SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
----------------------
FORM 10-Q
(Mark One)
[X] Quarterly report pursuant to section 13 or 15(d) of the Securities Exchange
Act of 1934
For the quarterly period ended September 30, 1999
OR
[ ] Transition report pursuant to section 13 or 15(d) of the Securities
Exchange Act of 1934
Commission file number 0-17353
FMS FINANCIAL CORPORATION
-------------------------
(Exact name of registrant as specified in its charter)
New Jersey 22-2916440
- ---------- ----------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
3 Sunset Road, Burlington, New Jersey 08016
- ------------------------------------- -----
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (609) 386-2400
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 reports), and (2) has been
subject to such filing requirements for the past 90 days. YES X NO .
--- ---
As of November 5, 1999 there were 7,190,978 shares outstanding of the
registrant's Common Stock, par value $.10 per share.
<PAGE>
FMS FINANCIAL CORPORATION AND SUBSIDIARY
----------------------------------------
QUARTERLY REPORT ON FORM 10-Q
-----------------------------
SEPTEMBER 30, 1999
------------------
TABLE OF CONTENTS
-----------------
Page
----
PART I - Financial Information
- ------------------------------
Item 1 - Financial Statements
Consolidated Statements of Financial Condition as of
September 30, 1999 (unaudited) and December 31, 1998....1
Consolidated Statements of Income (unaudited)
for the three and nine month periods ended
September 30, 1999 and September 30, 1998...............2
Consolidated Statements of Cash Flows (unaudited)
for the nine month periods ended September 30, 1999
and September 30, 1998..................................3
Consolidated Statements of Changes in Stockholders' Equity
for the nine months ended September 30, 1999
(unaudited).............................................4
Item 2 - Management's Discussion and Analysis of
Financial Condition and Results of Operations........5 - 16
Item 3 - Disclosure about Market Risk................................17
PART II - Other Information
- ---------------------------
Item 1 - Legal Proceedings...........................................18
Item 2 - Changes in Securities.......................................18
Item 3 - Defaults Upon Senior Securities.............................18
Item 4 - Submission of Matters to a Vote of Security Holders.........18
Item 5 - Other Information...........................................18
Item 6 - Exhibits and Reports on Form 8-K............................18
<PAGE>
FMS FINANCIAL CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
September 30, December 31,
1999 1998
- --------------------------------------------------------------------------------------------------------------------
(Unaudited)
ASSETS
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Cash and amounts due from depository institutions $ 13,539,038 $ 18,142,316
Interest-bearing deposits 165,086 0
Short term funds 19,505,243 11,754,075
------------- -------------
Total cash and cash equivalents 33,209,367 29,896,391
Investment securities held to maturity 217,765,525 129,417,826
Investment securities and mortgage-backed securities available for sale 54,193,207 109,833,133
Loans receivable - net 296,250,428 298,603,223
Mortgage-backed securities held to maturity 104,805,335 90,592,647
Accrued interest receivable:
Loans 1,648,280 1,839,217
Mortgage-backed securities 703,630 633,667
Investments 2,922,554 2,371,410
Federal Home Loan Bank stock 4,861,410 4,861,410
Real estate held for development - net 644,487 644,487
Real estate owned - net 313,541 167,541
Office properties and equipment - net 19,647,090 19,292,247
Deferred income taxes 2,329,210 2,015,772
Excess cost over fair value of net assets acquired 64,069 164,969
Prepaid expenses and other assets 923,629 1,156,573
Subordinated debentures issue cost - net 278,102 321,113
============= =============
TOTAL ASSETS $ 740,559,864 $ 691,811,626
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits $ 582,447,822 $ 536,309,623
Advances from the Federal Home Loan Bank 16,337,031 16,368,321
Securities sold under agreements to repurchase 80,000,000 80,000,000
10% Subordinated debentures, due 2004 10,000,000 10,000,000
Advances by borrowers for taxes and insurance 2,125,555 2,259,435
Accrued interest payable 1,133,164 1,304,742
Dividends payable 216,104 216,953
Other liabilities 2,685,577 1,883,887
------------- -------------
Total liabilities 694,945,253 648,342,961
------------- -------------
Commitments and contingencies
Stockholders' Equity:
Preferred stock - $.10 par value 5,000,000 shares authorized; none issued
Common stock - $.10 par value 10,000,000 shares authorized; shares
issued 7,897,691 and 7,897,191 and shares outstanding 7,203,478 and
7,231,767 as of September 30, 1999 and December 31, 1998, respectively 789,769 789,719
Paid-in capital in excess of par 8,217,415 8,216,820
Accumulated other comprehensive loss (630,061) (21,793)
Retained earnings 40,898,197 37,860,291
Less: Treasury stock (694,213 and 665,424 shares, at cost, as of
September 30, 1999 and December 31, 1998, respectively) (3,660,709) (3,376,372)
------------- -------------
Total stockholders' equity 45,614,611 43,468,665
------------- -------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 740,559,864 $ 691,811,626
============= =============
</TABLE>
See notes to consolidated financial statements.
