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U.S. Securities and Exchange Commission
Washington, D. C. 20549
FORM 10-K
[ X ] Annual Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
OR
[ ] Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the transition period from to
For the year ended: Commission File No.:
December 31, 1998 0-22836
SOUTHERN FINANCIAL BANCORP, INC.
(Exact name of registrant as specified in its charter)
Virginia 54-1779978
(State or other jurisdiction (I.R.S. Employer or
of incorporation or organization) Identification Number)
37 East Main Street, Warrenton, Virginia 20186
(Address of principal executive office)(Zip Code)
(540) 349-3900
(Registrant's telephone number, including area code)
Securities Registered Pursuant to Section 12(b) of the Act: None
Securities Registered Pursuant to Section 12 (g) of the Act:
Common Stock, par value $0.01 per share
(Title of Class)
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 such shorter period that the registrant
was required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
----- ----
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not considered herein, and will not be contained, to
the best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of the Form 10-K or any
amendment to this Form 10-K. [ ]
The aggregate market value of the Common Stock held by non-affiliates of the
registrant computed by reference to the last reported bid price of such stock as
of February 26, 1999 was $14,710,127 (726,426 shares @ $20.25 per share). For
purposes of this computation, it is assumed that directors, executive officers
and persons beneficially owning more than 5% of the Common Stock of the
registrant are affiliates. As of February 26, 1999, there were 1,603,220 shares
of the registrant's Common Stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
I. Portions of Annual Report to Stockholders for the Year Ended December
31, 1998 incorporated by reference into certain items of Parts I. and
II.
II. Portions of Proxy Statement for the Annual Meeting of Stockholders to be
held on April 29, 1999 incorporated by reference into certain items of
Part III.
PART I.
ITEM 1. BUSINESS
GENERAL
Southern Financial Bancorp, Inc. ("Southern Financial" or "the Bancorp")
was incorporated in Virginia as a bank holding company under the Bank Holding
Company Act of 1956, as amended. On December 1, 1995, Southern Financial
Bancorp, Inc. acquired all of the outstanding shares of Southern Financial Bank.
Southern Financial Bank, formerly Southern Financial Federal Savings Bank,
converted from a savings bank to a state chartered commercial bank effective
December 1, 1995. The only activity of the Bancorp is to own and control all of
the capital stock of Southern Financial Bank. Hereafter, references to Southern
Financial and the Bancorp include the activities of Southern Financial Bank.
Headquartered in Warrenton, Virginia, the Bancorp serves the retail and
commercial financial market as a deposit and loan specialist from eleven full
service offices located in Warrenton, Herndon, Middleburg, Winchester, Leesburg,
Fairfax, Sterling and Woodbridge, Virginia. Southern Financial's defined market
area forms a semi-circle to the west of the Metropolitan Washington, D.C. area
roughly centered on Warrenton. The counties included in the defined market area
where the Bancorp currently operates branches include: Loudoun (Middleburg,
Leesburg and Sterling branches), Fauquier (Warrenton branches), Fairfax (Herndon
and Fairfax branches), Frederick (Winchester branches) and Prince William
(Woodbridge branch). Other counties in the defined market area include:
Spotsylvania, Culpeper, Rappahanock, Clarke and the three counties in the West
Virginia panhandle.
The inner ring of the semi-circle that comprises the Bancorp's market
area is the bedroom community for the close-in greater Metropolitan Washington
commercial centers that have grown up in Northern Virginia in the past 30 years.
As the economy of the Metropolitan Washington area has diversified away from its
concentration in government and government-related employment, the Dulles
Corridor has developed into a major center for communication and high-tech
activities. In the process, Reston, Herndon, Tysons Corner and Fairfax have
become important employment centers in their own right much as Stamford and
White Plains have done outside Manhattan. As a consequence, the commutable
radius has pushed west out to Loudoun and Fauquier Counties and south and
southwest to Stafford, Spotsylvania and Prince William Counties. The branch
locations in these areas situate Southern Financial to take advantage of the
rapid economic growth of these communities.
The principal business of the Bancorp is the acquisition of deposits
from the general public through its home and branch offices and use of these
deposits to fund its loan and investment portfolios. The Bancorp seeks to be a
full service community bank which provides a wide variety of financial services
to its middle market corporate clients as well as to its retail clients. The
Bancorp is an active commercial lender that often lends in conjunction with the
Small Business Administration ("SBA") 504 and 7(a) loan programs. In addition,
the Bancorp is an active residential construction lender and offers its retail
clients a full menu of permanent residential mortgage loan alternatives. The
Bancorp also invests funds in mortgage-backed securities, securities issued by
Agencies of the Federal Government, obligations of counties and municipalities,
corporate obligations and preferred stock of the Federal Home Loan Mortgage
Corporation.
The principal sources of funds for the Bancorp's lending and investment
activities are deposits, amortization and repayment of loans, proceeds from the
sales of loans, prepayments from mortgage-backed securities, repayments of
maturing investment securities, FHLB advances and other borrowed money.
Principal sources of revenue are interest and fees on loans and
investment securities and gains from the sale of loans, as well as fee income
derived from the maintenance of deposit accounts. The Bancorp's principal
expenses include interest paid on deposits and advances from the FHLB and other
borrowings, and operating expenses.
LENDING ACTIVITIES
The principal lending activity of the Bancorp is the origination of
loans on commercial real estate primarily through various lending programs of
the U.S. Small Business Administration (SBA) program. The Bancorp is a Preferred
Lender in the Richmond District of SBA and a Certified Lender in the Washington,
D.C. District. In addition, the Bancorp makes conventional and government fixed
and adjustable rate real estate loans to enable borrowers to purchase or
refinance one-to-four-family, owner-occupied residential properties. The Bancorp
also makes owner-occupied residential construction loans secured by first liens
on the properties to which they relate. At December 31, 1998, approximately 80%
of the Bancorp's total loan portfolio, or $107.3 million, consisted of loans
secured by real estate. The Bancorp also makes commercial business and secured
and unsecured consumer loans.
