SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
------------------------
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 or 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
------------------------
For Quarter Ended June 30, 1999 Commission File Number 0-20378
CENIT BANCORP, INC.
(Exact name of registrant as specified in its charter)
Delaware 54-1592546
(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization) Number)
225 West Olney Road
Norfolk, Virginia 23510
(Address of principal executive (Zip code)
office)
Registrant's telephone number, including area code: (757) 446-6600
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
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
Common Stock $.01 Par Value 4,813,674
Title of Class Number of Shares Outstanding
as of August 9, 1999
<PAGE>
CENIT BANCORP, INC. AND SUBSIDIARY
Contents
- -------------------------------------------------------------------------------
Page
PART I - FINANCIAL INFORMATION
Item 1
Financial Statements
Consolidated Statement of Financial Condition as of June 30, 1999 (Unaudited)
and December 31, 1998....................................................... 1
Unaudited Consolidated Statement of Operations for the Three Months and Six
Months ended June 30, 1999 and June 30, 1998................................ 2
Unaudited Consolidated Statement of Comprehensive Income for the Six
Months Ended June 30, 1999 and June 30, 1998................................ 3
Unaudited Consolidated Statement of Changes in Stockholders' Equity for the
Six Months ended June 30, 1999.............................................. 4
Unaudited Consolidated Statement of Cash Flows for the Six Months ended
June 30, 1999 and June 30, 1998............................................. 5
Notes to Unaudited Consolidated Financial Statements........................ 6
Item 2
Management's Discussion and Analysis of Financial Condition and Results
of Operations............................................................... 6
Item 3
Quantitative and Qualitative Disclosures About Market Risk.............. 19
PART II - OTHER INFORMATION
Item 1
Legal Proceedings....................................................... 20
Item 2
Changes in Securities................................................... 20
Item 3
Defaults Upon Senior Securities......................................... 20
Item 4
Submission of Matters to a Vote of Security Holders..................... 20
Item 5
Other Information....................................................... 20
Item 6
Exhibits and Reports on Form 8-K........................................ 20
Signatures................................................................. 20
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
CENIT BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF FINANCIAL CONDITION
(Dollars in thousands, except per share data)
ASSETS
<TABLE>
<CAPTION>
(Unaudited)
June 30, 1999 December 31, 1998
------------- -----------------
<S> <C> <C>
Cash $ 18,495 $ 14,656
Federal funds sold 20,266 42,289
Securities available for sale at fair value (adjusted
cost of $83,004 and $64,327, respectively) 82,862 65,136
Loans, net:
Held for investment 472,878 484,783
Held for sale 3,310 3,878
Interest receivable 4,037 3,723
Real estate owned, net 335 377
Federal Home Loan Bank stock, at cost 3,900 5,066
Property and equipment, net 12,840 13,002
Goodwill and other intangibles, net 3,469 3,647
Other assets 4,081 4,499
--------- ---------
$ 626,473 $ 641,056
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits:
Noninterest-bearing $ 76,030 $ 78,712
Interest-bearing 405,122 418,060
--------- ---------
Total deposits 481,152 496,772
Advances from the Federal Home Loan Bank 75,000 75,000
Securities sold under agreements to repurchase 16,822 13,084
Advance payments by borrowers for taxes and insurance 742 599
Other liabilities 2,572 5,525
--------- ---------
Total liabilities 576,288 590,980
--------- ---------
Stockholders' equity:
Preferred stock, $.01 par value; authorized 3,000,000
shares; none outstanding - -
Common stock, $.01 par value; authorized 7,000,000 shares;
issued and outstanding 4,801,284 and 4,808,806 shares,
respectively 48 48
Additional paid-in capital 13,922 14,177
Retained earnings - substantially restricted 40,421 39,600
Common stock acquired by Employee Stock Ownership Plan (ESOP) (3,958) (4,052)
Common stock acquired by Management Recognition
Plan (MRP) (160) (199)
Accumulated other comprehensive (loss) income,
net of income taxes (88) 502
--------- ---------
Total stockholders' equity 50,185 50,076
--------- ---------
$ 626,473 $ 641,056
========= =========
<FN>
The notes to unaudited consolidated financial statements are an integral part of
this statement.
</FN>
</TABLE>
1
<PAGE>
CENIT BANCORP, INC. AND SUBSIDIARY
UNAUDITED CONSOLIDATED STATEMENT OF OPERATIONS
(Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
Three months Six Months
Ended Ended
June 30, June 30,
-------------------- ---------------------
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Interest and fees on loans $ 9,198 $ 10,274 $ 18,643 $ 20,324
Interest on mortgage-backed certificates 258 1,022 532 2,505
Interest on investment securities 809 684 1,579 1,368
Dividends and other interest income 303 337 541 684
-------- -------- -------- --------
Total interest income 10,568 12,317 21,295 24,881
-------- -------- -------- --------
Interest on deposits 4,170 4,994 8,367 10,097
Interest on borrowings 1,154 2,020 2,336 4,094
-------- -------- -------- --------
Total interest expense 5,324 7,014 10,703 14,191
-------- -------- -------- --------
Net interest income 5,244 5,303 10,592 10,690
Provision for loan losses 22 136 36 340
-------- -------- -------- --------
Net interest income after provision
for loan losses 5,222 5,167 10,556 10,350
-------- -------- -------- --------
Other income:
Deposit fees 624 616 1,283 1,220
Merchant processing fees 677 537 1,191 930
Commercial mortgage brokerage fees 10 183 168 364
Gains on sales of loans and securities, net 192 287 432 462
Other 321 246 580 459
-------- -------- -------- --------
Total other income 1,824 1,869 3,654 3,435
-------- -------- -------- --------
Other expenses:
Salaries and employee benefits 2,134 2,105 4,571 4,193
Equipment, data processing and supplies 744 773 1,491 1,478
Net occupancy expense of premises 522 455 1,048 928
Merchant processing 553 472 982 832
Expenses, gains/losses on sales and provision
for losses on real estate owned, net 27 11 35 80
Professional fees 217 173 391 367
Other 643 712 1,197 1,321
-------- -------- -------- --------
Total other expenses 4,840 4,701 9,715 9,199
-------- -------- -------- --------
Income before income taxes 2,206 2,335 4,495 4,586
Provision for income taxes 794 831 1,618 1,624
-------- -------- -------- --------
Net income $ 1,412 $ 1,504 $ 2,877 $ 2,962
======== ======== ======== ========
Earnings per share:
Basic $ .31 $ .32 $ .63 $ .62
======== ======== ======== ========
Diluted $ .30 $ .31 $ .62 $ .61
======== ======== ======== ========
Dividends per common share $ .15 $ .10 $ .30 $ .20
======== ======== ======== ========
<FN>
The notes to unaudited consolidated financial statements are an integral part of
this statement.
