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, 1999
--------------------
___ 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 8, 1999, 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>
PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
<TABLE>
<CAPTION>
EASTON BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(Unaudited)
September 30, December 31,
1999 1998
--------------- --------------
<S> <C> <C>
ASSETS
Cash and due from banks $ 1,109,612 $ 976,682
Federal funds sold 2,142,836 7,269,903
Investment in Federal Home Loan Bank stock 150,000 145,600
Investment securities available-for-sale 4,493,924 4,840,026
Loans, less allowance for credit losses of
$663,348 and $530,000, respectively 42,475,138 33,254,808
Premises and equipment, net 1,755,355 1,662,127
Intangible assets, net --- 1,853
Accrued interest receivable 311,706 246,470
Loan payment held in escrow --- 1,175,000
Deferred income taxes 221,667 401,551
Other assets 88,202 92,924
--------------- --------------
Total assets $ 52,748,440 $ 50,066,944
=============== ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits
Noninterest-bearing $ 3,442,187 $ 4,682,618
Interest-bearing 42,685,927 39,436,342
--------------- --------------
Total deposits 46,128,114 44,118,960
Accrued interest payable 95,755 95,611
Securities sold under agreements to repurchase 71,215 281,019
Note payable 1,578,687 1,000,000
Other liabilities 67,930 111,685
--------------- --------------
Total liabilities 47,941,701 45,607,275
--------------- --------------
Stockholders' equity
Common stock, par value $.10 per share;
authorized 5,000,000 shares, 560,318
shares issued and outstanding 56,032 56,032
Additional paid-in-capital 5,227,487 5,227,487
Retained earnings (deficit) (417,995) (816,863)
--------------- --------------
4,865,524 4,466,656
Accumulated other comprehensive income (58,785) (6,987)
--------------- --------------
Total stockholders' equity 4,806,739 4,459,669
--------------- --------------
Total liabilities and stockholders' equity $ 52,748,440 $ 50,066,944
=============== ==============
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
1
<PAGE>
<TABLE>
<CAPTION>
EASTON BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
----------------------- ------------------------
1999 1998 1999 1998
----------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
Interest revenue
Loans, including fees $1,033,790 $ 774,969 $2,666,879 $2,289,174
Investment securities 65,576 48,405 201,346 101,864
Federal funds sold 41,113 97,609 119,141 217,352
----------- ---------- ----------- -----------
Total interest revenue 1,140,479 920,983 2,987,366 2,608,390
Interest expense 483,768 488,958 1,354,015 1,398,277
----------- ---------- ----------- -----------
Net interest income 656,711 432,025 1,633,351 1,210,113
Provision for loan losses (134,547) 91,212 (98,547) 162,557
----------- ---------- ----------- -----------
Net interest income after
provision for loan losses 791,258 340,813 1,731,898 1,047,556
----------- ---------- ----------- -----------
Other operating revenue 119,542 29,335 206,565 89,950
----------- ---------- ----------- -----------
Other expenses
Salaries and benefits 304,569 269,240 829,031 690,367
Occupancy 18,847 14,475 52,678 42,880
Furniture and equipment 19,432 17,594 57,218 66,981
Other operating 135,185 105,589 394,101 337,411
----------- ---------- ----------- -----------
Total operating expenses 478,033 406,898 1,333,028 1,137,639
----------- ---------- ----------- -----------
Net income (loss) before income taxes 432,767 (36,750) 605,435 (133)
Income tax expense (benefit) 147,895 (380,297) 206,567 (380,297)
----------- ---------- ----------- -----------
Net income $ 284,872 $ 343,547 $ 398,868 $ 380,164
=========== ========== =========== ===========
Earnings per common share - basic $ 0.51 $ 0.61 $ 0.71 $ 0.68
=========== ========== =========== ===========
Earnings per common share - diluted $ 0.47 $ 0.57 $ 0.67 $ 0.63
=========== ========== =========== ===========
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
2
<PAGE>
<TABLE>
<CAPTION>
EASTON BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Nine Months Ended
September 30,
--------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES 1999 1998
------------ ------------
Interest received $ 2,913,211 $ 2,608,163
Other revenue received 242,866 90,984
Cash paid for operating expenses (1,331,566) (1,017,613)
Interest paid (1,353,870) (1,400,055)
------------ ------------
470,641 281,479
