<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 September 30, 1997
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 of (I.R.S. Employer
incorporation or organization) Identification No.)
2215 York Road, Suite 208, Oak Brook, Illinois 60523
----------------------------------------------------
(Address of principal executive offices)
(630) 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 October 31, 1997, the registrant
had 7,500,051 shares outstanding of
common stock, $3.12 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 September
30, 1997 and December 31, 1996, the related consolidated statements of income
for the three and nine month periods ended September 30, 1997 and 1996, and the
related consolidated statements of cash flows for the nine month periods ended
September 30, 1997 and 1996.
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 omitted since it would substantially duplicate
the disclosure contained in the latest audited financial statements of Pinnacle
contained in the 1996 Annual Report to Shareholders with the exception of the
pro forma disclosure of the Adoption of Statement of Financial Accounting
Standards ("SFAS") No. 128, "Earnings Per Share".
2
<PAGE>
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
PINNACLE BANC GROUP, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
September 30 December 31
(in thousands; except per share amounts) 1997 1996
------------ ------------
<S> <C> <C>
ASSETS:
Cash and due from banks. . . . . . . . . . $26,558 $21,745
Federal funds sold . . . . . . . . . . . . 1,125 1,350
---------- ----------
Total cash and cash equivalents . . . . . 27,683 23,095
Interest-bearing deposits. . . . . . . . . 270 3,424
Securities:
Available for sale. . . . . . . . . . . . 426,182 434,558
(amortized cost: 9/30/97: $407,018
12/31/96: $423,857)
Loans. . . . . . . . . . . . . . . . . . . 509,789 525,069
Less: Allowance for loan losses . . . . . (7,996) (8,364)
---------- ----------
Net loans . . . . . . . . . . . . . . . . 501,793 516,705
Premises and equipment . . . . . . . . . . 17,404 17,301
Goodwill and other intangibles . . . . . . 23,676 25,366
Other assets . . . . . . . . . . . . . . . 22,607 27,927
---------- ----------
Total . . . . . . . . . . . . . . . . . . $1,019,615 $1,048,376
---------- ----------
---------- ----------
LIABILITIES:
Demand deposits:
Noninterest-bearing . . . . . . . . . . . $98,669 $ 101,127
Interest-bearing. . . . . . . . . . . . . 86,430 88,489
Savings deposits . . . . . . . . . . . . . 283,753 297,399
Other time deposits. . . . . . . . . . . . 368,854 390,537
---------- ----------
Total deposits. . . . . . . . . . . . . . 837,706 877,552
Short-term borrowings. . . . . . . . . . . 39,481 28,525
Notes payable. . . . . . . . . . . . . . . 20,625 32,800
Other liabilities. . . . . . . . . . . . . 12,339 8,675
---------- ----------
Total liabilities . . . . . . . . . . . . 910,151 947,552
---------- ----------
STOCKHOLDERS' EQUITY:
Preferred stock. . . . . . . . . . . . . .
1,000 shares authorized, none issued. . . 0 0
Common stock, $3.125 par . . . . . . . . . 23,438 23,811
20,000,000 shares authorized; shares issued and
outstanding: 9/30/97: 7,500,051
12/31/96: 7,619,487
Additional paid-in capital . . . . . . . . 38,519 37,980
Retained earnings. . . . . . . . . . . . . 34,922 31,985
Unrealized gains in securities available
for sale, net of tax. . . . . . . . . . 12,585 7,048
---------- ----------
Total stockholders' equity. . . . . . . . 109,464 100,824
---------- ----------
Total. . . . . . . . . . . . . . . . . . $1,019,615 $1,048,376
---------- ----------
---------- ----------
</TABLE>
3
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CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
PINNACLE BANC GROUP, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
For the three months For the nine months
(in thousands; except per share amounts) ended September 30 ended September 30
-------------------- -------------------
1997 1996 1997 1996
------- ------- ------- -------
<S> <C> <C> <C> <C>
INTEREST INCOME:
Loans. . . . . . . . . . . . . . . . . . . $10,712 $ 7,066 $32,276 $20,424
Securities:
Taxable . . . . . . . . . . . . . . . . . 6,094 5,972 18,049 17,003
Tax exempt. . . . . . . . . . . . . . . . 396 435 1,189 1,315
Interest-bearing deposits, Federal funds sold
and other . . . . . . . . . . . . . . . . 11 29 57 182
------- ------- ------- -------
Interest income . . . . . . . . . . . . . 17,213 13,502 51,571 38,924
------- ------- ------- -------
INTEREST EXPENSE:
Deposits:
Interest-bearing demand . . . . . . . . . 449 460 1,359 1,365
Savings . . . . . . . . . . . . . . . . . 2,168 1,952 6,566 5,790
Other time. . . . . . . . . . . . . . . . 5,271 3,795 15,966 11,155
Short-term borrowings. . . . . . . . . . . 456 266 1,241 375
Notes payable. . . . . . . . . . . . . . . 407 469 1,511 1,251
------- ------- ------- -------
Interest expense. . . . . . . . . . . . . 8,751 6,942 26,643 19,936
------- ------- ------- -------
Net Interest Income. . . . . . . . . . . . . 8,462 6,560 24,928 18,988
Provision for loan losses. . . . . . . . . 0 0 0 0
------- ------- ------- -------
Net interest income after provision
for loan losses. . . . . . . . . . . . . . 8,462 6,560 24,928 18,988
------- ------- ------- -------
OTHER INCOME:
Banking services and other . . . . . . . . 1,491 1,190 4,320 3,579
Trust services . . . . . . . . . . . . . 738 531 1,902 1,649
Net securities gains (losses). . . . . . . 3,187 (1) 5,753 132
------- ------- ------- -------
Other income. . . . . . . . . . . . . . . 5,416 1,720 11,975 5,360
------- ------- ------- -------
OTHER EXPENSE: . . . . . . . . . . . . . .
