U.S. 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 MARCH 31, 2000.
[ ] 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 May 12, 2000
Common Stock, without par value 3,590,691 shares
<PAGE>
LAFAYETTE BANCORPORATION
INDEX
PART I. FINANCIAL INFORMATION
Item 1.
Consolidated Balance Sheets -- March 31, 2000 and December 31, 1999
Consolidated Statements of Income and
Comprehensive Income -- Three Months Ended March 31, 2000 and 1999
Consolidated Statements of Cash Flows -- Three Months Ended March 31,
2000 and 1999
Notes to Consolidated Financial Statements -- March 31, 2000
Item 2.
Management's Discussion and Analysis of Financial Condition and Results
of Operations
Item 3.
Quantitative and Qualitative Disclosures About Market Risk
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits
27 Financial Data Schedule
b) Reports on Form 8-K
SIGNATURES
<PAGE>
ITEM 1.
LAFAYETTE BANCORPORATION
CONSOLIDATED BALANCE SHEETS
(Dollar amounts in thousands, except share data)
(Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
March 31, December 31,
2000 1999
---- ----
ASSETS
Cash and due from banks $ 24,277 $ 28,370
Federal funds sold 2,200 2,200
-------------- -------------
Total cash and cash equivalents 26,477 30,570
Securities available-for-sale (at market) 80,164 79,722
Securities held-to-maturity (market value $4,487
and $4,709) 4,484 4,712
Loans held for sale 4,352 3,174
Loans 503,486 489,070
Less: Allowance for loan losses (4,860) (4,618)
-------------- -------------
Loans, net 498,626 484,452
Federal Home Loan Bank stock (at cost) 1,897 1,897
Premises, furniture and equipment, net 10,694 10,583
Intangible assets 13,562 13,747
Accrued interest receivable and other assets 15,400 16,292
-------------- -------------
Total assets $ 655,656 $ 645,149
============== =============
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
Noninterest-bearing deposits $ 60,348 $ 63,206
Interest-bearing demand and savings deposits 239,614 229,302
Interest-bearing time deposits 241,155 229,739
-------------- -------------
Total deposits 541,117 522,247
Short-term borrowings 27,246 27,273
FHLB advances 20,659 30,027
Note payable 12,600 12,950
Accrued interest payable and other liabilities 6,761 6,867
-------------- -------------
Total liabilities 608,383 599,364
Shareholders' equity
Common stock, no par value: 5,000,000 shares authorized;
3,590,691 and 3,586,140 shares issued and outstanding 3,591 3,586
Additional paid-in capital 32,948 32,886
Retained earnings 12,709 11,269
Unrealized gain / (loss) on securities available-for-sale,
net of tax (($1,296) and ($1,283)) (1,975) (1,956)
-------------- --------------
Total shareholders' equity 47,273 45,785
-------------- -------------
Total liabilities and shareholders' equity $ 655,656 $ 645,149
============== =============
</TABLE>
See accompanying notes to consoldiated financial statements.
<PAGE>
LAFAYETTE BANCORPORATION
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
For the three months ended March 31,
2000 and 1999 (Dollar amounts in
thousands, except per share data)
(Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
2000 1999
---- ----
Interest income
Loans $ 10,744 $ 8,130
Taxable Securities 860 890
Tax exempt securities 412 361
Other 107 102
-------------- -------------
Total interest income 12,123 9,483
Interest expense
Deposits 5,114 3,901
Short-term borrowings 339 275
Other borrowings 586 396
-------------- -------------
Total interest expense 6,039 4,572
-------------- -------------
Net interest income 6,084 4,911
Provision for loan losses 300 180
-------------- -------------
Net interest income after provision for loan losses 5,784 4,731
Noninterest income
Income from fiduciary activities 316 253
Service charges on deposit accounts 405 307
Net realized gain on securities - -
Net gain on loan sales 112 308
Other service charges and fees 253 182
Other operating income 166 150
-------------- -------------
Total noninterest income 1,252 1,200
