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, 1998
Commission File No. 0-10585
Mid Am, Inc.
(Exact Name of Registrant as Specified in its Charter)
Ohio 34-1580978
(State or Other Jurisdiction of (IRS Employer
Incorporation or Organization) Identification Number)
221 South Church Street, Bowling Green, Ohio 43402
(Address of Principal Executive Offices) (Zip Code)
(419)327-6300
(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
Indicate the number of shares outstanding of each of the
issuer's classes of common stock as of the close of business
on April 30, 1998.
Common Stock, without par value - 23,360,430 shares
<PAGE 2>
MID AM, INC.
INDEX
PART I - FINANCIAL INFORMATION Page Number
Item 1. Financial Statements
Consolidated Statement of Condition
(Unaudited)
March 31, 1998 and December 31, 1997 3
Consolidated Statement of Earnings
(Unaudited)
Three months ended March 31, 1998 and 1997 4
Consolidated Statement of Cash Flows
(Unaudited)
Three months ended March 31, 1998 and 1997 5
Notes to Consolidated Financial Statements
(Unaudited) 7
Item 2. Management's Discussion and Analysis and
Statistical Information 9
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 21
Item 2. Changes in Securities 21
Item 3. Defaults Upon Senior Securities 21
Item 4. Submission of Matters to a Vote
of Security Holders 21
Item 5. Other Information 21
Item 6. Exhibits and Reports on Form 8-K 22
SIGNATURES 23
EXHIBIT INDEX 24
<PAGE 3>
PART I. - FINANCIAL INFORMATION
MID AM, INC. Consolidated Statement of Condition (Unaudited)
(Dollars in thousands) March 31, December 31,
1998 1997
Assets
Cash and due from banks $ 94,066 $ 84,062
Int-bearing deposits in banks 2,095 1,728
Federal funds sold 41,162 14,566
Loans held for sale 11,209 11,376
Securities available for sale 405,427 385,961
Loans, net of unearned fees 1,609,918 1,619,895
Allowance for credit losses (18,450) (17,625)
Net loans 1,591,468 1,602,270
Bank premises and equipment 53,581 53,903
Int receivable and other assets 40,105 38,009
Total Assets $2,239,113 $2,191,875
Liabilities
Demand deposits (non-interest) $ 224,375 $ 220,441
Savings deposits 554,306 545,667
Other time deposits 1,002,801 994,204
Total Deposits 1,781,482 1,760,312
Federal funds purchased and
securities sold under
agreements to repurchase 95,616 103,174
Debt and FHLB advances 175,060 122,604
Int payable and other liabilities 23,724 25,025
Total Liabilities 2,075,882 2,011,115
Shareholders' Equity
Preferred stock - no par value
Authorized - 2,000,000 shares -- --
Common stock - stated value
of $3.33 per share
Authorized - 35,000,000 shares
Issued - 24,459,511 shares
in 1998 and 1997 81,531 81,531
Surplus 94,186 94,594
Retained earnings 9,921 6,321
Treasury stock
949,592 and 197,206 shares (24,556) (3,874)
Unrealized gains on securities
available for sale 2,149 2,188
Total Shareholders' Equity 163,231 180,760
Total Liabilities and
Shareholders' Equity $2,239,113 $2,191,875
<PAGE 4>
MID AM, INC. Consolidated Statement of Earnings (Unaudited)
(Dollars in thousands) Three Months Ended March 31,
1998 1997
Interest Income
Int and fees on loans $37,147 $34,942
Int on deposits in banks 38 85
Int on federal funds sold 390 354
Int on taxable investments 5,337 5,635
Int on tax exempt investment 496 528
Total Interest Income 43,408 41,544
Interest Expense
Int on deposits 17,095 17,417
Int on borrowed funds 3,789 2,182
Total Interest Expense 20,884 19,599
Net Interest Income 22,524 21,945
Provision for credit losses 1,017 1,885
Net Interest Income After
Provision Credit Losses 21,507 20,060
Non-interest Income
Trust department 588 381
Service charges on deposit accts 2,106 1,894
Mortgage banking 5,773 2,327
Brokerage commissions 2,223 1,480
Collection agency fees 1,397 1,242
Net gains (losses) on
sales of securities 98 (726)
Net gains on sales of loans at
commercial financing affiliate 4,150 2,189
Other income 2,299 11,131
Total Non-interest Income 18,634 19,918
Non-interest Expense
Salaries and employee benefits 15,712 13,796
Net occupancy expense 1,429 1,372
Equipment expense 2,344 2,008
Other expenses 9,439 8,025
Total Non-interest Expense 28,924 25,201
Income before income taxes 11,217 14,777
Applicable income taxes 3,774 5,210
Net Income $ 7,443 $ 9,567
Net Income Available to
Common Shareholders $ 7,443 $ 9,151
Earnings per Common Share:
Basic $ 0.31 $ 0.40
Diluted $ 0.31 $ 0.37
<PAGE 5>
MID AM, INC. Consolidated Statement of Cash Flows (Unaudited)
(Dollars in thousands) Three Months Ended March 31,
1998 1997
Operating Activities
Net income $ 7,443 $ 9,567
Adjustments to reconcile net
income to net cash provided
by operating activities:
Provision for credit losses 1,017 1,885
Depreciation and
