UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30,
1997.
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM ___ TO ___.
Commission file number 000-22469
LAFAYETTE BANCORPORATION
(Exact name of registrant as specified in its charter)
INDIANA 35-1605492
(State or other jurisdiction of I.R.S. Employer
incorporation or organization) Identification No.)
133 North 4th Street, Lafayette, Indiana 47902
(Address of principal executive offices) (Zip Code)
(765) 423-7100
(Registrant's telephone number, including area code)
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 1994 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days: Yes (x) No ( )
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date:
Class Outstanding at November 11, 1997
Common Stock, without par value 2,161,370 shares
LAFAYETTE BANCORPORATION
INDEX
PART I. FINANCIAL INFORMATION
Item 1.
Consolidated Balance Sheets -- September 30, 1997 and December 31, 1996
Consolidated Statements of Income -- Three Months Ended September 30, 1997 and
1996
Consolidated Statements of Income -- Nine Months Ended September 30, 1997 and
1996
Consolidated Statements of Cash Flows -- Nine Months Ended September 30, 1997
and 1996
Notes to Consolidated Financial Statements -- September 30, 1997
Item 2.
Management's Discussion and Analysis of Financial Condition and Results of
Operations
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits
11 Statement of Computation of Per Share Earnings
27 Financial Data Schedule
b) Reports on Form 8-K
SIGNATURES
ITEM 1.
LAFAYETTE BANCORPORATION
CONSOLIDATED BALANCE SHEETS
(Dollar amounts in thousands)
(Unaudited)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
September 30, December 31,
1997 1996
------------ -------------
<S> <C> <C>
ASSETS
Cash and due from banks $ 22,297 $ 21,330
Federal funds sold 9,300 8,050
-------------- -------------
Total cash and cash equivalents 31,597 29,380
Securities available-for-sale (at market) 67,237 88,206
Securities held-to-maturity, at cost (market value $5,308
and $6,147) 5,260 6,156
Loans held for sale 7,029 5,877
Loans 302,732 268,940
Less: Allowance for loan losses (3,338) (3,198)
-------------- -------------
Loans, net 299,394 265,742
Federal Home Loan Bank stock (at cost) 1,242 1,116
Premises, furniture and equipment, net 6,090 6,355
Accrued interest receivable and other assets 11,902 11,559
-------------- -------------
Total assets $ 429,751 $ 414,391
============== =============
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
Noninterest-bearing deposits $ 37,478 $ 43,579
Interest-bearing demand and savings deposits 139,998 135,883
Interest-bearing time deposits 170,821 162,088
-------------- -------------
Total deposits 348,297 341,550
Short-term borrowings 19,107 24,521
Long-term debt 19,981 9,265
Accrued interest payable and other liabilities 4,773 4,409
-------------- -------------
Total liabilities 392,158 379,745
Shareholders' equity
Common stock, no par value: 5,000,000 shares authorized;
2,173,570 shares issued; and 2,161,389 shares outstanding 1,976 1,976
Common stock to be distributed 198 -
Additional paid-in capital 24,555 19,368
Retained earnings 11,198 13,705
Unrealized gain (loss) on securities available-for-sale,
net of tax (($156) and ($204)) (237) (311)
Less: Treasury stock, at cost (12,181 and 10,923 shares) (97) (92)
-------------- -------------
Total shareholders' equity 37,593 34,646
-------------- -------------
Total liabilities and shareholders' equity $ 429,751 $ 414,391
============== =============
</TABLE>
See accompanying notes to consolidated financial
statements.
