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 Quarter Ended Commission File
September 30, 1997 Number 0-10869
FORT WAYNE NATIONAL CORPORATION
(Exact name of registrant as specified in its charter.)
INDIANA 35-1502812
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
110 West Berry Street
Post Office Box 110, Fort Wayne, Indiana 46801
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (219) 426-0555
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,
and (2) has been subject to such filing requirements for the past
90 days.
YES [X] NO [ ]
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practical date:
Class Outstanding November 4, 1997
________________________________ ____________________________
Common Shares, Without Par Value 17,080,116
6% Cumulative Convertible Class B
Preferred Stock, Series 1 739,976
The exhibit index appears on page 17.
This report, including the cover page contains a total of 18 pages.
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FORT WAYNE NATIONAL CORPORATION AND SUBSIDIARIES
INDEX
<TABLE>
<CAPTION>
PART I FINANCIAL INFORMATION PAGE NO.
<S> <C> <C>
Item 1. Financial Statements
Consolidated balance sheet -- September 30, 1997,
December 31, 1996 and September 30, 1996....... 3.
Consolidated statement of income -- three months
and nine months ended September 30, 1997 and 1996 4.
Consolidated statement of cash flows -- nine
months ended September 30, 1997 and 1996. ..... 5.
Notes to consolidated financial statements --
September 30, 1997............................. 6.
Item 2. Management's Discussion and Analysis of Results
of Operations and Financial Condition............ 7 - 14.
</TABLE>
<TABLE>
<CAPTION>
PART II OTHER INFORMATION
<S> <C> <C>
Item 1. Legal Proceedings................................ 15.
Item 2. Changes in Securities............................ 15.
Item 3. Defaults on Senior Securities.................... 15.
Item 4. Submission of Matters to a Vote of Security
Holders......................................... 15.
Item 5. Other Information................................ 15.
Item 6. Exhibits and Reports on Form 8-K................. 15.
</TABLE>
SIGNATURES.................................................. 16.
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<TABLE>
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
FORT WAYNE NATIONAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(Unaudited)
<CAPTION>
Sept 30 Dec 31 Sept 30
1997 1996 1996
__________ __________ __________
(In thousands)
<S> <C> <C> <C>
ASSETS
Cash and due from banks.............. $ 189,449 $ 191,913 $ 182,083
Federal funds sold and securities
purchased under agreements to
resell............................. 24,450 56,075 23,500
Interest-bearing deposits with banks. 3,046 376 426
Investment securities................ 929,213 974,608 989,041
Loans................................ 2,022,480 1,875,965 1,832,691
Less: Unearned income............. (4,020) (2,220) (2,442)
Allowance for possible
loan losses............... (30,682) (30,307) (32,105)
__________ __________ __________
NET LOANS 1,987,778 1,843,438 1,798,144
Premises and equipment............... 56,433 55,234 55,330
Other assets......................... 102,233 99,653 106,093
__________ __________ __________
TOTAL ASSETS $3,292,602 $3,221,297 $3,154,617
========== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY
<S> <C> <C> <C>
Deposits:
Noninterest-bearing................ $ 382,808 $ 419,118 $ 375,745
Interest-bearing................... 2,071,199 2,002,773 1,975,112
__________ __________ __________
TOTAL DEPOSITS 2,454,007 2,421,891 2,350,857
Federal funds purchased and
securities sold under agreements
to repurchase...................... 367,870 387,357 386,474
Notes payable - U.S. Treasury and
other borrowings................... 46,324 37,628 82,150
Dividends payable.................... 4,086 3,602 3,419
Accrued liabilities.................. 24,954 19,360 22,000
Subordinated and other long-term
notes.............................. 104,996 58,341 25,114
__________ __________ __________
TOTAL LIABILITIES 3,002,237 2,928,179 2,870,014
Deferred gain on sale of premises 762 961 1,028
Shareholders' equity:
Preferred stock, without par value:
Class A Voting - 2,000,000 shares
authorized but unissued
Class B Nonvoting - 2,000,000 shares
authorized:
Series 1 6% convertible issued and
outstanding shares: 739,976..... 36,999 36,999 36,999
Common stock, without par value:
Authorized shares: 50,000,000
Issued and outstanding shares -
September 30,1997 - 17,058,556;
December 31, 1996 - 17,560,251;
September 30,1996 - 17,627,939 .. 18,954 19,511 19,587
Capital surplus...................... 46,547 49,367 49,467
Retained earnings.................... 178,282 179,052 174,557
Unrealized gain on securities