amortization of assets 2,257 2,717
Proceeds from sales of mortgage
and other loans held for sale 334,051 95,027
Mortgage and other loans
originated for sale (324,309) (91,140)
Net gains on sales of assets (9,997) (12,085)
Increase in interest receivable
and other assets (2,279) (323)
(Decrease) increase in interest
payable and other liabilities (1,301) 1,603
Net Cash Provided By
Operating Activities 6,882 7,251
Investing Activities
Net (increase) decrease in interest-
bearing deposits in other banks (367) 176
Net decrease in
federal funds sold (26,596) (29,538)
Proceeds from sales of securities
available for sale 10,458 54,494
Proceeds from maturities and paydowns
of securities available for sale 30,183 16,120
Purchases of securities
available for sale (59,780) (17,434)
Proceeds from sales of loans 2,062 3,952
Net decrease (increase) in loans 7,676 (22,049)
Proceeds from sales of
other real estate owned 332
Proceeds from sales of bank
premises and equipment 63 1,406
Purchases of bank premises
and equipment (1,712) (5,330)
Net Cash (Used For) Provided By
Investing Activities (38,013) 2,129
<PAGE 6>
MID AM, INC. Consolidated Statement of Cash Flows (Unaudited)
(Dollars in thousands) Three Months Ended March 31,
1998 1997
Financing Activities
Cash transferred in connection
with the sale of branch deposits (84,927)
Net increase (decrease) in demand
deposits and savings accounts 12,573 (7,443)
Net increase in other time deposits 8,597 16,209
Net (decrease) increase in
short-term borrowings (7,558) 55,318
Repayment of debt and FHLB advances (22,544) (2,301)
Proceeds from issuance of debt
and FHLB advances 75,000 17,522
Preferred stock retired (6,162)
Proceeds from issuance of
common stock 699 324
Cash dividends paid (3,843) (3,798)
Treasury stock acquisitions (21,789) (724)
Other items (37)
Net Cash Provided By (Used For)
Financing Activities 41,135 (16,019)
Net increase (decrease) in cash
and due from banks 10,004 (6,639)
Cash and due from banks at the
beginning of the period 84,062 85,657
Cash and due from banks at the
end of the period $ 94,066 $ 79,018
Supplemental Schedule of Noncash
Investing and Financing Activities
Securitization of loans held for
sale and transferred to
securities available for sale $ 241 $ 3,145
Transfers from loans to other
real estate owned $ 134 $ 774
Loans on other real estate sold $ 7
Unrealized losses on
securities available for sale $ (60) $ (2,282)
Adjustment to deferred tax (21) (798)
Adjustment to shareholders' equity $ (39) $ (1,484)
<PAGE 7>
MID AM, INC.
Notes to Consolidated Financial Information (Unaudited)
1. Accounting Principles
The accounting and reporting policies followed by Mid Am, Inc. conform
to generally accepted accounting principles and to general practices
within the financial services industry. The preparation of financial
statements in conformity with generally accepted accounting principles
requires management to make estimates and assumptions that affect the
reported amount of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial statements.
Actual results could differ from those estimates. In the opinion of
management of the Company, all adjustments necessary to present fairly
the financial position, results of operations and cash flows as of and
for the periods presented have been made. Such adjustments consisted
only of normal recurring items.
Prior to 1994, Mid Am, Inc.'s business related solely to commercial
banking and related services which for financial reporting purposes
was considered a single business segment. Since the beginning of
1994, the Company has either acquired or commenced businesses relating
to collection activities, broker-dealer operations, commercial finance
lending and consumer finance lending. However, the revenues,
operating profit and assets of the collection business, broker-dealer
business and finance companies are not material for separate
disclosure. Mid Am, Inc.'s predominant business continues to be
banking.
The consolidated financial statements of Mid Am, Inc. (the
Company) include the accounts of the banking subsidiaries,
Mid American National Bank and Trust Company (Mid Am Bank), First
National Bank Northwest Ohio (First National), American Community
Bank, N.A. (AmeriCom), AmeriFirst Bank, N.A. (AmeriFirst), and Adrian
State Bank (Adrian); and the financial service subsidiaries, Mid Am
Recovery Services, Inc. (MARSI), MFI Investments Corp (MFI), Mid Am
Credit Corp. (MACC), Mid Am Financial Services, Inc. (MAFSI),
Simplicity Mortgage Consultants, Inc. (Simplicity), Mid Am Private
Trust, N.A. (MAPT) and Mid Am Information Services, Inc. (MAISI). All
significant intercompany transactions and accounts have been
eliminated in consolidation.