LAFAYETTE BANCORPORATION
CONSOLIDATED STATEMENTS OF INCOME
For the three months ended September 30, 1997 and 1996 (Dollar
amounts in thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Interest income
Loans $ 6,898 $ 5,820
Taxable securities 889 1,006
Tax exempt securities 182 234
Other 169 155
-------------- -------------
Total interest income 8,138 7,215
Interest expense
Deposits 3,505 3,299
Short-term borrowings 160 198
Long-term debt 278 123
-------------- -------------
Total interest expense 3,943 3,620
-------------- -------------
Net interest income 4,195 3,595
Provision for loan losses 120 60
-------------- -------------
Net interest income after provision for loan losses 4,075 3,535
Noninterest income
Income from fiduciary activities 221 201
Service charges on deposit accounts 321 295
Net realized gain on securities (4) -
Net gain on loan sales 226 115
Other service charges and fees 199 119
Other operating income 127 114
-------------- -------------
Total noninterest income 1,090 844
-------------- -------------
Noninterest expense
Salaries and employee benefits 1,866 1,645
Occupancy expenses, net 228 197
Equipment expenses 265 229
Other operating expenses 778 716
-------------- -------------
Total noninterest expense 3,137 2,787
-------------- -------------
Income before income taxes 2,028 1,592
Income taxes 723 530
-------------- -------------
Net income $ 1,305 $ 1,062
============== =============
Net income per share $ .60 $ .49
============== =============
See accompanying notes to consolidated financial
statements.
</TABLE>
LAFAYETTE BANCORPORATION
CONSOLIDATED STATEMENTS OF INCOME
For the nine months ended September 30, 1997 and 1996 (Dollar
amounts in thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Interest income
Loans $ 19,491 $ 16,551
Taxable securities 2,989 3,186
Tax exempt securities 612 683
Other 462 371
-------------- -------------
Total interest income 23,554 20,791
Interest expense
Deposits 10,403 9,381
Short-term borrowings 490 551
Long-term debt 562 384
-------------- -------------
Total interest expense 11,455 10,316
-------------- -------------
Net interest income 12,099 10,475
Provision for loan losses 270 180
-------------- -------------
Net interest income after provision for loan losses 11,829 10,295
Noninterest income
Income from fiduciary activities 631 605
Service charges on deposit accounts 915 809
Net realized gain on securities 27 64
Net gain on loan sales 507 277
Other service charges and fees 462 316
Other operating income 376 361
-------------- -------------
Total noninterest income 2,918 2,432
-------------- -------------
Noninterest expense
Salaries and employee benefits 5,426 4,659
Occupancy expenses, net 659 576
Equipment expenses 727 754
Other operating expenses 2,368 2,138
-------------- -------------
Total noninterest expense 9,180 8,127
-------------- -------------
Income before income taxes 5,567 4,600
Income taxes 1,942 1,563
-------------- -------------
Net income $ 3,625 $ 3,037
============== =============
Net income per share $ 1.68 $ 1.40
============== =============
</TABLE>
See accompanying notes to consolidated financial statements.
LAFAYETTE BANCORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the nine months ended September 30, 1997 and 1996
(Dollar amounts in thousands)
(Unaudited)
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Cash flows from operating activities
Net income $ 3,625 $ 3,037
Adjustments to reconcile net income to net cash
from operating activities
Depreciation 474 533
Unrealized loss on other real estate - 64
Premium amortization, net of discount accretion 223 210
Provision for loan losses 270 180
Net realized gain on securities (27) (64)
Net (gain) loss on :
Other real estate 22 -
Change in assets and liabilities:
Loans held for sale (1,152) (4,170)
Accrued interest receivable and other assets (582) (646)
Accrued interest payable and other liabilities 364 436
----------- -----------
Net cash from operating activities 3,217 (420)
Cash flows from investing activities
Purchase of securities available-for-sale (11,902) (23,430)
Proceeds from sales of securities available-for-sale 17,453 18,073
Proceeds from maturities of securities available-for-sale 15,390 13,011
Purchase of securities held-to-maturity (1,153) (4,430)
Proceeds from maturities of securities held-to-maturity 2,036 3,026
Loans made to customers, net of payments collected (33,922) (24,509)
Purchase of FHLB stock (126) (36)
Property and equipment expenditures (209) (1,457)
Proceeds from sales of other real estate 136 300
----------- -----------
Net cash from investing activities (12,297) (19,452)
Cash flows from financing activities
Net change in deposit accounts 6,747 228
Cash received in branch acquisition for liabilities
assumed, net of assets acquired - 16,298
Net change in short-term borrowings (5,414) 844
Proceeds from long-term debt 11,500 -
Payments on long-term debt (784) (1,054)
Dividends paid (747) (655)
Purchase of treasury stock (5) -
------------ -----------
Net cash from financing activities 11,297 15,661
Net change in cash and cash equivalents 2,217 (4,211)
Cash and cash equivalents at beginning of year 29,380 34,229
----------- -----------
Cash and cash equivalents at end of period $ 31,597 $ 30,018
=========== ===========
Supplemental disclosures of cash flow information Cash paid during the period
for:
Interest $ 11,556 $ 10,262
Income taxes 1,824 1,601
Non-cash investing activity
Loans transferred to other real estate $ - $ 99
</TABLE>
See accompanying notes to consolidated financial statements.
