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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1996
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 [ ]
FIRST DECATUR BANCSHARES, INC.
- - ------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 33-80333 37-1085161
------------------------ --------------- ------------------
(State or other jurisdiction (Commission File (I.R.S. Employer
of incorporation) Number) Identification No.)
130 NORTH WATER STREET, DECATUR, IL 62523
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 217-424-1111
----------------------------
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 twelve 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 ninety days.
Yes X No
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2,205,189 shares of the Registrant's common stock, par value $.01 per
share, were outstanding at March 31, 1996.
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FIRST DECATUR BANCSHARES, INC.
FORM 10-Q FOR THREE MONTHS ENDED MARCH 31, 1996
INDEX
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PAGE
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PART I - FINANCIAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Item 1. Condensed Consolidated Financial Statements . . . . . . . . . . . . . . . . . 1
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . . . . . . . . . . . . . . . . . . 6
PART II - OTHER INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Item 1. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Item 2. Changes in Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Item 3. Defaults upon Senior Securities . . . . . . . . . . . . . . . . . . . . . . . 8
Item 4. Submission of Matters to a Vote of Security Holders . . . . . . . . . . . . 8
Item 5. Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . . . . . . . . . 9
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
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PART 1 - FINANCIAL INFORMATION
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FIRST DECATUR BANCSHARES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
MARCH 31, 1996 AND DECEMBER 31, 1995
(IN THOUSANDS)
<TABLE>
<CAPTION>
March 31, December 31,
1996 1995
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(Unaudited)
<S> <C> <C>
Assets
Cash and due from banks $ 21,623 $ 35,371
Federal funds sold 8,000 0
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Cash and cash equivalents 29,623 35,371
Securities available for sale 66,162 66,685
Securities held to maturity 21,984 22,625
Loans, net 173,931 172,610
Premises and equipment 11,484 11,766
Goodwill, net 276 283
Other assets 6,962 6,729
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Total assets $ 310,422 316,069
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------------------------------------------
Liabilities
Deposits
Noninterest bearing $ 41,511 47,763
Interest bearing 214,954 220,400
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Total deposits 256,465 268,163
Federal funds purchased and securities
sold under repurchase agreements 12,634 8,849
U.S. Treasury demand notes 2,179 665
Other liabilities 3,819 3,498
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Total liabilities 275,097 281,175
Stockholders' Equity
Preferred stock, no par value. Authorized 200,000 shares,
none issued or outstanding
Common stock, $.01 par value. Authorized 5,000,000
shares; Issued 2,213,545 shares of which 8,356 shares
and 1,376 shares were held as treasury stock 22 22
Surplus 6,778 6,895
Paid-in capital - phantom stock 107 91
Retained earnings 28,686 27,857
Net unrealized gain (loss) on securities
available for sale (97) 203
------------------------------------------
35,496 35,068
Treasury stock, at cost (171) (174)
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Total stockholders' equity 35,325 34,894
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Total liabilities and
stockholders' equity $ 310,422 316,069
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FIRST DECATUR BANCSHARES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
THREE MONTH PERIODS ENDED MARCH 31, 1996 AND 1995
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
Three Months Ended
March 31, March 31,
1996 1995
(Unaudited) (Unaudited)
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<S> <C> <C>
Interest Income
Interest on loans $ 3,779 $ 3,708
Interest on investments 1,327 1,196
Interest on funds sold 31 53
Other interest income 36 43
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Total interest income 5,173 5,000
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Interest Expense
Interest on deposits 2,257 2,060
Interest on borrowings 85 75
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Total interest expense 2,342 2,135
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Net Interest Income 2,831 2,865
Provision for loan losses 75 75
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Net Interest Income After Provision for Loan Losses 2,756 2,790
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Other Income
Trust fees 330 315
Loan fee income 77 82
Remittance processing fees 1,787 2,438
Service charges on deposit accounts 243 202
Security transactions, net 0 (11)
Other 169 95
