<PAGE>
PAGE 1 OF 19
EXHIBIT INDEX ON PAGE 17
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10 - Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1995
0-14511
-------
(Commission File Number)
TODAY'S BANCORP, INC.
---------------------
(Exact name of registrant as specified in its charter)
DELAWARE 36-2902424
-------- ----------
(State or other jurisdiction of (IRS Employer Identification
incorporation or organization) Number)
TODAY'S Bank Center
P.O. Box 30
Freeport, Illinois 61032
- --------------------------------------- -----
Address of principal executive offices) (Zip Code)
(815) 235-8459
--------------
(Registrant's telephone number)
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
----- ----
Number of shares of common stock outstanding:
Shares outstanding
Title of each class June 30, 1995
------------------- -------------
Common stock, par value
$5.00 per share 2,732,319
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PAGE 2
PART I. ITEM I.
TODAY'S BANCORP, INC.
CONSOLIDATED BALANCE SHEETS
(dollars in thousands)
unaudited
<TABLE>
<CAPTION>
June 30 December 31
---------------------- -----------
1995 1994 1994
---- ---- ----
<S> <C> <C> <C>
ASSETS
Cash and due from banks................ $ 16,283 $ 14,968 $ 15,144
Federal funds sold..................... 470 14,720 11,570
------- ------- -------
Total cash and cash equivalents 16,753 29,688 26,714
Mortgage loans held for sale........... 4,364 7,026 1,288
Time deposits in other banks........... 1,135 117 1,607
Trading account securities............. -- -- 6,350
Securities available for sale, at fair
value................................ 67,989 61,734 63,298
Securities held to maturity with
aggregate fair values of $43,525,
$36,002 and $35,476, respectively.... 43,194 36,060 36,243
Loans.................................. 352,898 275,535 330,782
Allowance for possible loan losses... (3,032) (2,942) (3,144)
------- ------- -------
Net loans 349,866 272,593 327,638
Premises and equipment................. 12,961 11,115 12,637
Accrued interest and other assets...... 11,841 10,354 13,591
------- ------- -------
Total assets $508,103 $428,687 $489,366
------- ------- -------
------- ------- -------
LIABILITIES
Deposits:
Non interest bearing................. $ 43,453 $ 42,534 $ 45,937
Interest bearing..................... 388,171 327,543 371,810
------- ------- -------
Total deposits 431,624 370,077 417,747
Federal funds purchased, securities
sold under agreements to repurchase
and other short-term borrowings...... 12,794 8,583 13,130
Other liabilities...................... 3,345 2,583 3,860
Other borrowings....................... 16,297 8,222 13,797
------- ------- -------
Total liabilities 464,060 389,465 448,534
------- ------- -------
CAPITAL
Preferred stock, without par value:
Authorized - 200,000 shares, issuable
in series; none issued or outstanding -- -- --
Common stock, par value $5 per share:
Authorized - 6,000,000 shares;
Issued - 2,732,319, 2,705,745 and
2,705,745 shares, respectively;
Outstanding - 2,732,319, 2,687,503
and 2,705,257 shares, respectively. 13,664 13,529 13,529
Capital surplus........................ 6,259 5,878 6,036
Retained earnings...................... 23,824 20,659 22,396
Unrealized gain (loss) on securities... 296 (758) (1,127)
Treasury shares - None, 18,242 and.....
488 shares, respectively, at cost.... - (86) (2)
------- ------- -------
Total capital 44,043 39,222 40,832
------- ------- -------
Total liabilities and capital $508,103 $428,687 $489,366
------- ------- -------
------- ------- -------
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
PAGE 3
TODAY'S BANCORP, INC.
