<PAGE>
_____________________________________________________________________________
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 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 period ended March 31, 1996
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from _________________ to _________________
Commission File Number: 0-18283
PINNACLE BANC GROUP, INC.
(Exact name of registrant as specified in its charter)
Illinois 36-3190818
-------- ----------
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
2215 York Road, Suite 208, Oak Brook, Illinois 60521
----------------------------------------------------
(Address of principal executive offices)
(708) 574-3550
--------------
(Registrant's telephone number, including area code)
______________________________________________________________________________
(Former name, former address and former fiscal year, if changed since last
report.)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes [ X ] No [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS: As of April 29, 1996, the registrant
had 4,330,138 shares outstanding of
common stock, $4.69 par value.
______________________________________________________________________________
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
Presented on the following pages are the unaudited consolidated balance
sheets of Pinnacle Banc Group, Inc. and subsidiaries ("Pinnacle") for March
31, 1996 and December 31, 1995, the related consolidated statements of
income for the three month periods ended March 31, 1996 and 1995, and the
related consolidated statements of cash flows for the three month periods
ended March 31, 1996 and 1995.
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and
Article 10 of Regulation S-X. Accordingly, they do not include all the
information and footnotes required by generally accepted accounting
principles for a complete financial statement. In the opinion of
management, all adjustments, such as estimated provisions for profit
sharing and bonus arrangements normally determined at year end, considered
necessary for a fair presentation have been included.
Footnote disclosure has been made about an event subsequent to quarter
end where Pinnacle has entered into a definitive agreement to acquire
Financial Security Corp. ("Financial Security") and its wholly-owned
subsidiary, Security Federal Savings and Loan Association of Chicago,
("Security Federal") and the adoption of Statement of Financial Accounting
Standards ("SFAS") No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to Be Disposed Of." The remaining
footnote disclosure has been omitted since it would substantially duplicate
the disclosure contained in the latest audited financial statements of
Pinnacle contained in the 1995 Annual Report to Shareholders.
2
<PAGE>
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
PINNACLE BANC GROUP, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
MARCH 31 DECEMBER 31
1996 1995
------------ ------------
<S> <C> <C>
ASSETS:
Cash and due from banks. . . . . . . . . . . . . . . $ 24,012,519 $ 27,272,616
Federal funds sold . . . . . . . . . . . . . . . . . 2,900,000 14,100,000
------------ ------------
Total cash and cash equivalents. . . . . . . . . . 26,912,519 41,372,616
Interest-bearing deposits. . . . . . . . . . . . . . 2,747,064 2,725,891
Securities:
Available for sale . . . . . . . . . . . . . . . . 422,361,662 426,928,812
(amortized cost: 3/31/96 - $414,659,000
12/31/95 - $418,637,000)
Loans. . . . . . . . . . . . . . . . . . . . . . . . 318,031,624 309,599,860
Less: Allowance for loan losses . . . . . . . . . . (6,040,179) (6,023,011)
------------ ------------
Net loans. . . . . . . . . . . . . . . . . . . . . 311,991,445 303,576,849
Premises and equipment . . . . . . . . . . . . . . . 16,516,190 15,565,402
Goodwill and other intangibles . . . . . . . . . . . 18,705,588 19,177,420
Other assets . . . . . . . . . . . . . . . . . . . . 8,254,450 9,350,293
------------ ------------
Total. . . . . . . . . . . . . . . . . . . . . . . $807,488,918 $818,697,283
============ ============
LIABILITIES:
Demand deposits:
Noninterest-bearing. . . . . . . . . . . . . . . . $ 91,206,120 $ 96,714,490
Interest-bearing . . . . . . . . . . . . . . . . . 87,676,098 89,230,444
Savings deposits . . . . . . . . . . . . . . . . . . 253,127,537 257,793,601
Other time deposits. . . . . . . . . . . . . . . . . 271,382,565 269,066,162
------------ ------------
Total deposits . . . . . . . . . . . . . . . . . . 703,392,320 712,804,697
Notes payable. . . . . . . . . . . . . . . . . . . . 20,700,000 20,600,000
Other liabilities. . . . . . . . . . . . . . . . . . 5,461,334 6,331,771
------------ ------------
Total liabilities. . . . . . . . . . . . . . . . . 729,553,654 739,736,468
------------ ------------
STOCKHOLDERS' EQUITY:
Preferred stock. . . . . . . . . . . . . . . . . . . -0- -0-
1,000 shares authorized, none issued
Common stock, $4.69 par. . . . . . . . . . . . . . . 20,410,022 20,505,323
20,000,000 shares authorized; shares issued and
outstanding: 3/31/96: 4,354,138
12/31/95: 4,374,469
Additional paid-in capital . . . . . . . . . . . . . 18,001,282 17,897,900
Retained earnings. . . . . . . . . . . . . . . . . . 32,987,437 33,505,657
Unrealized gains in securities available
for sale. . . . . . . . . . . . . . . . . . . . . 6,536,523 7,051,935
------------ ------------
Total stockholders' equity . . . . . . . . . . . . 77,935,264 78,960,815
------------ ------------
Total. . . . . . . . . . . . . . . . . . . . . . . $807,488,918 $818,697,283
============ ============
</TABLE>
3
<PAGE>
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
PINNACLE BANC GROUP, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
FOR THE THREE MONTHS
ENDED MARCH 31
---------------------------
1996 1995
---------------------------
<S> <C> <C>
INTEREST INCOME:
Loans . . . . . . . . . . . . . . . . . . . . . . . . $ 6,458,895 $ 6,644,824
Securities:
Taxable . . . . . . . . . . . . . . . . . . . . . . 5,301,742 6,502,727
Tax exempt . . . . . . . . . . . . . . . . . . . . 444,026 840,425
Interest-bearing deposits, Federal funds sold
and other. . . . . . . . . . . . . . . . . . . . . 101,106 273,997
---------------------------
Interest income. . . . . . . . . . . . . . . . . . 12,305,769 14,261,973
---------------------------
INTEREST EXPENSE:
Deposits:
Interest-bearing demand. . . . . . . . . . . . . . 448,996 403,869
Savings. . . . . . . . . . . . . . . . . . . . . . 1,918,328 2,094,978