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Total other income 2,606 3,121
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Other Expenses
Salaries and employee benefits 2,065 2,301
Net occupancy and equipment expenses 655 598
Other operating expenses 1,229 1,537
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Total other expenses 3,949 4,436
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Income Before Income Tax 1,413 1,475
Income tax expense 465 528
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Net Income $ 948 $ 947
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Net Income Per Share $ 0.43 $ 0.43
Dividends Per Share 0.11 0.10
Weighted Average Shares Outstanding 2,208,134 2,204,312
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FIRST DECATUR BANCSHARES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTH PERIODS ENDED MARCH 31, 1996 AND 1995
(IN THOUSANDS)
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<CAPTION>
Three Months Ended
March 31, March 31,
1996 1995
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<S> <C> <C>
Cash flows from operating activities:
Net cash provided by operating activities $ 1,636 $ 1,934
Cash flows from investing activities:
Net change in other invested funds 0 0
Purchases of securities available for sale (2,016) (9,797)
Proceeds from maturities of securities available for sale 2,000 2,000
Proceeds from sales of securities available for sale 0 8,077
Purchases of securities held to maturity 0 0
Proceeds from maturities of securities held to maturity 639 1,169
Net change in loans (1,332) 2,401
Purchases of premises and equipment (141) (1,620)
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Net cash provided (used) by investing activities (850) 2,230
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Cash flows from financing activities:
Net change in
Noninterest-bearing, interest-bearing demand and savings deposits (8,732) (5,455)
Certificates of deposit (2,870) (1,034)
Federal funds purchased and securities sold under
repurchase agreements 3,786 (703)
U.S. Treasury demand notes 1,514 (945)
Cash dividends (243) (221)
Net cash from (purchase) sale of treasury stock 11 141
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Net cash provided (used) by financing activities (6,534) (8,217)
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Net increase (decrease) in cash and cash equivalents (5,748) (4,053)
Cash and cash equivalents, beginning of period 35,371 34,777
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Cash and cash equivalents, end of period 29,623 30,724
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Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest $ 2,133 $ 2,060
Income Taxes $ 140 $ 3
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FIRST DECATUR BANCSHARES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE QUARTER ENDED MARCH 31, 1996
Note 1: Basis of Presentation
The interim financial statements have been prepared by First Decatur
Bancshares, Inc. (the "Company") pursuant to the rules and regulations of
the Securities and Exchange Commission applicable to quarterly reports on
Form 10-Q. Certain information and footnote disclosures normally included
in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to such rules
and regulations. These financial statements should be read in conjunction
with the audited consolidated financial statements and related notes and
schedules included in the Company's registration statement filed on
Form S-4 dated February 6, 1996 and the Form 10-K for 1995 filed on May 3,
1996.
The results for the interim periods are not necessarily indicative of
the results of operations that may be expected for the fiscal year. In the
opinion of management, the information furnished reflects all adjustments
which are of a normal recurring nature and are necessary for a fair
presentation of the Company's financial position, results of operations and
cash flows for the period presented. Such adjustments were of a normal
recurring nature.
The consolidated financial statements include the accounts of the
Company and its wholly-owned subsidiaries. All significant intercompany
accounts and transactions have been eliminated.
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FIRST DECATUR BANCSHARES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE QUARTER ENDED MARCH 31, 1996
Note 2: Merger Agreement
In October 1995, the Company's Board of Directors approved a merger
agreement between Shelby Acquisition Corporation (Acquisition Corp.), a
wholly-owned subsidiary of the Company that was formed in 1995 and First
Shelby Financial Group, Inc. (First Shelby). Under the terms of this
agreement, at the effective time of the merger, Acquisition Corp. shall be
merged with and into First Shelby and the separate existence of Acquisition
Corp. shall cease. First Shelby shall be the surviving corporation.
Additionally, each Acquisition Corp. share issued and outstanding
immediately prior to the effective time of the merger shall be converted
into shares of First Shelby and each First Shelby share issued and
outstanding immediately prior to the effective time of the merger shall be
converted into shares of the Company's common stock. The merger was
consummated on April 1, 1996 as reported on From 8-K dated April 12, 1996.