COMMERCIAL REAL ESTATE LENDING
U.S. SMALL BUSINESS ADMINISTRATION LENDING Approximately 68% ($44.2
million) of Southern Financial's nonresidential real estate lending is done in
conjunction with the SBA 7(a) and 504 loan programs. The SBA 7(a) and 504 Loan
Programs are economic development programs of the U.S. Small Business
Administration. The Small Business Administration, in cooperation with banks and
other lending institutions, finances the expansion of small businesses. As noted
above, Southern Financial is a Preferred SBA Lender in the Richmond District
Office and a Certified Lender in the Washington, D. C. District Office.
Section 7(a) loans may be used for the purchase of real estate,
construction, renovation or leasehold improvements, as well as machinery,
equipment, furniture, fixtures, inventory, and in some instances, working
capital and debt refinance. Start-up businesses are eligible. The SBA guarantees
up to 80% of the loan balance under the 7(a) Program. At December 31, 1998,
Southern Financial had $3.4 million in SBA 7(a) real estate loans, which
represents 5.2% of total nonresidential mortgage loans receivable.
The 504 Program is used to finance long-term fixed assets, primarily
real estate and large/heavy equipment. The 504 Program is an economic
development program designed to create new jobs or retain existing jobs. The
credit structure of the 504 Program gives borrowers access to 90% financing of
the project 50% is provided by the financial institution (in the form of a first
trust) and 40% is provided by the certified development company (the 504
representative) with a second trust. The borrower provides the remaining 10% of
the funds required for the project. Of the bank's $64.9 million in
non-residential mortgages, 62.8% ($40.8 million) are 504 loans. During the year
ended December 31, 1998, Southern Financial originated $12 million in loans
under the 504 Program.
COMMERCIAL PERMANENT LENDING. Southern Financial offers an extensive
array of commercial real estate loans. These loans are serving both the investor
and owner occupied facility market. At December 31, 1998, approximately 32%
($20.7 million) of the Bancorp's non-residential mortgages are investor and
owner-occupied real estate loans. These loans are secured by real estate with
collateral loan-to-values averaging less than 70%.
COMMERCIAL CONSTRUCTION LENDING. Southern Financial is involved in
financing the construction phase of small business projects prior to the project
being approved by the SBA. To a lesser extent, the Bancorp also provides
commercial construction financing for projects outside of the SBA programs. At
December 31, 1998, approximately 8% of the Bancorp's loan portfolio consisted of
nonresidential construction loans.
COMMERCIAL BUSINESS LENDING
In general, commercial business loans involve somewhat more credit risk
than do residential mortgage loans and real estate backed commercial loans and,
therefore, usually yield a higher return to Southern Financial. The increased
credit risk for commercial business loans is due to the type of collateral
securing these loans. The increased risk also derives from the expectation that
commercial loans generally will be serviced principally from the business
operations conducted, and such operations may not be successful and, hence, may
lead to default on the loan. Historical trends have shown these types of loans
to have higher delinquencies than mortgage loans. Therefore, Southern Financial
utilizes the Section 7(a) Program of the SBA to reduce the inherent risk
associated with this type of lending. The real estate loan, as a collateral
loan, is a stable asset. At December 31, 1998, Southern Financial had $24.8
million in commercial business loans, which represent 18% of the Bancorp's total
loans receivable. Of the bank's $24.8 million in non-mortgage business loans,
70% ($17.3 million) are SBA 7(a) loans backed by a guaranty of 75% or 80%.
During the year ended December 31, 1998, Southern Financial originated and
closed $11.9 million in loans under the 7(a) Program and sold $8 million on the
secondary market.
RESIDENTIAL LENDING
The Bancorp makes fixed and adjustable rate, first mortgage loans with
terms up to 30 years. It offers second mortgages in conjunction with its own
first mortgages or those of other lenders. These second mortgages typically have
terms of 5 to 15 years and have rates 2% to 3% above the prevailing rate for
fixed rate and adjustable rate first mortgages at the time of origination.
Southern Financial makes construction loans and permanent loans on individual
single family residences and on other residential properties. Construction loans
generally have interest rates of prime plus one to two percent and fees of one
to three points, loan-to-value ratios of 80% or less based on current appraisals
and terms of generally nine months or less. In the case of conventional loans,
Southern Financial typically lends up to 80% of the appraised value of
single-family residences. The Bancorp requires private mortgage insurance for
loans exceeding 80% of the appraised value.
Residential mortgage loans are secured by single-family homes. At
December 31, 1998, loans secured by residential property, both permanent and
construction, totaled $31.2 million, which represented approximately 23% of
total loans receivable. Approximately 19% of the total loans receivable
consisted of loans secured by permanent mortgages on one-to-four family
residential property.
CONSUMER LENDING
Southern Financial offers various types of secured and unsecured
consumer loans. These loans are offered as a convenience to its customer base
since these products are not the focus of the bank's lending activities. At
December 31, 1998, Southern Financial had $2.4 million in consumer loans which
represents 2% of the total loans receivable.
INCOME FROM LENDING ACTIVITIES
Interest on loans, gains on sale of loans, and loan fees and service
charges amounted to approximately 64% of Southern Financial's total revenue for
the year ended December 31, 1998. Income from loan origination fees and other
fees are sources of income which vary with the volume and type of loans and
commitments made and with competitive and economic conditions.