Other time . . . . . . . . . . . . . . . . . . . . 3,688,559 3,070,244
Short-term borrowings . . . . . . . . . . . . . . . . 2,157 35,995
Notes payable . . . . . . . . . . . . . . . . . . . . 356,508 564,254
---------------------------
Interest expense . . . . . . . . . . . . . . . . . 6,414,548 6,169,340
---------------------------
Net Interest Income . . . . . . . . . . . . . . . . . 5,891,221 8,092,633
Provision for loan losses. . . . . . . . . . . . . -0- 75,000
---------------------------
Net interest income after provision for
loan losses. . . . . . . . . . . . . . . . . 5,891,221 8,017,633
---------------------------
OTHER INCOME:
Banking services and other. . . . . . . . . . . . . . 1,213,770 1,449,196
Trust services. . . . . . . . . . . . . . . . . . . . 546,699 470,636
Net securities gains. . . . . . . . . . . . . . . . . 263,722 346,118
---------------------------
Other income . . . . . . . . . . . . . . . . . . . 2,024,191 2,265,950
---------------------------
OTHER EXPENSE:
Salaries, profit sharing and other employee
benefits . . . . . . . . . . . . . . . . . . . . . 3,011,320 2,967,391
Occupancy . . . . . . . . . . . . . . . . . . . . . . 678,441 587,175
Amortization of goodwill and other intangibles. . . . 471,832 469,643
Other operating expenses. . . . . . . . . . . . . . . 1,503,110 2,031,200
---------------------------
Other expense. . . . . . . . . . . . . . . . . . . 5,664,703 6,055,409
---------------------------
Income before income taxes . . . . . . . . . . . . . . . 2,250,709 4,228,174
Provision for income taxes. . . . . . . . . . . . . . 694,000 822,000
---------------------------
NET INCOME . . . . . . . . . . . . . . . . . . . . . . . $ 1,556,709 $ 3,406,174
===========================
WEIGHTED AVERAGE NUMBER OF COMMON AND
COMMON EQUIVALENT SHARES OUTSTANDING. . . . . . . . . 4,381,940 4,432,243
EARNINGS PER SHARE . . . . . . . . . . . . . . . . . . . 0.36 0.77
</TABLE>
4
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
PINNACLE BANC GROUP, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
FOR THE THREE MONTHS
ENDED MARCH 31
------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES: 1996 1995
------------- -------------
<S> <C> <C>
Net income . . . . . . . . . . . . . . . . . . . . . . $ 1,556,709 $ 3,406,174
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation . . . . . . . . . . . . . . . . . . . 352,188 315,239
Amortization of goodwill and other
intangibles. . . . . . . . . . . . . . . . . . . 471,832 469,643
Amortization of purchase accounting
adjustments. . . . . . . . . . . . . . . . . . . 49,814 25,691
Provision for loan losses. . . . . . . . . . . . . -0- 75,000
Discount accretion . . . . . . . . . . . . . . . . (5,087,283) (5,781,344)
Premium amortization . . . . . . . . . . . . . . . 49,462 56,691
Gain on sale of securities . . . . . . . . . . . . (263,722) (346,118)
Decrease in interest receivable. . . . . . . . . . 143,184 275,103
Increase in interest payable . . . . . . . . . . . 172,062 636,762
Decrease in other assets . . . . . . . . . . . . . 752,659 1,911,905
Decrease in other liabilities. . . . . . . . . . . (1,042,497) (734,974)
Other, net . . . . . . . . . . . . . . . . . . . . 174,306 66,567
------------- -------------
Total adjustments. . . . . . . . . . . . . . . (4,227,995) (3,029,835)
Net cash provided by (used for)
operating activities . . . . . . . . . . . . (2,671,286) 376,339
CASH FLOWS FROM INVESTING ACTIVITIES:
Cash portion of acquisition, net of cash
acquired (Note) . . . . . . . . . . . . . . . . . -0- (14,799,803)
Proceeds from sale of securities. . . . . . . . . . 733,653,678 664,425,829
Proceeds from maturities and paydowns of
securities . . . . . . . . . . . . . . . . . . . 2,625,995 6,066,006
Purchase of securities available for sale . . . . . (726,860,929) (649,007,634)
Net decrease (increase) in interest-bearing
deposits . . . . . . . . . . . . . . . . . . . . (21,173) 5,930,417
Net loan principal (advanced) collected . . . . . . (8,441,250) 9,242,749
Premises and equipment expenditures . . . . . . . . (1,365,905) (443,954)
------------- -------------
Net cash provided by (used for)
investing activities . . . . . . . . . . . . (409,584) 21,413,610
CASH FLOWS FROM FINANCING ACTIVITIES:
Net decrease in total deposits. . . . . . . . . . . (9,412,377) (26,948,587)
Net decrease in short-term borrowings . . . . . . . -0- (4,800,000)
Proceeds from notes payable . . . . . . . . . . . . 2,900,000 30,300,000
Principal reductions of notes payable . . . . . . . (2,800,000) (6,000,000)
Issuance of common stock. . . . . . . . . . . . . . 132,285 417,215
Purchase and retirement of common stock . . . . . . (841,950) (326,915)
Dividends paid. . . . . . . . . . . . . . . . . . . (1,357,185) (1,281,430)
------------- -------------
Net cash used for financing activities . . . . (11,379,227) (8,639,717)
Net increase (decrease) in cash and cash
equivalents. . . . . . . . . . . . . . . . . . . . . . (14,460,097) 13,150,232
Cash and cash equivalents at beginning of period . . . . 41,372,616 20,265,069
Cash and cash equivalents at end of period . . . . . . . $ 26,912,519 $ 33,415,301
============= ============
CASH PAID DURING PERIOD FOR:
Interest. . . . . . . . . . . . . . . . . . . . . . $ 6,242,486 $ 5,537,121
Income taxes. . . . . . . . . . . . . . . . . . . . 50,000 -0-
</TABLE>
NOTE: On January 6, 1995, Acorn Financial Corp and its subsidiary,
Suburban Trust & Savings Bank, was purchased by Pinnacle for $23,413,897 in
cash. At the date of purchase, the balance sheet of Acorn included cash
and cash equivalents of $8,614,094 resulting in a net cash position of
$14,799,803.
5
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
PINNACLE BANC GROUP, INC. AND SUBSIDIARIES
SUBSEQUENT EVENT:
On April 22, 1996, Pinnacle entered into a definitive agreement to
acquire Financial Security and its wholly-owned subsidiary, Security
Federal. Pursuant to the agreement, Financial Security will merge into
Pinnacle with Security Federal initially becoming a separate subsidiary of
Pinnacle. Under the terms of the agreement, holders of Financial Security
common stock will receive $28.50 per share, subject to adjustment, in cash,
Pinnacle common stock, or a combination thereof. The aggregate transaction
value is estimated to be $47,000,000. At December 31, 1995, Financial
Security had total assets of $277,000,000, loans of $194,000,000, deposits
of $194,000,000, and stockholders' equity of $39,000,000.
