SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(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
or
[ ] 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 0-11026
SOUTHWEST NATIONAL CORPORATION
(Exact name of registrant as specified in its charter)
PENNSYLVANIA 25-1409649
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
111 SOUTH MAIN STREET
GREENSBURG, PENNSYLVANIA 15601
(Address of principal executive offices)
(Zip Code)
Registrant's telephone number, including area code: (724) 834-2310
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. [X] Yes [ ] No.
Indicate the number of shares outstanding of each of the issuer's common stock,
as of the latest practicable date.
Class Outstanding at November 12, 1998
Common Stock, $2.50 Par Value 3,043,738
<PAGE>
<TABLE>
SOUTHWEST NATIONAL CORPORATION
FORM 10-Q INDEX
FOR QUARTER ENDED SEPTEMBER 30, 1998
<CAPTION>
<S> <C> <C>
PAGE
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Southwest National Corporation and Subsidiary
Consolidated Statement of Income 1
Consolidated Balance Sheet 2
Consolidated Statement of Changes in
Shareholders' Equity 3
Consolidated Statement of Cash Flows 4
Notes to Consolidated Financial Statements 5-6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations 6-8
Item 3. Quantitative and Qualitative
Disclosures About Market Risk 8
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 9
SIGNATURES 10
</TABLE>
<PAGE>
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
SOUTHWEST NATIONAL CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENT OF INCOME
(Unaudited)
(in thousands, except per share amounts)
<CAPTION>
THREE MONTHS NINE MONTHS
ENDED SEPTEMBER 30, ENDED SEPTEMBER 30,
1998 1997 1998 1997
- --------- -------- ------- -------
<S> <C> <C> <C> <C>
INTEREST INCOME
$10,248 $10,813 Interest and fees on loans $31,541 $31,712
Interest on money market investments:
1 1 Interest bearing deposits with banks 3 5
395 248 Federal funds sold 1,276 609
Interest and dividends on investment securities:
U.S. Treasury securities and obligations of
1,674 1,730 U.S. government agencies and corporations 4,941 5,307
275 270 Obligations of states and political subdivisions 798 845
630 817 Collateralized mortgage obligations 1,843 2,585
1,861 46 Other securities 2,755 129
---------------- ---------------
15,084 13,925 Total interest income 43,157 41,192
INTEREST EXPENSE
5,254 5,395 Interest on deposits 15,776 15,770
58 56 Interest on securities sold under agreements to repurchase 165 223
1,450 75 Interest on Federal Home Loan Bank advances 2,250 196
---------------- ---------------
6,762 5,526 Total interest expense 18,191 16,189
---------------- ---------------
8,322 8,399 Net interest income 24,966 25,003
675 668 Provision for possible loan losses 2,025 1,763
---------------- ---------------
Net interest income after provision
7,647 7,731 for possible loan losses 22,941 23,240
NONINTEREST INCOME
427 445 Trust income 1,351 1,272
849 700 Service charges on deposit accounts 2,498 1,939
138 142 Other service charges, commissions, and fees 437 470
68 155 Other income 256 393
----------------- ---------------
1,482 1,442 Total noninterest income 4,542 4,074
NONINTEREST EXPENSE
2,854 2,780 Salaries and employee benefits 8,592 8,405
458 468 Net occupancy expense 1,383 1,452
908 874 Equipment expenses and data processing fees 2,692 2,583
191 177 Pennsylvania shares tax 572 532
23 24 FDIC insurance expense 70 72
1,411 1,442 Other expenses 4,627 4,003
---------------- ---------------
5,845 5,765 Total noninterest expense 17,936 17,047
---------------- ---------------
3,284 3,408 Income before income taxes 9,547 10,267
959 1,022 Income taxes 2,754 3,077
---------------- ---------------
$2,325 $2,386 NET INCOME $6,793 $7,190
================ ===============
PER SHARE:
$0.77 $0.77 Basic net income $2.23 $2.32
0.35 0.32 Cash dividends 1.05 0.96
3,044 3,072 AVERAGE SHARES OUTSTANDING (in thousands) 3,053 3,096
<FN>
See accompanying notes to consolidated financial statements.
