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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, 1996
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) 235-8596
-------------
(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, 1996
------------------- ---------------
Common stock, par value 2,751,198
$5.00 per share
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Part I. Item I.
TODAY'S BANCORP, INC.
CONSOLIDATED BALANCE SHEETS
(dollars in thousands)
unaudited
June 30 December 31
------------- ----------
1996 1995 1995
---- ---- ----
ASSETS
Cash and due from banks................ $ 15,435 $ 16,283 $ 16,603
Federal funds sold..................... 9,980 470 5,330
-------- -------- --------
Total cash and cash equivalents 25,415 16,753 21,933
Mortgage loans held for sale........... 1,738 4,364 1,116
Time deposits in other banks........... 338 1,135 434
Trading account securities............. - - -
Securities available for sale, at fair
value................................ 75,070 67,989 76,933
Securities held to maturity with
aggregate fair values of $27,553,
$43,525, and $34,257, respectively... 27,640 43,194 34,037
Loans.................................. 358,652 352,898 362,418
Allowance for possible loan losses... (3,538) (3,032) (3,289)
-------- -------- --------
Net loans 355,114 349,866 359,129
Premises and equipment................. 12,122 12,961 12,633
Accrued interest and other assets...... 12,101 11,841 12,269
-------- -------- --------
Total assets $509,538 $508,103 $518,484
-------- -------- --------
-------- -------- --------
LIABILITIES
Deposits:
Non interest bearing................. $ 43,788 $ 43,453 $ 49,821
Interest bearing..................... 393,871 388,171 396,000
-------- -------- --------
Total deposits 437,659 431,624 445,821
Federal funds purchased, securities
sold under agreements to repurchase,
and other short-term borrowings...... 9,022 12,794 8,298
Other liabilities...................... 3,593 3,345 4,354
Other borrowings....................... 11,397 16,297 13,497
-------- -------- --------
Total liabilities 461,671 464,060 471,970
-------- -------- --------
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 and Outstanding - 2,751,198,
2,732,319, and 2,742,865 shares,
respectively....................... 13,756 13,664 13,714
Capital surplus........................ 6,461 6,259 6,357
Retained earnings...................... 27,585 23,824 25,809
Unrealized gain on securities.......... 65 296 634
-------- -------- --------
Total capital 47,867 44,043 46,514
-------- -------- --------
Total liabilities and capital $509,538 $508,103 $518,484
-------- -------- --------
-------- -------- --------
See accompanying notes to consolidated financial statements.
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TODAY'S BANCORP, INC.
CONSOLIDATED STATEMENTS OF INCOME
(dollars in thousands, except per share data)
unaudited
Three Months Ended
June 30
-------
INTEREST INCOME 1996 1995
---- ----
Interest and fees on loans....................... $7,940 $8,051
Interest on federal funds sold and
time deposits in other banks................... 92 144
Interest and fees on mortgage loans
originated for sale............................ 31 38
Interest on investment securities
Trading securities............................. - 4
Securities available for sale - taxable........ 1,123 1,019
Securities available for sale - exempt from
federal income taxes......................... 28 -
Securities held to maturity - taxable.......... 209 384
Securities held to maturity - exempt from
federal income taxes......................... 217 247
------ ------
TOTAL INTEREST INCOME 9,640 9,887
------ ------
INTEREST EXPENSE
Interest on deposits............................. 4,544 4,476
Interest on federal funds purchased,
securities sold under agreement to
repurchase, and other short-term borrowings.... 91 157
Interest on other borrowings..................... 202 288
------ ------
TOTAL INTEREST EXPENSE 4,837 4,921
------ ------
NET INTEREST INCOME 4,803 4,966
Provision for possible loan losses............... 280 165
------ ------
NET INTEREST INCOME AFTER PROVISION
FOR POSSIBLE LOAN LOSSES 4,523 4,801
------ ------
OTHER OPERATING INCOME
Trust revenues................................... 439 393
Service charges on deposit accounts.............. 449 454
Mortgage banking fees and gain on sale of
mortgage servicing rights...................... 107 246
Securities gains, net............................ (2) -
Trading account securities gains................. - 8
Other income..................................... 198 149
------ ------
TOTAL OTHER OPERATING INCOME 1,191 1,250
------ ------
OTHER OPERATING EXPENSES
Salaries, wages, and employee benefits........... 1,865 1,978
Net occupancy expense............................ 326 336
Furniture and equipment expense.................. 310 333
Printing, stationery, and supplies............... 110 172
FDIC insurance expense........................... 1 238
Data processing expense.......................... 284 261
Marketing and advertising........................ 100 203
Other expenses................................... 688 750
------ ------
TOTAL OTHER OPERATING EXPENSES 3,684 4,271
------ ------
Income before income taxes....................... 2,030 1,780
Income tax provision............................. 718 619
------ ------
NET INCOME $1,312 $1,161
------ ------
------ ------
Net income per common share...................... $ 0.47 $ 0.43
------ ------
------ ------
Dividends declared per common share.............. $0.1500 $0.1375
------ ------
------ ------
See accompanying notes to consolidated financial statements.