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Cash paid for premises, equipment and software (109,420) (27,118)
Loans originated, net of principal repayments (9,170,334) 816,446
Purchase of investment securities (1,473,035) (4,022,028)
Proceeds from sales/maturities of investments 1,733,725 1,500,000
Receipt of funds held in escrow 1,175,000 ---
Proceeds from sale of other real estate owned 61,699 ---
Purchase of other real estate owned (60,450) ---
------------ ------------
(7,842,815) (1,732,700)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in time deposits 213,758 1,565,252
Net increase in other deposits 1,795,396 2,653,348
Net increase in other debt 578,687 943,088
Proceeds from stock option exercise --- 9,900
Net decrease in securities sold under
agreements to repurchase (209,804) ---
------------ ------------
2,378,037 5,171,588
------------ ------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (4,994,137) 3,720,367
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 8,246,585 4,382,348
------------ ------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 3,252,448 $ 8,102,715
============ ============
RECONCILIATION OF NET INCOME TO NET CASH
PROVIDED BY OPERATING ACTIVITIES
Net income $ 398,868 $ 380,164
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 71,265 103,625
Provision for loan losses (98,547) 162,557
Decrease (increase) in accrued interest receivable and
other assets (53,734) 7,333
Increase (decrease) in operating accounts payable and
other liabilities (43,611) 13,196
Increase (decrease) in deferred loan origination fees (11,449) (5,099)
Decrease (increase) in deferred income taxes 206,568 (380,297)
Securities amortization/accretion, net 2,530 ---
Gain on sale of other real estate (1,249) ---
------------ ------------
$ 470,641 $ 281,479
============ ============
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
3
<PAGE>
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, 1999, are not necessarily indicative of the
results that may be expected for the year ended December 31, 1999. For further
information, refer to the consolidated financial statements and footnotes
thereto for the Company's fiscal year ended December 31, 1998, included in the
Company's Form 10-KSB for the year ended December 31, 1998.
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.
4
<PAGE>
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 was organized as a nonmember
state bank under the laws of the State of Maryland. The Bank is engaged in a
general commercial banking business, emphasizing in its marketing the Bank's
local management and ownership, from its main office location in its primary
service area, Talbot County, Maryland. In addition, in February 1999 the Bank
opened a loan production office in Denton, Maryland, which is in Caroline
County. In April 1999, the Bank received approval from the Federal Deposit
Insurance Corporation and the State of Maryland State Banking Department to
establish a branch in Denton, Maryland. In October 1999, the Bank opened a
branch at 300 Market Street in Denton. The Bank offers a full range of deposit
services that are typically available in most banks and savings and loan
associations, including checking accounts, NOW accounts, savings accounts and
other time deposits of various types, ranging from daily money market accounts
to longer-term certificates of deposit. In addition, the Bank offers certain
retirement account services, such as Individual Retirement Accounts. The Bank
offers a full range of short- to medium-term commercial and personal loans. The
Bank also originates and holds or sells into the secondary market fixed and
variable rate mortgage loans and real estate construction and acquisition loans.
Other bank services include cash management services, safe deposit boxes,
travelers checks, direct deposit of payroll and social security checks, and
automatic drafts for various accounts.
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, 1999,
was $284,872, compared to $343,547 during the corresponding period of 1998. Net
income for the nine months ended September 30, 1999, was $398,868, compared to
$380,164 for the corresponding period of 1998. Net income before income taxes
was $432,767 for the three months ended September 30, 1999, compared to a loss
of $36,750 during the corresponding period of 1998. Net income before income
taxes was $605,435 for the nine months ended September 30, 1999, compared to a
loss of $133 during the corresponding period of 1998.