</FN>
</TABLE>
<PAGE> 1
<TABLE>
SOUTHWEST NATIONAL CORPORATION AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
(in thousands, except share amounts)
<CAPTION>
SEPTEMBER 30, DECEMBER 31, SEPTEMBER 30,
1998 1997 1997
(Unaudited) (Unaudited)
------------- ------------ -------------
<S> <C> <C> <C>
ASSETS
Cash and due from banks $24,090 $22,391 $21,859
Money market investments:
Int. bearing deposits with banks 43 55 21
Federal funds sold 9,300 27,000 6,100
----------------------------------------
Total money market investments: 9,343 27,055 6,121
Investment securities:
Securities available for sale 249,767 109,287 134,632
Securities held to maturity (market
values: $57,070; $49,625 and $53,268) 56,879 49,817 53,541
----------------------------------------
Total investment securities 306,646 159,104 188,173
Loans, net of unearned income of $1; $15
and $34 483,749 515,434 509,133
Less: reserve for possible loan losses (6,035) (6,166) (5,851)
-----------------------------------------
Loans, net 477,714 509,268 503,282
Bank premises and equipment 7,719 8,953 8,594
Other assets 11,855 12,471 14,878
-----------------------------------------
Total assets $837,367 $739,242 $742,907
=========================================
LIABILITIES
Deposits
Noninterest bearing demand $111,562 $109,139 $110,326
NOW accounts 32,747 33,176 33,512
Savings 225,330 233,960 242,112
Time 270,372 265,590 259,785
----------------------------------------
Total deposits 640,011 641,865 645,735
Securities sold under agreements to
repurchase 4,959 4,531 5,237
Federal Home Loan Bank borrowings 100,000 5,000 5,000
Other liabilities 5,934 5,357 5,119
-----------------------------------------
Total liabilities 750,904 656,753 661,091
SHAREHOLDERS' EQUITY
Common stock ($2.50 par value)
Authorized 5,000,000 shares
Issued 3,180,787 shares 7,952 7,952 7,952
Surplus 31,760 31,760 31,760
Retained earnings 50,684 47,093 46,350
Treasury stock of 137,049; 115,877 and
113,877 shares at cost (5,902) (4,840) (4,745)
Accumulated other comprehensive income 1,969 524 499
-----------------------------------------
Total shareholders' equity 86,463 82,489 81,816
-----------------------------------------
Total liabilities and shareholders'
equity $837,367 $739,242 $742,907
========================================
<FN>
See accompanying notes to consolidated financial statements.
</FN>
</TABLE>
<PAGE> 2
<TABLE>
SOUTHWEST NATIONAL CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
(Unaudited)
(in thousands)
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Accumulated other Total
Common Retained Treasury Comprehensive comprehensive shareholders'
stock Surplus earnings stock income income equity
------ ------- -------- -------- ------------- ----------------- -------------
Balance at January 1, 1997 $7,952 $31,760 $42,132 ($1,800) $ -- $120 $80,164
Comprehensive income:
Net income -- -- 7,190 -- 7,190 -- 7,190
Other comprehensive income,
net of tax: Unrealized
losses on securities -- -- -- -- 379 379 379
------------
Total comprehensive income -- -- -- $7,569
============
Cash dividends -- -- (2,972) -- -- (2,972)
Purchase of treasury stock -- -- -- (2,945) -- (2,945)
----------------------------------------- ------------------------------
Balance at September 30, 1997 $7,952 $31,760 $46,350 ($4,745) $499 $81,816
========================================= ==============================
Balance at January 1, 1998 $7,952 $31,760 $47,093 ($4,840) $ -- $524 $82,489
Comprehensive income:
Net income -- -- 6,793 -- 6,793 -- 6,793
Other comprehensive income,
net of tax: Unrealized
gains on securities -- -- -- -- 1,445 1,445 1,445
-----------
Total comprehensive income -- -- -- -- $8,238
===========
Cash dividends -- -- (3,202) -- -- (3,202)
Purchase of treasury stock -- -- (1,062) -- (1,062)
----------------------------------------- ------------------------------
Balance at September 30, 1998 $7,952 $31,760 $50,684 ($5,902) $1,969 $86,463
========================================= ==============================
Disclosure of reclassification amount (1997):
Unrealized holding gains arising during the period $424
Less: reclassification adjustment for gains included in net income (45)
--------
Unrealized gains on securities $379
========
Disclosure of reclassification amount (1998):
Unrealized holding gains arising during the period $1,419
Plus: reclassification adjustment for losses included in net income 26
--------
Unrealized gains on securities $1,445
========
<FN>
See accompanying notes to consolidated financial statements
</FN>
</TABLE>
<PAGE> 3
<TABLE>
SOUTHWEST NATIONAL CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
(in thousands)
<CAPTION>
NINE MONTHS
ENDED SEPTEMBER 30,
1998 1997
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $6,793 $7,190
Adjustments to reconcile net income to net
cash from operating activities:
Depreciation 991 946
