<PAGE> 1
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
UNITED STATES
SECURITIES & EXCHANGE COMMISSION
Washington, D.C. 20549
-----------------------
FORM 10-Q
/X/ Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the Quarterly Period ended March 31, 1999
--------------------------
Commission File Number 0-18082
--------------------------
GREAT SOUTHERN BANCORP, INC.
(Exact name of registrant as specified in its charter)
DELAWARE
(State or other jurisdiction of incorporation or organization)
43-1524856
(IRS Employer Identification Number)
1451 E. BATTLEFIELD
SPRINGFIELD, MISSOURI
(Address of principal executive offices)
65804
(Zip Code)
(417) 887-4400
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes /X/ No / /
The number of shares outstanding of each of the registrant's classes of
common stock: 7,619,644 shares of common stock, par value $.01, outstanding at
May 10, 1999.
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
<PAGE> 2
PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
GREAT SOUTHERN BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Unaudited)
<TABLE>
<CAPTION>
March 31, December 31,
1999 1998
------------- ------------
<S> <C> <C>
ASSETS
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 34,544,620 $ 24,115,015
Interest-bearing deposits in other financial institutions. . . . . . . . . 4,462,794 9,431,407
----------- -----------
Cash and cash equivalents. . . . . . . . . . . . . . . . . . . . . 39,007,414 33,546,422
Available-for-sale securities. . . . . . . . . . . . . . . . . . . . . . . 5,934,085 6,475,897
Held-to-maturity securities (fair value $44,147,000 - March 1999;
$49,287,000 - December 1998) . . . . . . . . . . . . . . . . . . . . . . 44,083,630 49,117,932
Loans receivable, net. . . . . . . . . . . . . . . . . . . . . . . . . . . 719,517,281 708,238,463
Interest receivable:
Loans. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,034,582 4,854,247
Investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 662,898 651,993
Prepaid expenses and other assets. . . . . . . . . . . . . . . . . . . . . 4,548,642 6,571,841
Foreclosed assets held for sale, net . . . . . . . . . . . . . . . . . . . 752,458 2,810,201
Premises and equipment, net . . . . . . . . . . . . . . . . . . . . . . . 10,059,301 10,012,125
Investment in Federal Home Loan Bank Stock . . . . . . . . . . . . . . . . 9,632,700 9,454,100
Excess of cost over fair value of net assets acquired, at amortized cost . 508,351 543,278
Deferred income taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . 4,554,529 4,221,203
------------ ------------
Total Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . $844,295,871 $836,497,702
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $627,607,440 $597,624,994
Federal Home Loan Bank advances. . . . . . . . . . . . . . . . . . . . . . 136,021,498 158,452,407
Short-term borrowings. . . . . . . . . . . . . . . . . . . . . . . . . . . 4,265,893 798,247
Accrued interest payable . . . . . . . . . . . . . . . . . . . . . . . . . 4,275,599 5,356,558
Advances from borrowers for taxes and insurance. . . . . . . . . . . . . . 765,635 1,582,298
Accounts payable and accrued expenses. . . . . . . . . . . . . . . . . . . 2,428,595 2,442,368
Income taxes payable . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,318,312 1,858,343
------------ ------------
Total Liabilities . . . . . . . . . . . . . . . . . . . . . . . . 777,682,972 768,115,215
------------ ------------
Capital stock
Serial preferred stock, $.01 par value; authorized
1,000,000 shares
Common stock, $.01 par value; authorized 20,000,000 shares; issued
12,325,002 shares. . . . . . . . . . . . . . . . . . . . . . . . . . . 123,250 123,250
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . 17,229,305 17,224,451
Retained earnings . . . . . . . . . . . . . . . 92,940,283 90,459,992
Accumulated other comprehensive income:
Unrealized appreciation on available-for-sale securities,
net of income taxes of $1,098 at March 31, 1999
and $214,410 at December 31, 1998. . . . . . . . . . . . . . . . . . . . 1,717 335,359
----------- -----------
110,294,555 108,143,052
Less treasury common stock, at cost; March 31, 1999 - 4,657,728 shares;
December 31, 1998 - 4,522,323 shares . . . . . . . . . . . . . . . . . . (43,681,656) (39,760,565)
------------ ------------
Total Stockholders' Equity . . . . . . . . . . . . . . . . . . . . 66,612,899 68,382,487
------------ ------------
Total Liabilities and Stockholders' Equity . . . . . . . . . . . . $844,295,871 $836,497,702
============ ============
<FN>
See Notes to Consolidated Financial Statements
</TABLE>
<PAGE> 3
GREAT SOUTHERN BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
March 31,
1999 1998
----------- -----------
<S> <C> <C>
INTEREST INCOME
Loans $15,017,747 $14,777,913
Investment securities and other 906,561 1,080,087
---------- ----------
TOTAL INTEREST INCOME 15,924,308 15,858,000
---------- ----------
INTEREST EXPENSE
Deposits 6,025,424 5,100,206
FHLBank advances 2,114,813 2,693,792
Short-term borrowings 42,681 294,655
---------- ----------
TOTAL INTEREST EXPENSE 8,182,918 8,088,653
---------- ----------
NET INTEREST INCOME 7,741,390 7,769,347
PROVISION FOR LOAN LOSSES 576,410 414,425
---------- -----------
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 7,164,980 7,354,922
---------- ----------
NON-INTEREST INCOME
Commissions 1,759,509 1,446,395
Service charge fees 999,490 955,125
Net realized gains on sales of loans 455,585 285,717
Net realized gains on available-for-sale securities 219,596 417,761
Income on foreclosed assets (43,508) (56,347)
Other income 524,135 322,181
---------- ----------
TOTAL NON-INTEREST INCOME 3,914,807 3,370,832
---------- ----------
NON-INTEREST EXPENSE
Salaries and employee benefits 3,264,513 2,755,007
Net occupancy expense 1,053,455 783,596
Postage 270,611 245,576
Insurance 173,717 145,317
Amortization of goodwill 34,927 27,149
Advertising 110,242 134,873
Office supplies and printing 286,603 174,849
Other operating expenses 817,012 958,092
---------- ----------
TOTAL NON-INTEREST EXPENSE 6,011,080 5,224,459
---------- ----------
INCOME BEFORE INCOME TAXES 5,068,707 5,501,295
PROVISION FOR INCOME TAXES 1,622,000 2,137,700
---------- ----------
NET INCOME $ 3,446,707 $ 3,363,595
========== ==========
BASIC EARNINGS PER COMMON SHARE $.44 $.42
=== ===