The acquisition agreement is subject to approval by the shareholders of
Financial Security and Pinnacle, approval of the appropriate regulatory
authorities, and satisfaction of certain other customary conditions. It is
anticipated that the transaction will be completed in the third quarter of
1996.
LONG-LIVED ASSETS:
On January 1, 1995, Pinnacle adopted Statement of Financial Accounting
Standards ("SFAS") No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed Of." The standard requires
evaluation of impairment of long-lived assets to be reviewed when
indicators of impairment are present. Indicators of impairment include,
but are not limited to, a significant decrease in the market value of an
asset; a significant change in the manner an asset is used; or a
significant adverse change in legal, business or regulatory factors which
affect the ability to use the asset. The fair value of the long-lived
assets is compared to the carrying value, and any impairment is recorded in
current earnings. Currently, there are no indicators present to warrant
any evaluation of the impairment of Pinnacle's long-lived assets and, thus,
there is no effect of the adoption of this standard on the financial
position and results of operations of Pinnacle.
6
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
NET INCOME - THREE MONTHS ENDED MARCH 31, 1996 AND 1995
Consolidated net income was $1,557,000, or $0.36 per share, on a fully
diluted basis for the three months ended March 31, 1996 (the "first
quarter"), a per share decrease of 53% from the $3,406,000, or $0.77 per
share earned in the first three months of 1995. The annualized return on
average assets was 0.78% for the first three months of 1996 and 1.67% for
the first three months of 1995. For each period, the return on average
equity was 8.7% and 20.7%, respectively. Return on average assets and
equity for the same periods, calculated using the effects of SFAS No. 115
would not be materially different.
The primary factor for the lower earnings was a 27% decrease in net
interest income in the first quarter of 1996 compared with the same period
of one year ago. The decrease results with the narrowing of Pinnacle's net
interest margin to 3.33% compared to 4.58% for the first three months of
1995. The relatively low interest rate environment, coupled with Pinnacle's
high volume of U. S. Government securities and level yield curve have
continued to put pressure on the net interest margin, compressing it
throughout 1995 and into the first quarter of 1996. A decrease in average
earning assets has also contributed to the decrease in the net interest
margin.
Other income, excluding net securities gains, decreased 8% compared
with the same period of 1995. Other expenses decreased 6%, more than
offsetting the decrease in other income.
Net Interest Income
The primary component of Pinnacle's consolidated earnings is net
interest income, or the difference between interest income on earning
assets and interest paid on supporting liabilities. The net interest
margin is net interest income expressed as a percentage of average earning
assets. Pinnacle's earning assets consist of loans, securities,
interest-bearing deposits at financial institutions and Federal funds sold.
Supporting liabilities primarily consist of deposits, short-term
borrowings and Pinnacle's notes payable. A portion of Pinnacle's interest
income is earned on tax exempt investments such as state and municipal
bonds. In an effort to state this tax exempt income and its resultant
yields on a basis comparable to all other taxable investments, an
adjustment is made to analyze this income on a taxable equivalent basis.
During the first three months of 1996, Pinnacle's average earning
assets were $736,820,000, a 2% decrease from the comparable period of the
previous year. The decrease in average assets was primarily in Federal
funds sold and non-taxable securities, as a result of the net decrease in
deposits. The net interest margin for the first three months of 1996 was
3.33%, down from 4.58% of the same period a year ago. Net interest income
on a fully taxable equivalent basis was $6,143,000 for the first three
months of 1996, or 28% lower than the comparable period in 1995. Actual
net interest income decreased 27% as a result of the shrinkage of both the
net interest margin and average earning assets.
The yield earned on total earning assets was 6.82% for the first three
months of 1996 compared to 7.88% for the same period of 1995. The decrease
resulted from the lower level of yields earned on taxable securities and
loans. The average rate on interest-bearing deposits and Federal funds sold
remained relatively flat, increasing by only 3 basis points. The average
rate on taxable securities was 5.38% for the first three months of 1996
compared to 7.13% of the same period a year ago. The decrease in the yield
on taxable securities was primarily a
7
<PAGE>
result of the lower level of rates paid on these securities compared to
those carried a year ago. The average volume of taxable securities
increased $29 million in the comparable period, with the corresponding
decrease in non-taxable securities. The average rate on non-taxable
securities increased 63 basis points, while the average balance decreased
$22 million. The decrease in average balances was due to the sale late in
the first quarter of 1995 of certain non-taxable securities which were
acquired from AFC with lower rates, as well as normal maturities of the
non-taxable portfolio. The rate earned on loans decreased 15 basis points
due primarily to the decrease in the prime rate since the first quarter of
1995 as well as generally lower interest rates on certain types of loans,
primarily real estate.
The average cost of interest-bearing liabilities increased only 29
basis points to 4.06% from 3.77% paid in the first three months of 1995.
The average rate paid on interest-bearing demand deposits and savings
deposits remained relatively flat while rates paid on money market deposits
increased 52 basis points. The average rate paid on other time deposits
increased 65 basis points. Pinnacle has taken action at appropriate
intervals to adjust the rates on all deposit accounts to not only keep them
in line with market rates, but to meet the needs of its particular customer
bases. For example, two of the subsidiary banks have added a third level
of interest rates for certain of its high balance money market customers,
with rates comparable to money market mutual funds. This move was done to
lessen the loss of these deposits to those non-bank types of investments.
Management began late in 1994 and throughout 1995 to increase interest
rates on certain time deposits to also keep in line with market rates.
Generally, rates on time deposits have remained flat or dropped slightly in
the first quarter of 1996, however, the effect of the increases in previous
quarters has added to the increase in these rates paid. The increase in
rates paid on other time deposits have caused customers to switch their
savings deposits into other time deposits, as evidenced by the decrease in
the average balance in savings deposits and the corresponding increase in
the average balance of other time deposits.
The average balance in short-term borrowings decreased $2 million,
primarily resulting from less liquidity needs at Pinnacle's savings bank.
The average rate paid on notes payable decreased 94 basis points as these
notes are tied to either prime or LIBOR-based indices, which have decreased
since the first quarter of 1995. The average balance in notes payable
decreased approximately $8 million due to paydowns by Pinnacle.