Provision for loan losses 2,025 1,763
Increase from net interest receivable/payable 939 333
Decrease in other assets (84) (3,300)
Net decrease from other operating activities 328 1,004
-------- --------
Net cash from operating activities 10,992 7,936
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sales and maturities of inv. securities
available for sale 37,630 52,652
Purchase of investment securities available for sale (175,965) (51,416)
Proceeds from maturities of inv. securities held to
maturity 22,063 8,528
Purchase of investment securities held to maturity (29,124) 0
Investment in limited partnerships (633) 0
Net (increase) decrease in loans 29,471 (23,682)
Property and equipment expenditures (893) (1,459)
Proceeds from sales of property and equipment 1,136 8
--------- --------
Net cash used for investing activities (116,315) (15,369)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net decrease in deposits (1,854) (5,593)
Net increase (decrease) in securities sold under
agr. to repurchase 428 (1,574)
Proceeds from Federal Home Loan Bank advances 100,000 5,000
Repayment of Federal Home Loan Bank advances (5,000) (11,907)
Dividends paid (3,202) (2,971)
Purchase of treasury stock (1,062) (2,945)
--------- --------
Net cash from (used for) financing activities 89,310 (19,990)
--------- --------
Net change in cash and cash equivalents ($16,013) ($27,423)
========= =========
Cash and cash equivalents at beginning of period $49,446 $55,403
Cash and cash equivalents at end of period 33,433 27,980
------- -------
Net change in cash and cash equivalents ($16,013) ($27,423)
========= =========
Cash paid during the period for:
Interest $11,538 $10,761
Income taxes 2,404 3,197
<FN>1
Transfers from loans to other real estate owned and other repossessions totaled $ 1.581 million and
$1.579 million in 1998 and 1997, respectively.
<FN>2
The Corporation has defined cash and cash equivalents as cash and due from banks, certain interest
bearing deposits with banks, and federal funds sold with an original maturity of less than three months.
<FN>3
See accompanying notes to consolidated financial statements.
</FN>
</TABLE>
<PAGE> 4
SOUTHWEST NATIONAL CORPORATION
AND SUBSIDIARY
PART I. FINANCIAL INFORMATION (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Significant accounting policies have not changed since the
last reporting period, except for the reporting of
comprehensive income which is discussed in Note 3.
BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements
of Southwest National Corporation (the Corporation) include
the accounts of the Corporation and its wholly-owned
subsidiary, Southwest National Bank of Pennsylvania (the
Bank). All significant intercompany accounts and transactions
have been eliminated in the consolidated financial statements.
Certain items previously reported have been reclassified to
conform with the current year's classifications. In the
opinion of management, all normal recurring adjustments
necessary for fair presentation of the financial position and
results of operations for the periods have been included.
2. INVESTMENT SECURITIES
Investment securities are classified as follows: debt
securities that the Corporation has the positive intent and
ability to hold to maturity are classified as securities held
to maturity and reported at amortized cost; debt and equity
securities bought and held principally for the purpose of
selling them in the near term are classified as trading
securities and reported at fair value, with unrealized gains
and losses included in the current period earnings; or debt
and equity securities not classified as either securities held
to maturity or trading securities are classified as securities
available for sale and reported at fair value, with unrealized
gains and losses reported as a separate component of other
comprehensive income. A $1,969,000, net of tax, unrealized
gain on securities classified as available for sale at
September 30, 1998, was recorded as accumulated other
comprehensive income .
3. ADOPTION OF NEW ACCOUNTING STANDARDS
On January 1, 1998, the Corporation adopted Statement of
Accounting Standards (FAS) No. 130 "Reporting Comprehensive
Income." FAS No. 130 requires reporting of comprehensive
income by its components and in total in the financial
statements. Comprehensive income is defined as the change in
equity of a business enterprise during a period from
transactions and other events and circumstances from nonowner
sources. It includes all changes in equity during a period
except those resulting from investments by owners and
distributions to owners. Comprehensive income for the
Corporation includes net income and unrealized gains and
losses on securities available for sale. The adoption of this
statement did not have a material effect on the Corporation's
financial position or results of operations.