DILUTED EARNINGS PER COMMON SHARE $.44 $.41
=== ===
<FN>
See Notes to Consolidated Financial Statements
</TABLE>
<PAGE> 4
GREAT SOUTHERN BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
1999 1998
--------------- ---------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income $ 3,446,707 $ 3,363,595
Items not requiring (providing) cash:
Depreciation 491,051 342,159
Amortization 34,927 27,149
Provision for loan losses 576,410 414,425
Provision for losses on foreclosed assets -- 100,000
Gain on sale of loans (455,585) (285,717)
Proceeds from sales of loans held for sale 19,749,839 --
Originations of loans held for sale (19,749,146) --
Net realized (gains) losses on sale of available-for-sale securities (6,284) 81,262
Loss on sale of premises and equipment -- 2,223
Gain on sale of foreclosed assets (27,737) (29,106)
Amortization of deferred income, premiums and discounts (171,796) (191,602)
Deferred income taxes (735,210) (531,817)
Changes in:
Accrued interest receivable (191,240) (594,189)
Prepaid expenses and other assets 2,021,805 (937,818)
Accounts payable and accrued expenses (1,094,732) (606,894)
Income taxes refundable/payable 861,853 170,385
----------- -----------
Net cash provided by operating activities 4,750,862 1,324,055
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Net increase in loans (19,226,230) (32,360,096)
Purchase of premises and equipment (538,227) (680,660)
Proceeds from sale of premises and equipment -- 10,000
Proceeds from sale of foreclosed assets 165,000 313,500
Capitalized costs on foreclosed assets 185 (31,841)
Proceeds from maturing held-to-maturity securities 24,319,600 7,500,000
Purchase of held-to-maturity securities (9,367,313) (9,013,370)
Proceeds from sale of available-for-sale securities 1,204,728 629,894
Purchase of available-for-sale securities (990,274) (338,014)
Purchase of FHLBank stock (178,600) --
----------- -----------
Net cash used in investing activities (4,611,131) (33,970,587)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in certificates of deposit 27,972,729 24,686,222
Net increase in checking and savings 2,009,717 8,005,734
Proceeds from Federal Home Loan Bank advances 281,200,000 200,979,809
Repayments of Federal Home Loan Bank advances (303,630,909) (175,785,711)
Net increase in short-term borrowings 3,467,646 5,194,777
Advances from borrowers for taxes and insurance (816,664) 572,033
Purchase of treasury stock (3,973,815) (944,426)
Dividends paid (976,498) (887,985)
Stock options exercised 69,055 40,088
----------- -----------
Net cash provided by financing activities 5,321,261 61,860,541
----------- -----------
INCREASE IN CASH AND CASH EQUIVALENTS 5,460,992 29,214,009
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 33,546,422 39,158,884
----------- -----------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 39,007,414 $ 68,372,893
=========== ===========
<FN>
See Notes to Consolidated Financial Statements
</TABLE>
<PAGE> 5
GREAT SOUTHERN BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1: BASIS OF PRESENTATION
The accompanying unaudited interim consolidated financial statements of
Great Southern Bancorp, Inc. (the "Company") have been prepared in accordance
with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-Q and Rule 10-01 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. The financial statements presented herein reflect all
adjustments, which are in the opinion of management, necessary for a fair
statement of the results for the periods presented. Operating results for the
three months ended March 31, 1999 and 1998 are not necessarily indicative of
the results that may be expected for the full year. For further information,
refer to the consolidated financial statements and footnotes thereto included
in the Company's annual report on Form 10-K for the six month transition
period ended December 31, 1998. When necessary, reclassifications have been
made to prior period balances to conform to current period presentation.
These reclassifications had no effect on net income.
NOTE 2: OPERATING SEGMENTS
The Company's banking operation is its only reportable segment. The
banking operation segment is principally engaged in the business of
originating residential and commercial real estate loans, commercial business
and consumer loans and funding these loans through the attraction of deposits
from the general public, originating brokered deposits and borrowing from the
Federal Home Loan Bank and others. The operating results of this segment are
regularly reviewed by management to make decisions about resource allocations
and to assess performance.
The following table provides information about segment profits and
segment assets and has been prepared using the same accounting policies as
those described in Note 1. There are no material inter-segment revenues, thus
no reconciliations to amounts reported in the consolidated financial
statements are necessary. Revenue from segments below the reportable segment
threshold is attributable to four operating segments of the Company. These
segments include an insurance agency, a travel agency, discount brokerage
services and real estate appraisal services.
Three Months Ended March 31, 1999
----------------------------------------
Banking All Other Totals
------------ ------------ ------------
Interest income $15,890,644 $ 33,664 $15,924,308
Non-interest income 1,840,886 2,073,921 3,914,807
Segment profit 3,035,081 411,626 3,446,707
Three Months Ended March 31, 1998
----------------------------------------
Banking All Other Totals
------------ ------------ ------------
Interest income $15,823,261 $ 34,739 $15,858,000
Non-interest income 1,418,660 1,952,172 3,370,832
Segment profit 2,957,033 406,562 3,363,595
<PAGE> 6
NOTE 3: COMPREHENSIVE INCOME
Statement of Accounting Financial Standards No. 130, "Reporting
Comprehensive Income", requires the reporting of comprehensive income and its
components. Comprehensive income is defined as the change in equity from
transactions and other events and circumstances from non-owner sources, and
excludes investments by and distributions to owners. Comprehensive income
includes net income and other items of comprehensive income meeting the above
criteria. The Company's only component of other comprehensive income is the
unrealized gains and losses on available for sale securities.