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TODAY'S BANCORP, INC.
CONSOLIDATED STATEMENTS OF INCOME
(dollars in thousands, except per share data)
unaudited
Six Months Ended
June 30
-------
INTEREST INCOME 1996 1995
---- ----
Interest and fees on loans....................... $15,951 $15,456
Interest on federal funds sold and
time deposits in other banks................... 144 221
Interest and fees on mortgage loans
originated for sale............................ 60 79
Interest on investment securities
Trading securities............................. - 102
Securities available for sale - taxable........ 2,248 2,024
Securities available for sale - exempt from
federal income taxes......................... 55 -
Securities held to maturity - taxable.......... 492 707
Securities held to maturity - exempt from
federal income taxes......................... 445 494
------ ------
TOTAL INTEREST INCOME 19,395 19,083
------ ------
INTEREST EXPENSE
Interest on deposits............................. 9,171 8,692
Interest on federal funds purchased,
securities sold under agreement to
repurchase, and other short-term borrowings.... 199 291
Interest on other borrowings..................... 422 530
------ ------
TOTAL INTEREST EXPENSE 9,792 9,513
------ ------
NET INTEREST INCOME 9,603 9,570
Provision for possible loan losses............... 560 330
------ ------
NET INTEREST INCOME AFTER PROVISION
FOR POSSIBLE LOAN LOSSES 9,043 9,240
------ ------
OTHER OPERATING INCOME
Trust revenues................................... 915 801
Service charges on deposit accounts.............. 869 877
Mortgage banking fees and gain on sale of
mortgage servicing rights...................... 208 312
Securities gains, net............................ 6 57
Trading account securities gains................. - 77
Other income..................................... 401 417
------ ------
TOTAL OTHER OPERATING INCOME 2,399 2,541
------ ------
OTHER OPERATING EXPENSES
Salaries, wages, and employee benefits........... 3,750 3,895
Net occupancy expense............................ 720 711
Furniture and equipment expense.................. 631 659
Printing, stationery, and supplies............... 204 393
FDIC insurance expense........................... 1 475
Data processing expense.......................... 585 537
Marketing and advertising........................ 210 330
Other expenses................................... 1,384 1,523
------ ------
TOTAL OTHER OPERATING EXPENSES 7,485 8,523
------ ------
Income before income taxes....................... 3,957 3,258
Income tax provision............................. 1,391 1,118
------ ------
NET INCOME $2,566 $2,140
------ ------
------ ------
Net income per common share...................... $ 0.93 $ 0.79
------ ------
------ ------
Dividends declared per common share.............. $0.2875 $0.2625
------ ------
------ ------
See accompanying notes to consolidated financial statements.