LOAN PORTFOLIO COMPOSITION
The following table sets forth the composition of the Bancorp's loan
portfolio during the periods indicated:
At December 31, At June 30,
1998 1997 1996 1995 1995
Amount Percent Amount Percent Amount Percent Amount Percent Amount Percent
-----------------------------------------------------------------------------------------------------
(amounts in thousands)
Mortgage:
Residential $26,046 19% $30,421 24% $35,033 32% $37,583 35% $ 40,123 43%
Nonresidential 64,890 48% 57,160 43% 46,549 42% 36,742 35% 29,216 31%
Construction:
Residential 5,185 4% 6,534 5% 5,616 5% 8,516 8% 8,460 9%
Nonresidential 11,214 8% 13,161 10% 7,510 7% 11,029 10% 5,941 6%
----------- ------- ----------- ------ ----------- ------ ----------------- ---------- ------
Total Mortgage 107,335 80% 107,276 82% 94,708 86% 93,870 88% 83,740 89%
----------- ------- ----------- ------ ----------- ------ ----------------- ---------- ------
Nonmortgage:
Business 24,773 18% 21,253 16% 12,198 11% 9,265 9% 7,601 9%
Consumer 2,425 2% 3,093 2% 3,294 3% 2,761 3% 2,238 2%
----------- ------- ----------- ------ ----------- ------ ----------------- ---------- ------
Total Nonmortgage 27,198 20% 24,346 18% 15,492 14% 12,026 12% 9,839 11%
----------- ------- ----------- ------ ----------- ------ ----------------- ---------- ------
Gross Loans 134,533 100% 131,622 100% 110,200 100% 105,896 100% 93,579 100%
Less:
Deferred Fees 837 627 412 455 442
Allowance for Loan Losses 2,051 2,037 1,501 1,190 1,057
----------- ----------- ----------- ----------- ----------
Total Loans Receivable, Net $131,645 $128,958 $108,287 $104,251 $ 92,080
=========== =========== =========== =========== ==========
The following table sets forth the scheduled maturity of selected loans
as of December 31, 1998:
Over 1 Year
Through 5 Years Over 5 years
One Year Fixed Floating Fixed Floating
or Less Rate Rate Rate Rate Total
------------- ------------- ------------- ------------- ------------- -------------
(amounts in thousands)
Construction:
Residential $ 5,185 $ - $ - $ - $ - $ 5,185
Nonresidential 10,967 - 247 - - 11,214
Business 11,702 2,670 2,728 994 6,679 24,773
------------- ------------- ------------- ------------- ------------- -------------
Total $ 27,854 $ 2,670 $ 2,975 $ 994 $ 6,679 $ 41,172
============= ============= ============= ============= ============= =============
LOAN UNDERWRITING POLICIES
Because future loan losses are so closely intertwined with its
associated underwriting policy, Southern Financial has instituted what it
believes is a stringent loan underwriting policy. Its underwriting guidelines
are tailored for particular credit types, including lines of credit, revolving
credit facilities, demand loans, term loans, equipment loans, real estate loans,
SBA loans, stand-by letters of credit and unsecured loans.
More specifically, it is Southern Financial's policy to encourage all
loan applicants for sound and lawful purposes, regardless of race, religion or
creed. Extensions of credit will be made if the criteria of creditworthiness,
likelihood of repayment and proximity to market areas served indicate that such
extensions of credit will provide acceptable profitability to the Bancorp.
Detailed loan applications are obtained to determine the borrower's
ability to repay, and the more significant items on these applications are
verified through the use of credit reports, financial statements and
confirmations. All property valuations are performed by independent outside
appraisers who are reviewed by the Vice President of Real Estate Lending who
reports his findings annually to Southern Financial's Board of Directors.
It is the Bancorp's policy to retain a mortgage creating a valid lien on
real estate and to obtain a title insurance policy that insures the property is
free of encumbrances. Also required from the borrower is hazard insurance, and
flood insurance is required if the property is in a flood plain as designated by
the Department of Housing and Urban Development. Most borrowers are also
required to advance funds on a monthly basis from which Southern Financial makes
disbursements for items such as real estate taxes, private mortgage insurance
(required when the loan to value ratio exceeds 80%) and hazard insurance.
Under the Financial Institutions Reform, Recovery, and Enforcement Act
of 1989 ("FIRREA"), the aggregate amount of loans that Southern Financial may
make to one borrower is limited to 15% of the Bancorp's unimpaired capital and
surplus. The maximum amount of loans that Southern Financial could have made to
one borrower as of December 31, 1998 was approximately $3.1 million based on 15%
of its unimpaired capital and surplus. As of December 31, 1998, the largest
aggregate amount of such loans by Southern Financial to any one borrower was
$3.1 million.
All commercial loans must be approved by the Chief Executive Officer and
one other authorized officer prior to disbursement of funds. In cases where the
loan amount exceeds $250,000 as to real estate or $150,000 on other loans, the
commercial loan must be approved by the Credit Committee and further reported to
the full Board of Directors. The information regarding the loan and its borrower
must include financial statements. Supporting financial data must be verified by
bank references, trade credit checks and similar procedures. In addition,
commercial loan files are generally reviewed on an annual basis to ensure both
the quality and timeliness of the information contained.
Interest rates charged by Southern Financial are affected primarily by
competitive market factors. These factors include general economic conditions,
monetary policies of the Federal Reserve Bank, legislative tax policies and
government budgetary matters.
The Credit Committee, which consists of two outside members of the Board
of Directors and the Chief Executive Officer, is responsible for the qualitative
review of the loan portfolio, for approving all loans exceeding lending
officers' authorities ($250,000 on real estate loans and $150,000 on other
loans) and for assuring compliance with all of the Board's policies and
procedures as well as all applicable state and federal laws, rules and
regulations. All loans approved by the Credit Committee are reported to the full
Board of Directors at its next regularly scheduled meeting.
Individual lending authorities are determined by the Chief Executive
Officer based on the individual's technical ability and must be agreed to by the
Credit Committee. All authorities are reviewed at least annually by the full
Board of Directors.
When a borrower fails to make a required payment, Southern Financial
attempts to cause the deficiency to be cured by contacting the borrower. After
17 days, a reminder notice is sent indicating that a late charge has been
levied. After 30 days delinquency, the borrower is contacted by phone and
responses are documented. After 90 days, if the loan has not been brought
current or an acceptable arrangement is not worked out with the borrower,
Southern Financial will institute measures to remedy the default, including
commencing foreclosure action with respect to mortgage loans and repossessions
of collateral in the case of consumer loans.
If foreclosure is effected, the property is sold at a public auction in
which Southern Financial may participate as a bidder. If Southern Financial is
the successful bidder, the acquired real estate property is then included in its
real estate owned account until it is sold. Such assets are carried at the lower
of cost or fair value net of estimated selling costs. To the extent there is a
decline in value, that amount is charged to operating expense.
