<PAGE>
UNITED STATES
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 the Quarterly Period Ended March 31, 2000
Commission File No. 0-20293
UNION BANKSHARES CORPORATION
(Exact name of registrant as specified in its charter)
Virginia 54-1598552
(State of Incorporation) (I.R.S. Employer Identification No.)
212 North Main Street
P.O. Box 446
Bowling Green, Virginia 22427
(Address of principal executive offices)
(804) 633-5031
(Registrant's telephone number)
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: COMMON
STOCK, $2 PAR VALUE
Union Bankshares Corporation (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
--------------- ---------------
As of April 10, 2000, Union Bankshares Corporation had 7,499,242 shares
of Common Stock outstanding.
<PAGE>
UNION BANKSHARES CORPORATION
FORM 10-Q
March 31, 2000
INDEX
-----
<TABLE>
<CAPTION>
PART 1 - FINANCIAL INFORMATION Page
----
Item 1 - Financial Statements
<S> <C>
Consolidated Balance Sheets as of March 31, 2000 and 1999 (Unaudited)
and December 31, 1999 (Audited) ........................................................................... 1
Consolidated Statements of Income
for the three months ended March 31, 2000 and 1999 (Unaudited) ............................................ 2
Consolidated Statements of Changes in Shareholders' Equity
For the three months ended March 31, 2000 and 1999 (Unaudited) ............................................ 3
Consolidated Statements of Cash Flows for the
three months ended March 31, 2000 and 1999 (Unaudited) .................................................... 4
Notes to Consolidated Financial Statements (Unaudited) ......................................................... 5-8
Item 2 - Management's Discussion and Analysis of
Financial Condition and Results of Operations ........................................................ 9-16
Item 3 - Quantitative and Qualitative Disclosures about Market Risk .................................................. 17
PART II - OTHER INFORMATION
Item 6 - Exhibits and Reports on Form 8-K ............................................................................ 18
Signatures ........................................................................................................... 19
Index to Exhibits .................................................................................................... 20
</TABLE>
2
<PAGE>
PART 1 - FINANCIAL INFORMATION
Item 1. Financial Statements
UNION BANKSHARES CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets
(dollars in thousands)
<TABLE>
<CAPTION>
March 31, December 31, March 31,
ASSETS 2000 1999 1999
- -------- ---- ---- ----
(Unaudited) (Unaudited)
<S> <C> <C> <C>
Cash and cash equivalents:
Cash and due from banks $ 19,967 $ 18,804 $ 23,738
Interest-bearing deposits in other banks 565 867 2,315
Federal funds sold 76 248 9,916
--------------- -------------- --------------
Total cash and cash equivalents 20,608 19,919 35,969
--------------- -------------- --------------
Securities available for sale, at fair value 213,660 201,721 193,859
Investment securities
fair value of $8,701, $9,518 and $13,106, respectively 8,761 9,578 12,873
--------------- -------------- --------------
Total securities 222,421 211,299 206,732
--------------- -------------- --------------
Loans held for sale 6,572 6,680 15,209
Loans, net of unearned income 570,484 543,367 479,971
Less allowance for loan losses 7,044 6,617 6,708
--------------- -------------- --------------
Net loans 563,440 536,750 473,263
--------------- -------------- --------------
Bank premises and equipment, net 21,208 21,458 22,520
Other real estate owned 1,889 2,016 912
Other assets 24,042 23,705 25,413
--------------- -------------- --------------
Total assets $ 860,180 $ 821,827 $ 780,018
=============== ============== ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Noninterest-bearing demand deposits $ 88,318 $ 79,048 $ 80,410
Interest-bearing deposits:
Savings accounts 58,767 58,209 59,029
NOW accounts 100,875 95,882 85,914
Money market accounts 62,323 63,249 63,439
Time deposits of $100,000 and over 106,893 107,654 95,687
Other time deposits 248,912 242,824 234,120
--------------- -------------- --------------
Total interest-bearing deposits 577,770 567,818 538,189
--------------- -------------- --------------
Total deposits 666,088 646,866 618,599
--------------- -------------- --------------
Short-term borrowings 36,860 39,159 17,269
Long-term borrowings 80,778 54,420 47,220
Other liabilities 5,999 12,588 22,189
--------------- -------------- --------------
Total liabilities 789,725 753,033 705,277
--------------- -------------- --------------
Stockholders' equity:
Common stock, $2 par value. Authorized 24,000,000 shares;
issued and outstanding, 7,494,202, 7,487,829 and 7,530,356 shares,
respectively 14,988 14,976 15,061
Surplus 248 163 599
Retained earnings 60,025 58,603 57,537
Accumulated other comprehensive income (losses) (4,806) (4,948) 1,544
--------------- -------------- --------------
Total stockholders' equity 70,455 68,794 74,741
--------------- -------------- --------------
Total liabilities and stockholders' equity $ 860,180 $ 821,827 $ 780,018
=============== ============== ==============
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE>
UNION BANKSHARES CORPORATION AND SUBSIDIARIES
Consolidated Statements of Income (Unaudited)
(dollars in thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Ended
March 31
-------------------------------
2000 1999
---- ----
<S> <C> <C>
Interest income:
Interest and fees on loans $ 11,898 $ 10,318
Interest on securities:
Non taxable 1,245 1,062
Taxable 2,188 1,548
Interest on Federal funds sold 19 59
Interest on interest-bearing deposits in other banks 16 28
------------- --------------
Total interest income 15,366 13,015
------------- --------------
Interest expense:
Interest on deposits 6,029 5,678
Interest on short term borrowings 517 152
Interest on long term borrowings 1,058 453
------------- --------------
Total interest expense 7,604 6,283
------------- --------------
Net interest income 7,762 6,732
Provision for loan losses 564 762
------------- --------------
Net interest income after provision
for loan losses 7,198 5,970
------------- --------------
Noninterest income:
Service charges on deposit accounts 806 692
Other service charges and fees 484 393
Gains on securities transactions, net 22 19
Gains on sales of loans 1,045 2,476
Gains (losses) on sales of other real estate owned
and bank premises, net 5 (2)
Other operating income 99 85
------------- --------------
Total noninterest income 2,461 3,663
------------- --------------
Noninterest expenses:
Salaries and benefits 4,643 4,508
Occupancy expenses 607 396
Furniture and equipment expenses 731 464
Other operating expenses 2,126 1,992
------------- --------------
Total noninterest expenses 8,107 7,360