LAFAYETTE BANCORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1997
(Dollar amounts in thousands)
(Unaudited)
NOTE 1 - BASIS OF PRESENTATION
The significant accounting policies followed by Lafayette Bancorporation (the
"Corporation") for interim financial reporting are consistent with the
accounting policies followed for annual financial reporting. The consolidated
interim financial statements have been prepared in accordance with Generally
Accepted Accounting Principles and in accordance with instructions to Form 10-Q
and may not include all information and footnotes normally disclosed for full
annual financial statements. All adjustments which are, in the opinion of
management, necessary for a fair presentation of the results for the periods
reported have been included in the accompanying unaudited consolidated financial
statements and all such adjustments are of a normal recurring nature.
NOTE 2 - PER SHARE DATA
In September 1997, the Corporation declared a 10% stock dividend to shareholders
of record September 30, 1997. A total of 197,597 common shares were issued
November 1, 1997 in connection with this 10% stock dividend, and these shares
are reflected as common stock to be distributed in the September 30, 1997
balance sheet. The weighted average number of shares have been retroactively
restated for all stock dividends. The weighted average number of shares used in
calculating earnings and dividends per share amounts were 2,161,389 for the
three and nine months ending September 30, 1997 and 2,161,659 for the three and
nine months ending September 30, 1996.
NOTE 3 - SECURITIES
The amortized cost and estimated market values of securities are as follows at
September 30, 1997:
<TABLE>
<CAPTION>
Amortized Estimated
Cost Market Value
<S> <C> <C>
Securities Available-for-Sale
U.S. Government and its agencies $ 27,023 $ 26,913
Obligations of states and political subdivisions 10,326 10,375
Corporate obligations 250 250
Mortgage-backed and other asset-backed securities 30,031 29,699
----------- -----------
$ 67,630 $ 67,237
=========== ===========
Securities Held-to-Maturity
Obligations of states and political subdivisions $ 5,260 $ 5,308
=========== ===========
The amortized cost and estimated market values of securities are as follows at
December 31, 1996:
Amortized Estimated
Cost Market Value
Securities Available-for-Sale
U.S. Government and its agencies $ 36,116 $ 35,938
Obligations of states and political subdivisions 17,358 17,480
Corporate obligations 1,249 1,301
Mortgage-backed and other asset-backed securities 33,998 33,487
----------- -----------
$ 88,721 $ 88,206
=========== ===========
Securities Held-to-Maturity
Obligations of states and political subdivisions $ 6,156 $ 6,147
=========== ===========
</TABLE>
LAFAYETTE BANCORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1997
(Dollar amounts in thousands)
(Unaudited)
NOTE 4 - LOANS
Loans are comprised of the following:
<TABLE>
<CAPTION>
September 30, December 31,
1997 1996
<S> <C> <C>
Commercial and agricultural loans $ 119,012 $ 108,470
Residential real estate loans 127,111 104,547
Installment loans to individuals 56,609 54,924
Commercial paper - 999
---------------- ---------------
Total loans $ 302,732 $ 268,940
================ ===============
</TABLE>
NOTE 5 - ALLOWANCE FOR LOAN LOSSES
The activity in the allowance for loan losses is as follows:
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Balance, January 1 $ 3,198 $ 3,200
Provision charged to operations 270 180
Loans charged off (313) (414)
Recoveries on loans previously charged off 183 277
------------- --------------
Balance, September 30 $ 3,338 $ 3,243
============= ==============
</TABLE>
NOTE 6 - SHORT-TERM BORROWINGS
Short-term borrowings are comprised of the following:
<TABLE>
<CAPTION>
September 30, December 31,
1997 1996
<S> <C> <C>
Repurchase agreements $ 16,044 $ 23,497
Treasury tax and loan open-end note 3,063 1,024
---------------- ---------------
Total short-term borrowings $ 19,107 $ 24,521
================ ===============
</TABLE>
<PAGE>
ITEM 2.