available-for-sale................. 8,821 7,228 2,965
__________ __________ __________
TOTAL SHAREHOLDERS' EQUITY 289,603 292,157 283,575
__________ __________ __________
TOTAL LIABILITIES
AND SHAREHOLDERS' EQUITY $3,292,602 $3,221,297 $3,154,617
========== ========== ==========
</TABLE>
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<TABLE>
FORT WAYNE NATIONAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
(Unaudited)
<CAPTION>
Three Months Nine Months
Ended Sept 30 Ended Sept 30
________________ ________________
1997 1996 1997 1996
_______ _______ _______ _______
(In thousands, except per share data)
<S> <C> <C> <C> <C>
INTEREST INCOME
Interest and fees on loans:
Taxable................... $44,747 $40,213 $128,364 $99,082
Tax-exempt................ 206 280 678 724
Interest and dividends on
investment securities:
Taxable................. 11,729 12,759 35,933 32,272
Tax-exempt.............. 2,879 2,984 8,719 8,367
Interest on federal funds
sold and securities
purchased under agreements
to resell................. 194 382 1,389 1,271
Interest on deposits with
banks..................... 15 5 19 12
_______ _______ _______ _______
TOTAL INTEREST INCOME 59,770 56,623 175,102 141,728
INTEREST EXPENSE
Interest on deposits........ 23,238 22,445 67,929 57,705
Interest on federal funds
purchased and securities
sold under agreements
to repurchase............. 4,535 4,861 13,513 10,843
Interest on notes payable -
U.S. Treasury and other
borrowings................ 303 335 1,348 920
Interest on subordinated and
other long-term notes..... 1,870 1,043 4,359 1,735
_______ _______ _______ _______
TOTAL INTEREST EXPENSE 29,946 28,684 87,149 71,203
_______ _______ _______ _______
NET INTEREST INCOME
BEFORE PROVISION FOR
POSSIBLE LOAN LOSSES 29,824 27,939 87,953 70,525
Provision for possible
loan losses............... 1,170 940 3,410 2,825
_______ _______ _______ _______
NET INTEREST INCOME AFTER
PROVISION FOR POSSIBLE
LOAN LOSSES 28,654 26,999 84,543 67,700
NONINTEREST INCOME
Fiduciary fees.............. 3,704 3,443 10,690 9,168
Service charges on deposit
accounts.................. 1,901 1,910 5,660 4,624
Other service charges....... 1,290 838 3,717 2,241
Net securities gains........ 54 9 98 389
Other income................ 1,110 830 3,279 2,031
_______ _______ _______ _______
TOTAL NONINTEREST INCOME 8,059 7,030 23,444 18,453
NONINTEREST EXPENSE
Salaries and wages.......... 9,840 8,833 28,451 22,661
Employee benefits........... 2,279 2,084 6,759 5,455
Net Occupancy............... 1,970 1,993 6,050 4,781
Equipment expense........... 1,737 1,442 5,160 3,876
FDIC assessment............. 78 (61) 228 (34)
Amortization of goodwill
and other intangibles...... 723 718 2,159 1,054
Other expense............... 6,760 5,822 18,149 14,588
_______ _______ _______ _______
TOTAL NONINTEREST EXPENSE 23,387 20,831 66,956 52,381
_______ _______ _______ _______
INCOME BEFORE INCOME TAXES 13,326 13,198 41,031 33,772
Applicable income taxes..... 4,395 4,280 13,746 10,788
_______ _______ _______ _______
NET INCOME $ 8,931 $ 8,918 $27,285 $22,984
======= ======= ======= =======
Primary earnings per share.. $ .47 $ .47 $ 1.44 $ 1.27
======= ======= ======= =======
Fully diluted earnings
per share................. $ .46 $ .46 $ 1.40 $ 1.26
======= ======== ======= ========
</TABLE>
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<TABLE>
FORT WAYNE NATIONAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
Nine Months
Ended Sept 30
1997 1996
________ ________
(In thousands)
<CAPTION>
<S> <C> <C>
OPERATING ACTIVITIES
Net income............................................. $ 27,285 $ 22,984
Adjustments to reconcile net income to net cash
provided by (used in)operating activities:
Provision for possible loan losses................. 3,410 2,825
Net accretion and amortization of investment
securities....................................... 60 203
Net accretion and amortization of loans............ (15) (18)
Provision for depreciation and amortization
of premises and equipment........................ 4,654 3,372
Deferred income taxes.............................. 56 375
Capitalized originated mortgage servicing rights... (66) (160)
Amortization of capitalized originated mortgage
servicing rights................................. 26 10
Amortization of goodwill and other intangibles..... 2,158 1,054
Amortization of deferred gain on sale of premises.. (199) (199)
Gain on sale of investment securities
available-for-sale............................... (106) (419)
Loss on sale of investment securities
available-for-sale............................... 9 30
Market value adjustment on investment securities
held for trading purposes........................ -- 1,321
Net loss on sale of investment securities held
