SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 For the Fiscal Year Ended December 31, 1996 containing only
financial statements pursuant to Rule 15d-2.
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission File Number 0-22103
HEMLOCK FEDERAL FINANCIAL CORPORATION
------------------------------------------------------
(Exact Name of Registrant as Specified in its Charter)
Delaware 36-4126192
- -------------------------------------------- ----------------------
(State or Other Jurisdiction (I.R.S. Employer
of Incorporation or Organization) Identification Number)
5700 West 159th Street, Oak Forest, Illinois 60452
- -------------------------------------------- ----------------------
(Address of Principal Executive Offices) Zip Code
Registrant's telephone number, including area code: (708) 687-9400
--------------
------------
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 $.01 per share
--------------------------------------
(Title of Class)
Indicate by check mark whether the Registrant (1) filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding twelve months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
requirements for the past 90 days. YES [ ] NO [X].
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K (ss. 229.405 of this chapter) is not contained herein, and
will not be contained, to the best of Registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III of this
Form 10-KSB or any amendment to this Form 10-KSB. [X]
As of May 5, 1997, the Registrant had 2,076,325 shares of Common Stock
issued and outstanding.
The aggregate market value of the voting stock held by non-affiliates of
the Registrant, computed by reference to the average of the bid and asked price
of such stock as of May 5, 1997 was $23,213,047. (The exclusion from such amount
of the market value of the shares owned by any person shall not be deemed an
admission by the Registrant that such person is an affiliate of the Registrant.)
DOCUMENTS INCORPORATED BY REFERENCE
None.
<PAGE>
HEMLOCK FEDERAL BANK FOR SAVINGS
Oak Forest, Illinois
FINANCIAL STATEMENTS
December 31, 1996, 1995, and 1994
CONTENTS
REPORT OF INDEPENDENT AUDITORS........................................ 1
FINANCIAL STATEMENTS
STATEMENTS OF FINANCIAL CONDITION................................ 2
STATEMENTS OF INCOME............................................. 3
STATEMENTS OF CHANGES IN EQUITY.................................. 4
STATEMENTS OF CASH FLOWS......................................... 5
NOTES TO FINANCIAL STATEMENTS.................................... 7
<PAGE>
REPORT OF INDEPENDENT AUDITORS
Board of Directors
Hemlock Federal Bank for Savings
Oak Forest, Illinois
We have audited the accompanying statements of financial condition of Hemlock
Federal Bank for Savings, as of December 31, 1996 and 1995, and the related
statements of income, changes in equity, and cash flows for each of the three
years in the period ended December 31, 1996. These financial statements are the
responsibility of the Bank's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Hemlock Federal Bank for
Savings as of December 31, 1996 and 1995, and the results of its operations and
its cash flows for each of the three years in the period ended December 31,
1996, in conformity with generally accepted accounting principles.
/s/ Crowe, Chizek and Company LLP
---------------------------------
Crowe, Chizek and Company LLP
Oak Brook, Illinois
February 27, 1997
1.
<PAGE>
HEMLOCK FEDERAL BANK FOR SAVINGS
STATEMENTS OF FINANCIAL CONDITION
December 31, 1996 and 1995
- --------------------------------------------------------------------------------
1996 1995
---- ----
ASSETS
Cash and due from bank $ 1,770,710 $ 3,143,758
Interest-bearing deposits in financial institutions 15,639,183 10,157,563
------------ ------------
Cash and cash equivalents 17,409,893 13,301,321
Securities available-for-sale (Note 2) 42,618,974 39,293,603
Securities held-to-maturity (fair value: 1996 --
$30,321,855; 1995 -- $45,748,852) (Note 2) 29,537,388 44,605,765
Loans receivable, net (Note 3) 53,536,294 45,232,108
Federal Home Loan Bank stock, at cost 901,000 849,400
Accrued interest receivable 788,234 1,106,528
Premises and equipment, net (Note 5) 1,043,015 1,044,406
Prepaid expenses and other assets 570,722 193,152
------------ ------------
Total assets $146,405,520 $145,626,283
============ ============
LIABILITIES AND EQUITY
Deposits (Note 6) $131,242,630 $130,740,879
Advance from Federal Home Loan Bank
(Note 7) 1,500,000 1,500,000
Advance payments by borrowers for taxes
and insurance 681,208 651,687
Accrued interest payable and other liabilities 866,460 856,393
------------ ------------
Total liabilities 134,290,298 133,748,959
Commitments and contingencies (Notes 12
and 13)
Equity
Retained earnings, substantially restricted
(Notes 10 and 11) 11,508,229 11,346,378
Net unrealized gain on securities
available-for-sale, net of income taxes
of $388,077 and $339,457 in 1996 and
1995, respectively (Note 2) 606,993 530,946
------------ ------------
Total equity 12,115,222 11,877,324
------------ ------------
Total liabilities and equity $146,405,520 $145,626,283
============ ============
- --------------------------------------------------------------------------------
See accompanying notes to financial statements.
2.
<PAGE>
HEMLOCK FEDERAL BANK FOR SAVINGS
STATEMENTS OF INCOME
Years ended December 31, 1996, 1995, and 1994
- --------------------------------------------------------------------------------
1996 1995 1994
---- ---- ----
Interest income
Loans $ 4,067,979 $3,382,711 $3,064,080
Mortgage-backed securities 4,616,636 4,904,228 4,508,129
Securities 598,774 897,783 400,103
Other interest-earning assets 853,340 749,956 528,914
----------- ---------- ----------
Total interest income 10,136,729 9,934,678 8,501,226
Interest expense
Deposits 5,493,859 5,268,569 4,435,674
Other borrowings 148,884 147,749 236,928
----------- ---------- ----------
Total interest expense 5,642,743 5,416,318 4,672,602
----------- ---------- ----------
Net interest income 4,493,986 4,518,360 3,828,624
Provision for loan losses (Note 3) 150,000 133,470 150,000
----------- ---------- ----------
Net interest income after provision
for loan losses 4,343,986 4,384,890 3,678,624
Noninterest income
Fees and service charges 379,286 352,251 308,179
Rental income 43,257 39,173 68,715
Loss on sale of securities (Note 2) (123,580) (160,680) (89,099)
Miscellaneous income 88,376 106,517 95,579
----------- ---------- ----------
Total noninterest income 387,339 337,261 383,374
Noninterest expense
Compensation and employee
benefits 1,681,233 1,634,726 1,536,264
Occupancy and equipment expenses 719,458 637,172 515,217
Data processing 225,715 201,561 203,875
Federal insurance premiums 302,264 298,137 301,887
SAIF special assessment 839,700 -- --
Gain on sale of real estate owned -- (223,409) --
Advertising and promotion 129,147 124,001 94,148
Other 589,407 538,759 528,093
----------- ---------- ----------
Total noninterest expense 4,486,924 3,210,947 3,179,484
----------- ---------- ----------
Income before provision for income taxes 244,401 1,511,204 882,514
Provision for income taxes (Note 10) 82,550 559,170 343,216
----------- ---------- ----------
Net income $ 161,851 $ 952,034 $ 539,298
============ ========== ==========
- --------------------------------------------------------------------------------
See accompanying notes to financial statements.