Salaries, profit sharing and other
employee benefits. . . . . . . . . . . . 3,539 3,001 10,422 9,033
Occupancy. . . . . . . . . . . . . . . . . 647 713 1,990 2,061
Amortization of goodwill and other
intangibles . . . . . . . . . . . . . . . 600 472 1,794 1,416
Other operating expenses . . . . . . . . . 2,076 2,517 6,326 5,781
------- ------- ------- -------
Other expense . . . . . . . . . . . . . . 6,862 6,703 20,532 18,291
------- ------- ------- -------
Income before income taxes . . . . . . . . . 7,016 1,577 16,371 6,057
Provision for income taxes . . . . . . . . 2,353 392 5,526 1,078
------- ------- ------- -------
NET INCOME . . . . . . . . . . . . . . . . . $ 4,663 $ 1,185 $10,845 $ 4,979
------- ------- ------- -------
------- ------- ------- -------
WEIGHTED AVERAGE NUMBER OF COMMON AND
COMMON EQUIVALENT SHARES OUTSTANDING . . . . 7,525,673 6,485,310 7,563,284 6,523,704
EARNINGS PER SHARE . . . . . . . . . . . . . $0.61 $ 0.18 $1.43 $ 0.76
</TABLE>
4
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
PINNACLE BANC GROUP, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
(dollars in thousands) For the nine months
ended September 30
------------------------
CASH FLOWS FROM OPERATING ACTIVITIES: 1997 1996
---------- ----------
<S> <C> <C>
Net income . . . . . . . . . . . . . . . . $10,845 $ 4,979
Adjustments to reconcile net income to
net cash provided by operating
activities:
Depreciation . . . . . . . . . . . . . 1,328 1,067
Amortization of goodwill and other
intangibles . . . . . . . . . . . . . 1,794 1,416
Amortization of purchase
accounting adjustments . . . . . . . . (51) 132
Discount accretion . . . . . . . . . . (1,028) (6,573)
Premium amortization . . . . . . . . . 202 274
Provision for loan losses. . . . . . . 0 0
Gain on sale of securities . . . . . . (5,753) (132)
Decrease (increase) in interest
receivable . . . . . . . . . . . . . . 4,127 (147)
Increase in interest payable . . . . . 353 558
Decrease in other assets . . . . . . . 678 170
Increase in other liabilities. . . . . 920 20,741
Other, net . . . . . . . . . . . . . . 163 (490)
---------- ----------
Total adjustments. . . . . . . . . 2,733 17,016
Net cash provided by
operating activities. . . . . . . 13,578 21,995
CASH FLOWS FROM INVESTING ACTIVITIES:
Cash portion of acquisition, net of
cash acquired (Note) . . . . . . . . . . 0 (19,050)
Proceeds from sale of securities
available for sale . . . . . . . . . . 1,220,055 1,098,134
Proceeds from maturities and paydowns of
securities available for sale. . . . . . . 2,446 7,643
Purchase of securities available
for sale . . . . . . . . . . . . . . . . . (1,199,421) (1,098,156)
Net decrease in interest-bearing
deposits . . . . . . . . . . . . . . . . . 3,155 749
Net loan principal (advanced) collected. . 14,985 (36,239)
Premises and equipment expenditures. . . . (1,380) (2,562)
---------- ----------
Net cash provided by (used for)
investing activities . . . . . . 39,840 (49,481)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net decrease in total deposits . . . . . . (39,846) (7,930)
Net increase in short-term borrowings. . . 10,956 20,250
Proceeds from notes payable. . . . . . . . 18,800 12,650
Principal reductions of notes payable. . . (30,975) (7,200)
Issuance of common stock . . . . . . . . . 709 132
Purchase and retirement of common stock. . (3,468) (2,513)
Dividends paid . . . . . . . . . . . . . . (5,006) (4,039)
---------- ----------
Net cash provided by (used for)
financing activities. . . . . . . . (48,830) 11,350
Net increase (decrease) in cash and
cash equivalents. . . . . . . . . . . . . 4,588 (16,136)
Cash and cash equivalents at beginning
of period . . . . . . . . . . . . . . . . 23,095 41,373
---------- ----------
Cash and cash equivalents at end of
period. . . . . . . . . . . . . . . . . . $ 27,683 $ 25,237
---------- ----------
---------- ----------
CASH PAID DURING PERIOD FOR:
Interest . . . . . . . . . . . . . . . . . $ 26,630 $ 19,490
Income taxes . . . . . . . . . . . . . . . 4,285 928
</TABLE>
NOTE: On September 30, 1996, Financial Security and its subsidiary,
Security Federal, was purchased for a combination of stock and cash.
The cash portion of the acquisition price was $20,140. At the date of
purchase, the balance sheet of Financial Security included cash and cash
equivalents of $1,090, resulting in a net cash position of $19,050.
Shares totalling 1,285,413 were also issued in the transaction.