1
<PAGE>
FMS FINANCIAL CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
Three Months ended Nine Months ended
September 30, September 30,
----------------------------- ---------------------------------
1999 1998 1999 1998
- ---------------------------------------------------------------------------------- ---------------------------------
INTEREST INCOME: (Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Interest income on:
Loans $ 5,658,203 $ 6,084,380 $ 17,232,423 $ 18,215,681
Mortgage-backed securities 1,628,239 1,558,480 4,687,392 4,876,675
Investments 4,684,824 4,104,943 12,904,158 11,884,491
------------ ------------ ------------ ------------
Total interest income 11,971,266 11,747,803 34,823,973 34,976,847
------------ ------------ ------------ ------------
INTEREST EXPENSE:
Interest expense on:
Deposits 4,581,534 4,620,432 13,326,141 13,700,298
Subordinated debentures 264,337 264,337 793,011 793,011
Borrowings 1,388,165 1,405,058 4,118,938 4,297,072
------------ ------------ ------------ ------------
Total interest expense 6,234,036 6,289,827 18,238,090 18,790,381
------------ ------------ ------------ ------------
NET INTEREST INCOME 5,737,230 5,457,976 16,585,883 16,186,466
PROVISION FOR LOAN LOSSES 60,000 60,000 180,000 180,000
------------ ------------ ------------ ------------
NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES 5,677,230 5,397,976 16,405,883 16,006,466
------------ ------------ ------------ ------------
OTHER INCOME (EXPENSE):
Loan service charges and other fees 65,023 35,415 126,298 106,685
Gain on sale of loans 2,235 4,065 3,568 5,420
Gain on disposal of fixed assets 0 0 244,731 0
Real estate owned operations, net (3,823) (11,634) (16,662) (59,249)
Service charges on accounts 647,401 619,751 1,864,005 1,791,192
Other income (expense) 42,891 (57,111) 136,408 (111,942)
------------ ------------ ------------ ------------
Total other income (expense) 753,727 590,486 2,358,348 1,732,106
------------ ------------ ------------ ------------
OPERATING EXPENSES:
Salaries and employee benefits 2,581,629 2,142,833 7,496,118 6,709,130
Occupancy and equipment 872,138 740,620 2,615,541 2,173,092
Purchased services 387,286 333,648 1,120,055 949,104
Federal deposit insurance premiums 77,108 75,291 229,240 221,798
Professional fees 81,413 95,965 360,163 273,520
Advertising 57,885 51,798 161,341 152,581
Other 329,467 374,332 1,009,247 1,047,649
------------ ------------ ------------ ------------
Total operating expenses 4,386,926 3,814,487 12,991,705 11,526,874
------------ ------------ ------------ ------------
INCOME BEFORE INCOME TAXES 2,044,031 2,173,975 5,772,526 6,211,698
INCOME TAXES:
Current 896,267 873,851 1,897,126 2,499,037
Deferred (160,543) (89,332) 188,170 (253,202)
------------ ------------ ------------ ------------
Total income taxes 735,724 784,519 2,085,296 2,245,835
NET INCOME $ 1,308,307 $ 1,389,456 $ 3,687,230 $ 3,965,863
============ ============ ============ ============
BASIC EARNINGS PER COMMON SHARE $ 0.18 $ 0.19 $ 0.51 $ 0.55
============ ============ ============ ============
DILUTED EARNINGS PER COMMON SHARE $ 0.18 $ 0.19 $ 0.51 $ 0.54
============ ============ ============ ============
Weighted average common shares outstanding 7,206,340 7,216,619 7,215,877 7,195,890
Potential dilutive effect of the exercise of stock
options 83,100 104,696 82,393 105,186
------------ ------------ ------------ ------------
Adjusted weighted average common shares outstanding 7,289,440 7,321,315 7,298,270 7,301,076
============ ============ ============ ============
</TABLE>
See notes to consolidated financial statements.
2
<PAGE>
FMS FINANCIAL CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
Nine Months Ended
September 30,
-----------------------------------
1999 1998
- ------------------------------------------------------------------------------------------------------------------------
(Unaudited)
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $ 3,687,230 $ 3,965,863
Adjustments to reconcile net income to net cash provided
by operating activities:
Provision for loan losses 180,000 180,000
Depreciation and amortization 1,547,985 1,425,869
Provision for real estate owned 0 110,298
Realized (gains) and losses on:
Sale of loans and loans held for sale (3,568) (5,419)
Disposal of fixed assets (244,731) 0
Sale of real estate owned 0 (103,544)
Increase in accrued interest receivable (430,170) (529,447)
Decrease (Increase) in prepaid expenses and other assets 232,945 (80,287)
Decrease in accrued interest payable (171,578) (64,879)
Increase in other liabilities 815,471 1,535,142
Deferred income taxes 28,416 (410,138)
------------- -------------
Net cash provided by operating activities 5,642,000 6,023,458
------------- -------------
INVESTING ACTIVITIES:
Proceeds from sale of:
Education loans 707,172 1,658,696
Real estate owned 0 529,461
Office property and equipment 348,731 1,010
Proceeds from maturities of investment securities held to maturity 78,984,657 239,685,761
Proceeds from maturities of investment securities available for sale 58,642,554 57,315,458
Principal collected on mortgage-backed securities 20,911,988 23,633,601
Principal collected on longer-term loans, net 41,822,212 44,520,089
Longer-term loans originated or acquired, net (40,431,102) (42,581,714)
Purchase of investment securities and mortgage-backed securities held to maturity (202,705,135) (250,358,332)
Purchase of investment securities and mortgage-backed securities available for sale (4,056,040) (112,472,554)
Purchase of Federal Home Loan Bank stock 0 (1,230,610)
Purchase of office property and equipment (1,593,223) (3,352,173)
------------- -------------
Net cash used by investing activities (47,368,186) (42,651,307)
------------- -------------
FINANCING ACTIVITIES:
Net increase in demand deposits and savings accounts 34,025,274 32,756,138
Net increase (decrease) in time deposits 12,112,925 (10,976,303)
Net decrease in FHLB advances (31,290) (7,878,155)
Increase in securities sold under agreement to repurchase 0 20,000,000
(Decrease) Increase in advances from borrowers for taxes and insurance (133,880) 102,482
Purchase of treasury stock (284,337) (186,051)
Dividends paid on common stock (650,175) (550,856)
Net proceeds from issuance of common stock 645 93,643
------------- -------------
Net cash provided by financing activities 45,039,162 33,360,898
------------- -------------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 3,312,976 (3,266,951)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 29,896,391 12,631,622
------------- -------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 33,209,367 $ 9,364,671
============= =============
Supplemental Disclosures:
Cash paid for:
Interest on deposits, advances, and other borrowings $ 18,409,668 $ 18,855,260
Income taxes 1,985,238 2,300,558
Non cash investing and financing activities:
Dividends declared and not paid at quarter end 216,104 216,606
Non-monetary transfers from loans to real estate acquired
through foreclosure 146,000 331,028
</TABLE>
See notes to consolidated financial statements
3
<PAGE>
FMS FINANCIAL CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
Accumulated
other Total
Common shares Common Paid-in comprehensive Retained Treasury Stockholders'
outstanding stock capital loss earnings stock Equity
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balances at December 31, 1998 7,231,767 $ 789,719 $8,216,820 $ (21,793) $ 37,860,291 $(3,376,372) $43,468,665
Net Income 3,687,230 3,687,230
Other comprehensive income
Unrealized loss on securities
available for sale (608,268) (608,268)
------------
Total comprehensive income 3,078,962
------------
Dividends declared (649,324) (649,324)
Exercise of stock options 500 50 595 645
Purchase of common stock (28,789) (284,337) (284,337)
- --------------------------------------------------------------------------------------------------------------------------------
Balances at September 30, 1999 7,203,478 $ 789,769 $8,217,415 $ (630,061) $ 40,898,197 $(3,660,709) $45,614,611
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See notes to consolidated financial statements.
