<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For quarter ended March 31, 1995 Commission file number 2-54663
FIRST MANISTIQUE CORPORATION
(Exact name of registrant as specified in its charter)
Michigan 38-2062816
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
130 S. Cedar Street, Manistique, Michigan 49854
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (906) 341-8401
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 May 5, 1995.
Common stock, no par value 699,023 shares outstanding.
<PAGE> 2
INDEX
FIRST MANISTIQUE CORPORATION AND SUBSIDIARIES
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements (Unaudited)
Consolidated balance sheets - March 31, 1995
and December 31, 1994 I-1-2
Consolidated statements of income - three months
ended March 31, 1995 and 1994 I-3
Consolidated statements of cash flows - three
months ended March 31, 1995 and 1994 I-4-5
Notes to consolidated financial statements - March 31, 1995 I-6-7-8
ITEM 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations I-9-13
PART II. OTHER INFORMATION
ITEM 6. Reports on Form 8-K II-1
Signatures II-1
<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
FIRST MANISTIQUE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
ASSETS
March 31, December 31,
1995 1994
----------------------
(000's omitted)
<S> <C> <C>
Cash and cash equivalents:
Cash and noninterest bearing deposits $7,851 $10,219
Federal funds sold 2,300 4,100
-------- --------
TOTAL CASH AND CASH EQUIVALENTS 10,151 14,319
Interest bearing time deposits 2,002 2,422
-------- --------
Investment securities:
Securities available for sale 20,869 21,929
Securities held to maturity 15,452 14,446
(market value 1995 $15,069 and 1994 $13,778) -------- --------
TOTAL INVESTMENT SECURITIES 36,321 36,375
-------- --------
Loans: (net of unearned income)
Commercial, financial and agricultural loans 84,310 78,138
Real estate loans - mortgage 55,288 56,987
Installment loans 28,174 26,785
Leases 23,533 21,259
-------- --------
TOTAL LOANS 191,305 183,169
Less: Reserve for possible loan losses (2,349) (2,350)
NET LOANS 188,956 180,819
-------- --------
Accrued interest receivable and other assets 9,469 9,361
Bank premises and equipment 10,244 9,803
-------- --------
TOTAL ASSETS $257,143 $253,099
======== ========
</TABLE>
I-1
<PAGE> 4
<TABLE>
<CAPTION>
LIABILITIES
March 31, December 31,
1995 1994
------------------------
(000's omitted)
<S> <C> <C>
Deposits:
Non interest-bearing $21,839 $24,272
Interest-bearing 203,782 199,864
-------- --------
TOTAL DEPOSITS 225,621 224,136
Notes Payable - Federal Home Loan Bank 4,773 3,552
Accrued interest payable and other liabilities 3,556 2,927
-------- --------
TOTAL LIABILITIES 233,950 230,615
-------- --------
STOCKHOLDERS' EQUITY
Common stock, no par value;
2,000,000 shares authorized
699,024 share issued and outstanding in 1995;
699,024 shares in 1994 5,190 5,190
Capital surplus 7,847 7,847
Retained earnings 10,442 10,015
Unrealized gains/losses on securities (net of $147 tax for 1995) (286) (568)
(net of $284 tax for 1994) -------- --------
TOTAL STOCKHOLDERS' EQUITY 23,193 22,484
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $257,143 $253,099
======== ========
</TABLE>
(Concluded)
See notes to consolidated financial statements.
