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 March 31, 1997
- OR -
TRANSACTION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 0-20987
Grand Premier Financial Inc.
(Exact Name of Registrant as Specified in its Charter)
Delaware 36-4077455
State or Other Jurisdiction of (IRS Employer
Incorporation or Organization) Identification No.)
486 W. Liberty St., Wauconda, IL 60084-2489
(Address of Principal Executive Office) (Zip Code)
Registrant's telephone number, including area code: (847) 487-1818
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. Yes X
or No
The number of shares of the registrant's Common Stock outstanding on
April 30, 1997 was 20,002,563 shares.
GRAND PREMIER FINANCIAL INCORPORATED
FORM 10-Q - QUARTERLY REPORT
FOR QUARTER ENDED MARCH 31, 1997
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION Page
Item 1. Financial Statements
Consolidated Balance Sheets
March 31, 1997 (unaudited) and December 31, 1996. 1 - 2
Consolidated Statements of Income (unaudited)
Three Months Ended March 31, 1997 and 1996 3 - 4
Consolidated Statements of Cash Flow (unaudited)
Three Months Ended March 31, 1997 and 1996 5
Notes to Unaudited Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations. 7 - 8
PART II. OTHER INFORMATION
Item 6. A. Exhibits 9 - 10
B. Reports on Form 8-K 10
GRAND PREMIER FINANCIAL, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
(000's omitted
except share data)
March 31, December 31,
1997 1996
(Unaudited) (Audited)
Cash and non-interest bearing deposits $ 45,691 $ 49,441
Interest bearing deposits 1,557 3,114
Federal funds sold 10,030 13,400
Cash and cash equivalents 57,278 65,955
Securities available for sale at fair value 514,175 535,687
Securities purchased under resale agreements 6,331 4,405
Loans 1,001,416 966,324
Less: Unearned discount (1,012) (842)
Allowance for possible loan losses (9,867) (10,116)
Net loans 990,537 955,366
Bank premises and equipment 33,412 33,321
Excess cost over fair value of net
net assets acquired 18,088 18,489
Accrued interest receivable 12,610 12,264
Other assets 14,224 17,051
Total assets $1,646,655 $1,642,538
The accompanying notes are an integral
part of these financial statements.
GRAND PREMIER FINANCIAL, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(continued)
LIABILITIES AND STOCKHOLDERS' EQUITY
(000's omitted
except share data)
March 31, December 31,
1997 1996
(Unaudited) (Audited)
Liabilities
Non-interest bearing deposits $ 190,589 $ 211,015
Interest bearing deposits 1,197,909 1,206,379
Total deposits 1,388,498 1,417,394
Short-term borrowings 49,943 23,486
Long-term borrowings 30,000 30,000
Other liabilities 18,218 13,569
Total liabilities 1,486,659 1,484,449
Stockholders' equity
Preferred stock - $1 par value, 2,000,000
shares authorized:
Series B convertible, $1,000 stated value,
8.00%, 7,250 shares authorized, issued
and outstanding 7,250 7,250
Series C perpetual, $1,000 stated value,
8.00%, 2,000 shares authorized, issued
and outstanding 2,000 2,000
Common stock - $.01 par value
No of Shares 3/31/97 12/31/96
Authorized 30,000,000 30,000,000
Issued 20,002,563 19,983,679
Outstanding 20,002,563 19,983,679 200 200
Surplus 49,735 49,670
Retained earnings 93,274 89,154
Unrealized gain on securities available
for sale, net of tax 7,537 9,815
Stockholders' equity 159,996 158,089
Total liabilities &
stockholders' equity $1,646,655 $1,642,538
The accompanying notes are an integral
part of these financial statements.
GRAND PREMIER FINANCIAL, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(000's omitted
except per share data)
THREE MONTHS ENDED MARCH 31, 1997 AND 1996
1997 1996
Interest income
Interest and fees on loans $20,831 $19,216
Interest on securities
Taxable 6,097 6,761
Exempt from federal income tax 1,890 1,872
Other interest income 281 198
Total interest income 29,099 28,047
Interest expense
Interest on deposits 13,204 12,729
Interest on short-term borrowings 343 1,034
Interest on long-term debt 473 130
Total interest expense 14,020 13,893
Net interest income 15,079 14,154
Provision for loan losses 410 406
Net interest income after provision
for loan losses 14,669 13,748
Other income
Service charges on deposits 1,548 1,416
Other fees and operating income 943 1,130
Trust department income 847 788
Securities gains 3,440 81
Total other income 6,778 3,415
Other expenses
Salaries 5,446 5,157
Pension, profit sharing and other
employee benefits 1,216 1,315
Net occupancy of bank premises 1,287 1,095
Furniture and equipment 809 809
Amortization of excess cost over fair
value of net assets acquired 401 398
Other 3,281 3,465
Total other expenses 12,440 12,239
The accompanying notes are an integral
part of these financial statements.
