<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1995
Commission file number 0-7818
INDEPENDENT BANK CORPORATION
_____________________________________
(Exact name of registrant as specified in its charter)
Michigan 38-2032782
(State or jurisdiction of (I.R.S. Employer Identification
Incorporation or Organization) Number)
230 West Main Street, P.O. Box 491, Ionia, Michigan 48846
(Address of principal executive offices)
(616) 527-9450
(Registrant's telephone number, including area code)
NONE
Former name, address and fiscal year, if changed since last report.
Indicate by check mark whether the registrant (1) has filed all documents
and reports required to be filed by Sections 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. YES X NO
--- ---
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
Class Outstanding at August 11, 1995
Common stock, par value $1 2,574,593
<PAGE> 2
INDEPENDENT BANK CORPORATION AND SUBSIDIARIES
<TABLE>
<CAPTION>
INDEX
-----
Page
Number(s)
---------
<S> <C> <C>
PART I - Financial Information
---------------------
Item 1. Consolidated Statements of Financial Condition
June 30, 1995 and December 31, 1994 2
Consolidated Statements of Operations
Three- and six-month periods ended June 30, 1995 and 1994 3
Consolidated Statements of Cash Flows
Six-month periods ended June 30, 1995 and 1994 4
Consolidated Statements of Shareholders' Equity
Six-month periods ended June 30, 1995 and 1994 5
Notes to Interim Consolidated Financial Statements
Three- and six month periods ended June 30, 1995 and 1994 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 7-12
PART II - Other Information
-----------------
Item 4. Submission of Matters to a Vote of Security-Holders 13
Item 6. Exhibits & Reports on Form 8-K 13
</TABLE>
<PAGE> 3
Part I.
INDEPENDENT BANK CORPORATION AND SUBSIDIARIES
Consolidated Statements of Financial Condition
<TABLE>
<CAPTION>
June 30, December 31,
1995 1994
-------------- --------------
(unaudited)
-------------- --------------
<S> <C> <C>
Assets
Cash and Cash Equivalents
Cash and due from banks $ 21,673,000 $ 22,869,000
Federal funds sold 850,000
------------- -------------
Total Cash and Cash Equivalents 21,673,000 23,719,000
------------- -------------
Interest bearing deposits 200,000 200,000
Securities available for sale 43,985,000 52,756,000
Securities held to maturity (Fair value of $84,174,000 at June 30,
1995; $80,683,000 at December 31, 1994) 82,177,000 80,954,000
Real estate mortgage loans held for sale 6,151,000 5,933,000
Loans
Commercial and agricultural 107,630,000 103,984,000
Real estate mortgage 194,677,000 166,794,000
Installment 77,139,000 65,947,000
------------- -------------
Total Loans 379,446,000 336,725,000
Allowance for loan losses (5,210,000) (5,054,000)
------------- -------------
Net Loans 374,236,000 331,671,000
Property and equipment, net 9,597,000 9,493,000
Accrued income 3,928,000 4,045,000
Other assets 6,631,000 7,440,000
------------- -------------
Total Assets $ 548,578,000 $ 516,211,000
============= =============
Liabilities and Shareholders' Equity
Deposits
Non-interest bearing $ 43,493,000 $ 48,641,000
Savings and NOW 213,997,000 227,137,000
Time 140,729,000 133,693,000
------------- -------------
Total Deposits 398,219,000 409,471,000
Federal funds purchased 24,100,000 13,900,000
Other borrowings 75,973,000 47,741,000
Accrued expenses and other liabilities 6,668,000 4,788,000
------------- -------------
Total Liabilities 504,960,000 475,900,000
------------- -------------
Shareholders' Equity
Common stock, $1.00 par value-14,000,000 shares authorized;
issued and outstanding: 2,574,593 shares at June 30, 1995
and 2,589,163 shares at December 31, 1994 2,575,000 2,589,000
Capital surplus 16,566,000 16,932,000
Retained earnings 24,864,000 22,910,000
Net unrealized loss on securities available for sale, net of
related tax effect (387,000) (2,120,000)
------------- -------------
Total Shareholders' Equity 43,618,000 40,311,000
------------- -------------
Total Liabilities and Shareholders' Equity $ 548,578,000 $ 516,211,000
============= ==============
</TABLE>
See notes to interim consolidated financial statements.