I-2
<PAGE> 5
FIRST MANISTIQUE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Three Month Ended
March 31,
1995 1994
---------------------
(000's omitted)
except per share data
---------------------
<S> <C> <C>
Interest Income:
Interest and fees on loans $4,430 $2,353
Interest on investment securities:
Taxable 429 343
Exempt from Federal income taxes 52 84
Other interest income 156 55
------ ------
TOTAL INTEREST INCOME 5,067 2,835
Interest Expense:
Interest on deposits 2,142 1,181
Interest on short-term borrowings 63 33
TOTAL INTEREST EXPENSE 2,205 1,214
------ ------
NET INTEREST INCOME 2,862 1,621
Provision for loan losses 69 0
------ ------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 2,793 1,621
Other Income:
Service charges on deposit accounts 140 75
Securities gains (losses) 3 54
Other 223 121
------ ------
TOTAL OTHER INCOME 366 250
Other Expenses:
Salaries & employee benefits 921 584
Occupancy expense 151 94
Furniture and equipment expense 198 120
Other 845 558
------ ------
TOTAL OTHER EXPENSES 2,115 1,356
Income before income taxes 1,044 515
Income taxes - Note B 267 91
NET INCOME $777 $424
====== ======
Earnings per share: 699,024 average shares
outstanding in 1995 and 508,107 shares in 1994
NET INCOME PER SHARE 1.11 0.83
====== ======
</TABLE>
(Concluded)
See notes to consolidated financial statements
I-3
<PAGE> 6
CONSOLIDATED STATEMENT OF CHANGES IN CASH FLOW
<TABLE>
<CAPTION>
Three Months Ended
March 31
------------------
1995 1994
------------------
(000's omitted)
<S> <C> <C>
Net income $777 $424
Adjustments to reconcile net income to net cash
provided by operations:
Provision for possible losses 69 0
Depreciation 190 112
Amortization 33 64
Accretion (3) 0
(Gains) losses on investment securities (3) (54)
Increase in interest receivable and other assets (253) (266)
Increase in interest payable and other liabilities 629 20
Gains on sale of bank premises and equipment (3) 0
------- -------
NET CASH PROVIDED BY OPERATING ACTIVITIES 1,436 300
======= =======
Cash Flows From Investing Activities:
Held to maturity securities purchased (1,511) (1,803)
Held to maturity proceeds from maturities of securities 413 440
Available for sale securities purchased (974) (600)
Available for sale proceeds from sales of securities 599 1,231
Available for sale proceeds from maturities of securities 1,928 555
Net increase in loans (8,206) (7,441)
Time deposits matured 3,519 0
Time deposits purchased (3,100) 0
Purchase of bank premises and equipment (628) (599)
Acquisition of Bank of Stephenson, net of cash and 0 (4,492)
cash equivalents acquired
NET CASH USED IN INVESTING ACTIVITIES (7,960) (12,709)
------- -------
Cash Flows From Financing Activities:
Net increase in deposits 1,485 10,743
Proceeds from short-term liabilities 1,221 1,400
Payment of dividends (350) (193)
Proceeds from stock issuance 0 215
------- -------
NET CASH PROVIDED BY FINANCING ACTIVITIES 2,356 12,165
------- -------
NET DECREASE IN CASH AND CASH EQUIVALENTS (4,168) (244)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 14,319 14,390
------- -------
CASH AND CASH EQUIVALENTS, END OF PERIOD $10,151 $14,146
======= =======
</TABLE>
(continued)
I-4
<PAGE> 7
RECONCILIATION OF NET INCOME TO NET CASH PROVIDED BY
OPERATING ACTIVITIES
Supplemental disclosure of cash flow information
Cash paid during the year for:
(000's omitted)
<TABLE>
<CAPTION>
1995 1994
------ ------
<S> <C> <C>
Interest $2,205 $1,214
Income Taxes 541 0
Non Cash
Transfer to Other Real Estate 90 0
</TABLE>
(Concluded)
See notes to consolidated financial statements
I-5
<PAGE> 8
FIRST MANISTIQUE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1995
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, the unaudited consolidated financial statements
do not include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements.
In the opinion of the Corporation, the unaudited consolidated financial
statements include all adjustments necessary to a fair presentation of its
financial position as of March 31, 1995 and the results of its operations and
its cash flows for the three months then ended. Such adjustments were of a
normal recurring nature.
The results of operations for the three months ended March 31, 1995 are not
necessarily indicative of the results that will occur for the year ended
December 31, 1995. In addition, the unaudited consolidated financial
statements, accounting policies and footnotes thereto included in the
Corporation's annual report on Form 10-K for the year ended December 31, 1994.
The results of operation for the three months ended March 31, 1994 as reported
in the accompanying financial statement is reported on a historical basis. The
results attributable to the acquisition of the Bank of Stephenson, purchased
February 8, 1994, are included herein after the purchase date. Accordingly,
the acquisition of a substantial portion of the assets and liabilities of
Newberry State Bank, purchased December 8, 1994, have no impact on the results
of operations for the same time period.