Although the average balance of interest-bearing liabilities decreased
from the first quarter of 1995, the increase in rates paid, as well as the
shift of deposits to higher paying deposit categories, resulted in total
interest expense being $245,000 higher in the first three months of 1996
compared to the same period of 1995.
A detailed Analysis of Net Interest Income for the three month periods
ended March 31, 1996 and 1995 is included on Page 13.
Provision for Loan Losses
Management records a provision for loan losses in an amount sufficient
to maintain the allowance for loan losses at a level commensurate with the
risks in the loan portfolio. The allowance for loan losses is adjusted
through charges to current income based on factors such as past loan loss
experience, management's evaluation of known potential losses in the loan
portfolio, and prevailing economic conditions.
There was no provision for loan losses in the first three months of
1996 compared to $75,000 for the first three months of 1995. In the fourth
quarter of 1995, Pinnacle reversed the provision for loan losses made in
the first quarter due to several factors, including the level of allowance
for possible loan losses to total loans, which has been steadily increasing
for the last
8
<PAGE>
five years, management's assessment of the overall adequacy for allowance
for loan losses, as well as the downward trend of net charge-offs to loans.
Pinnacle had net recoveries of $17,000 in the first three months of 1996
compared to net recoveries of $52,000 in 1995. The allowance for loan
losses was $6,040,000, or 1.90% of total loans, at March 31, 1996, compared
to 1.95% at December 31, 1995.
Total nonperforming assets totalled $7,399,000, down $900,000 from a
total of $8,299,000 at December 31, 1995. Nonperforming assets consisted
of $5,331,000 in nonaccrual loans, $946,000 in loans past due greater than
90 days and still accruing, $908,000 in restructured loans, and $214,000 in
other real estate owned. Over fifty percent of these nonperforming assets
resulted from the acquisition of AFC in 1995. The investment in impaired
loans at quarter end totalled $5,731,000 and are included in the totals
above.
NON-INTEREST INCOME AND EXPENSE
The major components of Pinnacle's non-interest income consist of
service charges on deposit accounts and other banking income, trust fees
and net gains or losses on the sale of securities. Fees on banking
services and other income decreased $235,000. The decrease was due
primarily to a $319,000 gain on the sale of an installment note in the
first quarter of 1995. Absent the effect of that gain, other income
increased $84,000, including an increase in fees earned on the sale of
non-bank investment products of $28,000. Trust fees increased 16% on a
period-to-period basis. Total trust assets under management amounted to
$244,000,000, or an 11% increase of a year ago.
Gains on the sale of securities, on a pre-tax basis, were $264,000 in
the first three months of 1996 compared to net gains of $346,000 in the
same period of 1995. The net gains in 1996 are related to the sales in
Pinnacle's U. S. Government securities portfolio.
Security sales relating to Pinnacle's U. S. Government securities
portfolio are made as part of Pinnacle's disciplined portfolio funds
management system. The timing of these sales and the determination of the
acceptable maturity for the reinvestment of the proceeds is made dependent
on the slope of the yield curve and on management's assessment of the
acceptable interest rate risk for Pinnacle. The use of the securities
portfolio to manage interest rate risk is especially crucial to Pinnacle
because of the fact that its loan to asset ratio is an unusually low 39%.
This results in a securities portfolio significantly larger than comparable
financial institutions.
Management has always viewed the gains recorded on this program as
closely related to its net interest income as opposed to one-time security
gains or losses. Accordingly, since implementation of the program, the
yield on Pinnacle's U. S. Government portfolio has outperformed the U. S.
Treasury yield by 32 basis points and by including the net gain since
inception of the program, the total yield is 142 basis points higher than
the same Index. For the first quarter of 1996, due to the relative
flatness of the yield curve, the portfolio has only outperformed the Index
by 18 basis points and by including the net gain, by 48 basis points.
Non-interest expense decreased 6% for the first three months of 1996
compared to the same period last year. The decrease was in other expense,
which dropped 26% primarily due to lower FDIC insurance premiums which
decreased $338,000, and a reduction in data processing expenses of $116,000
due to one-time conversion costs incurred during the first quarter
of 1995. Employee compensation and benefits increased only 1% on a
quarter-to-quarter basis, where the increase in salaries due to normal
raises of approximately 4% were offset by the planned reduction in staff
that occurred after the acquisition of AFC in 1995. Occupancy expense
increased 16% due to the increase in certain real estate tax accruals, as
well as greater depreciation due to a new branch building at one of
Pinnacle's subsidiary banks which was put into service in the second
quarter of 1995.
9
<PAGE>
INCOME TAXES
Pinnacle's Federal income tax return is prepared on a consolidated
basis including the accounts of its subsidiary banks. The provision for
income taxes was $694,000 for the first three months of 1996 compared with
$822,000 for the first three months of 1995. The lower provision for taxes
in the first three months of 1996 was primarily the result of lower pre-tax
income in the first quarter of 1996.
BALANCE SHEET
Total consolidated assets were $807,489,000 at March 31, 1996, or a 1%
drop from year-end 1995. The decrease, primarily in cash and cash
equivalents, was the result of the reduction in deposits, primarily demand
and savings deposits.
Pinnacle's securities portfolio is its most significant balance sheet
asset. Total securities were $422,362,000 at March 31, 1996 and consisted
of U. S. Government securities amounting to $367,952,000, mortgage-backed
securities and CMO's of $9,565,000, state and municipal bonds of
$24,571,000, and corporate and other securities of $20,274,000. The total
securities outstanding at March 31, 1996 was down 1% from year-end 1995,
however, the portfolio at quarter-end retained relatively the same mix.
U. S. Government securities amounted to $367,952,000, or 46% of assets
at March 31, 1996. The average maturity of these securities was
approximately four months. Certain U. S. Government securities (primarily
U. S. Treasury bills) are part of Pinnacle's term taxable securities
strategy which has been designed to manage Pinnacle's interest rate risk
and to take advantage of the slope in the yield curve. The decision to
undertake intermittent sales of these securities is based on management's
assessment of economic conditions. For example, management will undertake
sales of securities based on the slope of the yield curve and its
determination that the reinvestment of the proceeds into a longer or
shorter term security is an acceptable alternative given management's
assessment of interest rate risk. At March 31, 1996, U. S. Government
securities had gross unrealized losses of $261,000 on a pre-tax basis.