At March 31, 1996, First Shelby and its wholly-owned subsidiary, First
Trust Bank of Shelbyville, had total assets of $67,640,000, total deposits
of $55,909,500, and total stockholders' equity of $10,783,700.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion of the results of operations and financial
condition should be read in conjunction with the Company's unaudited
condensed consolidated financial statements and notes thereto.
OVERVIEW
The Company is a holding company whose principal activity is the
ownership and management of its subsidiaries, The First National Bank of
Decatur ("Bank") and FirsTech, Inc. ("FirsTech"). The Bank operates under
a national charter and provides full banking services, including trust
services. As a national bank, the Bank is subject to regulation by the
Office of the Comptroller of the Currency and the Federal Deposit Insurance
Corporation. The Bank generates commercial, mortgage and consumer loans
and receives deposits from customers located throughout the Bank's
principal lending area, which is Central Illinois. FirsTech is a
remittance processing company that provides various remittance processing
services for several large utility companies.
RESULTS OF OPERATIONS
Comparison of Three Months Ended March 31, 1996 to Three Months Ended March
31, 1995
NET INTEREST INCOME. Net interest income decreased from $2,865,000
for the three months ended March 31, 1995, to $2,831,000 for the three
months ended March 31, 1996. This change represents only a $34,000 (1%)
decrease. However, two significant changes were noted:
Interest income on investments increased from $1,196,000 for the three
months ended March 31, 1995, to $1,327,000 for the three months ended March
31, 1996. This change represents a $131,000 (11%) increase. This increase
is attributed to an increase in the average balance of investment
securities during 1995.
Interest paid on deposits increased from $2,060,000 for the three
months ended March 31, 1995, to $2,257,000 for the three months ended March
31, 1996. This change represents a $197,000 (10%) increase. This increase
is attributed to an increase in volume of time deposits of $4,132,000
during 1995 as well as an increase in rates paid during the last half of
1995 through March 31, 1996.
OTHER INCOME. Other income decreased from $3,121,000 for the three
months ended March 31, 1995, to $2,606,000 for the three months ended March
31, 1996. This represents a decrease of $515,000 (17%). The majority of
this decrease is attributed to the decrease in remittance processing income
generated by FirsTech as the result of the loss of a major contract
Page 6
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during the period. In September 1995, Bancshares received notification
from one major customer of their intention not to renew a service contract
that expired January 1, 1996. Management is continuing to attract new
business from several other prospective customers.
OTHER EXPENSES. Other expenses decreased from $4,436,000 for the
three months ended March 31, 1995, to $3,949,000 for the three months ended
March 31, 1996. This represents a $487,000 (11%) decrease. The decrease
was attributed to decreases in salaries and employee benefits and other
operating expenses. Salaries and employee benefits were $236,000 (10%)
lower mainly due to the reduction of staff at FirsTech as a result of the
loss of a major contract effective January 1, 1996.
Other operating expenses were $308,000 (20%) lower. The change in other
operating expenses is mainly due to a reduction in FDIC insurance expense
($145,000) as a result of the FDIC insurance fund being fully funded during
1995; a net reduction in data processing expenses ($100,000) as a result
of purchasing a new in-house computer system and imaging equipment during
1995; a reduction in postage expense ($60,000) as a result of the loss of a
major contract by FirsTech and increased efficiencies; and a reduction in
correspondent bank service charges ($21,000) as a result of decreased
FirsTech processing. The company also had an increase in legal fees
($23,000) for contract development as a result of FirsTech actively
attracting new business.
FINANCIAL CONDITION
Bancshares assets were reduced $5,647,000 or 2.0% from December 31,
1995 to March 31, 1996. This reduction was primarily due to decreased in
cash and due from banks offset by Federal funds sold.
CASH AND DUE FROM BANKS. Cash and due from banks decreased
$13,748,000 from December 31, 1995 to March 31, 1996. See the
consolidated statement of cash flow for the three months ended March 31,
1996, in the interim financial statements for the details representing
this decrease in cash and due from banks.