CONSOLIDATED STATEMENTS OF INCOME
(dollars in thousands, except per share data)
unaudited
<TABLE>
<CAPTION>
THREE MONTHS ENDED
JUNE 30
-------
1995 1994
----- ----
<S> <C> <C>
INTEREST INCOME
Interest and fees on loans....................... $8,051 $5,631
Interest on federal funds sold and
time deposits in other banks................... 148 123
Interest and fees on mortgage loans
originated for sale............................ 38 185
Interest on investment securities
Taxable........................................ 1,403 1,006
Exempt from federal income taxes............... 247 269
------ -----
TOTAL INTEREST INCOME 9,887 7,214
------ -----
INTEREST EXPENSE
Interest on deposits............................. 4,476 3,086
Interest on federal funds purchased,
securities sold under agreement to
repurchase and other short-term borrowings..... 157 60
Interest on other borrowings..................... 288 115
------ -----
TOTAL INTEREST EXPENSE 4,921 3,261
------ -----
NET INTEREST INCOME BEFORE PROVISION
FOR POSSIBLE LOAN LOSSES 4,966 3,953
Provision for possible loan losses............... 165 120
------ -----
NET INTEREST INCOME AFTER PROVISION
FOR POSSIBLE LOAN LOSSES 4,801 3,833
------ -----
OTHER OPERATING INCOME
Trust department income.......................... 393 353
Service charges on deposit accounts.............. 454 331
Mortgage banking fees and gain on sale of
mortgage servicing rights...................... 246 (141)
Securities gains, net............................ 8 4
Other income..................................... 149 94
------ -----
TOTAL OTHER OPERATING INCOME 1,250 641
OTHER OPERATING EXPENSES
Salaries, wages and employee benefits............ 1,978 1,999
Net occupancy expense............................ 336 269
Furniture and equipment expense.................. 333 272
Printing, stationery and supplies................ 172 122
FDIC insurance expense........................... 238 236
Data processing expense.......................... 261 239
Marketing and advertising........................ 203 97
Other expenses................................... 750 877
------ -----
TOTAL OTHER OPERATING EXPENSES 4,271 4,111
------ -----
Income before income taxes....................... 1,780 363
Income tax provision............................. 619 68
------ -----
NET INCOME $1,161 $ 295
------ -----
------ -----
Net income per common share...................... $ 0.43 $ 0.11
------ -----
------ -----
Dividends declared per common share.............. $0.1375 $0.125
------ -----
------ -----
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
PAGE 4
TODAY'S BANCORP, INC.
CONSOLIDATED STATEMENTS OF INCOME
(dollars in thousands, except per share data)
unaudited
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30
-------
1995 1994
----- ----
<S> <C> <C>
INTEREST INCOME
Interest and fees on loans....................... $15,456 $ 11,057
Interest on federal funds sold and
time deposits in other banks................... 323 132
Interest and fees on mortgage loans
originated for sale............................ 79 524
Interest on investment securities
Taxable........................................ 2,731 2,007
------ -----
Exempt from federal income taxes............... 494 553
------ -----
TOTAL INTEREST INCOME 19,083 14,273
------ -----
INTEREST EXPENSE
Interest on deposits............................. 8,692 5,980
Interest on federal funds purchased,
securities sold under agreement to
repurchase and other short-term borrowings..... 291 166
Interest on other borrowings..................... 530 202
------ -----
TOTAL INTEREST EXPENSE 9,513 6,348
------ -----
NET INTEREST INCOME BEFORE PROVISION
for possible loan losses 9,570 7,925
------ -----
Provision for possible loan losses............... 330 238
------ -----
NET INTEREST INCOME AFTER PROVISION
FOR POSSIBLE LOAN LOSSES 9,240 7,687
------ -----
OTHER OPERATING INCOME
Trust department income.......................... 801 753
Service charges on deposit accounts.............. 877 638
Mortgage banking fees and gain on sale of
mortgage servicing rights...................... 312 146
Securities gains, net............................ 134 75
Other income..................................... 417 278
------ -----
TOTAL OTHER OPERATING INCOME 2,541 1,890
------ -----
OTHER OPERATING EXPENSES
Salaries, wages and employee benefits............ 3,895 3,829
Net occupancy expense............................ 711 485
Furniture and equipment expense.................. 659 515
Printing, stationery and supplies................ 393 237
FDIC insurance expense........................... 475 427
Data processing expense.......................... 537 470
Marketing and advertising........................ 330 173
Other expenses................................... 1,523 1,626
------ -----
TOTAL OTHER OPERATING EXPENSES 8,523 7,762
------ -----
Income before income taxes....................... 3,258 1,815
Income tax provision............................. 1,118 547
------ -----
Net income $ 2,140 $ 1,268
------ -----
------ -----
Net income per common share...................... $ 0.79 $ 0.48
------ -----
------ -----
Dividends declared per common share.............. $0.2625 $ 0.25
------ -----
------ -----
</TABLE>
See accompanying notes to consolidated financial statements.