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TODAY'S BANCORP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in thousands)
unaudited
Six Months Ended
June 30
-------
1996 1995
---- ----
OPERATING ACTIVITIES
Net income....................................... $ 2,566 $ 2,140
Adjustments to reconcile net income to net cash
provided (used) by operating activities:
Depreciation................................. 799 799
Amortization of goodwill..................... 180 186
Benefit for deferred income taxes............ (139) (265)
Provision for possible loan losses........... 560 330
Amortization of premiums, net................ 156 170
Securities gains, net........................ (6) (57)
Trading account security gains............... - (77)
Proceeds from sale of trading account
securities................................. - 6,427
Loans originated for sale.................... (18,540) (20,468)
Loans sold................................... 17,918 17,392
Decrease in accrued interest and other assets 443 930
Decrease in other liabilities................ 716 515
--------- ---------
Net cash provided by operating activities 3,221 6,992
------- ------
INVESTING ACTIVITIES
Proceeds from maturities of time
deposits in other banks........................ 101 476
Securities available for sale:
Proceeds from sales, maturities, and repayments
of mortgage-backed securities................ 889 338
Proceeds from sales of investment securities... 2,525 5,038
Proceeds from calls and maturities of
investment securities........................ 10,132 12,301
Purchase of investment securities.............. (12,710) (20,098)
Securities held to maturity:
Proceeds from sales, maturities, and repayments
of mortgage-backed securities................ 3,743 1,106
Proceeds from sale of investment securities.... 351 347
Proceeds from calls and maturities of
investment securities........................ 2,435 1,555
Purchase of investment securities.............. (190) (10,024)
Net increase (decrease) in loans held for
portfolio ..................................... 3,455 (22,558)
Purchases of premises and equipment.............. (288) (1,123)
--------- ---------
Net cash provided (used) by investing activities. 10,443 (32,642)
--------- ---------
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TODAY'S BANCORP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS, CONTINUED
(dollars in thousands)
unaudited
Six Months Ended
June 30
-------
1996 1995
---- ----
FINANCING ACTIVITIES
Net increase (decrease) in deposits.............. (8,162) $ 13,877
Net increase (decrease) in federal funds
purchased, securities sold under agreements to
repurchase, and other short-term borrowings.... 724 (336)
Payment on other borrowings...................... (2,100) (500)
Cash dividends paid.............................. (790) (712)
Proceeds from exercise of stock options.......... 146 360
Increase in other borrowings..................... - 3,000
--------- ---------
Net cash provided (used) by financing activities (10,182) 15,689
--------- ---------
Net decrease in cash and cash equivalents (3,482) (9,961)
Cash and cash equivalents at beginning of period 21,933 26,714
--------- ---------
Cash and cash equivalents at end of period $ 25,415 $ 16,753
--------- ---------
--------- ---------
See accompanying notes to consolidated financial statements.
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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 1995 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 principals for
interim financial information and with the instructions of Form 10-Q and
Article 10 of Regulation S-X except for the December 31, 1995 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 period'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, 1996 and for all periods
presented have been made. All significant inter-company 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 1996, the securities available for sale were
written down $930 thousand to reflect the current market price at June 30,
1996. The offsetting entries were to other assets which were increased by
$361 thousand to reflect the deferred income tax impact and to the capital
account, unrealized gain (loss) on securities, which was decreased by $569
thousand moving from a positive position of $634 thousand at December 31,
1995 to a positive $65 thousand at June 30, 1996.
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Note 4 - Merger
On March 19, 1996, TODAY'S BANCORP, INC. ("TODAY" or the "Company") entered
into a definitive agreement to merge with a wholly owned subsidiary of
Mercantile Bancorporation Inc. ("Mercantile") pursuant to which Mercantile
will acquire 100% of the common stock of TODAY in exchange for a combination
of Mercantile common stock and cash having a value of $87,250,000 as of March
19, 1996.
The transaction is subject to the approval of banking authorities and the
shareholders of TODAY. It is expected that the transaction will be
consummated in late 1996.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
(dollars in thousands)
The following discussion and analysis provides an overview of significant
factors which affected TODAY'S financial statements and results of
operations. This commentary is intended to provide readers with a more
comprehensive review than is apparent from the consolidated financial
statements and notes alone.