I-6
<PAGE> 9
NOTE B - ACQUISITIONS
On February 8, 1994 the Corporation purchased 100% of the outstanding stock of
the Bank of Stephenson with total assets of approximately $70,000,000. The
results of the operations of the bank have been incorporated in the
accompanying financial statements after the purchase date. Assuming the Bank
of Stephenson had been acquired January 1, 1994, the estimated total revenues,
net income and earnings per share amounts for the three months ending March 31,
1994 would have been as follows:
<TABLE>
<S> <C>
Total Revenue 3611
Net Income 464
Net income per common and common equivalent share 2.74
</TABLE>
NOTE C - STATEMENTS OF FINANCIAL ACCOUNTING STANDARDS
The Corporation adopted SFAS NO. 114, "Accounting by Creditors for Impairment
of a Loan" effective January 1, 1995. The statement requires that a specific
measurement basis be applied to loans when it is probable that all amounts
due under terms of the loan agreement will not be collected. No material
impact has occurred on the corporation's financial statements as a result of
adoption of this statement.
I-7
<PAGE> 10
NOTE D - INVESTMENT SECURITIES
(000's omitted)
Debt and equity securities have been classified in the accompanying
consolidated balance sheets according to management's intent. The amortized
cost and estimated market value of securities at March 31, 1995 and December
31, 1994 are as follows:
<TABLE>
<CAPTION>
Amortized Unrealized
Cost Gains Losses Market Value
--------- --------------- ------------
<S> <C> <C> <C> <C>
03/31/95
AVAILABLE FOR SALE SECURITIES
U.S. Treasury and Federal agencies $15,440 $4 ($346) $15,098
States and Political Subdivisions 3,347 3 (94) 3,256
Other Securities 2,517 0 (2) 2,515
------- -- ----- -------
21,304 7 (442) 20,869
======= == ===== =======
12/31/94
AVAILABLE FOR SALE SECURITIES
U.S. Treasury and Federal agencies 17,696 3 (642) 17,057
States and Political Subdivisions 3,348 2 (220) 3,130
Other Securities 1,751 0 (9) 1,742
------- -- ----- -------
22,795 5 (871) 21,929
======= == ===== =======
03/31/95
HELD TO MATURITY SECURITIES
U.S. Treasury and Federal agencies 5,984 3 (167) 5,820
States and Political Subdivisions 1,035 10 (15) 1,030
Other Securities 8,433 0 (214) 8,219
------- -- ----- -------
15,452 13 (396) 15,069
======= == ===== =======
12/31/94
HELD TO MATURITY SECURITIES
U.S. Treasury and Federal agencies 8,799 0 (477) 8,322
States and Political Subdivisions 1,150 2 (9) 1,143
Other Securities 4,497 0 (184) 4,313
------- -- ----- -------
$14,446 $2 ($670) $13,778
======= == ===== =======
</TABLE>
I-8
<PAGE> 11
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following presents management's discussion and analysis of the
Corporation's financial condition and earnings performance. This review
highlights the major factors affecting results of operations and any
significant changes in financial condition for the three months ended March 31,
1995.
Highlights
The Corporation acquired the Bank of Stephenson with assets of $70,258,000 on
February 8, 1994. On December 8, 1994, the Corporation acquired assets of the
Newberry State Bank totaling $22,000,000 in loans and liabilities totaling
$45,100,000 in deposits. These acquisitions have significantly impacted the
Corporation's financial results as noted below.
Results of Operations
Income before federal income tax during the first three months of 1995
increased by 102.7% compared to same period in 1994. This increase is the
result of increase in net interest income and other income more than offsetting
the increase in other expenses. Income tax expense increased by 193.4%
compared to first three months in 1994. This increase is the result in the
increase in pretax income.
Net income for the first three months of 1995 increased by 83.2% compared to
same period in 1994. This increase is the result in the increase in net
interest income and other income more than offsetting the increase in other
expenses and the increase in federal income taxes.
Net interest income increased by 76.6% for the first three months of 1995
compared to same period in 1994. The acquisition of Stephenson on February 8,
1994 and Newberry on December 8, 1994 accounted for approximately 61.3% of the
increase. The principal reason for the balance of the increase in net interest
income was the increased loan volume which generates a higher interest rate
return compared to other interest earning assets. Interest rates increased
slightly during the first quarter of 1995 and had a minimal positive impact on
the increase in net interest income.
Non-interest income increased by 46.4% for the first three months of 1995
compared to same period in 1994. The acquisitions of Stephenson on February 8,
1994 and Newberry on December 8, 1994 accounted for approximately 41.4% of
increase. The principal reason for the balance of the increase was increased
volume of deposit accounts accounting for increase in service charges, other
income also increased with the growth of the Corporation. This offset the
decrease in security gains. Management expects continued increase in other
income as volume and growth continue.
