68,826 TO 5.00%
Tier 1 Capital (to Risk Weighted Assets) 81,565 9.00 36,250 4.00 54,375 6.00
Total Risk Based Capital
(to Risk Weighted Assets) 92,570 10.21 72,500 8.00 90,625 10.00
</TABLE>
YEAR 2000
The following constitutes the Company's Year 2000 Readiness disclosure under the
Year 2000 Information and Readiness Disclosure Act. The potential problem with
Year 2000 ("Y2K") concerned the inability of information systems, primarily
software programs, to properly recognize and process date sensitive information
for the year 2000 and beyond.
The Company took numerous remedial steps over the past several years to prepare
for the change of century. These steps included: forming a bank-wide project
team to address and resolve Y2K issues; and forming a Year 2000 Compliance
Oversight Committee of the Board of Directors to oversee the activities of
management and others in dealing with Y2K issues; replacing or upgrading
non-compliant hardware and software; working with third party service bureaus
and other vendors to ensure that the Company's mission critical information
systems were Y2K compliant; and establishing contingency plans in the event that
an unforeseen problem were to arise.
Subsequent to December 31, 1999, the Company has not experienced any material
Year 2000 transition issues. However there can be no assurance that a material
vendor will not experience a Year 2000 transition issue, or that such transition
issue will not have a material negative impact on the Company's consolidated
financial position, results of operations or cash flows.
17
<PAGE>
RECENT ACCOUNTING DEVELOPMENTS
In June 1998, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative
Instruments and Hedging Activities". The statement establishes accounting and
reporting standards requiring that every derivative instrument (including
certain derivative instruments embedded in other contracts) be recorded on the
balance sheet as either an asset or liability measured at its fair value. The
statement requires that changes in the derivative's fair value be recognized
currently in earnings unless specific hedge accounting criteria are met. Special
accounting for qualifying hedges allows a derivative's gains and losses to
offset related results on the hedged item in the income statement, and requires
that a company must formally document, designate, and assess the effectiveness
of transactions that receive hedge accounting.
Statement 133 as amended by SFAS No. 137 is effective for fiscal years beginning
after June 15, 2000. A company may also implement the statement as of the
beginning of any fiscal quarter after issuance (that is, fiscal quarters
beginning June 16, 1998 and thereafter). Statement 133 cannot be applied
retroactively. Statement 133 must be applied to (a) derivative instruments and
(b) certain derivative instruments embedded in hybrid contracts that were
issued, acquired, or substantively modified after December 31, 1997 (and, at the
company's election, before January 1, 1998).
The Company has not yet quantified the impact of adopting SFAS No. 133 on the
financial statements, and has not determined the timing of or method of the
adoption of the statement. The adoption of SFAS No. 133 could have the effect of
increasing the volatility in reported earnings and accumulated other
comprehensive income.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
MARKET RISK
Market risk is the risk of loss in a financial instrument arising from adverse
changes in market rates/prices such as interest rates, foreign currency exchange
rates, commodity prices, and equity prices. The Company's primary market risk
exposure is interest rate risk. The ongoing monitoring and management of this
risk is an important component of the Company's asset/liability management
process which is governed by policies established by the Board of Directors that
are reviewed and approved annually. The Board of Directors delegates
responsibility for carrying out the asset/liability management policies to the
Asset/Liability Committee (ALCO). In this capacity, ALCO develops guidelines and
strategies impacting the Company's asset/liability related activities based upon
estimated market risk sensitivity, policy limits and overall market interest
rate levels/trends.
INTEREST RATE RISK
Interest rate risk represents the sensitivity of earnings to changes in market
interest rates. As interest rates change the interest income and expense streams
associated with the Company's financial instruments also change thereby
impacting net interest income (NII), the primary component of the Company's
earnings. ALCO utilizes the results of a detailed and dynamic simulation model
to quantify the estimated exposure of NII to sustained interest rate changes.
While ALCO routinely monitors simulated NI sensitivity over a rolling two-year
horizon, it also utilizes additional tools to monitor potential longer-term
interest rate risk. There have been no material changes in the interest rate
risk reported at the conclusion of the Company's December 31, 1999 year end.
LIQUIDITY AND CAPITAL RESOURCES
The Bank's principal sources of liquidity are customer deposits, borrowings from
the FHLB, scheduled amortization and prepayments of loan principal, cash flow
from operations, maturities of various investments and loan sales.
Management believes it is prudent to maintain an investment portfolio that not
only provides a source of income, but also provides a potential source of
liquidity to meet lending demand and deposit flows. The Bank adjusts the level
of its liquid assets and the mix of its loans and investments based upon
management's judgment as to the quality of specific investment opportunities and
the relative attractiveness of their maturities and yields.
