<PAGE> 1
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
- --- EXCHANGE ACT OF 1934
For the quarterly period ended: September 30, 1998
------------------
- --- TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _______________ to ________________
Commission file number: 33-43317
--------
EASTON BANCORP, INC.
---------------------------------------------------------------
(Exact name of small business issuer as specified in its charter)
Maryland 52-1745344
---------------------- ---------------------------------
(State of incorporation) (I.R.S. Employer Identification No.)
501 Idlewild Avenue, Easton, Maryland 21601
-------------------------------------------
(Address of principal executive offices)
(410) 819-0300
--------------
(Issuer's telephone number)
Not Applicable
-------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report)
Check whether the issuer: (1) filed all reports required to be filed
by Section 13 or 15(d) of the Exchange Act during the past 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
----- -----
State the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest practicable date:
On November 6, 1998, 560,318 shares of the issuer's common stock, par
value $.10 per share, were issued and outstanding.
Transitional Small Business Disclosure Format (check one): Yes No X
--- ---
<PAGE> 2
PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
EASTON BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
September 30, December 31,
1998 1997
ASSETS ---- ----
<S> <C> <C>
Cash and due from banks $ 744,434 $ 642,726
Federal funds sold 7,358,281 3,739,622
Investment in Federal Home Loan Bank stock 145,600 124,500
Investment securities held-to-maturity (market
value of $1,502,794) -- 1,500,000
Investment securities available-for-sale 4,004,172 --
Loans, less allowance for credit losses of
$511,000 and $378,000, respectively 33,708,375 34,682,279
Premises and equipment, net 1,666,318 1,713,683
Intangible assets, net -- 30,261
Accrued interest receivable 244,242 248,303
Deferred income taxes 378,937 --
Other assets 56,981 58,323
----------- -----------
Total assets $48,307,340 $42,739,697
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits
Noninterest-bearing $ 3,235,203 $ 2,060,848
Interest-bearing 39,071,549 36,027,304
----------- -----------
Total deposits 42,306,752 38,088,152
Accrued interest payable 98,202 99,980
Securities sold under agreements to repurchase 424,578 481,490
Federal Home Loan Bank borrowings 1,000,000 --
Other liabilities 72,337 57,363
----------- -----------
Total liabilities 43,901,869 38,726,985
----------- -----------
Stockholders' equity
Common stock, par value $.10 per share;
authorized 5,000,000 shares, 560,318 and
559,328 shares issued and outstanding, respectively 56,032 55,933
Additional paid-in-capital 5,227,487 5,217,686
Accumulated comprehensive income adjustment 2,695 --
Retained earnings (deficit) (880,743) (1,260,907)
---------- -----------
Total stockholders' equity 4,405,471 4,012,712
----------- -----------
Total liabilities and stockholders' equity $48,307,340 $42,739,697
=========== ===========
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
1
<PAGE> 3
EASTON BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------- -------------
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Interest revenue
Loans, including fees $ 774,969 $ 751,863 $ 2,289,174 $2,160,573
Investment securities 48,405 22,330 101,864 62,187
Federal funds sold 97,609 56,561 217,352 162,974
--------- --------- ----------- ----------
Total interest revenue 920,983 830,754 2,608,390 2,385,734
Interest expense 488,958 417,765 1,398,277 1,198,575
--------- --------- ----------- ----------
Net interest income 432,025 412,989 1,210,113 1,187,159
Provision for loan losses 91,212 8,285 162,557 49,751
--------- --------- ----------- ----------
Net interest income after
provision for loan losses 340,813 404,704 1,047,556 1,137,408
--------- --------- ----------- ----------
Other operating revenue 29,335 21,382 89,950 70,898
--------- --------- ----------- ----------
Other expenses
Salaries and benefits 269,240 190,767 690,367 540,170
Occupancy 14,475 20,352 42,880 58,079
Furniture and equipment 17,594 26,742 66,981 74,746
Other operating 105,589 114,902 337,411 334,865
--------- --------- ----------- ----------
Total operating expenses 406,898 352,763 1,137,639 1,007,860
--------- --------- ----------- ----------
Net income (loss) before income taxes (36,750) 73,323 (133) 200,446
Income taxes 380,297 -- 380,297 --
--------- --------- ----------- ----------
Net income $ 343,547 $ 73,323 $ 380,164 $ 200,446
