<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
(X) QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1999
OR
( ) TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE
ACT
For the transition period from to
------------ -----------------
Commission file number 33-24728C
CAPITOL BANCORP LTD.
(Exact name of registrant as specified in its charter)
MICHIGAN 38-2761672
(State or other jurisdiction (I.R.S. Employer
of incorporation or Identification
organization) Number)
200 WASHINGTON SQUARE NORTH, LANSING, MICHIGAN
(Address of principal executive offices)
48933
(Zip Code)
(517) 487-6555
(Registrant's telephone number)
Not Applicable
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) filed all reports
required to be filed by Section 13 or 15(d) of the Exchange Act 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:
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date:
Common stock, No par value: 6,769,521 shares outstanding as of October 31, 1999.
Page 1 of 21
<PAGE> 2
INDEX
PART I. FINANCIAL INFORMATION
FORWARD-LOOKING STATEMENTS
Certain of the statements contained in this document, including the
Corporation's interim consolidated financial statements, Management's Discussion
and Analysis of Financial Condition and Results of Operations and in documents
incorporated into this document by reference that are not historical facts,
including, without limitation, statements of future expectations, projections of
results of operations and financial condition, statements of future economic
performance and other forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995, are subject to known and
unknown risks, uncertainties and other factors which may cause the actual future
results, performance or achievements of the Corporation and/or its subsidiaries
and other operating units to differ materially from those contemplated in such
forward-looking statements. The words "intend", "expect", "project", "estimate",
"predict", "anticipate", "should", "believe", and similar expressions also are
intended to identify forward-looking statements. Important factors which may
cause actual results to differ from those contemplated in such forward-looking
statements include, but are not limited to: (i) the results of the Corporation's
efforts to implement its business strategy, (ii) changes in interest rates,
(iii) legislation or regulatory requirements adversely impacting the
Corporation's banking business and/or expansion strategy, (iv) adverse changes
in business conditions or inflation, (v) general economic conditions, either
nationally or regionally, which are less favorable than expected and that result
in, among other things, a deterioration in credit quality and/or loan
performance and collectability, (vi) competitive pressures among financial
institutions, (vii) changes in securities markets, (viii) actions of competitors
of the Corporation's banks and the Corporation's ability to respond to such
actions, (ix) the cost of the Corporation's capital, which may depend in part on
the Corporation's asset quality, prospects and outlook, (x) changes in
governmental regulation, tax rates and similar matters, (xi) "Year 2000"
computer, imbedded chip and data processing issues, and (xii) other risks
detailed in the Corporation's other filings with the Securities and Exchange
Commission. Should one or more of these risks or uncertainties materialize, or
should underlying assumptions prove incorrect, actual outcomes may vary
materially from those indicated. All subsequent written or oral forward-looking
statements attributable to the Corporation or persons acting on its behalf are
expressly qualified in their entirety by the foregoing factors. Investors and
other interested parties are cautioned not to place undue reliance on such
statements, which speak as of the date of such statements. The Corporation
undertakes no obligation to release publicly any revisions to these
forward-looking statements to reflect events or circumstances after the date of
such statements or to reflect the occurrence of unanticipated events.
Item 1. Financial Statements:
Consolidated balance sheets - September 30, 1999 and December 31,1998.
Consolidated statements of income - Three months and nine months ended
September 30, 1999 and 1998.
Consolidated statements of changes in stockholders' equity -
Nine months ended September 30, 1999 and 1998.
Consolidated statements of cash flows - Nine months ended
September 30, 1999 and 1998.
Notes to consolidated financial statements.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
Item 2. Changes in Securities.
Item 3. Defaults Upon Senior Securities.
Item 4. Submission of Matters to a Vote of Security Holders.
Item 5. Other Information.
Item 6. Exhibits and Reports on Form 8-K.
SIGNATURES
Page 2 of 21
<PAGE> 3
PART I, ITEM I
CAPITOL BANCORP LTD.
Consolidated Balance Sheets
As of September 30, 1999 and December 31, 1998
<TABLE>
<CAPTION>
September 30 December 31
1999 1998
----------- -----------
(in thousands)
<S> <C> <C>
ASSETS
- ------
Cash and due from banks $ 52,651 $ 45,263
Interest-bearing deposits with banks 1,834 1,732
Federal funds sold 74,840 104,050
----------- -----------
Total cash and cash equivalents 129,325 151,045
Loans held for resale 6,329 36,789
Investment securities:
Available for sale, carried at market value 97,667 83,597
Held for long-term investment, carried at
amortized cost which approximates market value 4,377 2,867
----------- -----------
Total investment securities 102,044 86,464
Portfolio loans:
Commercial 789,813 590,351
Real estate mortgage 91,320 80,808
Installment 71,641 53,121
----------- -----------
Total portfolio loans 952,774 724,280
Less allowance for loan losses (11,529) (8,817)
----------- -----------
Net portfolio loans 941,245 715,463
Premises and equipment, net 13,748 11,646
Accrued interest income 6,413 5,100
Excess of cost over net assets of acquired subsidiaries, net 3,605 2,626
Other assets 21,977 15,311
----------- -----------
TOTAL ASSETS $ 1,224,686 $ 1,024,444
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Deposits:
Noninterest-bearing $ 143,505 $ 120,986
Interest-bearing 896,956 769,904
----------- -----------
Total deposits 1,040,461 890,890
Debt obligations -- Note F 46,000 23,600
Accrued interest on deposits and other liabilities 9,663 8,831
----------- -----------
Total liabilities 1,096,124 923,321
GUARANTEED PREFERRED BENEFICIAL INTERESTS
IN THE CORPORATION'S SUBORDINATED DEBENTURES 24,282 24,255
MINORITY INTERESTS IN CONSOLIDATED SUBSIDIARIES 50,266 27,576
STOCKHOLDERS' EQUITY Common stock, no par value:
25,000,000 shares authorized;
issued and outstanding: 1999 - 6,769,521 shares
1998 - 6,344,886 shares 56,649 51,868
Retained earnings 249 (2,019)
Market value adjustment (net of tax effect) for
investment securities available for sale (accumulated
other comprehensive income) (598) 168
----------- -----------
56,300 50,017
Less unallocated ESOP shares and note receivable
from sale of common stock (2,286) (725)
----------- -----------
Total stockholders' equity 54,014 49,292
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 1,224,686 $ 1,024,444
=========== ===========
</TABLE>
Page 3 of 21
<PAGE> 4
CAPITOL BANCORP LTD.