FEDERAL FUNDS SOLD. The increase in Federal funds sold of $8,000,000
from December 31, 1995 to March 31, 1996 was attributed to short-term cash
fluctuations. The Federal funds sold are of a short-term nature and
provide the needed liquidity to fund loan growth and security acquisitions.
DEPOSITS. Total deposits decreased $11,698,000 from December 31, 1995
to March 31, 1996. This decrease is attributed to large Certificates of
Deposit for a local school district not renewed and loss of a major
contract by FirsTech.
FEDERAL FUNDS PURCHASED AND SECURITIES SOLD UNDER REPURCHASE
AGREEMENTS. The increase in Federal funds purchased and securities sold
under repurchase agreements of $3,785,000 from December 31, 1995 to March
31, 1996, is attributed to an increase of $3,350,000 in repurchase
agreements with a large utility company.
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PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is involved from time to time in routine litigation
incidental to its business. However, the Company believes that it is not a
party to any material pending litigation which, if decided adversely to the
Company, would have a significant negative impact on the business, income,
assets or operation of the Company. The Company is not aware of any other
material threatened litigation which might involve the Company.
ITEM 2. CHANGES IN SECURITIES
Not Applicable
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not Applicable
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company's annual meeting was held on March 12, 1996. The primary
purposes of the meeting were to establish the number of Directors to be
elected at eleven (11) and elect a Board of Directors for a one year term.
Both items were approved by 2,002,058 shares out of 2,204,725 shares (91%).
The number of Directors established was eleven. The Board of Directors
remained unchanged from 1995 with the exception of Fred Kenney who replaced
Ed Bachrach (retired). Following are a list of Directors:
Gerald Demirjian Tom Dickes William Eichenauer
Larry D. Haab Fred Kenney Neal Lentz
Gary S. Likins John W. Luttrell William Penhallegon
Tom Sloan H. Gale Zacheis
ITEM 5. OTHER INFORMATION
Pursuant to the merger of the Company with First Shelby as discussed
in Note 2 to the interim financial statements, the Company will be issuing
approximately 695,889 shares of common stock in exchange for all of First
Shelby's outstanding stock.
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ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit
Number Description of Exhibit
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11 Computation of Per Share Income - Refer to
the Condensed Consolidated Statement of Income in
the interim financial statements
27 Financial Data Schedule
(b) Reports on Form 8-K
Not applicable
Page 9
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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.
FIRST DECATUR BANCSHARES, INC.
May 14, 1996 By:
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John L. Luttrell
President and Chief Executive Officer
May 14, 1996 By:
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Matthew C. Graves
Vice President and Principal Financial
Officer
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<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 21,623
<INT-BEARING-DEPOSITS> 214,954
<FED-FUNDS-SOLD> 8,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 66,162
<INVESTMENTS-CARRYING> 21,984
<INVESTMENTS-MARKET> 21,927
<LOANS> 177,191
<ALLOWANCE> 3,260
<TOTAL-ASSETS> 310,422
<DEPOSITS> 256,465
<SHORT-TERM> 14,813
<LIABILITIES-OTHER> 3,819
<LONG-TERM> 0
0
0
<COMMON> 22
<OTHER-SE> 35,303
<TOTAL-LIABILITIES-AND-EQUITY> 310,422
<INTEREST-LOAN> 3,779
<INTEREST-INVEST> 1,327
<INTEREST-OTHER> 67
<INTEREST-TOTAL> 5,173
<INTEREST-DEPOSIT> 2,257
<INTEREST-EXPENSE> 2,342
<INTEREST-INCOME-NET> 2,831
<LOAN-LOSSES> 75
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 3,949
<INCOME-PRETAX> 1,413
<INCOME-PRE-EXTRAORDINARY> 1,413
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 948
<EPS-PRIMARY> .430
<EPS-DILUTED> .430
<YIELD-ACTUAL> .019
<LOANS-NON> 49
<LOANS-PAST> 182
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 1,404
<ALLOWANCE-OPEN> 3,249
<CHARGE-OFFS> 107
<RECOVERIES> 43
<ALLOWANCE-CLOSE> 3,260
<ALLOWANCE-DOMESTIC> 3,260
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