Net cash provided from operating activities totaled $1.7 million for the three
months ended March 31, 2000 compared to $6.7 million that was provided by
operating activities for the same period in 1999. The change is primarily
related to a decrease in other liabilities partially offset by the increase in
proceeds from sales of mortgage loans during the first three months of 2000 as
compared to the prior period.
18
<PAGE>
Net cash used for investing activities totaled $39.3 million for the three
months ended March 31, 2000 compared to net cash used of $114.4 million for the
comparable period in 1999. The decrease in net cash used by investing activities
during the first quarter of 2000 as compared to the same period of 1999 is
primarily attributable to the decrease in purchases of investment securities,
offset by the growth in loans.
Net cash provided by financing activities totaled $34.9 million for the three
months ended March 31, 2000, compared to net cash provided of $66.5 million for
the comparable period in 1999. The change primarily reflects the reduced level
of borrowed funds offset by the growth in deposits and the issuance of trust
preferred securities.
IMPACT OF INFLATION
The financial statements and related data presented herein have been prepared in
accordance with generally accepted accounting principles which require
measurement of financial position and operating results in terms of historical
dollars without considering changes in the relative purchasing power of money
over time due to inflation.
An important concept in understanding the effect of inflation on financial
institutions is the distinction between monetary and non-monetary items. In a
stable environment, monetary items are those assets and liabilities that are or
will be converted into a fixed amount of dollars regardless of changes in
prices. Examples of monetary items include cash, investment securities, loans,
deposits and borrowings. Non-monetary items are those assets and liabilities
that gain or lose general purchasing power a a result of the relationships
between specific prices for the items and price change levels. Examples of
non-monetary items include equipment and real estate. Additionally, interest
rates do not necessarily move in the same direction, or in the same magnitude,
as the prices of goods and services as measured by the consumer price index.
19
<PAGE>
PART II - OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Annual Meeting of Shareholders of the registrant was held on May 4, 2000.
All nominees of the Board of Directors of the registrant were re-elected for a
three-year term. Votes were cast as follows:
1. Election of Three Class III Directors
<TABLE>
<CAPTION>
NOMINEE FOR WITHHELD
------- --- --------
<S> <C> <C>
Frank J. Leone, Jr. 6,501,885 144,143
Robert H. Pangione 6,500,040 145,988
Brian W. Thompson 6,501,740 144,288
</TABLE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS:
(3) ARTICLES OF INCORPORATION AND BY-LAWS:
3.1 The Restated Certificate of Incorporation of the Company is
incorporated herein by reference to Exhibit 3.1 to Amendment No.
1 to the Company's Registration Statement on Form S-1,
Registration No. 33-10966, filed with the Securities and Exchange
Commission on April 17, 1987 ("Amendment No. 1 to the Form S-1");
3.2 The Amended and Restated By-laws of the Company are incorporated
herein by reference to Exhibit 4.1 of the Company's current
report on Form 8-K filed on December 28, 1992.
(10) MATERIAL CONTRACTS:
*10.1- The First Essex Bancorp, Inc. 1987 Stock Option Plan is
incorporated herein by reference to Appendix B to the prospectus
included in the Company's Registration Statement on Form S-8,
registration number 33-21292, filed on April 15, 1988;
10.2- The Shareholder Rights Agreement is incorporated herein by
reference to the exhibit to the Company's Current Report on Form
8-K filed on October 12, 1989, as amended by the Amendment to the
Shareholder Rights Plan, incorporated herein by reference to
Exhibit 28.2 to the Company's Current Report on Form 8-K filed on
February 12, 1990;
*10.3- Executive Salary Continuation Agreement between First Essex
Bancorp, Inc., First Essex Bank, FSB and Leonard A. Wilson
incorporated herein by reference to Exhibit 10.15 to the
Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1988;
*10.4- Amended and Restated Employment Agreement dated as of October 9,
1997 between Leonard A. Wilson and First Essex Bancorp, Inc.,
incorporated herein by reference to Exhibit 10.4 to the Company's
Quarterly Report on Form 10-Q for the quarter ended September 30,
1997.
*10.5- Amended and Restated Employment Agreement dated as of October 9,
1997 between Leonard A. Wilson and First Essex Bank, FSB,
incorporated herein by reference to Exhibit 10.5 to the Company's
Quarterly Report on Form 10-Q for the quarter ended September 30,
1997.
*10.6- Amended and Restated Employment Agreement dated as of October 9,
1997 between Brian W. Thompson and First Essex Bancorp, Inc.,
incorporated herein by reference to Exhibit 10.8 to the Company's
Quarterly Report on Form 10-Q for the quarter ended September 30,
1997.