========= ========= =========== ==========
Earnings per common share - basic $ .61 $ .13 $ .68 $ .36
========= ========= =========== ==========
Earnings per common share - diluted $ .57 $ .12 $ .63 $ .33
========= ========= =========== ==========
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
2
<PAGE> 4
EASTON BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
-------------
1998 1997
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Interest received $ 2,608,163 $ 2,337,074
Other revenue received 90,984 62,836
Cash paid for operating expenses (1,017,613) (1,019,103)
Interest paid (1,400,055) (1,199,173)
------------ ------------
281,479 181,634
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Cash paid for premises, equipment and software (27,118) (274,548)
Net loans to customers 816,446 (3,249,080)
Loan participations sold -- 359,766
Purchase of investment securities (4,022,028) (1,252,900)
Proceeds from sales/maturities of investments 1,500,000 1,000,000
------------ ------------
(1,732,700) (3,416,762)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in time deposits 1,565,252 1,936,384
Net increase in other deposits 2,653,348 1,759,097
Net increase in other debt 943,088 --
Proceeds from stock option exercise 9,900 --
Net decrease in securities sold under
agreements to repurchase -- (130,566)
------------ ------------
5,171,588 3,564,915
------------ ------------
NET INCREASE IN CASH AND CASH EQUIVALENTS 3,720,367 329,787
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 4,382,348 4,035,909
------------ ------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 8,102,715 $ 4,365,696
============ ============
RECONCILIATION OF NET INCOME TO NET CASH
PROVIDED BY OPERATING ACTIVITIES
Net income $380,164 $200,446
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 103,625 124,097
Provision for loan losses 162,557 49,751
Increase (decrease) in accrued interest receivable and
other assets 7,333 (87,514)
Increase (decrease) in operating accounts payable and
other liabilities 13,196 (105,049)
Deferred loan origination fees (5,099) (97)
Deferred income taxes (380,297) --
----------- -----------
$ 281,479 $ 181,634
=========== ===========
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
3
<PAGE> 5
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS:
1. Basis of Presentation
The accompanying unaudited condensed financial statements have been
prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-QSB and Item
310(b) of Regulation S-B of the Securities and Exchange Commission.
Accordingly, they do not include all the information and footnotes required by
generally accepted accounting principles for complete financial statements. In
the opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been included.
Operating results for the nine months ended September 30, 1998, are not
necessarily indicative of the results that may be expected for the year ended
December 31, 1998. For further information, refer to the consolidated financial
statements and footnotes thereto for the Company's fiscal year ended December
31, 1997, included in the Company's Form 10-KSB for the year ended December 31,
1997.
2. Cash Flows
For purposes of reporting cash flows, cash and cash equivalents
include cash on hand, unrestricted amounts due from banks, overnight
investments in repurchase agreements, and federal funds sold.
3. Adoption of New Accounting Principles
During the fourth quarter of 1997, the Company adopted Financial
Accounting Standards Board Statement No. 128, "Earnings Per Share." SFAS 128
replaces the presentation of primary earnings per share with a presentation of
basic earnings per share and it requires a dual presentation of basic and
diluted earnings per share on the face of the income statement. SFAS 128 was
effective for financial statements issued for periods ending after December 15,
1997. The adoption of this pronouncement by the Company in 1997 has resulted in
the recalculation and restatement, where necessary, of the Company's prior
period earnings per share disclosures.
Effective January 1, 1998, the Company adopted Statement of Financial
Accounting Standards (SFAS) No. 130, "Reporting Comprehensive Income." SFAS No.
130 requires the reporting of comprehensive income which includes unrealized
gains and losses not recognized in net income. Unrealized gains and losses on
available-for-sale securities which have been reported as a separate component
of stockholders' equity are included in comprehensive income. The adoption of
SFAS No. 130 had no impact on the Company's net income or stockholders' equity.