for trading...................................... -- 1,451
Proceeds from sale of investment securities held
for trading...................................... -- 39,546
Purchase of investment securities held for trading. -- (79,079)
Loans originated for resale........................ (10,454) (25,966)
Proceeds from sales of loans....................... 14,860 24,696
Net loss on sale of loans.......................... 115 88
Net gain on sale of premises and equipment......... (29) (4)
(Increase) decrease in other assets................ (5,839) 989
Increase (decrease) in other liabilities........... 5,594 (474)
________ ________
NET CASH PROVIDED BY(USED IN) OPERATING ACTIVITIES 41,519 (7,375)
INVESTING ACTIVITIES
Net decrease in federal funds sold and
securities purchased under agreements to resell...... 31,625 80,250
Net (increase) decrease in interest-bearing deposits
with banks........................................... (2,670) 18
Proceeds from sales of investment securities
available-for-sale................................... 16,396 3,574
Proceeds from maturities of investment securities
available-for-sale................................... 105,033 127,882
Purchases of investment securities available-for-sale.. (73,319) (178,075)
Net increase in loans.................................. (152,256) (25,969)
Proceeds from disposals of premises and equipment...... 199 13
Purchase of premises and equipment..................... (6,023) (6,900)
Purchase of net assets of Valley Financial
Services, Inc., net of cash acquired................. -- (62,637)
________ ________
NET CASH USED IN INVESTING ACTIVITIES (81,015) (61,844)
FINANCING ACTIVITIES
Net increase in deposits............................... 32,116 19,695
Net increase (decrease)in short-term borrowings........ (10,791) 4,816
Issuance of long-term debt............................. 65,358 15,000
Principal payment on long-term debt.................... (18,703) (2,563)
Issuance of preferred stock............................ -- 36,999
Issuance of common stock............................... 77 20,000
Proceeds from exercise of stock options................ 1,414 1,030
Repurchase of common stock............................. (20,924) (8,831)
Cash dividends paid on preferred stock................. (1,665) (185)
Cash dividends paid on common stock.................... (9,850) (12,261)
________ ________
NET CASH PROVIDED BY FINANCING ACTIVITIES 37,032 73,700
________ ________
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (2,464) 4,481
Cash and cash equivalents at beginning of period....... 191,913 177,602
________ ________
CASH AND CASH EQUIVALENTS AT END OF PERIOD $189,449 $182,083
======== ========
</TABLE>
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FORT WAYNE NATIONAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Principals of Consolidation
The financial statements are consolidated statements of Fort
Wayne National Corporation(the Company) and its wholly-
owned subsidiaries. All significant intercompany accounts
and transactions have been eliminated. A description of all
significant accounting policies is included in the 1996 Annual
Report to Shareholders.
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principals for
interim financial information and with the instructions to Form 10-Q and
Article 10 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, all
adjustments (consisting of normal recurring accruals) considered necessary for
a fair presentation have been made. Operating results for the three-month and
nine-month periods ended September 30, 1997 are not necessarily indicative of
the results that may be expected for the year ending December 31, 1997.
2. Recently Adopted Accounting Standard
In February 1997, the Financial Accounting Standards Board issued Statement
128, "Earnings per Share," which is required to be adopted on December 31,
1997. At that time, the Company will be required to change the method
currently used to compute earnings per share and to restate all prior periods.
Under the new requirements for calculating primary earnings per share, the
dilutive effect of stock options will be excluded. The impact of Statement
128 on both primary and fully diluted earnings per share is not expected to be
material.
3. Share and Per Share Data
On April 20, 1997, the Company's shareholders approved an increase in the
number of authorized shares of stock from 22,000,000 to 54,000,000. The
authorized shares are divided into three classes, one of which is designated
Class A Preferred Stock and consists of 2,000,000 shares without par value,
one of which is designated Class B Preferred Stock and consists of 2,000,000
shares without par value and one of which is designated Common Stock and
consists of 50,000,000 shares without par value.