3.
<PAGE>
HEMLOCK FEDERAL BANK FOR SAVINGS
STATEMENTS OF CHANGES IN EQUITY Years
ended December 31, 1996, 1995, and 1994
- --------------------------------------------------------------------------------
Unrealized
Gains (Losses)
on Securities
Retained Available-
Earnings for-Sale Total
-------- -------- -----
Balance at January 1, 1994 $ 9,855,046 $ -- $ 9,855,046
Effect of adopting SFAS No. 115,
as of January 1, 1994, net of
income tax of $161,220 -- 252,165 252,165
Net income 539,298 -- 539,298
Decrease in unrealized gain on
securities available-for-sale, net
of income tax of $(167,206) -- (267,558) (267,558)
----------- --------- -----------
Balance at December 31, 1994 10,394,344 (15,393) 10,378,951
Net income 952,034 -- 952,034
Reclassification of securities from,
held-to-maturity to available-for-
sale, net of tax of $54,498 (Note 2) -- 86,178 86,178
Change in unrealized loss on
securities available-for-sale, net
of income tax of $290,945 -- 460,161 460,161
----------- --------- -----------
Balance at December 31, 1995 11,346,378 530,946 11,877,324
Net income 161,851 -- 161,851
Change in unrealized gain
on securities available-for-sale,
net of income tax of $48,620 -- 76,047 76,047
----------- --------- -----------
Balance at December 31, 1996 $11,508,229 $ 606,993 $12,115,222
=========== ========= ===========
- --------------------------------------------------------------------------------
See accompanying notes to financial statements.
4.
<PAGE>
HEMLOCK FEDERAL BANK FOR SAVINGS
STATEMENTS OF CASH FLOWS
Years ended December 31, 1996, 1995, and 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Cash flows from operating activities
Net income $ 161,851 $ 952,034 $ 539,298
Adjustments to reconcile net income to net
cash provided by operating activities
Depreciation 141,373 133,588 158,146
Amortization of premiums and discounts
on investment and mortgage-backed
securities, net 181,169 745,790 1,638,259
Net loss on sale of securities 123,580 160,680 89,099
Provision for loan losses 150,000 133,470 150,000
FHLB stock dividends -- (12,800) --
Change in deferred income taxes (10,233) 112,540 2,517
Gain on sale of REO -- (223,409) --
(Increase) decrease in accrued
interest receivable 318,294 (222,139) 110,391
Increase (decrease) in accrued
interest payable and other liabilities (38,553) 18,273 (119,225)
Decrease in deferred loan fees (86,295) (66,432) (33,200)
(Increase) decrease in other assets (367,337) 233,228 (84,790)
------------ ------------ ------------
Net cash provided by operating activities 573,849 1,964,823 2,450,495
Cash flows from investing activities
Purchase of securities available-for-sale (30,473,624) (39,682,993) (29,719,559)
Proceeds from sales of
securities available-for-sale 7,620,716 4,913,964 4,914,990
Proceeds from sales of securities held-
to-maturity -- 575,152 --
Principal payments on mortgage-backed
securities and collateralized mortgage
obligations 22,135,875 22,439,602 38,475,954
Purchase of securities held-to-maturity (325,043) (5,109,961) (33,254,477)
Proceeds from maturities and calls of securities 12,605,000 19,000,000 19,252,875
Proceeds from redemption of FHLB stock -- -- 154,200
Purchase of FHLB stock (51,600) -- --
Net increase in loans (8,367,891) (7,640,586) (734,594)
Property and equipment expenditures (139,982) (95,686) (54,320)
Real estate owned expenditures -- -- (56,955)
Proceeds from sale of real estate owned -- 223,409 473,292
------------ ------------ ------------
Net cash provided by (used in) investing
activities 3,003,451 (5,377,099) (548,594)
Cash flows from financing activities
Net increase (decrease) in deposits 501,751 (29,886) (1,811,876)
Increase (decrease) in advance payments by
borrowers for taxes and insurance 29,521 (83,089) 105,854
Repayment of FHLB advances -- -- (1,500,000)
------------ ------------ ------------
Net cash provided by (used in) financing
activities 531,272 (112,975) (3,206,022)
------------ ------------ ------------
</TABLE>
- --------------------------------------------------------------------------------
(Continued)
5.
<PAGE>
HEMLOCK FEDERAL BANK FOR SAVINGS
STATEMENTS OF CASH FLOWS
Years ended December 31, 1996, 1995, and 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Net increase (decrease) in cash and cash equivalents $ 4,108,572 $ (3,525,251) $ (1,304,121)
Cash and cash equivalents at beginning of year 13,301,321 16,826,572 18,130,693
------------ ------------ ------------
Cash and cash equivalents at end of year $ 17,409,893 $ 13,301,321 $ 16,826,572
============ ============ ============
Supplemental disclosures of cash flow information
Cash paid during the year for
Interest $ 5,630,979 $ 5,395,870 $ 4,668,130
Income taxes 316,000 370,880 460,864
Supplemental schedule of noncash
investing activities
Transfer of debt securities to available-for-sale from
held-to-maturity on December 31, 1995 -- 9,310,934 --
Transfer of debt securities on January 1, 1994 to
Held-to-maturity -- -- 70,394,259
Available-for-sale -- -- 17,074,080
</TABLE>
- --------------------------------------------------------------------------------
See accompanying notes to financial statements.