-------------- -------------
Noninterest expense
Salaries and employee benefits 2,318 2,166
Occupancy expenses, net 281 243
Equipment expenses 389 286
Intangible amortization 185 55
Other operating expenses 1,130 911
-------------- -------------
Total noninterest expense 4,303 3,661
-------------- -------------
Income before income taxes 2,733 2,270
Income taxes 935 751
-------------- -------------
Net income 1,798 1,519
-------------- -------------
Other comprehensive income, net of tax:
Change in unrealized gains / (losses) on securities (19) (82)
--------------- --------------
Comprehensive income $ 1,779 $ 1,437
============== =============
Basic earnings per share $ .50 $ .42
============== =============
Diluted earnings per share $ .49 $ .41
============== =============
Dividend per share $ .10 $ .09
============== =============
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
LAFAYETTE BANCORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the three months ended March 31, 2000 and 1999
(Dollar amounts in thousands)
(Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
2000 1999
---- ----
Cash flows from operating activities
Net income $ 1,798 $ 1,519
Adjustments to reconcile net income to net cash
from operating activities
Depreciation 305 194
Net amortization 182 104
Provision for loan losses 300 180
Net realized gain on securities - -
Net realized (gain) loss on sale of :
Other real estate - -
Change in assets and liabilities:
Loans originated for sale (11,081) (22,085)
Loans sold 9,903 23,791
Accrued interest receivable and other assets 904 (1,011)
Accrued interest payable and other liabilities (106) 1,397
------------ -----------
Net cash from operating activities 2,205 4,089
Cash flows from investing activities
Change in interest-bearing balances with other
financial institutions - (8)
Purchase of securities available-for-sale (1,630) (24,883)
Proceeds from sales of securities available-for-sale - -
Proceeds from maturities of securities available-for-sale 1,160 5,927
Purchase of securities held-to-maturity - (2,000)
Proceeds from maturities of securities held-to-maturity 228 19
Loans made to customers, net of payments collected (14,474) (14,765)
Property and equipment expenditures (416) (735)
------------ ------------
Net cash from investing activities (15,132) (36,445)
Cash flows from financing activities
Net change in deposit accounts 18,870 (11,225)
Cash received in branch acquisition for liabilities assumed, net
of assets acquired - 45,266
Net change in short-term borrowings (27) 3,235
Proceeds from FHLB advances - -
Payments on FHLB advances (9,368) (388)
Proceeds from note payable - 14,000
Payments on note payable (350) -
Common stock issued 67 122
Dividends paid (358) (334)
------------ ------------
Net cash from financing activities 8,834 50,676
Net change in cash and cash equivalents (4,093) 18,320
Cash and cash equivalents at beginning of period 30,570 18,768
----------- -----------
Cash and cash equivalents at end of period $ 26,477 $ 37,088
=========== ===========
Supplemental disclosures of cash flow information
Cash paid during the period for:
Interest $ 5,938 $ 3,841
Income taxes 570 150
Non-cash investing activity
Loans transferred to other real estate $ - $ 181
</TABLE>
See accompanying note to consolidated financial statements.
<PAGE>
LAFAYETTE BANCORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2000
(Dollar amounts in thousands, except share and per share data)
(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. Certain
prior period information has been reclassified to correspond with the 2000
presentation.
NOTE 2 - PER SHARE DATA
The following illustrates the computation of basic and diluted earnings per
share, and includes the weighted average number of shares used in calculating
earnings and dividends per share amounts for the periods presented. The weighted
average number of shares has been retroactively restated for stock dividends and
splits.