I-9
<PAGE> 12
Non-interest expense increased by 55.9% for the first three months of 1995
compared to the same period for 1994. The acquisitions of Stephenson on
February 8, 1994 and Newberry on December 8, 1994 accounted for approximately
74.4% of the increase. The principal reason for the balance of the increase
was due to the increase in salary and benefits and furniture and equipment
expense. Salaries and benefits increased due to additional personnel hired and
to normal salary increases. The furniture and equipment expense increased due
to depreciation and maintenance costs related to growth and the remodeling of
the Manistique Office in July of 1994. Management expects non-interest expense
to continue to increase during 1995 as corporate growth continues.
Liquidity
The principal source of liquidity is provided by amounts due from banks and
federal funds sold. Secondary liquidity is provided by investment securities,
however, the historical growth in customer deposits has eliminated the need to
sell securities to meet liquidity purposes.
The consolidated statement of cash flows for the first quarter ending March 31,
1995 showed a total cash and cash equivalent of $10,151,000 compared to
$14,146,000 as of March 31, 1994. The primary reason for the decrease is a
decrease in federal funds sold of $4,900,000. The major components of the cash
flows were net increase in loans for first quarter ending March 31, 1995 of
$8,289,000, which compares to an increase of $7,441,000 during first quarter of
1994. This reflects our continued loan demand and continues a trend that has
existed the last five years. The net deposits increased during the first
quarter of 1995 by $2,185,000 which compares to $10,743,000 during the first
quarter of 1994. This reflects continued steady growth in deposits.
Short-term debt increased by $1,200,000 during first quarter ending March 31,
1995. Net proceeds from sales and maturities of securities to securities
purchased increased by $500,000 during first quarter ending March 31, 1995.
Net cash provided by operating activities amounted to $960,000 during first
quarter ending March 31, 1995.
I-10
<PAGE> 13
CAPITAL ADEQUACY
(In thousands of dollars)
The Corporation's capital position compared to the regulatory minimum
requirements is as follows:
<TABLE>
<CAPTION>
Regulators
03/31/95 03/31/94 Minimum
-------- -------- ----------
<S> <C> <C> <C>
Total Risk Weighted Assets $181,905 $126,250
Allowable Capital - Tier I $19,359 $16,566
Allowable Capital - Tier II $21,287 $18,009
Tier I Capital to Risk Weighted Assets 10.64% 13.12% 4.00%
Tier II Capital to Risk Weighted Assets 11.70% 14.26% 8.00%
Leverage - Tier I to Ave. Total Assets 7.51% 8.69% 4.00%
</TABLE>
LOAN PORTFOLIO AND LOAN LOSS EXPERIENCE
Total loans increased by 46.6% in the first three months of 1995 compared to the
first three months of 1994. This increase was primarily due to the Newberry
acquisition which accounted for nearly 40.0% of the increase. The remainder of
this increase is the result of continued strong loan demand in our ever
increasing market area.
Non-Accrual, Past Due and Restructured Loans:
The following table summarizes the Company's non-accrual, past due and
restructured loans: (In thousands of dollars)
<TABLE>
<CAPTION>
03/31/95 03/31/94
-------- --------
<S> <C> <C>
Non-Accrual Loans $102 $264
Past due 90 days or more still accruing (1) $194 $341
Interest Income that would have been recorded
under original terms $3 $7
Interest Income recorded for loans and in non- $2 $3
accrual status
</TABLE>
The accrual of interest income is discontinued when a loan becomes 90 days
past due as to principal or interest unless in management's judgment the
delinquency is a temporary condition. When interest accruals are discontinued,
interest credited to income in the current year is reversed and interest
accrued in prior years is charged to allowance for loan losses. Management may
elect to continue the accrual of interest when the estimated net realizable
value of collateral is sufficient to cover the principal balance and accrued
interest and the loan is in process of collection.