4
<PAGE>
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS FOR THE NINE MONTHS
ENDED SEPTEMBER 30, 1999 AND 1998.
FMS Financial Corporation (the "Corporation") may from time to time make written
or oral "forward-looking statements", including statements contained in the
Corporation's filings with the Securities and Exchange Commission (including
this quarterly report on form 10-Q and the exhibits thereto), in its reports to
stockholders and in other communications by the Corporation, which are made in
good faith by the Corporation pursuant to the "safe harbor" provisions of the
Private Securities Litigation Reform Act of 1995.
These forward-looking statements involve risks and uncertainties, such as
statements of the Corporation's plans, objectives, expectations, estimates and
intentions, that are subject to change based on various important factors (some
of which are beyond the Corporation's control). The following factors, among
others, could cause the Corporation's financial performance to differ materially
from the plans, objectives, expectations, estimates and intentions expressed in
such forward-looking statements: The strength of the United States economy in
general and the strength of the local economies in which the Corporation
conducts operations; the effects of, and changes in, trade, monetary and fiscal
policies and laws, including interest rate policies of the board of governors of
the federal reserve system, inflation, interest rate, market and monetary
fluctuations; the timely development of and acceptance of new products and
services of the Corporation and the perceived overall value of these products
and services by users, including the features, pricing and quality compared to
competitors' products and services; the willingness of users to substitute
competitors' products and services for the Corporation's products and services;
the success of the Corporation in gaining regulatory approval of its products
and services, when required; the impact of changes in financial services' laws
and regulations (including laws concerning taxes, banking, securities and
insurance); technological changes, acquisitions; changes in consumer spending
and saving habits; and the success of the Corporation at managing the risks
involved in the foregoing.
The Corporation cautions that the foregoing list of important factors is not
exclusive. The Corporation does not undertake to update any forward-looking
statement, whether written or oral, that may be made from time to time by or on
behalf of the Corporation.
General
FMS Financial Corporation ("the Corporation") is the parent company of Farmers &
Mechanics Bank ("the Bank"), its only subsidiary.
In the opinion of management, the accompanying unaudited consolidated financial
statements of FMS Financial Corporation contain all adjustments, consisting of
normal recurring accruals, necessary for a fair presentation of FMS's financial
condition, results of operations and cash flows for the periods and dates
indicated. The results of operations for the nine months ended September 30,
1999 are not necessarily indicative of the operating results for the full fiscal
year or any other interim period.
The accompanying unaudited consolidated financial statements have been prepared
in accordance with the instructions for FORM 10-Q, and therefore, do not include
all information and notes necessary for a fair presentation of financial
condition, results of operations and statements of cash flows in conformity with
generally accepted accounting principles. These statements should be read in
conjunction with the consolidated statements and related notes which are
incorporated by reference to the Corporation's annual report on Form 10-K for
the year ended December 31, 1998.
5
<PAGE>
YEAR 2000
The Year 2000 issue concerns the potential impact of historic computer software
code that only utilizes two digits to represent the calendar year (e.g. "99" for
"1999"). Software so developed could produce inaccurate or unpredictable results
upon the change to January 1, 2000, when current and future dates represent a
lower two digit year number than dates in the prior century. The Bank, similar
to most financial institutions, is significantly subject to the potential impact
of the "Year 2000 issue" due to the nature of financial information. Potential
impact to the Bank may arise from software, hardware, and equipment both within
the Bank's direct control and outside of the Bank's ownership, yet with which
the Bank electronically or operationally interfaces (e.g. vendors providing
credit bureau information). Financial institution regulators have intensively
focused upon Year 2000 exposures, issuing guidance concerning an adequate Year
2000 program and the responsibilities of senior management and directors. The
Bank has a Year 2000 compliance program in place to ensure that all software
applications will be Year 2000 certified compliant. The program includes Year
2000 committees consisting of directors and executive officers of the Bank. The
purposes of the committees are to oversee and manage the Year 2000 compliance
program providing regular reports to the Board of Directors detailing progress
with the Year 2000 issue. The Bank has contacted all significant vendors and
suppliers regarding their Year 2000 readiness. These third party vendors have
delivered written assurance that they are or expect to be Year 2000 compliant
prior to the end of 1999. At the current time management estimates its Year 2000
readiness is at 97%. The following table provides a summary of the current
status of the five phases involved in our Year 2000 readiness plan.
----------------------------------------------------------------------
Project Phase Percent Projected Date Comments
Complete of Completion
----------------------------------------------------------------------
Awareness 100% Complete
Assessment 100% Complete
Renovation 100% Complete
Validation 100% Complete
Implementation 95% October 1999 On Schedule
Overall Completion 97% November 1999 On Schedule
At this time management currently estimates Year 2000 compliance cost at
between $50,000 and $150,000 of which $72,000 was expensed during the nine
months ended September 30, 1999. The Bank does not expect that these costs will
be material to its financial condition or results of operations. Non-compliance
with the Year 2000 issue could have an adverse affect on the operations of the
business. Successful and timely completion of Year 2000 compliance is based upon
management's best estimate derived from various assumptions of future events
which are inherently uncertain, including the progress and results of the Bank's
testing plans, and all vendors, suppliers and customers readiness. The Bank
continues in the process of updating contingency plans for each critical system,
in the event one of those systems fail, despite our best efforts. The Bank's
contingency plan is to provide resources during the weekend of December 31, 1999
and for the period of time afterward. It is anticipated that the Bank, and its
vendors will be able to overcome any unforeseen problems associated with the
millennium change.