</FN>
</TABLE>
2
<PAGE>
CENIT BANCORP, INC. AND SUBSIDIARY
UNAUDITED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
(Dollars in thousands)
<TABLE>
<CAPTION>
Six Months
Ended
June 30,
1999 1998
---- ----
<S> <C> <C>
Net income $ 2,877 $ 2,962
-------- -------
Other comprehensive income (loss), before income taxes:
Unrealized gains (losses) on securities available for sale
Unrealized holding gains (losses) arising during the period (952) (500)
Less: reclassification adjustment for gains included in net income - (72)
-------- -------
Other comprehensive loss, before income taxes (952) (572)
Income tax benefit related to items of other comprehensive loss 362 185
-------- -------
Other comprehensive loss, net of income taxes (590) (387)
-------- -------
Comprehensive income $ 2,287 $ 2,575
======== =======
<FN>
The notes to unaudited consolidated financial statements are an integral part of
this statement.
</FN>
</TABLE>
3
<PAGE>
CENIT BANCORP, INC. AND SUBSIDIARY
UNAUDITED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
Six Months Ended June 30, 1999
(Dollars in thousands)
<TABLE>
<CAPTION>
Accumulated
Common Other
Stock Comprehensive
Common Additional Acquired Income (Loss),
Common Stock Paid-In Retained by ESOP Net of Income
Stock Shares Amount Capital Earnings and MRP Taxes Total
------------ ------ ------- -------- ------- ------------- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1998 4,808,806 $ 48 $14,177 $39,600 $(4,251) $ 502 $ 50,076
Comprehensive income - - - 2,877 - (590) 2,287
Cash dividends declared - - - (2,056) - - (2,056)
Exercise of stock options and
related tax benefits 10,808 - 73 - - - 73
Stock repurchases (18,330) - (373) - - - (373)
Other - - 45 - 133 - 178
--------- ---- ------- ------- ------- ------ --------
Balance, June 30, 1999 4,801,284 $ 48 $13,922 $40,421 $(4,118) $ (88) $ 50,185
========= ==== ======= ======= ======= ====== ========
<FN>
The notes to unaudited consolidated financial statements are an integral part of
this statement.
</FN>
</TABLE>
4
<PAGE>
CENIT BANCORP, INC. AND SUBSIDIARY
UNAUDITED CONSOLIDATED STATEMENT OF CASH FLOWS
(Dollars in thousands)
<TABLE>
<CAPTION>
Six months ended June 30,
-------------------------
1999 1998
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income $ 2,877 $ 2,962
Add (deduct) items not affecting cash in the period:
Provision for loan losses 36 340
Provision for losses on real estate owned 22 14
Amortization of loan yield adjustments 349 233
Depreciation, amortization and accretion, net 855 1,108
Net (gains) losses on sales/disposals of:
Securities - (72)
Loans (432) (390)
Real estate, property and equipment (96) 51
Proceeds from sales of loans held for sale 33,430 33,221
Originations of loans held for sale (32,438) (36,211)
Change in assets/liabilities:
Decrease in interest receivable and other assets 206 670
(Decrease) increase in other liabilities (3,136) 124
------ ------
Net cash provided by operating activities 1,673 2,050
------ ------
Cash flows from investing activities:
Purchases of securities available for sale (31,925) (37,237)
Principal repayments on securities available for sale 3,876 25,720
Proceeds from maturities of securities available for sale 9,350 11,000
Proceeds from sales of securities available for sale - 66,660
Net decrease (increase) in loans held for investment 11,321 (25,743)
Net proceeds on sales of real estate owned 215 302
Additions to real estate owned - (12)
Purchases of Federal Home Loan Bank stock (400) (1,650)
Redemption of Federal Home Loan Bank stock 1,566 4,511
Proceeds from sale of property and equipment 1 59
Purchases of property and equipment (456) (1,075)
------ ------
Net cash (used for) provided by investing activities (6,452) 42,535
------ ------
Cash flows from financing activities:
Proceeds from exercise of stock options and warrants 77 183
Net decrease in deposits (15,620) (8,460)
Proceeds from Federal Home Loan Bank advances 41,000 508,000
Repayment of Federal Home Loan Bank advances (41,000) (568,000)
Repayments of other borrowings - (1,878)
Common stock repurchases (373) -
Net increase in securities sold under agreement
to repurchase and federal funds purchased 3,738 1,844
Cash dividends paid (1,370) (948)
Other, net 143 402
------ ------
Net cash used for financing activities (13,405) (68,857)
------ ------
Decrease in cash and cash equivalents (18,184) (24,272)
Cash and cash equivalents, beginning of period 56,945 54,111
------ ------
Cash and cash equivalents, end of period $ 38,761 $ 29,839
====== ======
Supplemental disclosures of cash flow information:
Cash paid during the period for interest $ 3,244 $ 5,583
Cash paid during the period for income taxes 1,882 1,205
Schedule of noncash investing and financing activities:
Real estate acquired in settlement of loans $ 199 $ 210
Loans to facilitate sale of real estate owned - 470
<FN>
The notes to unaudited consolidated financial statements are an integral part of
this statement.
</FN>
</TABLE>
5
<PAGE>
CENIT BANCORP, INC. AND SUBSIDIARY
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
Note 1 - Basis of Presentation
The accompanying unaudited consolidated financial statements have been
prepared in accordance with the instructions to Form 10-Q and, therefore, do not
include all of the disclosures and notes required by generally accepted
accounting principles. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. The results of operations for the three and six month periods
ended June 30, 1999 and 1998 are not necessarily indicative of results that may
be expected for the entire year or any interim periods. Certain previously
reported amounts have been reclassified to agree with the current presentation.