Other securities held by Pinnacle, amounting to $54,410,000, at March
31, 1996, consisted of mortgage-backed, CMO's, state and municipal, and
corporate and equity securities. At quarter end, these securities had
gross unrealized gains of $8,003,000 and gross unrealized losses of $39,000
on a pre-tax basis. Currently, Pinnacle is not using derivative products
for hedging or other purposes.
Total loans amounted to $318,032,000 at March 31, 1996, up 3% from
year-end 1995. The increase was part of a strategic effort on management's
part to increase the loan portfolio without sacrificing credit quality of
the portfolio. The increase was primarily in commercial loans, which
increased 5% or approximately $4,400,000. At March 31, 1996, 28% of the
loans were commercial, real estate loans amounted to 56%, and installment
loans were 16% of the portfolio. Pinnacle's loan to asset ratio was 39% at
March 31, 1996.
Goodwill and other intangibles amounted to $18,706,000, or 24% of
stockholders' equity, at March 31, 1996.
Total deposits were $703,392,000 at March 31, 1996, or 1% lower than
year-end 1995. The decrease in deposits was primarily in transaction
accounts, including both noninterest-bearing and interest-bearing demand of
approximately $7,100,000, which balances fluctuate based on customer needs
and are not as rate sensitive as savings and time deposits. There was also
an approximate $4,700,000 drop in savings deposits. Offsetting the drop in
savings deposits was an increase in other time deposits of approximately
$2,300,000. Management
10
<PAGE>
believes the drop in savings deposits is the result of the customers
attempting to earn higher rates by moving to non-bank products and special
term deposits at other financial institutions or brokerage-type companies.
Changing demographics of certain of the banking center locations has also
led to the shift and loss of deposits. Management continues to take an
active role to increase and maintain interest rates on deposits and provide
products to reduce the disintermediation of funds. As evidenced by the
shift in deposits to other time deposits, customers are more willing to
commit their funds to defined periods of time; Pinnacle's rates and new
deposit products are not only attracting new customers, but maintaining
existing customers. At March 31, 1996, the percentage of total deposits
for each category were: Noninterest-bearing deposits, 13%;
Interest-bearing demand deposits, 12%; Savings accounts (including money
market accounts), 36%; and Other time deposits, 39%.
Pinnacle's notes payable were $20,700,000 at March 31, 1996.
Outstandings consist of $18,000,000 remaining on the note used to purchase
AFC, and $2,700,000 drawn on Pinnacle's revolving line which is used for
purchasing equity securities and other corporate needs. At year-end 1995,
outstandings consisted of $20,000,000 on the AFC note and $600,000 drawn on
the revolving line.
CAPITAL RESOURCES
Total stockholders' equity of Pinnacle was $77,935,000 at March 31,
1996 and $78,961,000 at December 31, 1995. The ratio of equity to assets
was 9.65% and 9.64% at each period end, respectively.
The Federal Reserve Board ("Board") regulations prescribe capital
requirements for bank holding companies. Pinnacle must have a Leverage
Capital Ratio with a minimum level of Tier One capital to total assets of
3.00%. Tier One capital consists of common stock, additional paid-in
capital, retained earnings and is exclusive of Pinnacle's allowance for
loan losses, goodwill and other intangibles, and unrealized gains (losses)
on securities available for sale. In addition, the Board has issued
Risk-Based Capital Guidelines with a minimum standard of total regulatory
capital to risk weighted assets of 8.00%. The structure of Pinnacle's
balance sheet results in a Risk-Based Capital Ratio significantly in excess
of the guidelines.
The following table provides an analysis of the minimum capital
requirements (as defined), ratios and the excess over the minimum which
Pinnacle holds as capital as of March 31, 1996, in thousands (except
percentages).
<TABLE>
MINIMUM MINIMUM EXCESS
REQUIRED REQUIRED ACTUAL ACTUAL OVER
RATIO RATIO RATIO AMOUNT MINIMUM
-------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Leverage Capital 3.00% $23,663 6.74% $52,693 $29,030
Risk-based Capital:
Tier One 4.00 12,726 16.56 52,693 39,967
Total (Tier Two) 8.00 25,452 17.81 56,670 31,218
</TABLE>
At December 31, 1995, Pinnacle's total risk-based capital ratio was
18.09%.
In addition, each of Pinnacle's subsidiary banks must meet similar
minimum capital requirements as prescribed by Federal and state banking
regulatory authorities. At March 31, 1996, Pinnacle and each of its
subsidiary banks was in compliance with the current capital guidelines and
are considered "well-capitalized" under regulatory standards.
Book value per share was $17.90 at March 31, 1996 compared to $18.05 at
December 31, 1995. Dividends amounting to $0.31 per share were paid in the
first three months of 1996.
11
<PAGE>
LIQUIDITY
As characteristic of the banking industry, Pinnacle's indicators of
liquidity are principally its deposit base, loan and investment portfolios.
On a short term basis, adjustments are made in these categories based on
deposit fluctuations and loan demand. Longer term, liquidity is determined
by growth objectives, rate pricing policies and the ability to borrow debt
or raise equity. In general, Pinnacle is able to meet deposit withdrawals
and to fund loan demand through earnings and the maturity or sale of
securities. Pinnacle would also be able to respond to short term cash flow
needs through short term borrowings. On a longer term basis, Pinnacle has
the ability to incur debt or to raise equity through the sale of preferred
or common stock.
Pinnacle's cash flows are comprised of three general types. Cash flows
from operating activities are primarily Pinnacle's net income. Cash flows
from investing activities consist of loans made to and collected from
customers; and purchases, sales and maturities of securities available for
sale. Cash flows from financing activities are determined by Pinnacle's
deposit base and from Pinnacle's ability to borrow and repay debt and issue
or repurchase stock. For the three months ended March 31, 1996, cash flows
were generated from a $9,400,000 decrease in securities. Cash flow uses
and needs included a $9,400,000 decrease in deposits, an $8,400,000 net
loan principal advanced, and $1,400,000 to pay dividends. Pinnacle's net
cash position decreased $14,500,000 with the decrease primarily in Federal
funds sold of $11,200,000 and the remainder in cash and due from banks.
Pinnacle's subsidiary banks have a relatively stable base of deposits
and any increased loan demand can be sufficiently funded without a material
change in its balance sheet. Pinnacle's corporate strategy includes
profitable acquisitions. Certain acquisitions would be primarily funded
with debt. Reductions of debt would be made from Pinnacle's earnings.