For the nine months ended September 30, 1998 and 1997, total comprehensive
income, net of taxes, was $382,859 and $200,446, respectively.
In June 1998, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities." The Company currently has no derivative
instruments or hedging activities but elected early adoption of this
pronouncement. The standard allows, at adoption, a one-time transfer of
securities between the held-to-maturity and available-for-sale securities
without affecting the classification of other securities. The Company
transferred its remaining securities classified as held-to-maturity to the
available-for-sale portfolio.
4
<PAGE> 6
This Report contains statements which constitute forward-looking
statements within the meaning of Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934. These statements appear in
a number of places in this Report and include all statements regarding the
intent, belief or current expectations of the Company, its directors or its
officers with respect to, among other things: (i) the Company's financing
plans; (ii) trends affecting the Company's financial condition or results of
operations; (iii) the Company's growth strategy and operating strategy; and
(iv) the declaration and payment of dividends. Investors are cautioned that any
such forward-looking statements are not guarantees of future performance and
involve risks and uncertainties, and that actual results may differ materially
from those projected in the forward-looking statements as a result of various
factors discussed herein and those factors discussed in detail in the Company's
filings with the Securities and Exchange Commission.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
Easton Bancorp, Inc. (the "Company") was incorporated in Maryland on
July 19, 1991, primarily to own and control all of the capital stock of Easton
Bank & Trust Company (the "Bank") upon its formation. The Bank commenced
business on July 1, 1993, and the only activity of the Company since then has
been the ownership and operation of the Bank. The Bank conducts a general
commercial banking business in its service area, emphasizing the banking needs
of individuals and small- to medium-sized businesses and professional concerns.
The following discussion of the financial condition and results of
operations of the Company should be read in conjunction with the Company's
unaudited financial statements and related notes and other statistical
information included elsewhere herein.
Results of Operations
Net income for the Company for the three months ended September 30,
1998, was $343,547, compared to $73,323 during the corresponding period of
1997. Net income/(loss) before a deferred income tax adjustment of $380,297 for
the three months ended September 30, 1998, was a loss of $36,750, compared to a
profit of $73,323 during the corresponding period of 1997. Net income for the
nine months ended September 30, 1998, was $380,164, compared to $200,446 for
the corresponding period of 1997. Net income/(loss) before a deferred income
tax adjustment of $380,297 for the nine months ended September 30, 1998, was a
loss of $133, compared to a profit of $200,446 for the corresponding period of
1997. The decrease in earnings before income taxes can be attributed primarily
to an increase in noninterest expenses which have grown as the Bank has
expanded, and the retarded growth in net interest income which was the result
of placing one loan in the amount of $2.3 million on non-accrual status as of
March 31, 1998. Lost interest on this nonperforming asset totals approximately
$192,000 through September 30, 1998. The loan is fully secured by real estate
and is partially guaranteed by the U.S. Department of Agriculture Rural
Community & Development Program. The U.S. Government is responsible for 80% of
any deficiency after liquidation of the collateral. Collection efforts on this
loan are progressing in conjunction with the U.S. Government Agency. The
collateral was sold in October, 1998, with settlement to occur prior to January
31, 1999. Management believes that there will be no material additional
reduction from earnings.
During the quarter ended September 30, 1998, the Company recognized
its deferred tax asset resulting in the deferred income tax adjustment of
$380,297 reflected in net income for the three month and nine month periods
ended September 30, 1998. Because the Company has net operating losses without
the ability to recognize its deferred tax asset by carrying losses back to
offset prior periods' tax, the deferred tax asset could only be recognized to
the extent of future earnings. Management
5
<PAGE> 7
reevaluated its financial position and determined that after three years of
profits, and based on earnings projections for the next three years, these
deferred tax assets are valid, recoverable assets of the Company. The deferred
tax asset of the Company is comprised of net tax operating loss carryforwards
and deferred taxes related to the allowance for loan losses on the records of
the Company in excess of the allowance for loan losses allowed on the corporate
income tax return. These items are offset by the accelerated depreciation
reported on the tax return compared to the depreciation recorded in the
financial statements. The deferred tax asset is further reduced by the
difference between the accrual method of accounting used for financial
statement purposes and the cash method of accounting used on the tax return.