PAST DUE LOANS AND NONPERFORMING ASSETS
The following table sets forth information regarding past due loans and
nonperforming assets as of the periods indicated:
At December 31, At June 30,
1998 1997 1996 1995 1995
------------- ------------- ------------- ------------- -------------
(amounts in thousands)
Accruing Loans 90 Days
or More Delinquent
Residential $ - $ - $ - $ 878 $ 607
Nonresidential - - 28 - 196
Business 225 1 - - -
Consumer 11 - - 3 2
------------- ------------- ------------- ------------- -------------
Total 236 1 28 881 805
============= ============= ============= ============= =============
Nonperforming Loans
Residential 291 443 321 541 -
Nonresidential 1,033 1,002 1,257 - -
Business 659 - 49 - 39
Consumer - - 7 50 15
------------- ------------- ------------- ------------- -------------
Subtotal 1,983 1,445 1,634 591 54
------------- ------------- ------------- ------------- -------------
Real Estate Owned
Residential 72 176 340 357 387
------------- ------------- ------------- ------------- -------------
Total Nonperforming Assets $ 2,055 $ 1,621 $ 1,974 $ 948 $ 441
============= ============= ============= ============= =============
Nonperforming Assets
to Total Assets 0.91% 0.72% 1.03% 0.58% 0.28%
============= ============= ============= ============= =============
The Bancorp's loss and delinquency experience on its residential real
estate loan portfolio has been limited by a number of factors, including the
Bancorp's underwriting standards. Whether Southern Financial's loss and
delinquency experience will increase significantly depends upon the value of the
real estate securing its loans, economic factors such as an increase in
unemployment as well as the overall economy of the region. As a result of
economic conditions and other factors beyond its control, the Bancorp's future
loss and delinquency experience cannot be accurately predicted. However,
management has provided an allowance for loan losses which it believes will be
adequate to absorb future losses.
At December 31, 1998, loans totaling $1.7 million were classified as
potential problem loans that are not reported in the table above. The loans are
subject to management attention and their classification is reviewed on a
quarterly basis. At December 31, 1998, all of the potential problem loans were
adequately secured in the opinion of management.
ALLOWANCE FOR LOAN LOSSES
Management evaluates the adequacy of the allowance at least quarterly.
As a result of that process, loans are categorized as to doubtful, substandard
and/or special mention. Each quarter the Board of Directors considers a review
of the loans in Southern Financial's portfolio, conducts an evaluation of the
credit quality and reviews the adequacy of the loan loss provision, recommending
changes as may from time to time be required. In establishing the appropriate
classification for specific assets, management takes into account, among other
factors, the estimated value of the underlying collateral, the borrower's
ability to repay, the borrower's payment history and the current delinquent
status. The remaining loan portfolio is evaluated for potential loss exposure by
examining the growth and composition of the portfolio, previous loss experience,
current delinquency levels, industry concentration and the general economic
condition.
The allowance for loan losses represents management's estimate of an
amount adequate to provide for potential losses inherent in the loan portfolio
in the normal course of business. However, there are additional risks of future
losses that cannot be quantified precisely or attributed to particular loans or
classes of loans. Because those risks include general economic trends as well as
conditions affecting individual borrowers, management's judgement of the
allowance necessary is approximate. The Bancorp has also contracted with an
outside, independent company to perform a detailed loan review, including an
assessment of the adequacy of the allowance for loan losses. The allowance is
also subject to regulatory examinations and determination as to the adequacy of
the allowance in comparison to peer institutions identified by the regulatory
agencies.
The following table summarizes activity in the Bancorp's allowance for
loan losses during the periods indicated.
Six Months
Year Ended Ended Year Ended
December 31, December 31, June 30,
1998 1997 1996 1995 1995
-------------- --------------- --------------- -------------- --------------
(amounts in thousands)
Allowance at Beginning of Period $ 2,037 $ 1,501 $ 1,190 $ 1,057 $ 1,008
Provision for Losses 975 880 695 150 60
Charge-offs:
Residential (221) (65) (8) - -
Nonresidential (261) (200) (300) - -
Business (492) (77) (38) (16) -
Consumer (3) (27) (43) (1) (11)
-------------- --------------- --------------- -------------- --------------
Total Charge-offs (977) (369) (389) (17) (11)
-------------- --------------- --------------- -------------- --------------
Recoveries:
Residential - 12 - - -
Business 13 6 3 - -
Consumer 3 7 2 - -
-------------- --------------- --------------- -------------- --------------
Total Recoveries 16 25 5 - -
-------------- --------------- --------------- -------------- --------------
Net Charge-offs (961) (344) (384) (17) (11)
-------------- --------------- --------------- -------------- --------------
Allowance at End of Period $ 2,051 $ 2,037 $ 1,501 $ 1,190 $ 1,057
============== =============== =============== ============== ==============
Loans at End of Period $ 133,696 $ 130,995 $ 109,788 $ 105,441 $ 93,137
Ratio of Allowance to Loans 1.53% 1.56% 1.37% 1.13% 1.13%
The following table summarizes the composition of the Allowance for Loan
Losses.
At December 31, At June 30,
1998 1997 1996 1995 1995
Amount Percent Amount Percent Amount Percent Amount Percent Amount Percent
-----------------------------------------------------------------------------------------------------
(amounts in thousands)
Mortgage:
Residential $ 68 3% $ 140 7% $ 152 10% $ 413 35% $ 79 7%
Nonresidential 751 37% 1,162 57% 708 47% 249 21% 188 18%
Construction:
Residential 21 1% 27 1% 23 2% 123 10% 254 24%
Nonresidential 46 2% 43 2% 131 9% 133 11% 227 21%
Nonmortgage:
Business 687 33% 438 22% 382 25% 219 18% 262 25%
Consumer 38 2% 41 2% 105 7% 53 4% 47 4%
Unallocated 440 21% 186 9% - 0% - 0% - 0%
---------- ------ -------- ------- ----------- ------- ---------- ------ ---------- -----
Allowance for Loan Losses $ 2,051 100% $ 2,037 100% $ 1,501 100% $ 1,190 100% $ 1,057 100%
========== ====== ======== ======= =========== ======= ========== ====== ========== =====
The Bancorp has allocated the allowance according to the amount deemed
to be reasonably necessary to provide for the possibility of losses being
incurred within each of the above categories of loans. These figures are based
on gross loans. The allocation of the allowances as shown in the table above
should not be interpreted as an indication that loan losses in future years will
occur in the same proportions or that the allocation indicates future loan loss
trends. Furthermore, the portion allocated to each loan category is not the
total amount available for future losses that might occur within such categories
since the total allowance is a general allowance applicable to the entire
portfolio.