Consolidated Statements of Income
For the Three Months and Nine Months Ended September 30, 1999 and 1998
(in thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30 September 30
-------------------- -------------------
1999 1998 1999 1998
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Interest income:
Portfolio loans (including fees) $ 21,741 $ 15,556 $ 58,656 $ 42,524
Loans held for resale 256 335 1,198 970
Taxable investment securities 1,279 958 3,250 2,841
Federal funds sold 1,037 1,517 3,386 3,701
Interest-bearing deposits with banks and other 248 64 480 166
-------- -------- -------- --------
Total interest income 24,561 18,430 66,970 50,202
Interest expense:
Demand deposits 2,952 1,975 7,933 4,965
Savings deposits 401 382 1,123 1,114
Time deposits 7,252 6,745 21,283 18,423
Debt obligations and other 1,195 617 2,912 1,854
-------- -------- -------- --------
Total interest expense 11,800 9,719 33,251 26,356
-------- -------- -------- --------
Net interest income 12,761 8,711 33,719 23,846
Provision for loan losses 1,221 800 2,931 2,458
-------- -------- -------- --------
Net interest income after provision for loan losses 11,540 7,911 30,788 21,388
Noninterest income:
Service charges on deposit accounts 429 330 1,155 875
Trust fee income 147 114 459 317
Fees from origination of non-portfolio residential
mortgage loans 358 421 1,062 991
Realized gain on sale of investment securities
available for sale -- -- 17 2
Other 38 103 442 373
-------- -------- -------- --------
Total noninterest income 972 968 3,135 2,558
Noninterest expense:
Salaries and employee benefits 5,604 3,560 15,080 9,453
Occupancy 939 637 2,541 1,663
Equipment rent, depreciation and maintenance 1,056 800 2,940 2,135
Other 2,800 1,639 7,323 5,347
-------- -------- -------- --------
Total noninterest expense 10,399 6,636 27,884 18,598
-------- -------- -------- --------
Income before federal income taxes, minority interest and
cumulative effect of change in accounting principle 2,113 2,243 6,039 5,348
Federal income taxes 755 803 2,450 1,996
-------- -------- -------- --------
Income before minority interest and cumulative
effect of change in accounting principle 1,358 1,440 3,589 3,352
Credit resulting from minority interest in net losses
(income) of consolidated subsidiaries (22) 70 589 175
-------- -------- -------- --------
NET INCOME BEFORE CUMULATIVE EFFECT OF
CHANGE IN ACCOUNTING PRINCIPLE 1,336 1,510 4,178 3,527
Cumulative effect of change in accounting principle -- Note B (197)
-------- -------- -------- --------
NET INCOME $ 1,336 $ 1,510 $ 3,981 $ 3,527
======== ======== ======== ========
NET INCOME PER SHARE -- Note C
</TABLE>
Page 4 of 21
<PAGE> 5
CAPITOL BANCORP LTD.
Consolidated Statements of Changes in Stockholders' Equity
For the Nine Months Ended September 30, 1999 and 1998
(in thousands)
<TABLE>
<CAPTION>
Unallocated
ESOP Shares
Accumulated and Note
Other Receivable
Common Retained Comprehensive From Sale of
Stock Earnings Income Common Stock Total
----- -------- ------ ------------ -----
<S> <C> <C> <C> <C> <C>
Nine Months Ended September 30, 1998
- ------------------------------------
Balances at January 1, 1998 $ 50,312 $ (4,553) $ 143 $ (870) $ 45,032
Cash dividends paid (1,567) (1,567)
Issuance of 42,072 shares of common stock
upon exercise of stock options 464 464
Issuance of 33,205 shares of common stock
in exchange for minority interest in
majority-owned subsidiary 745 745
Components of comprehensive income:
Net income for the period 3,527 3,527
Market value adjustment for investment
securities available for sale (net of tax effect) 273 273
--------
Comprehensive income for the period 3,800
-------- -------- ----- -------- --------
BALANCES AT SEPTEMBER 30, 1998 $ 51,521 $ (2,593) $ 416 $ (870) $ 48,474
======== ======== ===== ======== ========
Nine Months Ended September 30, 1999
- ------------------------------------
Balances at January 1, 1999 $ 51,868 $ (2,019) $ 168 $ (725) $ 49,292
Cash dividends paid (1,713) (1,713)
Issuance of 224,770 shares of common stock
in exchange for minority interest in
majority-owned subsidiary 3,004 3,004
Issuance of 199,865 shares of common stock
upon exercise of stock options 1,777 (1,561) 216
Components of comprehensive income:
Net income for the period 3,981 3,981
Market value adjustment for investment
securities available for sale (net of tax effect) (766) (766)
--------
Comprehensive income for the period 3,215
-------- -------- ----- -------- --------
BALANCES AT SEPTEMBER 30, 1999 $ 56,649 $ 249 $(598) $ (2,286) $ 54,014
======== ======== ===== ======== ========
</TABLE>
Page 5 of 21
<PAGE> 6
CAPITOL BANCORP LTD.