On May 20, 1997, the Company's Board of Directors approved a three-for-two
common stock split. This split was paid July 15, 1997 to common shareholders
of record as of June 16, 1997. All share and per share data has been adjusted
to retroactively reflect the three-for-two common stock split.
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<PAGE>
Item 2. Management's Discussion and Analysis of Results of Operations
and Financial Position
FORT WAYNE NATIONAL CORPORATION AND SUBSIDIARIES
Management's Discussion and Analysis of Results of Operations
and Financial Position
On June 1, 1996 the Company acquired Valley Financial Services, Inc. (VFS)
and it's only banking subsidiary, Valley American Bank and Trust Company
(Valley). This acquisition has been accounted for as a purchase for
accounting purposes. Therefore, the consolidated results of operations for
the three-month periods ended September 30, 1997 and 1996 and the nine-month
period ended September 30, 1997 include the results of operations of Valley
for the entire period while the consolidated results of operations for the
nine months ended September 30, 1996 include the results of operations of
Valley for only four months. Also, the consolidated balance sheets as of
September 30, 1997, December 31, 1996 and September 30, 1996 each include the
financial position of Valley, as do the consolidated average balances for the
three-month periods ended September 30, 1997 and 1996 and the nine-month
period ended September 30, 1997. The consolidated average balances for the
nine months ended September 30, 1996 include Valley for only four months.
Results of Operations
Net income for the third quarter of 1997 amounted to $8.9 million or $.47 per
common share, consistent with the same quarter of 1996. For the nine months
ended September 30, 1997, net income was $27.3 million or $1.44 per common share
compared to $23.0 million or $1.27 per common share for the nine months anded
September 30, 1996, an increase of $4.3 million or 18.7%. The additional
earnings attributable to Valley accounted for $3.2 million of the increase for
the nine months ended September 30, 1997 over the same period of 1996.
Net interest income measured on a fully taxable equivalent basis (fte) for the
three months ended September 30, 1997 was $31.5 million, an increase of $398,000
or 1.3% over the three months ended June 30, 1997 and $1.8 million or 6.0% over
the three months ended September 30, 1996. For the nine months ended September
30, 1997, the net interest income (fte) was $93.0 million, an increase of $17.6
million or 23.3% over the same period of 1996, with Valley contributing $14.0
million to this increase.
Due to improving yields on loans, the net interest margin (fte) for both the
third quarter and nine months ended September 30, 1997 was 4.30%, an increase of
11 basis points over the 4.19% achieved for both the third quarter and nine
months ended September 30, 1996.
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<PAGE>
The Company uses exchange traded financial futures contracts as a part of its
overall interest rate risk management. At September 30, 1997, the Company had
685 Eurodollar contracts outstanding to hedge liability accounts as compared to
704 contracts at December 31, 1996 and 682 contracts at September 30, 1996. The
net decrease to net interest income from Eurodollar futures contracts was
$408,000 and $345,000 for the nine months ended September 30, 1997 and 1996,
respectively.
As a result of management's quarterly review of the adequacy of the allowance
for possible loan losses, the Company provided $1,170,000 for possible loan
losses during the third quarter of 1997 as compared to the $940,000 provided
during the same period of the prior year. For the nine months ended September
30, 1997, the Company provided $3,410,000 for possible loan losses. This
represents an increase of $585,000 over the amount provided in the same period
of 1996, with $250,000 of the increase attributable to Valley
The Company's noninterest income for the third quarter of 1997 reflected a
$1.0 million or 14.6% increase from the third quarter of 1996. For the nine
months ended September 30, 1997 noninterest income of $23.4 million was $5.0
million above the prior year's results, with the increase at Valley amounting
to $2.6 million.
Fiduciary fees increased by $261,000 or 7.6% and $1,522,000 or 16.6% for the
three months and nine months ended September 30, 1997, respectively, compared
to the same periods in 1996 as assets under management continue to increase.
Without Valley, fiduciary fees would have reflected a $672,000 or 7.6%
increase for the nine months ended September 30, 1997 over the same period of
1996. Service charges on deposits decreased just slightly for the three
months ended September 30, 1997 from the same period of a year ago while
increasing $1,036,000 for the nine months ended September 30, 1997 compared to
the same period in 1996. Excluding Valley, service charges on deposits
reflected a $112,000 or 2.9% increase . Other service charges increased by
$452,000 or 53.9% and $1,476,000 or 65.9% for the three months and nine months
ended September 30, 1997, respectively, compared to the same periods in 1996
as the result of increased credit life insurance income, loan servicing fees,
credit card fees, and lease accounting fees. Other income increased by
$280,000 or 33.7% and $1,248,000 or 61.4% for the three months and nine months
ended September 30, 1997, respectively, compared to the same periods in 1996
due to increased electronic banking fee income. However, these increases were
partially offset by increased electronic banking expenses of $186,000 and
$522,000 for the same periods as reflected in other expense.