*10.7- Amended and Restated Employment Agreement dated as of October 9,
1997 between Brian W. Thompson and First Essex Bank, FSB,
incorporated herein by reference to Exhibit 10.9 to the Company's
Quarterly Report on Form 10-Q for the quarter ended September 30,
1997.
*10.8- Special Termination Agreement dated January 1, 1994 and restated
as of October 9, 1997 between Leonard A. Wilson and First Essex
Bancorp, Inc. incorporated by reference to Exhibit 10.10 to the
Company's Quarterly report on Form 10-Q for the quarter ended
September 30, 1997.
*10.9- Special Termination Agreement dated January 1, 1994 and restated
as of October 9, 1997 between Brian W. Thompson and First Essex
Bancorp, Inc. incorporated by reference to Exhibit 10.12 to the
Company's Quarterly report on Form 10-Q for the quarter ended
September 30, 1997.
20
<PAGE>
*10.10- Form of Special Termination Agreement between First Essex
Bancorp, Inc., First Essex Bank, FSB, and each of William F.
Burke, John M. DiGaetano, and Wayne C. Golon, incorporated herein
by reference to Exhibit 10.13 to the Company's Quarterly Report
on Form 10-Q for the quarter ended September 30, 1997.
*10.11- Common Stock Option Agreement with Brian W. Thompson incorporated
herein by reference to Form S-8, Registration No.333-22183, filed
on February 21, 1997.
*10.12- First Essex Bancorp, Inc. 1997 Stock Incentive Plan incorporated
herein by reference to Form S-8, Registration No. 333-35057,
filed on September 5, 1997.
*10.13- Deferred Compensation Plan for Directors of First Essex Bancorp,
Inc. and Its Subsidiaries incorporated by reference to Exhibit
10.13 to the Company's Annual Report on Form 10-K for the year
ended December 31, 1998.
*10.14- First Essex Bancorp, Inc. Senior Management Incentive
Compensation Plan incorporated by reference to Exhibit 10.14 to
the Company's Annual Report on Form 10-K for the year ended
December 31, 1998.
*10.15- Agreement between First Essex Bancorp, Inc., First Essex Bank,
FSB and David W. Dailey incorporated by reference to Exhibit
10.15 to the Company's Annual Report on Form 10-K for the year
ended December 31, 1998.
*10.16- Agreement between First Essex Bank, FSB and David L. Savoie
incorporated by reference to Exhibit 10.16 to the Company's
Annual Report on Form 10-K for the year ended December 31, 1998.
(27) Financial Data Schedule
* Management contract or compensatory plan.
(b) Reports on Form 8-K
No reports on Form 8-K were filed by the Registrant during the
quarter ended March 31, 2000.
21
<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.
FIRST ESSEX BANCORP, INC.
-------------------------
(Registrant)
Date: May 10, 2000 By /s/ DOUGLAS E. MOISAN
---------------------
Douglas E. Moisan
Senior Vice President
and Principal Accounting Officer
22
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-END> MAR-31-2000
<CASH> 38,952
<INT-BEARING-DEPOSITS> 136
<FED-FUNDS-SOLD> 9,615
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 428,521
<INVESTMENTS-CARRYING> 21,179
<INVESTMENTS-MARKET> 21,179
<LOANS> 841,869
<ALLOWANCE> 11,345
<TOTAL-ASSETS> 1,409,349
<DEPOSITS> 1,043,427
<SHORT-TERM> 228,144
<LIABILITIES-OTHER> 8,753
<LONG-TERM> 26,220
0
0
<COMMON> 975
<OTHER-SE> 92,165
<TOTAL-LIABILITIES-AND-EQUITY> 1,409,349
<INTEREST-LOAN> 17,917
<INTEREST-INVEST> 7,440
<INTEREST-OTHER> 410
<INTEREST-TOTAL> 25,767
<INTEREST-DEPOSIT> 9,776
<INTEREST-EXPENSE> 13,614
<INTEREST-INCOME-NET> 12,153
<LOAN-LOSSES> 600
<SECURITIES-GAINS> (18)
<EXPENSE-OTHER> 7,782
<INCOME-PRETAX> 5,523
<INCOME-PRE-EXTRAORDINARY> 3,365
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,365
<EPS-BASIC> 0.44
<EPS-DILUTED> 0.43
<YIELD-ACTUAL> 3.72
<LOANS-NON> 2,705
<LOANS-PAST> 0
<LOANS-TROUBLED> 301
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 11,339
<CHARGE-OFFS> 758
<RECOVERIES> 163
<ALLOWANCE-CLOSE> 11,344
<ALLOWANCE-DOMESTIC> 11,344
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