<PAGE> 5
4. PENDING BUSINESS COMBINATION
On July 15, 1998, the Corporation entered into a definitive agreement
to be acquired by First Commonwealth Financial Corporation ("First
Commonwealth"). First Commonwealth is a Pennsylvania chartered bank
holding company headquartered in Indiana, Pennsylvania. First
Commonwealth has total assets of approximately $3.2 billion, deposits of
$2.3 billion and equity of $283 million at September 30, 1998. The
agreement provides for the issuance of 2.9 shares of First Commonwealth
common stock for each Southwest National Corporation ("Southwest") common
share. The transaction has been structured to be a tax-free reorgani-
zation accounted for as a pooling of interests.
Regulatory approvals for the proposed merger were received from the
Federal Reserve Bank and the Pennsylvania Department of Banking on
November 2, 1998 and November 3, 1998, respectively. Subject to approval
from Southwest and First Commonwealth shareholders at shareholder meetings
scheduled for December 15, 1998, the merger will be completed by
December 31, 1998. It is anticipated that the merger will be accretive
to earnings per share in 1999, the first full year of combined operations.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
FIRST NINE MONTHS OF 1998 COMPARED TO FIRST NINE MONTHS OF 1997
Net income for the first nine months of 1998 declined to
$6,793,000 compared to $7,190,000 for the comparable period in
1997, a $397,000 (5.5%) decrease. Basic earnings per share
declined to $2.23 in 1998 from $2.32 in 1997, a 3.9% decrease.
Return on average assets dipped to 1.14% for the current period
compared to 1.29% for the same period last year. Return on average
equity also declined, settling at 10.84% for the first nine months
of 1998, down from the 11.99% achieved for the first nine months of
1997. Improved noninterest income; up 11.5% and comparable net
interest income, were not enough to overcome a higher provision
for loan losses and increased noninterest expense.
Net interest income on a fully tax equivalent amounted to
$25,578,000 in 1998, basically flat compared to last year.
Excluding the taxable equivalent adjustment, net interest income
was also relatively unchanged, amounting to $24,966,000 for the
period versus $25,003,000 in 1997. Average earning assets grew to
$792,984,000 for the period, up $47,637,000 (6.4%) compared to the
same period last year. The net interest margin contracted to 4.52%
in 1998, down from the 4.82% registered in 1997. The decline in
the margin is due principally to lower yields on earning assets
resulting from the lack of loan growth working in tandem with
higher funding costs.
The provision for loan losses increased $262,000 (14.9%)
compared to last year. The rise was primarily the result of
increased losses in the indirect loan portfolio.
Noninterest income climbed $468,000 (11.5%) compared to the
first nine months of 1997. Service charges on deposit accounts
jumped $559,000 (28.8%) period to period as the result of
adjustments made to the fee structure during 1997. Trust income
rose $79,000 (6.2%). Other income declined $137,000 (34.9%) due to
gains recorded on the sale of available for sale investment
securities in 1997.
Noninterest expense rose $889,000 (5.2%) to $17,936,000 for
the first nine months of 1998. Salaries and employee benefits rose
$187,000 (2.2%). Higher salary expense and reduced deferral of
expenses due to the changing loan mix were only partially offset by
lower benefit costs. Net occupancy expenses declined $69,000
(4.8%) while equipment expenses and data processing fees rose
$109,000 (4.2%). Other expenses increased $624,000 (15.6%) for the
period. Increases in several categories contributed to this rise
and included: marketing ($100,000), professional fees ($200,000),
office supplies ($176,000) and subscriptions and services
($74,000).
At September 30, 1998 assets totaled $837,367,000 up
$94,460,000 (12.7%) over September 30, 1997. Investment securities
jumped $118,473,000 (63.0%) as loans fell $25,384,000 (5.0%) during
the period. The increase in investment securities is the direct
result of the Corporation's strategic repositioning of its earning
asset mix to help overcome
<PAGE> 6
the lack of loan growth and assure income stability. Deposits remained
relatively flat period to period as Federal Home Loan Bank (FHLB) borrowings
rose $95,000,000 which helped fund the growth in earning assets.