2. Recent Accounting Pronouncements
In 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No.130 "Reporting Comprehensive
<PAGE 8>
Income," which establishes standards for reporting of comprehensive
income and its components. This Statement will be effective for the
Company for the year ending December 31, 1998. This Statement
requires that entities classify items of other comprehensive income by
their nature in a financial statement and display the accumulated
balance of other comprehensive income separately from retained
earnings and surplus in the equity section of a statement of financial
condition. Comprehensive income is composed of net income and
"other comprehensive income." Other comprehensive income includes
charges or credits to equity that are not the result of transactions
with the entities' shareholders. Currently, the only item of other
comprehensive income from the activities of the Company relate to the
unrealized gains and losses of the Company's portfolio of available
for sale securities. The Company anticipates reporting comprehensive
income in the Statement of Changes in Stockholders' Equity. Upon
adoption, the financial statements of earlier periods will be restated
for comparative purposes.
In 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No.131 "Disclosures about Segments of
an Enterprise and Related Information" (SFAS 131). SFAS 131
establishes new standards for the way public companies report
information about their operating segments in annual and interim
financial statements. The Company will be required to adopt SFAS 131
no later than December 31, 1998. SFAS 131 adopts a "management
approach" to determine operating segments and then imposes
quantitative criteria to determine which operating segments, if any,
must be reported. The Company is currently evaluating SFAS 131 and
has not determined what operating segments will be reported under the
new standards' disclosure rules which, on an annual basis, will
include information regarding each reportable operating segment's
products and services, factors used to determine reportable segments,
and certain operating information such as interest revenue, interest
expense, and profit or loss of the operating segment.
3. Repurchase Program
On January 15, 1998, the Board of Directors of the Company authorized
management to undertake purchases of up to 1,200,000 shares of the
Company's outstanding common stock over a twelve month period in the
open market or in privately negotiated transactions. This new
authorization follows the expiration of the Company's 1997
authorization to repurchase up to 1,650,000 shares of common stock.
The shares reacquired are held as treasury stock and reserved for use
in the Company's stock option plan and for future stock dividend
declarations. As of March 31, 1998, the Company had repurchased
approximately 560,000 shares of common stock pursuant to its 1998
repurchase program. Subsequent to March 31, 1998, the Company has
repurchased an additional 170,000 shares of common stock pursuant to
its 1998 repurchase program.
<PAGE 9>
4. Other Events
On April 24, 1998, Mid Am, Inc. shareholders approved an Amendment of
Article Fourth of the Amended Articles of Incorporation of the Company
to increase the number of common shares authorized from 35 million
shares to 100 million shares. The number of authorized shares of the
Company will be 102 million shares, of which 100 million are common
shares without par value and 2 million are preferred shares without
par value.
Item 2. - Management's Discussion and Analysis and Statistical
Information
(Dollars in thousands, except per share data)
Three Months Ended March 31, 1998 and 1997
Results of Operations
Net income for the first quarter of 1998 was $7,443, an increase of
$1,324 or 22% over the first quarter of 1997 core earnings of $6,119
(excluding the net gain related to the February 1997 sale of various
branch offices). Total earnings for the first quarter of 1997,
including the net effect of the branch sale, were $9,567. The
significant improvement in core earnings is attributable to the
strength of the Company's net interest margin and the improvement in
fee-based income. Diluted earnings per share for the first quarter of
1998 was $.31 ($.31 basic), up 29% when compared to $.24 ($.25 basic)
for the same period in 1997, excluding the net effect of the branch
sale. Total earnings per share for the first quarter of 1997 was $.37
diluted and $.40 basic. Return on average common equity (ROE) for the
first quarter of 1998 was 17.87% while return on average assets (ROA)
was 1.36%. This compares to ROE and ROA ratios based on core earnings
of 14.18% and 1.14% (22.51% and 1.79% including the net effect of the
branch sale), respectively, for the first quarter of 1997.
Net Interest Income
Net interest income increased $579 to $22,524 in the first quarter of
1998 as compared to $21,945 for the same period in 1997. The
Company's net interest margin continues to improve despite the
issuance and sale of $50,000 of subordinated notes and the buyback of
its common stock during the first quarter of 1998. Net interest
income is affected by changes in the volumes and rates of interest-
earning assets and interest-bearing liabilities and the type and mix
<PAGE 10>
of interest-earning assets and interest-bearing liabilities. The
Company's net interest margin for the three months ended March 31,
1998 was 4.51% compared to 4.49% for the same period in 1997. The
Company's net interest margin improved primarily due to higher
yielding earning assets resulting from increased yields from the
Company's loan portfolio.
Provision for Credit Losses
The provision for credit losses decreased $868 or 46% to $1,017 in the
first quarter of 1998 compared to $1,885 in the first quarter of 1997.