Despite management's best efforts to address the Year 2000 issue, the vast
number of external entities that have direct and indirect business relationships
with the Bank, such as, customers, vendors, payments system providers, utility
companies, and other financial institutions, make it impossible to assure that a
failure to achieve compliance by one or more of these entities would not have a
material adverse impact on the Bank's business or on the Company's consolidated
statements.
6
<PAGE>
FINANCIAL CONDITION -
Total Assets - at September 30, 1999 were $740.6 million as compared with total
assets at December 31, 1998 of $691.8 million.
Investment Securities Held to Maturity - increased $88.4 million to $217.8
million at September 30, 1999 from $129.4 million at December 31, 1998 as a
result of the purchase of $103.1 million of U.S. Agency notes and $23.1 million
of CMOs, partially offset by $16.9 of U.S. Agency notes maturities and calls and
$17.3 million of principal paydowns on CMOs, during the nine months ended
September 30, 1999. Investments held to maturity consisted entirely of fixed
rate securities at September 30, 1999. A comparison of cost and approximate
market values of investment securities available for sale as of September 30,
1999 and December 31, 1998 follows:
<TABLE>
<CAPTION>
September 30, 1999 December 31, 1998
------------------------------------------------------------ -------------------------------
Gross Gross Estimated Estimated
Amortized Unrealized Unrealized Market Amortized Market
Cost Gains Losses Value Cost Value
------------------------------------------------------------ -------------------------------
<S> <C> <C> <C> <C> <C> <C>
U. S. Gov't Agencies $ 164,358,478 $ 71,809 $ (5,417,835) $ 159,012,452 $ 78,291,686 $ 78,241,778
CMOs 50,832,261 0 (1,141,880) 49,690,381 47,302,338 47,297,209
Municipal bonds 2,574,786 0 (1,157) 2,573,629 3,823,802 3,826,635
---------------------------------------------------------- -----------------------------
Total $ 217,765,525 $ 71,809 $ (6,560,872) $ 211,276,462 $ 129,417,826 $ 129,365,622
============================================================ ===============================
</TABLE>
Investment Securities and Mortgage-Backed Securities Available for Sale -
decreased $55.6 million to $54.2 million at September 30, 1999 from $109.8
million at December 31, 1998 as a result $49.4 million of principal paydowns on
CMOs and MBSs and $9.2 million of maturities and calls on U.S. Treasury and U.S.
Agency notes, partially offsetting the purchase of $3.0 million of MBSs and $1.0
million of U.S. Agency notes during the nine months ended September 30, 1999.
Investments available for sale consisted of $4.1 million in adjustable rate
securities and $50.1 million in fixed rate securities at September 30, 1999. A
comparison of cost and approximate market values of investment securities
available for sale as of September 30, 1999 and December 31, 1998 follows:
<TABLE>
<CAPTION>
September 30, 1999 December 31, 1998
---------------------------------------------------------- -------------------------------
Gross Gross Estimated Estimated
Amortized Unrealized Unrealized Market Amortized Market
Cost Gains Losses Value Cost Value
---------------------------------------------------------- -------------------------------
<S> <C> <C> <C> <C> <C> <C>
U. S. Gov't Agencies $ 10,291,009 $ 0 $ (317,053) $ 9,973,956 $ 18,492,035 $ 18,500,616
CMOs 41,972,355 19,579 (681,595) 41,310,339 91,377,435 91,332,517
GNMAs 2,916,303 0 (7,391) 2,908,912 0 0
---------------------------------------------------------- -------------------------------
Total $ 55,179,667 $ 19,579 $ (1,006,039) $ 54,193,207 $ 109,869,470 $ 109,833,133
========================================================== ===============================
</TABLE>
7
<PAGE>
Loans Receivable and Loans Held for Sale - decreased $2.3 million to $296.3
million at September 30, 1999 from $298.6 million at December 31, 1998. This
decrease was the result of approximately $41.8 million of principal collected on
loans, partially offset by $40.4 million of loans originated during the nine
months ended September 30, 1999. The following table sets forth certain
information concerning the loan portfolio at the dates indicated.
Table 1 September 30, December 31,
1999 1998
------------------------------------
Mortgage loans ( 1-4 dwelling) $ 238,991,699 $ 246,071,511
Construction loans 397,345 1,410,456
Commercial construction 2,975,028 2,609,315
Consumer loans 3,098,868 3,237,176
Commercial real estate 51,010,794 45,937,998
Commercial business 4,560,500 4,120,967
------------------------------------
Subtotal 301,034,234 303,387,423
------------------------------------
Less:
Deferred loan fees 979,333 1,441,926
Allowance for possible
loan losses 3,804,473 3,342,274
------------------------------------
Net Loans Receivable $ 296,250,428 $ 298,603,223
====================================
At September 30, 1999, the recorded investment in loans for which impairment has
been recognized in accordance with SFAS Nos. 114 and 118 totaled $3.5 million of
which $1.7 million related to loans that were individually measured for
impairment with a valuation allowance of $686 thousand and $1.8 million of loans
that were collectively measured for impairment with a valuation allowance of $83
thousand. For the nine months ended September 30, 1999, the average recorded
investment in impaired loans was approximately $3.8 million. The Bank recognized
$113 thousand of interest income on impaired loans, all of which was recognized
on the cash basis. The Bank had $3.8 million in total reserves for possible loan
losses at September 30, 1999, representing approximately 108% of non-accrual
loans and 1% of total loans.
As of September 30, 1999 the Bank had outstanding loan commitments of $26.1
million, of which $19.3 million represented variable rate loans and $6.8 million
represented fixed rate loans. The Bank intends to fund these commitments through
scheduled amortization of loans and mortgage-backed securities, additional
borrowings and if necessary the sale of investment securities available for
sale.
Mortgage-Backed Securities Held to Maturity - increased $14.2 million to $104.8
million at September 30, 1999 from $90.6 million at December 31, 1998. The
increase is the result of the purchase of $35.1 million in FHLMC, GNMA and FNMA
securities, partially offset by $20.9 million in principal repayments.