5
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
PINNACLE BANC GROUP, INC. AND SUBSIDIARIES
EARNINGS PER SHARE:
In February, 1997, the Financial Accounting Standards Board
("FASB") issued SFAS No. 128, "Earnings Per Share" which superseded
Accounting Principles Board Opinion 15. SFAS No. 128 requires
disclosure of basic earnings per share ("EPS"), which replaces primary
EPS, and diluted EPS, which was formerly called fully diluted EPS.
Basic EPS does not require dilution for any potentially dilutive items
such as stock options or convertible stock. SFAS No. 128 is effective
for periods ending after December 15, 1997, and requires, upon
adoption, restatement of all prior period EPS data presented. The
adoption of SFAS No. 128 would have had no impact on Pinnacle's
reported earnings per share for the nine and three months ended
September 30, 1997 and 1996.
6
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Dollars in thousands, except per share amounts)
NET INCOME - NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
-----------------------------------------------------------
Consolidated net income was $10,845, or $1.43 per share, on a fully
diluted basis for the nine months ended September 30, 1997, compared to the
$4,979, or $0.76 per share, earned in the first nine months of 1996. The
annualized return on average assets was 1.42% for the first nine months of
1997 and 0.81% for the first nine months of 1996. For each period, the
return on average equity was 15.4% and 9.4%, 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 factors for higher earnings were twofold. Net
interest income increased 31% compared to the same period one year
ago, with a corresponding increase in the net interest margin to 3.66%
from 3.52% for the same periods. The increase was the result of the
25% rise in average earning assets due to the acquisition of Financial
Security and its wholly-owned subsidiary, Security Federal Savings and
Loan Association of Chicago ("Security"). Net securities gains were
$5,753 compared to $132 in gains during the same period a year ago.
Other operating income, excluding net securities gains, increased
19% compared with the same period of 1996. Other expenses increased
12%. The acquisition contributed to both increases.
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, Federal funds purchased, other 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 nine months of 1997, Pinnacle's average earning
assets were $932,089, a 25% increase from the comparable period of the
previous year. The net interest margin for the first nine months of
1997 was 3.66%, up from 3.52% of the same period a year ago. Net
interest income on a fully taxable equivalent basis was $25,588 for
the first nine months of 1997, or 30% higher than the comparable
period in 1996. Actual net interest income increased 31% as the
result of the increase in the net interest margin and the increase in
average earning assets.
The yield earned on total earning assets was 7.47% for the first
nine months of 1997 compared to 7.07% for the same period of 1996.
The increase resulted primarily from an increase in average loans as a
percent of earning assets to 56% from 44%. The rate earned on
interest-bearing deposits and Federal funds sold decreased 140 basis
points. Pinnacle was primarily in a funds sold position in the first
half of 1996 which was at a higher rate than current balances in this
category. The remaining balances in interest-bearing funds related to
funds held in interest-bearing accounts at the Federal Home Loan Bank.
The average rate on taxable securities increased 40 basis points
to 6.13% for the first nine months of 1997. The increase in the yield
on taxable securities was primarily a result of the higher level of
rates paid on the securities compared to those carried a year ago.
The average volume of taxable securities remained relatively flat.
The yield earned on non-taxable securities increased 3 basis points
while the average balance decreased $2,159. The rate earned on loans
decreased 6 basis points. This decrease related primarily to the
acquisition where most of the loans were real estate related which
traditionally carry a lower rate than
7
<PAGE>
commercial or installment type loans. The decrease in the rate earned
on loans was, however, offset by the increase in average balances of
loans of $191,578 or 59%.
The average cost of interest-bearing liabilities increased 22
basis points to 4.34% from 4.12% paid in the first nine months of
1996. The average rate paid on interest-bearing demand deposits
remained relatively flat while the rates paid on savings deposits
decreased 8 basis points and the rates paid on money market deposits
increased 2 basis points. The average rate paid on other time
deposits increased 14 basis points to 5.61% from 5.47% of a year ago.
Pinnacle has taken action at appropriate intervals to adjust the rates
on deposit accounts to keep them in line with market rates as well as
to meet the needs of its particular customer bases. Rates paid on
time deposits have been relatively flat since the first quarter of
1996. The acquisition, however, added a significant portion of other
time deposits at rates higher than those offered by Pinnacle.
Management anticipates the increase in rates paid on other time
deposits to stabilize or even drop as these higher paying time
deposits mature and renew at lower rates or run off. Approximately
$26,000 in these higher paying time deposits at Security have matured
and have not been renewed. All other deposit categories at Security
have remained stable. Average balances in all deposit categories
increased due to the acquisition.
The average rate paid on short-term borrowings increased 30 basis
points, while the average balance increased $18,843. Increases or
decreases in the average balance of this category fluctuate due to
Pinnacle's subsidiary banks' daily liquidity needs, such as loan
growth and the maturity of the above-mentioned Security's time
deposits. Also contributing the increase was the assumption of
Security's fixed term advances from the Federal Home Loan Bank. The
average balance in Pinnacle's notes payable increased $5,462 due
primarily to the purchase of Security as well as other corporate
needs. The rate paid decreased 17 basis points as the indices (Prime
or LIBOR), to which the notes payable are tied, were lower in the
first nine months of 1997 compared to a year ago.
A detailed Analysis of Net Interest Income for the nine and three
month periods ended September 30, 1997 and 1996 is included on Pages
14 and 15.
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
potential losses in the loan portfolio, and prevailing economic
conditions.
There was no provision for loan losses in the first nine months
of 1997, as well as no provision for the first nine months of 1996.