2
<PAGE> 4
INDEPENDENT BANK CORPORATION AND SUBSIDIARIES
Consolidated Statements of Operations
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1995 1994 1995 1994
-------- ----------- ----------- ---------
(unaudited) (unaudited)
------------------------- -------------------------
<S> <C> <C> <C> <C>
Interest Income
Interest and fees on loans $ 9,115,000 $ 6,990,000 $17,394,000 $13,749,000
Securities
Taxable 1,620,000 1,691,000 3,300,000 3,330,000
Tax-exempt 443,000 429,000 881,000 861,000
Federal funds sold 120,000 12,000 305,000
Other investments 3,000 3,000 6,000 6,000
----------- ----------- ----------- -----------
Total Interest Income 11,181,000 9,233,000 21,593,000 18,251,000
----------- ----------- ----------- -----------
Interest Expense
Deposits 3,068,000 2,760,000 6,024,000 5,752,000
Other borrowings 1,171,000 229,000 2,104,000 367,000
----------- ----------- ----------- -----------
Total Interest Expense 4,239,000 2,989,000 8,128,000 6,119,000
----------- ----------- ----------- -----------
Net Interest Income 6,942,000 6,244,000 13,465,000 12,132,000
Provision for loan losses 159,000 126,000 318,000 252,000
----------- ----------- ----------- -----------
Net Interest Income After
Provision for Loan Losses 6,783,000 6,118,000 13,147,000 11,880,000
----------- ----------- ----------- -----------
Non-interest Income
Service charges on deposit accounts 485,000 475,000 947,000 922,000
Net gains (losses) on asset sales
Real estate mortgage loans 100,000 98,000 104,000 248,000
Securities (18,000) (28,000) (86,000) 168,000
Other income 317,000 291,000 634,000 582,000
----------- ----------- ----------- -----------
Total Non-interest Income 884,000 836,000 1,599,000 1,920,000
----------- ----------- ----------- -----------
Non-interest Expense
Salaries and employee benefits 3,012,000 2,718,000 5,717,000 5,432,000
Occupancy, net 364,000 325,000 730,000 708,000
Furniture and fixtures 328,000 336,000 634,000 639,000
Other expenses 1,697,000 1,524,000 3,238,000 3,108,000
----------- ----------- ----------- -----------
Total Non-interest Expense 5,401,000 4,903,000 10,319,000 9,887,000
----------- ----------- ----------- -----------
Income Before Federal Income Tax 2,266,000 2,051,000 4,427,000 3,913,000
Federal income tax expense 630,000 583,000 1,235,000 1,069,000
----------- ----------- ----------- -----------
Net Income $ 1,636,000 $ 1,468,000 $ 3,192,000 $ 2,844,000
=========== =========== =========== ===========
Net Income Per Share $ .63 $ .56 1.23 1.08
Dividends Per Share
Declared $ .24 $ .20 .48 .40
Paid .24 .20 .44 .35
</TABLE>
See notes to interim consolidated financial statements.