Consolidated Statements of Cash Flows
For the Nine Months Ended September 30, 1999 and 1998
<TABLE>
<CAPTION>
1999 1998
---- ----
(in thousands)
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 3,981 $ 3,527
Adjustments to reconcile net income to net
cash provided (used) by operating activities:
Provision for loan losses 2,931 2,458
Depreciation of premises and equipment 2,136 1,357
Amortization of goodwill and other intangibles 206 42
Net amortization (accretion) of investment security discounts 65 (93)
Loss (gain) on sale of premises and equipment (6) 4
Minority interest in net losses of consolidated subsidiaries (589) (175)
Cumulative effect of change in accounting principle 197
Originations and purchases of loans held for resale (258,062) (226,085)
Proceeds from sales of loans held for resale 288,522 218,460
Increase in accrued interest income and other assets (8,723) (5,049)
Increase in accrued interest and other liabilities 832 1,438
--------- ---------
NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES 31,490 (4,116)
INVESTING ACTIVITIES
Proceeds from sales of investment securities
available for sale 2,500 500
Proceeds from maturities of investment securities
available for sale 66,969 36,506
Purchases of investment securities available for sale (86,275) (40,125)
Net increase in portfolio loans (228,713) (160,123)
Proceeds from sales of premises and equipment 105 151
Purchases of premises and equipment (4,337) (3,965)
--------- ---------
NET CASH USED BY INVESTING ACTIVITIES (249,751) (167,056)
FINANCING ACTIVITIES
Net proceeds from debt obligations 22,400 4,000
Resources provided by minority interests 26,277 9,645
Net proceeds from issuance of common stock 6 464
Cash dividends paid (1,713) (1,567)
Net increase in demand deposits, NOW accounts and
savings accounts 99,296 108,517
Net increase in certificates of deposit 50,275 105,850
--------- ---------
NET CASH PROVIDED BY FINANCING ACTIVITIES 196,541 226,909
--------- ---------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (21,720) 55,737
Cash and cash equivalents at beginning of period 151,045 92,770
--------- ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 129,325 $ 148,507
========= =========
</TABLE>
Page 6 of 21
<PAGE> 7
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
CAPITOL BANCORP LTD.
Note A - Basis of Presentation
The accompanying condensed consolidated financial statements of Capitol
Bancorp Ltd. ("Capitol") have been prepared in accordance with generally
accepted accounting principles for interim financial information and with the
instructions for Form 10-Q. Accordingly, they do not include all information and
footnotes necessary for a fair presentation of consolidated financial position,
results of operations and cash flows in conformity with generally accepted
accounting principles.
The statements do, however, include all adjustments of a normal recurring
nature (in accordance with Rule 10-01(b)(8) of Regulation S-X) which Capitol
considers necessary for a fair presentation of the interim periods.
The results of operations for the nine-month period ended September 30,
1999 are not necessarily indicative of the results to be expected for the year
ending December 31, 1999.
The consolidated balance sheet as of December 31, 1998 was derived from
audited consolidated financial statements as of that date. Certain 1998 amounts
have been reclassified to conform to the 1999 presentation.
Note B - Implementation of New Accounting Standards
AICPA Statement of Position 98-5, Reporting on the Costs of Start-Up
Activities, requires start-up, preopening and organizational costs to be charged
to expense when incurred. The initial application of this statement, which
became effective January 1, 1999, also requires the write-off of any such costs
previously capitalized. Implementation of this new statement is shown as a
cumulative effect adjustment in the first quarter of 1999.
[The remainder of this page intentionally left blank]
Page 7 of 21
<PAGE> 8
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
CAPITOL BANCORP LTD. - CONTINUED
Note C - Net Income Per Share
The computations of basic and diluted earnings per share were as follows:
<TABLE>
<CAPTION>
Three Months Ended September 30 Nine Months Ended September 30
------------------------------- ------------------------------
1999 1998 1999 1998
-------------- -------------- ------------ -------------
<S> <C> <C> <C> <C>
Numerator--net income for the period $ 1,335,540 $ 1,510,271 $ 3,980,597 $ 3,527,216
============== ============== =========== =============
Denominator:
Weighted average number of common shares outstanding
(denominator for basic earnings per share)
6,349,291 6,300,528 6,357,959 6,269,727
Effect of dilutive securities--stock options -- 143,646 3,103 156,860
-------------- -------------- ----------- -------------
Denominator for dilutive net income per share--
Weighted average number of common shares and potential
dilution
6,349,291 6,444,174 6,361,062 6,426,587
============== ============== =========== =============
Net income per share:
Before cumulative effect of change in
accounting principle:
Basic $ 0.21 $ 0.24 $ 0.66 $ 0.56
============== ============== =========== =============
Diluted $ 0.21 $ 0.23 $ 0.66 $ 0.55
============== ============== =========== =============
After cumulative effect of change in accounting principle:
Basic $ 0.21 $ 0.24 $ 0.63 $ 0.56
============== ============== =========== =============
Diluted $ 0.21 $ 0.23 $ 0.63 $ 0.55
============== ============== =========== =============
</TABLE>
Note D - New Banks and Pending Bank Applications
East Valley Community Bank, located in Chandler, Arizona, opened on June
30, 1999. It is majority owned by Sun Community Bancorp Limited (Sun), Capitol's
51% owned subsidiary.
Desert Community Bank, located in Las Vegas, Nevada, opened in August 1999.
It is a majority-owned subsidiary of Nevada Community Bancorp Limited which is
majority-owned by Sun.
Elkhart Community Bank, located in Elkhart, Indiana, opened on September 9,
1999. It is a majority-owned subsidiary of Indiana Community Bancorp Limited
which is majority-owned by Capitol.
At September 30, 1999, applications were pending for additional banks in
Nevada and New Mexico.
Page 8 of 21
<PAGE> 9
Note E - Initial Public Offering by Sun Community Bancorp Limited
In early July 1999, Sun completed an initial public offering of 1,650,000
shares of its common stock at $16.00 per share. In that offering, Capitol
purchased 850,000 shares, at the same share price as the public, aggregating
$13.6 million, maintaining its 51% ownership of Sun. Capitol's purchase of those
Sun shares was funded by an increase in its credit facilities with an
unaffiliated bank negotiated in June 1999.
Note F - Prospective Impact of New Accounting Standards Not Yet Adopted
FASB Statement No. 133, Accounting for Derivative Instruments and Hedging
Activities, requires all derivatives to be recognized in financial statements
and to be measured at fair value. Gains and losses resulting from changes in
fair value would be included in income, or in comprehensive income, depending on
whether the instrument qualifies for hedge accounting and the type of hedging
instrument involved. This new standard will become effective in 2001 and,
because Capitol and its banks have not typically entered into derivative
contracts either to hedge existing risks or for speculative purposes, is not
expected to have a material effect on its financial statements.