Pinnacle had net charge-offs of $368 in the first nine months of 1997
compared to net recoveries of $76 in 1996. The increase in net
charge-offs relates primarily to loans charged off from Security.
Pinnacle continues not to record a provision for loan losses due to
several factors, including the level of allowance for possible loan
losses to total loans; management's assessment of the overall adequacy
of the allowance for loan losses as well as the high level of real
estate secured loans within the portfolio. Insignificant losses have
been recorded on real estate secured loans in the last three years.
Total nonperforming assets totalled $7,890 at September 30, 1997, a
decrease of $2,453, over the $10,343 at December 31, 1996. Non-performing
assets consisted of $4,438 in non-accrual loans, $1,803 in loans past due
greater than 90 days and still accruing, $1,251 in restructured loans, and
$398 in other real estate owned. Approximately forty-three percent of these
nonperforming assets resulted from the acquisition of Security in 1996. The
investment in impaired loans at quarter end includes all nonaccrual loans
over $100,000 and restructured loans. All are included in the above
nonperforming asset numbers.
Pinnacle maintains a system of review of the credit quality of the loan
portfolio, including the use of an independent credit review system as well
as an internal "Watch List" to identify potential problem loans. Currently,
there are approximately $2,001 in potential problem loans which are
identified through that review process that are not considered nonperforming
and are not included in totals above.
8
<PAGE>
NONINTEREST INCOME AND EXPENSE
The major components of Pinnacle's noninterest 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 were $4,320 for the nine months
ended September 30, 1997 compared to $3,579 in the same period of
1996. The increase in fees on banking services and other income
primarily relate to the acquisition. Trust fees increased 15% on a
period-to-period basis. Total trust assets under management amounted
to $311,000 at September 30, 1997, or a 17% increase of a year ago.
Gains on the sale of securities, on a pre-tax basis, were $5,753
for the first nine months of 1997 compared to net gains of $132 in the
same period of 1996. The net gains on a year to date basis in 1997
consisted of gains of $2,842 recorded on the sale of equity securities
as part of Pinnacle's equity investment program in other financial
institutions and net gains of $2,911 from the sale of U. S. Treasury
securities as part of Pinnacle's portfolio funds management system.
The net gains in 1996 related to the portfolio funds management
system.
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.
Management has always viewed the gains recorded on the U. S.
Government 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 for
comparable maturities by 29 basis points and by including the net
gains since inception of the program, the total yield is 126 basis
points higher than the same index. For the first nine months of 1997,
due to the relative flatness of the yield curve, the portfolio has
slightly underperformed the index by 4 basis points but by including
the gain on sale, outperformed the index by 106 basis points. The
most recent sale of term portfolio, which netted $2,642 in gains,
will also have the effect of reducing the interest yield earned on the
portfolio by approximately 30 basis points.
Noninterest expense increased 12% for the first nine months of 1997
compared to the same period last year. The increase in noninterest expense
is due primarily to the acquisition. Employee compensation and benefits
increased 15%; excluding the effect of the acquisition, this category would
have increased approximately 5%. Occupancy expense decreased 3% while other
expense increased 9%. Included in these expenses are added data processing
and equipment costs which relate to the conversion of Security to Pinnacle's
data processing system which was done at the time of the merger of Security
into Pinnacle Bank in the first quarter of 1997. In the second quarter of
1997, Pinnacle Bank, F.S.B. was merged into Pinnacle Bank and incurred
certain data processing charges relating to ATM's. Consulting expenses
increased $170 due to payment of consulting services to certain of Financial
Security's former officers. Other expenses such as advertising, supplies and
postage also increased due to the acquisition. Offsetting the increase in
other expenses due to the acquisition, was the decrease in the FDIC insurance
premium of $784. In September, 1996, a onetime charge of $750 was made for
the special assessment by the FDIC to recapitalize the Savings Association
Insurance Fund ("SAIF") pursuant to legislation signed on September 30, 1996
for SAIF insured deposits at Pinnacle Bank, FSB and Pinnacle Bank.
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 $5,526 for the first nine months of 1997 compared with a provision
of $1,078 for the first nine months of 1996. The higher provision for taxes
in the first nine months of 1997 was primarily the result of higher pre-tax
income in the first nine months of 1997, versus the lower pre-tax income in
the same period of 1996.
9
<PAGE>
NET INCOME - THREE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
Consolidated net income was $4,663, or $0.61 per share, on a fully
diluted basis for the three months ended September 30, 1997 (the "third
quarter"), compared to $1,185, or $0.18 per share, earned in the third
quarter of 1996. The annualized return on average assets was 1.86% for the
third quarter of 1997 and 0.57% for the third quarter of 1996. For each
period, the return on average equity was 19.6% and 6.7%, respectively.
The primary factors for the increase in net income was the increase in
net interest income and higher net gains recorded on the sale of securities.
Net interest income increased $1,902, or 29%. Net securities gains of $3,187
were recorded versus net losses of $(1) for the same period a year ago.
Other income, exclusive of securities transactions, increased $508, or 30%.
Other expense increased $159, or 2%.
NET INTEREST INCOME
During the third quarter of 1997, Pinnacle's average earning
assets were $918,026 compared to $833,407 with the comparable period
of the previous year. The increase was due to the acquisition. The
net interest margin of the third quarter of 1997 was 3.78% compared to
3.57% for 1996. Net interest income on a fully taxable equivalent
basis was $8,682 for the third quarter of 1997, or 28% higher than the
comparable period in 1996. Actual net interest income increased 29%.