Also included in noninterest income is $98,000 of net securities gains during
the nine months ended September 30, 1997 as compared to $389,000 for the nine
months ended September 30, 1996.
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<PAGE>
Noninterest expense increased $2,556,000 during the third quarter of 1997 over
the third quarter of 1996 and $14,575,000 for the nine months ended September
30, 1997 over the same period of 1996. Without the results of Valley,
noninterest expense increased by $1,192,0000 or 9.22% for the nine months
ended September 30, 1997 over the same period in 1996.
Salaries and wages increased by $1,007,000 or 11.4% for the third quarter of
1997 over the third quarter of 1996. For the first nine months of 1997,
salaries and wages rose $5,790,000 compared to the same period in 1996.
Approximately 74% of the increase is attributable to Valley. Excluding
Valley, salaries and wages increased by 7.4% for the nine months ended
September 30, 1997 over the same period of 1996. However, certain employee
bonus accruals had been reduced during the nine months ended September 30,
1996 and therefore this increase is not indicative of the true increases in
compensation levels. Employee benefit expense increased by $195,000 or 9.4%
for the third quarter of 1997 over the third quarter of 1996 and by $1,304,000
or 23.9% for the nine months ended September 30, 1997 over the nine months
ended September 30, 1996. The employee benefit expense increases reflect the
increases in salaries and wages as noted above.
Net occupancy expense decreased by $23,000 or 1.2% for the third quarter of
1997 from the third quarter of 1996 due to lower maintenance and repair
expenses while all other occupancy expenses were flat. For the nine months
ended September 30, 1997, net occupancy expense was $1,269,000 or 26.5% above
the same period in 1996, including $935,000 of additional expense as a result
of including Valley for the entire period in 1997 and for only four months in
the prior year.
For the three months ended September 30, 1997, equipment expense increased
$295,000 or 20.5%. For the nine months ended September 30, 1997, equipment
expense increased by $1,284,000 with expenses at Valley accounting for
$567,000 of the increase. These increases are reflective of depreciation on
the recent expenditures for hardware and software for the Company's wide area
computer network and the new loan/teller/platform system.
Amortization of goodwill and other intangibles increased just slightly for the
third quarter of 1997 over the third quarter of 1996 while increasing by
$1,105,000 for the nine months ended September 30, 1997 over the same period
of a year ago. The increase in the year-to-date amount is attributable to a
full nine months of amortization of the goodwill and other intangibles
recorded in connection with the Valley acquisition in 1997 and only four
months of amortization in 1996.
FDIC insurance expense increased by $139,000 and $262,000 for the third
quarter and nine months ended September 30, 1997, respectively over the same
periods of 1996. These increases are the result of the recent increase in the
insurance premium rate and deposit growth.
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<PAGE>
Other noninterest expense increased by $2,556,000 or 12.3% for the three
months ended September 30, 1997 over 1996. For the nine months ended
September 30, 1997, other expense increased by $3,561,000 or 24.4% with Valley
accounting for 66.5% of this increase. The remaining year-to-date increase
and the increase from the third quarter of 1997 over the third quarter of 1996
is the result of increased expenses as the Company standardized deposit
products this summer and reviews operating procedures for best practices.
Applicable income taxes for the nine months ended September 30, 1997 amounted
to 33.5% of pre-tax net income as compared to 31.9% for the same period of
1996. The increase in the effective rate in 1997 is attributable to the
increase in the amortization of goodwill and other intangibles which is not
deductible for tax purposes.
Financial Condition
Total assets of the Company increased by $71 million at September 30, 1997 from
December 31, 1996 and by $138 million from September 30, 1996. Average daily
assets for the third quarter of 1997 of $3.204 billion were 2.8% above the
$3.115 billion for the third quarter of 1996. For the first nine months of
1997, average daily assets were $3.166 billion compared to $2.635 billion for
the same period in 1996. Total average assets of Valley included in these
figures were $874 million for the first nine months of 1997 and $381 million
for the first nine months of 1996.
The Company continues to experience loan growth. Loans, net of unearned income,
as of September 30, 1997 were $1.988 billion or $145 million over the amount
outstanding at December 31,1996 and $188 million over the amount outstanding at
September 30,1996. While each of the loan categories show growth, the
commercial and industrial, residential mortgage, and commercial real estate
categories account for the majority of the growth.