------------- --------------
Income before income taxes 1,552 2,273
Income tax expense 131 458
------------- --------------
Net income $ 1,421 $ 1,815
============= ==============
Basic net income per share $ 0.19 $ 0.24
============= ==============
Diluted net income per share $ 0.19 $ 0.24
============= ==============
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE>
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
UNION BANKSHARES CORPORATION AND SUBSIDIARIES
THREE MONTHS ENDED MARCH 31, 2000 AND 1999
(dollars in thousands)
<TABLE>
<CAPTION>
Shares Common
Outstanding Stock Surplus
----------- ----- -------
<S> <C> <C> <C>
Balance - December 31, 1998 7,507,394 $ 15,015 $ 311
Comprehensive income:
Net income - 1999
Other comprehensive income net of tax:
Unrealized holding losses arising during the period (net of tax, $297 )
Less reclassification adjustment (net of tax, $6)
Other comprehensive income (net of tax, $291 )
Total comprehensive income
Stock repurchased under Stock Repurchase Plan (38,928 shares) (38,928) (77) (593)
Issuance of common stock under Incentive Stock Option Plan (400 shares) 400 1 4
Issuance of common stock in exchange for net assets in acquisition
(61,490 shares) 61,490 122 877
----------------------------
Balance - March 31, 1999 7,530,356 $ 15,061 $ 599
============================
Balance - December 31, 1999 7,487,829 $ 14,976 $ 163
Comprehensive income:
Net income - 2000
Other comprehensive income net of tax:
Unrealized holding gains arising during the period (net of tax, $84 )
Less reclassification adjustment (net of tax, $7)
Other comprehensive income (net of tax, $ 73 )
Total comprehensive income
Stock repurchased under Stock Repurchase Plan (11,300 shares) (11,300) (23) (116)
Issuance of common stock in exchange for net assets in acquisition (17,673 shares) 17,673 35 201
----------------------------
Balance - March 31, 2000 7,494,202 $ 14,988 $ 248
============================
</TABLE>
<TABLE>
<CAPTION>
Accumulated
Other
Retained Comprehensive Comprehensive
Earnings Income (Loss) Income (Loss)
-------- ------------- -------------
<S> <C> <C> <C>
Balance - December 31, 1998 $ 55,690 $ 2,343
Comprehensive income:
Net income - 1999 1,815 $ 1,815
Other comprehensive income net of tax:
Unrealized holding losses arising during the period (net of tax, $297 ) (786)
Less reclassification adjustment (net of tax, $6) (13)
----------------
Other comprehensive income (net of tax, $291 ) (799) (799)
----------------
Total comprehensive income $ 1,016
================
Stock repurchased under Stock Repurchase Plan (38,928 shares) -
Issuance of common stock under Incentive Stock Option Plan (400 shares) -
Issuance of common stock in exchange for net assets in acquisition (61,490 shares) 32
----------------------------
Balance - March 31, 1999 $ 57,537 $ 1,544
============================
Balance - December 31, 1999 $ 58,603 $ (4,948)
Comprehensive income:
Net income - 2000 1,421 $ 1,421
Other comprehensive income net of tax:
Unrealized holding gains arising during the period (net of tax, $84 ) 157
Less reclassification adjustment (net of tax, $7) (15)
----------------
Other comprehensive income (net of tax, $ 73 ) 142 142
----------------
Total comprehensive income $ 1,563
================
Stock repurchased under Stock Repurchase Plan (11,300 shares) 1
Issuance of common stock in exchange for net assets in acquisition (17,673 shares)
----------------------------
Balance - March 31, 2000 $ 60,025 $ (4,806)
============================
</TABLE>
<TABLE>
<CAPTION>
Total
-----
<S> <C>
Balance - December 31, 1998 $ 73,359
Comprehensive income:
Net income - 1999 1,815
Other comprehensive income net of tax:
Unrealized holding losses arising during the period (net of tax, $297 )
Less reclassification adjustment (net of tax, $6)
Other comprehensive income (net of tax, $291 ) (799)
Total comprehensive income
Stock repurchased under Stock Repurchase Plan (38,928 shares) (670)
Issuance of common stock under Incentive Stock Option Plan (400 shares) 5
Issuance of common stock in exchange for net assets in acquisition (61,490 shares) 1,031
--------------
Balance - March 31, 1999 $ 74,741
==============
Balance - December 31, 1999 $ 68,794
Comprehensive income:
Net income - 2000 1,421
Other comprehensive income net of tax:
Unrealized holding gains arising during the period (net of tax, $84 )
Less reclassification adjustment (net of tax, $7)
Other comprehensive income (net of tax, $ 73 ) 142
Total comprehensive income -
Stock repurchased under Stock Repurchase Plan (11,300 shares) (138)
Issuance of common stock in exchange for net assets in acquisition (17,673 shares) 236
-------------
Balance - March 31, 2000 $ 70,455
=============
</TABLE>
<PAGE>
UNION BANKSHARES CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows (Unaudited)
Three Months Ended March 31, 2000 and 1999
(dollars in thousands)
<TABLE>
<CAPTION>
2000 1999
---- ----
<S> <C> <C>
Operating activities:
Net income $ 1,421 $ 1,815
Adjustments to reconcile net income to net cash and
cash equivalents used in operating activities:
Depreciation of bank premises and equipment 462 401
Amortization 172 365
Provision for loan losses 564 762
(Gains) on sales of securities available for sale (22) (19)
(Gains) losses on sale of other real estate owned
and fixed assets, net (5) 2
(Increase) decrease in loans held for sale 108 (18,852)
(Increase) decrease in other assets (258) (1,089)
Increase (decrease) in other liabilities (6,660) 17,272
------------ ------------
Net cash and cash equivalents used in
operating activities (4,218) 657
------------ ------------
Investing activities:
Net increase in securities (10,910) (30,411)
Net increase in loans (27,315) (610)
Acquisition of bank premises and equipment (379) (1,864)
Proceeds from sales of bank premises and equipment 181 -
Proceeds from sales of other real estate owned 187 190
------------ ------------
Net cash and cash equivalents used in
investing activities (38,236) (32,695)
------------ ------------
Financing activities:
Net increase (decrease) in noninterest-bearing deposits 9,270 (919)
Net increase in interest-bearing deposits 9,952 11,889
Net (decrease) in short-term borrowings (2,299) (2,207)
Proceeds from long-term borrowings 26,500 18,925
Repurchase of common stock (138) (671)
Repayment of long-term borrowings (142) (30)
------------ ------------
Net cash and cash equivalents provided by
financing activities 43,143 26,987
------------ ------------
Increase (decrease) in cash and cash equivalents 689 (5,051)
Cash and cash equivalents at beginning of period 19,919 41,020
------------ ------------
Cash and cash equivalents at end of period $ 20,608 $ 35,969
============ ============
Supplemental Disclosure of Cash Flow Information
Cash payments for:
Interest 7,406 6,131
Income taxes - 802
</TABLE>
See accompanying notes to consolidated financial statements.