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PAGE 5
TODAY'S BANCORP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in thousands)
unaudited
SIX MONTHS ENDED
JUNE 30
-------
1995 1994
----- ----
<TABLE>
<S> <C> <C>
OPERATING ACTIVITIES
Net income....................................... $ 2,140 $ 1,268
Adjustments to reconcile net income to net cash
provided (used) by operating activities:
Depreciation................................. 799 635
Amortization of goodwill..................... 186 101
Benefit for deferred income taxes............ (265) (30)
Provision for possible loan losses........... 330 238
Amortization of premiums, net................ 170 415
Securities gains, net........................ (57) (75)
Trading account security gains............... (77) -
Proceeds from sale of trading account
securities................................. 6,427 -
Loans originated for sale.................... (20,468) (119,564)
Loans sold................................... 17,392 136,756
(Increase) decrease in accrued interest
and other assets........................... 930 (984)
Decrease in other liabilities............... (515) (1,391)
------ -----
Net cash provided by operating activities 6,992 17,369
------ -----
</TABLE>
INVESTING ACTIVITIES
<TABLE>
<S> <C> <C>
(Purchase of)/proceeds from maturities of time
deposits in other banks........................ 476 (62)
Securities available for sale:
Proceeds from sales, maturities and repayments
of mortgage-backed securities................ 338 1,711
Proceeds from sales of investment securities... 5,038 8,145
Proceeds from calls and maturities of
investment securities........................ 12,301 10,798
Purchase of investment securities.............. (20,098) (18,930)
Securities held to maturity:
Proceeds from sales, maturities and repayments
of mortgage-backed securities................ 1,106 4,129
Proceeds from sale of investment securities.... 347 -
Proceeds from calls and maturities of
investment securities........................ 1,555 3,021
Purchase of investment securities.............. (10,024) (5,585)
Net increase in loans held for portfolio......... (22,558) (18,201)
Purchase of premises and equipment............... (1,123) (3,221)
------ -----
Net cash used by investing activities (32,642) (18,195)
------ -----
</TABLE>
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PAGE 6
TODAY'S BANCORP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS, CONTINUED
(dollars in thousands)
unaudited
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30
-------
1995 1994
---- ----
<S> <C> <C>
FINANCING ACTIVITIES
Net increase in deposits......................... 13,877 25,536
Net decrease in federal funds purchased,
securities sold under agreements to repurchase
and other short-term borrowings................ (336) (1,163)
Payment on other borrowings...................... (500) (16,078)
Cash dividends paid.............................. (712) (667)
Proceeds from exercise of stock options.......... 360 496
Increase in other borrowings..................... 3,000 4,300
------ -----
Net cash provided by financing activities........ 15,689 12,424
------ -----
Net increase (decrease) in cash and cash
equivalents ................................... (9,961) 11,598
Cash and cash equivalents at beginning of period 26,714 18,090
------ -----
Cash and cash equivalents at end of period $ 16,753 $ 29,688
------ -----
------ -----
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
PAGE 7
TODAY'S BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Unaudited
(dollars in thousands)
Note 1 - Accounting Policies
The accompanying consolidated financial statements have been prepared in
accordance with accounting policies set forth in the Company's 1994 Annual
Report on Form 10-K and should be read in conjunction with the notes to the
consolidated financial statements contained therein.
Note 2 - Consolidated Financial Statements
The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information and with the instructions of Form 10-Q and Article 10 of
Regulation S-X except for the December 31, 1994 balance sheet which was derived
from audited financial statements, but does not include all disclosures required
by generally accepted accounting principles. Certain reclassifications, which
had no effect on net income, have been made in the prior period financial
statements to conform with the current year's presentation.
In the opinion of management, all adjustments (which include only normal
recurring adjustments) necessary to present fairly the financial position,
results of operations and cash flows at June 30, 1995 and for all periods
presented have been made. All significant intercompany balances and transactions
have been eliminated in consolidation. Results of operations for interim periods
are not necessarily indicative of the results that may be expected for the
entire fiscal year.
Note 3 - Non-cash Investing Activity
During the first six months of 1995, the securities available for sale were
written up $2.3 million to reflect the current market price at June 30, 1995.
The offsetting entries were to other assets which were decreased by $899
thousand to reflect the deferred income tax impact and to the capital account,
unrealized loss on securities, which was increased by $1.4 million moving from a
negative position of $1.1 million at December 31,1994 to $$296 thousand at June
30, 1995.
Note 4 - Change in Accounting for Impaired Loans
Effective January 1, 1995, the Company adopted Statement of Financial Accounting
Standard No. 114 (as amended by No. 118), "Accounting by Creditors for
Impairment of a Loan". As a result of applying the new rules, certain impaired
loans were written down to the present value of expected future cash flows using
each loan's effective interest rate, or as a practical expedient, at each loan's
observable market price or the fair value of the collateral if the loan was
collateral dependent. A portion of the allowance for loan losses was allocated
to such loans. There
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PAGE 8
was no additional provision for possible loan losses as a result of adopting
this standard. The average balance for the first six months of 1995 and the June
30, 1995 balance of impaired loans was $1.5 million and $1.3 million,
respectively. The portion of allowance for loan losses allocated to the impaired
loan balance as of June 30, 1995 was $31 thousand. There was no interest income
recognized on impaired loans for the six month period ended June 30, 1995.