At March 31, 1996, Pinnacle had a line of credit of $10,000,000 with an
unaffiliated bank from which $2,700,000 had been drawn. The outstanding
$18,000,000 note related to the AFC acquisition and is secured by the stock
of Pinnacle's subsidiary banks.
Regulatory requirements exist which influence Pinnacle's liquidity and
cash flow needs. These requirements include the maintenance of
satisfactory capital ratios on a consolidated and subsidiary bank basis,
restrictions on the amount of dividends which a subsidiary bank may pay and
reserve requirements with the Federal Reserve Bank. Based on these
restrictions, at April 1, 1996, bank subsidiaries could have declared
approximately $2,244,000 in dividends without requesting approval of the
applicable Federal or State regulatory agency. In addition, Pinnacle has
made loan commitments which could result in increased cash flow
requirements for loans. Management is of the opinion that these regulatory
requirements and loan commitments will not have a significant impact on the
liquidity of Pinnacle. Management is not aware of any known trends, events
or uncertainties that will have, or that are reasonably likely to have, a
material effect on Pinnacle except the pending acquisition of Financial
Security, as previously discussed in the Notes to Consolidated Financial
Statements. Management is also not aware of any current recommendations by
the regulatory authorities which, if implemented, would have an adverse
material effect on Pinnacle. There are several issues which have been
pending before Congress, including recapitalization of the SAIF fund, and
the elimination of the Thrift Charter. The recapitalization of the SAIF
fund is estimated to cost Pinnacle Bank approximately $1,000,000 on a
pre-tax basis.
12
<PAGE>
ANALYSIS OF NET INTEREST INCOME
PINNACLE BANC GROUP, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
THREE MONTHS ENDED THREE MONTHS ENDED
MARCH 31, 1996 MARCH 31, 1995
------------------------------- --------------------------------
(DOLLARS IN THOUSANDS) AVERAGE AVERAGE
BALANCE INTEREST RATE BALANCE INTEREST RATE
------------------------------- --------------------------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS:
Interest-earning assets:
Interest-bearing deposits and
Federal funds sold . . . . . . . . . . $ 8,034 $ 101 5.03% $ 21,904 $ 274 5.00%
Taxable securities . . . . . . . . . . . 393,900 5,302 5.38 365,070 6,503 7.13
Nontaxable securities . . . . . . . . . . 22,370 673 12.03 44,655 1,273 11.40
Loans . . . . . . . . . . . . . . . . . . 12,516 6,482 8.30 316,586 6,689 8.45
------------------------------- --------------------------------
Total interest-earning assets. . . . . 736,820 12,558 6.82 748,215 14,739 7.88
Noninterest-earning assets:
Cash and due from banks . . . . . . . . . 23,676 24,910
Allowance for loan losses . . . . . . . . (6,031) (6,239)
Other assets . . . . . . . . . . . . . . 45,105 48,105
-------- --------
Total assets . . . . . . . . . . . . . $799,570 $814,991
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY:
Interest-bearing liabilities:
Interest-bearing demand deposits . . . . $ 88,198 $ 449 2.04% $ 86,544 $ 404 1.87%
Savings deposits. . . . . . . . . . . . . 208,095 1,556 2.99 229,451 1,732 3.02
Money market deposits. . . . . . . . . . 44,622 362 3.25 53,219 363 2.73
Other time deposits . . . . . . . . . . . 270,366 3,689 5.46 255,540 3,070 4.81
Short-term borrowings. . . . . . . . . . 124 2 6.45 2,239 36 6.43
Notes payable . . . . . . . . . . . . . . 19,714 357 7.24 27,577 564 8.18
------------------------------- --------------------------------
Total interest-bearing liabilities . . 631,119 6,415 4.06 654,570 6,169 3.77
Noninterest-bearing liabilities:
Demand deposits . . . . . . . . . . . . . 90,233 90,072
Other liabilities . . . . . . . . . . . . 6,810 4,478
Stockholders' equity . . . . . . . . . . 71,408 65,871
-------- --------
Total liabilities and
stockholders' equity. . . . . . . . $799,570 $814,991
======== ========
Net interest income and margin. . . . . . . . . $ 6,143 3.33% $ 8,570 4.58%
=================== ====================
</TABLE>
Interest income is adjusted to taxable equivalents for the tax-exempt
assets based upon a Federal income tax rate of 34% for 1996. The fully
taxable equivalent adjustment to interest income for the three months ended
March 31, 1996 and 1995 was $252 and $477 respectively. The average
balance on nonaccrual loans is included in the total loans category. The
average balances do not include the effects of SFAS No. 115.
13
<PAGE>
PART II - OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
At the Annual Meeting of Pinnacle held on April 16, 1996, all of the
proposed Directors listed in the Proxy Statement were elected. Mark P.
Burns, Samuel M. Gilman, Albert Giusfredi, John J. Gleason, John J.
Gleason, Jr., Donald G. King, James A. Maddock, James J. McDonough, William
C. Nickels, and James R. Phillip, Jr. received votes totalling 3,209,650
shares, or 73.71% of the outstanding shares, FOR, 62 shares, or 0% AGAINST.
Richard W. Burke received votes totalling 3,170,840 shares, or 72.82% of
the outstanding shares, FOR, 38,872 shares, or 0.89% AGAINST; William J.
Finn, Jr. received votes totalling 3,209,470 shares, or 73.71% of the
outstanding shares, FOR, 242 shares, or 0.01% AGAINST; James L. Greene
received votes totalling 3,170,840 shares, or 72.82% of the outstanding
shares, FOR, 38,872 shares, or 0.89% AGAINST; William P. Gleason received
votes totalling 3,170,750 shares, or 72.80% of the outstanding shares, FOR,
38,962 shares, or 0.89% AGAINST; John E. O'Neill received votes totalling
3,170,494 shares, or 72.80% of the outstanding shares, FOR, 39,218 shares,
or 0.90% AGAINST; and Kenneth C. Whitener, Jr. received votes totalling
3,170,840 shares, or 72.82% of the outstanding shares, FOR, 38,872 shares,
or 0.89% AGAINST. Each of the directors was elected for a term of one
year.
A total of 3,209,712 shares, accounting for 73.72% of the outstanding
shares, were represented in person or by proxy at the Annual Meeting.
No other items were voted on at the Annual Meeting.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) The following exhibit is filed as part of this Form 10-Q.
DESCRIPTION NO.