6
<PAGE>
UNION BANKSHARES CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited)
March 31, 2000
1. ACCOUNTING POLICIES
-------------------
The consolidated financial statements include the accounts of Union
Bankshares Corporation and its subsidiaries (the "Company"). Significant
intercompany accounts and transactions have been eliminated in
consolidation.
The information contained in the financial statements is unaudited and
does not include all of the information and footnotes required by
generally accepted accounting principles for complete financial
statements. However, in the opinion of management, all adjustments
(consisting only of normal recurring accruals) necessary for a fair
presentation of the results of the interim periods presented have been
made. Operating results for the three month period ended March 31, 2000
are not necessarily indicative of the results that may be expected for the
year ending December 31, 2000.
These financial statements should be read in conjunction with the
consolidated financial statements and notes thereto included in the
Company's 1999 Annual Report to Shareholders. Certain previously reported
amounts have been reclassified to conform to current period presentation.
2. ALLOWANCE FOR LOAN LOSSES
-------------------------
The following summarizes activity in the allowance for loan losses for the
three months ended March 31, (in thousands):
2000 1999
---- ----
Balance, January 1 $ 6,617 $ 6,407
Provisions charged to operations 564 762
Recoveries credited to allowance 74 87
Loans charged off (211) (548)
------- -------
Balance, March 31 $ 7,044 $ 6,708
======= =======
7
<PAGE>
3. Earnings Per Share
------------------
Basic earnings per share (EPS) is computed by dividing net income by the
weighted average number of shares outstanding during the period. Weighted
average shares used for the computation of basic EPS were 7,494,470 and
7,528,729 for the three months ended March 31, 2000 and 1999. Diluted EPS
is computed using the weighted number of common shares outstanding during
the period, including the effect of dilutive potential common shares
outstanding attributable to stock options. Weighted average shares used
for the computation of diluted EPS were 7,499,214 and 7,645,214 for the
three months ended March 31, 2000 and 1999.
4. SEGMENT REPORTING DISCLOSURES
-----------------------------
Union Bankshares Corporation has two reportable segments: its traditional
full service community banks and its mortgage loan origination business.
The community bank business includes four banks, which provide loan,
deposit, investment, and trust services to retail and commercial customers
throughout their locations in Virginia. Through its mortgage subsidiary,
the Company provides a variety of mortgage loan products in a multi-state
market. These loans are originated and sold principally in the secondary
market through purchase commitments from investors, which subject the
company to only de minimis market risk.
Profit and loss is measured by net income after taxes including realized
gains and losses on the Company's investment portfolio. The accounting
policies of the reportable segments are the same as those described in the
summary of significant accounting policies. Intersegment transactions are
recorded at cost and eliminated as part of the consolidation process.
Both of the Company's reportable segments are service based. While the
banks offer a distribution and referral network for the mortgage services,
the mortgage company does not offer a similar network for the banks due
largely to the lack of overlapping geographic markets. Another major
distinction is the source of income. The mortgage business is a fee based
business while the banks are driven principally by net interest income.
Information about reportable segments and reconciliation of such
information to the consolidated financial statements as of March 31, 2000
and March 31, 1999 follows:
8
<PAGE>
<TABLE>
<CAPTION>
Three Months ended March 31, 2000
(dollars in thousands) Banks Mortgage Other Elimination Consolidated Totals
<S> <C> <C> <C> <C> <C>
Net interest income $ 7,791 $ 63 $ (92) $ - $ 7,762
Provision for loan losses 564 564
Net interest income after provision for loan losses 7,227 63 (92) 7,198
Noninterest income 1,152 1,045 1,788 (1,524) 2,461
Noninterest expense 5,632 2,072 1,927 (1,524) 8,107
Income before taxes 2,747 (964) (231) - 1,552
Income taxes (benefits) 527 (328) (68) - 131
--------------------------------------------------------------------------
Net income (loss) $ 2,220 $ (636) $ (163) $ - $ 1,421
==========================================================================
Assets $853,823 $ 7,373 $ 74,951 $ (75,967) $ 860,180
==========================================================================
</TABLE>
The following summary reconciles segment profit (loss) to income after taxes
(dollars in thousands):
Net Income
Segment profit $ 1,584
Other subsidiary 37
Parent (200)
Intersegment profit elimination -
--------------
Net Income $ 1,421
==============
<TABLE>
<CAPTION>
Three Months ended March 31, 1999
(dollars in thousands) Banks Mortgage Other Elimination Consolidated Totals
<S> <C> <C> <C> <C> <C>
Net interest income $ 6,761 $ - $ (29) $ - $ 6,732
Provision for loan losses 762 762
Net interest income after provision for loan losses 5,999 - (29) 5,970
Noninterest income 1,007 2,352 304 - 3,663
Noninterest expense 4,908 1,771 681 - 7,360
Income before taxes 2,098 581 (406) - 2,273
Income taxes (benefits) 413 177 (132) - 458
--------------------------------------------------------------------------
Net income (loss) $ 1,685 $ 404 $ (274) $ - $ 1,815
==========================================================================
Assets $770,549 $ 23,452 $ 84,254 $ (98,237) $ 780,018
==========================================================================
</TABLE>
The following summary reconciles segment profit (loss) to income after taxes
(dollars in thousands):
Net Income
Segment profit $ 2,089
Other subsidiary (4)
Parent (270)
Intersegment profit elimination -
--------------
Net Income $ 1,815
==============
<PAGE>
5. RECENT ACCOUNTING STATEMENTS
----------------------------
In June 1998 the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 133, "Accounting
for Derivative Instruments and Hedging Activities", which establishes
accounting and reporting standards for derivative instruments and for
hedging activities. It requires that a company recognize all derivative
instruments as either assets or liabilities in the consolidated balance
sheet and measure those instruments at fair value. The accounting for
changes in the fair value of a derivative depends on the intended use of
the derivative and the resulting designation. In June of 1999 the FASB
issued SFAS 137, "Accounting for derivative instruments hedging
activities--deferral of the effective date of FASB Statement 133". SFAS
137 delayed the effective date of SFA3133 until fiscal years beginning
after June 15, 2000. As such, the effective date for the Company will be
January 1, 2001. The impact of adopting SFAS 133 will be dependent on the
specific derivative instruments in place at the date of adoption. At this
time management believes the adoption of this new standard will not have a
material impact on the financial condition or results of operations of the
Company.