A variety of proposed or otherwise potential accounting standards are
currently under study by standard-setting organizations and various regulatory
agencies. Because of the tentative and preliminary nature of these proposed
standards, management has not determined whether implementation of such proposed
standards would be material to Capitol's financial statements.
Page 9 of 21
<PAGE> 10
PART I, ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Financial Condition
Total assets approximated $1.22 billion at September 30, 1999, an increase
of $200 million from the December 31, 1998 level of $1.02 billion. The
consolidated balance sheets include Capitol and its majority-owned subsidiaries.
During the first nine months of 1999, two new bank development subsidiaries
(Nevada Community Bancorp Limited and Indiana Community Bancorp Limited) and
three banks (East Valley Community Bank in Chandler, Arizona, Elkhart Community
Bank in Elkhart, Indiana, and Desert Community Bank in Las Vegas, Nevada) were
added to the consolidated group.
Portfolio loans increased during the nine-month period by approximately
$228 million. Loan growth was funded primarily by higher levels of time
deposits. The majority of portfolio loan growth occurred in commercial loans,
which increased approximately $199 million, consistent with the banks' emphasis
on commercial lending activities.
The allowance for loan losses at September 30, 1999 approximated $11.5
million or 1.21% of total portfolio loans, a slight decrease from the year-end
1998 ratio of 1.22%.
The allowance for loan losses is maintained at a level believed adequate by
management to absorb potential losses inherent in the loan portfolio at the
balance sheet date. Management's determination of the adequacy of the allowance
is based on evaluation of the portfolio (including volume, amount and
composition, potential impairment of individual loans and concentrations of
credit), past loss experience, current economic conditions, loan commitments
outstanding and other factors.
[The remainder of this page intentionally left blank]
Page 10 of 21
<PAGE> 11
The table below summarizes portfolio loan balances and activity in the
allowance for loan losses for the nine month periods (in thousands):
<TABLE>
<CAPTION>
1999 1998
-------- --------
<S> <C> <C>
Allowance for loan losses at January 1 $ 8,817 $ 6,229
Loans charged-off:
Commercial 540 680
Real estate mortgage 58
Installment 59 64
-------- --------
Total charge-offs 599 802
Recoveries:
Commercial 371 180
Real estate mortgage 5
Installment 4 27
-------- --------
Total recoveries 380 207
-------- --------
Net charge-offs 219 595
Additions to allowance charged to expense 2,931 2,458
-------- --------
Allowance for loan losses at September 30 $ 11,529 $ 8,092
======== ========
Average total portfolio loans for period ended September 30 $827,574 $577,814
======== ========
Ratio of net charge-offs to average portfolio loans outstanding 0.03% 0.10%
======== ========
</TABLE>
For internal purposes, management allocates the allowance to all loan
classifications. The amounts allocated in the following table (in thousands),
which include all loans for which management has concerns based on Capitol's
loan rating system, should not be interpreted as an indication of future
charge-offs. In addition, amounts allocated are not intended to reflect the
amount that may be available for future losses.
<TABLE>
<CAPTION>
September 30, 1999 December 31, 1998
---------------------- ----------------------
% %
Total Total
Portfolio Portfolio
Loans Loans
---------- --------
<S> <C> <C> <C> <C>
Commercial $ 5,929 .62% $ 4,501 0.62%
Real estate mortgage 147 .02% 127 0.02
Installment 354 .04% 262 0.04
Unallocated 5,099 .53% 3,927 0.54
-------- -------- -------- -------
Total allowance for loan losses $ 11,529 1.21% $ 8,817 1.22%
======== ======== ======== =======
Total portfolio
Loans outstanding $952,774 $724,280
======== ========
</TABLE>
Page 11 of 21
<PAGE> 12
In addition to the allowance for loan losses, some loans to Michigan
borrowers are enrolled in a state government loan program and have additional
reserves established to provide for loss protection. At September 30, 1999,
total loans under this program approximated $30.1 million. Reserves related to
these loans, which are represented by earmarked funds on deposit at
participating bank subsidiaries, approximated $1.9 million and are not included
in the recorded allowance for loan losses.
Impaired loans (i.e., loans for which there is a reasonable probability
that borrowers would be unable to repay all principal and interest due under the
contractual terms of the loan documents) were not material in 1998 and through
September 30, 1999. Impaired loans include amounts owed to one of the
Corporation's banks relating to a customer's checks drawn on uncollected funds
which arose in early February 1998. The total of the customer's overdrafts at
the bank subsidiary approximated $1.5 million. Management subsequently became
aware that larger overdrafts occurred at other, unaffiliated, financial
institutions (one of which subsequently filed suit against the bank subsidiary).
Based on management's analysis of the customer's loan collateral and amounts
owing the bank by that customer, an estimated loss accrual and write-off of
$600,000 was recorded at March 31, 1998 relating to the advances arising from
uncollected funds. In addition, the bank increased its interim provision for
loan losses at March 31, 1998 by $300,000 relating to that customer.
Nonperforming loans (i.e., loans which are 90 days or more past due and
loans on nonaccrual status) are summarized below (in thousands):
<TABLE>
<CAPTION>
Sept 30 Dec 31
1999 1998
---- ----
<S> <C> <C>
Nonaccrual loans:
Commercial $3,229 $2,608
Real estate 199
Installment 113 185
------ ------
Total nonaccrual loans 3,342 2,992
Past due (>90 days) loans:
Commercial 921 3,963
Real estate 796 183
Installment 191 104
------ ------
Total past due loans 1,908 4,250
------ ------
Total nonperforming loans $5,250 $7,242
====== ======
</TABLE>
Nonperforming loans decreased approximately $2 million during the
nine-month period ended September 30, 1999, primarily due to the transfer of one
troubled credit relationship (approximately $2.8 million) from loans to other
real estate owned. Most of the nonaccrual loans at September 30, 1999 are a
small number of loans in various stages of resolution which management believes
to be adequately collateralized or otherwise appropriately recorded in its
determination of the adequacy of the allowance for loan losses.