The interim financial statements should be read in conjunction with the
December 31, 1998 consolidated financial statements of CENIT Bancorp, Inc. (the
"Company").
Note 2 - Per Share Data
Basic earnings per share is calculated using weighted average shares
outstanding. For the six month period and three month period ended June 30,
1999, weighted average shares used to compute basic earnings per share were
4,570,589 and 4,575,103, respectively. For the six months and three months ended
June 30, 1998, weighted average shares used to compute basic earnings per share
were 4,739,667 and 4,750,237, respectively.
Diluted earnings per share is calculated by adding common stock equivalents
to the weighted average shares outstanding. For the six month period and three
month period ended June 30, 1999, weighted average shares used to compute
diluted earnings per share were 4,655,412 and 4,656,375, respectively. For the
six months and three months ended June 30, 1998, weighted average shares used to
compute diluted earnings per share were 4,873,557 and 4,879,072, respectively.
Item 2 - Management's Discussion and Analysis of Financial Condition and Results
of Operations
General
The Company's business currently consists of the business of its sole
subsidiary, CENIT Bank (the "Bank"). The principal business of the Bank consists
of attracting retail deposits from the general public in its market areas
through a variety of deposit products and investing these funds in commercial,
real estate and consumer loans. The Bank also invests in mortgage-backed
certificates, securities issued by the U.S. Treasury and U.S. Government
agencies, federal funds sold, Federal Home Loan Bank stock, and other
investments permitted by applicable laws and regulations.
Financial Condition Of The Company
Total Assets
At June 30, 1999, the Company had total assets of $626.5 million, compared
to $641.1 million at December 31, 1998.
Securities Available for Sale
Securities available for sale totaled $82.9 million at June 30, 1999 and
are comprised of U. S. Treasury and other U. S. Government agency securities,
mortgage-backed certificates, and other debt securities. The net increase of
$17.8 million, or 27.3% from the December 31, 1998 balance of $65.1 million
resulted primarily from $31.9 million in purchases of available for sale
securities, partially offset by $9.4 million in proceeds from maturities, and
$3.9 million in principal repayments.
In July, 1999, the Company committed to purchase a total of $20.6 million
in seasoned 10-year and 15-year mortgage-backed securities with a weighted
average remaining maturity of approximately nine years.
6
<PAGE>
Loans
The balance of net loans held for investment decreased from $484.8 million
at December 31, 1998 to $472.9 million at June 30, 1999, a decrease of $11.9
million or 2.5%. This decrease is primarily due to a decrease in adjustable rate
single-family mortgages of $24.7 million, offset by a $7.8 million increase in
fixed rate single-family mortgages. The Company's core banking loans
(multi-family, commercial real estate, construction, land acquisition and
development, consumer lots, commercial business and consumer loans) increased
$4.9 million, or 2.1%, from December 31, 1998 to June 30, 1999. For the six
months ended June 30, 1999, loan originations totaled $108.7 million and loan
purchases totaled $23.9 million. Total principal reductions totaled $147.8
million.
7
<PAGE>
The following table sets forth the composition of the Company's loans in
dollar amounts and as a percentage of the Company's total gross loans held for
investment at the dates indicated.
<TABLE>
<CAPTION>
June 30, 1999 December 31, 1998
------------- -----------------
(Dollars in Thousands)
Amount Percent Amount Percent
------ ------- ------ -------
<S> <C> <C> <C> <C>
Real estate loans:
Residential permanent 1- to 4-family:
Adjustable rate $ 156,439 30.77% $ 181,104 34.63%
Fixed rate
Conventional 74,720 14.70 66,041 12.63
Guaranteed by VA or insured by FHA 3,090 .61 3,972 .76
--------- ----- --------- -----
Total permanent 1- to 4-family 234,249 46.08 251,117 48.02
Residential permanent 5 or more family 7,357 1.45 7,874 1.51
--------- ----- --------- -----
Total permanent residential loans 241,606 47.53 258,991 49.53
--------- ----- --------- -----
Commercial real estate loans:
Hotels 9,141 1.80 9,208 1.76
Office and warehouse facilities 38,460 7.57 36,659 7.01
Retail facilities 21,682 4.26 22,823 4.37
Other 8,655 1.70 7,921 1.51
--------- ----- --------- -----
Total commercial real estate loans 77,938 15.33 76,611 14.65
--------- ----- --------- -----
Construction loans:
Residential 1- to 4-family 49,347 9.71 47,232 9.03
Residential 5 or more family 12,485 2.46 19,621 3.75
Nonresidential 5,401 1.06 4,101 .79
--------- ----- --------- -----
Total construction loans 67,233 13.23 70,954 13.57
--------- ----- --------- -----
Land acquisition and development loans:
Consumer lots 3,493 .68 3,703 0.71
Acquisition and development 12,036 2.37 11,444 2.19
--------- ----- --------- -----
Total land acquisition and development
loans 15,529 3.05 15,147 2.90
--------- ----- --------- -----
Total real estate loans 402,306 79.14 421,703 80.65
--------- ----- --------- -----
Consumer loans:
Boats 3,472 .68 4,275 .82
Home equity and second mortgage 54,526 10.72 52,845 10.11
Other 11,058 2.18 10,589 2.02
--------- ----- --------- -----
Total consumer loans 69,056 13.58 67,709 12.95
--------- ----- --------- -----
Commercial business loans 36,992 7.28 33,485 6.40
--------- ----- --------- -----
Total loans 508,354 100.00% 522,897 100.00%
--------- ===== --------- =====
Less:
Allowance for loan losses 3,889 4,024
Loans in process 32,920 35,463
Unearned discounts, premiums, and loan fees, net (1,333) (1,373)
--------- ---------
35,476 38,114
--------- ---------
Total loans, net $ 472,878 $ 484,783
========= =========
</TABLE>
8
<PAGE>
The following table sets forth information about originations, purchases,
sales, and principal reductions for the Company's loans for the period
indicated.