Note 5 - Reorganization
Early in 1995, the Company combined its five subsidiary banks into two separate
banking units which are named TODAY'S BANK (East and West). State Bank of
Freeport, Bank of Pecatonica and First State Bank of Rockford combined into a
single entity on January 1, 1995 and First National Bank of Galena and Tri-State
Bank merged on February 1, 1995. The newly-merged entities are called TODAY'S
BANK (East and West) and are wholly owned subsidiaries of TODAY'S BANCORP, INC.,
the new name selected for Northwest Illinois Bancorp, Inc.
In addition, the Company has changed the name of its mortgage banking
subsidiary to TODAY'S MORTGAGE SOURCE and set up a new financial services
company called TODAY'S FINANCIAL SERVICES COMPANY. TODAY'S FINANCIAL SERVICES
COMPANY will include the operations of trust, asset management, full service
investment brokerage, insurance and other fee-based services, currently
provided by the individual banks.
Effective July 1, 1995, the Company restructured the activities of TODAY'S
MORTGAGE SOURCE. While still maintaining the present sales structure, all
operational support will be provided by an outside company beginning in the
third quarter.
<PAGE>
PAGE 9
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The following discussion and analysis provides an overview of significant
factors which affected TODAY'S BANCORP, INC.'s ("TDAY") financial statements
and results of operations. This commentary is intended to provide readers
with a more comprehensive review than may be apparent from the consolidated
financial statements and notes alone.
On September 30, 1994, TDAY acquired all of the outstanding common stock of
Tri-State Bank and Trust Company of East Dubuque and all of the common stock
of Tri-State Insurance Company. The transaction has been treated under the
purchase method of accounting. Therefore, TDAY's consolidated balance sheets
from that date include the assets and liabilities of these companies;
however, earnings prior to that date are not included in the consolidated
statements of income.
EARNINGS OVERVIEW
The Company's second quarter earnings of $1,161 or $0.43 per share, were
significantly greater than the $295 or $0.11 per share recorded in the same
quarter of 1994. Year-to-date earnings of $2,140 or $0.79 per share,
represents an increase of 68.8% or $0.31 per share compared to six month
ending June 30, 1994. Compared to first quarter 1995, per share net income
reflected an increase of $0.07.
The increase for the six month period was attributable to earning
improvements within the bank affiliates, a reduction of the loss at the
mortgage subsidiary and a one-time charge for expenses associated with the
termination of a proposed merger. For the six months ended June 30, 1995 and
1994, the mortgage subsidiary had a net loss of $350 and $780, respectively.
Mortgage revenues from loan originations are expected to increase during the
month of August due to the increase in refinancing activity resulting from
the lower interest rate environment. Management is currently implementing a
plan that will reduce fixed overhead costs and personnel at the mortgage
subsidiary by outsourcing all operational functions. It is estimated that the
plan will be completed by the middle of the third quarter.
TDAY's annualized return on average equity was 10.82% and 10.20% for the
three month and six month period ending June 30, 1995. The return on average
assets was .93% and .87% for the three month and six month periods ended June
30, 1995. For the same periods in 1994, the annualized return on average
equity was 3.00% and 6.48%, while the annualized return on average assets was
.28% and .61%, respectively.
NET INTEREST INCOME
Net interest income, defined as the difference between interest income and
interest expense ("the margin"), remains TDAY's most significant source of
profitability. The second quarter margin increased by $362, or 7.9% from the
prior quarter. The increase
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PAGE 10
was due to loan growth which resulted from the Company's ongoing business
development efforts. This success was somewhat negated by higher costs
associated with deposit funding. Throughout much of 1994, increases in
deposit costs lagged rises in asset yields. However, this is no longer the
case as most deposits have repriced and additional growth is coming in the
form of more expensive funds. Compared to the same period of 1994, the margin
increased about $1.6 million of which approximately $800 is attributable to
the Tri-State purchase.
The Company believes it has a very stable deposit base and sound, high
quality loan and investment portfolios. While there may be some additional
margin compression in the future, the overall effect of this is thought to be
minimal due to the limited rate risk associated with the affiliate Banks'
repricing schedules. Given the competitive nature of deposit pricing,
additional loan related growth may be purposely restrained.
OTHER OPERATING INCOME
TDAY'S earnings from non-interest sources for the first six months of 1995
were $2.5 million, an increase of 34.4% from the prior year. Compared to the
prior quarter, non-interest revenues showed a slight decline of $41 or 3.2%.
Deposit fees reflect additional income as a result of standardizing related
fees within the affiliates and a more aggressive posture of charging for
accounts being overdrawn. The $801 recorded in the first half of 1995
represents an increase of 6.4% from the same period in 1994.
Mortgage refinancing activity during the second quarter was higher as
interest rates declined to their lowest level since the beginning of 1994.