EXHIBIT UNDER ITEM 601 EXHIBIT
NUMBER OF REGULATION S-K DESCRIPTION
------- ----------------- ---------------------
1 (20) Report furnished to
securities holders.
First Quarter Report.
(b) Reports on Form 8-K.
Form 8-K was filed on April 29, 1996 reporting that Pinnacle entered
into an Agreement and Plan of Merger on April 22, 1996 with Financial
Security Corp. pursuant to which Pinnacle will acquire Financial Security.
14
<PAGE>
SIGNATURE
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.
PINNACLE BANC GROUP, INC.
Dated: May 10, 1996 By: /s/ John J. Gleason, Jr.
________________________________
John J. Gleason, Jr.
Director, Vice Chairman and
Chief Executive Officer
By: /s/ Sara J. Mikuta
________________________________
Sara J. Mikuta
Chief Financial Officer
and Treasurer
15
<PAGE>
_______________________________________________________________________________
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
____________________________________________
EXHIBITS
TO
FORM 10-Q
Annual Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
____________________________________________________
PINNACLE BANC GROUP, INC.
(Exact name of registrant as specified in its charter)
_______________________________________________________________________________
<PAGE>
EXHIBIT 1. REPORT FURNISHED TO SECURITIES HOLDERS.
<PAGE>
CORPORATE INFORMATION
- - -------------------------------------------
-------------------------------------------
CORPORATE HEADQUARTERS
2215 York Road, Suite 208
Oak Brook, Illinois 60521
(708) 574-3550
SUBSIDIARY BANKS
[LOGO]
Pinnacle Bank
CICERO, BERWYN, NORTH RIVERSIDE,
LAGRANGE PARK, HARVEY,
OAK PARK, WESTMONT
Pinnacle Bank of the Quad-Cities
SILVIS, GREEN ROCK-COLONA
Batavia Savings Bank
BATAVIA, ELBURN
COMMON STOCK
Common stock is traded on NASDAQ
with the ticker symbol "PINN"
and listed with the
abbreviations "PinBG"
and "PinclBns"
PRINCIPAL MARKET MAKERS
The Chicago Corporation
Howe Barnes Investments, Inc.
[LOGO]
[LOGO]
FIRST QUARTER REPORT
MARCH 31, 1996
- - -------------------------------------------
-------------------------------------------
<PAGE>
FINANCIAL HIGHLIGHTS
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED MARCH 31
(UNAUDITED; IN THOUSANDS -------------------------------------
EXCEPT PER SHARE DATA) 1996 1995 CHANGE
---------- ---------- -------------
<S> <C> <C> <C>
FOR THE PERIOD:
Net income................................................................. $ 1,557 $ 3,406 (54)%
Return on average equity................................................... 8.7% 20.7%
Return on average assets................................................... 0.78 1.67
PER SHARE:
Net income--fully diluted.................................................. $ 0.36 $ 0.77 (53)
Dividends.................................................................. 0.31 0.29 +7
Book value................................................................. 17.90 16.68 +7
AT MARCH 31:
Total assets............................................................... $ 807,498 $ 813,184 (1)
Loans...................................................................... 318,032 314,735 +1
Deposits................................................................... 703,392 703,928 --
Stockholders' equity....................................................... 77,935 73,684 +6
</TABLE>
- - --------------------------------------------------------------------------------
LETTER TO SHAREHOLDERS
- - --------------------------------------------------------------------------------
Dear Shareholder:
Pinnacle reported net income of $1,557,000, or $0.36 per share on a fully
diluted basis for the first quarter of 1996, a decrease of 53% on a per share
basis from the $3,406,000, or $0.77 per share earned in the first quarter of
1995. The decrease in net income was primarily the result of a decline in
Pinnacle's net interest income. Earnings for the first quarter equated to
returns of 8.7% and 0.78% on average equity and average assets, respectively,
compared to a return on average equity of 20.7% and a return on average assets
of 1.67% for the first quarter of 1995.
Total consolidated assets amounted to $807,489,000 at March 31, 1996, a 1%
decrease from the same date one year ago. Stockholders' equity totalled
$77,935,000, up 6% from March 31, 1995. Total loans were $318,032,000, an
increase of 3% from year end.
The primary factor contributing to the first quarter earnings decline was a
27% decrease in net interest income. Pinnacle's net interest margin declined to
3.33% for the first quarter of 1996 compared to a margin of 3.51% for the fourth
quarter of 1995 and 4.58% earned in the first three months of 1995. Total
average earning assets were down 2% on a quarter-to-quarter comparative basis.
A significantly lower yield earned on Pinnacle's taxable securities
portfolio, principally consisting of short term U. S. Government Treasury Bills,
was the primary factor driving the decrease. The yield on taxable securities,
absent the effect of any securities gains or losses, amounted to 5.38% for the
first quarter of 1996 compared to a rate earned of 7.13% in the same quarter of
the previous year. Pinnacle's term securities portfolio, which comprises 45% of
its assets, had an average remaining maturity of four months in the first
quarter due to the lack of any significant slope in the yield curve. In
addition, only a minimal amount of net securities gains totalling $264,000 were
recorded in the first quarter of 1996 because of the relatively level yield
curve.
Other items influencing first quarter earnings included a lower provision
for loan losses and a decrease in other operating expense of 6% primarily as the
result of lower deposit insurance costs and legal fees. Other operating income
was down 8% as the result of a gain on the sale of an asset recorded in the
first quarter of 1995.
Nonperforming assets totalled $7,399,000 at March 31, 1996, a decrease of
approximately $900,000, or 11% from the amount at year end. The allowance for
loan losses was $6,040,000, or 1.89% of loans at quarter end. Net recoveries of
$17,000 were recorded during the period. Nonperforming assets at March 31, 1996
were 2.32% of total loans plus other real estate owned, and amounted to 0.92% of
total assets.
At the Board of Directors' meeting on April 16, 1996, the Board declared a
dividend of $0.31 per share payable on May 9 to shareholders of record as of
April 29.
Sincerely,
[SIG]
John J. Gleason, Jr.