Mortgage-backed securities at September 30, 1999 consisted of $75.7 in fixed
rate securities and $29.1 adjustable rate securities. Mortgage-backed securities
held to maturity at September 30, 1999 and December 31, 1998 are summarized
below:
<TABLE>
<CAPTION>
September 30, 1999 December 31, 1998
---------------------------------------------------------- -----------------------------
Gross Gross
Amortized Unrealized Unrealized Estimated Amortized Estimated
Cost Gains Losses Market Cost Market
Value Value
---------------------------------------------------------- -----------------------------
<S> <C> <C> <C> <C> <C> <C>
GNMA $ 36,756,981 $ 394,951 $ (702,481) $ 36,449,451 $ 31,716,739 $ 32,312,889
FNMA 49,711,858 197,255 (610,069) 49,299,044 37,531,455 38,079,458
FHLMC 18,336,496 319,063 (61,263) 18,594,296 21,255,729 21,779,645
Private 0 0 0 0 88,724 90,301
---------------------------------------------------------- -----------------------------
Total $ 104,805,335 $ 911,269 $ (1,373,813) $ 104,342,791 $ 90,592,647 $ 92,262,293
========================================================== =============================
</TABLE>
8
<PAGE>
Asset Classifications - are monitored by management on a regular basis.
Classified assets generally consist of assets which have possible credit risk
and/or have a sufficient degree of risk or potential weakness to warrant
management's close attention. Total classified assets decreased $226 thousand
during the nine months ended September 30, 1999 resulting from a decrease in
commercial real estate of $165 thousand, one-to-four family loans of $140
thousand, consumer loans of $83 thousand and $9 thousand of loans classified as
loss, partially offset by an increase in real estate owned of $146 thousand and
doubtful loans of $25 thousand. The following table sets forth information with
respect to the Bank's classified assets at the dates indicated:
September 30, December 31,
1999 1998
-------------- --------------
Classified Assets:
Substandard Loans:
One-to-four family $1,804,945 $1,945,059
Commercial real estate 3,591,484 3,756,181
Consumer and other 200,000 282,740
-------------- --------------
Total loans 5,596,429 5,983,980
Real estate held for development, net 644,487 644,487
Real Estate Owned, net 313,541 167,541
-------------- --------------
Total Substandard 6,554,457 6,796,008
-------------- --------------
Doubtful loans 25,000 0
-------------- --------------
Total Doubtful 25,000 0
-------------- --------------
Loss - Commercial Real Estate 0 9,121
-------------- --------------
Total Loss 0 9,121
-------------- --------------
TOTAL CLASSIFIED ASSETS $6,579,457 $6,805,129
============== ==============
9
<PAGE>
Deposits - increased $46.1 million to $582.4 million at September 30, 1999 from
$536.3 million at December 31, 1998 as a result of an increase in interest
bearing checking accounts of $21.0 million, certificate of deposits of $12.1
million, savings accounts of $10.1 million, non-interest bearing checking
accounts of $4.9 million, partially offset by a decrease in money market
accounts of $2.0 million. Non-interest checking accounts increased due to the
promotion of "Free Personal" and "Free Business" checking accounts. Interest
credited to depositor's accounts for the nine months ended September 30, 1999
amounted to $13.0 million. The following table set forth certain information
concerning deposits at the dates indicated:
<TABLE>
<CAPTION>
September 30, 1999 December 31, 1998
-------------------------------------------------------------------------------------
Percent Weighted Percent Weighted
of Total Average of Total Average
Amount Deposits Rate Amount Deposits Rate
-------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Non-interest checking $74,287,944 12.75% 0.00% $69,336,887 12.93% 0.00%
Checking accounts 96,250,960 16.53% 2.11% 75,280,395 14.04% 1.89%
Savings accounts 105,717,003 18.15% 2.67% 95,591,907 17.82% 2.83%
Money market accounts 65,668,778 11.27% 2.76% 67,690,222 12.62% 2.64%
Certificates 240,523,137 41.30% 4.94% 228,410,212 42.59% 5.35%
-------------------------------------------------------------------------------------
Total Deposits $582,447,822 100.00% 3.19% $536,309,623 100.00% 3.49%
=====================================================================================
</TABLE>
Borrowings - at September 30, 1999 amounted to $26.3 million. Borrowings
included $10.0 million of 10% subordinated debentures, $16.3 million in Federal
Home Loan Bank Advances with a weighted average interest rate of 6.00%.
Securities Sold Under the Agreements to Repurchase - totaled $80.0 million with
an average interest rate of 5.57%, an average term of 5.7 years and an average
call of 1.7 years.
There are three (3) standards that a savings institution must satisfy in order
to meet its capital requirements under the Federal Deposit Insurance Corporation
Improvement Act of 1991 "FDICIA". The requirements include a leverage ratio of
tier 1 (core) capital to adjusted total assets of 4.0 percent, a tangible
capital standard requirement of 2.0 percent of total adjusted assets, and a
risk-based capital standard set at 8.0 percent of risk-weighted assets. If a
savings institution is not in compliance with applicable capital standards, the
Office of Thrift Supervision (OTS) can restrict the institutions asset growth,
require the submission of a capital plan, and require compliance with a capital
directive, which may include restrictions on the payment of dividends and
compensation, and other restrictions determined to be appropriate by the OTS. At
September 30, 1999 the Bank exceeds all three current capital requirements as
the Bank's core, tangible, and risk-based capital ratios were 6.95%, 6.95%, and
18.72%, respectively.
10
<PAGE>
RESULTS OF OPERATIONS -
General
The earnings of the Bank depend primarily upon the level of net interest income,
which is the difference between interest earned on its interest-earning assets,
such as loans and investments, and the interest paid on interest-bearing
liabilities, such as deposits and borrowings. Net interest income is a function
of the interest rate spread, which is the difference between the weighted
average yield earned on interest-earning assets and the weighted average rate
paid on interest-bearing liabilities, as well as the average balance of interest
earning-assets as compared to interest-bearing liabilities. Net income is also
affected by the provision for loan losses and real estate owned, non-interest
income, such as gains (losses) on sales of loans and investments, service
charges and other fees. In addition to interest expense, the Bank incurs
operating expenses such as salaries and employee benefits, deposit insurance
premiums, depreciation, occupancy and equipment expense and purchased services
expense.