The yield earned on total earning assets was 7.60% for the third
quarter of 1997 compared to 7.22% for the same period of 1996. The
increase resulted primarily from the increase in average earning
assets as a result of the acquisition. The yield on interest-bearing
deposits decreased 200 basis points while average balances decreased
$774. While the average balance of taxable securities decreased
$9,214, the yield on the portfolio increased 27 basis points. The
yield earned on loans increased 10 basis points to 8.41% due to the
increase in prime rate. The average balance of loans increased 50%,
or $169,265 due to the acquisition of Security. Total interest
income, on a fully taxable equivalent basis, increased $3,699.
The average cost of interest-bearing liabilities increased by 17
basis points to 4.38% from the 4.21% paid in the third quarter of
1996. The average rates paid on interest-bearing demand and savings
deposits decreased slightly. The average rate paid on money market
accounts decreased by 14 basis points. The average rate paid on other
time deposits increased 16 basis points as the acquisition added time
deposits which were paid a higher rate. The rates paid on other
short-term borrowings increased 36 basis points as rates due to higher
market rates as well as the addition of the Federal Home Loan Bank
borrowings of Security.
PROVISION FOR LOAN LOSSES
There was no provision for loan losses for the third quarter of
1997, as well as no provision for the third quarter of 1996. Pinnacle
had net recoveries of $116 in 1997 compared to net recoveries of $38
in 1996.
NONINTEREST INCOME AND EXPENSE
Fees on banking services and other income were $1,491 for the
three months ended September 30, 1997 compared to $1,190 in the same
period of 1996, an increase of 25% due primarily to the acquisition as
well as ATM surcharge income. Trust fees increased 39% to $738.
On a pre-tax basis, net gains on the sale of securities were
$3,187 for the third quarter of 1997 compared to net losses on the
sale of securities of $(1) in the same period of 1996. The gross and
net gains in the third quarter of 1997 were $3,187. The gross and net
losses realized in the third quarter of 1996 were $(1).
All of the net securities gains recorded by Pinnacle in the third
quarter of 1997 related to its U. S. Government securities portfolio. The
loss in the third quarter of 1996 related to the call of a non-taxable
security.
10
<PAGE>
Non-interest expense increased 2% as a result primarily of the
acquisition. Absent the $750 SAIF provision, the increase due to
acquisition would have been 15%.
INCOME TAXES
The provision for income taxes was $2,353 for the third quarter
of 1997 compared with $392 provision for the third quarter of 1996.
The higher provision for taxes in the third quarter of 1997 was
primarily the result of higher pre-tax income in the third quarter of
1997.
BALANCE SHEET
Total consolidated assets were $1,019,615 at September 30, 1997,
or a 3% decrease from year-end 1996.
Total securities were $426,182 at September 30, 1997 and
consisted of U. S. Government securities amounting to $356,416,
mortgage-backed securities and CMO's of $4,948, state and municipal
bonds of $22,849, and corporate and other securities of $41,969. The
total securities outstanding at September 30, 1997 decreased 2% from
year-end 1996 but retained relatively the same mix.
U. S. Government securities amounted to $356,416, or 35% of
assets, at September 30, 1997. The average remaining maturity of
these securities was approximately 35 months. U. S. Government
securities 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
September 30, 1997, U. S. Government securities had gross unrealized
gains of $1,369 and gross unrealized losses of $(323) on a pre-tax
basis.
Other securities held by Pinnacle, amounting to $69,766 at
September 30, 1997, consisted of mortgage-backed, CMO's, state and
municipal, and corporate and equity securities. At quarter end, these
securities had gross unrealized gains of $18,328 and gross unrealized
losses of $(210) on a pre-tax basis. Currently, Pinnacle is not using
any derivatives for hedging or other purposes.
Due to the acquisition, loans are now Pinnacle's most significant
balance sheet asset. Total loans amounted to $509,789 at September
30, 1997, down 3% from year-end 1996. The decrease was primarily due
to payments received on loans purchased by Security prior to the
acquisition. At September 30, 1997, 21% of the loans were commercial,
67% were real estate, and 12% were installment loans. Pinnacle's loan
to asset ratio was 50% at September 30, 1997.
Goodwill and other intangibles amounted to $23,676, or 22% of
stockholders' equity at September 30, 1997.
Total deposits were $837,706 at September 30, 1997, or 5% lower
than year-end 1996. The decrease in deposits was primarily in other
time deposits which dropped $21,683 from year end. This decrease was
due primarily to the run-off of deposits from Security. These
deposits were 5-year or 13-month term higher yielding time deposits
that were part of advertising promotions by Security in previous
years. Certain steps were taken by management to maintain "core"
customers while other customers were "rate shoppers" and moved for
special term and rate deposits at other financial institutions. At
September 30, 1997, the percentage of total deposits for each category
were noninterest-bearing deposits, 12%; interest-bearing demand
deposits, 10%; savings accounts (including money market accounts),
34%; and other time deposits, 44%.
11
<PAGE>
Pinnacle's notes payable were $20,625 at September 30, 1997.
Outstandings were used for the acquisition of Acorn Financial Corp in
January, 1995; for the acquisition of Financial Security; and the
purchase of other equity securities. Pinnacle's notes payable are
borrowings under a $35,000 revolving line of credit. At year-end
1996, outstandings consisted of $30,000 outstanding on acquisition and
equity security purchases and $2,800 drawn on the line of credit.