Six Months Ended
June 30, 1999
---------------------
(Dollars in Thousands)
Loans originated:
Real estate:
Permanent:
Residential 1- to 4-family $ 39,820
Residential 5 or more family -
----------
Total 39,820
----------
Commercial real estate 6,651
----------
Construction:
Residential 1- to 4-family 8,320
Residential 5 or more family 800
Nonresidential 1,413
----------
Total 10,533
----------
Land acquisition:
Consumer lots 483
Acquisition and development 3,497
----------
Total 3,980
----------
Total real estate loans originated 60,984
----------
Consumer:
Home equity and second mortgage 17,501
Other 4,870
----------
Total 22,371
----------
Commercial business 25,383
----------
Total loans originated 108,738
Loans purchased 23,931
----------
Total loans originated and purchased 132,669
----------
Principal reductions:
Repayments and other principal reductions 116,171
Real estate loans sold 31,602
----------
Total principal reductions 147,773
----------
Net decrease in total loans $ (15,104)
==========
Net decrease in loans held for sale $ (561)
Net decrease in gross loans held for investment (14,543)
----------
$ (15,104)
==========
9
<PAGE>
Deposits
Total deposits decreased $15.6 million, or 3.1%, for the six months ended
June 30, 1999, as compared to December 31, 1998. Interest-bearing and
noninterest-bearing deposits decreased $12.9 million and $2.7 million,
respectively. The decrease in interest-bearing deposits is primarily attributed
to customers seeking other investment alternatives offered in the market as a
result of current economic conditions. The $2.7 million decrease in noninterest-
bearing deposits is due, in part, to a decrease in the Company's commercial
customer escrow deposits at June 30, 1999, as compared to December 31, 1998.
Capital
The Company's and the Bank's capital ratios exceeded applicable regulatory
requirements at June 30, 1999.
In July 1999, the Board of Directors of the Company gave the Company's
management the discretion to initiate a repurchase of up to 150,000 of the
Company's shares. The Company is not obligated to conduct such a repurchase at
all, and the Company's decision to do so, as well as the timing of any
repurchase, will depend on a variety of factors.
Asset Quality
Nonperforming Assets. Nonperforming assets consist of nonperforming loans,
real estate acquired in settlement of loans ("REO"), and other repossessed
assets. Generally the Company does not accrue interest on loans that are 90 days
or more past due, with the exception of certain VA-guaranteed or FHA insured
one- to four-family permanent mortgage loans, certain credit card loans, and
matured loans for which the borrowers are still making required monthly payments
of interest, or principal and interest, and with respect to which the Bank is
negotiating extensions or refinancings with the borrowers.
10
<PAGE>
The following table sets forth information about the Company's
nonperforming loans, REO, and other repossessed assets at the dates indicated.
<TABLE>
<CAPTION>
June 30, December 31,
1999 1998
----- -----
(Dollars in Thousands)
<S> <C> <C>
Nonperforming loans:
Real estate loans:
Permanent residential 1- to 4-family
Nonaccrual $ 197 $ 359
Accruing loans 90 days or more past due 699 511
------ ------
Total 896 870
------ ------
Land acquisition and development loans:
Accruing loans 90 days or more past due 48 -
------ ------
Consumer loans:
Nonaccrual:
Boats 13 37
Home equity and second mortgage 122 57
Other 42 46
Accruing loans 90 days or more past due - 2
------ ------
Total 177 142
------ ------
Commercial business loans:
Nonaccrual 84 64
------ ------
Total nonperforming loans:
Nonaccrual 458 563
Accruing loans 90 or more days past due 747 513
------ ------
Total 1,205 1,076
Real estate owned, net 335 377
Other repossessed assets, net - 21
------ ------
Total nonperforming assets, net $1,540 $ 1,474
====== ======
Total nonperforming assets, net, to total assets .25% .23%
====== ======
</TABLE>
11
<PAGE>
Allowance for Loan Losses. The following table sets forth activity of the
allowance for loan losses for the periods indicated.
Six months ended June 30,
-------------------------
1999 1998
---- ----
(Dollars in Thousands)
Balance at beginning of period $ 4,024 $ 3,783
Provision for loan losses 36 340
Losses charged to allowance (195) (286)
Recovery of prior losses 24 70
------- -------
Balance at end of period $ 3,889 $ 3,907
======= =======
The Company's provision for loan losses decreased to $36,000 for the six
months ended June 30, 1999, as compared to $340,000 in the same period in 1998.
The difference between the provision for loan losses and net loans charged off
during the first half of 1999 relates primarily to loan types in which the Bank
is no longer active and for which provisions for loan losses have been made
previously which management believes to be adequate. At June 30, 1999, the
Company's coverage ratio was 322.7% based on a total allowance for loan losses
of $3,889,000 and total nonperforming loans of $1,205,000. This compares to a
coverage ratio of 374.0% at December 31, 1998.
Average Balance Sheets
The following tables set forth, for the periods indicated, information
regarding: (i) the total dollar amounts of interest income from interest-earning
assets and the resulting average yields; (ii) the total dollar amounts of
interest expense from interest-bearing liabilities and the resulting average
costs; (iii) net interest income; (iv) interest rate spread; (v) net interest
position; (vi) the net yield earned on interest-earning assets; and (vii) the
ratio of total interest-earning assets to total interest-bearing liabilities.
Average balances shown in the following tables have been calculated using daily
average balances.
12
<PAGE>
<TABLE>
<CAPTION>
For the Three Months For the Three Months
Ended Ended
June 30, 1999 June 30, 1998
------------------------------ ------------------------------
Average Yield/ Average Yield/
Balance Interest Cost Balance Interest Cost
------- -------- ------ ------- -------- ------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Loans (1) $ 487,072 $ 9,198 7.55% $ 520,626 $ 10,274 7.89%
Mortgage-backed certificates 14,209 258 7.27 63,591 1,022 6.43
U.S. Treasury and other U.S.