The Corporation recorded net income for the three months ended September 30,
1999 of $1.3 million, or $.18 diluted earnings per share as compared to $1.4
million, or $.19 diluted earnings per share for the comparable three month
period in 1998. Earnings for the nine months ended September 30, 1999 were $3.7
million, or $.51 diluted earnings per share as compared to $4.0 million, or $.54
diluted earnings per share for the comparable period in 1998.
Interest Rate Spread
The Bank's interest income is affected by the difference or "interest rate
spread" between yields earned by the Bank on its interest-earning assets and the
interest rates paid by the Bank on its interest-bearing liabilities including
non-interest checking accounts. Net interest income is affected by (i) the
spread between the yield earned on interest-earning assets and the interest
rates paid on interest-bearing savings deposits including non-interest checking
accounts and borrowings (liabilities), and (ii) the relative amounts of
interest-earning assets versus interest-bearing liabilities. The Bank's interest
rate spread varies over time because money fund accounts and other flexible rate
accounts have become significant sources of savings deposits. Income from
investment securities and mortgage-backed securities depends upon the amount
invested during the period and the yields earned on such securities. The yield
on loans receivable changes principally as a result of existing mortgage loan
repayments, adjustable rate loan adjustments, sales and the interest rates and
volume of new mortgage loans.
The following table sets forth the Bank's weighted-average yields on its
interest-earning assets, weighted-average interest rates paid on its
interest-bearing liabilities and weighted-average interest rate spreads for the
periods indicated:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
--------------------------- ---------------------------
1999 1998 1999 1998
--------------------------- ---------------------------
<S> <C> <C> <C> <C>
Weighted-Average Yields Earned on:
Loans, net 7.51 % 8.02 % 7.63 % 7.99 %
Mortgage-Backed Securities 6.73 6.97 6.83 7.10
Investment Securities 6.37 6.60 5.95 6.61
--------------------------- ---------------------------
Total Interest-Earning Assets 6.92 7.32 6.81 7.34
--------------------------- ---------------------------
Weighted-Average Interest Rates Paid on:
Deposits 3.15 3.57 3.19 3.59
Borrowings 5.76 5.76 5.69 5.70
Subordinated Debentures 10.56 10.56 10.57 10.57
--------------------------- ---------------------------
Total Interest-Bearing Liabilities 3.63 4.02 3.67 4.05
--------------------------- ---------------------------
Weighted-Average Interest Rate Spread
=========================== ===========================
for the Period 3.29 % 3.31 % 3.14 % 3.30 %
=========================== ===========================
</TABLE>
11
<PAGE>
Average Balance of Interest-Earning Assets and Interest-Bearing Liabilities
The following table sets forth the Bank's average balance of interest-earning
assets in comparison to its average balance of interest-bearing liabilities
during the periods indicated:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
----------------------------- -----------------------------
1999 1998 1999 1998
----------------------------- -----------------------------
(In Thousands) (In Thousands)
<S> <C> <C> <C> <C>
Average Interest-Earning Assets:
Loans, net $ 301,303 $ 303,449 $ 301,127 $ 304,079
Mortgage-Backed Securities 96,719 89,381 91,468 91,522
Investment Securities 294,038 248,701 289,058 239,523
----------------------------- -----------------------------
Total 692,060 641,531 681,653 635,124
----------------------------- -----------------------------
Average Interest-Bearing
Liabilities:
Deposits 581,169 518,300 556,860 508,550
Borrowings 96,434 97,579 96,448 100,527
Subordinated Debentures 10,000 10,000 10,000 10,000
----------------------------- -----------------------------
Total 687,603 625,879 663,308 619,077
----------------------------- -----------------------------
Excess of Interest-Earning Assets
over Interest-Bearing Liabilities $ 4,457 $ 15,652 $ 18,345 $ 16,047
============================= =============================
</TABLE>
12
<PAGE>
Rate/Volume Analysis
The following table describes the extent to which changes in interest rates and
changes in volume of interest-earning assets and interest-bearing liabilities
have affected the Bank's interest income and interest expense during the periods
indicated. For each category of interest-earning assets and interest-bearing
liabilities, information is provided on changes attributable to (i) changes in
volume, (ii) changes in rate and (iii) total changes in rate and volume (the
combined effect of changes in both volume and rate, not separately identified,
has been allocated to rate).
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1999 compared to 1998 1999 compared to 1998
------------------------------------ -----------------------------------
Increase (Decrease) due to: Increase (Decrease) due to:
Rate Volume Total Rate Volume Total
------------------------------------ -----------------------------------
(In Thousands) (In Thousands)
<S> <C> <C> <C> <C> <C> <C>
Interest income:
Loans receivable $ (383) $ (43) $ (426) $ (807) $ (177) $ (984)
Mortgage-backed securities (58) 128 70 (187) (3) (190)
Investment securities (168) 748 580 (1,438) 2,458 1,020
------------------------------------ -----------------------------------
Total change - interest income (609) 833 224 (2,432) 2,278 (154)
------------------------------------ -----------------------------------
Interest expense:
Deposits (598) 560 (38) (1,675) 1,301 (374)
Borrowings (1) (16) (17) (4) (174) (178)
Subordinated Debentures 0 0 0 0 0 0
------------------------------------ -----------------------------------
Total change - interest expense (599) 544 (55) (1,679) 1,127 (552)
------------------------------------ -----------------------------------
Net change in net interest income $ (10) $ 289 $ 279 $ (753) $ 1,151 $ 398
==================================== ===================================
</TABLE>
Net Interest Income - for the three and nine months ended September 30, 1999
totaled $5.7 million and $16.6 million, respectively. Net interest income for
the three months ended September 30, 1999 increased $279 thousand as compared to
the same period in 1998 due primarily to an increase in interest income on
investment securities of $580 thousand, an increase in mortgage backed
securities of $70 thousand and a decrease in interest expense on deposits of $38
thousand, partially offset by a decrease in interest income on loans of $426
thousand.