The Bank's loan portfolio decreased from $34.7 million at December 31,
1997, to $33.7 million at September 30, 1998. The Bank's provision for loan
losses was $91,212 for the quarter ended September 30, 1998, and $162,557 for
the nine months ended September 30, 1998, compared to $8,285 for the quarter
ended September 30, 1997, and $49,751 for the nine months ended September 30,
1997. The allowance for loan losses was $511,000 at September 30, 1998, or
1.49% of total loans, compared to $418,000 at June 30, 1998, or 1.22% of the
total loans, and $378,000 at December 31, 1997, or 1.08% of total loans. The
level of the allowance for loan losses represents management's current estimate
of future losses in the loan portfolio; however, there can be no assurance that
loan losses in future periods will not exceed the allowance for loan losses or
that additional increases in the allowance will not be required.
Noninterest expense increased $54,135 to $406,898 for the quarter
ended September 30, 1998, from $352,763 for the quarter ended September 30,
1997. The increase was primarily related to the increases in salaries and
benefits of $78,473. The increase in salaries and benefits was due to annual
increases and two new full time and two new part time employees hired since the
second quarter of 1997. Also, on March 6, 1998, the Board of Directors and the
Bank's former President and Chief Executive Officer, Thomas P. McDavid, entered
into a mutual agreement to accept the resignation of the President and Chief
Executive Officer while honoring his employment contract through March 6, 1999.
This employment contract represents compensation expense of $82,000 between May
1, 1998, and September 30, 1998. On May 1, 1998, the Board of Directors hired a
new President and Chief Executive Officer, R. Michael S. Menzies.
Return on average assets and average equity, on an annualized basis,
for the quarter ended September 30, 1998, were .97% and 11.08%, respectively,
compared to .75% and 7.24%, respectively, for the same quarter of 1997. Return
on average assets and average equity, on an annualized basis, for the nine
months ended September 30, 1998, were 1.23% and 13.91%, respectively, compared
to .68% and 7.00%, respectively, for the same period of 1997. Earnings per
share on a fully diluted basis for the quarter and the nine months ended
September 30, 1998, were $.57 and $.63, respectively, compared to $.12 and
$.33, respectively, for the same periods of 1997.
The Company's assets ended the third quarter of 1998 at $48.3 million,
an increase of $5.6 million, or 13.03%, from $42.7 million at December 31,
1997. This increase can be attributed primarily to the increase in the Bank's
deposits which contributed significantly to the $3.6 million increase in
federal funds sold and the $2.5 million increase in investment securities. The
Company borrowed $1 million from the Federal Home Loan Bank of Atlanta that
will be match funded on two loans.
Liquidity and Sources of Capital
The $4.2 million increase in deposits from December 31, 1997, to
September 30, 1998, is
6
<PAGE> 8
primarily reflected in the $3.6 million increase in federal funds sold. The
Company's primary source of liquidity is cash on hand plus short term
investments. At September 30, 1998, the Company's liquid assets totaled $12.3
million, or 25.4% of total assets, compared to $6.0 million, or 14.1% of total
assets, at December 31, 1997. Another source of liquidity, is the $6 million,
of which $1 million is used, secured line of credit the Company has from the
Federal Home Loan Bank of Atlanta, the $1 million unsecured line of credit the
Company has from a correspondent bank, and the $1.5 million secured line of
credit the Company has from another correspondent bank, of which $425,000 of
the $1.5 million line of credit is pledged to secure repurchase agreements. If
additional liquidity is needed, the Bank will sell participations in its loans.
The capital of the Company and the Bank exceed all prescribed
regulatory capital guidelines at September 30, 1998. At September 30, 1998, the
Tier 1 leverage ratio for the Bank was 9.25%. At September 30, 1998, the Bank
had a risk-weighted total capital ratio of 14.23%, and a Tier 1 risk-weighted
capital ratio of 12.98%. The Company expects that its current capital and
short-term investments will satisfy the Company's cash requirements for the
foreseeable future. However, no assurance can be given in this regard as rapid
growth, deterioration in the loan quality or poor earnings, or a combination of
these factors, could change the Company's capital position in a relatively
short period of time.