Vice Chairman and
Chief Executive Officer
- - --------------------------------------------------------------------------------
<PAGE>
CONSOLIDATED BALANCE SHEETS
PINNACLE BANC GROUP, INC. AND SUBSIDIARIES
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARCH 31 DECEMBER 31 MARCH 31
(UNAUDITED; IN THOUSANDS) 1996 1995 1995
------------ --------------- ------------
<S> <C> <C> <C>
ASSETS:
Cash and due from banks..................................... $ 24,012 $ 27,273 $ 24,590
Federal funds sold.......................................... 2,900 14,100 8,825
Interest-bearing deposits................................... 2,747 2,726 9,254
Securities--available for sale.............................. 422,362 426,929 413,938
Loans....................................................... 318,032 309,600 314,735
Less: Allowance for loan losses............................. (6,040) (6,023) (6,302)
------------ --------------- ------------
NET LOANS............................................. 311,992 303,577 308,433
Premises and equipment...................................... 16,516 15,565 15,825
Goodwill and other intangibles.............................. 18,706 19,177 20,593
Other assets................................................ 8,254 9,350 11,726
------------ --------------- ------------
TOTAL................................................. $ 807,489 $ 818,697 $ 813,184
------------ --------------- ------------
------------ --------------- ------------
LIABILITIES:
Demand deposits:
Noninterest-bearing..................................... $ 91,206 $ 96,714 $ 85,979
Interest-bearing........................................ 87,676 89,230 87,637
Savings deposits............................................ 253,127 257,794 277,491
Other time deposits......................................... 271,383 269,066 252,821
------------ --------------- ------------
TOTAL DEPOSITS........................................ 703,392 712,804 703,928
Short-term borrowings....................................... -0- -0- -0-
Notes payable............................................... 20,700 20,600 29,700
Other liabilities........................................... 5,462 6,332 5,873
------------ --------------- ------------
TOTAL LIABILITIES..................................... 729,554 739,736 739,501
------------ --------------- ------------
STOCKHOLDERS' EQUITY:
Common stock $4.69 par value................................ 20,410 20,505 20,713
20,000,000 shares authorized;
shares issued and outstanding:
3/31/96: 4,354,138
12/31/95: 4,374,469
3/31/95: 4,418,724
Additional paid-in capital.................................. 18,001 17,898 17,873
Retained earnings........................................... 32,987 33,506 29,433
Unrealized gains (losses) in securities
available for sale......................................... 6,537 7,052 5,664
------------ --------------- ------------
TOTAL STOCKHOLDERS' EQUITY............................ 77,935 78,961 73,683
------------ --------------- ------------
TOTAL................................................. $ 807,489 $ 818,697 $ 813,184
------------ --------------- ------------
------------ --------------- ------------
</TABLE>
- - --------------------------------------------------------------------------------
<PAGE>
CONSOLIDATED STATEMENTS OF INCOME
PINNACLE BANC GROUP, INC. AND SUBSIDIARIES
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE THREE MONTHS
ENDED MARCH 31
(UNAUDITED; IN THOUSANDS ----------------------
EXCEPT PER SHARE DATA) 1996 1995
---------- ----------
<S> <C> <C>
INTEREST INCOME:
Loans................................................................................ $ 6,459 $ 6,645
Securities........................................................................... 5,746 7,343
Interest-bearing deposits and Federal funds sold..................................... 101 274
---------- ----------
INTEREST INCOME.................................................................. 12,306 14,262
INTEREST EXPENSE:
Deposits............................................................................. 6,056 5,569
Short-term borrowings................................................................ 2 36
Notes payable........................................................................ 357 564
---------- ----------
INTEREST EXPENSE................................................................. 6,415 6,169
---------- ----------
NET INTEREST INCOME...................................................................... 5,891 8,093
Provision for loan losses............................................................ -0- 75
---------- ----------
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES.............................. 5,891 8,018
OTHER INCOME:
Banking services and other........................................................... 1,214 1,449
Trust services....................................................................... 547 471
Net securities gains................................................................. 264 346
---------- ----------
OTHER INCOME..................................................................... 2,025 2,266
OTHER EXPENSE:
Employee compensation and benefits................................................... 3,011 2,968
Occupancy............................................................................ 679 587
Amortization of goodwill and other intangibles....................................... 472 470
Other expenses....................................................................... 1,503 2,031
---------- ----------
OTHER EXPENSE.................................................................... 5,665 6,056
INCOME BEFORE INCOME TAXES............................................................... 2,251 4,228
Provision for income taxes........................................................... 694 822
---------- ----------
NET INCOME....................................................................... $ 1,557 $ 3,406
---------- ----------
---------- ----------
WEIGHTED AVERAGE NUMBER OF COMMON AND COMMON
EQUIVALENT SHARES OUTSTANDING:
Primary.............................................................................. 4,382 4,432
Fully diluted........................................................................ 4,382 4,434
EARNINGS PER SHARE:
Primary.............................................................................. $ 0.36 $ 0.77
Fully diluted........................................................................ 0.36 0.77
</TABLE>
- - --------------------------------------------------------------------------------
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<LEGEND>
This schedule contains summary financial information extracted from March 31,
1996 10 Q and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 24,012,519
<INT-BEARING-DEPOSITS> 2,747,064
<FED-FUNDS-SOLD> 2,900,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 422,361,662
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 318,031,624
<ALLOWANCE> (6,040,179)
<TOTAL-ASSETS> 807,488,918
<DEPOSITS> 703,392,320
<SHORT-TERM> 0
<LIABILITIES-OTHER> 5,461,334
<LONG-TERM> 20,700,000
0
0
<COMMON> 20,410,022
<OTHER-SE> 57,525,242
<TOTAL-LIABILITIES-AND-EQUITY> 807,488,918
<INTEREST-LOAN> 6,458,895
<INTEREST-INVEST> 5,745,768
<INTEREST-OTHER> 101,106
<INTEREST-TOTAL> 12,305,769
<INTEREST-DEPOSIT> 6,055,883
<INTEREST-EXPENSE> 6,414,548
<INTEREST-INCOME-NET> 5,891,221
<LOAN-LOSSES> 0
<SECURITIES-GAINS> 263,722
<EXPENSE-OTHER> 5,664,703
<INCOME-PRETAX> 2,250,709
<INCOME-PRE-EXTRAORDINARY> 1,556,709
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,556,709
<EPS-PRIMARY> .36
<EPS-DILUTED> .36
<YIELD-ACTUAL> 3.33
<LOANS-NON> 5,331,000
<LOANS-PAST> 946,000
<LOANS-TROUBLED> 908,000
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 6,023,011
<CHARGE-OFFS> (6,607)
<RECOVERIES> 23,775
<ALLOWANCE-CLOSE> 6,040,179
<ALLOWANCE-DOMESTIC> 2,529,996
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 3,510,183
</TABLE>