3
<PAGE> 5
INDEPENDENT BANK CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
Six months ended
June 30,
1995 1994
------------- -------------
(unaudited)
----------------------------
<S> <C> <C>
Net Income $ 3,192,000 $ 2,844,000
Adjustments to Reconcile Net Income
to Net Cash from Operating Activities
Proceeds from sales of loans held for sale 14,787,000 24,555,000
Disbursements for loans held for sale (14,901,000) (25,308,000)
Provision for loan losses 318,000 252,000
Deferred loan fees (54,000) (222,000)
Depreciation, amortization of intangible assets
and premiums and accretion of discounts on
investment securities and loans 1,091,000 1,301,000
Net (gains) losses on sales of securities 86,000 (168,000)
Net gains on sales of real estate mortgage loans (104,000) (248,000)
Net gains on sales of property and equipment (20,000)
Decrease in accrued income and other assets 794,000 577,000
Increase in accrued expenses and other liabilities 1,234,000 1,044,000
------------- -------------
Total Adjustments 3,251,000 1,763,000
------------- -------------
Net Cash from Operating Activities 6,443,000 4,607,000
------------- -------------
Cash Flow from Investing Activities
Proceeds from sales of securities available for sale 11,156,000 18,909,000
Proceeds from maturities of securities held to maturity 3,110,000 9,856,000
Principal payments received on securities available for sale 77,000 143,000
Principal payments received on securities held to maturity 2,464,000 5,490,000
Purchases of securities available for sale (28,400,000)
Purchases of securities held to maturity (7,026,000) (10,292,000)
Portfolio loans made to customers net of principle payments received (42,830,000) (8,437,000)
Capital expenditures (759,000) (645,000)
Proceeds from sales of property and equipment 4,000 30,000
------------- -------------
Net Cash from Investing Activities (33,804,000) (13,346,000)
------------- -------------
Cash Flow from Financing Activities
Net decrease in total deposits (11,252,000) (19,406,000)
Net increase in short-term borrowings 38,432,000 18,640,000
Retirement of debt (500,000)
Dividends paid (1,136,000) (876,000)
Proceeds from issuance of common stock 26,000
Repurchase of common stock (755,000)
------------- -------------
Net Cash from Financing Activities 25,315,000 (2,142,000)
------------- -------------
Net Decrease in Cash and Cash Equivalents (2,046,000) (10,881,000)
Cash and Cash Equivalents at Beginning of Period 23,719,000 37,388,000
------------- -------------
Cash and Cash Equivalents at End of Period $ 21,673,000 $ 26,507,000
============= =============
Cash paid during the period for:
Interest 8,034,000 6,242,000
Income taxes 1,075,000 900,000
Loans transferred to other real estate 146,000 96,000
Transfer of investment securities to available for
sale classification 19,283,000
</TABLE>
See notes to interim consolidated financial statements.
4
<PAGE> 6
INDEPENDENT BANK CORPORATION AND SUBSIDIARIES
Consolidated Statements of Shareholders' Equity
<TABLE>
<CAPTION>
Six months ended
June 30,
1995 1994
----------- -----------
(unaudited)
--------------------------
<S> <C> <C>
Balance at beginning of period $ 40,311,000 $ 39,049,000
Net income 3,192,000 2,844,000
Cash dividends declared (1,239,000) (1,052,000)
Issuance of common stock 376,000 347,000
Repurchase of common stock (755,000)
Net change in unrealized loss on securities
available for sale, net of related tax effect 1,733,000 (1,191,000)
------------ ------------
Balance at end of period $ 43,618,000 $ 39,997,000
============ ============
</TABLE>
See notes to interim consolidated financial statements.
5
<PAGE> 7
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
1. In the opinion of management of the Registrant, the accompanying unaudited
consolidated financial statements contain all the adjustments (consisting only
of normal recurring accruals) necessary to present fairly the consolidated
financial condition of the Registrant as of June 30, 1995 and December 31,
1994, and the results of operations for the three- and six-month periods ended
June 30, 1995 and 1994.
2. Management's assessment of the allowance for loan losses is based on an
evaluation of the loan portfolio, recent loss experience, current economic
conditions and other pertinent factors. Loans on non-accrual status, past due
more than 90 days, or restructured amounted to $2,819,000 at June 30, 1995, and
$2,834,000 at December 31, 1994. (See Management's Discussion and Analysis of
Financial Condition and Results of Operations).
3. The provision for income taxes represents federal income tax expense
calculated using annualized rates on taxable income generated during the
respective periods.
4. The results of operations for the six-month period ended June 30, 1995,
are not necessarily indicative of the results to be expected for the full year.
6
<PAGE> 8
MANAGEMENT'S DISCUSSION & ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATION
This section presents Management's discussion and analysis of
financial condition and results of operation for the Registrant and its bank
subsidiaries (the "Banks"). Its purpose is to provide additional information
that may be necessary to assess the consolidated financial statements contained
elsewhere in this report. This section should be read in conjunction with the
Registrant's 1994 Annual Report on Form 10-K.