Shareholders' equity at September 30, 1998 reached $86,463,000,
up $4,647,000 (5.7%) compared to September 30, 1997. The other
comprehensive income component of shareholders' equity includes an
unrealized gain on securities net of tax of $1,969,000 and $499,000
at September 30, 1998 and September 30, 1997, respectively. Total
capital as a percentage of risk-weighted assets was 18.96%, up from
the 17.20% reported at September 30, 1997. The Corporation's leverage
capital ratio declined to 10.04% at the end of the period.
The reserve for loan losses totaled $6,035,000 at September
30, 1998, up $184,000 (3.1%) from September 30, 1997. Nonperforming assets
rose to $3,832,000 at September 30, 1998, due primarily to a higher level
of nonaccrual loans, up $1,396,000 in the current period. Loans past due
90 days or more were relatively unchanged, settling at $1,930,000 at
September 30, 1998. The ratio of nonperforming loans to loans was 0.72% at
September 30, 1998, up from 0.41% at September 30, 1997. Net charge-offs rose
to $2,156,000 from $1,822,000 as the result of increased charge-offs in the
consumer sector, primarily in the indirect automobile portfolio. This
increase in nonperforming loans reverses an improving trend earlier in the
year and management is continuing to work towards improvement with credit
quality, a major focus.
The Bank has identified several internal sources available for
liquidity management. First and foremost is the Bank's core
deposit base, consisting of deposits from customers with long-standing
relationships with the Bank. Substantial internal funding can also be
derived from the Bank's investment portfolio. The portfolio provides
liquidity through the sale of available for sale of securities and cash
flows derived from maturities. In addition to internal funding sources,
the Bank has numerous external funding sources. These sources provide
ample funding to meet short and long-term needs.
The Corporation is subject to a number of asserted and unasserted
potential claims encountered in the normal course of business. In the
opinion of management and legal counsel, the resolution of these claims
is not expected to have a material effect on the Corporation's financial
position, liquidity or results of operations.
YEAR 2000 UPDATE
The Corporation is aware of the issues associated with the
programming code in existing computer systems as the millennium,
"year 2000," approaches. A team comprised of representatives from
all areas of the organization has conducted a comprehensive review
of the Corporation's computer systems. All systems that could be
affected by year 2000 issues have been identified and implementation
plans have been developed to address those issues. The Corporation
relies on external processing vendors for all of its core data processing
requirements. These vendor's systems are scheduled to be renovated or
replaced during 1998. Remediation and testing activities are continuing on
schedule with testing to be completed by December 31, 1998. A contingency
plan is being developed to address potential failures by critical suppliers
and service providers to minimize vulnerability to those parties failure to
remediate their own year 2000 issues. This plan is targeted for completion
by December 31, 1998 as required by regulatory guidelines. Although the
Corporation's estimates for total year 2000 project costs and estimated times
for completion are subject to certain risks and uncertainties, as of
September 30, 1998, the Corporation estimates that expenditures for year 2000
issues will not have a material impact on the Corporation's financial condition
or results of operations.
THIRD QUARTER 1998 COMPARED TO THIRD QUARTER 1997
Net income for the third quarter of 1998 slipped 2.6% to
$2,325,000 from the $2,386,000 reported for the same period in
1997. Basic earnings per share were flat, reaching $0.77 for both
periods. For the quarter, lower net interest income and higher
noninterest expense were only partially offset by higher
noninterest income in comparison to the same period last year.
<PAGE> 7
Net interest income on a fully tax equivalent basis declined
slightly to $8,525,000 from $8,609,000, a decrease of $84,000
(1.0%). Excluding the taxable equivalent adjustment, net interest
income decreased to $8,322,000 from $8,399,000. The net interest
margin dropped 60 basis points to 4.25% for the quarter compared to
4.85% in the third quarter of 1997. The lower margin has resulted
from decreased yields on earning assets coupled with increased
funding costs, as loans and deposits have trended lower over the
period. Average earning assets jumped to $802,857,000 for the
period, an increase of $92,125,000 (13.0%), compared to the same
period last year which has helped to support the level of net
interest income.
The provision for possible loan losses was flat compared to
the same period last year. The provision remains at higher than
historical levels, but the trend of net charge-offs on a quarterly basis has
continued to improve since reaching a peak in the fourth quarter of 1997.
Noninterest income grew by $40,000 (2.8%), reaching $1,482,000
for the quarter. Sharply higher service charges on deposit
accounts, up $149,000 (21.3%), were offset by decreased other
income as a gain on the sale of available for sale investment
securities of $86,000 was recognized in 1997.