Government agency securities 56,312 809 5.75 45,444 684 6.02
Federal funds sold 19,456 230 4.73 12,494 173 5.54
Federal Home Loan Bank and
Federal Reserve Bank stock 3,882 73 7.52 8,834 164 7.70
------- ------ ------- ------
Total interest-earning assets 580,931 10,568 7.28 650,989 12,317 7.57
------- ------ ------- ------
Noninterest-earning assets:
REO 375 600
Other 37,488 45,276
------- -------
Total noninterest-earning assets 37,863 45,876
------- -------
Total assets $ 618,794 $ 696,865
======= =======
Interest-bearing liabilities:
Passbook and statement savings $ 35,079 213 2.43% $ 40,937 341 3.33%
Checking accounts 40,683 149 1.47 35,512 162 1.82
Money market deposit accounts 72,802 623 3.42 61,777 587 3.80
Certificates of deposit 256,105 3,185 4.97 297,437 3,904 5.25
------- ------ ------- ------
Total interest-bearing deposits 404,669 4,170 4.12 435,663 4,994 4.59
------- ------ ------- ------
Advances from the Federal Home
Loan Bank 75,319 973 5.17 135,484 1,857 5.48
Securities sold under agreements
to repurchase 18,314 181 3.95 11,901 138 4.64
Other borrowings - - - 1,311 25 7.63
------- ------ ------- ------
Total borrowings 93,633 1,154 4.93 148,696 2,020 5.43
------- ------ ------- ------
Total interest-bearing liabilities 498,302 5,324 4.27 584,359 7,014 4.80
------- ------ ------- ------
Noninterest-bearing liabilities:
Deposits 65,353 55,192
Other liabilities 5,012 6,144
------- -------
Total noninterest-bearing liabilities 70,365 61,336
------- -------
Total liabilities 568,667 645,695
------- -------
Stockholders' equity 50,127 51,170
------- -------
Total liabilities and stockholders' equity $ 618,794 $ 696,865
======= =======
Net interest income/interest rate spread $ 5,244 3.00% $ 5,303 2.77%
======= ==== ======= ====
Net interest position/net interest margin $ 82,629 3.61% $ 66,630 3.26%
======= ==== ======= ====
Ratio of average interest-earning assets to
average interest-bearing liabilities 116.58% 111.40%
======= =======
<FN>
(1) Includes nonaccrual loans and loans held for sale.
</FN>
</TABLE>
13
<PAGE>
<TABLE>
<CAPTION>
For the Six Months For the Six Months
Ended Ended
June 30, 1999 June 30, 1998
------------------------------ ------------------------------
Average Yield/ Average Yield/
Balance Interest Cost Balance Interest Cost
------- -------- ------ ------- -------- ------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Loans (1) $ 493,598 $ 18,643 7.55% $ 512,752 $ 20,324 7.93%
Mortgage-backed certificates 14,390 532 7.39 75,784 2,505 6.61
U.S. Treasury and other U.S.
Government agency securities 54,813 1,579 5.76 45,224 1,368 6.05
Federal funds sold 15,981 376 4.71 12,830 352 5.48
Federal Home Loan Bank and
Federal Reserve Bank stock 4,443 165 7.43 9,115 332 7.50
------- ------ ------- ------
Total interest-earning assets 583,225 21,295 7.30 655,705 24,881 7.59
------- ------ ------- ------
Noninterest-earning assets:
REO 381 811
Other 37,426 43,712
------- -------
Total noninterest-earning assets 37,807 44,523
------- -------
Total assets $ 621,032 $ 700,228
======= =======
Interest-bearing liabilities:
Passbook and statement savings 35,532 431 2.43% $ 42,038 694 3.30%
Checking accounts 39,149 282 1.44 33,711 309 1.83
Money market deposit accounts 73,796 1,249 3.39 58,743 1,086 3.70
Certificates of deposit 257,253 6,405 4.98 306,242 8,008 5.23
------- ------ ------- ------
Total interest-bearing deposits 405,730 8,367 4.12 440,734 10,097 4.58
------- ------ ------- ------
Advances from the Federal Home
Loan Bank 78,392 2,010 5.13 138,575 3,781 5.46
Securities sold under agreements
to repurchase 16,770 326 3.89 10,572 243 4.59
Other borrowings - - - 1,865 70 7.51
------- ------ ------- ------
Total borrowings 95,162 2,336 4.91 151,012 4,094 5.42
------- ------ ------- ------
Total interest-bearing liabilities 500,892 10,703 4.27 591,746 14,191 4.80
------- ------ ------- ------
Noninterest-bearing liabilities:
Deposits 64,890 51,578
Other liabilities 5,276 6,153
------- -------
Total noninterest-bearing liabilities 70,166 57,731
------- -------
Total liabilities 571,058 649,477
------- -------
Stockholders' equity 49,974 50,751
------- -------
Total liabilities and stockholders' equity $ 621,032 $ 700,228
======= =======
Net interest income/interest rate spread $ 10,592 3.03% $ 10,690 2.79%
======== ==== ======== ====
Net interest position/net interest margin $ 82,332 3.63% $ 63,959 3.26%
======= ==== ======= ====
Ratio of average interest-earning assets to
average interest-bearing liabilities 116.44% 110.81%
======= ======
<FN>
(1) Includes nonaccrual loans and loans held for sale.
</FN>
</TABLE>
14
<PAGE>
Comparison of Operating Results for the Three Months Ended June 30, 1999 and
June 30, 1998.
General
The Company's pre-tax income decreased slightly to $2.2 million for the
three months ended June 30, 1999 as compared to $2.3 million for the same period
in 1998. An increase in other expenses of $139,000 and decreases in net interest
income of $59,000 and other income of $45,000 were partially offset by a
decrease in the provision for loan losses of $114,000.
In the third quarter of 1999, the Company's management expects the Company
to experience increased loan production, particularly in core banking loans, and
continued improvements in fee income. The Company's pipeline of loans in process
is promising, and if management's assumptions are correct, they believe that the
Company's diluted earnings per share for the third quarter will meet or exceed
analysts' predictions as compiled by I/B/E/S International.