<TABLE>
<S> <C> <C>
March 31, March 31,
2000 1999
---- ----
Basic earnings per share
Net income $ 1,798 $ 1,519
Weighted average shares outstanding 3,586,259 3,585,425
------------- --------------
Basic earnings per share $ .50 $ .42
============= ==============
Diluted earnings per share
Net income $ 1,798 $ 1,519
Weighted average shares outstanding 3,586,259 3,585,425
Diluted effect of assumed shares
exercised of Stock Options 52,770 93,427
------------- --------------
Diluted average shares outstanding 3,639,029 3,678,852
-------------- --------------
Diluted earnings per share $ .49 $ .41
============== ==============
</TABLE>
<PAGE>
LAFAYETTE BANCORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2000
(Dollar amounts in thousands, except share and per share data)
(Unaudited)
- --------------------------------------------------------------------------------
NOTE 3 - SECURITIES
The amortized cost and estimated fair values of securities are as follows at
March 31, 2000:
<TABLE>
<S> <C> <C>
Amortized Estimated
Cost Fair Value
Securities Available-for-Sale
U.S. Government and its agencies $ 5,203 $ 5,005
Obligations of states and political subdivisions 30,398 29,255
Corporate obligations 2,000 1,947
Mortgage-backed and other asset-backed securities 43,264 41,561
Other securities 2,566 2,396
----------- -----------
$ 83,431 $ 80,164
=========== ===========
Securities Held-to-Maturity
Obligations of states and political subdivisions $ 4,484 $ 4,487
=========== ===========
The amortized cost and estimated fair values of securities are as follows at
December 31, 1999:
Amortized Estimated
Cost Fair Value
Securities Available-for-Sale
U.S. Government and its agencies $ 5,207 $ 5,005
Obligations of states and political subdivisions 28,785 27,268
Corporate obligations 2,000 1,973
Mortgage-backed and other asset-backed securities 44,402 42,888
Other securities 2,567 2,588
----------- -----------
$ 82,961 $ 79,722
=========== ===========
Securities Held-to-Maturity
Obligations of states and political subdivisions $ 4,712 $ 4,709
=========== ===========
</TABLE>
NOTE 4 - LOANS
Loans are comprised of the following:
<TABLE>
<S> <C> <C>
March 31, December 31,
2000 1999
---- ----
Commercial and agricultural loans $ 201,472 $ 192,760
Real estate construction loans 49,455 47,375
Residential real estate loans 200,974 197,181
Installment loans to individuals 51,585 51,754
---------------- ---------------
Total loans $ 503,486 $ 489,070
================ ===============
</TABLE>
<PAGE>
LAFAYETTE BANCORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2000
(Dollar amounts in thousands, except share and per share data)
(Unaudited)
- --------------------------------------------------------------------------------
NOTE 5 - ALLOWANCE FOR LOAN LOSSES
The activity in the allowance for loan losses is as follows:
<TABLE>
<S> <C> <C>
2000 1999
---- ----
Balance, January 1 $ 4,618 $ 4,241
Provision charged to operations 300 180
Loans charged-off (89) (211)
Recoveries on loans previously charged-off 31 17
------------- --------------
Balance, March 31 $ 4,860 $ 4,227
============= ==============
</TABLE>
NOTE 6 - SHORT-TERM BORROWINGS
Short-term borrowings are comprised of the following:
<TABLE>
<S> <C> <C>
March 31, December 31,
2000 1999
---- ----
Repurchase agreements $ 25,767 $ 24,645
Treasury tax and loan open-end note 1,479 2,628
---------------- ---------------
Total short-term borrowings $ 27,246 $ 27,273
================ ===============
</TABLE>
NOTE 7 - SEGMENT INFORMATION
The Corporation's operations include three primary segments: banking, mortgage
banking, and trust. Through its banking subsidiary's sixteen locations in
Tippecanoe, White, and Jasper Counties, the Corporation provides traditional
community banking services, such as accepting deposits and making commercial,
residential and consumer loans. Mortgage banking activities include the
origination of residential mortgage loans for sale on a servicing released basis
to various investors. The Corporation's trust department provides both personal
and corporate trust services.
The Corporation's three reportable segments are determined by the products and
services offered. Interest on loans, investments and deposits comprise the
primary revenues and expenses of the banking operation, net gains on loans sold
account for the revenues in the mortgage banking segment, and trust
administration fees provide the primary revenues in the trust department.
<PAGE>
LAFAYETTE BANCORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2000
(Dollar amounts in thousands, except share and per share data)
(Unaudited)
- --------------------------------------------------------------------------------
NOTE 7 - SEGMENT INFORMATION (Continued)
The following segment financial information has been derived from the internal
profitability reporting system utilized by management to monitor and manage the
financial performance of the Corporation. The accounting policies of the three
segments are the same as those described in the summary of significant
accounting policies of the annual report. The Corporation evaluates segment
performance based on profit or loss before income taxes. The evaluation process
for the mortgage banking and trust segments include only direct expenses, while
certain indirect expenses, including goodwill, are absorbed by the banking
operation.
