<PAGE>
FORM 10-Q
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(MARK ONE)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1997
or
( ) 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 0-4707
Beverly Bancorporation, Inc.
- ------------------------------------------------------------------------------
(Exact Name of registrant as specified in its charter)
DELAWARE 36-4090152
-------- ----------
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
16345 South Harlem Avenue 60477
Tinley Park, Illinois (Zip Code)
(Address of principal executive
offices)
Registrant's telephone number, including area code (708) 614-5073
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
As of April 30, 1997, 5,469,958 shares of the registrant's common stock were
outstanding.
1
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BEVERLY BANCORPORATION, INC.
INDEX
Page
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Consolidated Balance Sheets at March 31, 1997
and December 31, 1996 3
Consolidated Statements of Income for the three-
month periods ended March 31, 1997 and 1996 4
Consolidated Statements of Cash Flows for the three-
month periods ended March 31, 1997 and 1996 6
Notes to Condensed Consolidated Financial Statements 8
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 9
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 14
SIGNATURES 15
2
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PART I. FINANCIAL INFORMATION - ITEM 1. FINANCIAL STATEMENTS
BEVERLY BANCORPORATION, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
MARCH 31, 1997 (UNAUDITED) AND DECEMBER 31, 1996
(AMOUNTS IN THOUSANDS)
ASSETS
March 31, December 31,
1997 1996
--------- ------------
Cash and due from banks $24,143 $25,698
Funds sold 10,600 4,900
Investment securities:
Available-for-sale, at fair value 173,722 175,530
Held-to-maturity, at amortized cost (fair value
$29,719 and $30,703, respectively) 29,955 30,797
Loans 380,904 372,622
Less allowance for possible loan losses 3,977 4,020
------- -------
Net loans 376,927 368,602
Premises and equipment, net 16,025 15,816
Accrued interest receivable 5,077 4,848
Other real estate 261 350
Intangible assets, net 951 1,021
Other assets 3,356 2,482
------- -------
TOTAL ASSETS $641,017 $630,044
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Interest bearing $486,767 $469,397
Non-interest bearing 83,547 90,749
-------- --------
Total deposits 570,314 560,146
Securities sold under agreements to repurchase, funds
purchased, and other borrowings 3,300 2,542
Accrued expenses and other liabilities 4,641 5,410
-------- --------
Total liabilities 578,255 568,098
-------- --------
STOCKHOLDERS' EQUITY
Preferred stock, par value $.01 per share; authorized
1,000,000 shares; no shares issued and outstanding -- --
Common stock, par value $.01 per share; authorized
8,000,000 shares; issued and outstanding, 5,209,584
and 5,175,182, respectively 52 52
Additional paid-in capital 27,725 27,292
Retained earnings 37,832 36,607
Net unrealized losses on available-for-sale
securities (1,049) (207)
Note receivable - officer stockholders (1,798) (1,798)
-------- --------
Total stockholders' equity 62,762 61,946
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $641,017 $630,044
======== ========
The accompanying notes are an integral part of the consolidated
financial statements.
3
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BEVERLY BANCORPORATION, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
(AMOUNTS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
Three Months Ended
March 31
----------------------
1997 1996
------- -------
Interest Income:
Interest and fees on loans $ 7,816 $ 6,710
Interest on investment securities
Taxable 2,584 2,848
Tax exempt 473 336
Funds sold 142 359
------ ------
Total Interest Income 11,015 10,253
Interest Expense:
Deposits 4,762 4,525
Securities sold under agreement to repurchase,
funds purchased, and other borrowings 59 55
Note payable -- 188
------- -------
Total Interest Expense 4,821 4,768
------- -------
Net Interest Income 6,194 5,485
Provision for loan losses 0 41
------- -------
Net Interest Income after Provision
For Loan Losses 6,194 5,444
Other Income:
Income from fiduciary activities 530 497
Service charges on deposit accounts 1,017 1,105
Net gains on sales of investment securities 372 0
Mortgage origination and servicing fees 105 195
Other 321 326
------- -------
Total Other Income 2,345 2,123
------- -------
4
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BEVERLY BANCORPORATION, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
(AMOUNTS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
Three Months Ended
March 31
----------------------
1997 1996
------ -------
Operating Expense:
Salaries and Employment Benefits $ 3,185 $ 2,755
Occupancy 667 623
Equipment 383 420
Marketing and promotion 233 203
Computer Systems & Services 296 242
Outside Services 222 30
Other 1,357 1,204
------ -------
Total Operating Expenses 6,343 5,477
Income Before Income Taxes 2,196 2,090
Income tax expense 642 647
------ -------
NET INCOME $ 1,554 $ 1,443
------ -------
------ -------
Net income per share $ .29 $ .35
------ -------
------ -------
Common and common equivalent shares 5,389,416 4,085,912
--------- ----------
--------- ----------
The accompanying notes are an integral part of the consolidated financial
statements.