The increase in earnings before income taxes for the nine month period
ended September 30, 1999, can be attributed to an increase in net interest
income of approximately $423,000, a decrease of approximately $261,000 in the
provision for loan losses, and an increase of approximately $117,000 in other
operating income, offset by an increase of approximately $195,000 in total
operating expenses. The increase in net interest income is primarily due to an
increase of approximately $99,000 on the interest earned on growth in the
investment portfolio, an increase of approximately $298,000 on the interest
earned on growth in the loan portfolio, and a payment of approximately $80,000
received from the U.S. Department of Agriculture for interest earned on a loan
while in the workout process. The increase in total operating expenses is
primarily attributed to an increase in salaries and benefits of approximately
$139,000 and other operating expenses of approximately $57,000. The increase in
other operating income includes income of approximately $66,000 from the full
recovery of a loan charged off in 1995.
5
<PAGE>
The Bank's loan portfolio increased from $33.3 million at December 31,
1998, to $42.5 million at September 30, 1999. The allowance for loan losses was
$663,348 at September 30, 1999, or 1.54% of total loans, compared to $448,280 at
June 30, 1999, or 1.22% of total loans, and $530,000 at December 31, 1998, or
1.57% of total loans. In September 1999, the Bank received a recovery of
$408,069 on a loan that was charged off in 1995. Of the amount recovered,
$341,988 was applied to increase the allowance for loan losses and the balance
of $66,081 was credited to other income. The Bank subsequently analyzed its
allowance for loan losses and determined that the allowance should be reduced,
resulting in a reduction in the allowance of $196,547, and a corresponding
reduction in the 1999 provision for loan losses. As a result, the Bank's
provision for loan losses was an increase to income of $134,547 for the three
months ended September 30, 1999, and an increase to income of $98,547 for the
nine months ended September 30, 1999, compared to an expense of $91,212 for the
three months ended September 30, 1998, and an expense of $162,557 for the nine
months ended September 30, 1998. 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.
Total operating expenses increased $71,135 to $478,033 for the quarter
ended September 30, 1999, from $406,898 for the quarter ended September 30,
1998. The increase was primarily related to the increase in salaries and
benefits of $35,329 and the increase in other operating expenses of $29,596.
The increase in salaries and benefits was due to annual salary increases and
three new full-time employees hired for Denton Bank & Trust Company, a division
of Easton Bank & Trust Company, which opened in October 1999. Other operating
expenses increased due to expenses incurred in the opening of the branch.
Return on average assets and average equity, on an annualized basis, for
the quarter ended September 30, 1999, was 1.64% and 18.72%, respectively,
compared to .97% and 11.08%, respectively, for the same quarter of 1998. Return
on average assets and average equity, on an annualized basis, for the nine
months ended September 30, 1999, was 1.06% and 13.06%, respectively, compared to
1.23% and 13.91%, respectively, for the same period of 1998. Earnings per share
on a fully diluted basis for the quarter and the nine months ended September 30,
1999 were $.47 and $.67, respectively, compared to $.57 and $.63, respectively,
for the same periods of 1998.
The Company's assets ended the third quarter of 1999 at $52.7 million, an
increase of $2.6 million, or 5.4%, from $50.1 million at December 31, 1998.
This increase can be attributed primarily to the increase in the Bank's loans of
$9.2 million, offset by the $5.1 million decrease in federal funds sold and $1.2
million decrease in loan payment held in escrow. The Bank's total borrowings
from the Federal Home Loan Bank of Atlanta increased to $1.6 million. These
borrowings are match funded on two loans.
Management expects that its 1999 income will exceed expenses. Although
management expects that the Company's current profitability will continue,
future events, such as an unanticipated deterioration in the loan portfolio,
could reverse this trend. Management's expectations are based on management's
best judgment and actual results will depend on a number of factors that cannot
be predicted with certainty and thus fulfillment of management's expectations
cannot be assured.