EARNINGS OVERVIEW
The Company's second quarter earnings of $1,312 or $0.47 per share, was $151,
or $.04 per share greater than the $1,161 or $0.43 per share recorded in the
same quarter of 1995. Year-to-date earnings of $2,566 or $.93 per share, was
$426, or $.14 per share higher than the $2,140, or $.79 per share recorded
for the same period in 1995.
The increase for the three month period ended June 30, 1996 was attributable
to continued earning improvements at the bank affiliates and the increased
revenues from trust operations. Non-interest expense declined primarily due
to the reduction in FDIC insurance premiums and the Company's continued
efforts to reduce operating costs.
Part of the earning improvements in the bank affiliates came from the
reduction in the FDIC insurance premiums paid and supply costs. The
reduction in FDIC premiums was a result of a decision reached during the
third quarter of 1995 by the Federal Deposit Insurance Corporation's Board of
Directors. The Board voted to reduce the deposit insurance premiums paid from
$0.23 per $100 for "Well Capitalized Institutions" to $.04 per $100. As a
result of this vote, the Company has incurred minimal costs in 1996 related
to FDIC insurance premiums as compared to the same period in 1995. The
Company's supply costs returned to normal levels in the first half of 1996.
During the first six months of 1995, the Company's name change and
reorganization of its affiliates resulted in higher than normal supply costs.
For the three months ended June 30, 1996, the Company's trust operations
increased revenues by 12% from the same period in 1995. The increase was a
result of higher market values in the trust assets which are the basis for
most fees and the addition of new customers.
TODAY's annualized return on average equity was 11.03% and 10.80% and its
return on average assets was 1.04 and 1.01%, for the three month and six
month periods ending June 30, 1996, respectively. For the same periods in
1995, the annualized return on average equity was 10.82% and 10.20%, while
the annualized return on average assets was .93% and .87%, respectively.
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NET INTEREST INCOME
Net interest income, defined as the difference between interest income and
interest expense (the "margin"), remains TODAY's most significant source of
profitability. The second quarter margin decreased by $163 or 3% from the
second quarter of 1995. This decline was a result of installment loan
run-off experienced over the past year. For the six months ended June 1996,
the margin was $9,603, an increase of $33, or .3% from the same period in
1995. The Company expects loan growth in the commercial portfolio to be
minimal and will continue to experience a decline in the installment
portfolio. Although the Company has been successful in attracting new loan
relationships, most of the success has been negated by higher costs
associated with deposit fundings. During the first six months of 1996,
deposit costs continued to increase as asset yields declined slightly.
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 Company believes that the overall
effect of this will be minimal due to the limited rate risk associated with
the affiliate banks' repricing schedules.
OTHER OPERATING INCOME
TODAY's earnings from non-interest sources for the three months and six
months ended June 30, 1996 were $1.2 and $2.4 million, a decrease of 5% and
6% from the same periods of 1995
Trust department revenues for the second quarter were $439, an increase of
$46, or 12% from the same quarter in 1995. This increase was attributable to
higher market values in the trust assets which is the basis for most fees and
the addition of new customers.
Deposit fees remained flat between the second quarters of 1996 and 1995.
During 1995, the Company standardized related fees within the affiliates and
adopted a more aggressive posture of charging for accounts being overdrawn.
Service charges were higher by $29 from the first quarter of 1996.
Management is continually looking at alternatives to improve fee income.
Mortgage activity recorded revenues of $107 for the current quarter as
compared to $246 for the same period in 1995. Interest rate fluctuations
during the second quarter and staff turnover resulted in lower than
anticipated mortgage origination's. Management believes loan origination
activity for the balance of the year will remain below plan and below 1995
levels.
The Company had minimal security gains for the first half of 1996. During
the first quarter of 1995, the Company recorded market appreciation of $69 on
a mutual fund carried as a trading security. This fund was sold in the second
quarter of last year.
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OTHER OPERATING EXPENSE
Total other operating expenses were $3.7 million and $7.5 million for the
three month and six month periods ending June 1996. This is significantly
down from the $4.3 million and $8.5 million reported for the same periods in
1995. During the first half of 1995, the Company incurred $300 in costs over
normal operating expenses related to the changing of the Company's name and
the reorganization of its affiliates.