In the first quarter of 1997, the Company increased its provision for
credit losses by approximately $1,000 in response to continued loan
portfolio growth. Net charge-offs were $192 or 0.05% (annualized) of
average loans during the three months ended March 31, 1998, compared
to $805 or 0.20% (annualized) for the same period in 1997. The
decrease in net charge-offs is primarily due to a large recovery on a
commercial loan at one of the Company's bank subsidiaries. The
provision for credit losses reflects the amount necessary in
management's opinion to maintain an adequate allowance, based upon its
analysis of the loan portfolio (including the loan growth rate and
change in the mix of the loan portfolio) and general economic
conditions.
At March 31, 1998, the Company's allowance for credit losses as a
percentage of loans was 1.15% compared to 1.09% at December 31, 1997
and 1.05% at March 31, 1997. At March 31, 1998, the Company's
allowance for credit losses represented 329% of non-performing loans
as compared to 388% and 267% at December 31, 1997 and March 31, 1997,
respectively. The increase in the Company's allowance for credit
losses as a percentage of loans is due to low net charge-offs and a
slight decline in total loans from the beginning of the year. The
decrease in the Company's allowance for credit losses as a percentage
of non-performing loans is due to an increase of $1,058 in
non-performing loans from $4,546 at December 31, 1997 to $5,604 at
March 31, 1998. Management believes that the Company's allowance for
credit losses is adequate. (See "Asset Quality".)
Non-Interest Income
The table below summarizes the sources of the Company's non-interest
income.
Three months ended March 31, Percentage
(Dollars in thousands) 1998 1997 Change
Non-Interest Income:
Trust department $ 588 $ 381 54%
Service charges on
deposit accounts 2,106 1,894 11
<PAGE 11>
Mortgage banking 5,773 2,327 148
Brokerage commissions 2,223 1,480 50
Collection agency fees 1,397 1,242 12
Net gains (losses) on sales
of securities 98 (726) NA
Gain from sale of deposits and
branch offices 8,703 (100)
Net gains on sales of loans at
commercial financing affiliate 4,150 2,189 90
Credit card fees 523 488 7
International department fees 297 235 26
ATM card fees 462 409 13
Other 1,017 1,296 (22)
Total non-interest income $18,634 $19,918 (6)
As seen from the above table, non-interest income is an increasingly
important source of revenue to the Company as it continues to expand
its offerings of non-bank related financial services. Non-interest
income for the first quarter of 1998 was $18,634, an increase of
$6,708 or 56% from the $11,926, (excluding the net gain related to the
branch sale) reported for the same quarter of 1997. The increase was
primarily due to an increase of $3,446 in mortgage banking, an
increase of $1,961 in net gains on sales of loans at MACC, the
Company's commercial leasing and financing company, and to an increase
of $743 in brokerage commissions. Mortgage banking increased
primarily due to an increase in net gains on sales of loans due to the
higher volume of loan sales in the first quarter of 1998 compared to
1997 (approximately $265,000 in 1998 compared to $74,000 in 1997).
Net gains on sales of loans at MACC increased primarily due to
increased sales volume and improved profit margins. Brokerage
commissions increased due to the growth in the number of independent
registered representatives (brokers) and to the increase in the volume
of business generated by these representatives.
Non-Interest Expense
Non-interest expense includes costs, other than interest, that are
incurred in the operations of the Company. The table below summarizes
the components of the Company's non-interest expense.
Three months ended March 31, Percentage
(Dollars in thousands) 1998 1997 Change
Non-Interest Expense:
Salaries and employee benefits $15,712 $13,796 14%
Net occupancy expense 1,429 1,372 4
Equipment expense 2,344 2,008 17
Brokerage commissions 1,434 805 78
FDIC expense 106 122 (13)
<PAGE 12>
Marketing 723 654 11
Franchise taxes 714 646 11
Telephone 767 645 19
Printing and supplies 614 535 15
Legal and other
professional fees 1,024 724 41
Credit card merchant
processing costs 513 519 (1)
Amortization intangible assets 328 843 (61)
Postage 450 436 3
Other 2,766 2,096 32
Total non-interest expense $28,924 $25,201 15
The table below presents an analysis of the components of salary and
employee benefit expense and of the number of full-time equivalent
employees.
Three months ended March 31, Percentage
(Dollars in thousands) 1998 1997 Change
Salaries and employee benefits:
Salaries and wages $10,945 $10,232 7%
Commissions paid to employees 1,397 831 68
Employee benefits 3,370 2,733 23
Total salaries and employee
benefits $15,712 $13,796 14
Full-time equivalent employees 1,429 1,285 11%
Salaries and employee benefits comprise the largest component of
non-interest expense and were 54% and 55% of total non-interest
expense for the three months ended March 31, 1998 and 1997,
respectively. Salary and wages increased 7% in the first quarter
of 1998 due to increases in salary rates and in full-time equivalent
employees, primarily at the Company's financial service affiliates.