6. FORWARD-LOOKING STATEMENTS
--------------------------
Certain statements in this report may constitute "forward-looking
statements" within the meaning of the Private Securities Litigation Reform
Act of 1995. Although the Company believes that its expectations with
respect to certain forward-looking statements are based upon reasonable
assumptions within the bounds of its knowledge of its business and
operations, there can be no assurance that actual results, performance or
achievements of the Company will not differ materially from any future
results, performance or achievements expressed or implied by such
forward-looking statements.
10
<PAGE>
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Union Bankshares Corporation (the "Company") is a multi-bank holding
company organized under Virginia law which provides financial services through
its wholly-owned subsidiaries, Union Bank & Trust Company, Northern Neck State
Bank, Rappahannock National Bank, the Bank of Williamsburg, Union Investment
Services, Inc., and Mortgage Capital Investors, Inc. The four subsidiary banks,
Union Bank & Trust Company, Northern Neck State Bank, Rappahannock National Bank
and the Bank of Williamsburg are full service retail commercial banks offering a
wide range of banking and related financial services, including demand and time
deposits, as well as commercial, industrial, residential construction,
residential mortgage and consumer loans. Union Investment Services Inc., is a
full service discount brokerage company, which offers a full range of investment
services and sells mutual funds, bonds and stocks. Mortgage Capital Investors,
Inc. provides a wide array of mortgage products through its 13 offices in
Virginia, Maryland, New Jersey, Connecticut, and South Carolina.
The Company's primary trade area stretches from Rappahannock County to
Fredericksburg, south to Hanover County, east to Williamsburg and throughout the
Northern Neck area of Virginia. The Corporate Headquarters is located in Bowling
Green, Virginia. Through its banking subsidiaries, the Company operates 29
branches in its primary trade area. In addition to the primary banking trade
area, Mortgage Capital Investors, Inc. expands the Company's mortgage
origination business to four additional states.
In February 1999 the Company opened the Bank of Williamsburg in temporary
headquarters in the Williamsburg Crossing Shopping Center. In March 2000 the
Bank of Williamsburg moved into its permanent location at 5125 John Tyler
Parkway, which should enhance its continued growth in this community. Deposits
have increased significantly since the move, and we expect this bank to achieve
monthly profitability during the fourth quarter of 2000. In addition, the
company's mortgage subsidiary, Mortgage Capital Investors Inc., has opened a
Williamsburg office in the space formerly occupied by the Bank.
Management's discussion and analysis is presented to aid the reader in
understanding and evaluating the financial condition and results of operations
of the Company. The analysis focuses on the consolidated financial statements,
the footnotes thereto, and the other financial data herein. Highlighted in the
discussion are material changes from prior reporting periods and any
identifiable trends affecting the Company. Amounts are rounded for presentation
purposes, while the percentages presented are computed based on unrounded
amounts.
Results of Operations
- ---------------------
Net income for the first quarter of 2000 was $1.4 million, down from $1.8
million for the same period in 1999. The decrease in net income for the period
was caused primarily by a decrease in gains on the sale of loans of $1.4
million, which more than offsets a $1.0 million increase in net interest income.
The net interest income increase reflects the growth of the core banking
business, while the decline in the gain on sale of loans is reflective of the
effect of higher mortgage rates on mortgage loan production volumes. Also
included in net income was a decrease in the provision for loan losses of
$198,000 from the first quarter of 1999. Diluted earnings per share amounted to
$.19 in the first quarter of 2000, as compared to $.24 in the first quarter of
1999. The
11
<PAGE>
Company's annualized return on average assets for the first quarter of 2000 was
.68% as compared to .94% a year ago. The Company's annualized return on average
equity totaled 8.41% and 9.88% for the three months ended March 31, 2000 and
1999, respectively.
Net income from the Company's community banking segment increased from
approximately $1.7 million in the first quarter of 1999 to over $2.2 million in
the first quarter of 2000. Continued growth in existing markets, as well as the
performance of acquired and denovo banks and branches and previously implemented
initiatives to consolidate backoffice functions are reflected in improved
operating efficiencies and contributed to the improvement in the profitability
of the community banking segment.
Rising interest rates, coupled with continued strong loan demand and
competition for deposits, have continued to compress the net interest margin.
Deposit competition has heightened as banks, seeking to fund this loan growth,
have offered higher rates on deposits, often repricing their liabilities more
rapidly than their assets. In addition to increasing certain deposit rates to
attract deposits, the Company has also utilized Federal Home Loan Bank Advances
and other borrowings to fund this growth. Such funding is typically more
expensive than lower cost customer deposits and compresses the net interest
margin, but increases net interest income by enabling the Company to grow
earning assets.
The mortgage banking segment continued to suffer from the effects of
higher mortgage rates, the inversion in the yield curve and, in some markets,
depressed inventories of homes. Due to the decline in volumes, the mortgage
company has reduced its noncommission personnel, closed several marginal loan
production offices, and opened two loan production offices in higher volume
locations in Connecticut and New Jersey. The first quarter is typically the
slowest in the mortgage segment and the Company anticipates the mortgage segment
will return to monthly profitability during the second quarter.