6
<PAGE>
Liquidity and Sources of Capital
- ------------------------------------
The $2.0 million increase in deposits from December 31, 1998, to September
30, 1999, is primarily reflected in the increase of the Bank's loans of $9.2
million, offset by the $5.1 million decrease in federal funds sold and the
disbursement of the $1.2 million loan payment held in escrow. The Company's
primary source of liquidity is cash on hand plus short term investments. At
September 30, 1999, the Company's liquid assets totaled $7.7 million, or 14.7%
of total assets, compared to $13.0 million, or 26.1% of total assets, at
December 31, 1998. Another source of liquidity is the $6.0 million secured line
of credit the Company has from the Federal Home Loan Bank of Atlanta, of which
$1.6 million is currently used, the $1.0 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 $75,000 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, 1999. At September 30, 1999, the Tier 1
leverage ratio for the Bank was 9.05%. At September 30, 1999, the Bank had a
risk-weighted total capital ratio of 12.98%, and a Tier 1 risk-weighted capital
ratio of 11.72%. 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.
Accounting Rule Changes
- -------------------------
In June 1998, the Financial Accounting Standards Board ("FASB") 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.
Year 2000 Issues
- ------------------
The Year 2000 issue relates to computer programs that use only two digits
to identify a year in the date field. Unless corrected, these programs could
read the year 2000 as the year 1900 and likely would adversely affect any number
of calculations that are made using the date field. Financial institutions are
highly computerized organizations and the Year 2000 issue represents a
significant risk to the industry. The Company faces the same risks as the
industry. The failure of a major loan or deposit system due to the Year 2000
issue could result in interest and balances being calculated inaccurately. Such
failures could have a significant impact on a financial institution's operations
and liquidity.
Management has a Year 2000 Committee, which reports to the Board,
responsible for assessing progress in the Company's plans to minimize the
effects of the Year 2000 issue. In its assessment of the Year 2000 issue, the
committee identified five major phases: Awareness, Assessment, Renovation,
Validation and Implementation.
The awareness phase is a continuing effort to educate employees, customers,
business partners and vendors of the impact of the Year 2000 issue. The effort
is well under way through communication with the appropriate constituencies and
training for all employees. During the assessment phase, which was completed by
March 31, 1998, a detailed list was compiled of all vendors, hardware, software,
and equipment owned or used by the Company. Each item was assigned a priority
based on its importance to the operations of the Company and the risk associated
with non-compliance. All manufacturers, software providers and vendors were
requested to provide information relating to the readiness of their product or
process for the Year 2000. The mission critical areas were identified as the
third party data processor, the loan documentation and compliance software, the
new accounts platform software, the proof machines, the microfilmer and fische
reader and the security system. The Company has also assessed non-information
technology systems, including the alarm systems of the Company.
7
<PAGE>
The validation phase consisted of testing all mission critical hardware and
software for Year 2000 readiness. Validation of the core banking systems has
been completed. Test transactions were processed on loan and deposit accounts
to validate the accuracy of the Company's third party data processing service
provider. Validation tests were also run on the loan and compliance software
and the Federal Reserve Bank FedLine system. All tests were successful and no
Year 2000 problems were indicated. Contingency planning for all mission
critical functions was completed in June 1999.
Of concern to management is the amount of funds which may be necessary to
have in the Bank and the ATM at the end of 1999 in the event customers desire to
withdraw extra cash. The Company is currently working to estimate the most
likely level of cash requirements, the source of these funds, and the required
level of security and insurance for the additional cash. It may be necessary to
build significant levels of cash at the end of 1999 which could reduce earning
assets or increase borrowings for a period of time, thereby negatively affecting
earnings. In addition, it may be necessary to purchase commitments from current
cash sources to guarantee funds availability and to purchase commitments from
vendors who transport cash.