Noninterest expense rose $80,000 (1.4%) as all categories
changed only minimally quarter to quarter.
THIRD QUARTER 1998 COMPARED TO SECOND QUARTER 1998
Net income for the third quarter of 1998 was $2,325,000, up
$21,000 (0.9%) from the second quarter of the year. Basic earnings
per share rose to $0.77 from $0.75. Reduced noninterest expense
was the primary factor contributing to the improved quarter-to-quarter
results.
Net interest income, calculated on a fully taxable equivalent
basis, slipped to $8,525,000 from $8,652,000, a decline of $127,000
(1.5%). Excluding the taxable equivalent adjustment net interest,
income decreased to $8,322,000, down $119,000 (1.4%) compared to
the prior quarter. Higher average earning assets, up $43,775,000
(5.8%), were not enough to overcome the 31 basis point drop in the
net interest margin from 4.56% to 4.25% for the third quarter of 1998.
Noninterest income declined $75,000 (4.8%) period to period.
All categories registered decreases compared to the second quarter.
Noninterest expense fell to $5,845,000, a $221,000 (3.6%)
decline. Most categories were relatively unchanged with lower
marketing expense and professional fees accounting for the majority
of the $220,000 (13.5%) reduction in the other expenses category.
BALANCE SHEET COMPARISON SEPTEMBER 30, 1998 TO DECEMBER 31, 1997
Total assets rose $837,367,000 at September 30, 1998, a
$98,125,000 (13.3%) increase from $739,242,000 at December 31,
1997. Investment securities climbed $147,542,000 (92.7%) to
$306,646,000 at September 30, 1998 as loans dropped $31,685,000
(6.1%) over the same period. The primary source of funding
supporting this asset growth was FHLB borrowings which jumped
$95,000,00 as deposits declined period to period. Shareholders'
equity rose $3,974,000 (4.8%) over the period totaling $86,463,000
at September 30, 1998.
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
There has been no significant change in the Corporation's
market risk since the end of the most recent fiscal year. The
Corporation continues to monitor interest rate risk on a monthly
basis using earning simulation modeling. Management continues to
maintain a risk position well within the policy guideline range.
<PAGE> 8
Part II. OTHER INFORMATION
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
Exhibit 27: Financial Data Schedule
The registrant filed no Form 8K Current Report during the third
quarter ended September 30, 1998.
<PAGE> 9
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.
Southwest National Corporation
------------------------------------------------
(Registrant)
November 12, 1998 /s/ David S. Dahlmann
- --------------------------- -------------------------------------------------
Date David S. Dahlmann
President and Chief Executive Officer
November 12, 1998 /s/ Donald A. Lawry
- --------------------------- -------------------------------------------------
Date Donald A. Lawry
Secretary and Treasurer
(Chief Financial Officer)
<PAGE> 10
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> SEP-30-1998
<CASH> 24,090
<INT-BEARING-DEPOSITS> 43
<FED-FUNDS-SOLD> 9,300
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 249,767
<INVESTMENTS-CARRYING> 56,879
<INVESTMENTS-MARKET> 57,070
<LOANS> 483,749
<ALLOWANCE> 6,035
<TOTAL-ASSETS> 837,367
<DEPOSITS> 640,011
<SHORT-TERM> 4,959
<LIABILITIES-OTHER> 5,934
<LONG-TERM> 100,000
0
0
<COMMON> 7,952
<OTHER-SE> 78,511
<TOTAL-LIABILITIES-AND-EQUITY> 837,367
<INTEREST-LOAN> 31,541
<INTEREST-INVEST> 10,337
<INTEREST-OTHER> 1,279
<INTEREST-TOTAL> 43,157
<INTEREST-DEPOSIT> 15,776
<INTEREST-EXPENSE> 18,191
<INTEREST-INCOME-NET> 24,966
<LOAN-LOSSES> 2,025
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 17,936
<INCOME-PRETAX> 9,547
<INCOME-PRE-EXTRAORDINARY> 6,793
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,793
<EPS-PRIMARY> 2.23
<EPS-DILUTED> 2.23
<YIELD-ACTUAL> 7.73
<LOANS-NON> 3,489
<LOANS-PAST> 1,930
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 6,166
<CHARGE-OFFS> 2,722
<RECOVERIES> 566
<ALLOWANCE-CLOSE> 6,035
<ALLOWANCE-DOMESTIC> 6,035
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