INVESTMENT ACTIVITIES
The following table sets forth the Bancorp's investment portfolio as of
the periods indicated:
December 31, December 31, December 31,
1998 1997 1996
------------------- ----------------- -----------------
(amounts in thousands)
Available-for-sale securities:
FHLMC preferred stock $ 3,808 $ 3,866 $ 4,310
FHLMC MBS 11,996 - -
GNMA MBS 3,826 - -
FNMA MBS 29,671 782 903
Collateralized mortgage obligations 1,527 - -
Commercial MBS 18,044 - -
Obligations of counties and municipalities 3,234 - -
Corporate obligations 989 - -
U.S. Government agency obligations 949 - -
------------------- ----------------- -----------------
$ 74,044 $ 4,648 $ 5,213
=================== ================= =================
Held-to-maturity securities:
FHLMC MBS $ 4,091 $ 6,078 $ 7,300
GNMA MBS 24,305 42,471 27,388
FNMA MBS 6,780 27,075 21,982
Collateralized mortgage obligations 1,015 4,203 6,547
Obligations of counties and municipalities 1,960 - -
U.S. Government agency obligations - 642 2,000
------------------- ----------------- -----------------
$ 38,151 $ 80,469 $ 65,217
=================== ================= =================
SOURCE OF FUNDS
DEPOSITS
Deposit accounts have been the primary source of the Bancorp's funds for
use in lending, making other investments, and for other general business
purposes. In addition to deposits, Southern Financial obtains funds from loan
repayments, maturing investments, loan sales, cash flows generated from
operations and FHLB advances. Borrowings may be used as an alternative source of
lower costing funds or to fund the origination of certain assets.
The following table shows the average balances and rates
(presented on a monthly average basis) for the Bancorp's deposits for the
periods indicated:
Year Ended December 31,
(amounts in thousands) 1998 1997 1996
---------------------------- ---------------------------- -----------------------------
Average Average Average Average Average Average
Balance Rate Balance Rate Balance Rate
--------------- ---------- --------------- ---------- --------------- -----------
Demand $ 16,315 0.00% $ 9,878 0.00% $ 6,658 0.00%
Interest checking 17,479 1.22% 15,720 1.18% 14,755 1.44%
Money market and savings 25,369 3.05% 22,834 3.33% 21,066 3.37%
Certificates of deposit 155,208 5.76% 135,863 5.71% 115,672 5.63%
--------------- --------------- ---------------
$ 214,370 $ 184,296 $ 158,151
=============== =============== ===============
Weighted average rate 4.63% 4.73% 4.70%
----- ----- -----
The following table sets forth by time remaining until maturity
Southern Financial's certificates of deposit of $100,000 or more at December 31,
1998:
Time Deposits of
Maturity Period $100,000 or More
- --------------- -----------------------
(amounts in thousands)
Three months or less $ 28,038
Over three months through twelve months 21,114
Over twelve months 5,008
-----------------------
Total $ 54,160
=======================
BORROWINGS
Borrowings consist of short-term advances from the Federal Home Loan
Bank of Atlanta ("FHLB"). The following table sets forth information regarding
the Bancorp's borrowings for the periods indicated:
Year Ended
December 31,
1998 1997 1996
- -------------------------------------------------------------------------------
Ending Balance $ 3,500 $ 4,000 $ 8,500
Average Balance for the Period 4,907 5,979 6,077
Maximum Month-end Balance
During the Period 13,500 8,500 12,000
Average Interest Rate for the Period 5.50% 5.59% 5.63%
Weighted Average Interest Rate at
the End of the Period 5.15% 5.95% 6.57%
COMPETITION
Southern Financial experiences substantial competition in attracting and
retaining savings deposits and in lending funds. The primary factors in
competing for savings deposits are convenient office locations and rates
offered. Direct competition for savings deposits comes from other commercial
banks and thrift institutions. Additional significant competition for savings
deposits comes from money market mutual funds and corporate and government
securities which may yield more attractive interest rates than insured
depository institutions are willing to pay. The primary factors in competing for
loans are interest rate and loan origination fees and the range of services
offered. Competition for origination of real estate loans normally comes from
other commercial banks, thrift institutions, mortgage bankers, mortgage brokers
and insurance companies.
EMPLOYEES
At December 31, 1998, Southern Financial employed 79 full-time
equivalent persons. Management considers its relations with its employees to be
good. The employees are not covered by a collective bargaining agreement.
THE YEAR 2000
Until recently, many companies had operating computer applications which
used only two digits to identify a year in the date field. These applications
were designed and developed without considering the potential impact of the
rapidly approaching millennium. If these fields were not corrected computer
applications could fail or create a magnitude of erroneous results in the Year
2000. Therefore, in order to effectively address the Year 2000 concerns,
Southern Financial Bank's Board of Directors approved a Plan to mitigate the
risks associated with the Year 2000.
This Plan, which is managed as outlined by the Federal Financial
Institutions Examination Council ("FFEIC") addresses the essential five phases:
Awareness, Assessment, Renovation, Validation and Implementation.
The Awareness and Assessment phases of the Plan were completed in 1998.
The Bank has ensured that customers received statement stuffers and newsletters
apprising them of the status of the Plan. Year 2000 status updates have been
incorporated into the Bank's website, www.southernfinancialbank.com and are
regularly updated. The Bank contacted its material business partners to
determine their state of readiness and the potential impact on the Company by
sending letters to them requesting updates on their own year 2000 initiatives.
Through these endeavors, systems were upgraded and tested to ensure meeting Year
2000 Readiness. Those systems that do not meet Year 2000 requirements have been
replaced.