Commissions paid to employees increased primarily due to growth in
revenues from its fee-based financial service affiliates and higher
mortgage loan originations. In addition, certain employee benefit
expenses determined under formulas which take into account pre-tax
income also increased in the three months ended March 31, 1998
compared to the same period in 1997 because of the increase in pre-tax
income. Net occupancy expense and equipment expense increased due to
new offices for MAFSI and new computer equipment at MAISI. The
increase in other non-interest expenses was primarily due to increases
in brokerage commissions ($629), legal and other professional fees
($300), and telephone expense ($122), which were partially offset by a
decrease in amortization of intangible assets ($515).
<PAGE 13>
Income Taxes
The provision for income taxes for the first quarter of 1998 decreased
$1,436 or 28% to $3,774 compared to $5,210 for the same period in
1997. The decrease was due primarily to higher pre-tax income in the
first quarter of 1997 which included the net gain from the sale of
branch offices. The effective tax rate for the first quarter of 1998
was 33.6% as compared to 35.3% for the same period in 1997.
Year 2000 Software Initiatives
Management has initiated a company-wide assessment, remediation and
conversion program to address the effect of the year 2000 on the
Company's information systems and application software. The
Company's Year 2000 Readiness Project contains awareness, assessment,
renovation, validation and implementation phases. A substantial
majority of the significant application software utilized by the
Company is licensed from a third-party vendor and management is
working with the vendor to ensure that the software will operate
properly in the year 2000. At this time, the estimated cost to
remediate the Company's year 2000 issues is not expected to be
material.
Liquidity
The liquidity of a financial institution reflects its ability to
provide funds to meet loan requests, to accommodate possible outflows
in deposits and to take advantage of interest rate market
opportunities. Funding of loan requests, providing for liability
outflows, and management of interest rate fluctuations require
continuous analysis in order to match the maturities of specific
categories of short-term loans and investments with specific types of
deposits and borrowings. Financial institution liquidity is thus
normally considered in terms of the nature and mix of the
institution's sources and uses of funds.
Since the Company is a holding company and does not conduct
operations, its primary sources of liquidity are borrowings from
outside sources and dividends paid to it by its subsidiaries. For
national banks, the approval of the Office of the Comptroller of the
Currency is required in order to pay dividends in excess of the
subsidiaries' earnings retained for the current year plus retained net
profits since January 1, 1995. The Company's state bank can pay
dividends up to the total amount of retained earnings as long as
certain capital ratios are maintained. As a result of these
restrictions, at March 31, 1998 dividends which can be paid to the
Company by its bank subsidiaries are limited to $25,670.
<PAGE 14>
As shown in the consolidated statement of cash flows presented
elsewhere herein, cash and due from banks increased $10,004 during the
first quarter of 1998 to $94,066 at March 31, 1998. The increase in
1998 is composed of $6,882 provided by operating activities and
$41,135 provided by financing activities, offset in part by net cash
used for investing activities of $38,013.
Three months ended March 31, Dollar
(Dollars in thousands) 1998 1997 Change
Operating activities:
Net income $ 7,443 $ 9,567 $ (2,124)
Provisions for credit losses,
depreciation and amortization 3,274 4,602 (1,328)
Proceeds from sales of mortgages
and other loans held for sale 334,051 95,027 239,024
Mortgages and other loans
originated for sale (324,309) (91,140) (233,169)
Net cash provided by secondary
market activity 9,742 3,887 5,855
Net gains on sales of assets (9,997) (12,085) 2,088
Other items (3,580) 1,280 (4,860)
Net cash provided by
operating activities 6,882 7,251 (369)
Net cash provided by operating activities remained level in 1998
compared to 1997. The decreases in net income and provisions for
credit losses, depreciation and amortization were offset by a decrease
in net gains on sales of assets and the increase in net cash provided
by secondary market activity. Cash flows from the sales of mortgages
and other loans and refinancing of loans increased substantially in
the first quarter of 1998 as compared to 1997. Of the $239,024 and
$233,169 increases in 1998 proceeds and cash origination costs,
respectively, $43,174 and $40,183 related to increases in MACC loan
sales and originations, respectively.
Three months ended March 31, Dollar
(Dollars in thousands) 1998 1997 Change
Investing activities:
Net decrease (increase) in loans $ 7,676 $(22,049) $ 29,725
Proceeds from sales of
portfolio loans 2,062 3,952 (1,890)
Net loan activities 9,738 (18,097) 27,835
Proceeds from securities
activities 40,641 70,614 (29,973)
Purchases of securities (59,780) (17,434) (42,346)
Net securities activities (19,139) 53,180 (72,319)
<PAGE 15>
Purchases of bank premises
and equipment (1,712) (5,330) 3,618
Net change in federal funds
sold position (26,596) (29,538) 2,942
Other items (304) 1,914 (2,218)
Net cash (used for) provided
by investing activities (38,013) 2,129 (40,142)
Comparing 1998 to 1997, net cash used for investing activities
increased $40,142 primarily from the growth in securities activities,
partially offset by the decrease in the loan portfolio.