I-11
<PAGE> 14
Potential Problem Loans:
At March 31, 1995 the Corporation had no known loans for which payments are
current, but on which the borrowers are currently experiencing severe financial
difficulties
Summary of Loan Loss Experience
(In thousands of dollars)
<TABLE>
<CAPTION>
03/31/95 03/31/94
<S> <C> <C>
Beginning Balance of Allowance $2,350 $917
Loans Charged Off
Commercial 52 210
Real Estate Mortgage 0 21
Installment 53 3
Total Loans Charged Off 105 234
Recoveries of Loans
Commercial 4 38
Real Estate Mortgage 1 0
Installment 36 3
Total Recoveries on Loans 41 41
Net Charge Offs (64) 193
Additions to Allowance 69 0
Additions to Allowance from acquisitions 0 1,076
Subtractions to Allowance from Required
Loans Resold Back (6) 0
Ending Balance of Allowance $2,349 $1,800
</TABLE>
I-12
<PAGE> 15
The following table shows the amounts of loans (excluding residential mortgages
for 1-4 family residences and installment loans) outstanding as of March 31,
1995, which, based on remaining scheduled repayments of principal, are due in
the period indicated and loans maturing after one year by fixed and variable
rates. (In thousands of dollars)
<TABLE>
<CAPTION>
Maturing
After One
Within But Within After
One Year Five Years Five Years Total
<S> <C> <C> <C> <C>
Commercial, financial and agricultural $22,787 $50,881 $10,642 $84,310
Real Estate Mortgage 1,079 1,692 382 3,153
Leases 2,591 10,428 10,514 23,533
------- ------- ------- --------
TOTAL $26,457 $63,001 $21,538 $110,996
======= ======= ======= ========
Loans Maturing after one year with
Fixed int. rates 21,964 12,492
Variable int. rates 41,037 9,045
------- -------
TOTAL $63,001 $21,537
======= =======
</TABLE>
Since 1977, real estate mortgages have been written with either a 3 year or 5
year balloon payment. The mortgage notes, if current credit information
warrants, are rewritten at current interest rates when they become due. Annual
adjustable real estate mortgages have been written since September of 1986.
The majority of commercial loans being written have rates that are adjusted
monthly based on the prevailing prime rates.
I-13
<PAGE> 16
PART II -- OTHER INFORMATION
ITEM 6. Reports on Form 8-K
(a) Exhibits
Exhibit
Number Description
------- -----------
27 Financial Data Schedule
(b) Reports on Form 8-K
The Corporation did not file a current report on Form 8-K
during the three month period ended March 31, 1995.
All other items required under Part II are omitted because they are not
applicable.
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 MANISTIQUE CORPORATION
------------------------------
(Registrant)
Date: May 12, 1995 Daniel R. Purcell
- - ------------------ ------------------------------
Daniel R. Purcell
Chief Financial Officer
II-1
<PAGE> 17
EXHIBIT INDEX
Exhibit
No. Description Page
- - ------- ----------- ----
27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> MAR-31-1995
<EXCHANGE-RATE> 1
<CASH> 7,851
<INT-BEARING-DEPOSITS> 2,002
<FED-FUNDS-SOLD> 2,300
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 20,869
<INVESTMENTS-CARRYING> 15,452
<INVESTMENTS-MARKET> 15,069
<LOANS> 191,305
<ALLOWANCE> 2,349
<TOTAL-ASSETS> 257,143
<DEPOSITS> 225,621
<SHORT-TERM> 4,773
<LIABILITIES-OTHER> 3,556
<LONG-TERM> 0
<COMMON> 5,190
0
0
<OTHER-SE> 18,289
<TOTAL-LIABILITIES-AND-EQUITY> 257,143
<INTEREST-LOAN> 4,430
<INTEREST-INVEST> 481
<INTEREST-OTHER> 156
<INTEREST-TOTAL> 5,067
<INTEREST-DEPOSIT> 2,142
<INTEREST-EXPENSE> 2,205
<INTEREST-INCOME-NET> 2,862
<LOAN-LOSSES> 69
<SECURITIES-GAINS> 3
<EXPENSE-OTHER> 2,115
<INCOME-PRETAX> 1,044
<INCOME-PRE-EXTRAORDINARY> 1,044
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 777
<EPS-PRIMARY> 1.11
<EPS-DILUTED> 1.11
<YIELD-ACTUAL> 5.06
<LOANS-NON> 102
<LOANS-PAST> 194
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 2,350
<CHARGE-OFFS> 105
<RECOVERIES> 41
<ALLOWANCE-CLOSE> 2,349
<ALLOWANCE-DOMESTIC> 1,282
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 1,067
</TABLE>