The phases of the Plan which include Renovation, Validation and
Implementation were completed by December 31, 1998. The Bank completed upgrading
and/or replacements of the entire Bank's branch operating computer systems ahead
of schedule. The upgrades and/or replacements of the computers were necessitated
by the requirement to perform end-to-end testing with Intrieve, Inc, the Bank's
data processing system provider, on November 8, 1998. All Intrieve-related
systems passed the Year 2000 performance test. Additionally, the EFT operating
systems have been tested to confirm the capability to receive and send account
information. EFT systems include the ATM Network and Direct Teller System.
Through a partnership with Intrieve, Inc., OnLine Resources Corporation,
("ORCC"), based in McLean, Va., manages Southern OnLine, the bank's remote
banking service, with all transactions flowing through the EFT system. ORCC
received Year 2000 certification in February 1999. Testing between Intrieve and
ORCC will be scheduled for the second quarter of 1999. Since Intrieve, Inc., is
responsible for the major portion of the Bank's Year 2000 Plan, continued focus
will be directed throughout 1999. Intrieve is actively addressing all issues
associated with this time critical issue. Intrieve has completed the upgrades
for its mission critical system for Year 2000 Readiness. Additionally,
throughout 1999, Intrieve, Inc., will continue to test and further develop their
systems.
The Bank, as well as Intrieve, Inc., is focusing on the completion of
its Year 2000 Contingency Plan, which is due for completion June 30, 1999. This
critical phase of the Plan provides the details concerning how the Bank will
operate in the event there are system failures, power failures, etc. Southern
Financial's Plan will outline how the branches and the corporate office will
function if circumstances are presented which affect the normal course of
business. On the other hand, while unlikely, it is acknowledged that the Bank's
failure to successfully implement its Year 2000 Plan or to adequately assess the
likelihood of events relating to the Year 2000 issue, could have a material
adverse impact on operations. Therefore, based on the severity of the situation,
Intrieve could readily implement their disaster recovery systems to permit
continuing to provide data processing services. Additionally, Intrieve, Inc.,
has implemented two additional services, the first being a special trial balance
run on December 25, 1999. This information will prove to be critical if system
communications are affected on the first day of business in Year 2000. Secondly,
Intrieve will provide a communications connectivity test opportunity on January
1, 2000 from 11:00 a.m. to 1:00 p.m. EST. The purpose of this test is to verify
transmission functionality before opening the doors for business on January 3,
2000. All branches will participate in this critical test as a means of
preventative action.
The total costs associated with becoming Year 2000 compliant are
expected to be less than $100 thousand and are not expected to have a material
impact on the results of operations. As of December 31, 1998, the Bank had
incurred approximately $50 thousand of costs to become Year 2000 compliant.
Intrieve, Inc., the Bank's data processing system provider, has made substantial
investments in software and hardware to become Year 2000 compliant. Costs
related to these investments have not been passed on to Southern Financial.
The costs of the project and the date on which the Bank plans to
complete the Year 2000 Contingency Plan are based on management's best
estimates. There can be no assurance that these estimates will be achieved and
actual results could differ from those plans.
REGULATION
Set forth below is a brief description of certain laws and regulations
that relate to the regulation of Southern Financial. The description of these
laws and regulations, as well as descriptions of laws and regulations contained
elsewhere herein, does not purport to be complete and is qualified in its
entirety by reference to applicable laws and regulations.
GENERAL
Southern Financial is a bank holding company within the meaning of the
Bank Holding Company Act of 1956 as amended. As a bank holding company, Southern
Financial is supervised by the Board Of Governors of the Federal Reserve System
("FRB") and is required to file reports with the FRB and provide such additional
information as the FRB may require. Southern Financial is also subject to
Virginia laws regarding financial institution holding companies administered by
the Bureau of Financial Institutions of the State Corporation Commission of
Virginia. The Bank is also affected by rules and regulations of the Federal
Deposit Insurance Corporation ("FDIC"). Southern Financial is a member of the
Federal Reserve System and the FHLB of Atlanta. The various laws and regulations
administered by the regulatory agencies affect corporate practices, expansion of
business, and provisions of services. Also, monetary and fiscal policies of the
United States directly affect bank loans and deposits and thus may affect the
Bancorp's earnings. The future impact of these policies and of the continuing
regulatory changes in the financial services industry cannot be predicted.
FIRREA
Under the Financial Institutions Reform, Recovery, and Enforcement Act
of 1989 ("FIRREA"), certain independent appraisal requirements are imposed upon
a bank's real estate lending activities, and certain loan-to-value restrictions
are imposed on a bank's real estate lending activities. The Bancorp's regulators
have promulgated regulations in these areas. Further, under FIRREA the failure
to meet capital guidelines could subject a bank to a variety of enforcement
remedies available to federal regulatory authorities, including termination of
deposit insurance by the FDIC.
FDICIA
The Federal Deposit Insurance Corporation Act of 1991 ("FDICIA"), which
became law in December, 1991, required each federal banking agency to revise its
risk-based capital standards to ensure that those standards take adequate
account of interest rate risk, concentration of credit risk and the risks of
non-traditional activities. In addition, pursuant to FDICIA, each federal
banking agency has promulgated regulations, specifying the levels at which a
financial institution would be considered "well capitalized", "adequately
capitalized", "under capitalized", "significantly under capitalized", or
"critically under capitalized", and to take certain mandatory and discretionary
supervisory actions based on the capital level of the institution.
Under the FRB's regulations implementing the prompt corrective action
provisions, an institution shall be deemed to be (i) "well capitalized" if it
has total risk-based capital of 10% or more, has a Tier I risk-based capital
ratio of 6% or more, has a leverage capital ratio of 5% or more and is not
subject to any order or final capital directive to meet and maintain a specific
capital level for any capital measure, (ii)"adequately capitalized" if it has a
total risk-based capital ratio of 8% or more, a Tier I risk-based ratio of 4% or
more and a leverage capital ratio of 4% or more (3% under certain circumstances)
and does not meet the definition of "well capitalized", (iii) "undercapitalized"
if it has a total risk-based capital ratio that is less than 8%, a Tier I
risk-based capital ratio that is less than 4% or a leverage capital ratio that
is less than 4% (3% in certain circumstances), (iv) "significantly
undercapitalized" if it has a total risk-based capital ratio that is less than
6%, a Tier I risk-based capital ratio that is less than 3% or a leverage capital
ratio that is less than 3% and (v) "critically undercapitalized" if it has a
ratio of tangible equity to total assets that is equal to or less than 2%. In
addition, under certain circumstances, a federal banking agency may reclassify a
well capitalized institution as adequately capitalized and may require an
adequately capitalized institution or an undercapitalized institution to comply
with supervisory actions as if it were in the next lower category (except that
the FDIC may not reclassify a significantly undercapitalized institution as
critically undercapitalized). Immediately upon becoming undercapitalized, or
upon failing to submit or implement a capital plan as required, an institution
shall become subject to various regulatory restrictions.