Quarter ended March 31:
<TABLE>
<S> <C> <C> <C> <C>
2000 Mortgage Total
Banking Banking Trust Segments
Net interest income $ 6,271 $ 33 $ - $ 6,304
Net gain on loan sales - 112 - 112
Other revenue 818 6 316 1,140
Noncash items:
Depreciation 281 12 12 305
Provision for loan loss 300 - - 300
Segment profit 2,947 40 137 3,124
Segment assets 650,412 4,492 190 655,094
1999 Mortgage Total
Banking Banking Trust Segments
Net interest income $ 4,882 $ 61 $ - $ 4,943
Net gain on loan sales - 308 - 308
Other revenue 617 22 253 892
Noncash items:
Depreciation 181 7 6 194
Provision for loan loss 180 - - 180
Segment profit 2,109 213 87 2,409
Segment assets 599,852 8,514 166 608,532
</TABLE>
<PAGE>
LAFAYETTE BANCORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2000
(Dollar amounts in thousands, except share and per share data)
(Unaudited)
- --------------------------------------------------------------------------------
NOTE 7 - SEGMENT INFORMATION (Continued)
Significant segment totals are reconciled to the financial statements as
follows:
<TABLE>
<S> <C> <C> <C>
Reportable Consolidated
2000 Segments Other Totals
- ---- -------- ----- ------
Net interest income (expense) $ 6,304 $ (220) $ 6,084
Provision for loan loss 300 - 300
Net gain on loan sales 112 - 112
Other revenue 1,140 - 1,140
Profit 3,124 (1,326) 1,798
Assets 655,094 562 655,656
Reportable Consolidated
1999 Segments Other Totals
- ---- -------- ----- ------
Net interest income $ 4,943 $ (32) $ 4,911
Provision for loan loss 180 - 180
Net gain on loan sales 308 - 308
Other revenue 892 - 892
Profit 2,409 (890) 1,519
Assets 608,532 696 609,228
</TABLE>
Amounts included in the "other" column are as follows:
2000 1999
---- ----
Income:
Holding company net interest
income (expense) $ (220) $ (32)
Profit:
Holding company net interest
income (expense) (220) (32)
Holding company expenses (171) (107)
Income tax expense (935) (751)
Assets:
Holding company assets 562 696
<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. The Corporation's wholly-owned subsidiary,
Lafayette Bank and Trust Company ("Bank") conducts business from sixteen offices
in Tippecanoe, White, and Jasper 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
Mergers and Acquisitions
On March 12, 1999, the Bank purchased three Bank One, Indiana, branches in
Jasper County, Indiana, located in the towns of DeMotte, Remington, and
Rensselaer.
The fair value of assets acquired was $71,749, which consisted primarily of
commercial loans, the physical facilities, goodwill, and core deposit
intangibles. The fair value of liabilities assumed was $117,015, which consisted
primarily of customer deposits. Since the Bank acquired more liabilities than
assets in the transaction, the Bank received $45,266 of cash as of the
settlement date.
From a year-to-year comparative standpoint, this transaction had a significant
effect on the Corporation's results of operations, as the Corporation had use of
the earning assets and interest-bearing liabilities acquired during the entire
three months of 2000, and only approximately one-half month during the first
three months of 1999.
Net Income
The Corporation earned $1,798, or $.50 per share for the first quarter of 2000
compared to $1,519, or $.42 per share for the first quarter of 1999. The $279,
or 18.4% increase in net income was attributable primarily to higher net
interest income due, in large part, from the increase in earning assets and
liabilities obtained in the branch acquisition. Gross earnings from the
Corporation's trust department, along with higher service charges and ATM fees
recorded were contributing factors in enhancing earnings. The increase in 2000
profits was partially offset by lower realized gains on the sale of mortgage
loans, in addition to higher salaries and benefits expense and other operational
expenses incurred in connection with the purchase of the three Jasper County
branches.
Return on average assets (ROA) was 1.11% and 1.16% for the periods ending March
31, 2000 and 1999, while return on average equity (ROE) was 15.48% and 13.99%
for the periods ending March 31, 2000 and 1999, respectively. The increase in
ROE was primarily the result of the Corporation's decreased capital position
after the branch acquisition.
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. Net
interest income for the first quarter of 2000 was $1,173, or 23.9% higher than
that same three month period ending March 31, 1999 and was fueled predominately
by the continued growth of the Corporation's loan portfolio.
<PAGE>
Total interest income increased $2,640, or 27.8% to $12,123 for the first
quarter of 2000. The deployment of excess funds obtained in the Jasper County
branch acquisition into the loan portfolio during the second and third quarter
of 1999, in addition to the loan growth experienced in the first quarter of 2000
resulted in the increased revenue posted. From March 1999 to March 2000, average
loan balances increased $67,406, or 15.6%.