LAFAYETTE BANCORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Dollar amounts
in thousands, except per share data)
Lafayette Bancorporation (the "Corporation") is a one-bank holding company
located in Lafayette, Indiana, and conducts business from thirteen offices in
Tippecanoe and White Counties, Indiana. The Corporation provides a wide range of
commercial and personal banking activities, including accepting deposits; making
commercial and consumer loans; originating mortgage loans; providing personal
and corporate trust services; providing investment advisory and brokerage
services; and providing auto, homeowners, and other insurance products.
RESULTS OF OPERATIONS
Net Income
The Corporation earned $1,305, or $.60 per share for the third quarter of 1997
compared to $1,062, or $.49 per share for the third quarter of 1996. Net income
for the nine months ended September 30, 1997 was $3,625, or $1.68 per share,
which was $588, or 19.4% greater than the $3,037, or $1.40 per share earned for
the same period in 1996. Higher net interest income and noninterest income,
offset by increases in certain noninterest expense categories, account for the
increase in the Corporation's net income.
Return on average assets (ROA) was 1.17% and 1.09% for the periods ending
September 30, 1997 and 1996, respectively, while return on average equity (ROE)
was 13.43% and 12.38% for those same nine months ending September 30, 1997 and
1996, respectively. For the quarter ending September 30, 1997 and 1996, return
on average assets was 1.24% and 1.11%, respectively, while return on average
equity was 14.07% and 12.80%, respectively, for those same time periods.
Net Interest Income
Net interest income is the most significant component of the Corporation's
earnings. Net interest income is the difference between interest and fees
realized on earning assets, primarily loans and securities, and interest paid on
deposits and other borrowed funds. The net interest margin is this difference
expressed as a percentage of average earning assets. Net interest income is
determined by several factors, including the volume of earning assets and
liabilities, the mix of earning assets and liabilities, and interest rates. For
the nine months ended September 30, 1997 and 1996, net interest income was
$12,099 and $10,475, respectively. This represents a $1,624, or 15.5% increase
over the prior year. Net interest income for the third quarter of 1997 was $600,
or 16.7% higher than for that same three month period ending September 30, 1996.
The increase in net interest income during 1997 is primarily attributable to
loan growth and a reduction in rates paid on certain deposits.
Interest income for the nine month period ending September 30, 1997 and 1996 was
$23,554 and $20,791, respectively. Interest income for the third quarter of 1997
was $923, or 12.8% greater than for that same quarter in 1996. Interest income
increased during 1997 primarily due to increased interest and fees on loans.
Interest and fees on loans increased $2,940, or 17.8%, to $19,491 for the first
nine months of 1997, compared to $16,551 for the first nine months of 1996. For
the third quarter of 1997, interest and fees on loans increased $1,078, or 18.5%
compared to the third quarter of 1996. Contributing to these increases was
$49,798, or 19.3% growth in the average balance of the Corporation's loan
portfolio from September 1996 to September 1997.
Total interest expense for the nine month period ending September 30, 1997 and
1996 was $11,455 and $10,316, respectively. For the third quarter of 1997, total
interest expense increased $323, or 8.9%, compared to the same 1996 time period.
Average deposit growth of approximately 9.9% from September 1996 to September
1997 contributed to the higher interest expense. In addition, interest expense
on long-term debt increased $178, or 46.4% from the prior year as a result of
additional current year Federal Home Loan Bank borrowings required to fund the
aforementioned loan growth.
The following table summarizes the Corporation's net interest income (on a
tax-equivalent basis) for each of the periods presented. A marginal federal
income tax rate of 34% for each period was used.