-10-
<PAGE>
The Company's investment portfolio at both September 30, 1997 and December 31,
1996 was comprised entirely of investment securities available-for-sale while at
September 30, 1996 the portfolio included $58 million of investment securities
held for trading purposes with the remainder of the portfolio
available-for-sale. The net unrealized gain, net of taxes, on securities
available-for-sale was $8.8 million at September 30, 1997, $7.2 million at
December 31, 1996 and $3.0 million at September 30, 1996.
Available-for-sale securities, excluding the market valuation adjustment,
decreased $48 million from December 31, 1996 as the result of increased loan
demand. On average for first nine months of 1997, securities available-for-sale
were $118 million above the same period last year. Average securities
available-for-sale increased by $92 million due to the inclusion of Valley and
therefore, without Valley's averages, would have reflected an increase of $26
million.
Federal funds sold and securities purchased under agreements to resell decreased
$32 million as of September 30, 1997 compared to year-end 1996 and were
consistent with the amount outstanding at September 30, 1996. Average federal
funds sold and securities purchased under agreements to resell for the third
quarter were $9 million below the third quarter of 1996. For the nine-month
period ended September 30, 1997, average federal funds sold and securities
purchased under agreements to resell were $8 million below the same period in
1996.
The allowance for possible loan losses, which is established through a provision
for possible loan losses charged against income, is maintained at a level
believed adequate by management to absorb estimated probable loan losses. The
allowance for possible loan losses amounted to $30.7 million at September 30,
1997, an increase of $375,000 over the $30.3 million balance at December 31,
1996 and $1.4 million below the $32.1 million at September 30, 1996. The ratio
of the allowance to total loans outstanding at September 30, 1997 was 1.52%, as
compared to 1.62% at December 31, 1996 and 1.75% at September 30, 1996.
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<PAGE>
The Company's nonaccrual loans, accruing loans past due 90 days or more,
restructured loans and other real estate are summarized as follows (dollars in
thousands).
<TABLE>
NONPERFORMING ASSET TABLE
<CAPTION>
SEPT 30, 1997 DEC 31, 1996 SEPT 30, 1996
_____________ ____________ _____________
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Nonaccrual Loans $ 12,619 $ 7,717 $ 15,999
90 Days Past Due 1,749 1,804 2,227
Restructured 1,102 2,534 913
____________ ____________ ____________
Total Nonperforming Loans $ 15,470 $ 12,055 $ 19,139
Other Real Estate 946 1,736 1,958
____________ ____________ ____________
Total Nonperforming Assets $ 16,416 $ 13,791 $ 21,097
============ ============ ============
Nonperforming Loans as a
Percent of Total Loans
Outstanding .77% .64% 1.05%
============ ============ ============
Nonperforming Assets as a
Percent of Total Assets .50% .43% .67%
============ ============ ============
</TABLE>
In addition to loans classified as nonperforming at December 31, 1996, the
Company had reported an additional $14.9 million of loans as of that date where
management was closely monitoring the borrower's ability to comply with payment
terms. Through September 30, 1997 this amount has been reduced by $2,769,000
representing pay downs or pay-offs of these loans. Management continues to
closely monitor the remaining loans.
Total nonperforming loans increased by $3.4 million at September 30, 1997 when
compared to December 31, 1996 due primarily to an increase in nonaccrual loans.
However, total nonperforming loans have decreased by $3.7 million from September
30, 1996. The ratio of nonperforming loans to total loans outstanding stands at
.77% at September 30, 1997 compared to .64% at December 31, 1996 and 1.05% at
September 30, 1996.
Net charge-offs for the third quarter of 1997 amounted to $676,000 following net
charge-offs of $566,000 and $1,793,000 during the second and first quarters of
1997, respectively.
The Company's total deposits increased $32 million at September 30, 1997 when
compared to December 31, 1996 and $103 million when compared to September 30,
1996. Average total deposits for the first nine months of 1997 are $369 million
over the same period last year. Valley's average deposits contributed $331
million to this increase. Excluding average deposits outstanding at Valley,
-12-
<PAGE>
average interest-bearing checking accounts decreased by $27 million or 15.1% and
average savings accounts decreased by $49 million or 18.2%. Offsetting these
decreases was an increase in money market deposits of $107 million or 38.1%.