Net Interest Income
Net interest income on a tax-equivalent basis for the first quarter of
2000 increased by 13.5% to $8.4 million from $7.4 million for the same period a
year ago. By managing its interest rate spread and increasing the volume of
earning assets over interest-bearing liabilities, the Company has been able to
maintain a strong net interest margin. The current interest rate environment and
competition for deposits continue to put pressure on net interest margins. In
addition, the subsidiary banks have periodically engaged in wholesale leverage
transactions, borrowing funds to invest in securities at lower margins of 150 -
200 basis points. Although such transactions increase net income and return on
equity, they do reduce the net interest margin. As of March 31, 2000 such
transactions accounted for $25 million of the Company's total borrowings. Also,
the Bank of Williamsburg, with most of its capital invested in the investment
portfolio much of 1999, contributed to the narrowed interest margin. However,
with more of its funds going into loans this year, it should begin contributing
to the margin. Average earning assets during the first quarter of 2000 increased
by $103.0 million to $777.0 million from the first quarter of 1999, while
average interest-bearing deposits grew by $40.0 million to $571.0 million over
this same period. The Company's yield on average earning assets was 8.29%, up 5
basis point from 8.24% a year ago, while its cost of average interest-bearing
liabilities increased 4 basis points from 4.42% in first quarter 1999 to 4.46%
in first quarter 2000.
12
<PAGE>
Union Bankshares Corporation
Average Balances, Income and Expenses, Yields and Rates
(Taxable Equivalent Basis)
<TABLE>
<CAPTION>
------------------------------------------------------------------
Three Months Ended March 31,
------------------------------------------------------------------
2000
------------------------------------------------------------------
Interest
Average Income/ Yield/
Balance Expense Rate
------------------------------------------------------------------
<S> <C> <C> <C>
Assets:
Securities:
Taxable ......................................... $ 119,970 $ 2,188 7.33%
Tax-exempt(1) ................................... 98,611 1,887 7.70%
---------------------------------------
Total securities .......................... 218,581 4,075 7.50%
Loans, net.............................................. 556,083 11,898 8.56%
Federal funds sold ..................................... 767 19 9.96%
Interest-bearing deposits
in other banks ................................... 1,088 16 5.91%
---------------------------------------
Total earning assets ....................... 776,519 16,008 8.29%
Allowance for loan losses ............................... (6,842)
Total non-earning assets ................................ 70,372
----------------------
Total assets ............................................ $ 840,049
======================
Liabilities & Stockholders' Equity:
Interest-bearing deposits:
Checking ......................................... 97,134 502 2.08%
Regular savings .................................. 58,689 351 2.41%
Money market savings ............................. 63,162 506 3.22%
Certificates of deposit:
$100,000 and over ................................ 103,638 1,363 5.29%
Under $100,000 ................................... 248,018 3,307 5.36%
---------------------------------------
Total interest-bearing
deposits ............................ 570,641 6,029 4.24%
Other borrowings ........................................ 114,446 1,575 5.54%
---------------------------------------
Total interest-bearing
liabilities ......................... 685,087 7,604 4.46%
-----------------
Noninterest bearing liabilities:
Demand deposits .................................. 80,440
Other liabilities ................................ 6,727
----------------------
Total liabilities .......................... 772,254
Stockholders' equity .................................... 67,795
----------------------
Total liabilities and
stockholders' equity ............................. $ 840,049
======================
Net interest income ..................................... $ 8,404
=================
Interest rate spread .................................... 3.83%
Interest expense as a percent
of average earning assets ........................ 3.94%
Net interest margin ..................................... 4.35%
</TABLE>
<TABLE>
<CAPTION>
Union Bankshares Corporation
Average Balances, Income and Expenses, Yields and Rates
(Taxable Equivalent Basis)
------------------------------------------------------------------
Three Months Ended March 31,
------------------------------------------------------------------
1999
------------------------------------------------------------------
Interest
Average Income/ Yield/
Balance Expense Rate
------------------------------------------------------------------
(Dollars in thousands)
<S> <C> <C> <C>
Assets:
Securities:
Taxable ......................................... $ 99,670 $ 1,538 6.26%
Tax-exempt(1) ................................... 85,819 1,624 7.68%
---------------------------------------
Total securities .......................... 185,489 3,162 6.91%
Loans, net.............................................. 481,763 10,444 8.79%
Federal funds sold ..................................... 4,337 57 5.33%
Interest-bearing deposits
in other banks ................................... 1,919 26 5.49%
---------------------------------------
Total earning assets ....................... 673,508 13,689 8.24%
Allowance for loan losses ............................... (6,714)
Total non-earning assets ................................ 65,129
----------------------
Total assets ............................................ $ 731,923
======================
Liabilities & Stockholders' Equity:
Interest-bearing deposits:
Checking ......................................... $ 82,283 461 2.27%
Regular savings .................................. 57,841 398 2.79%
Money market savings ............................. 64,041 515 3.26%
Certificates of deposit:
$100,000 and over ................................ 88,154 1,171 5.39%
Under $100,000 ................................... 238,686 3,133 5.32%
---------------------------------------
Total interest-bearing
deposits ............................ 531,005 5,678 4.34%
Other borrowings ........................................ 45,673 606 5.38%
---------------------------------------
Total interest-bearing
liabilities ......................... 576,678 6,284 4.42%
-----------------
Noninterest bearing liabilities:
Demand deposits .................................. 78,472
Other liabilities ................................ 3,566
----------------------
Total liabilities .......................... 658,716
Stockholders' equity .................................... 73,207
----------------------
Total liabilities and
stockholders' equity ............................. $ 731,923
======================
Net interest income ..................................... $ 7,405
=================
Interest rate spread .................................... 3.82%
Interest expense as a percent
of average earning assets ........................ 3.78%
Net interest margin ..................................... 4.46%
</TABLE>
<TABLE>
<CAPTION>
Union Bankshares Corporation
Average Balances, Income and Expenses, Yields and Rates
(Taxable Equivalent Basis)
-------------------------------------------------------
Three Months Ended March 31,
-------------------------------------------------------
1998
-------------------------------------------------------
Interest
Average Income/ Yield/
Balance Expense Rate
-------------------------------------------------------
<S> <C> <C> <C>