5
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BEVERLY BANCORPORATION, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Amounts in thousands)
Three Months Ended
March 31,
-----------------------
1997 1996
------- --------
Cash Flows from Operating Activities:
Net Income $1,554 $1,443
Adjustments to reconcile net income to net
cash provided by operating activities
Provision for credit losses - 41
Provision for depreciation and amortization 385 459
Investment security accretion and amortization net 282 188
Deferred tax expense (benefit) 51 294
Amortization of intangible assets 79 46
Realized investment security gains, net (372) -
Increase in accrued interest receivable (229) (607)
Increase in other assets (391) (54)
Loans held for sale 1,537 1,900
Decrease in accrued expense and other
liabilities (769) (1,326)
------- --------
Net Cash Provided by Operating Activities 2,127 2,384
------- --------
Cash Flows from Investment Activities:
Investment securities available-for-sale:
Proceeds from sales or maturities of securities 24,239 13,305
Purchase of securities (23,745) (42,354)
Investment securities held-to-maturity:
Proceeds from maturities and call of securities 870 701
Purchase of securities - (300)
Net increase in loans (9,892) (788)
Purchase of premises and equipment (603) (474)
Proceeds from sale of other real estate and equipment 119 8
------- --------
Net Cash Used by Investment Activities (9,012) (29,902)
------- --------
6
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BEVERLY BANCORPORATION, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(AMOUNTS IN THOUSANDS)
Three Months Ended
March 31
----------------------
1997 1996
------- -------
Cash Flows from Financing Activities:
Net increase in deposits $10,168 $17,321
Net increase (decrease) in securities sold under
agreements to repurchase, funds purchased and
other borrowings 758 (4,291)
Principal reductions on note payable - (1,300)
Cash dividends (329) (198)
Proceeds from issuance of common stock 433 88
Proceeds from notes receivable-officer stockholders - 20
------- -------
Net Cash Provided by Financing Activities 11,030 11,640
------- -------
Increase (Decrease) in Cash and Cash Equivalents 4,145 (15,878)
Cash and Cash Equivalents at Beginning of year 30,598 52,710
------- -------
Cash and Cash Equivalents at End of Period $34,743 $ 36,832
------- -------
------- -------
Supplemental Disclosure of Cash Flow Information:
Cash Paid During the Year for:
Interest $ 4,821 $ 4,546
Income taxes 200 121
Non-Cash Investing and Financing Activities:
Unrealized gain (loss) on available-for-sale
securities (1,367) 2,627
Net change in loans transferred to other real estate 30 8
Capital lease - 601
The accompanying notes are an integral part of the consolidated financial
statements.
7
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BEVERLY BANCORPORATION, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1997
(UNAUDITED)
NOTE 1. BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information and with the rules and regulations of the
Securities and Exchange Commission. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, all
adjustments (consisting of normal recurring items) considered necessary for a
fair presentation have been included. Operating results for the three month
period ended March 31, 1997 are not necessarily indicative of the results that
may be expected for the year ended December 31, 1997. The year-end condensed
balance sheet data was derived from audited financial statements. These
financial statements should be read in conjunction with the consolidated
financial statements and footnotes thereto included in the Company's annual
report and 10-K as of December 31, 1996.
NOTE 2. NEW ACCOUNTING PRONOUNCEMENT
The FASB has issued Statement of Financial Accounting Standards No. 128,
Earnings Per Share, which is effective for financial statements issued after
December 15, 1997. Early adoption of the new standard is not permitted. The
new standard eliminates primary and fully diluted earnings per share and
requires presentation of basic and diluted earnings per share together with
disclosure of how the per share amounts were computed. The pro forma effect
of adopting the new standard would be basic earnings per share of $.30 and
$.36, and diluted earnings per share of $.29 and $.35 for the quarters ended
March 31, 1997 and 1996.
8
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ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion and analysis is a review of significant factors
affecting the results of operations and the financial condition of the Company
for the three month period ended March 31, 1997. This discussion should be
read in conjunction with the accompanying unaudited condensed consolidated
financial statements and the notes thereto included in this report.
OVERVIEW
Beverly Bancorporation, Inc. (the "Company") provides a full range of
banking services, including personal and corporate trust services. The strategy
of the Company is to continue to increase its core banking business and to
further develop its mortgage, trust, securities sales and insurance activities
in order to provide an array of household financial services encompassing
banking and other investment products.
The Company was incorporated in Delaware on June 13, 1996 as a wholly-owned
subsidiary of Beverly Bancorporation, Inc., an Illinois corporation ("Beverly
Illinois"). Beverly Illinois was organized in 1969 and owned all of the
outstanding capital stock of the subsidiary banks and Beverly Trust Company.