CAPITAL RESOURCES
Total stockholders' equity of Pinnacle was $109,464 at September
30, 1997 and $100,824 at December 31, 1996. The ratio of equity to
assets was 10.74% and 9.62% 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 and 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 for a well-capitalized bank), ratios and the
excess over the minimum which Pinnacle holds as capital as of
September 30, 1997, in thousands (except percentages).
MINIMUM MINIMUM EXCESS
REQUIRED REQUIRED ACTUAL ACTUAL OVER
RATIO AMOUNT RATIO AMOUNT MINIMUM
Leverage Capital 3.00% $29,501 7.44% $73,203 $43,702
Risk-based Capital:
Tier One 4.00 19,092 15.34 73,203 54,111
Total (Tier Two) 8.00 38,184 16.59 79,169 40,985
At December 31, 1996, Pinnacle's total risk-based capital ratio was
15.01%.
In addition, each of Pinnacle's subsidiary banks must meet similar
minimum capital requirements as prescribed by Federal and state banking
regulatory authorities. At September 30, 1997, 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 $14.60 at September 30, 1997 compared to $13.23
at December 31, 1996. Dividends amounting to $0.66 per share were paid in
the first nine months of 1997.
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.
12
<PAGE>
Pinnacle's cash flows are comprised of three general types. Cash flows
from operating activities are primarily Pinnacle's net income, adjusted for
non-cash items. 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 nine months ended
September 30, 1997, cash flows were generated primarily from operations of
$13,578, the net decrease in securities of $23,080, the decrease in
interest-bearing deposits of $3,155 and the collection of loan principal of
$14,985. Cash flow uses and needs include a $39,846 decrease in deposits, a
$12,175 net reduction in notes payable, purchases and retirements of common
stock of $3,468, and $5,006 to pay dividends. Pinnacle's net cash position
increased $4,588, with the increase primarily 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
acquisitions of other financial institutions. Certain acquisitions could be
funded with debt and/or issuances of stock. Reductions of debt would be made
from Pinnacle's earnings.
At September 30, 1997, Pinnacle had lines of credit with an unaffiliated
bank from which $14,375 had not been drawn. The remaining outstanding
balance of $20,625 is related to the acquisitions and equity securities
purchases and is secured by the stock of Pinnacle's subsidiary banks as well
as certain equity securities held by the holding company.
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
October 1, 1997, bank subsidiaries could have declared approximately $5,353
in dividends without requesting approval of the applicable Federal or State
regulatory agency. Pinnacle Bank received approval from appropriate
regulatory authorities for the redemption of common stock. The redemption,
made in July, 1997, has reduced Pinnacle Bank's capital by $15,737, however,
it will remain within regulatory guidelines for a well capitalized bank. The
money was used to pay down holding company debt and other corporate needs.
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, stock redemption, 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.
Currently, Pinnacle Bank is in the process of building a new branch in the
far west suburbs of Chicago. The cost of this branch, including land, is
estimated to be approximately $2,000. Pinnacle Bank of the Quad-Cities is
also constructing a new branch in East Moline, Illinois. Total cost of this
project will be approximately $1,000. Management is also not aware of any
current recommendations by the regulatory authorities which, if implemented,
would have an adverse material effect on Pinnacle.
13
<PAGE>
ANALYSIS OF NET INTEREST INCOME
PINNACLE BANC GROUP, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
Three months ended Nine months ended
(DOLLARS IN THOUSANDS) September 30, 1997 September 30, 1997
----------------------------- ----------------------------
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 . . . . . . . . . . . . . . . $1,399 $11 3.15% $2,032 $57 3.74%
Taxable securities . . . . . . . . . . . . . 386,444 6,094 6.31 392,795 18,049 6.13
Nontaxable securities. . . . . . . . . . . . 19,939 600 12.04 19,880 1,801 12.08
Loans. . . . . . . . . . . . . . . . . . . . 510,244 10,728 8.41 517,382 32,324 8.33
-------- -------- ------ --------- --------- --------
Total interest-earning assets . . . . . . . 918,026 17,433 7.60 932,089 52,23 17.47
Noninterest-earning assets:
Cash and due from banks. . . . . . . . . . . 26,486 25,835
Allowance for loan losses. . . . . . . . . . (7,953) (8,024)
Other assets . . . . . . . . . . . . . . . . 66,650 66,465
-------- ----------
Total assets. . . . . . . . . . . . . . . . $1,003,209 $1,016,365
-------- ----------
-------- ----------
LIABILITIES AND STOCKHOLDERS' EQUITY:
Interest-bearing liabilities:
Interest-bearing demand deposits . . . . . . $ 88,315 $ 449 2.03% $ 88,693 $1,359 2.04%
Savings deposits . . . . . . . . . . . . . . 243,080 1,779 2.93 245,771 5,337 2.89
Money market deposits. . . . . . . . . . . . 45,521 389 3.42 47,583 1,229 3.44
Other time deposits. . . . . . . . . . . . . 370,374 5,271 5.69 379,432 15,966 5.61
Short-term borrowings. . . . . . . . . . . . 29,802 456 6.13 27,632 1,24 15.99
Notes payable. . . . . . . . . . . . . . . . 22,254 407 7.32 28,479 1,511 7.08
-------- -------- ------ --------- --------- --------
Total interest-bearing liabilities. . . . . 799,346 8,751 4.38 817,590 26,643 4.34
Noninterest-bearing liabilities:
Demand deposits. . . . . . . . . . . . . . . 100,495 97,872
Other liabilities. . . . . . . . . . . . . . 8,342 6,963
Stockholders' equity . . . . . . . . . . . . 95,026 93,940
-------- ----------
Total liabilities and stockholders'
equity . . . . . . . . . . . . . . . . . . $1,003,209 $1,016,365
---------- ----------
---------- ----------
Net interest income and margin . . . . . . . $8,682 3.78% $25,588 3.66%
------ ---- ------- ----
------ ---- ------- ----
</TABLE>
Interest income is adjusted to taxable equivalents for the tax-exempt assets
based upon a Federal income tax rate of 34% for 1997. The fully taxable
equivalent adjustment to interest income for the three and nine months ended
September 30, 1997 was $220 and $660, respectively. The average balance of
nonaccrual loans is included in the total loans category. The average
balances do not include the effects of SFAS No. 115.