Personnel costs continue to be the largest component of other operating
expenses. Employee related costs totaled $1.9 million and $3.8 million for
the first half of 1996. This reflects a decrease of $113 or 6%, and $145 or
4%, from the same periods of 1995, respectively. Mortgage banking employee
costs continued to decline due to efforts to reduce fixed costs at this
affiliate.
Year-to date employee costs represented 31% of net interest and non-interest
revenues, a decrease of 1% from the same period of the prior year. TODAY will
continue the efforts to improve in this area.
Net occupancy and equipment expenses for the second quarter were $636 as
compared to $669 for the three months ended June 30, 1995. This decrease is
due to lower than anticipated utility costs from the mild weather conditions
experienced during the spring months. Also contributing, was a decline in
maintenance contracts costs.
Printing, stationery and supplies expenses were $110 and $204 for the three
month and six month periods of 1996. This represents a decrease of $62 or
36% and $189 or 48%, from the same periods of 1995, respectively. This was
attributable to higher costs during the first half of 1995 related to the
name change and the reorganization of affiliates.
In August, 1995, the FDIC's Board of Directors determined that the Bank
Insurance Fund (BIF) was recapitalized as of May 31, 1995 and voted to reduce
the insurance rates from $.23 to $.04, per $100. In September of 1995, the
FDIC refunded the insurance premium overpayments made since the BIF was
recapitalized on May 31, 1995. During the fourth quarter of 1995, the FDIC
announced all "Well Capitalized" Banks with a 1A rating would not be required
to pay deposit insurance in 1996 (except for the $2,000 minimum mandated by
law). The reduction in premiums resulted in FDIC insurance for the first
half of 1996 to be $1, compared to $475 for the same periods in 1995.
Marketing and advertising expenses were $100 for the second quarter of 1996.
This represents a $103 or 51%, decline from the same period in 1995.
Management aggressively marketed the name change of the Company during last
year's reorginazation. Costs for the first half of 1996 indicate a return to
normal levels for the Company.
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STATEMENT OF CONDITION
Total assets of $509.5 million were reported as of June 30, 1996. This
represents a $1.4 million, or .3% increase, over the $508.1 million reported
as of June 30, 1996 and a $8.9 million, or 2% decrease, from the $518.5
million reported as of December 31, 1995. Most of the decrease since year
end was in the deposit accounts, loans and held-to-maturity securities.
Management has allowed this decline, given the current competitive nature of
deposit and loan pricing in the market.
Mortgage loans held for sale decreased $2.6 million to $1.8 million at June
30, 1996 from the same quarter of 1995 and they were $.6 million higher than
at December 31, 1995. Mortgage loans held for sale are expected to decline
slightly in the foreseeable future. Funds from this reduction will be
utilized to sell federal funds and to fund portfolio loan growth.
Loans represent the largest component of TODAY's earning asset base. Lending
activities over the past several years have showed positive results. During
1996, this positive trend in lending activities was starting to level-off.
At the end of the current quarter, total loans were $358.7 million. This
represents a $5.8 million, or 2% increase from June 30, 1995 total of $352.9
million and a $3.7 million, or 1% decrease from the $362.4 million reported
December 31, 1995. TODAY places a strong emphasis on sales to capture more
business from current customers and to attract new relationships by offering
high quality and diversified loan products.
Securities, including time deposits in other banks, totaled $103.0 million at
June 30, 1996, a decrease of $9.3 million, or 8%, from the $112.3 million
reported for the same period ended in 1995 and a $8.4 million decrease over
the $111.4 million reported December 31, 1995. The funds from the securities
which were sold or matured were used to fund the Company's loan growth.
On the liability side of the balance sheet, deposits totaled $437.7 million
at June 30, 1996. Deposits increased $6.1 million, or 1%, from the $431.6
million reported on June 30, 1995, and declined $8.1 million, or 2% from the
$445.8 million reported on December 31, 1995. Much of the deposit growth
during 1995 was attributable to increased market penetration in the Rockford
area. Specialized products were developed to meet the needs of targeted
groups such as small businesses. The decline of deposits during the first
half of 1996 was attributable to the competitive pricing being experienced in
the market.