For the first quarter of 2000, total interest expense increased $1,467, or 32.1%
compared to the same 1999 time period. Approximately $200, or 13.6% of the
$1,467 increase is attributable to the interest expense on the note payable the
Corporation obtained in connection with the acquisition of the Jasper County
branches. While there was an outstanding balance on that note for the entire
first quarter of 2000, there was an outstanding balance for only approximately
two weeks during 1999. The remaining increase in total interest expense was a
result of the higher interest rate environment combined with the increase in the
Corporation's total interest-bearing liabilities.
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>
<S> <C> <C> <C> <C>
Three Months Change from
Ended March 31, Prior Period
2000 1999 Amount Percent
---- ---- ------ -------
Interest income $12,337 $9,674 $2,663 27.5%
Interest expense 6,039 4,572 1,467 32.1%
----- ----- -----
Net interest income $6,298 $5,102 $1,196 23.4%
====== ====== ======
</TABLE>
The net interest margin, on a tax equivalent basis for the three months ending
March 31, 2000 and 1999 was 4.29% and 4.23%, respectively.
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.
Loans with a fair value of $56,398 were acquired in the Bank One, Indiana branch
acquisition. The fair value of loans acquired was net of a fair value adjustment
for credit risk of $563. This credit risk valuation account will be used to
absorb future charge-off's recorded on the acquired loans.
The consolidated provision for loan losses was $300 and $180 for the three
months ending March 31, 2000 and 1999, respectively. The increase in the
provision was a result of the Corporation's loan growth. The allowance for loan
losses was $4,860 and $4,618 at March 31, 2000 and December 31, 1999,
respectively. Adding the established credit valuation account with the allowance
for loan losses, the allowance as a percentage of loans was 1.08% and 1.06% at
March 31, 2000 and December 31, 1999, respectively. During the first quarter of
2000 net charge-offs decreased to $58, compared to $194 during the same time
period one year earlier. The 70.1% change in net charge-off amounts is primarily
associated with decreases in commercial and mortgage loan portfolio 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.
<PAGE>
The following table indicated the composition of nonperforming loans:
<TABLE>
<S> <C> <C>
March 31, December 31,
2000 1999
---- ----
Loans past due 90 days or more $ 524 $ 584
Nonaccrual loans 754 622
Restructured loans 98 114
---------------- ---------------
Total nonperforming loans $ 1,376 $ 1,320
================ ===============
</TABLE>
Management believes overall asset quality has not declined despite a slight
increase in the nonperforming loan totals. While loans past due 90 days or more
and restructured loan totals have declined slightly since year-end, nonaccrual
loan totals have increased $132, or 21.2%. A total of eight new credits have
been added to the nonaccrual list during the first quarter of 2000, while only
one borrower has been removed from that category. At March 31, 2000, total
nonperforming loans as a percentage of assets was .21% -- the lowest in over
three and one-half years.
Noninterest Income and Expense
Noninterest income increased $52, or 4.3% for the first three months of 2000,
compared to the same 1999 time period. Income from fiduciary activities
increased 24.9% to $316 for the quarter ending March 31, 2000. An increase in
the number of large-dollar accounts, along with an increase in the base fee
structure attributed to the higher fees recorded.
Service charges on deposit accounts were 31.9% higher for the first three months
of 2000 compared to the same 1999 time period. The larger deposit base as a
result of the branch acquisition led to increases in service charges, NSF and
early certificate of deposit withdrawal fees during the first quarter of 2000.
Net gain on loans originated and sold in the secondary mortgage market decreased
63.6% to $112 for the first quarter of 2000 compared to $308 for the first
quarter of 1999. The higher interest rate environment led to a decrease of
$13,888, or 58.4% in loan sales for the first quarter of 2000 compared to the
first quarter of 1999.
Other service charges and fees increased 39.0% to $253 during the first quarter
of 2000 compared to the $182 posted in 1999. Approximately 62% of this increase
is attributed to foreign ATM fees recorded based on higher transaction volumes,
with the remaining increase due to higher volume for other services provided,
such as wire transfer and check cashing fees.
Other operating income increased $16, or 10.7% to $166 for the first three
months of 2000 compared to the $150 recorded for the first three months of 1999.