Assets:
Securities:
Taxable ......................................... $ 96,770 $ 1,517 6.36%
Tax-exempt(1) ................................... 71,467 1,432 8.13%
--------------------------------------
Total securities .......................... 168,237 2,949 7.11%
Loans, net.............................................. 423,812 9,531 9.12%
Federal funds sold ..................................... 10,608 116 4.43%
Interest-bearing deposits
in other banks ................................... 1,171 24 7.97%
--------------------------------------
Total earning assets ....................... 603,828 12,620 8.48%
Allowance for loan losses ............................... (4,950)
Total non-earning assets ................................ 53,679
----------------------
Total assets ............................................ $ 652,557
======================
Liabilities & Stockholders' Equity:
Interest-bearing deposits:
Checking ......................................... $ 65,037 380 2.37%
Regular savings .................................. 55,363 416 3.05%
Money market savings ............................. 57,025 490 3.48%
Certificates of deposit:
$100,000 and over ................................ 65,531 896 5.55%
Under $100,000 ................................... 208,882 2,904 5.64%
--------------------------------------
Total interest-bearing
deposits ............................ 451,838 5,086 4.56%
Other borrowings ........................................ 56,645 735 5.26%
--------------------------------------
Total interest-bearing
liabilities ......................... 508,483 5,821 4.64%
----------------
Noninterest bearing liabilities:
Demand deposits .................................. 69,469
Other liabilities ................................ 4,914
----------------------
Total liabilities .......................... 582,866
Stockholders' equity .................................... 69,691
----------------------
Total liabilities and
stockholders' equity ............................. $ 652,557
======================
Net interest income ..................................... $ 6,799
================
Interest rate spread .................................... 3.84%
Interest expense as a percent
of average earning assets ........................ 3.91%
Net interest margin ..................................... 4.57%
</TABLE>
(1) Income and yields are reported on a taxable equivalent basis.
13
<PAGE>
Provision for Loan Losses
The provision for loan losses totaled $564,000 for the first quarter of
2000, down from $762,000 for the first quarter of 1999. The provision for loan
losses for the first quarter of 1999 included $350,000 related to a single
credit relationship. These provisions reflect the performance of the loan
portfolio and management's assessment of the credit risk in the portfolio. (See
Asset Quality)
Noninterest Income
Noninterest income for the three months ended March 31, 2000 totaled
$2.5 million, down from $3.7 million for the same period a year ago. This
decrease is due principally to the decrease in income from gains on sales of
loans in the mortgage banking segment totaling $1.0 million for the first
quarter versus $2.5 million for the first three months of 1999. All other
categories of noninterest income for first quarter 2000 increased over the same
period in 1999 with deposit service charges up $114,000 and other service
charges and fees up $91,000, reflecting deposit growth and initiatives to
enhance fee income. Management continues to seek additional sources of
noninterest income, including increased emphasis on cross-selling services and
better leveraging the financial services available throughout the organization.
Noninterest Expense
Noninterest expense in the first quarter of 2000 totaled $8.1 million, an
increase of $747,000 over the same period in 1999. Personnel costs comprised
$135,000 of the increase and includes a decline of $141,000 for the mortgage
banking segment. Occupancy expense was up $211,000 and furniture & equipment
expense was up $267,000 over last year's first quarter. These increases reflect
a full quarter of expenses in 2000 for MCI (acquired February 10, 1999) and
depreciation expenses for major technology investments made in the second and
third quarters of 1999.
Financial Condition
- -------------------
Total assets as of March 31, 2000 were $860.2 million, an increase of
10.3% from $780.0 million at March 31, 1999. Asset growth was fueled by loan
growth, as loans totaled $570.5 million at March 31, 2000, an increase of 18.9%
from $480.0 million at March 31, 1999. Stockholders' equity totaled $70.5
million at March 31, 2000, which represents a book value of $9.40 per share.
14
<PAGE>
Deposit growth was strong as the banks continued to increase market
share but was outpaced by the loan growth. Total deposits at March 31, 2000 were
$666.1 million, up 7.7% from $618.6 million at March 31, 1999. Other borrowings
totaled $117.6 million at March 31, 2000, an 82.3% increase over $64.5 million
at March 31, 1999. As a result, the Company utilizes other borrowings to fund
the excess growth; compressing the net interest margin but increasing net
interest income. The Company also, periodically engages in wholesale leverage
transactions to better leverage its strong capital position The increases in
other borrowings reflect about $25 million in leverage transactions over the
last five quarters. These wholesale leverage transactions have typically been
executed at spreads of approximately 150 to 200 basis points and, although they
have negatively impacted the Company's net interest margin (as a percentage),
they have had a positive effect on earnings and return on equity.
Continued competition for deposits, particularly as it impacts
certificate of deposit rates, is reflected in the deposit mix. Management
continues to focus on increasing lower cost deposit products, including
noninterest bearing demand deposits and savings accounts and effective
management of competitive rates on interest sensitive products. Increased
competition for funds by banks seeking to fund strong loan growth and by
non-banks, continues to contribute to a narrowing of the net interest margin,
which has been largely offset by increases in the volume of earning assets.
Asset Quality
- -------------
The allowance for loan losses is an estimate of an amount adequate to
provide for potential losses in the loan portfolio. General economic trends as
well as conditions affecting individual borrowers affect the level of credit
losses. The allowance is also subject to regulatory examinations and
determination as to adequacy, which may take into account such factors as the
methodology used to calculate the allowance and comparison to peer groups.
The allowance for loan losses totaled $7.0 million at March 31, 2000 or
1.23% of total loans, as compared to 1.22% at December 31, 1999 and 1.40% at
March 31, 1999.
March 31, December 31, March 31,
2000 1999 1999
--------------------------------------------
(dollars in thousands)
Non-accrual loans $1,208 $1,487 $3,063
Foreclosed properties 1,889 2,016 1,601
------ ------ ------
Non-performing assets $3,097 $3,503 $4,664
====== ====== ======
Allowance for loan losses $7,044 $6,617 $6,708
Allowance as % of total
loans 1.23% 1.22% 1.40%
Non-performing assets to
loans and foreclosed
properties .54% .64% .97%
At March 31, 1999, the allowance for loan losses included reserves of
approximately $1.4 million related to a single credit relationship totaling
approximately $1.8 million. Management has previously restructured this credit
with the borrowers in an attempt to work out repayment of this debt, but
collection is uncertain and accordingly, in late 1999 $1.1 million of this
credit was charged off against previously established reserves.