Year 2000 Issues
The year 2000 ("Y2k") presents many potential problems for businesses
and individuals. In an effort to conserve hard drive space, programmers wrote
programs that would not recognize the year 2000 correctly. This can cause
system failures for computers and other electronic equipment that have chip
components. Management has a Y2k committee, which reports to the Board,
responsible for assessing progress in the Company's plans to minimize the
effects of the Y2k problem.
The Company uses a third-party data processor for most of its
accounting functions. The processor has implemented many changes in preparation
for Y2k. Testing began in the third quarter of 1998 and should be completed by
the end of 1998. The Company also has a number of portable computers, most of
which, due to their age, are Y2k compliant. Management has sent surveys or met
with its vendors and as of September 30, 1998, believes that its systems are
Y2k compliant. Management expects no significant additional costs to get its
systems Y2k compliant.
The largest Y2k exposure to most banks is the preparedness of the
customers of the banks. Management is addressing with its customers the
possible consequences of not being prepared for Y2k. Should large borrowers not
sufficiently address this issue, the Company may experience an increase in loan
defaults. The amount of potential loss from this issue is not quantifiable.
Management is attempting to reduce this exposure by educating its customers.
Market Risk
Net interest income of the Company is one of the most important
factors in evaluating the financial performance of the Company. The Company
uses interest sensitivity analysis to determine the effect of rate changes. Net
interest income is projected over a one-year period to determine the effect of
an increase or decrease in the prime rate of 100 basis points. If prime were to
decrease 100 basis points, the Company would experience a decrease in net
interest income of $1,450 if all assets and liabilities maturing within that
period were adjusted for the rate change. The sensitivity analysis does not
consider the likelihood of these rate changes nor whether management's reaction
to this rate change would be to reprice its loans and deposits.
7
<PAGE> 9
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
There are no material pending legal proceedings to which the Company
or the Bank is a party or of which any of their property is the subject.
ITEM 2. CHANGES IN SECURITIES.
On March 5, 1998, a director and officer of the Company exercised
options to acquire 150 shares of the Company's Common Stock, and on April 6,
1998, a former officer and director of the Company exercised options to acquire
840 shares of the Company's Common Stock. The options in both transactions had
an exercise price of $10 per share and thus the Company received $9,900. The
Common Stock issued pursuant to the exercise of the options represents
unregistered securities, which issuance was considered to be exempt from
registration under the Securities Act of 1933 pursuant to Section 4(2) as a
transaction by an issuer not involving any public offering.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
There were no matters submitted to a vote of security holders during
the quarter ended September 30, 1998.
ITEM 5. OTHER INFORMATION.
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits.
3.1 Articles of Incorporation of the Company
(incorporated by reference to Exhibit 3.1 of
Registration Statement on Form S-18, File No.
33-43317).
3.2 Bylaws of the Company (incorporated by reference to
Exhibit 3.2 of Registration Statement on Form S-18,
File No. 33-43317).
10.1 Employment Agreement dated July 22, 1991, between
the Company and Thomas P. McDavid (incorporated by
reference to Exhibit 10.1 of Registration Statement
on Form S-18, File No. 33-43317).
10.2 Easton Bancorp, Inc. 1991 Stock Option Plan
(incorporated by reference to Exhibit 10.2 of
Registration Statement on Form S-18, File No.
33-43317).
8
<PAGE> 10
10.3 Form of Warrant Agreement (incorporated by reference
to Exhibit 10.3 of Registration Statement on Form
S-18, File No. 33-43317).
10.4 Agreement with Thomas P. McDavid dated March 6, 1998
(incorporated by reference to Exhibit 10.4 of the
Quarterly Report on Form 10-QSB filed by the Company
for the quarter ended March 31, 1998).
11.1 Computation of Earnings Per Share.
27.1 Financial Data Schedule (for SEC use only).
27.2 Restated Financial Data Schedule for Nine Months
Ended September 30, 1996 (for SEC use only).
27.3 Restated Financial Data Schedule for Nine Months
Ended September 30, 1997 (for SEC use only).