Net Interest Income
The Company's net interest income before the provision for loan losses
decreased $0.1 million, or 1.1%, to $5.2 million for the quarter ended June 30,
1999 as compared to $5.3 million for the quarter ended June 30, 1998. A $1.8
million decrease in interest income was substantially offset by a $1.7 million
decrease in interest expense for the second quarter of 1999 as compared to the
same period in 1998. As a result of changes in the interest rate environment in
1998, management used the proceeds from the sale, maturity and principal
repayment of certain securities, primarily mortgage- backed certificates, to
reduce advances from the Federal Home Loan Bank ("FHLB") rather than seek
alternative investment opportunities. This strategy reduced both average
interest earning assets and interest bearing liabilities during the second
quarter of 1999 compared to the second quarter of 1998. Total interest-earning
assets decreased from an average balance of $651.0 million during the second
quarter of 1998 to $580.9 million during the second quarter of 1999, while total
interest-bearing liabilities decreased from $584.4 million during the second
quarter of 1998 to $498.3 million during the same period of 1999. As a result,
the Company's net interest margin increased from 3.26% for the quarter ended
June 30, 1998 to 3.61% for the quarter ended June 30, 1999.
Interest on loans decreased $1.1 million, or 10.5%, to $9.2 million for the
second quarter 1999 compared to $10.3 million for the same period in 1998. This
decrease was attributable to both decreases in average balances as well as a
decrease in loan yields associated with declining market rates in 1998. The
average loan balance for the second quarter of 1999 decreased $33.5 million, or
6.4%, to $487.1 million at June 30, 1999 compared to $520.6 million at June 30,
1999. The yield on the loan portfolio for June 30, 1999 was 7.55% compared to
7.89% for the same period in 1998, a 4.3% decrease.
Interest on the Company's portfolio of mortgage-backed certificates
decreased $764,000, or 74.8%, to $258,000 for the quarter ended June 30, 1999
from $1.0 million for the comparable 1998 period. This decrease was attributable
to a $49.4 million decrease in the average balance of the portfolio during the
second quarter of 1999 compared to the second quarter of 1998. The decrease in
the portfolio average balance was primarily due to the sales and prepayments of
mortgage-backed securities as a result of the interest rate declines in 1998.
Interest on deposits decreased $824,000, or 16.5%, for the quarter ended
June 30, 1999 compared to the quarter ended June 30,1998. The decrease was
attributed to both a decrease in the average balance of interest-bearing
deposits as well as a decrease in the average cost of these deposits. The
average balance of interest-bearing deposits and the average cost of these
deposits were $404.7 million and 4.12%, respectively, for the second quarter of
1999 as compared to $435.7 million and 4.59%, respectively, for the second
quarter of 1998.
Interest on borrowings decreased $866,000, or 42.9%, in the second quarter
of 1999 compared to the same quarter in 1998. This decrease was substantially
due to a $60.2 million, or 44.4%, decrease in the average balance of FHLB
advances to $75.3 million at June 30, 1999 from $135.5 million at June 30, 1998.
Provision for Loan Losses
The Company's provision for loan losses decreased $114,000 to $22,000 for
the three months ended June 30, 1999 as compared to $136,000 for the same period
in 1998. Net loans charged off during the three months ended June 30,
15
<PAGE>
1999 were $77,000 compared to $27,000 for the comparable 1998 period. The
difference between the provision for loan losses and net loans charged off
during the first quarter of 1999 relates primarily to loan types in which the
Bank is no longer active and for which provisions for loan losses have been made
previously which management believes to be adequate.
Other Income
Total other income remained substantially the same for the second quarter
of 1999 compared to the second quarter of 1998. Increases in merchant processing
fees and other income were offset by decreases in commercial mortgage brokerage
fees and gains on sales of loans and securities.
Other Expenses
Total other expenses increased $139,000, or 3.0%, from the second quarter
of 1999 compared to the second quarter of 1998. The increase is primarily the
result of a volume related $81,000 increase in merchant processing expense.
Comparison of Operating Results for the Six Months Ended June 30, 1999 and
June 30, 1998.
General
The Company's pre-tax income decreased $0.1 million, or 2.0%, to $4.5
million for the six months ended June 30, 1999 as compared to $4.6 million for
the six months ended June 30, 1998. A $516,000 increase in other expense and a
$98,000 decrease in net interest income were partially offset by a $304,000
decrease in the provision for loan losses and a $219,000 increase in other
income.
Net Interest Income
The Company's net interest income before provision for loan losses
decreased $0.1 million, 0.9%, to $10.6 million for the six months ended June 30,
1999 as compared to $10.7 million for the six months ended June 30, 1998. A $3.6
million decrease in interest income was partially offset by a $3.5 million
decrease in interest expense for the first half of 1999 as compared to the same
period in 1998. As a result of changes in the interest rate environment in 1998,
interest income on loans and loan yields decreased. In addition, management used
the proceeds from the sale, maturity and principal repayment of certain
securities, primarily mortgage-backed certificates, to reduce advances from the
Federal Home Loan Bank ("FHLB") rather than seek alternative investment
opportunities. This strategy reduced both interest earning assets and interest
bearing liabilities during the first half of 1999 compared to the first half of
1998. Total interest- earning assets decreased to an average balance of $583.2
million at June 30, 1999 from $655.7 million at June 30, 1998, while total
interest-bearing liabilities decreased to $500.9 million at June 30, 1999 from
$591.7 million at June 30, 1998. As a result, the Company's net interest margin
increased to 3.63% for the six months ended June 30, 1999 from 3.26% for the six
months ended June 30, 1998.
Interest on the Company's portfolio of mortgage-backed certificates
decreased $2.0 million , or 78.8%, to $532,000 for the six months ended June 30,
1999 from $2.5 million for the comparable 1999 period. The decrease was
attributable to a $61.4 million decrease in the average balance of the portfolio
during the first half of 1999 compared to the first half of 1998. The decrease
in the portfolio average balance was attributed to the sales and prepayments of
mortgage-backed securities as a result of the interest rate declines in 1998.