The increase in interest income on investment securities was due to an increase
in the average balance of the portfolio of $45.3 million to $294.0 million for
the three months ended September 30, 1999 from $248.7 million for the same
period in 1998, which resulted in a volume increase in interest income of $748
thousand. The average balance increase in investments was primarily due to the
net purchase of $41.5 million of U.S. Agency notes. The average yield on the
investment portfolio decreased 23 basis points to 6.37% for the three months
ended September 30, 1999 from 6.60% for the three months ended September 30,
1998, which resulted in a decrease in interest income of $168 thousand.
Interest income on loans decreased a total of $426 thousand to $5.7 million for
the three months ended September 30, 1999 from $6.1 million for the same period
in 1998 principally due to a 51 basis points decrease in the loan portfolio's
average rate to 7.51% for the three months ended September 30, 1999 from 8.02%
for the three months ended September 30, 1998, which resulted in a decrease in
interest income of $383 thousand. The average balance of the loan portfolio
decreased $2.1 million to $301.3 million for the three months ended September
30, 1999 from $303.4 million for the same period in 1998, which resulted in a
decrease in interest income of $43 thousand.
13
<PAGE>
Interest income on mortgage backed securities increased $70 thousand to $1.6
million for the three months ended September 30, 1999 as compared to the same
period in 1998, which was primarily due to a $7.3 million increase in the
average balance of the portfolio to $96.7 million for the three months ended
September 30, 1999. This resulted in a volume increase in interest income of
$128 thousand. The average yield of the portfolio decreased 24 basis points to
6.73% for the three months ended September 30, 1999 from 6.97% for the same
period in 1998, which resulted in a decrease in interest income of $58 thousand.
Interest expense on deposits decreased $38 thousand for the three months ended
September 30, 1999 compared to the same period in 1998 which was due to a lower
average rate paid on deposits, principally lower CD rates coupled with higher
relative balances in our non-interest "Free Checking" and "Free Business
Checking" products. Overall deposit rates decline 42 basis points to 3.15% which
decreased interest expense $598 thousand for the three months ended September
30, 1999 from the comparable period in 1998. Higher overall average deposit
balances increased interest expense $560 thousand.
Net interest income for the nine months ended September 30, 1999 increased $398
thousand to $16.6 million from $16.2 million for the same period in 1998 due
primarily to an increase in interest income on investment securities of $1.0
million and a decrease in interest expense on deposits of $374 thousand and
borrowings of $178 thousand, partially offset by a $984 thousand decrease in
interest income on loans.
The increase in interest income on investment securities for the nine months
ended September 30, 1999 as compared to the same period in 1998 was due to an
increase in the average balance of the investment portfolio of $49.6 million to
$289.1 million for the nine months ended September 30, 1999 from $239.5 million
for the same period in 1998, which resulted in an increase in interest income of
$2.5 million. The average yield on the investment portfolio decreased 66 basis
points to 5.95% for the nine months ended September 30, 1999 from 6.61% for the
same period in 1998, which resulted in a decrease in interest income of $1.4
million.
Interest income on loans decreased a total of $984 thousand to $17.2 million for
the nine months ended September 30, 1999 from $18.2 million for the same period
in 1998. This was principally due to a 36 basis point decline in the loan
portfolio's average yield to 7.63% for the nine months ended September 30, 1999
from 7.99% for the same period in 1998 which resulted in a decrease in interest
income of $807 thousand. The average balance of loans decreased $3.0 million to
$301.1 million for the month ended September 30, 1999 from $304.1 million for
the same period in 1998, which resulted in a volume decrease in interest income
of $177 thousand.
Interest expense on deposits decreased $374 thousand to $13.3 million for the
nine months ended September 30, 1999 compared to $13.7 million for the same
period in 1998. Average interest rates on deposits decreased 40 basis points to
3.19% for the nine months ended September 30, 1999 from 3.59% for the same
period in 1998 which resulted in a decrease in interest expense of $1.7 million.
The average balance on deposits increased $48.3 million to $556.9 million for
the nine months ended September 30, 1999 from $508.6 million for the nine months
ended September 30, 1998 which resulted in an increase in interest expense of
$1.3 million.
14
<PAGE>
The decrease in interest expense on borrowings of $178 thousand for the nine
months ended September 30, 1999 compared to the same period in 1998 was
primarily due to a decrease in the average balance of borrowings of $4.1 million
to $96.4 million for the nine months ended September 30, 1999 from $100.5
million for the same period in 1998, which resulted in a decrease in interest
expense of $174 thousand.
Provision for Loan Losses - for the three and nine months ended September 30,
1999 remained constant at $60 thousand and $180 thousand, respectively compared
to 1998. The determination of the allowance level for loan losses is based on
management's analysis of the risk characteristics of various classifications of
loans, previous loan loss experience, estimated fair value of the underlying
collateral and current economic conditions. Accordingly, there can be no
assurance that future provisions for loan losses will not increase or be
necessary. Most of the Bank's lending activity is with customers located within
southern New Jersey. Generally, the loans are secured by real estate consisting
of single family residential properties. While this represents a concentration
of credit risk, the credit losses arising from this type of lending compare
favorably with the Bank's credit loss experience on its portfolio as a whole.
The ultimate repayment of these loans is dependent to a certain degree on the
local economy and real estate market.
Other Income - for the three and nine months ended September 30, 1999 totaled
$754 thousand and $2.4 million, respectively, increasing $163 thousand during
the three month period and $626 thousand in the first nine month period of 1999
when compared to the same periods in 1998.
Operating Expenses - for the three month and nine months ended September 30,
1999 amounted to $4.4 million and $13.0 million, respectively as compared to
$3.8 million and $11.5 million for the same periods in 1998.
15
<PAGE>
Salaries and Employee Benefits - for the three and nine month periods ended
September 30, 1999 were $2.6 million and $7.5 million, respectively, as compared
to $2.1 million and $6.7 million for the same periods in 1998. The increase was
due to additional staff in the 3 new branches opened since the third quarter of
1998, as well as an increase in branch staff for additional hours, principally
additional "Sunday Banking" hours from 9:00 a.m. to 3:00 p.m. Average full time
equivalent employees at September 30, 1999 were 374 as compared to 331 at
September 30, 1998.