(b) Reports on Form 8-K.
There were no reports on Form 8-K filed by the Company during
the quarter ended September 30, 1998.
9
<PAGE> 11
SIGNATURES
In accordance with the requirements of the Exchange Act, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
EASTON BANCORP, INC.
(Registrant)
Date: November 11, 1998 By: /s/ W. David Hill
-------------------- ----------------------------------
W. David Hill
President
Date: November 11, 1998 By: /s/ Pamela A. Mussenden
-------------------- ----------------------------------
Pamela A. Mussenden
Assistant Treasurer
(Principal Financial Officer)
10
<PAGE> 12
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit Sequential
Number Description Page Number
- ------- ----------- -----------
<S> <C> <C>
3.1 Articles of Incorporation of the Company (incorporated by
reference to Exhibit 3.1 of Registration Statement on Form
S-18, File No. 33-43317).
3.2 Bylaws of the Company (incorporated by reference to Exhibit
3.2 of Registration Statement on Form S-18, File No.
33-43317).
10.1 Employment Agreement dated July 22, 1991, between the Company
and Thomas P. McDavid (incorporated by reference to Exhibit
10.1 of Registration Statement on Form S-18, File No.
33-43317).
10.2 Easton Bancorp, Inc. 1991 Stock Option Plan (incorporated by
reference to Exhibit 10.2 of Registration Statement on Form
S-18, File No. 33-43317).
10.3 Form of Warrant Agreement (incorporated by reference to
Exhibit 10.3 of Registration Statement on Form S-18, File No.
33-43317).
10.4 Agreement with Thomas P. McDavid dated March 6, 1998
(incorporated by reference to Exhibit 10.4 of the Quarterly
Report on Form 10-QSB filed by the Company for the quarter
ended March 31, 1998).
11.1 Computation of Earnings Per Share.
27.1 Financial Data Schedule (for SEC use only).
27.2 Restated Financial Data Schedule for Nine Months Ended
September 30, 1996 (for SEC use only).
27.3 Restated Financial Data Schedule for Nine Months Ended
September 30, 1997 (for SEC use only).
</TABLE>
<PAGE> 1
EXHIBIT 11.1
EASTON BANCORP, INC.
COMPUTATION OF EARNINGS PER SHARE
QUARTER ENDED SEPTEMBER 30, 1998
<TABLE>
<CAPTION>
Three Months Nine Months
Ended Ended
September 30, 1998 September 30, 1998
------------------ ------------------
<S> <C> <C>
Net income $ 343,547 $ 380,164
========== ==========
Average shares outstanding 560,318 559,987
Basic earnings per share $ .61 $ .68
========== ==========
Average shares outstanding 560,318 559,987
Dilutive average shares outstanding under
warrants and options 207,800 207,800
Exercise price $ 10.00 $ 10.00
Assumed proceeds on exercise $2,078,000 $2,078,000
Average market value $ 12.50 $ 12.50
Less: Treasury stock purchased with assumed proceeds from
exercise of warrants and options
166,240 166,240
Adjusted average shares-diluted 601,878 601,547
Diluted earnings per share $ .57 $ .63
========== ==========
</TABLE>
The stock of the Company is not traded on any public exchange. The
average market values are derived from trades known to management. Private
sales may occur where management of the Company is unaware of the sales price.
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 744,434
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 7,358,281
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 4,004,172
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 33,708,375
<ALLOWANCE> 511,000
<TOTAL-ASSETS> 48,307,340
<DEPOSITS> 42,306,752
<SHORT-TERM> 424,578
<LIABILITIES-OTHER> 170,539
<LONG-TERM> 1,000,000
0
0
<COMMON> 56,302
<OTHER-SE> 4,349,439
<TOTAL-LIABILITIES-AND-EQUITY> 48,307,340
<INTEREST-LOAN> 2,289,174
<INTEREST-INVEST> 101,864
<INTEREST-OTHER> 217,352
<INTEREST-TOTAL> 2,608,390
<INTEREST-DEPOSIT> 1,367,134
<INTEREST-EXPENSE> 1,398,277
<INTEREST-INCOME-NET> 1,210,113
<LOAN-LOSSES> 162,557
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 1,137,639
<INCOME-PRETAX> (133)
<INCOME-PRE-EXTRAORDINARY> (133)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 380,164
<EPS-PRIMARY> .68
<EPS-DILUTED> .63
<YIELD-ACTUAL> 3.32
<LOANS-NON> 2,706,000
<LOANS-PAST> 292,000
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 761,468
<ALLOWANCE-OPEN> 378,000
<CHARGE-OFFS> 52,676
<RECOVERIES> 23,119
<ALLOWANCE-CLOSE> 511,000
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 511,000
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS FINANCIAL DATA SCHEDULE IS RESTATED FROM 9/30/96.