Interest on loans decreased $1.7 million, or 8.3%, to $18.6 million for the
six months ended June 30, 1999 compared to $20.3 million the same period in
1998. This decrease was attributable to both decreases in average balances as
well as a decrease in the loan portfolio yield associated with the declining
market rates in 1998. The average loan balance for the first half of 1999
decreased $19.2 million or 3.7% to $493.6 million compared to $512.8 million for
the first half of 1998. The yield on the loan portfolio was 7.55% for the six
months ended June 30, 1999 compared to 7.93% for the same period in 1998, a
decrease of 4.8%.
Interest on deposits decreased by $1.7 million, or 17.1%, for first half of
1999 compared to the first half of 1998. The decrease was attributed to both a
decrease in the average balance of interest-bearing deposits as well as a
decrease in the average cost of these deposits. The average balance of
interest-bearing deposits and the average cost of these
16
<PAGE>
deposits were $405.7 million and 4.12% respectively, for the first half of 1999
as compared to $440.7 and 4.58%, respectively, for the first half of 1998.
Interest on borrowings decreased $1.8 million, or 42.9%, for the six months
ended June 30, 1999 compared to the same period in 1998. This decrease was
substantially due to a $60.2 million decrease in the average balance of FHLB
advances for the first half of 1999 compared to the first half of 1998. The
decline in the average balance was primarily associated with the use of proceeds
from the sale of mortgage-backed certificates to significantly reduce the
balance of FHLB advances in 1998.
Provision for Loan Losses
The Company's provision for loan losses decreased $304,000 to $36,000 for
the six months ended June 30, 1999 as compared to $340,000 for the same period
in 1998. Net loans charged off during the six months ended June 30, 1999 were
$171,000 compared to $216,000 for the comparable 1998 period. The difference
between the provision for loan losses and net loans charged off during the first
half of 1999 relates primarily to loan types in which the Bank is no longer
active and for which provisions for loan losses have been made previously which
management believes to be adequate.
Other Income
Total other income increased $219,000, or 6.4%, for the six months ended
June 30, 1999 as compared to the same period in 1998. The increase was primarily
attributed to increases of $261,000 in merchant processing fees, $63,000 in
deposit fees, and $121,000 in other income. The increases in merchant processing
fees and deposit fees resulted from increased volume. The increase in other
income of $121,000 is primarily the result of a gain recognized from the sale of
the Company's headquarters building.
Other Expenses
Total other expenses increased $516,000, or 5.6%, from the first half of
1999 compared to the first half of the previous year. The increase is primarily
the result of a $378,000 increase salaries and employee benefits and a $150,000
increase in merchant processing expense. The increase in salaries and employee
benefits is partially attributed to the implementation of the Company's core
banking initiatives which required additional lenders and retail bankers, as
well as salary increases. The increase in the merchant processing expense is
primarily due to increased volume.
Liquidity
The principal sources of funds for the Company for the six months ended
June 30, 1999 included $33.4 million in proceeds from the sale of loans, $13.2
million in proceeds from principal repayments and maturities of securities
available for sale, an $11.3 million decrease in loans held for investment, a
$3.7 million increase in securities sold under agreement to repurchase, and $1.6
million redemption of Federal Home Loan Bank stock. Funds were used primarily to
originate loans held for sale of $32.4 million and to fund purchases of
securities available for sale of $31.9 million, as well as to compensate for a
$15.6 million decrease in deposits.
The Company's liquidity could be impacted by a decrease in the renewals of
deposits or general deposit runoff. However, the Company has the ability to
raise deposits by conducting deposit promotions. In the event the Company
requires funds beyond its ability to generate them internally, the Company could
obtain additional advances from the FHLB. The Company could also obtain funds
through the sale of investment securities from its available for sale portfolio.
All savings institutions, including the Bank, are required to maintain an
average daily balance of liquid assets equal to a certain percentage of the sum
of its average daily balance of net withdrawable deposit accounts and borrowings
payable in one year or less. The liquidity requirement may vary from time to
time (between 4% and 10%) depending upon economic conditions and savings flows
of all savings institutions. At June 30, 1999 and December 31, 1998, the
required liquid asset ratio was 4.0%. The Bank's liquid asset ratio exceeded
regulatory requirements at June 30, 1999 and December 31, 1998.
17
<PAGE>
Impact of the Year 2000 Issue
The Year 2000 Issue is the result of computer programs being written using
two digits rather than four to define the applicable year. As a result, such
computer programs will not recognize the correct date after December 31, 1999.
Also, systems and equipment that are not typically thought of as "computer
related" (referred to as "non-IT") contain imbedded hardware or software that
may have a time element.
In 1997, the Company implemented a four phase project of inventory,
assessment, renovation and testing/implementation to address the Year 2000
Issue. The scope of the project included: determining the compliance of all
applications, operating systems and hardware on the mainframe, PC and LAN
systems; addressing issues related to non-IT embedded software and equipment;
and addressing the compliance of the Company's significant borrowers and third
party providers.
All four phases of the Company's Year 2000 project have been substantially
completed within the guidelines and time- frames set forth by the Federal
Financial Institution Examination Council. The Company plans to conduct
additional testing throughout the remainder of the year. The Company also
completed its Year 2000 Contingency Plan, designed to address situations
including power shortages, telephone communications failure and our customers'
potential Year 2000 problems. This plan also contains two stand-alone plans to
address the Company's expected year-end cash requirements and an event plan to
monitor specific operations prior to and during the century rollover date.
Successful contingency planning is an ongoing process, and the plans will be
revised from time to time during the remainder of 1999 as events warrant.
- The Company has determined, based primarily on communications with
vendors, that the majority of the Company's non-IT related systems and equipment
are Year 2000 compliant. Testing of critical systems that the Company determined
needed to be conducted and compilation of written documentation regarding
compliance were substantially completed at the end of the first quarter of 1999.
- The potential impact of Year 2000 will depend not only on the corrective
measures the Company undertook but also on other entities that provide data to
or receive data from the Company and on those whose operational capability or
financial conditions are important to the Company. The Company has received
assurances from all major third party vendors that they are either Year 2000
compliant or expect to be in compliance prior to the end of the second quarter
of 1999. During the third quarter of 1999, the Company will confirm with those
vendors that were not yet compliant in the second quarter of 1999 that they have
achieved compliance. In addition, management has reviewed significant lending
and deposit relationships and consulted with these customers as to their Year
2000 readiness. The plans of such parties are currently being monitored and the
Company is prepared to deal with any fundamental impact on the Company.