FDICIA also contained the Truth in Savings Act, which requires certain
disclosures to be made in connection with deposit accounts offered to consumers.
The FRB has adopted regulations implementing the provisions of the Truth in
Savings Act.
In addition, significant provisions of FDICIA required federal banking
regulators to draft standards in a number of other important areas to assure
bank safety and soundness, including internal controls, information systems and
internal audit systems, credit underwriting, asset growth, compensation, loan
documentation and interest rate exposure. FDICIA also required the regulators to
establish maximum ratios of classified assets to capital, and minimum earnings
sufficient to absorb losses without impairing capital. The legislation also
contained other provisions which restricted the activities of state-chartered
banks, amended various consumer banking laws, limited the ability of "under
capitalized" banks to borrow from the Federal Reserve's discount window, and
required federal banking regulators to perform annual onsite bank examinations
and set standards for real estate lending.
REGULATORY CAPITAL REQUIREMENT
The Federal Reserve Board mandates minimum capital requirements for bank
holding companies. In 1990, the FRB adopted a risk based capital measure to
determine capital adequacy. Under this system all balance sheet assets are
assigned a certain risk category with a prescribed weight. Off-balance sheet
items, such as loan commitments and letters of credit, also are classified by
risk with duly assigned weights. The sum of the balance sheet and off balance
sheet amounts multiplied by their respective risk weight factors must then meet
a required minimum capital test. Tier 1 capital is defined as stockholders'
equity minus certain intangible assets. Tier 2 capital includes a certain amount
of the allowance for loan losses. At December 31, 1998, the minimum total
capital ratio (Tier 1 plus Tier 2) required was 8 percent. Southern Financial's
Tier 1 ratio of 13.4% and its total capital ratio of 14.8% were well in excess
of minimum requirements. The FRB also utilizes a Tier 1 leverage ratio in
conjunction with its risk based capital standard. This ratio measures Tier 1
capital as a percent of total average assets less intangible assets. The minimum
leverage ratio is 4 percent. At December 31, 1998, the Bancorp's leverage ratio
was 8%.
DEPOSIT INSURANCE
The deposits of the Bancorp are currently insured to a maximum of
$100,000 per depositor, subject to certain aggregation rules. The FDIC has
implemented a risk-related assessment system for deposit insurance premiums. All
depository institutions have been assigned to one of nine risk assessment
classifications based on certain capital and supervisory measures. The Bancorp's
deposits are subject to the rates of the Savings Associations Insurance Fund
("SAIF") since Southern Financial converted to a commercial bank from a federal
savings bank on December 1, 1995. Based on the Bancorp's current risk
classification, the Bancorp is required to pay the minimum SAIF assessment.
FEDERAL HOME LOAN BANK SYSTEM
Southern Financial is a member of the Federal Home Loan Bank System
which consists of 12 district Federal Home Loan Banks ("FHLBs") with each
subject to supervision and regulation by the Federal Housing Finance Board. The
FHLBs provide a central credit facility for member institutions. The Bancorp, as
a member of the FHLB of Atlanta, is required to acquire and hold shares of
capital stock in that FHLB in an amount equal to at least 1% of the aggregate
principal amount of its unpaid residential mortgage loans, home purchase
contracts and similar obligations at the beginning of each year, or 5% of its
advances (borrowings) from the FHLB of Atlanta, whichever is greater. At
December 31, 1998, Southern Financial had an investment of $1.1 million in the
stock of the FHLB of Atlanta and was in compliance with these requirements.
Advances from the FHLB of Atlanta are secured by mortgage-backed
securities. Interest rates charged for advances vary depending upon maturity,
the cost of funds to the FHLB of Atlanta and the purpose of the borrowing. At
December 31, 1998, Southern Financial had $3.5 million outstanding in borrowings
from the FHLB of Atlanta.
FEDERAL RESERVE SYSTEM
The Federal Reserve Board of Governors requires all depository
institutions to maintain reserves against their transaction accounts (primarily
NOW and Super NOW checking accounts) and non-personal time deposits. Because
required reserves must be maintained in the form of vault cash or a
noninterest-bearing account at a Federal Reserve Bank, the effect of this
reserve requirement is to reduce the earning assets of Southern Financial
SUBSEQUENT EVENT
Southern Financial has signed a letter of intent in principal for a
merger with The Horizon Bank of Virginia. Southern Financial will issue .63
shares of its common stock in exchange for each share of common stock of The
Horizon Bank of Virginia. Subject to certain conditions including receipt of
regulatory approval and approval of the shareholders of Southern Financial and
The Horizon Bank of Virginia, closing of the merger is anticipated to occur in
the third quarter of 1999.
ITEM 2. PROPERTIES
OFFICES AND OTHER MATERIAL PROPERTIES
At December 31, 1998, the Bancorp conducted its business from its main
office in Warrenton, Virginia and ten branch offices. The following table sets
forth certain information with respect to the offices of the Bancorp as of
December 31, 1998:
=====================================================================================
Owned or Lease Expiration Date Facility
Office Location Leased Date Opened
=====================================================================================
Home Office:
37 E. Main Street Leased September February
Warrenton, VA 2003 1989
Branch Offices:
362 Elden Street Leased June April
Herndon, VA 2000 1986
101 W. Washington Street Leased June November
Middleburg, VA 2002 1987
33 W. Piccadilly Street Owned N/A November
Winchester, VA 1990
526 E. Market Street Leased June March
Leesburg, VA 2002 1992
4021 University Drive Owned N/A July
Fairfax, VA 1997
322 Lee Highway Leased August August
Warrenton, VA 2001 1994
2545 Q-18 Centreville Road Leased September April
Herndon, VA 2001 1995
13542 Minnieville Road Leased December April
Woodbridge, VA 2003 1995
1095 Millwood Pike Owned N/A July
Winchester, VA 1996
46910 Community Plaza Leased May April
Sterling, VA 2008 1998
=====================================================================================
ITEM 3. LEGAL PROCEEDINGS
Neither the Bancorp nor the Bank is a party to, nor is any of their
property the subject of, any material pending legal proceedings incidental to
the business of the Bancorp and its subsidiary other than those arising in the
ordinary course of business. Although the amount of any ultimate liability with
respect to such matters cannot be determined, in the opinion of management, any
such liability will not have a material adverse effect on the consolidated
financial position or results of operations of the Bancorp.