6.
<PAGE>
HEMLOCK FEDERAL BANK FOR SAVINGS
NOTES TO FINANCIAL STATEMENTS
December 31, 1996, 1995, and 1994
- --------------------------------------------------------------------------------
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Operations: Hemlock Federal Bank for Savings (the Bank) is a
federally-chartered mutual savings bank and member of the Federal Home Loan Bank
(FHLB) system which maintains insurance on deposit accounts with the Savings
Association Insurance Fund (SAIF) of the Federal Deposit Insurance Corporation.
Use of Estimates in the Preparation of Financial Statements: The preparation of
financial statements in conformity with generally accepted accounting principles
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts of
income and expenses during the reporting period. Actual results could differ
from those estimates. The collectibility of loans, fair value of financial
instruments, and status of contingencies are particularly subject to change.
Securities: Securities are classified as held-to-maturity when the Bank has the
positive intent and ability to hold those securities to maturity. Accordingly,
they are stated at cost, adjusted for amortization of premiums and accretion of
discounts. All other securities are classified as available-for-sale since the
Bank may decide to sell those securities in response to changes in market
interest rates, liquidity needs, changes in yields or alternative investments,
and for other reasons. These securities are carried at fair value with
unrealized gains and losses charged or credited, net of income taxes, to a
valuation allowance included as a separate component of equity. Realized gains
and losses on disposition are based on the net proceeds and the adjusted
carrying amounts of the securities sold, using the specific identification
method.
Loans Receivable: Loans receivable are stated at unpaid principal balances, less
the allowance for loan losses and deferred loan origination fees and discounts.
Allowance for Loan Losses: Because some loans may not be repaid in full, an
allowance for loan losses is maintained. Increases to the allowance are recorded
by a provision for loan losses charged to expense. Estimating the risk of the
loss and the amount of loss on any loan is necessarily subjective. Accordingly,
the allowance is maintained by management at a level considered adequate to
cover losses that are currently anticipated based on past loss experience,
general economic conditions, information about specific borrower situations
including their financial position and collateral values, and other factors and
estimates which are subject to change over time. While management may
periodically allocate portions of the allowance for specific problem loan
situations, including impaired loans discussed below, the whole allowance is
available for any charge-offs that occur. Loans are charged off in whole or in
part when management's estimate of the undiscounted cash flows from the loan are
less than the recorded investment in the loan, although collection efforts
continue and future recoveries may occur.
- --------------------------------------------------------------------------------
(Continued)
7.
<PAGE>
HEMLOCK FEDERAL BANK FOR SAVINGS
NOTES TO FINANCIAL STATEMENTS
December 31, 1996, 1995, and 1994
- --------------------------------------------------------------------------------
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
In May 1993, the Financial Accounting Standards Board (FASB) issued Statement of
Financial Accounting Standards No. 114, "Accounting by Creditors for Impairment
of a Loan" (SFAS No. 114). SFAS No. 114 (as modified by No. 118, effective for
the Bank beginning January 1, 1995) requires the measurement of impaired loans,
based on the present value of expected cash flows discounted at the loan's
effective interest rate or, as a practical expedient, at the loan's observable
market price or the fair value of collateral if the loan is collateral
dependent. Under this standard, loans considered to be impaired are reduced to
the present value of expected future cash flows or to the fair value of
collateral, by allocating a portion of the allowance for loan losses to such
loans. If these allocations cause the allowance for loan losses to require
increase, such increase is reported as a provision for loan losses. The effect
of adopting the Statement was not material to the Bank's consolidated financial
position or results of operations during 1995.
Smaller balance homogenous loans are defined as residential first mortgage loans
secured by one-to-four-family residences, residential construction loans, and
share loans and are evaluated collectively for impairment. Commercial real
estate loans are evaluated individually for impairment. Normal loan evaluation
procedures, as described in the second preceding paragraph, are used to identify
loans which must be evaluated for impairment. In general, loans classified as
doubtful or loss are considered impaired while loans classified as substandard
are individually evaluated for impairment. Depending on the relative size of the
credit relationship, late or insufficient payments of 30 to 90 days will cause
management to reevaluate the credit under its normal loan evaluation procedures.
While the factors which identify a credit for consideration for measurement of
impairment, or nonaccrual, are similar, the measurement considerations differ. A
loan is impaired when the economic value estimated to be received is less than
the value implied in the original credit agreement. A loan is placed in
nonaccrual when payments are more than 90 days past due unless the loan is
adequately collateralized and in the process of collection. Although impaired
loan and nonaccrual loan balances are measured differently, impaired loan
disclosures under SFAS Nos. 114 and 118 are not expected to differ significantly
from nonaccrual and renegotiated loan disclosures.
Recognition of Income on Loans: Interest on real estate and certain consumer
loans is accrued over the term of the loans based upon the principal balance
outstanding. Where serious doubt exists as to the collectibility of a loan, the
accrual of interest is discontinued. Under SFAS No. 114 as amended by SFAS No.
118, the carrying values of impaired loans are periodically adjusted to reflect
cash payments, revised estimates of future cash flows, and increases in the
present value of expected cash flows due to the passage of time. Cash payments
representing interest income are reported as such. Other cash payments are
reported as reductions in carrying value, while increases or decreases due to
changes in estimates of future payments and due to the passage of time are
reported as adjustments to the provision for loan losses.
- --------------------------------------------------------------------------------
(Continued)
8.
<PAGE>
HEMLOCK FEDERAL BANK FOR SAVINGS
NOTES TO FINANCIAL STATEMENTS
December 31, 1996, 1995, and 1994
- --------------------------------------------------------------------------------
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Loan fees, net of direct loan origination costs, are deferred and amortized over
the contractual life of the loan as a yield adjustment.
Real Estate Owned: Real estate owned represents property obtained through
foreclosure or in settlement of debt obligations and is carried at the lower of
cost (fair value at date of foreclosure) or fair value less estimated selling
expenses. Valuation allowances are recognized when the fair value less selling
expenses is less than the cost of the asset. Changes in the valuation allowance
are charged or credited to income.