Three months ended March 31, Dollar
(Dollars in thousands) 1998 1997 Change
Financing activities:
Net change in deposit activities $ 21,170 $(76,161) $ 97,331
Proceeds from long-term and net
short-term borrowings 67,442 72,840 (5,398)
Repayments of long-term
borrowings (22,544) (2,301) (20,243)
Cash dividends paid (3,843) (3,798) (45)
Preferred stock retired,
treasury stock acquisitions
and other items (21,090) (6,599) (14,491)
Net cash provided by (used for)
financing activities 41,135 (16,019) 57,154
Net cash provided by financing activities of $41,135 for 1998 was
primarily due to an increase in proceeds from borrowings which
included $50,000 of subordinated debt and a net increase in deposit
activities. The net cash used for financing activities of $16,019 for
1997 was primarily due to a reduction in deposits from the sale at
AmeriFirst and buyback of the Company's common and preferred stocks,
offset by the increase in proceeds from borrowings.
Asset/Liability Management
Closely related to liquidity management is the management of
interest-earning assets and interest-bearing liabilities. The Company
manages its rate sensitivity position to avoid wide swings in net
interest margins and to minimize risk due to changes in interest
rates. At March 31, 1998, the Company had a manageable positive gap
position and therefore does not expect to experience any significant
fluctuations in its net interest income as a consequence of changes in
interest rates.
<PAGE 16>
Capital Resources
The Federal Reserve Board (FRB) has established risk-based capital
guidelines that must be observed by bank holding companies and banks.
Under these guidelines, total qualifying capital is categorized into
two components -- Tier I and Tier II capital. Tier I capital
generally consists of common shareholders' equity, perpetual preferred
stock (subject to limitations) and minority interests in subsidiaries.
The $27,500 of the Company's obligated mandatorily redeemable capital
securities of its subsidiary trust, which was issued in the second
quarter of 1997, is considered Tier I capital. Subject to
limitations, Tier II capital includes certain other preferred stock
and debentures, and a portion of the reserve for credit losses. On
January 16, 1998, the Company issued $50,000 of 7.08% subordinated
ten-year debt in a private placement transaction. The subordinated
debt is considered Tier II capital for regulatory purposes. These
ratios are expressed as a percentage of risk-adjusted assets, which
include various risk-weighted percentages of off-balance sheet
exposures, as well as assets on the balance sheet. The FRB
regulations governing the various capital ratios do not recognize the
effects of SFAS 115, "Accounting for Certain Investments in Debt and
Equity Securities" on capital relating to changes in market value of
securities available for sale.
At March 31, 1998, a minimum Tier I capital ratio of 4.00% and a total
capital ratio of 8.00% are required. The Company's qualifying capital
at March 31, 1998 exceeded both the Tier I and Tier II risk-based
capital guidelines. In addition, a capital leverage ratio is used in
connection with the risk-based capital standards which is defined as
Tier I capital divided by quarterly average total assets adjusted for
certain items. Included in Tier I capital are $27,500 of 10.20%
capital securities issued by the Company through a special purpose
trust subsidiary in 1997. At March 31, 1998, the Company's leverage
ratio, Tier I, and Total Capital ratios were 8.13%, 9.17% and 12.87%,
respectively.
Capital ratios applicable to the Company's banking subsidiaries
at March 31, 1998 are as follows:
Total
Tier I Risk-based
Leverage Capital Capital
Regulatory Capital Requirements
Minimum 4.00 4.00 8.00
Well-capitalized 5.00 6.00 10.00
Bank Subsidiaries
Mid Am Bank 8.16 9.75 10.93
First National 8.02 10.56 11.23
AmeriCom 7.08 9.85 11.08
AmeriFirst 7.78 10.61 11.76
Adrian 6.55 9.27 10.52
<PAGE 17>
The capital to asset ratios of the Company's financial service
subsidiaries are significantly different than the bank subsidiaries.
Asset Quality
At March 31, 1998, the Company's percentage of non-performing loans
(non-accrual loans and restructured loans) to total loans was 0.35%,
as compared to 0.28% at December 31, 1997 and 0.39% at March 31, 1997.
Non-performing loans at March 31, 1998 aggregated $5,604, an increase
of $1,058 or 23% from December 31, 1997. Accruing loans past due 90
days or more at March 31, 1998 aggregated $2,418, a decrease of $416
or 15% from December 31, 1997. The Company's percentage of net
charge-offs for the three months ended March 31, 1998 and March 31,
1997 to average loans outstanding were 0.05% (annualized) and 0.20%
(annualized), respectively. At March 31, 1998, the Company's
allowance for credit losses was 1.15% of total loans, as compared to
1.09% and 1.05% at December 31, 1997 and March 31, 1997, respectively.