15
<PAGE>
Capital Resources
- -----------------
Capital resources represent funds, earned or obtained, over which financial
institutions can exercise greater or longer control in comparison with deposits
and borrowed funds. The adequacy of the Company's capital is reviewed by
management on an ongoing basis with reference to the size, composition, and
quality of the Company's resources and consistency with regulatory requirements
and industry standards. Management seeks to maintain a capital structure that
will assure an adequate level of capital to support anticipated asset growth and
absorb potential losses.
The Federal Reserve, along with the Comptroller of the Currency and the
Federal Deposit Insurance Corporation, has adopted capital guidelines to
supplement the existing definitions of capital for regulatory purposes and to
establish minimum capital standards. Specifically, the guidelines categorize
assets and off-balance sheet items into four risk-weighted categories. The
minimum ratio of qualifying total assets is 8.0%, of which 4.0% must be Tier 1
capital, consisting of common equity and retained earnings, less certain
goodwill items.
At March 31, 2000, the Company's ratio of total capital to risk-weighted
assets was 12.05% and its ratio of Tier 1 capital to risk-weighted assets was
10.93%. Both ratios exceed the fully phased-in capital requirements. The
following summarizes the Company's regulatory capital and related ratios at
March 31, 2000 (dollars in thousands):
Tier 1 capital $ 68,827
Tier 2 capital $ 7,044
Total risk-based capital $ 75,871
Total risk-weighted assets $630,076
Capital Ratios:
Tier 1 risk-based capital ratio 10.93%
Total risk-based capital ratio 12.05%
Leverage ratio (Tier I capital to
average adjusted total assets) 8.26%
Equity to assets ratio 8.18%
The Company's book value per share at March 31, 2000 was $9.40.
Dividends to stockholders are typically declared and paid semi-annually in June
and December.
Liquidity
- ---------
Liquidity represents an institution's ability to meet present and
future financial obligations through either the sale or maturity of existing
assets or the acquisition of additional funds through liability management.
Liquid assets include cash, interest bearing deposits with banks, federal funds
sold, investments (available for sale) and loans maturing within one year. The
Company's ability to obtain deposits and purchase funds at favorable rates
determines its liability liquidity. Additional sources of liquidity available to
the Company include its capacity to borrow additional funds when necessary
through Federal funds lines with several regional banks and a line of credit
with the Federal Home Loan Bank. Management considers the Company's overall
liquidity to be sufficient to satisfy its depositors' requirements and to meet
its customers' credit needs.
16
<PAGE>
At March 31, 2000 cash, interest-bearing deposits in other banks,
federal funds sold, securities available for sale and loans maturing or
repricing in one year were 21.5% of total earning assets. At March 31, 2000
approximately $145.2 million or 25.4% of total loans would mature or reprice
within the next year. The Company utilizes federal funds purchased, FHLB
advances, securities sold under agreements to repurchase and customer repurchase
agreements, in addition to deposits, to fund the growth in its loan portfolio,
and to fund securities purchases, periodically in wholesale leverage
transactions.
17
<PAGE>
The following table presents the Company's interest sensitivity position at
March 31, 2000. This one-day position, which is continually changing, is not
necessarily indicative of the Company's position at any other time.
<TABLE>
<CAPTION>
Interest Sensitivity Analysis
March 31, 2000
-----------------------------------------------------
Within 90-365
90 Days Days
-------------------- --------------------
(In thousands)
Earning Assets:
<S> <C> <C>
Loans, net of unearned income (3) ............. $ 113,666 $ 31,492
Investment securities ......................... 1,730 - 1,913
Securities available for sale.................. 197 4,276
Federal funds sold ............................ 76 -
Other short-term investments .................. 565 -
Total earning assets .......................... 116,234 37,681
-------------------- --------------------
Interest-Bearing Liabilities:
Interest checking (2) ......................... $ - $ -
Regular savings (2) ........................... - -
Money market savings .......................... - 62,323
Certificates of deposit:
$100,000 and over ............ 31,206 47,430
Under $100,000 ............... 39,965 128,535
Short-term borrowings.......................... 36,860 -
Long-term borrowings .......................... 6,500 150
Total interest-bearing liabilities ............ 114,531 238,438
-------------------- --------------------
Period gap .................................... 1,703 (200,757)
Cumulative gap ................................ 1,703 (199,054)
==================== ====================
Ratio of cumulative gap to
total earning assets ......... 0.21% -25.08%
==================== ====================
</TABLE>
<TABLE>
<CAPTION>
Interest Sensitivity Analysis
March 31, 2000
-----------------------------------------------------
1-5 Over
Years 5 Years
----------- ------------
(In thousands)
Earning Assets:
<S> <C> <C> <C> <C>
Loans, net of unearned income (3) ............. $ - $ 266,535 $ - $ 158,791
Investment securities ......................... - 3,452 - 1,666
Securities available for sale.................. - 96,330 - 112,857
Federal funds sold ............................ - - - -
Other short-term investments .................. - - - -
Total earning assets .......................... 366,317 273,314
-------------------- --------------------
Interest-Bearing Liabilities:
Interest checking (2) ......................... $ - $ 100,875 $ - $ -
Regular savings (2) ........................... - 58,767 - -
Money market savings .......................... - - - -
Certificates of deposit:
$100,000 and over ............ - 28,149 - 108
Under $100,000 ............... 80,064 - 348
Short-term borrowings.......................... - - - -
Long-term borrowings .......................... - 39,128 35,000
Total interest-bearing
liabilities .................. 306,983 35,456
-------------------- --------------------
Period gap .................................... 59,334 237,858
Cumulative gap ................................ $ (139,720) $ 98,138
==================== ====================
Ratio of cumulative gap to
total earning assets ......... -17.61% 12.37%
==================== ====================
</TABLE>
<TABLE>
<CAPTION>
Interest Sensitivity Analysis
March 31, 2000
-----------------------------
Total
----------
(In thousands)
<S> <C> <C>
Earning Assets:
Loans, net of unearned income (3) ................... $ - $ 570,484
Investment securities ............................... - 8,761
Securities available for sale........................ - 213,660
Federal funds sold .................................. - 76
Other short-term investments ........................ - 565
Total earning assets ................................ 793,546
--------------------
Interest-Bearing Liabilities:
Interest checking (2) ............................... $ - $ 100,875
Regular savings (2) ................................. - 58,767
Money market savings ................................ - 62,323
Certificates of deposit: -
$100,000 and over .................. - 106,893
Under $100,000 ..................... - 248,912
Short-term borrowings................................ - 36,860
Long-term borrowings ................................ - 80,778
Total interest-bearing liabilities .................. 695,408
--------------------
Period gap ..........................................