Premises and Equipment: Premises and equipment are stated at cost less
accumulated depreciation. Depreciation is computed using the straight-line
method over the estimated useful lives of the respective premises and equipment.
Maintenance and repairs are charged to expense as incurred and improvements
which extend the useful lives of assets are capitalized.
Income Taxes: The Bank records income tax expense based on the amount of taxes
due on its tax return, plus deferred taxes computed on the expected future tax
consequences of temporary differences between the carrying amounts and the tax
bases of assets and liabilities, using enacted tax rates.
Statement of Cash Flows: Cash and cash equivalents include cash on hand, amounts
due from banks, and daily federal funds sold. The Bank reports net cash flows
for customer loan transactions and deposit transactions.
NOTE 2 - SECURITIES
Securities consist of the following at:
<TABLE>
<CAPTION>
December 31, 1996
--------------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains (Losses) Value
---- ----- -------- -----
<S> <C> <C> <C> <C>
Securities available-for-sale
U.S. government agencies $ 7,803,830 $ 29,586 $ (6,814) $ 7,826,602
FHLMC stock 25,740 725,385 -- 751,125
FHLMC certificates 7,602,537 149,840 (10,654) 7,741,723
FNMA certificates 12,731,043 115,518 (25,272) 12,821,289
Collateralized mortgage obligations 13,460,754 45,003 (27,522) 13,478,235
----------- ---------- -------- -----------
$41,623,904 $1,065,332 $(70,262) $42,618,974
=========== ========== ======== ===========
</TABLE>
- --------------------------------------------------------------------------------
(Continued)
9.
<PAGE>
HEMLOCK FEDERAL BANK FOR SAVINGS
NOTES TO FINANCIAL STATEMENTS
December 31, 1996, 1995, and 1994
- --------------------------------------------------------------------------------
NOTE 2 - SECURITIES (Continued)
<TABLE>
<CAPTION>
December 31, 1996
--------------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains (Losses) Value
---- ----- -------- -----
<S> <C> <C> <C> <C>
Securities held-to-maturity
GNMA certificates $ 3,058,223 $ 106,010 $ -- $ 3,164,233
FHLMC certificates 10,093,881 412,675 (8,790) 10,497,766
FNMA certificates 13,916,127 253,453 (6,777) 14,162,803
Collateralized mortgage obligations 2,469,157 29,582 (1,686) 2,497,053
----------- ---------- -------- ------------
$29,537,388 $ 801,720 $(17,253) $ 30,321,855
=========== ========== ======== ============
</TABLE>
<TABLE>
<CAPTION>
December 31, 1995
--------------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains (Losses) Value
---- ----- -------- -----
<S> <C> <C> <C> <C>
Securities available-for-sale
U.S. government agencies $13,132,845 $ 31,211 $(38,945) $13,125,111
FHLMC stock 25,740 523,022 -- 548,762
FHLMC certificates 7,176,085 239,152 (680) 7,414,557
FNMA certificates 5,989,017 64,708 (3,913) 6,049,812
Collateralized mortgage obligations 12,099,513 69,016 (13,168) 12,155,361
----------- ---------- -------- -----------
$38,423,200 $ 927,109 $(56,706) $39,293,603
=========== ========== ======== ===========
Securities held-to-maturity
U.S. government agencies $ 1,500,000 $ 4,667 $ -- $ 1,504,667
GNMA certificates 3,810,140 140,316 -- 3,950,456
FHLMC certificates 12,954,233 523,207 (5,499) 13,471,941
FNMA certificates 17,591,634 396,545 (2,113) 17,986,066
Collateralized mortgage obligations 8,749,758 89,175 (3,211) 8,835,722
----------- ---------- -------- -----------
$44,605,765 $1,153,910 $(10,823) $45,748,852
=========== ========== ======== ===========
</TABLE>
On December 31, 1995, the Bank reclassified a portion of its securities
held-to-maturity to available-for-sale in accordance with "A Guide to
Implementation of Statement 115 on Accounting for Certain Investments in Debt
and Equity Securities", in order to improve the Bank's flexibility in meeting
liquidity needs. The amortized cost and unrealized gain on securities
transferred to available-for-sale were $9,310,934 and $140,676, respectively.
- --------------------------------------------------------------------------------
(Continued)
10.
<PAGE>
HEMLOCK FEDERAL BANK FOR SAVINGS
NOTES TO FINANCIAL STATEMENTS
December 31, 1996, 1995, and 1994
- --------------------------------------------------------------------------------
NOTE 2 - SECURITIES (Continued)
The amortized cost and estimated market value of debt securities at December 31,
1996 by contractual maturity, are shown below. Expected maturities may differ
from contractual maturities because borrowers may have the right to call or
prepay obligations with or without call or prepayment penalties.
Amortized Fair
Cost Value
---- -----
Securities available-for-sale
Due in one year or less $ 5,238,162 $ 5,252,206
Due after one year through five years 2,565,668 2,574,396
----------- -----------
7,803,830 7,826,602
FHLMC stock 25,740 751,125
Mortgage-backed securities and
collateralized mortgage obligations 33,794,334 34,041,247
----------- -----------
$41,623,904 $42,618,974
=========== ===========
Securities held-to-maturity consist entirely of mortgage-backed securities and
collateralized mortgage obligations at December 31, 1996.
At December 31, 1996 and 1995, all of the Bank's mortgage-backed and related
securities were guaranteed or insured by quasi-governmental agencies (e.g.,
GNMA, FNMA, FHLMC).
Sales of securities available-for-sale are summarized as follows:
For the Year Ended
December 31,
--------------------------------------------
1996 1995 1994
---- ---- ----
Proceeds $7,620,716 $4,913,964 $4,914,990
Gross losses 123,580 156,726 89,099
Sales of securities held-to-maturity are summarized as follows:
For the Year Ended
December 31, 1995
-----------------
Proceeds $575,152
Gross gains 2,026
Gross losses 5,980
- --------------------------------------------------------------------------------
(Continued)
11.