Page 12 of 21
<PAGE> 13
If nonperforming loans (including loans in nonaccrual status) had performed
in accordance with their contractual terms, additional interest income of
$548,000 and $300,000 would have been recorded for the nine months ended
September 30, 1999 and 1998, respectively. Interest income recognized on loans
in nonaccrual status for these periods approximated $29,000 and $37,000,
respectively.
Other real estate owned (generally real estate acquired through foreclosure
or a deed in lieu of foreclosure and classified as a component of other assets)
approximated $3.6 million at September 30, 1999 and $541,000 at December 31,
1998. The total at September 30, 1999 consists primarily of one property of
which $1.6 million of the underlying loan is guaranteed by an agency of the
federal government.
The following comparative analysis summarizes each bank's total portfolio
loans, allowance for loan losses, nonperforming assets and allowance ratios
(dollars in thousands):
<TABLE>
<CAPTION>
Total Allowance for Nonperforming Allowance as a Percentage
Portfolio Loans Loan Losses Loans of Portfolio Loans
------------------- ------------------- ------------------ --------------------------
Sept 30 Dec 31 Sept 30 Dec 31 Sept 30 Dec 31 Sept 30 Dec 31
1999 1998 1999 1998 1999 1998 1999 1998
---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Ann Arbor Commerce Bank $183,044 $154,060 $ 2,471 $ 2,080 $ 594 $ 662 1.33% 1.39%
Brighton Commerce Bank(1) 43,652 34,024 437 341 50 -- 1.00 1.00
Capitol National Bank 117,230 104,333 1,484 1,406 1,141 880 1. 27 1.35
Detroit Commerce Bank(1) 13,641 506 140 6 -- -- 1.03 1.19
Grand Haven Bank 64,185 57,057 809 682 369 62 1.26 1.20
Kent Commerce Bank(1) 31,177 22,930 324 250 -- -- 1.04 1.09
Macomb Community Bank 54,980 40,426 550 405 12 -- 1.00 1.00
Muskegon Commerce Bank(1) 37,870 24,491 379 245 17 1 1.00 1.00
Oakland Commerce Bank 73,639 63,261 869 724 1,704 2,032 1.18 1.14
Paragon Bank & Trust 67,284 63,417 1,327 732 397 2,936 1.35 1.15
Portage Commerce Bank 104,814 90,589 1,327 1,150 820 669 1.27 1.27
Sun Community Bancorp
Limited:
Bank of Tucson 52,150 37,899 648 392 122 -- 1.24 1.03
Camelback Community Bank(1) 19,753 3,246 198 33 -- -- 1.00 1.03
East Valley Community Bank(1) 2,809 n/a 29 n/a n/a n/a 1.03 n/a
Mesa Bank(1) 15,772 1,386 158 14 -- -- 1.00 1.01
Southern Arizona Community
Bank(1) 13,335 2,925 134 30 -- -- 1.00 1.03
Sunrise Bank of Arizona(1) 16,407 1,745 165 18 -- -- 1.01 1.03
Valley First Community
Bank(1) 33,841 20,879 339 209 24 -- 1.00 1.00
Nevada Community Bancorp
Limited:
Desert Community Bank(1) 5,800 n/a 59 n/a -- n/a 1.02 n/a
Indiana Community
Bancorp Limited:
Elkhart Community Bank(1) 31 n/a 1 n/a -- n/a 3.23 n/a
Other, net 1,360 1,106 100 100 -- -- -- --
-------- -------- -------- -------- -------- -------- ---- ----
Consolidated $952,774 $724,280 $ 11,529 $ 8,817 $ 5,250 $ 7,242 1.21% 1.22%
======== ======== ======== ======== ======== ======== ==== ====
</TABLE>
n/a Not applicable
(1) As a condition of charter approval, bank is required to maintain an
allowance for loan losses of not less than 1% for the first three years of
operations.
Noninterest-bearing deposits approximated 13.8% of total deposits at
September 30, 1999, a slight increase from the December 31, 1998 level of 13.6%.
Levels of noninterest-bearing deposits fluctuate based on customers' transaction
activity.
[The remainder of this page intentionally left blank]
Page 13 of 21
<PAGE> 14
Results of Operations
Net income from operations (before cumulative effect of an accounting
change) for the nine months ended September 30, 1999 amounted to $4.2 million
($.66 per basic share), an increase from the $3.5 million ($.56 per basic share)
earned during the corresponding period of 1998.