Due to its higher level of activity, the mortgage banking unit had revenues
of $246 and $312 for the second quarter and first six months of 1995. This is
a significant increase from the $(141) reported in the same quarter in 1994
and the $146 reported in the first half of 1994.
During the fourth quarter of 1994, the Company recorded an unrealized loss of
$643 thousand on investment securities held in its trading account. In the
first quarter of this year, these securities showed some market appreciation
with an approximate gain of $70 thousand being recorded. The Company sold the
securities during the second quarter, and recorded a gain of approximately $7.
OTHER OPERATING EXPENSE
Total other operating expenses were $8.5 million for the first six months as
compared to $7.8 million for the same period in 1994. The Tri-State purchase
accounted for approximately $300 of the increase between 1995 and 1994.
Compared to the same quarter in 1994, operating expenses increased slightly
from $4.1 million to $4.3 million. The majority of this increase is in the
net occupancy expense and marketing and advertising expense.
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PAGE 11
Personnel costs continue to be the largest component of other operating
expenses. Employee related costs totaled $3.9 million for the first six
months of year. This reflects an increase of $66 or 1.7%, over the same
period in 1994. The addition of Tri-State added approximately $200 in
employee costs for the first half of 1995 as compared to the same period of
1994. Mortgage banking employee costs over the first two quarters of 1995, as
compared to the first two quarters of 1994, decreased $343 as a result of
staff reductions and reduced commissions paid to originators. For the current
quarter, personnel costs were $1,978, a decrease of $21 or 1.1%, from the
same quarter last year.
Employee costs represented 31.8% of net interest and non-interest revenues
for the second quarter, a decrease of 0.7% from the prior quarter. This
important indicator was also 32.2% for the first six months of 1995 compared
to 39.0% in the first half of 1994. TDAY continues additional efforts to
further improve in this area.
Net occupancy and equipment expenses for the six months ended June 30, 1995
were $711 as compared to $485 for the same period of 1994. This increase is
due to higher levels of depreciation on personnel computing networks and the
increased costs of maintenance. Net occupancy expense for the second quarter
was $336 as compared to $375 for the prior quarter, a decrease of 10.4%. The
decrease between quarters is due to utility expenses and maintenance costs
returning to lower levels during the second quarter. These expenses during
the first quarter were higher due to the colder weather conditions.
During the second quarter of 1995, the Company continued to experience
additional costs associated with the name change and the reorganization of
its affiliates. Additional costs associated with these efforts increased
expenses about $300 over normal operating expenses for the first half of
1995. The major components of the additional costs were supplies and forms
($100), marketing and advertising ($100), postage ($31), employee overtime
($20), and data processing ($10). While the majority of these expenses are
one time in nature, increased marketing and advertising are planned for the
balance of the year.
STATEMENT OF CONDITION
Total assets of $508.1 million were reported as of June 30, 1995. This
represents a $79.4 million, or 18.5% increase, over the $428.7 million
reported as of June 30, 1994 and a $18.7 million, or 3.8% increase, over the
$489.4 million reported as of December 31, 1994. Approximately $43 million of
the increase in assets is attributable to the purchase of Tri-State Bank.
Mortgage loans held for sale declined $2.6 million to $4.4 million in the
second quarter from the same date last year and increased $3.0 million from
year end 1994. Mortgage loans held for sale are expected to decline in the
foreseeable future. Funds from this reduction were utilized to reduce federal
funds purchased and to fund other asset growth.
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PAGE 12
Loans represent the largest component of TDAY's earning asset base and
lending activities continue to show positive results. At the end of the
current quarter, total net loans were $349.9 million. This represents a $77.3
million, or 28.4% increase, over the $272.6 million reported June 30, 1994
and a $22.3 million, or 6.8% increase, over the $327.6 million reported
December 31, 1994. TDAY's strong emphasis on sales, to capture more business
from current customers and to attract new relationships by offering high
quality and diversified loan products, should allow for continued growth of
the loan portfolio if appropriately priced funds can be secured. The purchase
of Tri-State Bank contributed approximately $26 million to the growth figures
reported between the second quarters of each year.
Securities totaled $111.2 million at June 30, 1995, an increase of $13.4
million, or 13.7%, from the $97.8 million reported the same day last year and
a $5.3 million increase over the $105.9 million reported December 31, 1994.
As previously mentioned, the Company sold its trading account securities
during the quarter. The funds were reinvested in securities and used to fund
loan growth. The relatively stable balances within the investment portfolio
are indicative of using deposit growth to fund lending opportunities. The
Tri-State Bank purchase added approximately $11 million in investments.