<TABLE>
<CAPTION>
Nine Months Change from
Ended September 30, Prior Period
1997 1996 Amount Percent
---- ---- ------ -------
<S> <C> <C> <C> <C>
Interest income $23,947 $21,173 $2,774 13.1%
Interest expense 11,455 10,316 1,139 11.0%
------ ------ ------
Net interest income $12,492 $10,857 $ 1,635 15.1%
======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
Three Months Change from
Ended September 30, Prior Period
1997 1996 Amount Percent
---- ---- ------ -------
<S> <C> <C> <C> <C>
Interest income $8,257 $7,349 $ 908 12.4%
Interest expense 3,943 3,620 323 8.9%
----- ----- -----
Net interest income $4,314 $3,729 $ 585 15.7%
====== ====== ======
</TABLE>
Net interest income, on a tax equivalent basis, for the first nine months of
1997 was $1,635, or 15.1% higher than for that same nine month period ending
September 30, 1996. For the third quarter of 1997, the net interest margin, on a
tax equivalent basis, was $585, or 15.7% higher than for the same 1996 time
period. The net interest margin, on a tax equivalent basis for the nine months
ending September 30, 1997 and 1996 was 4.44% and 4.28%, respectively. The
increase in the net interest margin in 1997 compared to 1996 was a result of the
changes that occurred in the rate and volume mix of the interest-bearing assets
and liabilities. Because loans are generally higher yielding than certain
securities in the investment security portfolio, a shift in earning assets has
resulted in a positive effect on net interest income. During the last year, the
Corporation's average loan portfolio increased approximately $49,798, or 19.3%,
while the average balance of investment securities declined approximately
$13,661, or 15.5%. The higher interest expense on long-term debt realized by the
Corporation during the year was offset by a reduction in interest rates paid on
interest-bearing deposit accounts, such as savings and certain certificates of
deposit, which resulted in a lower overall cost of funds to the Corporation.
Provision for Loan Losses and Asset Quality
The provision for loan losses represents charges made to earnings to maintain an
adequate allowance for loan losses. The allowance is maintained at an amount
believed by management to be sufficient to absorb losses inherent in the credit
portfolio. Management conducts, on a quarterly basis, a detailed evaluation of
the adequacy of the allowance.
The consolidated provision for loan losses was $270 and $180 for the first nine
months of 1997 and 1996, respectively. The provision for loan losses increased
$60 for the third quarter of 1997, compared to the same 1996 time period. The
increase in the provision for loan losses is attributable to the continued loan
growth the Corporation is experiencing. The allowance for loan losses at
September 30, 1997 was $3,338, or 1.10% of total loans compared to $3,198, or
1.19% of total loans at December 31, 1996. Net charge-offs were $130 and $137
for the first nine months of 1997 and 1996, respectively, a decrease of $7, or
5.1%. The third quarter of 1997 experienced a net recovery of $24, while that
same 1996 time period recorded $56 in net charge-offs.
Nonperforming loans include nonaccrual loans, restructured loans, and loans
delinquent 90 days or more. Loans are classified as nonaccrual when management
believes that collection of interest is doubtful, typically when payments are
past due 90 days, unless the loans are well secured and in the process of
collection.
The following table indicates the composition of nonperforming loans:
<TABLE>
<CAPTION>
September 30, December 31,
1997 1996
<S> <C> <C>
Loans past due 90 days or more $ 1,040 $ 735
Non-accrual loans 238 178
Restructured loans 443 482
---------------- ---------------
Total nonperforming loans $ 1,721 $ 1,395
================ ===============
</TABLE>
Management believes overall asset quality has not declined despite an increase
in the nonperforming loan totals. Loans past due 90 days or more increased $305
since December 31, 1996. This increase was the net result of adding two loans to
this category. The $60 net change in non-accrual loans is the effect of placing
one additional commercial loan on non-accrual status. Restructured loan totals
have declined slightly since December 31, 1996.
Noninterest Income and Expense
Noninterest income totaled $2,918 for the first nine months of 1997, compared to
$2,432 for that same period of 1996, an increase of $486, or 20.0%. Noninterest
income for the third quarter increased $246, or 29.1%.