ITEM 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS
None.
PART II.
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
The information required herein is incorporated by reference from page
36 of the Annual Report.
ITEM 6. SELECTED FINANCIAL DATA.
The information required herein is incorporated by reference from page 1
of the Annual Report.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS.
The information required herein is incorporated by reference from pages 6
through 13 of the Annual Report.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK.
The information required herein is incorporated by reference from pages 11
through 13 of the Annual Report.
ITEM 8. FINANCIAL STATEMENTS.
The information required herein is incorporated by reference from pages 14
through 33 of the Annual Report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
PART III.
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT.
The information required herein is incorporated by reference from pages
3 through 8 of the definitive proxy statement of Southern Financial Bancorp,
Inc. filed on March 23, 1999 ("Definitive Proxy Statement").
ITEM 11. EXECUTIVE COMPENSATION.
The information required herein is incorporated by reference from pages 10
through 12 of the Definitive Proxy Statement.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The information required herein is incorporated by reference from pages 7
through 9 of the Definitive Proxy Statement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The information required herein is incorporated by reference from page 6
of the Definitive Proxy Statement.
PART IV.
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES, AND REPORTS ON
FORM 8-K.
(a) Documents filed as a part of the report:
(1) The following is an index to the financial statements of the
Registrant included in the Annual Report to Stockholders for the
year ended December 31, 1998, and incorporated herein by reference
in Item 8. The remaining information appearing in the Annual Report
to Stockholders is not deemed to be filed as part of this Report,
except as expressly provided herein.
Page(s) in
Annual Report
Independent Auditors' Report. 14
Balance Sheets:
December 31, 1998 and December 31, 1997. 15
Statements of Income:
Years Ended December 31, 1998, 1997 and 1996, 16
Statements of Comprehensive Income:
Years Ended December 31, 1998, 1997 and 1996 17
Statements of Changes in Stockholders' Equity:
Years Ended December 31, 1998, 1997 and 1996, 18
Statements of Cash Flows:
Years Ended December 31, 1998, 1997 and 1996, 19
Notes to Consolidated Financial Statements. 20 - 33
(2) All other schedules have been omitted as the required information is
either inapplicable or included in the Notes to Financial
Statements.
(3) Exhibits (listed numbers correspond to item 601 of Regulation S-K)
(3) Articles of Incorporation of Southern Financial Bancorp,
Inc., by reference to the Form S-4 Registration Statement
filed with the Securities and Exchange Commission on August
4, 1995, and By-Laws, by reference to Form S-4 Registration
Statement filed with the Securities and Exchange Commission
on August 4, 1995.
(4) Instruments Defining the Rights of Security Holders,
Including Indentures--Reference is made to Exhibit (3)
above.
(9) Voting Trust Agreement--Not applicable.
(11) Statement re Computation of Per Share Earnings--Reference
is made to Note 1 and Note 14 to Financial Statements, Page
21and Page 33, respectively, in Annual Report.
(12) Statement re Computation of Ratios--Not applicable.
(13) Pages 14-33 of Annual Report to Stockholders for the Year
Ended December 31, 1998.
(18) Letter re Change in Accounting Principles--Not applicable.
(21) Subsidiaries of the registrant:
Percentage of Voting
Jurisdiction of Securities Owned by
Name Incorporation the Parent
---- --------------- --------------------
Southern Financial Bank Virginia 100%
(22) Published Report Regarding Matters Submitted to Vote of
Security Holders--Not applicable.
(23) (a) Consent of KPMG LLP
(23) (b) Consent of Arthur Andersen LLP
(24) Power of Attorney - Not applicable
(28) Information from Reports Furnished to State Insurance
Regulatory Authorities - Not applicable
(b) No reports on Form 8-K were filed during the quarter ended December 31,
1998.
SIGNATURES
Pursuant to the requirement of Section 13 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.
SOUTHERN FINANCIAL BANCORP, INC.
By: /s/ Georgia S. Derrico
---------------------------------
Georgia S. Derrico
Chairman of the Board and Chief
Executive Officer
Dated: March 31, 1999
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below on the dates indicated.
Name Title Date
---- ----- ----
/s/ Georgia S. Derrico Director and Chairman of March 31, 1999
- ------------------------ the Board and Chief
Georgia S. Derrico Executive Officer
/s/ R. Roderick Porter Director and President and March 31, 1999
- ------------------------ Chief Operating Officer
R. Roderick Porter
/s/ David de Give Director and Senior Vice March 31, 1999
- ------------------------ President/Treasurer
David de Give
/s/ William H. Lagos Senior Vice President/Controller March 31, 1999
- ------------------------ (Principal Accounting Officer)
William H. Lagos
/s/ Virginia Jenkins Director March 31, 1999
- ------------------------
Virginia Jenkins
/s/ Neil J. Call Director March 31, 1999
- ------------------------
Neil J. Call
/s/ John L Marcellus, Jr. Director March 31, 1999
- ------------------------
John L. Marcellus, Jr.
/s/ Michael P. Rucker Director March 31, 1999
- ------------------------
Michael P. Rucker
INDEX TO EXHIBITS
Number and Descriptions
13 Southern Financial Bancorp, Inc.
December 31, 1998 Annual Report to Stockholders
23 (a) Consent of KPMG LLP
23 (b) Consent of Arthur Andersen LLP
27 Financial Data Schedule