Operating results and total assets (in thousands) were as follows:
<TABLE>
<CAPTION>
Nine months ended September 30
---------------------------------------------------------------
Return on Return on
Total Assets Net Income Beginning Equity Average Assets
------------------------- --------------------------- ---------------- --------------
Sept 30 Dec 31
1999 1998 1999 1998 1999 1998 1999 1998
---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Ann Arbor Commerce Bank $ 213,805 $ 196,446 $ 1,931 $ 1,563 19.96% 21.35% 1.30% 1.37%
Brighton Commerce Bank 53,648 42,871 349 (103) 12.55 n/a .94 n/a
Capitol National Bank 135,396 136,776 1,597 1,498 21.82 22.46 1.67 1.68
Detroit Commerce Bank (1) 27,439 18,620 (276) n/a n/a n/a n/a n/a
Grand Haven Bank 74,305 66,872 714 436 20.15 15.54 1.35 1.09
Kent Commerce Bank (1) 38,663 31,587 (59) (293) n/a n/a n/a n/a
Macomb Community Bank 94,112 76,044 522 194 11.40 7.36 .85 .50
Muskegon Commerce Bank 43,720 28,552 74 (184) 4.07 n/a .27 n/a
Oakland Commerce Bank 93,664 108,747 708 614 14.27 14.09 .95 .88
Paragon Bank & Trust 84,304 86,692 333 565 6.94 13.88 .53 .93
Portage Commerce Bank 124,652 110,867 1,324 993 22.68 21.75 1.58 1.30
Sun Community Bancorp Limited:
Bank of Tucson 77,905 63,860 713 571 15.75 14.07 1.34 1.36
Camelback Community Bank (1) 28,329 10,017 (518) (197) n/a n/a n/a n/a
East Valley Community Bank(2) 7,141 n/a (464) n/a n/a n/a n/a n/a
Mesa Bank (1) 22,195 6,192 (210) n/a n/a n/a n/a n/a
Southern Arizona Community
Bank (1) 23,270 12,395 (498) (63) n/a n/a n/a n/a
Sunrise Bank of Arizona (1) 19,856 5,411 (551) n/a n/a n/a n/a n/a
Valley First Community Bank 37,498 36,588 43 (78) 1.40 n/a .16 n/a
Nevada Community Bancorp
Limited:
Desert Community Bank(2) 13,345 n/a (241) n/a n/a n/a n/a n/a
Indiana Community Bancorp
Limited:
Elkhart Community Bank(2) 6,337 n/a (103) n/a n/a n/a n/a n/a
Other,net 5,102 (14,093) (1,407) (1,989) n/a n/a n/a n/a
----------- ----------- ----------- ----------- ----- ----- --- ---
Consolidated $ 1,224,686 $ 1,024,444 $ 3,981 $ 3,527 10.77% 10.44% .48% .58%
=========== =========== =========== =========== ===== ===== === ===
</TABLE>
n/a Not applicable
(1) Kent Commerce Bank, Camelback Community Bank, Southern Arizona Community
Bank, Mesa Bank, Detroit Commerce Bank and Sunrise Bank of Arizona commenced
operations in January, May, August, October and December 1998, respectively.
(2) East Valley Community Bank, Desert Community Bank and Elkhart Community Bank
commenced operations in June, August and September 1999, respectively.
Net interest income increased 41.4% during the nine-month period versus the
corresponding period of 1998 primarily due to growth in total assets and the
number of banks within the consolidated group.
Noninterest income increased to $3.14 million for the 1999 nine-month
period, as compared with $2.56 million in 1998. Service charge revenue and trust
fee income both increased in the 1999 period by 32% and 45% due to the larger
number of banks and customers.
Provisions for loan losses were $2.93 million for the nine months ended
September 30, 1999 compared to $2.46 million during the corresponding 1998
period. The provisions for loan losses are based upon management's analysis of
the allowance for loan losses, as previously discussed.
Noninterest expense for the nine months ended September 30, 1999 was $27.9
million compared with $18.6 million in 1998. The increase in noninterest expense
is associated with
Page 14 of 21
<PAGE> 15
newly formed banks, growth and increases in general operating costs. Increases
in employee compensation and occupancy mostly relate to the growth in number of
banks within the consolidated group.
Liquidity and Capital Resources
The principal funding source for asset growth and loan origination
activities is deposits. Total deposits increased $149.6 million for the nine
month 1999 period, compared to $214.4 million in 1998. Such growth occurred in
all deposit categories, with the majority from time deposits. The Corporation's
banks generally do not rely on brokered deposits as a key funding source;
brokered deposits approximated $25.3 million as of September 30, 1999, or about
2% of total deposits.
Interim 1999 deposit growth was deployed primarily into commercial loans,
consistent with the banks' emphasis on commercial lending activities.
Cash and cash equivalents amounted to $129.3 million or 10.6% of total
assets at September 30, 1999 as compared with $151.1 million or 14.7% of total
assets at December 31, 1998. During the 1999 period this liquidity ratio
decreased due to loan growth. As liquidity levels vary continuously based on
customer activities, amounts of cash and cash equivalents can vary widely at any
given point in time. Management believes the banks' liquidity position at
September 30, 1999 is adequate to fund loan demand and meet depositor needs.
In addition to cash and cash equivalents, a source of long-term liquidity
is the banks' marketable investment securities. Capitol's liquidity requirements
have not historically necessitated the sale of investments in order to meet
liquidity needs. It also has not engaged in active trading of its investments
and has no intention of doing so in the foreseeable future. At September 30,
1999 and December 31, 1998, the Corporation had approximately $97.7 million and
$83.6 million, respectively, of investment securities classified as available
for sale which can be utilized to meet various liquidity needs as they arise.
During the first nine months of 1999, available-for-sale securities aggregating
$2.5 million were sold to meet liquidity needs at two banks.
Seven of the Michigan banks, (Portage Commerce Bank, Macomb Community Bank,
Brighton Commerce Bank, Grand Haven Bank, Oakland Commerce Bank, Capitol
National Bank and Ann Arbor Commerce Bank) have secured lines of credit with the
Federal Home Loan Bank of Indianapolis. Borrowings thereunder approximated $13
million and additional borrowing capacity approximated $14.6 million at
September 30, 1999.
At September 30, 1999, the Corporation had unused lines of credit from an
unrelated financial institution aggregating $5 million, including an increase in
credit facilities negotiated in June. Borrowings increased in early July 1999 as
a result of Capitol's investment in Sun's initial public offering.
In early July 1999, Sun Community Bancorp completed an initial public
offering of 1,650,000 shares of its common stock at $16.00 per share. Of the
offering, Capitol purchased
Page 15 of 21
<PAGE> 16
850,000 shares, at the same share price as the public, aggregating $13.6
million, maintaining its 51% ownership of Sun.
During the third calendar quarter of 1999, Capitol filed a registration
statement for a secondary offering of its common stock. Due to adverse changes
in market prices of financial institution equity securities in general, and
Capitol in particular, the proposed stock offering was withdrawn by management.
Capitol's Board of Directors recently approved a fourth quarter cash
dividend of $.09 per share (payable December 1, 1999 to shareholders of record
as of November 1, 1999), following cash dividends of $.09 per share paid March
1, June 1 and September 1, 1999.