14
<PAGE>
ANALYSIS OF NET INTEREST INCOME
PINNACLE BANC GROUP, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
Three months ended Nine months ended
(DOLLARS IN THOUSANDS) September 30, 1997 September 30, 1997
---------------------------- ----------------------------
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 $ 2,173 $ 28 5.15% $ 4,725 $ 182 5.14%
Taxable securities . . . . . . . . . . . 395,658 5,972 6.04 395,347 17,003 5.73
Nontaxable securities. . . . . . . . . . 21,892 646 11.81 22,039 1,992 12.05
Loans. . . . . . . . . . . . . . . . . . 340,979 7,088 8.31 325,804 20,491 8.39
-------- -------- ------ -------- -------- ------
Total interest-earning assets. . . . . 760,702 13,734 7.22 747,915 39,668 7.07
Noninterest-earning assets:. . . . . . . .
Cash and due from banks. . . . . . . . . 24,135 24,022
Allowance for loan losses. . . . . . . . (6,101) (6,067)
Other assets . . . . . . . . . . . . . . 54,671 48,763
-------- --------
Total assets . . . . . . . . . . . . . $833,407 $814,633
-------- --------
-------- --------
LIABILITIES AND STOCKHOLDERS' EQUITY:
Interest-bearing liabilities:
Interest-bearing demand deposits . . . . $ 88,657 $ 460 2.08% $ 88,497 $ 1,365 2.06%
Savings deposits . . . . . . . . . . . . 203,538 1,519 2.99 205,762 4,589 2.97
Money market deposits. . . . . . . . . . 48,629 433 3.56 46,762 1,201 3.42
Other time deposits. . . . . . . . . . . 274,365 3,795 5.53 271,902 11,155 5.47
Short-term borrowings. . . . . . . . . . 18,438 266 5.77 8,789 375 5.69
Notes payable. . . . . . . . . . . . . . 25,921 469 7.24 23,017 1,251 7.25
-------- -------- ------ -------- -------- ------
Total interest-bearing liabilities . . 659,548 6,942 4.21 644,729 19,936 4.12
Noninterest-bearing liabilities:
Demand deposits. . . . . . . . . . . . . 94,161 91,690
Other liabilities. . . . . . . . . . . . 8,616 7,417
Stockholders' equity . . . . . . . . . . 71,082 70,797
-------- ---------
Total liabilities and
stockholders' equity . . . . . . . . . . $833,407 $814,633
-------- ---------
-------- ---------
Net interest income and margin . . . . . . . $6,792 3.57% $19,732 3.52%
------ ---- ------- ----
------ ---- ------- ----
</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 and nine months ended
September 30, 1996 was $232 and $744, respectively. The average balance of
nonaccrual loans is included in the total loans category. The average
balances do not include the effects of SFAS No. 115.
15
<PAGE>
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) The following exhibits are filed as part of this Form 10-Q.
Description No. Under
Exhibit Item 601 of Exhibit
Number Regulation S-K Description
- ------- --------------------- -----------
1 (20) Report furnished to
securities holders.
Third Quarter Report.
27 (27) Financial Data Schedule.
(b) Reports on Form 8-K.
None.
16
<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: November 3, 1997 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
17
<PAGE>
EXHIBIT 1
October 31, 1997
Dear Shareholder:
Pinnacle Banc Group, Inc. reported net income of $4,663,000, or $0.61 per
fully diluted share, for the third quarter of 1997, compared with $1,185,000,
or $0.18 per share earned in the third quarter of 1996. For the first nine
months of 1997, net income totalled $10,845,000 or $1.43 per share, compared
with $4,979,000, or $0.76 per share, earned in the first nine months of 1996,
a per share increase of 88%. The return on average equity for the first nine
months of 1997 was 15.4% and the return on average assets amounted to 1.42%.
The primary factors contributing to the earnings increase for the third
quarter and first nine months of 1997 versus the same periods one year
earlier were increases in net interest income and higher net gains on the
sale of securities. Net interest income increased 31% for the first nine
months of 1997 compared with the same period one year earlier. The increase
was the result of a 25% rise in average earning assets. In addition,
Pinnacle's net interest margin was 3.78% for the third quarter of 1997
compared to 3.57% for the same three months of 1996. On a year-to-date
comparable basis, the margin was up 14 basis points.
Net securities gains of $3,187,000 for the third quarter and $5,753,000 for
the first nine months of 1997 were recorded compared to a minimal amount of
net securities gains (losses) in the same periods of 1996. The net gains on
a year to date basis in 1997 consisted of gains of $2.8 million recorded on
the sale of equity securities as part of Pinnacle's equity investment
program in other financial institutions and net gains of $2.9 million from
the sale of U. S. Treasury securities as part of Pinnacle's slope program.