Pursuant to a reincorporation, on August 16, 1996, Beverly Illinois was merged
with and into the Company and the Company is the surviving corporation.
Subsequent to the reincorporation, the Company sold 1,150,000 shares of
common stock at $15.00 per share in a public offering in the third quarter of
1996. In connection with the offering, the Company's common stock was listed on
the NASDAQ National Market under the symbol BEVB. A portion of the proceeds of
the offering was used to pay off the Company's $9 million debt. In September
1996, the Company completed the merger of its four subsidiary banks into one
bank subsidiary and renamed the bank "Beverly National Bank."
The net income of the Company was $1.6 million for the three months ended
March 31, 1997, compared with net income of $1.4 million for the three months
ended March 31, 1996. Earnings per share for the first quarter of 1997 was
$.29, compared to $.35 per share for the first quarter of 1996. The reduction
in earnings per share is attributed to the issuance of 1,150,000 additional
shares in the company's initial public offering in August of 1996. The
following table sets forth certain selected additional financial data of the
Company.
Three months ended
March 31,
------------------------
1997 1996
--------- ---------
Balance Sheet Data
Average assets $ 632,719 $ 594,774
Average total loans 373,746 308,629
Average deposits 561,798 533,592
Average equity 62,435 41,871
Per share data
9
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Net Income $0.29 $0.35
Book value end of period 12.05 10.31
Selected Financial Ratios
Return on average assets .98% .97%
Return on average equity 9.96% 13.93%
Net interest margin (TE) 4.38% 4.13%
Net Charge offs (recoveries) to average total loans 0.01% (0.12%)
RESULTS OF OPERATIONS
NET INTEREST INCOME
Net interest income equals the difference between interest income earned on
assets and the interest expense paid on liabilities. A comparison of the
Company's net interest income, on a taxable-equivalent basis, follows:
For the Three Months Ended
------------------------------------------------------
March 31, 1997 March 31, 1996
--------------------------- -------------------------
Average Yield/ Average Yield/
Balance Interest Rate Balance Interest Rate
-------- -------- ------ ------- -------- ------
(dollars in thousands)
Funds sold $ 11,092 $ 142 5.13% $ 27,229 $ 359 5.29%
Investment securities 205,581 3,317 6.45% 214,993 3,357 6.35%
Loans 373,746 7,838 8.39% 308,629 6,743 8.74%
--------- ------- ------ ------- ------- ------
Total earning assets 590,419 11,297 7.66% 550,851 10,459 7.59%
--------- ------- ----- ------- ------- ------
Interest bearing deposits 475,548 4,762 4.02% 448,950 4,525 4.04%
Notes payable 0 0 0% 10,103 188 7.46%
Other interest bearing
liabilities 3,687 59 6.42% 3,835 55 5.75%
Total interest bearing
liabilities 479,235 4,821 4.03% 462,888 4,768 4.13%
--------- ------- ----- ------- ------- ------
Margin (T/E) $6,476 4.38% $5,691 4.13%
------- ------ ------ ------
For the three months ended March 31, 1997, the Company's net interest
income increased $795,000 or 14.0% to $6.5 million on a taxable-equivalent basis
from $5.7 million in the first quarter of 1996. Interest on earning assets
increased $838,000 million or 8.0% to $11.3 million in the first quarter of 1997
from the same period in 1996 due to the deposit and capital
10
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growth of the Company, an increase in the yield on investment securities, and
an increase in loans outstanding (which provide higher yields than
alternative investments). The Company's interest expense increased $53,000 or
1.1% to $4.8 million in the first quarter of 1997 from the same period in
1996. Interest on deposits increased $237,000 due to the growth in deposits
while the interest expense on the notes payable was eliminated with the
payoff of the note payable.
LOAN LOSS PROVISION
The Company did not book a provision for loan losses in the first quarter
of 1997, compared to a provision of $41,000 in the first quarter of 1996. The
loan loss provisions have remained relatively low due to the Company's asset
quality, its significant loan loss recoveries, and its relatively high
concentration of low-risk residential real estate loans.
OTHER INCOME
Other income increased $222,000 or 10.5% to $2.3 million in the first
quarter of 1997, compared to $2.1 million in the first quarter of 1996,
primarily due to $372,000 of gains on the sale of investment securities. Those
gains were partially offset by a decrease in mortgage origination and servicing
fees. This decrease resulted from a change in the mix of mortgages originated,
with 62% of originations during the first quarter of 1997 being loans held in
the Company's loan portfolio, which do not generate current income.