Cumulative gap ...................................... $ 98,138
====================
Ratio of cumulative gap to total earning assets .....
</TABLE>
(1) The repricing dates may differ from maturity dates for certain assets due
to prepayment assumptions.
(2) The Company has found that interest-bearing checking deposits and regular
savings deposits are not sensitive to changes in related market rates and
therefore, it has placed them predominantly in the "1-5 Years" column.
(3) Excludes non-accrual loans
18
<PAGE>
ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Earnings Simulation Analysis
Management uses simulation analysis to measure the sensitivity of net
interest income to changes in interest rates. The model calculates an earnings
estimate based on current and projected balances and rates. This method is
subject to the accuracy of the assumptions that underlie the process, but it
provides a better analysis of the sensitivity of earnings to changes in interest
rates than other analysis such as the static gap analysis.
Assumptions used in the model, including loan and deposit growth rates,
are derived from seasonal trends and management's outlook, as are the
assumptions used to project yields and rates for new loans and deposits. All
maturities, calls and prepayments in the securities portfolio are assumed to be
reinvested in like instruments. Mortgage loans and mortgage backed securities
prepayment assumptions are based on industry estimates of prepayment speeds for
portfolios with similar coupon ranges and seasoning. Different interest rate
scenarios and yield curves are used to measure the sensitivity of earnings to
changing interest rates. Interest rates on different asset and liability
accounts move differently when the prime rate changes and are accounted for in
the different rate scenarios.
The following table represents the interest rate sensitivity on net
interest income for the Company using different rate scenarios as of March 31,
2000:
% Change in
Change in Prime Rate Net Interest Income
-------------------- -------------------
+200 basis points -0.62%
Flat 0
-200 basis points +0.31%
Market Value Simulation
Market value simulation is used to calculate the estimated fair value of
assets and liabilities over different interest rate environments. Market values
are calculated based on discounted cash flow analysis. The net market value is
the market value of all assets minus the market value of all liabilities. The
change in net market value over different rate environments is an indication of
the longer term repricing risk in the balance sheet. The same assumptions are
used in the market value simulation as in the earnings simulation.
The following chart reflects the change in net market value over different
rate environments as of March 31, 2000:
Change in Net Market Value
Change in Prime Rate (dollars in thousands)
-------------------- ----------------------
+200 basis points $ -41,580
+100 basis points -25,092
Flat -15,477
-100 basis points 8,109
-200 basis points 23,040
19
<PAGE>
PART II - OTHER INFORMATION
---------------------------
Item 6 - Exhibits and Reports on Form 8-K
(a) See attached list of exhibits
20
<PAGE>
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.
Union Bankshares Corporation
----------------------------
(Registrant)
May 12, 2000 /s/ G. William Beale
(Date) --------------------------------
G. William Beale,
President, Chief Executive Officer
and Director
May 12, 2000 /s/ D. Anthony Peay
(Date) --------------------------------
D. Anthony Peay,
Vice President and Chief Financial Officer
21
<PAGE>
UNION BANKSHARES CORPORATION AND SUBSIDIARIES
Index to Exhibits
Form 10-Q /March 31, 2000
Exhibit
No. Description
--- -----------
2 Plan of acquisition, reorganization, arrangement,
liquidation or succession - Not Applicable
4 Instruments defining the rights of security holders,
including indentures Not Applicable
10 Material contracts Not Applicable
11 Statement re: computation of per share earnings Not Applicable
15 Letter re: unaudited interim financial
information Not Applicable
18 Letter re: change in accounting principles Not Applicable
19 Previously unfiled documents Not Applicable
20 Report furnished to security holders Not Applicable
22 Published report re: matters submitted to
vote of security holders None
23 Consents of experts and counsel Not Applicable
24 Power of Attorney Not Applicable
99 Additional Exhibits None
22
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-END> MAR-31-2000
<CASH> 19,967
<INT-BEARING-DEPOSITS> 565
<FED-FUNDS-SOLD> 76
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 213,660
<INVESTMENTS-CARRYING> 8,761
<INVESTMENTS-MARKET> 8,701
<LOANS> 570,484
<ALLOWANCE> 7,044
<TOTAL-ASSETS> 860,180
<DEPOSITS> 666,088
<SHORT-TERM> 36,860
<LIABILITIES-OTHER> 5,999
<LONG-TERM> 80,778
0
0
<COMMON> 14,988
<OTHER-SE> 55,467
<TOTAL-LIABILITIES-AND-EQUITY> 860,180
<INTEREST-LOAN> 11,898
<INTEREST-INVEST> 3,433
<INTEREST-OTHER> 35
<INTEREST-TOTAL> 15,366
<INTEREST-DEPOSIT> 6,029
<INTEREST-EXPENSE> 7,604
<INTEREST-INCOME-NET> 7,762
<LOAN-LOSSES> 564
<SECURITIES-GAINS> 22
<EXPENSE-OTHER> 8,107
<INCOME-PRETAX> 1,552
<INCOME-PRE-EXTRAORDINARY> 1,552
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,421
<EPS-BASIC> 0.19
<EPS-DILUTED> 0.19
<YIELD-ACTUAL> 4.30
<LOANS-NON> 1,208
<LOANS-PAST> 1,566
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 9,988
<ALLOWANCE-OPEN> 6,617
<CHARGE-OFFS> 211
<RECOVERIES> 74
<ALLOWANCE-CLOSE> 7,044
<ALLOWANCE-DOMESTIC> 7,044
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