Three Months Ended March 31,
----------------------------
1999 1998
------------- -------------
Net income $3,446,707 $3,363,595
--------- ---------
Unrealized holding gains (losses),
net of income taxes (190,905) (118,717)
Less: reclassification adjustment
for gains included in net income,
net of income taxes (142,737) (271,545)
--------- ---------
(333,642) (390,262)
--------- ---------
Other comprehensive income (loss) $3,113,065 $2,973,333
========= =========
ITEM II. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATION
Forward-Looking Statements
When used in this Form 10-Q and in future filings by the Company with the
Securities and Exchange Commission (the "SEC"), in the Company's press
releases or other public or shareholder communications, and in oral statements
made with the approval of an authorized executive officer, the words or
phrases "will likely result" "are expected to," "will continue," "is
anticipated," "estimate," "project" or similar expressions are intended to
identify "forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995. Such statements are subject to
certain risks and uncertainties, including, among other things, changes in
economic conditions in the Company's market area, changes in policies by
regulatory agencies, fluctuations in interest rates, demand for loans in the
Company's market area and competition, that could cause actual results to
differ materially from historical earnings and those presently anticipated or
projected. The Company wishes to advise readers that the factors listed above
could affect the Company's financial performance and could cause the Company's
actual results for future periods to differ materially from any opinions or
statements expressed with respect to future periods in any current statements.
The Company does not undertake-and specifically declines any obligation-
to publicly release the result of any revisions which may be made to any
forward-looking statements to reflect events or circumstances after the date
of such statements or to reflect the occurrence of anticipated or
unanticipated events.
<PAGE> 7
General
Parts of management's discussion and analysis in the annual report on
Form 10-K are not included below. The following should be read in conjunction
with management's discussion and analysis in the Company's December 31, 1998
Form 10-K.
The profitability of the Company, and more specifically, the
profitability of its primary subsidiary Great Southern Bank (the "Bank"),
depends primarily on its net interest income. Net interest income is the
difference between the interest income it earns on its loans and investment
portfolio, and its cost of funds, which consists mainly of interest paid on
deposits and borrowings. Net interest income is affected by the relative
amounts of interest-earning assets and interest-bearing liabilities and the
interest rates earned or paid on these balances. When interest-earning assets
approximate or exceed interest-bearing liabilities, any positive interest rate
spread will generate net interest income.
The Company's profitability is also affected by the level of its non-
interest income and operating expenses. Non-interest income consists
primarily of gains on sales of loans and available-for-sale investments,
service charge fees and commissions. Operating expenses consist primarily of
salaries and employee benefits, occupancy-related expenses, equipment and
technology-related expenses and other general operating expenses.
The operations of the Bank, and banking institutions in general, are
significantly influenced by general economic conditions and related monetary
and fiscal policies of regulatory agencies. Deposit flows and the cost of
funds are influenced by interest rates on competing investments and general
market rates of interest. Lending activities are affected by the demand for
financing real estate and other types of loans, which in turn are affected by
the interest rates at which such financing may be offered and other factors
affecting loan demand and the availability of funds.
Effect of Federal Laws and Regulations
Federal legislation and regulation significantly affect the banking
operations of the Company and the Bank, and have increased competition among
savings institutions, commercial banks, mortgage banking enterprises and other
financial institutions. In particular, the capital requirements and
operations of regulated depository institutions such as the Company and the
Bank have been and will be subject to changes in applicable statutes and
regulations from time to time, which changes could, under certain
circumstances, adversely affect the Company or the Bank.
Potential Impact of Accounting Principles to be Implemented in the Future
The FASB recently adopted SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities." SFAS No. 133 establishes accounting and
reporting standards for derivative instruments, including certain derivative
instruments embedded in other contracts, and for hedging activities. SFAS No.
133 is effective for fiscal years beginning after June 15, 1999, and may be
implemented as of the beginning of any fiscal quarter after issuance. SFAS
No. 133 may not be applied retroactively. Management does not believe
adopting SFAS No. 133 will have a material impact on the Company's financial
statements.
<PAGE> 8
YEAR 2000 ISSUES
The Year 2000 issue confronting the Company and its suppliers, customers
and competitors, centers on the inability of computer systems to recognize the
year 2000. Many existing computer programs and systems were originally
programmed with six digit dates that provided only two digits to identify the
calendar year in the date field. With the impending new millennium, these
programs and computers may recognize "00" as the year 1900 rather than the
year 2000.
Financial institution regulators have increased their focus upon year
2000 compliance issues and have issued guidance concerning the
responsibilities of senior management and directors. The FDIC and the other
federal banking regulators have issued safety and soundness guidelines to be
followed by insured depository institutions, such as the Bank, to assure
resolution of any year 2000 problems. The federal banking agencies have
asserted that year 2000 testing and certification is a key safety and
soundness issue in conjunction with regulatory exams, and thus an
institution's failure to address appropriately the Year 2000 issue could
result in supervisory action, including such enforcement actions as the
reduction of the institution's supervisory ratings, the denial of applications
for approval of a merger or acquisition, or the imposition of civil money
penalties.
The Bank has experienced rapid growth in both the deposit and loan areas
in recent years. Management of the Bank evaluated the need to upgrade the
mission critical systems and determined conversion to a new hardware and
software system was the best solution to meet the growth needs of the Bank as
well as to resolve the year 2000 issues. During the six months ended December
31, 1998, the Bank completed the conversion to the Jack Henry Silverlake
system for its core processing system and internal financial reporting system.
The new system has been certified year 2000 compliant, was tested by the Bank
for year 2000 compliance in early 1999 and is believed to be year 2000
compliant. As an integral part of upgrading the core system, the Company has
also been in a program of replacing its personal computers and wide area
networks with systems believed to be year 2000 compliant systems. This
program was also completed during the six months ended December 31, 1998.
A complete inventory of non-mission critical hardware and software was
completed in December 1997. Non-compliant software systems are scheduled for
replacement or will be discontinued. Security systems, elevators, heating and
air conditioning and like items have been tested and are expected to function
as usual through the date of change. Third party vendors deemed appropriate
will continue to be used and have indicated their products as compliant.