Another concern is the preparedness of the Bank's customers for the Year
2000 issue. For example, commercial loan customers may be unable to repay their
loans from the Bank if their business is negatively impacted by the Year 2000
issue. Management continues to attempt to address this issue by educating its
customers as to the possible consequences of not being prepared for the Year
2000 issue. In addition, loan underwriting for the past year has included
issues relating to the customers' preparedness for the Year 2000 and their
reliance on computers in their business operations.
The Company's total costs associated with the Year 2000 issue will
primarily include the costs incurred to upgrade the existing software and
hardware not currently Year 2000 compliant. The Company expects that these
costs will be incurred in the normal course of business as software and hardware
is ordinarily upgraded to keep pace with technological advances. The Company
estimates that $1,000 has been spent to date which could be related to the Year
2000 issue. The Company does not track internal costs for personnel devoted to
the Year 2000 issue; however, one individual has spent significant time on the
project and many individuals have spent numerous hours working on the Year 2000
issue.
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 $14,887 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.
8
<PAGE>
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.
None.
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, 1999.
ITEM 5. OTHER INFORMATION.
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits.
11.1 Computation of Earnings Per Share.
27.1 Financial Data Schedule (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, 1999.
9
<PAGE>
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 10, 1999 By: /s/ R. Michael S. Menzies, Sr.
--------------------- -------------------------------
R. Michael S. Menzies, Sr.
President
Date: November 10, 1999 By: /s/ Pamela A. Mussenden
--------------------- ---------------------------
Pamela A. Mussenden
Assistant Treasurer
(Principal Financial Officer)
10
<PAGE>
INDEX TO EXHIBITS
Exhibit Sequential
Number Description Page Number
- ------ ------------------------------------------------- ------------
11.1 Computation of Earnings Per Share.
27.1 Financial Data Schedule (for SEC use only).
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT 11.1
EASTON BANCORP, INC.
COMPUTATION OF EARNINGS PER SHARE
QUARTER ENDED SEPTEMBER 30, 1999
Three Months Nine Months
Ended Ended
September 30, 1999 September 30, 1999
------------------- -------------------
<S> <C> <C>
Net income $ 284,872 $ 398,868
=================== ===================
Average shares outstanding 560,318 560,318
Basic earnings per share $ 0.51 $ 0.71
=================== ===================
Average shares outstanding 560,318 560,318
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 $ 12.33
Less: Treasury stock purchased with assumed
proceeds from exercise of warrants and options
166,240 168,486
Adjusted average shares-diluted 601,878 599,632
Diluted earnings per share $ 0.47 $ 0.67
=================== ===================
</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.
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 1109612
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 2142836
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 4493924
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 42475138
<ALLOWANCE> 663348
<TOTAL-ASSETS> 52748440
<DEPOSITS> 46128114
<SHORT-TERM> 71215
<LIABILITIES-OTHER> 163685
<LONG-TERM> 1578687
0
0
<COMMON> 56032
<OTHER-SE> 4750707
<TOTAL-LIABILITIES-AND-EQUITY> 52748440
<INTEREST-LOAN> 2666879
<INTEREST-INVEST> 201346
<INTEREST-OTHER> 119141
<INTEREST-TOTAL> 2987366
<INTEREST-DEPOSIT> 1289016
<INTEREST-EXPENSE> 1354015
<INTEREST-INCOME-NET> 1633351
<LOAN-LOSSES> (98547)
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 1333028
<INCOME-PRETAX> 605435
<INCOME-PRE-EXTRAORDINARY> 605435
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 398868
<EPS-BASIC> .71
<EPS-DILUTED> .67
<YIELD-ACTUAL> 4.14
<LOANS-NON> 229789
<LOANS-PAST> 29031
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 516531
<ALLOWANCE-OPEN> 530000
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<ALLOWANCE-DOMESTIC> 663348
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 663348
<PAGE>
</TABLE>