Service charges on deposit accounts, which comprise the largest component of
noninterest income, were up for the first nine months of 1997 and up for the
third quarter of 1997 when compared to the same 1996 time periods. The increase
in service charge income was a result primarily in the increasing number of
fee-generating transactions originated from the two supermarket banking
facilities.
Net gain on loan sales originated and sold in the secondary mortgage market was
$507 and $277 for the first nine months of 1997 and 1996 respectively, an
increase of $230, or 83.0%. For the third quarter of 1997, net gain on loan
sales were $226, an increase of $111, or 96.5% from the prior year. The
continued strength of the local economy was a factor in the above increases. But
more importantly, additional loan originators and support staff were added to
this department, which led to increased loan origination production and
improvement in overall operational efficiencies within the department.
Other service charges and fees were $462 and $316 for the first nine months of
1997 and 1996, respectively, an increase of $146, or 46.2%. For the third
quarter of 1997, other service charges and fees increased $80, or 67.2% compared
to the prior year. ATM fee income was $117 higher than the previous year
primarily as a result of surcharges that were implemented on all non-bank
customer ATM transactions beginning in May 1997. These surcharge fees accounted
for $100, or 85.5% of the $117 increase.
Noninterest expense totaled $9,180 for the first nine months of 1997, compared
to $8,127 for that same period of 1996, an increase of $1,053, or 13.0%. Total
noninterest expense for the third quarter of 1997 was $350, or 12.6% higher than
the prior year.
Salary and employee benefits expense was $5,426 for the first nine months of
1997, an increase of $767, or 16.5%, from the $4,659 for the first nine months
of 1996. Total salaries and employee benefits for the third quarter of 1997 was
$1,866, a $221, or 13.4% increase from the 1996 amount. The largest component of
increase in this category was a $390 expense recorded year-to-date in connection
with the rising value of the stock appreciation rights. Along with normal
increases in salary and wage rates, increases were also experienced in
commissions paid, as the performance of both the secondary mortgage market and
investment center departments improved significantly over the previous year.
Occupancy expense was $659 for the first nine months of 1997, an increase of
$83, or 14.4%, compared to the first nine months of 1996. For the third quarter
of 1997, occupancy expense increased $31, or 15.7% compared to the prior year.
Contributing factors to higher 1997 costs were increased maintenance and
repairs, along with the full year effect of the operating costs associated with
the second supermarket banking facility and the Monticello branch acquired from
National City Bank during the third quarter of 1996.
Equipment expenses were $727 for the first nine months of 1997, a decrease of
$27, or 3.6%, compared to the $754 for the first nine months of 1996. For the
third quarter of 1997, equipment expense increased $36, or 15.7% from the prior
year. A large number of fixed assets became fully depreciated during the latter
part of 1996, which led to a significant decline in depreciation expense during
1997. This decrease in depreciation expense was partially offset by the current
rising costs of maintenance and repairs to equipment.
Other operating expenses were $2,368 for the first nine months of 1997, an
increase of $230, or 10.8%, compared to $2,138 for the first nine months of
1996. For the third quarter of 1997, other operating expenses increased $62, or
8.7% from the prior year. Advertising, telephone, postage, legal fees, and
goodwill amortization accounted for 72.2% of the cost increases incurred in this
particular category.
Income Taxes
Income taxes were $1,942 for the first nine months of 1997 compared to $1,563
for the first nine months of 1996, an increase of $379, or 24.2%. Compared to
the prior year, income taxes increased $193, or 36.4% for the third quarter of
1997. This increase can be attributed primarily to the increased earnings the
Corporation experienced.
FINANCIAL CONDITION
Total assets increased $15,360, or 3.7% to $429,751 at September 30, 1997
compared to $414,391 at December 31, 1996. The majority of the change was a
result of cash and cash equivalents increasing $2,217, along with a $33,652
increase in net loans and a $1,152 increase in loans held for sale, while
investment securities declined $21,865 during that same time period.
Total deposits increased $6,747, or 2.0%, to $348,297 at September 30, 1997,
compared to the total deposits reported nine months earlier. As of September 30,
1997, short-term borrowings decreased $5,414, or 22.1%, while long-term
borrowings increased $10,716, or 115.7% when compared to December 31, 1996
totals. The increase in long-term borrowings is attributable to $11,500 of
Federal Home Loan Bank borrowings for the purpose of funding the continued loan
growth of the Corporation.