Occupancy and Equipment - for the three and nine month periods ended September
30, 1999 amounted to $872 thousand and $2.6 million, respectively, as compared
to $741 thousand and $2.2 million for the same periods in 1998. The increase is
the result of additional depreciation and occupancy expenses on the new
branches opened, as well as other facility improvements and equipment additions
since September 30, 1998.
Purchased Services - for the three and nine month periods ended September 30,
1999 amounted to $387 thousand and $1.1 million, respectively, as compared to
$334 thousand and $949 thousand for the same periods in 1998. MAC charges
increased $77 thousand and check processing costs have increased $73 thousand
for the nine months ended September 30, 1999 due to higher transaction volume
from an increase in the number of checking accounts.
Liquidity and Capital Resources
The Bank's liquidity is a measure of its ability to fund loans, withdrawals of
deposits, and other cash outflows in a cost effective manner. The Bank's primary
sources of funds are deposits and scheduled amortization and prepayments of loan
principal. To a lesser extent, the Bank obtains funds from sales and maturities
of mortgage-backed securities, investment securities, and short-term investments
and borrowings. During the past several years, the Bank has used such funds
primarily to meet ongoing commitments to fund maturing time deposits and saving
withdrawals, fund existing and continuing loan commitments and to maintain
liquidity. While loan payments, maturing investments and mortgage-backed
securities are a relatively predictable source of funds, deposit flows and loan
prepayments are greatly influenced by general interest rates, economic
conditions and competition. The Bank's liquidity is also influenced by the level
of demand for funding loan organizations.
The Bank is required under applicable federal regulations to maintain specified
levels of "liquid assets", which include obligations of the United States
government and federal agencies and other approved investments. Regulations
currently in effect require the Bank to maintain liquid assets of not less than
4% of its net withdrawable accounts plus short-term borrowings. The Bank has
generally maintained liquidity in excess of required levels. The Bank's
regulatory liquidity was 53.27% at September 30, 1999 and 31.35% at December 31,
1998.
16
<PAGE>
ITEM 3: DISCLOSURE ABOUT MARKET RISK
MARKET RISK
The Bank's financial performance is impacted by, among other factors, interest
rate risk. Interest rate risk is the risk of loss in value due to changes in
interest rates. This risk is addressed by the Bank's Asset Liability Management
Committee ("ALCO"), which includes senior management. The ALCO monitors and
considers methods of managing interest rate risk by monitoring changes in the
interest rate repricing GAP, the net portfolio values ("NPV") and net interest
income under various interest rate scenarios. The ALCO attempts to manage the
various components of the Bank's balance sheet to minimize the impact of sudden
and sustained changes in interest rates through GAP, NPV and net interest income
scenarios. The Bank's exposure to interest rate risk is reviewed on a periodic
basis by the Board of Directors and the ALCO. The principal objective of the
ALCO is to maximize income within acceptable levels as established by the risk
policy. The Board of Directors may direct management to adjust its asset and
liability mix to bring interest rate risk within Board approved limits. The Bank
has developed strategies to manage its liquidity, shorten the effective
maturities of certain interest-earning assets and increase the effective
maturities of certain liabilities, to reduce the exposure to interest rate
fluctuations. These strategies include focusing its investment activities on
short and medium-term securities, maintaining and increasing the transaction
deposit accounts, as these accounts are considered to be relatively resistant to
changes in interest rates and utilizing FHLB borrowings and deposit marketing
programs to adjust the term or repricing of its liabilities. There were no
significant changes for the nine months ended September 30, 1999 from the
information presented in the annual report on Form 10-K for the year ended
December 31, 1998.
17
<PAGE>
PART II. OTHER INFORMATION
-----------------
Item 1: Legal Proceedings
------- -----------------
None
Item 2: Changes in Securities
------- ---------------------
None
Item 3: Defaults Upon Senior Securities
------- -------------------------------
None
Item 4: Submission of Matters to Vote of Security of Holders
------- ----------------------------------------------------
None
Item 5: Other Information
------- -----------------
None
Item 6: Exhibits and Reports on Form 8-K
------- --------------------------------
None
18
<PAGE>
S I G N A T U R E
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.
FMS FINANCIAL CORPORATION
Date: November 12, 1999 /s/ Craig W. Yates
---------------------------------------
Craig W. Yates
President and Chief Executive Officer
(Principal Executive Officer)
Date: November 12, 1999 /s/ Channing L. Smith
---------------------------------------
Channing L. Smith
Vice President and
Chief Financial Officer
(Principal Financial Officer)
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
QUARTERLY REPORT ON FORM 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL INFORMATION.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> SEP-30-1999
<CASH> 13,539
<INT-BEARING-DEPOSITS> 165
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 54,193
<INVESTMENTS-CARRYING> 322,571
<INVESTMENTS-MARKET> 315,619
<LOANS> 296,250
<ALLOWANCE> 3,804
<TOTAL-ASSETS> 740,560
<DEPOSITS> 582,448
<SHORT-TERM> 0
<LIABILITIES-OTHER> 6,161
<LONG-TERM> 106,337
0
0
<COMMON> 789
<OTHER-SE> 44,824
<TOTAL-LIABILITIES-AND-EQUITY> 740,560
<INTEREST-LOAN> 17,232
<INTEREST-INVEST> 12,904
<INTEREST-OTHER> 4,687
<INTEREST-TOTAL> 34,824
<INTEREST-DEPOSIT> 13,326
<INTEREST-EXPENSE> 18,238
<INTEREST-INCOME-NET> 16,586
<LOAN-LOSSES> 180
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 10,634
<INCOME-PRETAX> 5,773
<INCOME-PRE-EXTRAORDINARY> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,687
<EPS-BASIC> 0.51
<EPS-DILUTED> 0.51
<YIELD-ACTUAL> 3.14
<LOANS-NON> 3,514
<LOANS-PAST> 0
<LOANS-TROUBLED> 420
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 3,342
<CHARGE-OFFS> 191
<RECOVERIES> 60
<ALLOWANCE-CLOSE> 3,804
<ALLOWANCE-DOMESTIC> 3,804
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 3,144
</TABLE>