<PAGE>
HEMLOCK FEDERAL BANK FOR SAVINGS
NOTES TO FINANCIAL STATEMENTS
December 31, 1996, 1995, and 1994
- --------------------------------------------------------------------------------
NOTE 2 - SECURITIES (Continued)
On February 13, 1995, the Bank sold six securities classified as
held-to-maturity. These sales were permissible under the provisions of SFAS No.
115, since the securities had been paid down to less than 15% of the original
par value.
NOTE 3 - LOANS RECEIVABLE
Loans receivable consist of the following at:
December 31,
----------------------------
1996 1995
---- ----
First mortgage loans
Principal balances:
Secured by one-to-four-family residences $48,338,655 $39,088,166
Secured by multi-family 2,782,995 3,386,466
Secured by commercial real estate 573,278 1,101,429
----------- -----------
51,694,928 43,576,061
Less:
Loans in process -- 27,639
Net deferred loan origination (costs) fees (2,379) 83,916
----------- -----------
Total first mortgage loans 51,697,307 43,464,506
Consumer and other loans
Principal balances:
Home equity loans 2,114,104 1,980,641
Loans on deposits 169,101 157,703
Automobile loans 300,867 229,258
----------- -----------
Total consumer and other loans 2,584,072 2,367,602
Less allowance for loan losses 745,085 600,000
----------- -----------
$53,536,294 $45,232,108
=========== ===========
There were no impaired loans at December 31, 1996 or December 31, 1995.
Nonaccrual and renegotiated loans totaled approximately $0 and $579,000 at
December 31, 1996 and 1995, respectively. The approximate amounts of interest
income that would have been recorded under the original terms of such loans and
the interest income actually recognized are summarized below:
- --------------------------------------------------------------------------------
(Continued)
12.
<PAGE>
HEMLOCK FEDERAL BANK FOR SAVINGS
NOTES TO FINANCIAL STATEMENTS
December 31, 1996, 1995, and 1994
- --------------------------------------------------------------------------------
NOTE 3 - LOANS RECEIVABLE (Continued)
For the Year Ended
December 31,
----------------------------------
1996 1995 1994
---- ---- ----
Interest that would have been recorded $ -- $ 55,855 $ 60,972
Interest income recognized -- (50,057) (45,269)
-------- -------- --------
Interest income forgone $ -- $ 5,798 $ 15,703
======== ======== ========
The Bank is not committed to lend additional funds to debtors whose loans have
been modified.
Loans serviced for others consisted of approximately $1,931,000, $2,539,000, and
$3,165,000 at December 31, 1996, 1995, and 1994, respectively. These loans were
sold to the Federal Home Loan Mortgage Corporation.
The Bank's lending activities have been concentrated primarily in Cook County,
Illinois, where its main office is located. The largest portion of the Bank's
loans are originated for the purpose of enabling borrowers to purchase
residential real estate property secured by first liens on such property. At
December 31, 1996, approximately 89% of the Bank's loans were secured by
owner-occupied, one-to-four-family residential property. The Bank requires
collateral on all loans and generally maintains loan-to-value ratios of 80% or
less.
Activity in the allowance for loan losses is summarized as follows:
For the Year Ended
December 31,
--------------------------------------
1996 1995 1994
---- ---- ----
Balance at beginning of year $600,000 $469,126 $234,480
Provision charged to income 150,000 133,470 150,000
Charge-offs (5,315) (2,596) --
Recoveries 400 -- 84,646
-------- -------- --------
$745,085 $600,000 $469,126
======== ======== ========
- --------------------------------------------------------------------------------
(Continued)
13.
<PAGE>
HEMLOCK FEDERAL BANK FOR SAVINGS
NOTES TO FINANCIAL STATEMENTS
December 31, 1996, 1995, and 1994
- --------------------------------------------------------------------------------
NOTE 4 - REAL ESTATE OWNED
Activity in the allowance for losses for foreclosed real estate for the year
ended December 31, 1994 is summarized below:
Balance at beginning of year $ 827,363
Provision charged to income --
Charge-offs, net of recoveries (827,363)
---------
Balance at end of year $ --
=========
There was no activity during 1996 or 1995.
NOTE 5 - PREMISES AND EQUIPMENT
Premises and equipment consists of the following at:
December 31,
--------------------------
1996 1995
---- ----
Land $ 76,730 $ 76,730
Building and landscaping 1,464,915 1,521,237
Furniture, fixtures, and equipment 472,997 509,260
---------- -----------
Total cost 2,014,642 2,107,227
Accumulated depreciation (971,627) (1,062,821)
---------- -----------
$1,043,015 $ 1,044,406
========== ===========
NOTE 6 - DEPOSITS
Savings and certificate of deposit accounts with balances greater than $100,000
totaled $6,421,000 and $6,532,000 at December 31, 1996 and 1995, respectively.
Deposits greater than $100,000 are not insured.
- --------------------------------------------------------------------------------
(Continued)
14.
<PAGE>
HEMLOCK FEDERAL BANK FOR SAVINGS
NOTES TO FINANCIAL STATEMENTS
December 31, 1996, 1995, and 1994
NOTE 6 - DEPOSITS (Continued)
At December 31, 1996, scheduled maturities of certificates of deposit are as
follows:
1997 $49,618,286
1998 8,936,479
1999 3,991,614
2000 1,851,412
2001 and thereafter 497,613
-----------
$64,895,404
===========
NOTE 7 - ADVANCES FROM FEDERAL HOME LOAN BANK
Advances from the Federal Home Loan Bank of Chicago were as follows:
Interest
Maturity Date Rate 1996 1995
------------- ---- ---- ----
August 19, 1997 9.72% $1,500,000 $1,500,000
========== ==========
The Bank maintains a collateral pledge agreement covering secured advances
whereby the Bank has agreed to at all times keep on hand, free of all other
pledges, liens, and encumbrances, whole first mortgage loans on improved
residential property not more than 90-days delinquent aggregating no less than
167% of the outstanding secured advances from the Federal Home Loan Bank of
Chicago.