GRAND PREMIER FINANCIAL, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(Continued)
(000's omitted
except per share data)
THREE MONTHS ENDED MARCH 31, 1997 AND 1996
1997 1996
Income before income taxes $ 9,007 $ 4,924
Applicable income taxes 3,100 1,393
Net income $ 5,907 $ 3,531
Weighted average common and common
equivalent shares outstanding 20,157,504 20,095,178
Earnings per common share $ .28 $ .16
The accompanying notes are an integral
part of these financial statements.
GRAND PREMIER FINANCIAL, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
(000's omitted)
THREE MONTHS ENDED MARCH 31, 1997 AND 1996
1997 1996
Cash flows from operating activities:
Net earnings $ 5,907 $ 3,531
Adjustments to reconcile net earnings to
net cash from operating activities:
Amortization net, related to:
Investment securities 144 385
Excess of cost over net assets acquired 401 398
Other 276 92
Depreciation 780 751
Provision for possible loan losses 410 406
Gain on sale related to:
Investment securities (3,440) (81)
Loans sold to secondary market (34) (96)
Change in:
Other assets 2,481 (1,628)
Other liabilities 6,033 1,732
Net cash from operating activities 12,958 5,490
Cash flows from investing activities:
Purchase of securities available for sale (21,911) (122,537)
Proceeds from:
Maturities of securities available for sale 33,497 69,878
Sales of securities available for sale 9,559 47,450
Net increase in loans (35,809) (11,089)
Purchase of bank premises and equipment (885) (581)
Net increase in securities under resale agreements (1,926) -
Net cash from investing activities (17,475) (16,879)
Cash flows from financing activities
Net decrease in deposits (28,896) (4,083)
Net increase (decrease) in short term borrowings 26,457 (1,506)
Net decrease in long term borrowings - (2,933)
Exercised stock options 65 16
Dividends paid (1,786) (1,527)
Net cash from financing activities (4,160) (10,033)
Net decrease in cash and cash equivalents (8,677) (21,422)
Cash and cash equivalents at beginning of year 65,955 77,303
Cash and cash equivalents at end of period $57,278 $ 55,881
The accompanying notes are an integral
part of these financial statements.
GRAND PREMIER FINANCIAL, INC.
AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
1. The accompanying consolidated financial statements include the
financial information of Grand Premier and its subsidiaries, all
of which are wholly owned. Significant intercompany balances
and transactions have been eliminated. The consolidated
financial statements as of March 31, 1997 and 1996 have not been
audited by independent public accountants. In the opinion of
management, the interim financial statements reflect all
adjustments (consisting only of adjustments of a normal
recurring nature) necessary for a fair presentation of Grand
Premier's financial position, results of operations and cash
flows for the interim periods presented. The results for such
interim periods are not necessarily indicative of the results
for the full year.
2. Earnings per share for the three months ended March 31, 1997 and
1996 were computed by dividing net income (less preferred stock
dividends) by the total of the average number of common shares
and stock options outstanding during such periods. The
aggregate amount of preferred stock dividends paid for the three
months ended March 31, 1997 and 1996 were $185,000 and $277,000,
respectively.
3. The merger of Northern Illinois Financial Corporation ("Northern
Illinois") and Premier Financial Services, Inc. ("Premier") with
and into the Company was consummated on August 22, 1996 and was
accounted for as a pooling of interests. Each outstanding share
of Northern Illinois and Premier common stock was converted into
4.25 shares and 1.116 shares of the Company common stock,
respectively. Total shares issued of the Company's common stock
was 19,940,181. Each of the 7,250 shares of Premier Series B
Preferred Stock was converted into one share of Grand Premier
Series B Preferred Stock, and each of the 2,000 shares of
Premier Series D Preferred Stock was converted into one share of
Grand Premier Series C Preferred Stock. The March 31, 1996
financial statements and information have been restated to
reflect the merger.
GRAND PREMIER FINANCIAL, INC.
AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATION
Grand Premier Financial, Inc. earned $5.9 million, ($.28 per share)
for the first quarter of 1997 versus $3.5 million, ($.16 per share)
for the same period in 1996. Net after tax securities gains in the
quarter just ended were just under $2.0 million, accounting for
approximately $.10 of the $.12 per share period to period increase.