Capitol and its banks are subject to complex regulatory capital
requirements which require maintaining certain minimum capital ratios. These
ratio measurements, in addition to certain other requirements, are used by
regulatory agencies to determine the level of regulatory intervention and
enforcement applied to financial institutions. Capitol and each of its banks are
in compliance with the regulatory requirements and management expects to
maintain such compliance.
Stockholders' equity, as a percentage of total assets, approximated 4.4% at
September 30, 1999, a slight decrease from the beginning of the year ratio of
4.8%. Total capital funds (stockholders' equity, plus minority interests in
consolidated subsidiaries and guaranteed preferred beneficial interests in the
Corporation's subordinated debentures) aggregated $128.6 million or 10.5% of
total assets at September 30, 1999. The following table summarizes the amounts
and related ratios of individually significant subsidiaries (assets of $125
million or more at the beginning of 1999) and consolidated regulatory capital
position at September 30, 1999:
<TABLE>
<CAPTION>
Sun
Ann Arbor Capitol Community
Commerce National Bancorp
Bank Bank Limited Consolidated
--------- --------- --------- ------------
<S> <C> <C> <C> <C>
Total capital to total assets:
Minimum required amount > $ 8,552 > $ 5,416 > $ 9,712 > $ 48,987
- - - -
Actual amount $ 14,906 $ 9,801 $ 50,350 $ 54,014
Ratio 6.97% 7.24% 20.74% 4.41%
Tier I capital to risk-weighted assets:
Minimum required amount(1) > $ 6,860 > $ 4,356 > $ 8,926 > $ 44,578
- - - -
Actual amount $ 14,998 $ 9,846 $ 67,232 $125,484
Ratio 8.75% 9.04% 30.13% 11.26%
Combined Tier I and Tier II capital to
risk-weighted assets:
Minimum required amount(2) > $ 13,720 > $ 8,711 > $ 17,853 > $ 89,156
- - - -
Amount required to meet "Well-Capitalized"
category(3) > $ 17,146 > $ 10,889 > $ 22,316 > $111,445
- - - -
Actual amount $ 17,146 $ 11,209 $ 68,962 $136,902
Ratio 10.00% 10.29% 30.90% 12.28%
</TABLE>
(1) The minimum required ratio of Tier I capital to risk-weighted assets is 4%.
(2) The minimum required ratio of Tier I and Tier II capital to risk-weighted
assets is 8%.
(3) In order to be classified as a "well-capitalized" institution, the ratio of
Tier I and Tier II capital to risk-weighted assets must be 10% or more.
Page 16 of 21
<PAGE> 17
Capitol's operating strategy continues to be focused on the ongoing growth
and maturity of its existing banks, coupled with new bank expansion in selected
markets as opportunities arise. Accordingly, Capitol may invest in or otherwise
add additional banks in future periods, subject to economic conditions and other
factors, although the timing of such additional banking units, if any, is
uncertain. Such future new banks and/or additions of other operating units could
be either wholly-owned, majority-owned or otherwise controlled by Capitol. Plans
to form additional banks in the states of Arizona, Nevada and Indiana were
announced earlier this year. At September 30, 1999, applications were pending
for additional banks, in Nevada and in New Mexico.
Year 2000
The year 2000 issue confronting Capitol and its suppliers, customers, and
competitors, centers on the inability of computer systems and embedded
technology to properly recognize dates near the end of and beyond the year 1999.
Capitol has been actively implementing a comprehensive plan throughout 1998
and 1999, as required by bank regulatory guidelines, to address potential
impacts of the year 2000 issue on Capitol's information technology (IT) and
non-IT systems. Capitol's year 2000 plans are subject to modification and are
revised periodically as additional information is developed.
READINESS. Capitol has completed the inventory, assessment, remediation and
planning phases for its mission-critical IT and non-IT systems, which are those
systems that pose risks to Capitol's ability to process data for its loans,
deposits, general ledger, revenues and operating results. Of the 17
mission-critical systems, all have tested as being year 2000 compliant.
Capitol recognizes that its ability to be year 2000 compliant is somewhat
dependent upon the year 2000 efforts of its vendors. Capitol and its banks sent
questionnaires to its significant vendors in 1998. Follow-up letters requesting
additional information of the vendors' year 2000 readiness were sent when
necessary. All mission-critical vendors have responded to the questionnaires or
have otherwise represented that they are year 2000 compliant. Capitol also
routinely monitors its nonmission-critical vendors to determine their level of
year 2000 readiness.
Capitol and its banks have been required by bank regulatory agencies to
update their customers on the banks' year 2000 compliance efforts. Letters and
informational brochures have been sent to customers heightening their awareness
of the year 2000 issue and notifying them of the banks' efforts in addressing
year 2000 issues. Compliance efforts are also communicated to customers on their
account statements and through brochures available in bank lobbies.
Capitol and its banks are also following regulatory requirements that
require an assessment of loan customers' year 2000 readiness. Letters and
questionnaires have been utilized to assess material loan customers' readiness
based on the size of their loan type. The number of existing customers that have
not responded to the letters and questionnaires is minimal. Follow-up letters or
phone calls are being made when necessary to obtain additional information from
these customers. Of those who have responded, all material customers represented
that they are year 2000 compliant or are working toward compliance. The number
of customers still working
Page 17 of 21
<PAGE> 18
towards year 2000 compliance is minimal and, in Capitol's opinion, their
inability to become compliant will not have a material adverse effect on
Capitol's business or operating results. Capitol and its banks also monitor
customers applying for new loans that exceed a certain dollar amount by
requiring a written representation that the customer is year 2000 compliant.
WORST CASE SCENARIO AND CONTINGENCY PLANS. Capitol and its banks have determined
the most reasonably likely worst case scenario is the possibility of the lack of
power or communication services for a period of time in excess of one day. If
this scenario were to occur, Capitol and its banks' operations could be
interrupted. Capitol and its banks have developed plans and procedures to
address this scenario, ranging from producing complete printed reports from the
core banking systems prior to January 1, 2000, to ensure that a hard copy of the
data is available in the event of a failure, to preparations for failures of
voice and data communications through the use of manual posting and courier
services, use of generators, alternative customer service locations and/or
reduced lobby hours.