The decrease in average interest-bearing checking accounts is the result of a
program which sweeps balances from interest-bearing transactional accounts to
non-transactional accounts thereby reducing required reserves at the Federal
Reserve Bank.
Short-term borrowings, including federal funds purchased and securities sold
under agreements to repurchase and notes payable, decreased $11 million at
September 30, 1997 from December 31, 1996 and $21 million from September 30,
1996. On average, short-term borrowings for the third quarter of 1997 were $29
million below the third quarter of 1996. For the nine months ended September
30, 1997, average short-term borrowings were $70 million above the same period
of the prior year with increased average short-term borrowings at Valley
accounting for substantially all of this increase.
Subordinated and other long-term notes increased by $47 million from December
31, 1996 to September 30, 1997. This increase is the net of $65 million of
additional borrowings and $18 million in normal scheduled principal reductions.
The additional borrowings are comprised of $34 million in borrowings from the
Federal Home Loan Bank to fund loan growth and $30 million in 9.85% capital
securities as described below.
Capital Resources
Quantitative measures to ensure capital adequacy require the Company and its
subsidiary banks to maintain minimum ratios of 4% for Tier I risk-based capital,
8% for total risk-based capital and 4% for Tier I leverage. To be considered
well capitalized under the regulatory framework the ratios are 6%, 10% and 5%,
respectively. Management believes, as of September 30, 1997, that the Company
meets all capital adequacy requirements to which it is subject. In addition,
each subsidiary bank had regulatory capital ratios in excess of the levels
established for well capitalized institutions.
On April 17, 1997, the Company completed a private placement of $30 million of
9.85% capital securities due April 15, 2027. The securities were issued by the
Company's recently formed subsidiary, Fort Wayne Capital Trust I, a statutory
business trust formed under the laws of the State of Delaware. Proceeds of the
issue were invested by Fort Wayne Capital Trust I in Junior Subordinated
Debentures issued by the Company. The issuance of these securities, which
qualify as Tier 1 capital for purposes of risk-based capital calculations,
resulted in an increase in the risk-based capital ratios at September 30, 1997
as compared to prior periods.
-13-
<PAGE>
In September of 1997, the Company repurchased 600,000 shares of common stock
through an accelerated buy-back program as part of the Company's capital
management plan. These shares were repurchased at a total cost of approximately
$21,000,000.
The following is a summary of the Company's capital ratios (dollars in
thousands).
<TABLE>
RISK-BASED CAPITAL
<CAPTION>
SEPT 30, 1997 DEC 31, 1996 SEPT 30, 1996
_____________ ____________ _____________
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Tier I Capital $ 259,616 $ 231,818 $ 226,784
Tier II Capital 27,307 24,831 24,411
____________ ____________ ____________
Total Tier I and
Tier II Capital $ 286,923 $ 256,649 $ 251,195
============ ============ ============
Risk-weighted Assets $ 2,181,155 $ 1,981,147 $ 1,945,376
============ ============ ============
Tier I Capital Ratio 11.90% 11.70% 11.66%
Tier II Capital Ratio 1.25% 1.25% 1.25%
____________ ____________ ____________
Total Tier I and
Tier II Capital Ratio 13.15% 12.95% 12.91%
============ ============ ============
Tier I Leverage Ratio 8.01% 7.32% 7.31%
============ ============ ============
</TABLE>
- 14 -
<PAGE>
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
This item is inapplicable or is omitted pursuant to
the instructions to Part II.
Item 2. Changes in Securities.
This item is inapplicable or is omitted pursuant to
the instructions to Part II.
Item 3. Defaults on Senior Securities.
This item is inapplicable or is omitted pursuant to
the instructions to Part II.
Item 4. Submission of Matters to a Vote of Security Holders.
This item is inapplicable or is omitted pursuant to
the instructions to Part II.
Item 5. Other Information.
This item is inapplicable or is omitted pursuant to
the instructions to Part II.
Item 6. Exhibits and Reports on Form 8-K.
a.) Exhibits
Exhibit 11 - Statement Re Computation of Earnings Per Share.
Exhibit 27 - Financial Data Schedule.
b.) Reports on Form 8-K.
No Form 8-K was filed during the third quarter of 1997.
- 15 -
PAGE
<PAGE>
FORT WAYNE NATIONAL CORPORATION
SIGNATURES
Pursuant to the requirement 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.