Testing of these and certain other systems is scheduled for completion no
later than June 30, 1999.
A budget of $2.4 million was established to complete the necessary steps
previously noted. Approximately $1.8 million has been spent to date, with
approximately $25,000 of these costs being expensed in the three months ended
March 31, 1999. The remaining amount spent to date has either been expensed
previously or has been capitalized and is being amortized over a 3 to 5 year
period. Management feels these expenses will not have a material impact on
the financial condition of the Company.
<PAGE> 9
An outside consultant has been utilized throughout the process to provide
an independent review of all areas. The Company's estimate of year 2000
project costs and completion dates are based on management's best estimates
that have been derived utilizing numerous assumptions about future events.
These estimates and actual results may differ materially.
The insurance, investment and travel subsidiaries operate on separate
computer systems from the Bank and each other. The Year 2000 Committee of the
Bank has been assisting these companies in performing a Risk Assessment of
their systems and taking the steps believed necessary to achieve compliance
with all year 2000 issues before December 31, 1999.
While the Company believes that its systems and technology will be
compliant on January 2000 and thereafter, it faces an unquantifiable risk that
third parties such as customers will encounter year 2000 problems that cause
them to reduce their use of bank services, default on loans, or reduce levels
of future borrowings. There is also a risk that other financial organizations
that the Company maintains relations with could experience Year 2000 issues
that would adversely affect the Company. Finally, if other service providers,
such as public utilities or telephone companies, are not Year 2000 compliant,
the Company could experience service interruptions that would make the conduct
of business difficult.
The Company has developed a contingency plan to address some of these
uncertainties. It may employ back-up generators as needed to provide electric
power beginning January 1, 2000. It plans to have in place a cellular based
modern communications system at key branches to maintain communication with
its data service location in the event that landline communications are
disrupted. Immediately before the change of the century, electronic trial
balances with extended information are to be downloaded for import into local
database systems. A complete backup of all files will be performed before the
century change, and critical information is expected to be printed in hard
copy. The Company anticipates taking other steps to assure both liquidity and
security.
The Company believes it has completed the majority of the actions
necessary to achieve Year 2000 compliance for its core systems and the
majority of the work necessary to achieve overall compliance. The Company
expects that it will be Year 2000 compliant before the century date change.
There remains, however, the possibility that problems encountered by third
parties, including customers, financial organizations and other service
providers, could adversely affect the Company.
Asset and Liability Management
During the three months ended March 31, 1999, total assets increased by
$8 million to $844 million. Loans increased $11.3 million and cash and cash
equivalents increased $5.5 million offset by a decline in held-to-maturity
securities of $5 million and a decline in foreclosed assets of $2.1 million.
Total liabilities increased $9.6 million to $778 million. Deposits
increased $30 million and short-term borrowings increased $3.5 million offset
by a decrease in Federal Home Loan Bank ("FHLBank") advances of $22.4 million.
The deposit increase was primarily from brokered deposits. The decrease in
FHLBank advances was due to repayment of these from the brokered deposits.
Management continues to feel that FHLBank advances and brokered deposits are
viable alternatives to retail deposits when factoring all the costs associated
with the generation and maintenance of retail deposits.
<PAGE> 10
Stockholders' equity decreased $1.8 million primarily as a result of net
treasury stock purchases of $3.9 million, a reduction in unrealized gains on
available-for-sale securities of $334,000 and dividend declarations and
payments of $976,000, offset by an increase from net income of $3.4 million.
The Company repurchased 165,449 shares of common stock at an average price of
$24.02 per share during the three months ended March 31, 1999 and reissued
52,724 shares of treasury stock at an average price of $1.75 per share to
cover stock option exercises.
Interest Rate Sensitivity
A principal operating objective of the Company is to produce stable
earnings by achieving a favorable interest rate spread that can be sustained
during fluctuations in prevailing interest rates. The Company has sought to
reduce its exposure to adverse changes in interest rates by attempting to
achieve a closer match between the periods in which its interest-bearing
liabilities and interest-earning assets can be expected to reprice through the
origination of adjustable-rate mortgages and loans with shorter terms and the
purchase of other shorter term interest-earning assets.
The term "interest rate sensitivity" refers to those assets and
liabilities that mature and reprice periodically in response to fluctuations
in market rates and yields. As noted above, one of the principal goals of the
Company's asset/liability program is to maintain and match the interest rate
sensitivity characteristics of the asset and liability portfolios.
In order to properly manage interest rate risk, the Bank's Board of
Directors has established an Asset/Liability Management Committee ("ALCO")
made up of members of management to monitor the difference between the Bank's
maturing and repricing assets and liabilities and to develop and implement
strategies to decrease the "gap" between the two. The primary
responsibilities of the committee are to assess the Bank's asset/liability
mix, recommend strategies to the Board that will enhance income while managing
the Bank's vulnerability to changes in interest rates and report to the Board
the results of the strategies used. The Company's experience with interest
rates are discussed in more detail under the headings "Results of Operations
and Comparisons of the Three Months Ended March 31, 1999 and 1998."
An important element of both earnings performance and liquidity is
management of interest rate sensitivity. Interest rate sensitivity reflects
the potential effect on net interest income of a movement in interest rates.
The difference between the Company's interest-sensitive assets and interest-
sensitive liabilities for a specified time frame is referred to as "gap." A
financial institution is considered to be asset-sensitive, or having a
positive gap, when the amount of its earning assets maturing or repricing
within a given time period exceeds the amount of its interest-bearing
liabilities also maturing or repricing within that time period. Conversely, a
financial institution is considered to be liability-sensitive, or have a
negative gap, when the amount of its interest-bearing liabilities maturing or
repricing within a given period exceeds the amount of earning assets also
maturing or repricing within that time period. During a period of rising
interest rates, a positive gap would tend to increase net interest income,
while a negative gap would tend to have an adverse effect on net interest
income. During a period of falling interest rates, a positive gap would tend
to have an adverse effect on net interest income, while a negative gap would
tend to increase net interest income.