Capital
The Corporation and Bank are subject to various regulatory capital guidelines as
required by federal and state banking agencies. These guidelines define the
various components of core capital and assign risk weights to various categories
of assets.
Tier 1 capital consists of shareholders' equity less goodwill, core deposit
intangibles, and the unrealized gain or loss on securities available-for-sale,
as defined by bank regulators. The definition of Tier 2 capital includes the
amount of allowance for loan losses which does not exceed 1.25% of gross risk
weighted assets. Total capital is the sum of Tier 1 and Tier 2 capital.
The minimum requirements under the capital guidelines are generally at least a
4.00% leverage ratio (Tier 1 capital divided by average assets less intangible
assets and unrealized gains/losses), a 4.00% Tier 1 risk-based capital ratio
(Tier 1 capital divided by risk-weighted assets), and a 8.00% total capital
ratio (Tier 1 capital plus Tier 2 capital divided by risk-weighted assets).
The Federal Deposit Insurance Corporation Improvement Act of 1991 (FDICIA)
requires federal regulatory agencies to define capital tiers. These are:
well-capitalized, adequately capitalized, undercapitalized, significantly
undercapitalized, and critically undercapitalized. Under these regulations, a
"well-capitalized" institution must achieve a Tier 1 risk-based capital ratio of
at least 6.00%, and a total capital ratio of at least 10.00%, and a leverage
ratio of at least 5.00% and not be under a capital directive order. Failure to
meet capital requirements can initiate regulatory action that could have a
direct material effect on the Corporation's financial statements. If only
adequately capitalized; regulatory approval is required to accept brokered
deposits. If undercapitalized, capital distributions, asset growth, and
expansion is limited, in addition to the institution being required to submit a
capital restoration plan.
Management believes the Corporation and the Bank met all the capital
requirements as of September 30, 1997 and December 31, 1996, and were well
capitalized under the guidelines established by the banking regulators. To be
well capitalized, the Corporation and Bank must maintain the prompt corrective
action capital guidelines described above.
At September 30, 1997 and December 31, 1996, management was not aware of any
current recommendations by banking regulatory authorities which, if they were to
be implemented, would have, or are reasonably likely to have, a material effect
on the Corporation's consolidated liquidity, capital resources or operations.
The Corporation's actual consolidated capital amounts and ratios are presented
in the following table. The Bank's actual capital amounts and ratios are not
materially different from the consolidated amounts below.
<TABLE>
<CAPTION>
September 30, December 31,
1997 1996
------------- ------------
<S> <C> <C>
Tier 1 capital
Shareholders' equity $ 37,593 $ 34,646
Less: Intangibles (895) (948)
Add/less: Unrealized loss/(gain) on securities 237 311
---------------- ---------------
TOTAL TIER 1 CAPITAL $ 36,935 $ 34,009
================ ===============
Total capital
Tier 1 capital $ 36,935 $ 34,009
Allowable allowance for loan losses 3,338 3,198
---------------- ---------------
TOTAL CAPITAL $ 40,273 $ 37,207
================ ===============
RISK WEIGHTED ASSETS $ 303,085 $ 280,860
================ ===============
AVERAGE ASSETS $ 419,239 $ 396,534
================ ===============
</TABLE>
<TABLE>
<CAPTION>
Actual ratios as of
September 30, December 31, Capital Adequacy Well-Capitalized
1997 1996 Requirement Requirement
---- ---- ----------- -----------
<S> <C> <C> <C> <C>
Tier I Capital
(to average assets) 8.81% 8.69% 4.00% 5.00%
Tier I Capital
(to risk
weighted assets) 12.19% 12.13% 4.00% 6.00%
Total Capital
(to risk
weighted assets) 13.29% 13.27% 8.00% 10.00%
Liquidity
</TABLE>
The consolidated statement of cash flows illustrates the elements which gave
rise to the change in the Corporation's cash and cash equivalents for the nine
months ended September 30, 1997 and 1996. Including net income of $3,625, the
net cash from operating activities for the first nine months of 1997 generated
$3,217 of available cash. Net cash from investing activities utilized $12,297 of
available cash, primarily as a result of funding $33,922 in net loans. An
increase in deposits and the proceeds from the net change in long-term debt
offset the net decrease in short-term borrowings to generate $11,297 in cash for
the Corporation from financing activities. Total cash inflows for the nine month
period in 1997 exceeded cash outflows by $2,217 resulting in a cash and cash
equivalent balance of $31,597 at September 30, 1997.