NOTE 8 - EMPLOYEE PROFIT SHARING PLAN
An employee profit sharing plan was approved by the Board of Directors effective
January 1, 1985. The plan covers employees having over one year of service (one
thousand working hours) and who are at least 21 years of age. Contributions to
the profit sharing plan are determined and approved annually by the Bank's Board
of Directors. Contributions of $107,791, $132,347, and $114,885 were approved
and funded for the years ended December 31, 1996, 1995, and 1994, respectively.
- --------------------------------------------------------------------------------
(Continued)
15.
<PAGE>
HEMLOCK FEDERAL BANK FOR SAVINGS
NOTES TO FINANCIAL STATEMENTS
December 31, 1996, 1995, and 1994
- --------------------------------------------------------------------------------
NOTE 9 - MONEY PURCHASE PLAN
A money purchase plan was approved by the Board of Directors effective January
1, 1993. The plan covers employees having over one year of service (one thousand
working hours) and who are at least 21 years of age. The Bank contributes an
amount equal to ten percent of participants' salaries. Contributions of $81,826,
$90,863, and $81,490 were funded for the years ended December 31, 1996, 1995,
and 1994, respectively. During 1996, the Board of Directors authorized the
termination of the Bank's money purchase plan.
NOTE 10 - INCOME TAXES
An analysis of the provision for income taxes consists of the following:
For the Year Ended
December 31,
---------------------------------------------
1996 1995 1994
---- ---- ----
Current
Federal $107,849 $413,908 $332,179
State (15,066) 32,722 8,520
Deferred (10,233) 112,540 2,517
-------- -------- --------
$ 82,550 $559,170 $343,216
======== ======== ========
The provision for income taxes differs from that computed at the statutory
corporate tax rate as follows:
<TABLE>
<CAPTION>
For the Year Ended
December 31,
-----------------------------------------------------
1996 1995 1994
--------------- ---------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Provision for federal
income taxes computed
at statutory rate of 34% $83,096 34.0% $513,809 34.0% $300,055 34.0%
State income taxes, net
of federal tax effect
and other (546) (.2) 45,361 3.0 43,161 4.9
------- ---- -------- ---- -------- ----
$82,550 33.8% $559,170 37.0% $343,216 38.9%
======= ==== ======== ==== ======== ====
</TABLE>
- --------------------------------------------------------------------------------
(Continued)
16.
<PAGE>
HEMLOCK FEDERAL BANK FOR SAVINGS
NOTES TO FINANCIAL STATEMENTS
December 31, 1996, 1995, and 1994
- --------------------------------------------------------------------------------
NOTE 10 - INCOME TAXES (Continued)
Deferred tax assets (liabilities) are comprised of the following:
December 31,
-----------------------
1996 1995
---- ----
Deferred loan fees $ -- $ 22,208
Loans, principally due to allowance for loan losses 163,593 107,344
--------- ---------
Total deferred tax assets 163,593 129,552
Unrealized gain on securities available-for-sale (388,077) (339,457)
Depreciation (39,582) (48,843)
Federal Home Loan Bank stock dividends (42,382) (42,382)
Deferred loan fees (19,526) --
Other (18,552) (5,009)
--------- ---------
Total deferred tax liabilities (508,119) (435,691)
--------- ---------
Net deferred tax liabilities $(344,526) $(306,139)
========= =========
The Bank has qualified under provisions of the Internal Revenue Code which
permit it to deduct from taxable income a provision for bad debts which differs
from the provision charged to income on the financial statements. Retained
earnings at December 31, 1996 and 1995 include approximately $3,114,000 for
which no deferred federal income tax liability has been recorded. Tax
legislation passed in August 1996 now requires all thrift institutions to deduct
a provision for bad debts for tax purposes based on actual loss experience and
recapture the excess bad debt reserve accumulated in the tax years after 1987.
The related amount of deferred tax liability which must be recaptured is
$156,000 and is payable over a six-year period beginning no later than 1998.
NOTE 11 - REGULATORY MATTERS
The Bank is subject to regulatory capital requirements administered by federal
regulatory agencies. Capital adequacy guidelines and prompt corrective action
regulations involve quantitative measures of assets, liabilities, and certain
off-balance-sheet items calculated under regulatory accounting practices.
Capital amounts and classifications are also subject to qualitative judgments by
regulators about components, risk weightings, and other factors, and the
regulators can lower classifications in certain cases. Failure to meet various
capital requirements can initiate regulatory action that could have a direct
material effect on the financial statements.
- --------------------------------------------------------------------------------
(Continued)
17.
<PAGE>
HEMLOCK FEDERAL BANK FOR SAVINGS
NOTES TO FINANCIAL STATEMENTS
December 31, 1996, 1995, and 1994
NOTE 11 - REGULATORY MATTERS (Continued)
The prompt corrective action regulations provide five classifications, including
well capitalized, adequately capitalized, undercapitalized, significantly
undercapitalized, and critically undercapitalized, although these terms are not
used to represent overall financial condition. If adequately capitalized,
regulatory approval is required to accept brokered deposits. If
undercapitalized, capital distributions are limited, as is asset growth and
expansion, and plans for capital restoration are required.
At year end, actual capital levels (in thousands) and minimum required levels
were:
<TABLE>
<CAPTION>
Minimum Required
to be Well
Minimum Required Capitalized
for Capital Under Prompt Corrective
Actual Adequacy Purposes Action Regulations
--------------- ----------------- -----------------------
1996 Amount Ratio Amount Ratio Amount Ratio
- ---- ------ ----- ------ ----- ------ -----
<S> <C> <C> <C> <C> <C> <C>
Total capital (to risk-weighted assets) $12,124 24.6% $3,936 8.0% $4,920 10.0%
Tier 1 (core) capital (to risk-weighted
assets) 11,508 23.4 1,968 4.0 2,952 6.0
Tier 1 (core) capital (to adjusted total
assets) 11,508 7.9 4,390 3.0 N/A N/A
Tangible capital (to adjusted total
assets) 11,508 7.9 2,195 1.5 N/A N/A
Tier 1 (leverage) capital (to average
total assets) 11,508 7.9 4,395 3.0 7,325 5.0
1995
- ----
Total capital (to risk-weighted assets) 11,925 25.6 3,704 8.0 4,630 10.0
Tier 1 (core) capital (to risk-weighted
assets) 11,346 24.5 1,852 4.0 2,778 6.0
Tier 1 (core) capital (to adjusted total
assets) 11,346 7.8 4,343 3.0 N/A N/A
Tangible capital (to adjusted total
assets) 11,346 7.8 2,172 1.5 N/A N/A
Tier 1 (leverage) capital (to average
total assets) 11,346 7.8 4,388 3.0 7,314 5.0
</TABLE>
At December 31, 1996, the most recent notification from the Office of Thrift
Supervision categorized the Bank as well capitalized under the regulatory
framework for prompt corrective action. There are no conditions or events since
that notification that management believes have changed the institution's
category.