<PAGE> 11
The Company evaluates interest sensitivity risk and then formulates
guidelines regarding asset generation, funding sources and the pricing of
each, and off-balance sheet commitments in order to decrease sensitivity risk.
These guidelines are based upon management's outlook regarding future interest
rate movements, the state of the regional and national economy and other
financial and business risk factors. The Bank uses a static gap model and a
computer simulation to measure the effect on net interest income of various
interest rate scenarios over selected time periods. The Company's gap can be
managed by repricing assets or liabilities, selling available-for-sale
investments, replacing an asset or liability prior to maturity or adjusting
the interest rate during the life of an asset or liability. Matching the
amount of assets and liabilities repricing during the same time interval helps
to reduce the risk and minimize the impact on net interest income in periods
of rising or falling interest rates.
As a part of its asset and liability management strategy, the Company has
increased its investment in loans which are interest rate sensitive by
emphasizing the origination of adjustable-rate, one- to four-family
residential loans and adjustable-rate or relatively short-term commercial
business and consumer loans, and originating fixed-rate, one- to four-family
residential loans primarily for immediate resale in the secondary market.
Approximately one-third of total assets are currently invested in commercial
real estate and commercial business loans. This part of the strategy was
designed to improve asset yield and fee income, and to shorten the average
maturity and increase the interest rate sensitivity of the loan portfolio.
While efforts to date have contributed to the changes in the one-year interest
rate sensitivity gap and increased net interest income, such lending,
commensurate with the increased risk levels, has also resulted in an increase
in the level of non-performing assets. Management continually evaluates
existing and potential commercial real estate and commercial business loans,
in order to try to reduce undesirable risks including concentrations in a
given geographic area or a particular loan category.
Interest rate risk exposure estimates (the sensitivity gap) are not exact
measures of an institution's actual interest rate risk. They are only
indicators of interest rate risk exposure produced in a simplified modeling
environment designed to allow management to gauge the Company's sensitivity to
changes in interest rates. They do not necessarily indicate the impact of
general interest rate movements on the Company's net interest income because
the repricing of certain categories of assets and liabilities is subject to
competitive and other factors beyond the Company's control. As a result,
certain assets and liabilities indicated as maturing or otherwise repricing
within a stated period may in fact mature or reprice at different times and in
different amounts and would therefore cause a change (which potentially could
be material) in the Company's interest rate risk.
<PAGE> 12
RESULTS OF OPERATIONS AND COMPARISON OF THE THREE MONTHS ENDED MARCH 31, 1999
and 1998
The increase in earnings of $83,000, or 2.5%, for the three months ended
March 31, 1999 when compared to the same period in 1998, was primarily due to
an increase in non-interest income of $544,000, or 16.1%, and a decrease in
provision for income taxes of $516,000, or 24.1%, offset by an increase in
non-interest expense of $787,000, or 15.1%, an increase in provision for loan
losses of $162,000 million, or 39.1%, and a decrease in net interest income of
$28,000, or .4%, during the three month period.
Total Interest Income
Total interest income increased $66,000, or .4%, during the three months
ended March 31, 1999, when compared to the three months ended March 31, 1998.
The increase was due to a $240,000, or 1.6%, increase in interest income on
loans offset by a $174,000, or 16.1% decrease in interest income on
investments and other interest earning assets.
Interest Income - Loans
During the three months ended March 31, 1999, interest income on loans
increased primarily from higher average balances. Interest income increased
$1.1 million as the result of higher average loan balances from $636 million
during the three months ended March 31, 1998 to $719 million during the three
months ended March 31, 1999. The higher average balance resulted from the
Bank's increased lending in commercial real estate and commercial business
lending and the indirect dealer consumer lending offset by a decline in
single-family residential lending.
The average yield on loans decreased from 9.29% during the three months
ended March 31 1998, to 8.35% during the three months ended March 31, 1999.
Interest Income - Investments and Other Interest-Earning Deposits
Interest income on investments and other interest-earning deposits
decreased from a combination of lower average balances and higher average
yields during the three months ended March 31, 1999 when compared to the three
months ended March 31, 1998. Interest income decreased $553,000 as a result
of lower average balances from $94 million during the three months ended March
31, 1998 to $65 million during the three months ended March 31, 1999. This
decrease was primarily in interest-bearing deposits in FHLBank used to fund
daily operations and lending. Interest income increased $379,000 as a result
of higher average yields from 4.62% during the three months ended March 31,
1998, to 5.59% during the three months ended March 31, 1999 due to higher
short term market rates.
Total Interest Expense
Total interest expense increased $94,000, or 1.2%, during the three
months ended March 31, 1999 when compared with the same period in 1998. The
increase during the three month period was primarily due to a $925,000, or
18.1%, increase in interest expense on deposits offset by a $831,000, or
27.8%, decrease in interest expense on FHLBank advances and other borrowings.
<PAGE> 13
Interest Expense - Deposits
Interest expense on deposits increased $925,000 primarily as a result of
higher average balances of time deposits from $307 million during the three
months ended March 31, 1998, to $378 million during the three months ended
March 31, 1999 and due to higher average balances of interest-bearing demand
deposits from $118 million during the three months ended March 31, 1998, to
$155 million during the three months ended March 31, 1999. The average
balances on time deposits increased as a result of the Company's use of
brokered deposits and the average balances on interest-bearing demand deposits
increased as a result of other borrowings being reclassed to this category
beginning June 30, 1998. Interest on time deposits decreased $215,000 due to
lower rates, while interest-bearing demand deposits experienced small
increases due to higher rates. The other deposit category, savings,
experienced only minor decreases due to slightly lower balances.
Interest Expense - FHLBank Advances and Other Borrowings
Interest expense on FHLBank advances and other borrowings decreased
$829,000 due to lower average balances from $212 million in the three months
ended March 31, 1998 to $153 million in the three months ended March 31, 1999.
Average rates were virtually unchanged during the three months ended March 31,
1999 compared to the three months ended March 31, 1998. The average balances
decreased primarily as a result of the Company's increased use of brokered
deposits and reclass of short-term borrowings to interest-bearing demand
deposits as noted above.