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
11 Statement of computation of per share earnings.
27 Financial Data Schedule for September 30, 1997
(b) Reports on Form 8-K
No Form 8-K was filed with the SEC during the quarter ended
September 30, 1997.
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly cause this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: November 11, 1997 By /s/ Robert J. Weeder
---------------------------------------
Robert J. Weeder
President
Date: November 11, 1997 By /s/ Marvin S. Veatch
---------------------------------------
Marvin S. Veatch
Controller
Exhibit 11
<TABLE>
Lafayette Bancorporation
Computation of Earnings Per Share (1)
<CAPTION>
Nine Months Nine Months
Ended September 30, Ended September 30,
1997 1996
---- ----
Fully Fully
Primary Diluted Primary Diluted
<S> <C> <C> <C> <C>
Average shares:
Outstanding Common Shares 2,161,389 2,161,389 2,161,659 2,161,659
Common Stock Equivalents:
Stock Options 106,753 106,753 78,593 78,593
Assumed Repurchase of Shares (92,218) (81,528) (74,742) (74,742)
-------- -------- -------- --------
Average Common and Common
Equivalent Shares Outstanding 2,175,924 2,186,614 2,165,510 2,165,510
Net Income $3,625,000 $3,625,000 $3,037,000 $3,037,000
---------- ---------- ---------- ----------
Earnings Per Share (2) $1.66 $1.66 $1.40 $1.40
===== ===== ===== =====
</TABLE>
(1) Average common shares and common stock equivalents have been restated for
all periods to reflect the 20% stock dividend in 1996 and the 10% stock dividend
declared September 15, 1997.
(2) Stock options are not materially dilutive and have been excluded from
earnings per share in the consolidated statements of income.
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
REGISTRANT'S UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS FOR THE NINE
MONTHS ENDED SEPTEMBER 30, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0001035373
<NAME> LAFAYETTE BANCORPORATION
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-1-1997
<PERIOD-END> SEP-30-1997
<CASH> 22,297
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 9,300
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 67,237
<INVESTMENTS-CARRYING> 5,260
<INVESTMENTS-MARKET> 5,308
<LOANS> 302,732
<ALLOWANCE> 3,338
<TOTAL-ASSETS> 429,751
<DEPOSITS> 348,297
<SHORT-TERM> 19,107
<LIABILITIES-OTHER> 4,773
<LONG-TERM> 19,981
0
0
<COMMON> 1,976
<OTHER-SE> 35,617
<TOTAL-LIABILITIES-AND-EQUITY> 429,751
<INTEREST-LOAN> 19,491
<INTEREST-INVEST> 3,601
<INTEREST-OTHER> 462
<INTEREST-TOTAL> 23,554
<INTEREST-DEPOSIT> 10,403
<INTEREST-EXPENSE> 11,455
<INTEREST-INCOME-NET> 12,099
<LOAN-LOSSES> 270
<SECURITIES-GAINS> 27
<EXPENSE-OTHER> 9,180
<INCOME-PRETAX> 5,567
<INCOME-PRE-EXTRAORDINARY> 5,567
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,625
<EPS-PRIMARY> 1.68
<EPS-DILUTED> 1.68
<YIELD-ACTUAL> 4.44
<LOANS-NON> 238
<LOANS-PAST> 1,040
<LOANS-TROUBLED> 443
<LOANS-PROBLEM> 2,509
<ALLOWANCE-OPEN> 3,198
<CHARGE-OFFS> 313
<RECOVERIES> 183
<ALLOWANCE-CLOSE> 3,338
<ALLOWANCE-DOMESTIC> 1,160
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 2,178
</TABLE>