For customers of the Investment Center, a full service brokerage operation
offered through Raymond James Financial Services, Inc., member NASD/SIPC, the
pullback in the stock market led to additional investing opportunities during
the first quarter which, in turn, led to 84.5% higher revenues posted in the
first quarter of 2000. Volume incentive fees generated by the secondary mortgage
market department on loan fundings declined 74.8% compared to the prior year as
a result of the lower funding amounts, largely offsetting the increase realized
in the Investment Center.
Noninterest expense increased $642, or 17.5% to $4,303 for the first quarter of
2000 compared to that same 1999 time period. Salaries and employee benefits, the
largest noninterest expense component, increased $152, or 7.0% during the first
quarter of 2000. This increase was primarily a result of the employment of the
Jasper County branch personnel. The Jasper County branch staff was employed by
the Corporation the entire first quarter of 2000, compared to only one-half
month in 1999.
<PAGE>
Approximately 79% of the total increase in occupancy and equipment expenses
related to the increase in depreciation expense recorded. This is a result of
not only the items acquired in the branch acquisition, but also the investment
the Corporation is making in new technology. A new communication system, along
with a wide- area network, teller system and proof imaging system, will enable
the Corporation to remain competitive within the market area while also
improving overall operational efficiencies.
The $130 increase in intangible amortization is solely attributable to the
purchase of the Jasper County branches.
Other operating expenses increased $219, or 24.0% to $1,130 for the first
quarter of 2000 compared to the same 1999 time period. The majority of the
increase in this category was attributable to the ongoing operational expenses
of the branches acquired for items such as office supplies, telephone,
advertising, and insurance, in addition to increased fees associated with higher
ATM volumes.
Income Taxes
The Corporation's effective tax rate was 34.2% and 33.1% for the periods ending
March 31, 2000 and 1999, respectively.
FINANCIAL CONDITION
Total assets were $655,656 at March 31, 2000 compared to $645,149 at December
31, 1999, an increase of $10,507. Loans held for sale and net loans increased
$1,178 and $14,174, respectively, while cash and cash equivalents and accrued
interest receivable and other assets decreased $4,093 and $892, respectively.
Total deposits increased $18,870 to $541,117 at March 31, 2000 compared to
$522,247 at December 31, 1999 and were offset by principal repayments of Federal
Home Loan Bank of Indianapolis advances and the quarterly principal repayment of
the note payable in the amount of $9,368 and $350, respectively.
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 and core deposit
intangibles, 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 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 an 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%, 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. If an institution is only
adequately capitalized, regulatory approval is required to accept brokered
deposits. If undercapitalized, capital distributions, asset growth, and
expansion may be limited, and the institution may be required to submit a
capital restoration plan.
At March 31, 2000, 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
<PAGE>
The Corporation's actual consolidated capital amounts are presented in the
following table.
<TABLE>
<S> <C> <C>
March 31, December 31,
2000 1999
---- ----
Tier 1 capital
Shareholders' equity $ 47,273 $ 45,785
Less: Intangibles (13,554) (13,737)
Add/less: Unrealized loss/(gain) on securities 1,975 1,956
---------------- ---------------
TOTAL TIER 1 CAPITAL $ 35,694 $ 34,004
================ ===============
Total capital
Tier 1 capital $ 35,694 $ 34,004
Allowable allowance for loan losses 4,860 4,618
---------------- ---------------
TOTAL CAPITAL $ 40,554 $ 38,622
================ ===============
RISK WEIGHTED ASSETS $ 496,589 $ 483,307
================ ===============
AVERAGE ASSETS $ 633,469 $ 627,045
================ ===============
</TABLE>
The Corporation and Bank's actual capital ratios and minimum required levels are
presented in the following table.