OPERATING EXPENSE
Operating expenses increased $866,000 or 15.8% to $6,3 million for the
three months ended March 31, 1997, compared to $5.5 million in the three months
ended March 31, 1996. Salaries and Benefits increased $430,000 primarily as a
result of severance arrangements of approximately $280,000. In addition the
Company incurred $179,000 in temporary help costs, much of it related to the
lingering aspects of the consolidation of its four banking charters in the
latter part of 1996. Occupancy expense increased $44,000 due to the opening of
the Company's Will-Cook branch late in the first quarter of 1996, as well as the
remodeling of several other facilities. Equipment costs declined $37,000,
computer systems and services increased $54,000 and outside services increased
$192,000. These changes are due to the outsourcing of additional operational
functions in the later portion of 1996. Other expenses increased $153,000 due
to growth of the Company, some additional costs from outsourcing, and $30,000
paid for outplacement services.
11
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FINANCIAL CONDITION
LOANS
The following table summarizes the Company's loan portfolio at March 31,
1997 and December 31, 1996.
March 31, December 31,
1997 1996
-------------------------------
(in thousands)
Commercial and industrial $ 55,108 $ 55,492
Residential real estate 152,455 151,769
Home equity lines of credit 30,139 29,379
Commercial real estate 99,865 93,734
Other consumer 43,337 42,248
-------- --------
Total loans 380,904 372,622
Allowance for loan losses (3,977) ( 4,020)
-------- --------
Net loans $376,927 $368,602
-------- --------
-------- --------
The Company's loan portfolio has increased $8.3 million or 2.2% since
December 31, 1996. Commercial Real Estate loans increased $6.1 million in the
first quarter of 1997 due to the timing of several large closings and the
Company's emphasis on collateralized loans to businesses. Home Equity loans
increased $.8 million with a new promotion beginning in the first quarter of
1997. Residential real estate loans increased $.7 million since December 31,
1996. These loans are exclusively ARM and balloon loans, as the Company does
not retain long-term, fixed-rate loans in its loan portfolio.
NON-PERFORMING LOANS
The following table sets forth information on the Company's non-performing
loans and other real estate as of March 31, 1997 and December 31, 1996.
March 31, December 31,
1997 1996
-----------------------------
(dollars in thousands)
Nonaccrual loans $1,954 $1,197
Other loans 90 days past due 311 508
Other real estate 261 350
------ ------
Total nonperforming assets $2,526 $2,055
------ ------
------ ------
Nonaccrual and other loans 90
days past due to total loans .59% .46%
Nonperforming assets to total
loans plus other real estate .66% .55%
Nonperforming assets to total
assets .39% .33%
12
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DEPOSITS
Total deposits were $570.3 million as of March 31, 1997, an increase of
$10.2 million from December 31, 1996. This growth was primarily in certificates
of deposit due to short-term promotional certificates offered in connection with
the renovation of the Lockport branch.
COMMON STOCK
ON MARCH 31, 1997, THE BOARD OF DIRECTORS OF BEVERLY BANCORPORATION DECLARED
A 5% STOCK DIVIDEND TO SHAREHOLDERS OF RECORD APRIL 1, 1997. THE STOCK DIVIDEND
WAS PAID ON APRIL 14, 1997.
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF
1995.
This quarterly report contains forward looking statements. Forward looking
statements made by or on behalf of the Company are subject to risks and
uncertainties, including but not limited to the following: changes in interest
rates and other economic conditions could have an adverse impact on the Company;
there is no assurance as to the sufficiency of the Company's allowance for loan
losses; current and future government regulation could have an adverse impact on
the Company; and the financial services business is extremely competitive with a
number of competitors being substantially larger than the Company. Accordingly,
actual results may differ materially from those set forth in the forward looking
statements. Attention is also directed to other risk factors set forth in the
Company's filings with the Securities and Exchange Commission.
13
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PART II. OTHER INFOMRATION
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit 27 Financial Data Schedule
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the three-month period ended
March 31, 1997.
14
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BEVERLY BANCORPORATION, INC. AND SUBSIDIARIES
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
BEVERLY BANCORPORATION, INC.
(Registrant)
/s/ John Van Winkle
Date: May 12, 1997 --------------------------------
John Van Winkle
President, Chief Executive Officer and
Director
Date: May 12, 1997 /s/ John T. O'Neill
--------------------------------
John T. O'Neill
Executive Vice President
Chief Financial Officer
15
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<PAGE>
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<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 24,143
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 10,600
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 173,722
<INVESTMENTS-CARRYING> 29,955
<INVESTMENTS-MARKET> 29,719
<LOANS> 380,904
<ALLOWANCE> 3,977
<TOTAL-ASSETS> 641,017
<DEPOSITS> 570,314
<SHORT-TERM> 3,300
<LIABILITIES-OTHER> 4,641
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0
0
<COMMON> 52
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