The allowance for credit losses as a percentage of non-performing
loans at March 31, 1998 was 329% compared to 388% at December 31, 1997
and 267% at March 31, 1997. The ratio of non-performing assets
(constituting the sum of non-performing loans and other real estate
owned) to total loans plus other real estate owned was 0.38% at March
31, 1998, compared to 0.30% and 0.49% at December 31, 1997 and March
31, 1997, respectively. As of March 31, 1998, based upon a review of
the loan portfolio (including the loan growth rate and change in the
mix of the loan portfolio), management believes the allowance for
credit losses is adequate.
Loans 30 to 89 days past due, excluding non-accrual and restructured
loans amounted to $5,817 or 0.36% of total loans at March 31, 1998 as
compared to $6,752 or 0.42% at December 31, 1997. Loans now current
but where some concerns exist as to the ability of the borrower to
comply with present loan repayment terms, excluding non-performing
loans, approximated $25,262 and $29,106 at March 31, 1998 and December
31, 1997, respectively, and are being closely monitored by management
and the Boards of Directors of the subsidiaries. The classification
of these loans, however, does not mean to imply that management
expects losses on each of these loans, but believes that a higher
level of scrutiny is prudent under the circumstances. The decrease in
loans where some concern exists is primarily attributable to the
Company's continuous process of loan review which has identified
various improvements in the financial condition of certain of the
individual borrowers. In the opinion of management, these loans
require close monitoring despite the fact that they are performing
according to their terms. Such classifications relate to specific
concerns relating to each individual borrower and do not relate to any
concentrated risk elements common to all loans in this group.
<PAGE 18>
AmeriCom and First National have purchased certain lease receivables
and extended loans with an aggregate outstanding balance at December
31, 1997 of $4,985 to The Bennett Funding Group, Inc. and related
entities (Bennett) which remain subject to the Bennett bankruptcy
proceeding commenced in March, 1996. On December 29, 1997 and January
7, 1998, the bankruptcy judge ruled that AmeriCom and First National,
respectively, are secured creditors with respect to $1,484 and $1,831,
respectively, of their outstanding Bennett portfolios. In early 1998,
AmeriCom and First National received $1,247 and $1,421, respectively,
from the Trustee in bankruptcy pursuant to the judge's order. These
decisions have been appealed by the bankruptcy trustee and the appeals
are pending. No decision has been rendered with respect to $1,671 in
loans from AmeriCom and First National which present different issues
from the issues decided by the bankruptcy judge. Due to the
complexity of the remaining legal issues, management and the Company's
legal counsel are currently unable to form an opinion as to the likely
outcome of the Banks' position with respect to the remaining Bennett
portfolio. The aggregate outstanding balance of the Bennett portfolio
after receipt of payout was $2,317 including $250 on non-accrual and
$2,067 ninety days past due and still accruing.
The following table presents asset quality information for each of the
Company's banking subsidiaries at March 31, 1998.
(Dollars in thousands)
Mid Am First
Bank National AmeriCom AmeriFirst Adrian
Loans:
Non-accrual $1,444 $ 783 $1,343 $1,598 $ 85
Restructured 0 138 65 0 58
Total
non-performing
loans 1,444 921 1,408 1,598 143
Other real
estate owned(1) 0 22 126 0 0
Total
non-performing
assets $1,444 $ 943 $1,534 $1,598 $143
Loans 90 days
or more past
due and not
on non-accrual $ 104 $ 700 $1,123 $ 171 $320
Non-performing
loans to
total loans 0.22 0.24 0.52 1.02 0.11
<PAGE 19>
Non-performing
assets to total
loans plus
OREO 0.22 0.25 0.57 1.02 0.11
Allowance for
credit losses
to total
non-performing
loans 629.16 291.97 237.64 106.76 1,100.70
Allowance for
credit losses
to total
non-performing
assets 629.16 285.15 218.12 106.76 1,100.70
Net charge-offs
to average loans
outstanding (0.23) 0.38 0.08 0.39 0.02
Allowance for
credit losses
to total loans 1.36 0.70 1.24 1.09 1.18
Loans 90 days
or more past
due and not
on non-accrual
to total loans 0.02 0.18 0.42 0.11 0.24
(1) The parent company has $311 of other real estate owned at
March 31, 1998.
The following table sets forth the Company's allocation of the
allowance for credit losses as of March 31, 1998 and December 31,
1997.
March 31, 1998 December 31, 1997
(Dollars in thousands)
Specific allowance
Real estate $ 181 $ 199
Commercial 2,067 2,415
Installment 115 101
Total specific allowance 2,363 2,715
<PAGE 20>
General allowance
Real estate 249 232
Commercial 5,258 5,347
Installment 2,252 1,585
Other 358 355
Total general allowance 8,117 7,519
Unallocated allowance 7,970 7,391
Allowance for credit losses $18,450 $17,625
The following table presents a summary of the Company's credit
loss experience for the three months ended March 31, 1998 and
1997.