<TABLE>
Actual ratios as of Minimum
March 31, December 31, Capital Adequacy Well-Capitalized
2000 1999 Requirement Requirement
---- ---- ----------- -----------
<S> <C> <C> <C> <C>
Tier I Capital
(to average assets)
Consolidated 5.63% 5.42% 4.00% 5.00%
Lafayette Bank and Trust 7.38% 7.22% 4.00% 5.00%
Tier I Capital
(to risk weighted assets)
Consolidated 7.19% 7.04% 4.00% 6.00%
Lafayette Bank and Trust 9.34% 9.38% 4.00% 6.00%
Total Capital
(to risk weighted assets)
Consolidated 8.17% 7.99% 8.00% 10.00%
Lafayette Bank and Trust 10.32% 10.33% 8.00% 10.00%
</TABLE>
Management believes the Bank met all the capital requirements as of March 31,
2000 and December 31, 1999, and was well-capitalized under the regulatory
framework for prompt corrective action. The Corporation, however, was
categorized as undercapitalized as of December 31, 1999 due to the Jasper County
branch acquisition, with a total capital ratio of 7.99%, slightly below the
8.00% minimum. The Corporation has returned to adequately capitalized status as
of March 31, 2000. Although slightly below the minimum at December 31, 1999, no
corrective regulatory action was initiated, and management anticipates
maintaining its current adequately capitalized status. The Federal Reserve Bank
considers the holding company capital adequacy in connection with any
application activity which requires their approval. Further, since the
Corporation's capital levels are below the well-capitalized category, the use of
expedited Federal Reserve Bank procedures in any application activity which
requires their approval will not be available to the Corporation until it once
again becomes well-capitalized. Certain statements in this paragraph relating to
future capital levels of the Corporation and Bank are forward-looking which may
or may not be accurate due to the impossibility of predicting future economic
and business events, including the ability of the Corporation to raise
additional capital, if needed, as well as other factors that are beyond the
control of the Corporation.
<PAGE>
Liquidity
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 three
months ended March 31, 2000 and 1999. Including net income of $1,798, the net
cash from operating activities for the first three months of 2000 generated
$2,205 of available cash. Net cash from investing activities utilized $15,132 of
available cash primarily as a result of $14,474 of net loan fundings by the
Corporation. Net cash from financing activities generated $8,834 of available
cash as a result of an $18,870 increase in deposits, offset by $9,718 in FHLB
advance and note payable principal repayments.
Total cash outflows for the three-month period in 2000 exceeded cash inflows by
$4,093 resulting in a cash and cash equivalent balance of $26,477 at March 31,
2000.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Market risk of the Corporation encompasses exposure to both liquidity and
interest rate risk and is reviewed quarterly by the Asset/Liability Committee
and the Board of Directors. There have been no material changes in the
quantitative and qualitative disclosures about market risks as of March 31, 2000
from the analysis and disclosures provided in the Corporation's Form 10-K for
the year ended December 31, 1999.
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
27 Financial Data Schedule for March 31, 2000
(b) Reports on Form 8-K
No Form 8-K was filed with the SEC during the quarter ended
March 31, 2000.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: May 12, 2000 By /s/ Robert J. Weeder
-------------------------------------
Robert J. Weeder
President and CEO
Date: May 12, 2000 By /s/ Marvin S. Veatch
-------------------------------------
Marvin S. Veatch
Vice President and Controller
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
REGISTRANT'S UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE MONTHS
ENDED MARCH 31, 2000 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> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-1-2000
<PERIOD-END> MAR-31-2000
<CASH> 24,277
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 2,200
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 80,164
<INVESTMENTS-CARRYING> 4,484
<INVESTMENTS-MARKET> 4,487
<LOANS> 503,486
<ALLOWANCE> 4,860
<TOTAL-ASSETS> 655,656
<DEPOSITS> 541,117
<SHORT-TERM> 27,246
<LIABILITIES-OTHER> 6,761
<LONG-TERM> 33,259
0
0
<COMMON> 3,591
<OTHER-SE> 43,682
<TOTAL-LIABILITIES-AND-EQUITY> 655,656
<INTEREST-LOAN> 10,744
<INTEREST-INVEST> 1,272
<INTEREST-OTHER> 107
<INTEREST-TOTAL> 12,123
<INTEREST-DEPOSIT> 5,114
<INTEREST-EXPENSE> 6,039
<INTEREST-INCOME-NET> 6,084
<LOAN-LOSSES> 300
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 4,303
<INCOME-PRETAX> 2,733
<INCOME-PRE-EXTRAORDINARY> 2,733
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,798
<EPS-BASIC> .50
<EPS-DILUTED> .49
<YIELD-ACTUAL> 4.29
<LOANS-NON> 754
<LOANS-PAST> 524
<LOANS-TROUBLED> 98
<LOANS-PROBLEM> 5,832
<ALLOWANCE-OPEN> 4,618
<CHARGE-OFFS> 89
<RECOVERIES> 31
<ALLOWANCE-CLOSE> 4,860
<ALLOWANCE-DOMESTIC> 3,691
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 1,731
</TABLE>