Contingency planning, including the type discussed above, is an integral
part of Capitol's year 2000 readiness plan. Capitol's contingency plans address
alternative courses of action in the event that mission-critical systems do not
function properly with the date change. Development of the contingency plans was
completed earlier this year. The year 2000 contingency plans were tested during
the third quarter of 1999 to validate the effectiveness of contingent
procedures. This validation of the contingency plans showed the plans to
operate, as designed, with no apparent problems.
COSTS. The costs associated with Capitol's year 2000 compliance in 1999 are
estimated at approximately $250,000, of which approximately $225,000 has been
incurred through September 30, 1999. A similar amount was incurred in 1998.
These costs principally relate to the added personnel costs, the employment of
external consultants, and the purchase of software upgrades.
These estimated costs are part of Capitol's information technology budget.
Capitol's information technology staff and senior management have devoted
significant time and resources to year 2000 activities. While this has resulted
in allocating resources that would have otherwise been devoted to other
information technology projects, no projects have been delayed or postponed that
would have a material adverse impact on Capitol or its banks' operations.
REGULATORY OVERSIGHT. Bank regulators have issued numerous statements and
guidance on year 2000 compliance issues and the responsibilities of senior
management and directors of banks and bank holding companies. In addition, the
bank regulators have issued safety and soundness guidelines to be followed by
insured depository institutions, including Capitol and its banks, to ensure
resolution of any year 2000 problems. Periodic year 2000 reviews are performed
by various bank regulatory agencies. Most of the recent examinations have been
performed by the FDIC, and it is expected that the FDIC will continue its
frequent examinations throughout 1999. The banking regulatory agencies have
asserted that year 2000 testing and certification is a key safety and soundness
issue in conjunction with regulatory examinations. Consequently, Capitol's or
its banks' failure to address appropriately the year 2000 issue could result in
supervisory action, including the reduction of the banks' supervisory ratings,
the denial of applications for expansion, or the imposition of civil money
penalties.
Page 18 of 21
<PAGE> 19
Numerous regulatory on-site and over-the-phone examinations have taken
place at Capitol and its banks during the past two quarters of 1999. At each
examination completed thus far, Capitol and its banks have been deemed to be
sufficiently following regulatory guidelines.
Impact of New Accounting Standards
As discussed elsewhere herein, a new accounting standard requiring the
write-off of previously capitalized start-up and preopening costs was
implemented effective January 1, 1999. That standard requires that such costs be
charged to expense, when incurred, in future periods.
FASB Statement No. 133, Accounting for Derivative Instruments and Hedging
Activities, requires all derivatives to be recognized in financial statements
and to be measured at fair value. Gains and losses resulting from changes in
fair value would be included in income, or in comprehensive income, depending on
whether the instrument qualifies for hedge accounting and the type of hedging
instrument involved. This new standard will become effective in 2001 and,
because Capitol and its banks have not typically entered into derivative
contracts either to hedge existing risks or for speculative purposes, is not
expected to have a material effect on its financial statements.
A variety of proposed or otherwise potential accounting standards are
currently under study by standard-setting organizations and various regulatory
agencies. Because of the tentative and preliminary nature of these proposed
standards, management has not determined whether implementation of such proposed
standards would be material to Capitol's financial statements.
Page 19 of 21
<PAGE> 20
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
Capitol and its subsidiaries are parties to certain
ordinary, routine litigation incidental to their business.
In the opinion of management, liabilities arising from such
litigation would not have a material effect on Capitol's
consolidated financial position or results of operations.
Item 2. Changes in Securities.
None.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Submission of Matters to a Vote of Security Holders.
None.
tem 5. Other Information.
None.
Item 6. Exhibits and reports on Form 8-K.
(a) Exhibits:
(27) Financial Data Schedule.
(b) Reports on Form 8-K:
A report on Form 8-K was filed September
24, 1999, which reported withdrawal of a
proposed stock offering.
Page 20 of 21
<PAGE> 21
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CAPITOL BANCORP LTD.
(Registrant)
\s\ Joseph D. Reid
------------------------------------
Joseph D. Reid
Chairman, President and CEO
(duly authorized to sign on behalf
of the registrant)
\s\ Lee W. Hendrickson
------------------------------------
Lee W. Hendrickson
Executive Vice President and
Chief Financial Officer
Date: November 15, 1999
- -----------------------
Page 21 of 21
<PAGE> 22
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Description
- ----------- -----------
<S> <C>
27 Financial Data Schedule
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 52,651
<INT-BEARING-DEPOSITS> 1,834
<FED-FUNDS-SOLD> 74,840
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 102,044
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 959,103
<ALLOWANCE> 11,529
<TOTAL-ASSETS> 1,224,686
<DEPOSITS> 1,040,461
<SHORT-TERM> 46,000
<LIABILITIES-OTHER> 9,663
<LONG-TERM> 0
0
0
<COMMON> 56,649
<OTHER-SE> 249
<TOTAL-LIABILITIES-AND-EQUITY> 1,224,686
<INTEREST-LOAN> 59,854
<INTEREST-INVEST> 3,250
<INTEREST-OTHER> 3,866
<INTEREST-TOTAL> 66,970
<INTEREST-DEPOSIT> 30,339
<INTEREST-EXPENSE> 33,251
<INTEREST-INCOME-NET> 33,719
<LOAN-LOSSES> 2,931
<SECURITIES-GAINS> 17
<EXPENSE-OTHER> 27,295
<INCOME-PRETAX> 6,628
<INCOME-PRE-EXTRAORDINARY> 4,178
<EXTRAORDINARY> 0
<CHANGES> (197)
<NET-INCOME> 3,981
<EPS-BASIC> .66
<EPS-DILUTED> .66
<YIELD-ACTUAL> 0
<LOANS-NON> 3,342
<LOANS-PAST> 1,908
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 8,817
<CHARGE-OFFS> 599
<RECOVERIES> 380
<ALLOWANCE-CLOSE> 11,529
<ALLOWANCE-DOMESTIC> 11,529
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 5,099
</TABLE>