Return on average assets and shareholders equity was 1.46% and
14.78%, respectively for the three months ended March 31, 1997,
compared to .90% and 9.19% for the same period in 1996.
Tax equivalent net interest income for the first quarter of 1997
was $16.2 million, as compared to $15.2 million in 1996. The
increase is a result of increased earning assets and asset mix.
Average earning assets were $1.51 billion as of March 31, 1997
versus $1.47 billion in 1996. Average loans for the first three
months of 1997 were $963.6 million, up 10.5% or $91.5 million from
$872.1 million reported for the same period in 1996. Grand
Premier's net interest margin was 4.34% at the end of the current
quarter, reflecting a 13 basis point improvement over the same
period in 1996. An analysis of the net interest margin components
for the first three months of 1997 as compared to the same period
in 1996 reflects yield on earning assets increasing five basis
points from 8.05% to 8.10% and cost of funds decreasing eight basis
points from 3.84% to 3.76%.
Grand Premier recorded a loan loss provision of $410,000 in the
first quarter of 1997, as compared to $406,000 in 1996. The
Company's provision for possible loan losses is determined as a
result of management's evaluation system for accessing the adequacy
of the allowance for possible loan losses. The system includes
assigning a risk grade to individual loans based on credit risk, as
well as reviewing overall loan portfolio composition, size,
economic factors and estimation of potential losses. At March 31,
1997 the allowance for possible loan losses totaled $9.9 million,
or .99% of gross loans, as compared to $10.1 million, or 1.05% of
gross loans at December 31, 1996.
Net charge-offs for the quarter ending March 31, 1997 were $659,000
as compared to $223,000 recorded for the same period in 1996.
Nonperforming loans (nonaccrual loans, loans past due 90 days or
more and still accruing and renegotiated loans) totaling $6.7
million at March 31, 1997, declined by $448,000 from $7.1 million
at December 31, 1996. The allowance for possible loan losses as a
percent of nonperforming loans was 146.7% and 141.0% as of March
31, 1997 and December 31, 1996, respectively.
Other income ( excluding net gains from sales of investment
securities) for the first three months of 1997 was essentially
unchanged from the $3.3 million recorded during the same period in
1996. Service charges on deposits and trust fees, up 8.7% from
one year ago, continue to be the primary components of noninterest
income. Other fees and operating income was $943,000 during the
first quarter of 1997, a decrease of $187,000 as compared to the
same period in 1996. Contributing to the decrease was a decline
in loans originated for resale to the secondary market, which were
negatively affected by rising mortgage loan rates during the
quarter and lower recorded gains from sales of other real estate
in 1997. Net investment security gains totaled $3.4 million at
March 31, 1997 as compared to $81,000 at March 31, 1996.
Total other expenses at March 31, 1997 increased modestly to $12.4
million, from $12.2 million at March 31, 1996. Salaries and
benefits, the largest component of other expense, totaled $6.7
million in 1997 an increase of $190,000 over $6.5 million in 1996.
The Company accrued an expense of $700,000 in 1996 for anticipated
severance payments to employees whose positions would be eliminated
as the Company completed consolidating its operations in early
1997. Three employee groups, including officials and managers,
technicians, and office and clerical totaling 46 employees were
identified in the restructuring plan. Severance payments to 45
employees totaling $705,000 were paid out in the first quarter of
1997, concluding the program. Employee benefits relating to the
accrued severance payments (which were not accrued for in 1996)
totaled $106,000 during the quarter ended March 31, 1997.
Income taxes for the first quarter of 1997 were $3.1 million
compared to $1.4 million in 1996. The increased tax provision is
due to a combination of an increase in taxable earnings and a
higher effective tax rate as the result of fully utilizing net
operating loss carry forwards for Illinois state income taxes
during 1996. The Company's effective tax rate for the period ended
March 31, 1997 was 34.4% versus 28.3% for the same period in 1996.
At March 31, 1997, total assets were $1.64 billion, unchanged from
year end 1996. In the same period, Grand Premier's net loans
increased $35.2 million (3.7%), securities available for sale
decreased $21.5 million (4.01%) and cash and cash equivalents
decreased $8.7 million (13.2%). Total deposits decreased $28.9
million (2.0%) from December 31, 1996, of which $20.4 million was
attributable to a decline in noninterest bearing deposits. The
majority of the decline in deposits was offset by a $26.5 million
increase in short-term borrowing consisting of federal funds
purchased and securities sold under agreements to repurchase.