(Dollars in thousands)
1998 1997
Balance of allowance at
beginning of year $17,625 $15,672
Loans actually charged-off:
Real estate 98 184
Commercial, financial
and agricultural 1,085 477
Installment and credit card 480 377
Other 54
Total loans charged-off 1,663 1,092
Recoveries of loans previously
charged-off:
Real estate 68 24
Commercial, financial
and agricultural 1,236 101
Installment and credit card 144 153
Other 23 9
Total recoveries of loans 1,471 287
Net charge-offs 192 805
Addition to allowance
charged to expense 1,017 1,885
Balance of allowance at
end of period $18,450 $16,752
Net charge-offs to
average loans outstanding 0.05 0.20
Allowance for credit losses
to total loans 1.15 1.05
<PAGE 21>
Allowance for credit losses
to total non-performing
loans 329.23 266.92
For the three months ended March 31, 1998, commercial loan recoveries
increased $1,135 as compared to the same period in 1997. The increase
in commercial loan recoveries is primarily due to a large recovery on
a commercial loan charged-off in prior years at one of the bank
subsidiaries.
PART II. - OTHER INFORMATION
Item 1. - Legal Proceedings
There are lawsuits and claims pending against the Company which arise
in the normal course of business. In the opinion of management, any
liabilities that may result from these lawsuits and claims will not
materially affect the financial position or results of operations of
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
Not applicable.
Item 5 - Other Information
Not applicable.
<PAGE 22>
Item 6 - Exhibits and Reports on Form 8-K
(a) Exhibits
1. Statement Re Computation of Earnings Per
Common Share
(b) Reports on Form 8-K
The Company filed a report on Form 8-K with the Commission as of
May 7, 1998, describing the increase in authorized shares of the
Company's common stock, effective upon filing with the Ohio Secretary
of State.
<PAGE 23>
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 hereunto duly
authorized.
MID AM, INC.
/s/ Dennis L. Nemec
Dennis L. Nemec
Executive Vice President / Chief Financial Officer
DATE: May 13, 1998
<PAGE 24>
MID AM, INC.
EXHIBIT INDEX
Exhibit No. Description Page Number
(1) Statement Re Computation of
Earnings Per Common Share 25
(2) Form 8-K describing the increase
in authorized shares of the Company's
common stock, effective upon filing
with the Ohio Secretary of State.
The information required by this exhibit
is incorporated herein by reference
from the Company's Form 8-K dated
May 7, 1998, filed with the Securities
and Exchange Commission on May 7, 1998.
<PAGE 25>
EXHIBIT 1
STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS
Mid Am, Inc.
The weighted average number of common shares outstanding for basic and
diluted earnings per share computations were as follows:
(Dollars and shares in Three Months Ended
thousands, except per March 31,
share data) 1998 1997
Numerator:
Net income $7,443 $9,567
Less: Preferred stock dividends -- 416
Net income available to
common shareholders (Basic) 7,443 9,151
Effect of Dilutive Securities:
Convertible preferred stock -- 416
Net income (Diluted) $7,443 $9,567
Denominator:
Weighted average common
shares outstanding (Basic) 23,756 23,081
Exercise of options 581 175
Convertible preferred stock -- 2,725
Weighted average common
shares outstanding (Diluted) 24,337 25,981
Earnings per share:
Basic $ 0.31 $ 0.40
Diluted $ 0.31 $ 0.37
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
This schedule contains summary financial information extracted from the
Consolidated Statement of Condition, the Consolidated Statement of Earnings and
Management's Discussion and Analysis and Statistical Information and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1998
<CASH> 94,066
<INT-BEARING-DEPOSITS> 2,095
<FED-FUNDS-SOLD> 41,162
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 416,636
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 1,609,918
<ALLOWANCE> 18,450
<TOTAL-ASSETS> 2,239,113
<DEPOSITS> 1,781,482
<SHORT-TERM> 95,616
<LIABILITIES-OTHER> 23,724
<LONG-TERM> 175,060
0
0
<COMMON> 81,531
<OTHER-SE> 81,700
<TOTAL-LIABILITIES-AND-EQUITY> 2,239,113
<INTEREST-LOAN> 37,147
<INTEREST-INVEST> 6,261
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 43,408
<INTEREST-DEPOSIT> 17,095
<INTEREST-EXPENSE> 3,789
<INTEREST-INCOME-NET> 22,524
<LOAN-LOSSES> 1,017
<SECURITIES-GAINS> 98
<EXPENSE-OTHER> 28,924
<INCOME-PRETAX> 11,217
<INCOME-PRE-EXTRAORDINARY> 11,217
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,443
<EPS-PRIMARY> 0.31
<EPS-DILUTED> 0.31
<YIELD-ACTUAL> 4.51
<LOANS-NON> 5,343
<LOANS-PAST> 2,418
<LOANS-TROUBLED> 261
<LOANS-PROBLEM> 25,262
<ALLOWANCE-OPEN> 17,625
<CHARGE-OFFS> 1,663
<RECOVERIES> 1,471
<ALLOWANCE-CLOSE> 18,450
<ALLOWANCE-DOMESTIC> 10,480
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 7,970
</TABLE>