All of the net securities gains recorded in the third quarter of 1997 related
to the sale of U. S. Treasury securities. At September 30, 1997, the U. S.
Treasury portfolio had an average remaining maturity of 35 months and
unrealized appreciation of $1.4 million. At the same date, Pinnacle's equity
portfolio of investments in other financial institutions had unrealized
appreciation of $15.2 million. All investment securities held by Pinnacle
are classified as available for sale and, as a result, unrealized
appreciation on an after-tax basis is recorded as part of Pinnacle's
stockholders' equity.
Other operating income increased 30% for the third quarter and 19% for the
first nine months of 1997 compared to the same periods of one year ago.
Other operating expense was up 2% and 12% for the quarter and year to date,
respectively. The increases in these categories were attributable to an
acquisition completed one year ago.
Total consolidated assets amounted to $1.020 billion, down 7% from the same
quarter end in 1996. Total loans were $510 million compared to $522 million
in the third quarter of 1996, a 2% decrease. Total deposits were down 5% to
$838 million. The balance sheet decreases were primarily the result of a
decrease in purchased real estate loans and in higher cost deposits which
were obtained in the acquisition. Stockholders' equity totalled $109 million
at September 30, 1997 resulting in a book value per share of $14.60, an
increase of 12% over the third quarter end of 1996.
Non-performing assets totalled $7,890,000 at September 30, 1997, a decrease
of $2,453,000, or 24%, from the amount at year end. The allowance for loan
losses was $7,996,000, or 1.57% of loans at quarter end. Non-performing
assets at September 30, 1997 were 1.55% of total loans plus other real estate
owned, and amounted to 0.77% of total assets.
At the Board of Directors' meeting on October 21, 1997, the Board declared a
dividend of $0.22 per share payable on November 13 to shareholders of record
as of November 3.
Very truly yours,
/s/ JOHN J. GLEASON, JR.
John J. Gleason, Jr.
Vice Chairman and
Chief Executive Officer
<PAGE>
PINNACLE BANC GROUP, INC.
FINANCIAL HIGHLIGHTS
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
QUARTER ENDED
SEPTEMBER 30 YEAR TO DATE
---------------------- ---------------------
1997 1996 1997 1996
------- ------- ------- -------
<S> <C> <C> <C> <C>
INCOME STATEMENT
Net interest income $8,462 $6,560 $24,928 $18,988
Provision for loan losses 0 0 0 0
Net securities gains (losses) 3,187 (1) 5,753 132
Non-interest income 2,229 1,721 6,222 5,228
Non-interest expense 6,862 6,703 20,532 18,291
Provision for income taxes 2,353 392 5,526 1,078
Net income 4,663 1,185 10,845 4,979
BALANCE SHEET (END OF PERIOD)
Total assets $1,019,615 $1,095,360
Loans 509,789 522,408
Portfolio funds 427,577 482,446
Deposits 837,706 886,181
Debt 20,625 26,050
Stockholders' equity 109,464 101,182
PER SHARE DATA
Earnings per share $ 0.61 $ 0.18 $ 1.43 $ 0.76
Book value 14.60 13.07 14.60 13.07
Dividends 0.22 0.21 0.66 0.63
Cash earnings per share 0.70 0.26 1.67 0.98
Tangible book value 11.44 9.68 11.44 9.68
RATIOS
Return on average equity 19.6 % 6.7 % 15.4% 9.4 %
Return on average assets 1.86 0.57 1.42 0.81
Net interest margin 3.78 3.57 3.66 3.52
Non-performing assets /
total assets 0.77 1.16 0.77 1.16
MARKET DATA
Stock price range
(DURING THE QUARTER):
High $24.25 $20.17
Low 21.00 18.50
Close 24.25 18.67
Annual dividend rate 0.88 0.83
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 26558
<INT-BEARING-DEPOSITS> 270
<FED-FUNDS-SOLD> 1125
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 426182
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 426182
<LOANS> 509789
<ALLOWANCE> 7996
<TOTAL-ASSETS> 1019615
<DEPOSITS> 837706
<SHORT-TERM> 39481
<LIABILITIES-OTHER> 12339
<LONG-TERM> 20625
0
0
<COMMON> 23438
<OTHER-SE> 86026
<TOTAL-LIABILITIES-AND-EQUITY> 1019615
<INTEREST-LOAN> 32276
<INTEREST-INVEST> 19238
<INTEREST-OTHER> 57
<INTEREST-TOTAL> 51571
<INTEREST-DEPOSIT> 23891
<INTEREST-EXPENSE> 26643
<INTEREST-INCOME-NET> 24928
<LOAN-LOSSES> 0
<SECURITIES-GAINS> 5753
<EXPENSE-OTHER> 20532
<INCOME-PRETAX> 16371
<INCOME-PRE-EXTRAORDINARY> 10845
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 10845
<EPS-PRIMARY> 1.43
<EPS-DILUTED> 1.43
<YIELD-ACTUAL> 3.66
<LOANS-NON> 4438
<LOANS-PAST> 1803
<LOANS-TROUBLED> 1251
<LOANS-PROBLEM> 2001
<ALLOWANCE-OPEN> 8364
<CHARGE-OFFS> 790
<RECOVERIES> 422
<ALLOWANCE-CLOSE> 7996
<ALLOWANCE-DOMESTIC> 2904
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 5092
</TABLE>