FORT WAYNE NATIONAL CORPORATION
REGISTRANT
November 14, 1997 /s/ M. James Johnston
Date M. James Johnston
Chairman of the Board and
Chief Executive Officer
November 14, 1997 /s/ Karen M. Kasper
Date Karen M. Kasper
Senior Vice President,
Chief Financial Officer and Treasurer
- 16 -
PAGE
<PAGE>
FORT WAYNE NATIONAL CORPORATION AND SUBSIDIARIES
FORM 10-Q
EXHIBIT INDEX
<TABLE>
<CAPTION>
Number
Assigned Per
Regulation Sequential
S-K Item 601 Description Page No.
____________ _____________________________________________ _______
<S> <C> <C>
11. Statement RE Computation of Earnings Per Share. 18.
27. Financial Data Schedule. 19.
- 17 -
</TABLE>
<TABLE>
EXHIBIT 11
FORT WAYNE NATIONAL CORPORATION AND SUBSIDIARIES
STATEMENT RE COMPUTATION OF EARNINGS PER SHARE
(Unaudited)
<CAPTION>
Three Months Nine Months
Ended Sept 30 Ended Sept 30
________________ ________________
1997 1996 1997 1996
_______ _______ _______ _______
(In thousands, except per share data)
<S> <C> <C> <C> <C>
PRIMARY
Average shares outstanding........... 17,571 17,792 17,584 17,445
Net effect of dilutive stock
options -- based on the treasury
stock method using average market
price.............................. 318 123 251 111
_______ _______ _______ _______
TOTAL 17,889 17,915 17,835 17,556
======= ======= ======= =======
Net income........................... $ 8,931 $ 8,918 $27,285 $22,984
Preferred stock dividends............ 555 555 1,665 740
_______ _______ _______ _______
Net income applicable to common stock. $ 8,376 $ 8,363 $25,620 $22,244
======= ======= ======= =======
Earnings per common and common share
equivalents......................... $ .47 $ .47 $ 1.44 $ 1.27
======= ======= ======= =======
FULLY DILUTED
Average shares outstanding............ 17,571 17,792 17,584 17,445
Net effect of conversion o preferred
stock................................ 1,494 1,494 1,494 666
Net effect of dilutive stock
options -- based on the treasury
stock method using the higher of
the end of the period market
price or average market
price............................... 365 131 365 131
_______ _______ _______ _______
TOTAL 19,430 19,417 19,443 18,242
======= ======= ======= =======
Net income............................ $ 8,931 $ 8,918 $27,285 $22,984
======= ======= ======= =======
Earnings per common and common share
equivalents......................... $ .46 $ .46 $ 1.40 $ 1.26
======= ======= ======= =======
</TABLE>
- 18 -
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FORT WAYNE NATIONAL CORPORATION AND SUBSIDIARIES CONSOLIDATED FINANCIAL
STATEMENTS (UNAUDITED) AS OF SEPTEMBER 30, 1997 AND FOR THE THREE AND NINE
MONTH PERIODS THEN ENDED AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 189,449
<INT-BEARING-DEPOSITS> 3,046
<FED-FUNDS-SOLD> 24,450
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 929,213
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 2,022,480
<ALLOWANCE> 30,682
<TOTAL-ASSETS> 3,292,602
<DEPOSITS> 2,454,007
<SHORT-TERM> 414,194
<LIABILITIES-OTHER> 29,802
<LONG-TERM> 104,996
<COMMON> 18,954
0
36,999
<OTHER-SE> 233,650
<TOTAL-LIABILITIES-AND-EQUITY> 3,292,602
<INTEREST-LOAN> 129,042
<INTEREST-INVEST> 44,652
<INTEREST-OTHER> 1,408
<INTEREST-TOTAL> 175,102
<INTEREST-DEPOSIT> 67,929
<INTEREST-EXPENSE> 87,149
<INTEREST-INCOME-NET> 87,953
<LOAN-LOSSES> 3,410
<SECURITIES-GAINS> 98
<EXPENSE-OTHER> 66,956
<INCOME-PRETAX> 41,031
<INCOME-PRE-EXTRAORDINARY> 41,031
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 27,285
<EPS-PRIMARY> 1.44
<EPS-DILUTED> 1.40
<YIELD-ACTUAL> 4.30
<LOANS-NON> 12,619
<LOANS-PAST> 1,749
<LOANS-TROUBLED> 1,102
<LOANS-PROBLEM> 12,113
<ALLOWANCE-OPEN> 30,307
<CHARGE-OFFS> 3,759
<RECOVERIES> 724
<ALLOWANCE-CLOSE> 30,682
<ALLOWANCE-DOMESTIC> 30,682
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 30,682
</TABLE>