Short-term borrowings totaled $9.0 million at June 30, 1996. This was a
decrease of $3.8 million or 29% from the same quarter in 1995, and an
increase of $.7 million or 9% from the $8.3 million reported at December 31,
1995. The decrease in short-term borrowings from June 30, 1995 was
attributable to a decline in repurchase agreements.
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Other borrowings decreased $4.9 million from June 30, 1995, to the current
balance of $11.4 million and declined $2.1 million since December 31, 1995.
The decline came in the form of payments on Federal Home Loan Bank notes and
corporate debt.
ASSET QUALITY
TODAY continues to emphasize asset quality as evidenced by its ratio of
non-performing loans being only .39% of gross loans at June 30, 1996. This
compares to .50% at December 31, 1995 and .90% for the same date last year.
Non-performing assets as a percent of capital have decreased to 3.36%,
compared to 5.22% at December 31, 1995 and 7.57% at June 30, 1995. Annualized
net charge-offs as a percent of average loans was .17% at June 30, 1996.
This is slightly lower than TODAY's three year average. In comparison to
peer group data, these numbers continue to indicate better than average asset
quality.
TODAY 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. Based
on current projections, TODAY is unaware of any information or uncertainties
concerning material credits that would significantly impact future
operations, liquidity or capital. However, given the continued growth in the
loan portfolio, prudent increases in the allowance may be necessary to
conservatively hedge against unforeseen and unanticipated loan problems.
INTEREST RATE SENSITIVITY AND LIQUIDITY
The Asset/Liability Committees of the affiliate banks continually monitor
TODAY's liquidity and rate sensitivity position. By managing rate
sensitivity, the Company 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.
TODAY'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 1996 was primarily provided by proceeds from the
sales, calls and maturities of time deposits in other banks, investment
securities and mortgage-backed securities of $20.2 million, loans sold of
$17.9 million and net repayments in the loan portfolio of $3.5. The funds
were primarily utilized to: purchase investment securities totaling $12.9
million, loans originated for sale of $18.5 million, decrease in deposits of
$8.2 million and pay-down of corporate debt and Federal Home Loan Bank
borrowings of $2.1 million for lending activities.
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Page 14
The following rate sensitivity table reflects the earlier of the maturity or
repricing dates for various assets and liabilities at June 30, 1996:
<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 $ 10,768 $ 28,713 $ 57,861 $ 5,244 $102,586
Time deposits in banks 162 176 - - 338
Federal funds sold 9,980 - - - 9,980
Mortgage loans held
for sale 1,738 - - - 1,738
Loans, excluding non-
accrual loans 146,460 55,034 127,636 28,603 357,733
------------------- -------- -------- -------- ------- --------
Total Uses $169,108 $ 83,923 $185,497 $33,847 $472,375
--------------- -------- -------- -------- ------- --------
SOURCES OF FUNDS
Int. bearing checking $ 46,219 $ - $ - $ - $ 46,219
Money market savings 69,017 - - - 69,019
Regular savings 33,814 - - - 33,814
Time deposits 89,214 78,564 43,227 3,763 214,768
Other interest bearing 10,344 10,003 8,363 1,341 30,051
Short-term borrowings 9,022 - - - 9,022
Term borrowings and
advances from FHLB 6,222 5,175 - - 11,397
----------------------- -------- -------- -------- ------- --------
Total interest bearing 263,854 93,742 51,590 5,104 414,290
Net other sources - - - 58,085 58,085
------------------- -------- -------- -------- ------- --------
Total Sources $263,854 $ 93,742 $ 51,590 $63,1893 $472,375
------------------ -------- -------- -------- -------- --------
CUMULATIVE MATURITY/RATE
SENSITIVE GAP ($94,746) ($104,932) $ 29,342 $ 0 $ 0
--------------------------------
</TABLE>
On a cumulative basis, TODAY's one year interest gap resulted in $104.9
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, TODAY notes
that certain deposit rates have a tendency to lag. When the cumulative rate
sensitivity gap is adjusted for this factor, TODAY 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. TODAY further utilizes simulation
to analyze the impact of changes in interest rates and volumes on the net
interest income.