Net Interest Income
The Company's overall interest rate spread decreased 29 basis points, or
7.8%, from 3.87% during the three months ended March 31, 1998, to 3.58% during
the three months ended March 31, 1999. The decrease was due to a 56 basis
point decline in the weighted average yields received on interest-earning
assets partially offset by a 27 basis point decrease in the weighted average
rates paid on interest-bearing liabilities.
Prime averaged 8.36% during the three months ended March 31, 1998
compared to an average of 7.75% (61 basis points less) during the three months
ended March 31, 1999. As a large percentage of the Company's loans are tied
to prime, this reduction was the primary reason for the decline in the
weighted average yields received on interest-earning assets.
Interest rates paid on deposits declined during the three months ended
March 31, 1999 compared to the same quarter one year earlier. However, as the
Company has grown the assets of the Bank, the brokered and other time deposits
needed to fund that growth have increased the average cost of deposits since
time deposits are higher cost deposits for the Bank than are interest-bearing
demand and savings.
Provision for Loan Losses
The provision for loan losses increased from $414,000 during the three
months ended March 31, 1998 to $576,000 during the three months ended March
31, 1999.
<PAGE> 14
Management records a provision for loan losses in an amount sufficient to
result in an allowance for loan losses that will cover current net charge-offs
as well as risks believed to be inherent in the loan portfolio of the Bank.
The amount of provision charged against current income is based on several
factors, including, but not limited to, past loss experience, current portfolio
mix, actual and potential losses identified in the loan portfolio, economic
conditions and regular reviews by internal staff and regulatory examinations.
Weak economic conditions, higher inflation or interest rates, or other
factors may lead to increased losses in the portfolio. Management has
established various controls in an attempt to limit future losses, such as a
watch list of possible problem loans, documented loan administration policies
and a loan review staff to review the quality and anticipated collectibility of
the portfolio. Management determines which loans are potentially
uncollectible, or represent a greater risk of loss and makes additional
provisions to expense, if necessary, to maintain the allowance at a
satisfactory level.
Non-performing assets decreased $2.9 million during the three months
ended March 31, 1999 from $12.9 million at December 31, 1998 to $10 million at
March 31, 1999. Non-performing loans decreased $850,000, or 8.4%, from $10.1
million at December 31, 1998 to $9.3 million at March 31, 1999, and foreclosed
assets decreased $2.1 million, or 73.2%, from $2.8 million at December 31,
1998 to $752,000 at March 31, 1999 due to the sale of two large properties.
Potential problem loans decreased $2.1 million during the three months
ended March 31, 1999 from $12.2 million at December 31, 1998 to $10.1 million
at March 31, 1999. These are loans which management has identified through
routine internal review procedures as having possible credit problems which
may cause the borrowers difficulty in complying with current loan repayment
terms. These loans are not reflected in the non-performing loans.
Management considers the allowance for loan losses and the allowance for
foreclosed asset losses adequate to cover losses inherent in the Company's
assets at this time, based on current economic conditions. If economic
conditions deteriorate significantly, it is possible that additional assets
would be classified as non-performing, and accordingly, additional provision
for losses would be required, thereby adversely affecting future results of
operations and financial condition.
Non-interest Income
Non-interest income increased $544,000, or 16.1%, in the three months
ended March 31, 1999 when compared to the same period in 1998. The increase
was primarily due to: (i) an increase in commission income of $314,000, or
21.7%, from increased sales in the travel, insurance and investment
subsidiaries; (ii) an increase in net realized gains on sales of fixed rate
residential loans of $170,000, or 59.4%; (iii) a decrease of $198,000, or
47.4%, in profits on sale of available-for-sale securities; and (iv) various
increases in other non-interest income items.
<PAGE> 15
Non-interest Expense
Non-interest expense increased $787,000, or 15.1%, in the three months
ended March 31, 1999 when compared to the same period in 1998. The increase
was primarily due to: (i) an increase of $510,000, or 18.5%, in salary and
employee related costs due to increased staffing levels resulting from
asset/customer growth and additional staffing required by the Bank's core
computer conversion and Y2K testing; (ii) an increase of $269,000, or 34.3%,
in occupancy and equipment expense due to the core computer conversion, Y2K
testing and other technology related purchases; (iii) an increase of $112,000,
in office supplies and printing costs related to the staffing increase,
computer conversion and Y2K testing; and (iii) increases or decreases in other
non-interest expense items.
In conjunction with the Company's recent growth and the Year 2000 issue
discussed previously in this document, the Company will be incurring
additional operating costs associated with the evaluation, purchase,
implementation and operation of new mainframe hardware and software as well as
other replacement computer and equipment items. In addition, it is probable
that the insurance, investment and travel subsidiaries will incur costs in the
evaluation, purchase, implementation and operation of their systems to bring
them into compliance to avoid potential Year 2000 issues. While the exact
impact of the cost to correct or convert the various systems of the Company is
not known at this time, management does not feel it will be material to the
overall operations or financial condition of the Company.
Provision for Income Taxes
Provision for income taxes as a percentage of pre-tax income decreased
from 38.9% in the three months ended March 31, 1998 to 32.0% in the three
months ended March 31, 1999. The lower percentage in the March 31, 1999
period was primarily due to lower state franchise and income taxes as a result
of a Real Estate Investment Trust organized by the Company in July 1998.
Average Balances, Interest Rates and Yields
The following tables present for the periods indicated the total dollar
amount of interest income from average interest-earning assets and the
resultant yields, as well as the interest expense on average interest-bearing
liabilities, expressed both in dollars and rates, and the net interest margin.
The tables do not include non-interest-bearing demand deposits and do not
reflect any effect of income taxes.