On the liability side of the balance sheet, deposits totaled $431.6 million
at June 30, 1995. They grew $61.5 million, or 16.6%, from the $370.1 million
reported on June 30, 1994, and $13.9 million from the $417.7 million reported
on December 31, 1994. Again, the Tri-State purchase increased total deposits
by approximately $39 million. Much of the remaining deposit growth during
1994 was attributable to increased market penetration in the Rockford,
Illinois area. Specialized products were developed to meet the needs of
targeted groups such as small businesses. These new funding sources were
specifically identified and used to match commercial loan growth.
Short-term borrowings totaled $12.8 million at June 30, 1995. This was an
increase of $4.2 million or 48.8% from the same period in 1994 and a slight
decrease of $300 thousand, or 2.3%, from the $13.1 million reported at
December 31, 1994. This increase in short-term borrowings from June 30, 1994
was mainly caused by a higher demand for repurchase agreements.
Other borrowings increased $8.1 million since June 30, 1994 to the current
balance of $16.3 million. This also represented an increase of $2.5 million
since December 31, 1994. Approximately $6.0 million of the year to year
increase resulted from debt associated with the Tri-State purchase. The
balance came in the form of advances from the Federal Home Loan bank. Again,
these funds were used to provide additional lending capacity.
<PAGE>
PAGE 13
ASSET QUALITY
TDAY continues to emphasize asset quality as evidenced by its ratio of
non-performing loans being only .92% of gross loans at June 30, 1995. This
compares to 0.8% for the same date last year. Non-performing loans as a
percent of capital have increased to 7.3%, compared to 5.7% for the same date
last year. The Tri-State purchase added approximately $292 thousand (or 0.7%)
to the non-performing numbers.
TDAY evaluates the allowance for possible loan losses on an on-going basis.
The results of these reviews are reported to the Board of Directors. The
level of the allowance is a matter of judgment and is dependent upon many
factors, including a prospective view of losses inherent in the loan
portfolio, delinquency trends, historic charge-off percentages and other
factors management believes may affect the quality of the portfolio. As part
of the due diligence procedures related to the acquisition, management has
assessed the condition of Tri-State Bank's portfolio and believes the level
of the allowance is adequate. Based on current projections, TDAY is unaware
of any information or uncertainties concerning material credits that would
significantly impact future operations, liquidity or capital. During the
first quarter of 1995, the Company adopted new accounting procedures for
reporting and identifying loans which may be impaired as to total
collectibility. Based upon the most recent evaluation, additional funding for
these impaired loans was unnecessary.
INTEREST RATE SENSITIVITY AND LIQUIDITY
The Asset/Liability Committees of the affiliate banks continually monitor
TDAY's liquidity and rate sensitivity position. Rate sensitivity management
seeks to maximize the growth of net interest income on a consistent basis by
minimizing the fluctuations associated with changing market interest rates
along with meeting cash flow requirements that may arise from increases in
demand for loans or other assets or from decreases in deposits or other
funding sources.
TDAY's liquidity position has been influenced by its funding base and asset
mix as identified in the Consolidated Statement of Cash Flows. Funding for
the first six months of 1995 was primarily provided by proceeds from the
sales, calls and maturities of trading securities, investment securities and
mortgage-backed securities of $27.1 million, an increase in other borrowings
of $3.0 million and an increase in deposits of $13.9 million. The funds were
primarily utilized to purchase investment securities totaling $30.1 million,
decrease short-term borrowings by $0.4 million, pay dividends of $0.7 million
and provide funds of $22.6 million for lending activities.
<PAGE>
PAGE 14
The following rate sensitivity table reflects the earlier of the maturity or
repricing dates for various assets and liabilities at June 30, 1995:
<TABLE>
<CAPTION>
0-3 MO 4-12 MO 1-5 YR. > 5 YR. TOTAL
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
USES OF FUNDS
Investment securities,
excluding valuation
allowance $ 7,009 $ 20,299 $ 73,449 $ 9,986 $110,743
Time deposits in banks 642 465 -- 28 1,135
Federal funds sold 470 -- -- -- 470
Mortgage loans held
for sale 4,364 -- -- -- 4,364
Loans, excluding non-
accrual loans 158,305 46,277 111,402 35,357 351,341
- -------------------------------------------------------------------------------------------------------------------
Total Uses $170,790 $ 67,041 $184,851 $45,371 $468,053
- -------------------------------------------------------------------------------------------------------------------
SOURCES OF FUNDS
Int. bearing checking $ 51,177 $ -- $ -- $ -- $ 51,177
Moneymarket savings 48,489 -- -- -- 48,489
Regular savings 42,357 -- -- -- 42,357
Time deposits 85,516 49,661 73,795 6,711 215,683
Other interest bearing 10,507 7,348 11,955 655 30,465
Short-term borrowings 12,794 -- -- -- 12,794
Term borrowings and
advances from FHLB 7,722 5,250 3,325 -- 16,297
- -------------------------------------------------------------------------------------------------------------------
Total interest bearing 258,562 62,259 89,075 7,366 417,262
Net other sources -- -- -- 50,791 50,791
- -------------------------------------------------------------------------------------------------------------------
Total Sources $258,562 $ 62,259 $ 89,075 $58,157 $468,053
- -------------------------------------------------------------------------------------------------------------------
CUMULATIVE MATURITY/RATE
SENSITIVE GAP ($87,772) ($82,990) $ 12,786 $ 0 $ 0
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
On a cumulative basis, TDAY's one year interest gap resulted in $(83.0)
million more interest sensitive liabilities than assets. This generally
indicates that net interest income would decline in a rising rate
environment. However, in tracking interest rate movements of deposit rates
compared to market based rates during past interest rate cycles, TDAY notes
that certain deposit rates have a tendency to lag. When the cumulative rate
sensitivity gap is adjusted for this factor, TDAY feels it is in a near
matched position, allowing for limited interest rate exposure.