During the fourth quarter of 1995, to reduce the impact of changes in
interest rate on its money market deposit accounts, the Company entered into
an interest rate swap agreement with a notional amount of $5.0 million for
five years. The Company will receive the three-month LIBOR rate in exchange
for a fixed rate of 5.855%.
CAPITAL
The Company's capital position provides a margin of safety for depositors and
stockholders which enables the Company to take advantage of profitable
investment opportunities and provide for future growth. Each of the
subsidiary banks is subject to regulatory capital guidelines as shown below.
At June 30, 1996, TODAY had Tier I capital of 11.08%, Tier II capital of
12.02% and a leverage ratio of 8.30%.
<PAGE>
Page 15
The following table illustrates in tabular form the various ratios:
MINIMUM
REGULATORY
AMOUNT RATIO GUIDELINES
------- ----- ----------
RISK-BASED CAPITAL RATIOS
Tier I capital $ 41,839 11.1% 4.0%
Tier II capital 45,377 12.0 8.0
Risk-weighted assets 377,619 - -
SUPPLEMENTAL RATIOS
Leverage ratio 41,839 8.3 3.0
Total average assets 510,118 - -
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. TODAY'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, 1996. 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 recommendation by federal bank regulators.
During 1995, TODAY's premium per $100 of deposits declined from $.23 to $.04
per $100 of deposits. At this time, no premiums are expected to be assessed
during 1996 at this time.
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 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 and 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.
<PAGE>
Page 16
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.
OTHER DEVELOPMENTS
The Company entered into a definitive agreement to merge with a wholly owned
subsidiary of Mercantile Bancorporation Inc. ("Mercantile") pursuant to which
Mercantile will acquire 100% of the common stock of TODAY in exchange for a
combination of Mercantile common stock and cash having a value of $87.25
million as of March 19, 1996. The transaction is subject to the approval of
banking authorities and the shareholders of TODAY. It is expected that the
transaction will be consummated in late 1996.
The Company is in discussions with the Federal Home Loan Mortgage Corporation
and a federal savings association concerning eleven mortgage loans having an
approximate value of $850 thousand. Research is underway in an effort to
determine if the Company has any liability for the loans which may have been
paid-off in late 1992, while the Company's mortgage banking affiliate was
acting as the servicing agent. It is to early to determine if there is any
financial risks to the Company.
Management is not aware of any other 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.
<PAGE>
Page 17
Part II.
Item 4. Submission of Matters to a Vote of Security holders
The annual meeting of shareholders was held April 18, 1996 and resulted in
the following approvals:
1. The election of three (3) Class III Directors, Michael A. Cavataio
Sr., J. Michael Hillard and R. William Owens who will serve until
their term expires at the 1999 annual meeting.
2. The ratification and appointment of KPMG Peat Marwick, LLP as indep-
endent public accountants for the Company for the fiscal year ending
December 31, 1996.
Item 5. Other Information
On July 16, 1996, the Board of Directors approved a $0.28375 per share cash
dividend to all shareholders of record as of August 1, 1996, payable on
August 10, 1996.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibit 11, Computation of Per Share Income is presented on page 19.
<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 2, 1996 /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
1996 1995
---- ----
Net income $2,566,000 $2,140,000
---------- ----------
---------- ----------
Weighted average shares outstanding* 2,748,644 2,714,852
Net additional shares resulting from assumed
exercise of stock options** 39,355 12,793
------ ------
Total weighted average common shares and
equivalents outstanding 2,787,999 2,727,645
--------- ---------
--------- ---------
Net income per common share:
Primary $0.93 $0.79
----- -----
----- -----
Assuming full dilution $0.92 $0.78
----- -----
----- -----
__________________________________
* The average number of shares outstanding 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.
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<PAGE>
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<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-02-1996
<PERIOD-END> JUN-30-1996
<CASH> 15,435
<INT-BEARING-DEPOSITS> 338
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13,756
0
<COMMON> 0
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