<PAGE> 16
<TABLE>
<CAPTION>
Three Months Ended March 31,
---------------------------------------------------------
1999 1998
--------------------------- --------------------------
Average Yield/ Average Yield/
Balance Interest Rate Balance Interest Rate
-------- -------- ------ -------- -------- ------
<S> <C> <C> <C> <C> <C> <C>
(Dollars in thousands)
Interest-earning assets:
Loans receivable $719,045 $15,018 8.35% $636,495 $14,778 9.29%
Investment securities and other
interest-earning assets 64,805 906 5.59 93,510 1,080 4.62
------- ------ ---- ------- ------- ----
Total interest-earning assets $783,850 15,924 8.13 $730,005 15,858 8.69
======= ------ ---- ======= ------ ----
Interest-bearing liabilities:
Demand deposits $154,528 856 2.22 $118,350 625 2.11
Savings deposits 32,954 200 2.43 34,506 210 2.43
Time deposits 378,072 4,969 5.26 306,897 4,265 5.56
------- ----- ---- ------- ----- ----
Total deposits 565,554 6,025 4.26 459,753 5,100 4.44
FHLBank advances and other borrowings 153,266 2,158 5.63 212,122 2,989 5.64
------- ----- ---- ------- ----- ----
Total interest-bearing liabilities $718,820 8,183 4.55 $671,875 8,089 4.82
======= ----- ---- ======= ----- ----
Net interest income:
Interest rate spread $7,741 3.58% $7,769 3.87%
===== ==== ===== ====
Net interest margin(1) 3.95% 4.26%
==== ====
Average interest-earning assets to
average interest-bearing liabilities 109.0% 108.7%
===== =====
<FN>
(1) Defined as the Company's net interest income divided by total interest-
earning assets.
</TABLE>
<PAGE> 17
Rate/Volume Analysis
The following schedule presents the dollar amount of changes in interest
income and interest expense for major components of interest-earning assets
and interest-bearing liabilities for the periods shown. For each category of
interest-earning assets and interest-bearing liabilities, information is
provided on changes attributable to (i) changes in rate (i.e., changes in rate
multiplied by old volume) and (ii) changes in volume (i.e., changes in volume
multiplied by old rate). For purposes of this table, changes attributable to
both rate and volume which cannot be segregated have been allocated
proportionately to volume and to rate.
<TABLE>
<CAPTION>
Three Months Ended March 31,
1999 vs. 1998
--------------------------------
Increase
(Decrease)
Due to Total
----------------- Increase
Rate Volume (Decrease)
-------- ------- ----------
<S> <C> <C> <C>
(Dollars in thousands)
Interest-earning assets:
Loans receivable $ (824) $1,064 $ 240
Investment securities and
other interest-earning assets (553) 379 (174)
----- ----- -----
Total interest-earning assets (1,377) 1,443 66
----- ----- -----
Interest-bearing liabilities:
Demand deposits 32 199 231
Savings deposits (1) (9) (10)
Time deposits (215) 919 704
----- ----- -----
Total deposits (184) 1,109 925
FHLBank advances and other borrowings (2) (829) (831)
----- ----- -----
Total interest-bearing liabilities (186) 280 94
----- ----- -----
Net interest income $(1,191) $1,163 $ (28)
===== ===== =====
</TABLE>
<PAGE> 18
Liquidity and Capital Resources
Liquidity is a measure of the Company's ability to generate sufficient
cash to meet present and future financial obligations in a timely manner
through either the sale or maturity of existing assets or the acquisition of
additional funds through liability management. These obligations include the
credit needs of customers, funding deposit withdrawals, and the day-to-day
operations of the Company. Liquid assets include cash, interest-bearing
deposits with financial institutions and certain investment securities and
loans. As a result of the Company's management of the ability to generate
liquidity primarily through liability funding, management believes that the
Company maintains overall liquidity sufficient to satisfy its depositors'
requirements and meet its customers' credit needs. At March 31, 1999, the
Company had commitments of approximately $117 million to fund loan
originations, issued lines of credit, outstanding letters of credit and
unadvanced loans.
Management continuously reviews the capital position of the Company and
the Bank to insure compliance with minimum regulatory requirements, as well as
exploring ways to increase capital either by retained earnings or other means.
The Company's capital position remained strong, with stockholders' equity
at $66.6 million, or 7.9% of total assets of $844 million at March 31, 1999
compared to equity at $68.4 million, or 8.2%, of total assets of $836 million
at December 31, 1998.
Banks are required to maintain minimum risk-based capital ratios. These
ratios compare capital, as defined by the risk-based regulations, to assets
adjusted for their relative risk as defined by the regulations. Guidelines
required banks to have a minimum Tier 1 capital ratio, as defined, of 4.00%
and a minimum Tier 2 capital ratio of 8.00%, and a minimum 4.00% leverage
capital ratio. On March 31, 1999, the Bank's Tier 1 capital ratio was 9.5%,
Tier 2 capital ratio was 10.8% and leverage ratio was 7.5%.
At March 31, 1999, the held-to-maturity investment portfolio included
$90,000 of gross unrealized gains and $26,000 of gross unrealized losses. The
unrealized gains are not expected to have a material effect on future earnings
beyond the usual amortization of acquisition premium or accretion of discount
because no sale of the held-to-maturity investment portfolio is foreseen.
The Company's primary sources of funds are savings deposits, FHLBank
advances, other borrowings, loan repayments, proceeds from sales of loans and
securities and funds provided from operations. The Company utilizes
particular sources of funds based on the comparative costs and availability at
the time. The Company has from time to time chosen not to pay rates on
deposits as high as the rates paid by certain of its competitors and, when
believed to be appropriate, supplements deposits with less expensive
alternative sources of funds.
Statements of Cash Flows. During the three months ended March 31, 1999,
and 1998, respectively, the Company experienced positive cash flows from
investment activities and financing activities.
<PAGE> 19
Cash flows from operating activities for the periods covered by the
Statements of Cash Flows have been primarily related to origination and sale
of loans held-for-sale, adjustments in deferred assets, credits and other
liabilities, the provision for loan losses and losses on foreclosed assets,
depreciation, sale of foreclosed assets and the amortization of deferred loan
origination fees and discounts (premiums) on loans and investments, all of
which are non-cash or non-operating adjustments to operating cash flows. As a
result, net income adjusted for non-cash and non-operating items was the
primary source of cash flows from operating activities during the three months
ended March 31, 1998, while originations of loans held-for-sale, net of
proceeds from sales of loans held-for-sale was the primary use of cash flows
from operating activities during the three months ended March 31, 1999.