</LEGEND>
<RESTATED>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 355,542
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 5,326,212
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 0
<INVESTMENTS-CARRYING> 750,000
<INVESTMENTS-MARKET> 745,733
<LOANS> 26,816,470
<ALLOWANCE> 295,441
<TOTAL-ASSETS> 35,110,616
<DEPOSITS> 31,103,971
<SHORT-TERM> 252,082
<LIABILITIES-OTHER> 107,358
<LONG-TERM> 0
0
0
<COMMON> 55,933
<OTHER-SE> 3,591,272
<TOTAL-LIABILITIES-AND-EQUITY> 35,110,616
<INTEREST-LOAN> 1,721,181
<INTEREST-INVEST> 26,281
<INTEREST-OTHER> 298,225
<INTEREST-TOTAL> 2,045,687
<INTEREST-DEPOSIT> 1,120,077
<INTEREST-EXPENSE> 1,120,077
<INTEREST-INCOME-NET> 925,610
<LOAN-LOSSES> 34,162
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 869,052
<INCOME-PRETAX> 115,528
<INCOME-PRE-EXTRAORDINARY> 115,528
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 115,528
<EPS-PRIMARY> .21
<EPS-DILUTED> .19
<YIELD-ACTUAL> 3.79
<LOANS-NON> 114,000
<LOANS-PAST> 13,000
<LOANS-TROUBLED> 107,000
<LOANS-PROBLEM> 98,000
<ALLOWANCE-OPEN> 260,000
<CHARGE-OFFS> 15,805
<RECOVERIES> 17,084
<ALLOWANCE-CLOSE> 295,441
<ALLOWANCE-DOMESTIC> 295,441
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS FINANCIAL DATA SCHEDULE IS RESTATED FROM 9/30/97.
</LEGEND>
<RESTATED>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 1,301,991
<INT-BEARING-DEPOSITS> 4,979
<FED-FUNDS-SOLD> 3,058,726
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 124,500
<INVESTMENTS-CARRYING> 1,500,000
<INVESTMENTS-MARKET> 1,501,528
<LOANS> 32,902,091
<ALLOWANCE> 358,000
<TOTAL-ASSETS> 40,955,252
<DEPOSITS> 36,454,040
<SHORT-TERM> 443,762
<LIABILITIES-OTHER> 134,213
<LONG-TERM> 0
0
0
<COMMON> 55,933
<OTHER-SE> 3,867,304
<TOTAL-LIABILITIES-AND-EQUITY> 40,955,252
<INTEREST-LOAN> 2,160,573
<INTEREST-INVEST> 62,187
<INTEREST-OTHER> 162,974
<INTEREST-TOTAL> 2,385,734
<INTEREST-DEPOSIT> 1,182,278
<INTEREST-EXPENSE> 1,198,575
<INTEREST-INCOME-NET> 1,187,159
<LOAN-LOSSES> 49,751
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 1,007,860
<INCOME-PRETAX> 200,446
<INCOME-PRE-EXTRAORDINARY> 200,446
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 200,446
<EPS-PRIMARY> .36
<EPS-DILUTED> .33
<YIELD-ACTUAL> 4.39
<LOANS-NON> 55,000
<LOANS-PAST> 151,000
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 400,789
<ALLOWANCE-OPEN> 332,253
<CHARGE-OFFS> 36,382
<RECOVERIES> 12,378
<ALLOWANCE-CLOSE> 358,000
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 358,000
</TABLE>