The cumulative rate sensitivity gap provides a general indication of interest
sensitivity at a specific point in time. TDAY further utilizes simulation to
analyze the impact of changes in interest rates and volumes on the net
interest income.
CAPITAL
TDAY's capital position provides a margin of safety for depositors and
stockholders, and enables the Company to take advantage of acquisition
opportunities and provide for future growth. Each of the subsidiary banks are
subject to regulatory capital guidelines as shown below. At June 30, 1995,
TDAY had Tier I capital of 9.6%, Tier II capital of 10.4% and a leverage
ratio of 7.6%.
The following table illustrates in tabular form the various ratios:
<TABLE>
<CAPTION>
MINIMUM
REGULATORY
AMOUNT RATIO GUIDELINES
- -----------------------------------------------------------------------------
<S> <C> <C> <C>
RISK-BASED CAPITAL RATIOS
Tier I capital $ 37,497 9.6% 4.0%
Tier II capital 40,529 10.4 8.0
Risk-weighted assets 391,483 -- --
</TABLE>
<PAGE>
PAGE 15
<TABLE>
<S> <C> <C> <C>
SUPPLEMENTAL RATIOS
Leverage ratio 37,497 7.6 3.0
Total average assets 494,614 -- --
</TABLE>
Bank regulators have established risk-based capital guidelines which are
intended to reflect the varying degrees of risk associated with different
balance sheet and off-balance-sheet items. Tier I capital includes equity
capital less goodwill to risk-weighted assets, and Tier II capital includes
Tier I capital plus the allowed portion of the allowance for possible loan
losses to risk-weighted assets. The leverage ratio is defined as Tier I
capital to total assets.
Under the risk-based capital guidelines presently in effect for banks and
bank holding companies, minimum capital levels are based on the perceived
risk in the various asset categories. Certain off-balance-sheet instruments
such as loan commitments and letters of credit require capital allocations.
Bank holding companies are required to maintain minimum risk-basked capital
ratios. TDAY's ratios are above the regulatory minimum guide-lines and each
of its subsidiary banks met the regulatory criteria to be categorized as
"well capitalized" institutions at June 30, 1995. For each of the subsidiary
banks, the "well capitalized" classification permits the banks to minimize
the cost of FDIC insurance assessments by being charged a lesser rate than
those who do not meet this definition. Designation as a "well capitalized"
institution does not constitute a recommend-ation by federal bank regulators.
The deposits of the Company are insured up to $100,000 per insured member (as
defined by law and regulation) by the FDIC with such insurance backed by the
full faith and credit of the United States government. The Company's deposits
are dominantly insured by the Bank Insurance Fund ("BIF") which is
administered by the FDIC.
As insurer, the FDIC assesses deposit insurance premiums and is authorized to
conduct examinations of, and require reporting by, FDIC-insured institutions.
Deposit insurance premiums are based upon risk classifications that are
determined by the insured institution's capital ratios ad the result of such
institution's supervisory examinations. Institutions assigned higher risk
classifications pay deposit insurance premiums at a higher rate than the
institutions assigned lower risk classifications.
The Banks are currently assessed an annual deposit insurance premium at a
rate of $.23 per $100 of insured deposits, which is the lowest insurance rate
imposed by the FDIC.
Federal banking regulators and law makers are believed to favor the merging
of the BIF and Savings Association Insurance Fund ("SAIF"). Congressional
hearings on the resolution of the issues have been held and future hearings
are scheduled. The outcome of such hearings and the impact of deposit
insurance premiums assessed and the likelihood of the merger of the BIF and
SAIF cannot be determined at this time.