- The Company has established an internal review process to evaluate its
Year 2000 testing results. Monthly progress reports are made to the Company's
senior management and Board of Directors. The Company has also established a
Customer Awareness Program to inform customers of Year 2000 issues and provide
status reports as to the Bank's Year 2000 efforts.
- The Company estimates, based on current projections of allocations of
existing resources and known direct costs, that total costs related to the Year
2000 project from 1997 to 2000 will be approximately $1,150,000. The Company
estimates that approximately 78% of these costs will be related to the
redeployment of existing personnel to address Year 2000 Issues, while
approximately 22% of these costs will represent incremental expenses to the
Company since inception of the Year 2000 project. Since inception, the Company
has incurred approximately $766,000 of costs related to its Year 2000 project,
of which approximately $90,000 represents incremental expenses primarily for
software upgrades and outside consultant fees. Of the $766,000 of Year 2000
project costs incurred since inception, approximately $160,000, $340,000 and
$266,000 were incurred in 1997, 1998 and the first half of 1999, respectively.
The remaining estimated costs to complete the project include additional
testing, monitoring and contingency activities during the remainder of 1999 and
into the year 2000. Some computer-related initiatives have been delayed due to
the allocation of resources towards Year 2000 issues. Management believes these
delays have not had an adverse impact on the Company's financial condition or
day to day operations.
Based on our testing program, it is the Company's opinion that critical
systems are Year 2000 compliant. In the unlikely event that a critical system
does not perform as expected or if there is non-compliance by a major third
party
18
<PAGE>
provider, the above mentioned contingency plan would be invoked. This plan is
intended to guide the Bank in responding to possible failure of critical
systems.
Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995
Information contained in the above discussion titled, "Management's
Discussion and Analysis of Financial Condition and Results of Operations," other
than historical information, may contain forward-looking statements that involve
risks and uncertainties including, but not limited to, management's expectations
regarding performance during the third quarter of 1999, the Company's and its
major vendors' Year 2000 readiness, and the estimated costs related to Year 2000
issues. These statements are made pursuant to the safe harbor provisions of the
Private Litigation Reform Act of 1995, and are provided to assist the reader in
understanding anticipated future financial and operational results. Although the
Company believes that the assumptions underlying the forward-looking statements
contained herein are reasonable, any of these assumptions could ultimately prove
to be inaccurate. The Company's actual results may differ materially from those
projected in forward-looking statements, particularly if market conditions or
other factors prevent the Company from achieving or sustaining the increases in
loan production of fee income that are the basis of many of the Company's
assumptions.
Item 3 - Quantitative and Qualitative Disclosure About Market Risk
Market Risk Management
The Company's primary market risk exposure is interest rate risk.
Fluctuations in interest rates will impact both the level of interest income and
interest expense and the market value of the Company's interest-earning assets
and interest- bearing liabilities. There were no material changes in the
Company's market risk management strategy, as stated in the Company's 1998
annual report, during the first six months of 1999.
19
<PAGE>
PART II - OTHER INFORMATION
Item 1 - Legal Proceedings - Inapplicable
Item 2 - Changes in Securities - Inapplicable
Item 3 - Defaults Upon Senior Securities - Inapplicable
Item 4 - Submission of Matters to a Vote of Security Holders
At the Company's annual meeting held on May 19, 1999 (the "Annual
Meeting"), the Company's stockholders reelected three directors of the Company,
William J. Davenport, III, Michael S. Ives, and Charles R. Malbon, Jr.. The
voting results in the election for directors were as follows:
FOR AGAINST
William J. Davenport, III 4,158,605 121,394
Michael S. Ives 4,159,491 120,508
Charles R. Malbon, Jr. 5,159,191 120,808
The terms of office of each of the other directors of the Company continued
following the Annual Meeting. These directors are David L. Bernd, Patrick E.
Corbin, Thomas J. Decker, Jr., John F. Harris, William H. Hodges, Roger C.
Reinhold, Anne B. Shumadine, and David R. Tynch.
In addition, the Company's stockholders approved the proposed CENIT
Long-term Incentive Plan. The voting results for, against, and abstain were
3,747,604, 491,640, and 40,755, respectively.
Item 5 - Other Information - None
Item 6 - Exhibits and Reports on Form 8-K - None
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.
CENIT BANCORP, INC.
DATE: August 12, 1999 /S/Michael S. Ives
-------------------------------------
Michael S. Ives
President and Chief Executive Officer
DATE: August 12, 1999 /S/ Winfred O. Stant, Jr.
-------------------------------------
Winfred O. Stant, Jr.
First Vice President and
Chief Accounting Officer
20
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-1-1999
<PERIOD-END> JUN-30-1999
<CASH> 18,495
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 20,266
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 82,862
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 476,188
<ALLOWANCE> 3,889
<TOTAL-ASSETS> 626,473
<DEPOSITS> 481,152
<SHORT-TERM> 76,822
<LIABILITIES-OTHER> 3,314
<LONG-TERM> 15,000
0
0
<COMMON> 48
<OTHER-SE> 50,137
<TOTAL-LIABILITIES-AND-EQUITY> 626,473
<INTEREST-LOAN> 18,643
<INTEREST-INVEST> 2,111
<INTEREST-OTHER> 541
<INTEREST-TOTAL> 21,295
<INTEREST-DEPOSIT> 8,367
<INTEREST-EXPENSE> 10,703
<INTEREST-INCOME-NET> 10,592
<LOAN-LOSSES> 36
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 9,715
<INCOME-PRETAX> 4,495
<INCOME-PRE-EXTRAORDINARY> 2,877
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,877
<EPS-BASIC> .63
<EPS-DILUTED> .62
<YIELD-ACTUAL> 3.63
<LOANS-NON> 458
<LOANS-PAST> 747
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 4,024
<CHARGE-OFFS> 195
<RECOVERIES> 24
<ALLOWANCE-CLOSE> 3,889
<ALLOWANCE-DOMESTIC> 3,889
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