Federal regulations require the Bank to comply with a Qualified Thrift Lender
(QTL) test which requires that 65% of assets be maintained in housing-related
finance and other specified assets. If the QTL test is not met, limits are
placed on growth, branching, new investments, FHLB advances, and dividends or
the institution must convert to a commercial bank charter. Management considers
the QTL test to have been met.
- --------------------------------------------------------------------------------
(Continued)
18.
<PAGE>
HEMLOCK FEDERAL BANK FOR SAVINGS
NOTES TO FINANCIAL STATEMENTS
December 31, 1996, 1995, and 1994
- --------------------------------------------------------------------------------
NOTE 12 - OFF-BALANCE-SHEET RISK AND CONCENTRATIONS OF CREDIT RISK
The Bank is party to financial instruments with off-balance-sheet risk in the
normal course of business of meeting the financing needs of its customers. These
financial instruments include commitments to fund loans and previously approved
unused lines of credit. The Bank's exposure to credit loss in the event of
nonperformance by the parties to these financial instruments is represented by
the contractual amount of the instruments. The Bank uses the same credit policy
for commitments as it uses for on-balance-sheet items. These financial
instruments are summarized as follows:
Contract Amount
December 31,
-------------------------
1996 1995
---- ----
Financial instruments whose contract amounts
represent credit risk
Commitments to extend credit, including
loans in process $1,223,000 $615,000
At December 31, 1996, commitments to extend credit, including loans in process,
consisted of $853,000 in fixed rate commitments. These commitments are due to
expire within 30 to 45 days of issuance and have rates ranging from 7.25% to
8.50%.
Financial instruments which potentially subject the Bank to concentrations of
credit risk include interest-bearing deposit accounts in other financial
institutions and loans. At December 31, 1996 and 1995, the Bank had deposit
accounts with balances totaling approximately $15,514,000 and $10,039,000,
respectively, at the Federal Home Loan Bank of Chicago. Concentrations of loans
are described in Note 3.
NOTE 13 - COMMITMENTS AND CONTINGENCIES
The Bank is, from time to time, a party to certain lawsuits arising in the
ordinary course of its business. The Bank believes that none of these lawsuits
would, if adversely determined, have a material adverse effect on its financial
condition, results of operations, or capital.
At December 31, 1996 and 1995, the Bank was obligated under noncancelable
operating leases for office space. Net rent expenses under operating leases,
including the proportionate share of taxes, insurance, and maintenance costs,
were approximately $89,000, $93,000, and $91,000 for the years ended December
31, 1996, 1995, and 1994, respectively. The lease for the Oak Lawn branch
expires April 1, 1997. In February 1997, management informed the building's
owner of their intention to renew the lease for an additional five-year period
expiring April 1, 2002. Management is in the process of renegotiating the Bank's
lease on the Chicago branch and is currently on a month-to-month lease with the
building's owner. Projected minimum rental payments under the terms of the
leases, not including taxes, insurance, and maintenance, are as follows at
December 31, 1996:
- --------------------------------------------------------------------------------
(Continued)
19.
<PAGE>
HEMLOCK FEDERAL BANK FOR SAVINGS
NOTES TO FINANCIAL STATEMENTS
December 31, 1996, 1995, and 1994
- --------------------------------------------------------------------------------
NOTE 13 - COMMITMENTS AND CONTINGENCIES (Continued)
1997 $ 46,725
1998 48,300
1999 48,300
2000 48,300
2001 and thereafter 60,375
--------
Total $252,000
========
The deposits of savings associations such as the Bank are presently insured by
the Savings Association Insurance Fund (SAIF), which, along with the Bank
Insurance Fund (BIF), is one of the two insurance funds administered by the
Federal Deposit Insurance Corporation (FDIC). Due to the inadequate
capitalization of the SAIF, a recapitalization plan was signed into law on
September 30, 1996 which required a special assessment of approximately .65% of
all SAIF-insured deposit balances as of March 31, 1995. The Bank paid $839,700
in November 1996.
NOTE 14 - FAIR VALUES OF FINANCIAL INSTRUMENTS
The approximate carrying amount and estimated fair value of financial
instruments consist of the following:
<TABLE>
<CAPTION>
(In thousands)
December 31, 1996 December 31, 1995
------------------------ ------------------------
Approximate Approximate
Carrying Estimated Carrying Estimated
Amount Fair Value Amount Fair Value
----------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
Financial Assets
- ----------------
Cash and cash equivalents $ 17,410 $ 17,410 $ 13,301 $ 13,301
Securities 72,156 72,941 83,900 85,042
Loans, net of allowance for loan losses 53,536 53,873 45,232 46,338
Federal Home Loan Bank stock 901 901 849 849
Accrued interest receivable 788 788 1,107 1,107
Financial Liabilities
- ---------------------
Interest-bearing demand deposits $(19,175) $(19,175) $(20,020) $(20,020)
Savings deposits (47,173) (47,173) (46,054) (46,054)
Time deposits (64,895) (65,047) (64,667) (64,841)
Advances from Federal Home
Loan Bank (1,500) (1,515) (1,500) (1,593)
Advance payments by borrowers
for taxes and insurance (681) (681) (652) (652)
Accrued interest payable (128) (128) (116) (116)
</TABLE>
- --------------------------------------------------------------------------------
(Continued)
20.