Operating activities provided cash flows of $4.8 million during the three
months ended March 31, 1999 and $1.3 million during the three months ended
March 31, 1998.
During the three months ended March 31, 1999 and 1998, respectively,
investing activities used cash of $4.6 million and $34 million primarily due
to the net increase of loans.
Changes in cash flows from financing activities during the periods
covered by the Statements of Cash Flows are due to changes in deposits after
interest credited, changes in FHLBank advances and changes in short-term
borrowings as well as purchases of treasury stock and dividend payments to
stockholders. Financing activities provided $5.3 million in cash during the
three months ended March 31, 1999 and $61.9 million in cash during the three
months ended March 31, 1998. Financing activities in the future are expected
to primarily include changes in deposits and changes in FHLBank advances.
Dividends. During the three months ended March 31, 1999, the Company
declared and paid dividends of $.125 per share, or 28% of net income, compared
to dividends declared and paid during the three months ended March 31, 1998 of
$.11 per share, or 26% of net income. The Board of Directors meets regularly
to consider the level and the timing of dividend payments.
Common Stock Repurchases. The Company has been in various buy-back
programs since May 1990. During the three months ended March 31, 1999, the
Company repurchased 165,449 shares of its common stock at an average price of
$24.02 per share and reissued 52,724 shares of treasury stock at an average
price of $1.75 per share to cover stock option exercises. During the three
months ended March 31, 1998, the Company repurchased 128,504 shares of its
common stock at an average price of $17.27 per share and reissued 231,776
shares of treasury stock at an average price of $1.86 per share to cover stock
option exercises.
Management intends to continue its stock buy-back programs as long as
repurchasing the stock contributes to the overall growth of shareholder value.
The number of shares of stock that will be repurchased and the price that will
be paid is the result of many factors, several of which are outside of the
control of the Company. The primary factors, however, are the number of
shares available in the market from sellers at any given time and the price of
the stock within the market as determined by the market.
<PAGE> 20
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
The Registrant and its subsidiaries are involved as plaintiff or defendant
in various legal actions arising in the normal course of their business.
While the ultimate outcome of the various legal proceedings involving the
Registrant and its subsidiaries cannot be predicted with certainty, it is the
opinion of management, after consultation with legal counsel, that these legal
actions currently are not material to the Registrant.
Item 2. Changes in Securities
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Submission of Matters to Vote of Common Stockholders
None.
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits
See the attached exhibit 11, Statement re computation of earnings per
share.
See the attached exhibit 27, Financial Data Schedule.
b) Reports on Form 8-K
None.
<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.
Great Southern Bancorp, Inc.
Registrant
Date: May 17, 1999 /s/ William V. Turner
--------------------------
William V. Turner
Chairman of the Board,
President and Chief
Executive Officer
Date: May 17, 1999 /s/ Don M. Gibson
--------------------------
Don M. Gibson,
Executive Vice President and
Chief Financial Officer
<PAGE> 22
Exhibit Index
-------------
Exhibit
No. Description
- ------- -----------
11 Statement Re Computation of Earnings Per Share
27 Financial Data Schedule, which is submitted electronically
to the Securities and Exchange Commission for information
only and not filed.
<PAGE> 23
<TABLE>
<CAPTION>
Exhibit 11- Statement Re Computation of Earnings Per Share
Three Months Ended
March 31,
------------------------
1999 1998
---------- ----------
<S> <C> <C>
Basic:
Average shares outstanding 7,759,234 8,049,032
========= =========
Net income $3,446,707 $3,363,595
========= =========
Per share amount $0.44 $0.42
==== ====
Diluted:
Average shares outstanding 7,759,234 8,049,032
Net effect of dilutive stock options -
based on the treasury stock method
using average market price 132,481 135,238
--------- ---------
Diluted shares 7,891,715 8,184,270
========= =========
Net income $3,446,707 $3,363,595
========= =========
Per share amount $0.44 $0.41
==== ====
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
This schedule contains summary financial information extracted from the
Consolidated Balance Sheet and the Consolidated Statement of Income filed as
part of the quarterly report on Form 10-Q and is qualified in its entirety by
reference to such quarterly report on Form 10-Q.
</LEGEND>
<MULTIPLIER> 1,000
<CAPTION>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> MAR-31-1999
<CASH> 34,545
<INT-BEARING-DEPOSITS> 4,463
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 5,934
<INVESTMENTS-CARRYING> 44,084
<INVESTMENTS-MARKET> 44,147
<LOANS> 719,517
<ALLOWANCE> 17,199
<TOTAL-ASSETS> 844,296
<DEPOSITS> 627,607
<SHORT-TERM> 37,219
<LIABILITIES-OTHER> 9,789
<LONG-TERM> 103,068
0
0
<COMMON> 123
<OTHER-SE> 66,490
<TOTAL-LIABILITIES-AND-EQUITY> 844,296
<INTEREST-LOAN> 15,018
<INTEREST-INVEST> 894
<INTEREST-OTHER> 13
<INTEREST-TOTAL> 15,924
<INTEREST-DEPOSIT> 6,025
<INTEREST-EXPENSE> 8,183
<INTEREST-INCOME-NET> 7,741
<LOAN-LOSSES> 576
<SECURITIES-GAINS> 220
<EXPENSE-OTHER> 6,011
<INCOME-PRETAX> 5,069
<INCOME-PRE-EXTRAORDINARY> 3,447
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,447
<EPS-PRIMARY> .44
<EPS-DILUTED> .44
<YIELD-ACTUAL> 3.95
<LOANS-NON> 6,590
<LOANS-PAST> 2,706
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 10,126
<ALLOWANCE-OPEN> 16,928
<CHARGE-OFFS> 977
<RECOVERIES> 1,248
<ALLOWANCE-CLOSE> 17,199
<ALLOWANCE-DOMESTIC> 17,199
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