GRAND PREMIER FINANCIAL, INC.
AND SUBSIDIARIES
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(A) Exhibits as follows
The following exhibits are filed with, or incorporated by
reference in, this report. Each management contract or
compensatory plan or arrangement required to be filed as an
exhibit to this report has been marked with an asterisk.
2.1 Agreement and Plan of Merger, dated January 22, 1996,
among Northern Illinois Financial Corporation, Premier
Financial Services, Inc and the Company (incorporated
by reference to Exhibit 2.1 to the Company's
Registration Statement on Form S-4, as amended, File
No. 333-03327), as amended by the First Amendment
thereto, dated March 18, 1996 (incorporated by
reference to Exhibit 2.2 to the Company's Registration
Statement on Form S-4, as amended, File No. 333-03327),
and the Second Amendment thereto, incorporated by
reference to Exhibit 2.3 to the Company's Current
Report on Form 8-K, dated August 22, 1996, Commission
File No. 0-20987).
3.1 Amended and Restated Certificate of Incorporation of
the Company (incorporated by reference to Appendix F to
the final proxy-statement prospectus included in the
Company's Registration Statement on Form S-4, as
amended, File No. 333-03327).
3.2 By-laws of the Company (incorporated by reference to
Exhibit 3.4 to the Company's Registration Statement on
Form S-4, as amended, File No. 333-03327).
4 Rights Agreement, dated as of July 8, 1996, between
Grand Premier Financial, Inc. and Premier Trust
Services, Inc. (incorporated by reference to the
Company's Registration Statement on Form S-4, as
amended, File No. 333-03327).
10.1* Form of Change in Control Agreement, dated October
(2)/(8), 1996, entered into between the Company and
each of Richard L Geach, David L. Murray, Kenneth A.
Urban, Steven E. Flahaven and Scott Dixon.
10.2* Form of Change in Control Agreement, dated October
(2)/(8), 1996, entered into between the Company and
each of Robert Hinman, Alan Emerick, Jack Emerick,
Joseph Esposito, William Theobald, Reid French, Larry
O'Hara and Ralph Zicco.
10.3* Grand Premier Financial, Inc. 1996 Non-Qualified Stock
Option Plan (incorporated by reference to Exhibit 4.1
to the Company's Registration Statement on Form S-8,
File No. 333-11663).
10.4* Premier Financial Services, Inc. 1996 Non-Qualified
Stock Option Plan (incorporated by reference to Exhibit
4.2 to Post-Effective Amendment No. 1 on Form S-8 to
the Company's Registration Statement on Form S-4, File
No. 333-03327).
10.5* Premier Financial Services, Inc. 1988 Non-Qualified
Stock Option Plan (incorporated by reference to Exhibit
4.3 to Post-Effective Amendment No. 1 on Form S-8 to
the Company's Registration Statement on For S-4, File
No. 333-03327).
10.6* Premier Financial Services, Inc. Senior Leadership and
Directors Deferred Compensation Plan, as amended
(incorporated by reference to Exhibit 4.1 to the
Company's Registration Statement on Form S-8, File No.
333-11645).
10.7* Consulting Agreement, dated February, 17, 1995, between
Howard A. McKee and Grand National Bank (incorporated
by reference to Exhibit 10.1 to the Company's
Registration Statement on Form S-4, as amended, File
No. 333-03327).
10.8* Grand Premier Financial, Inc. Deferred Compensation
Plan (incorporated by reference to Exhibit 10.8 of the
Company's 1996 Form 10-K, File No. 0-20987).
10.9* Grand Premier Financial, Inc. Savings and Stock Plan
and Trust (incorporated by reference to Exhibit 10.9 of
the Company's 1996 Form 10-K, File No. 0-20987).
11. Statement re computation of per share earnings (See
Note 2 to the Consolidated Financial Statements for the
three months ended March 31, 1997).
27. Financial Data Schedule, for the three months ended
March 31, 1997
(B) Reports on Form 8-K
No Form 8-K was required to be filed during the quarter ended
March 31, 1997 as there were no events or transactions to be
reported.
GRAND PREMIER FINANCIAL, INC.
AND SUBSIDIARIES
SIGNATURES
Pursuant to the requirements of the Securities Act of 1934, the
Registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
GRAND PREMIER FINANCIAL, INC
(Registrant)
May 9, 1997 /s/ David L. Murray
Date David L. Murray, Executive Vice President
and Chief Financial Officer
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