<PAGE>
HEMLOCK FEDERAL BANK FOR SAVINGS
NOTES TO FINANCIAL STATEMENTS
December 31, 1996, 1995, and 1994
- --------------------------------------------------------------------------------
NOTE 14 - FAIR VALUES OF FINANCIAL INSTRUMENTS (Continued)
For purposes of the above, the following assumptions were used:
Cash and Cash Equivalents: The estimated fair values for cash and cash
equivalents are based on their carrying values due to the short-term nature of
these assets.
Securities and Mortgage-backed Securities: The fair values of investment and
mortgage-backed securities are based on the quoted market value for the
individual security or its equivalent.
Loans: The estimated fair value for loans has been determined by calculating the
present value of future cash flows based on the current rate the Bank would
charge for similar loans with similar maturities, applied for an estimated time
period until the loan is assumed to be repriced or repaid.
Deposit Liabilities: The estimated fair value for time deposits has been
determined by calculating the present value of future cash flows based on
estimates of rates the Bank would pay on such deposits, applied for the time
period until maturity. The estimated fair values of interest-bearing demand and
savings deposits are assumed to approximate their carrying values as management
establishes rates on these deposits at a level that approximates the local
market area. Additionally, these deposits can be withdrawn on demand.
Advances from Federal Home Loan Bank: The fair value of the Federal Home Loan
Bank advance was determined by calculating the present value of future cash
flows using the current rate for an advance with a similar length to maturity.
Accrued Interest: The fair values of accrued interest receivable and payable are
assumed to equal their carrying values.
Off-Balance-Sheet Instruments: Off-balance-sheet items consist principally of
unfunded loan commitments. The fair value of these commitments is not material.
Other assets and liabilities of the Bank not defined as financial instruments,
such as property and equipment, are not included in the above disclosures. Also
not included are nonfinancial instruments typically not recognized in financial
statements such as the value of core deposits, loan servicing rights, customer
goodwill, and similar items.
While the above estimates are based on management's judgment of the most
appropriate factors, there is no assurance that if the Bank disposed of these
items on December 31, 1996 or 1995, the fair value would have been achieved,
because the market value may differ depending on the circumstances. The
estimated fair values at December 31, 1996 and 1995 should not necessarily be
considered to apply at subsequent dates.
- --------------------------------------------------------------------------------
(Continued)
21.
<PAGE>
HEMLOCK FEDERAL BANK FOR SAVINGS
NOTES TO FINANCIAL STATEMENTS
December 31, 1996, 1995, and 1994
- --------------------------------------------------------------------------------
NOTE 15 - ADOPTION OF PLAN OF CONVERSION
On September 10, 1996, the Board of Directors of the Bank, subject to regulatory
approval and approval by the members of the Bank, adopted a Plan of Conversion
to convert from a federal mutual savings bank to a federal stock savings bank
with the concurrent formation of a holding company and the adoption of a federal
thrift charter. The conversion is expected to be accomplished through the
amendment of the Bank's charter and the sale of the holding company's common
stock in an amount equal to the consolidated pro forma market value of the
holding company and the Bank after giving effect to the conversion. A
subscription offering of the shares of common stock is being offered initially
to the Bank's eligible deposit account holders, then to other members of the
Bank. Any shares of the holding company's common stock not sold in the
subscription offering will be offered for sale to the general public, giving
preference to the Bank's market area.
The Board of Directors of the Bank or the holding company intend to adopt an
Employee Stock Ownership Plan and various stock option and incentive plans,
subject to ratification by the stockholders of the holding company after
conversion, if such stockholder approval is required by any regulatory body
having jurisdiction to require such approval. In addition, the Board of
Directors is authorized to enter into employment contracts with key employees.
Simultaneous with the conversion, the Board of Directors of the Bank or the
holding company intend to establish a charitable foundation, subject to
depositor approval. The foundation will be a not-for-profit entity, initially
funded by a $1 million contribution from the Bank or holding company.
At the time of conversion, the Bank will establish a liquidation account in an
amount equal to its total net worth as of the latest statement of financial
condition appearing in the final prospectus. The liquidation account will be
maintained for the benefit of eligible depositors who continue to maintain their
accounts at the Bank after the conversion. The liquidation account will be
reduced annually to the extent that eligible depositors have reduced their
qualifying deposits. Subsequent increases will not restore an eligible account
holder's interest in the liquidation account. In the event of a complete
liquidation, each eligible depositor will be entitled to receive a distribution
from the liquidation account in an amount proportionate to the current adjusted
qualifying balances for accounts then held. The liquidation account balance is
not available for payment of dividends.
Conversion costs will be deferred and deducted from the proceeds of the shares
sold in the conversion. If the conversion is not completed, all costs will be
charged to expense. At December 31, 1996, $120,000 has been deferred.
- --------------------------------------------------------------------------------
22.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Section 15(d) 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.
HEMLOCK FEDERAL FINANCIAL CORPORATION
By: /s/ Maureen G. Partynski
-------------------------------------
Maureen G. Partynski, Chairman of the
Board and Chief Executive Officer
(Duly Authorized Representative)
Pursuant to the requirements of the Securities Act of 1934, this report has
been signed below by the following persons in the capacities and on the dates
indicated.
/s/ Maureen G. Partynski /s/ Michael R. Stevens
- ------------------------------------- -------------------------------------
Maureen G. Partynski, Chairman of the Michael R. Stevens, President and
Board and Chief Executive Officer Director
(Principal Executive Officer)
Date: May 8, 1997 Date: May 8, 1997
------------------------------- -------------------------------
/s/ Rosanne Pastorek-Belczak /s/ Charles Gjondla
- ------------------------------------- -------------------------------------
Rosanne Pastorek-Belczak, Director Charles Gjondla, Director
Date: May 8, 1997 Date: May 8, 1997
------------------------------- -------------------------------
/s/ Kenneth J. Bazarnik /s/ G. Gerald Schiera
- ------------------------------------- -------------------------------------
Kenneth J. Bazarnik, Director G. Gerald Schiera, Director
Date: May 8, 1997 Date: May 8, 1997
------------------------------- -------------------------------
<PAGE>
/s/ Jean M. Thornton
- -------------------------------------
Jean M. Thornton, Controller and
Treasurer (Principal Financial and
Accounting Officer)
Date: May 8, 1997
-------------------------------