<PAGE>
PAGE 16
OTHER DEVELOPMENTS
Management is not aware of any trends, events or uncertainties, other than
those discussed above, or of any recommendations by regulatory authorities
which, if they were to be implemented, would impact the future operations,
liquidity or capital of the company.
Recent publicity regarding the usage of derivative investment instruments has
caused concern about the safety and soundness of financial institutions using
such products. TDAY and it subsidiaries have not entered into any such
arrangements at this time.
In May 1995, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 122, "Accounting for Mortgage Servicing Rights, an amendment of FASB No.
65", which will be effective for the years beginning after December 15, 1995
with earlier adoption permitted. This statement amends the accounting for
mortgage servicing rights to allow capitalization of certain costs related to
internally originated loans. Once an adoption date is determined, it is
anticipated that this statement will not have a material impact on the
financial position or results of operations of the Company.
<PAGE>
PAGE 17
Part II.
Item 4. Submission of Matters to a Vote of Security holders
The annual meeting of shareholders was held April 20, 1995 and resulted in
the following approvals:
1. The election of four (4) Class II Directors, Craig D. Hartman, Dan Heine,
Edward D. Higgins, and Raymond E. Johnson who will serve until their term
expires at the 1998 annual meeting.
2. The ratification and appointment of KPMG Peat Marwick, LLP as independent
public accountants for the Company for the fiscal year ending December 31,
1995.
Item 5. Other Information
On July 18, 1995, the Board of Directors approved an $0.1375 per share cash
dividend to all shareholders of record as of August 1, 1995, payable on
August 10, 1995.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibit 11, Computation of Per Share Income is presented on page 19.
(b) There were no reports on Form 8-K filed during this reporting period.
<PAGE>
PAGE 18
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.
TODAY'S BANCORP, INC.
---------------------
(Registrant)
DATE: August 11, 1995 /s/ Richard W. Owen
---------------------------
Richard W. Owen
Executive Vice President
and Chief Financial Officer
<PAGE>
PAGE 19
TODAY'S BANCORP, INC.
EXHIBIT 11 - COMPUTATION OF PER SHARE INCOME
FOR THE SIX MONTHS ENDED JUNE 30
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Net income $2,140,000 $1,268,000
---------- ----------
---------- ----------
Weighted average shares outstanding* 2,714,852 2,667,286
Net additional shares resulting from assumed
exercise of stock options** 12,793 34,082
------ ------
Total weighted average common shares and
equivalents outstanding 2,727,645 2,701,368
--------- ---------
--------- ---------
Net income per common share:
Primary $0.79 $0.47
----- -----
----- -----
Assuming full dilution $0.78 $0.47
----- -----
----- -----
- ---------------------------
<FN>
* The average number of shares oustanding is used for the computation of
primary earnings per share since the change caused by common stock
equivalents is less than 3% and thus does not need to be considered as
dilutive.
** Assumes proceeds from exercise of stock options used to purchase treasury
shares at market on the last business day of the quarter.
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> JUN-30-1995
<CASH> 16,283
<INT-BEARING-DEPOSITS> 1,135
<FED-FUNDS-SOLD> 470
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 67,989
<INVESTMENTS-CARRYING> 43,194
<INVESTMENTS-MARKET> 0
<LOANS> 357,262
<ALLOWANCE> (3,032)
<TOTAL-ASSETS> 508,103
<DEPOSITS> 431,624
<SHORT-TERM> 12,794
<LIABILITIES-OTHER> 3,345
<LONG-TERM> 16,297
<COMMON> 13,664
0
0
<OTHER-SE> 30,379
<TOTAL-LIABILITIES-AND-EQUITY> 508,103
<INTEREST-LOAN> 15,535
<INTEREST-INVEST> 3,548
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 19,083
<INTEREST-DEPOSIT> 8,692
<INTEREST-EXPENSE> 9,513
<INTEREST-INCOME-NET> 9,570
<LOAN-LOSSES> 330
<SECURITIES-GAINS> 134
<EXPENSE-OTHER> 8,523
<INCOME-PRETAX> 3,258
<INCOME-PRE-EXTRAORDINARY> 2,140
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,140
<EPS-PRIMARY> .79
<EPS-DILUTED> .78
<YIELD-ACTUAL> 4.22
<LOANS-NON> 1,557
<LOANS-PAST> 1,309
<LOANS-TROUBLED> 364
<LOANS-PROBLEM> 2,811
<ALLOWANCE-OPEN> 3,144
<CHARGE-OFFS> 550
<RECOVERIES> 108
<ALLOWANCE-CLOSE> 3,032
<ALLOWANCE-DOMESTIC> 892
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 2,140
</TABLE>