FINANCIAL CONDITION
SUMMARY
Loans ("Portfolio Loans") totaled $379.4 million at June 30, 1995,
compared to $336.7 million at December 31, 1994. The $42.7 million increase in
Portfolio Loans was funded by increases in federal funds purchased and other
borrowed funds, principally advances from the Federal Home Loan Bank of
Indianapolis ("FHLBI"). Utilization of such non deposit sources of funds is
consistent with Management's intent to maintain profitable financial leverage
and is an integral part of the Banks deposit pricing strategies. (See
"Asset/liability management" and "Liquidity and capital resources".)
Real estate mortgage loans increased by $27.9 million and account for
approximately 65% of the $42.7 million increase in Portfolio Loans. In
addition to consumer demand for adjustable-rate and balloon loans, the increase
reflects two loan production offices that were established during the first
quarter of 1995 as well as third-party loan originations. The $11.2 million
increase in installment loans accounts for 26% of the increase in Portfolio
Loans and partially reflects indirect automobile financing by two of the Banks.
Total deposits declined during the six-month period to $398.2 million
at June 30, 1995, from $409.5 million at December 31, 1994. Demand and savings
deposits declined by $5.1 million and $13.1 million, respectively, and account
for the $11.3 million decline in total deposits. The decline in such deposits
largely reflects the seasonal cash management needs of the municipalities
served by the Banks. The pending purchase of a branch facility by one of the
Banks will provide an additional $17 million of core deposits and will extend
that Bank's franchise into an attractive retail lending market.
ASSET QUALITY
The Registrant provides certain commercial and retail loan services to
the Banks, including credit analysis, underwriting and documentation services
as well as loan review and compliance administration. The centralization of
such administrative services provides the requisite controls required by the
Registrant's decentralized management structure and also provides certain
operating efficiencies.
The Registrant also maintains a senior loan committee that consists of
commercial loan services personnel as well as the Banks' presidents and senior
lenders. This committee considers
7
<PAGE> 9
a variety of policy issues and reviews selected loan proposals prior to
presentation to the respective Bank's board of directors.
Total non-performing assets declined by $459,000 during the six-month
period to $3,756,000 at June 30, 1995. The decrease principally reflects cash
payments, including federal guarantees, received on restructured loans.
A portion of the decrease in other real estate and a corresponding
increase in non-accrual loans reflects the application of a new accounting
standard. Pursuant to Statement of Financial Accounting Standards No. 114,
"Accounting by Creditors for Impairment of a Loan" (SFAS #114) loans totaling
$50,000 that had been identified as in-substance foreclosed and previously
reported as other real estate are currently disclosed as non-accrual loans.
NON-PERFORMING ASSETS
<TABLE>
<CAPTION>
June 30, December 31,
1995 1994
---------- ---------
<S> <C> <C>
Non-accrual loans $2,235,000 $2,052,000
Loans 90 days or more past due and
still accruing interest 323,000 254,000
Restructured loans 261,000 528,000
----------- ----------
Total non-performing loans 2,819,000 2,834,000
Other real estate 937,000 1,381,000
----------- ----------
Total non-performing assets $3,756,000 $4,215,000
----------- ----------
As a percent of total loans
Total non-performing loans 0.74% 0.84%
Total non-performing assets 0.99% 1.25%
Allowance for loan losses as a percent of
non-performing loans 185% 178%
</TABLE>
Impaired loans totaled approximately $2,000,000 at June 30, 1995. In
addition to certain non-performing loans, other than homogeneous residential
mortgage and installment loans, contained in the table above, such impaired
loans include commercial and agricultural loans totaling $100,000 that have
been separately identified as impaired. The Banks' average investment in
impaired loans approximated $1,900,000 during the six-month period ended June
30, 1995. Cash receipts on impaired loans on non-accrual status are generally
applied to the principal balance. Interest income recognized on impaired loans
for the three and six-month periods ended June 30, 1995, totaled approximately
$10,000 and $25,000, respectively.
The provision for loan losses totaled $318,000 during the six months
ended June 30, 1995, compared to $252,000 during the comparable period of 1994.
During those same periods, loans charged against the allowance, net of
recoveries, amounted to $162,000 and $235,000, respectively.
8
<PAGE> 10
ALLOWANCE FOR LOAN LOSSES
<TABLE>
<CAPTION>
Six months ended
June 30,
1995 1994
---- ----
<S> <C> <C>
Balance at beginning of period $5,054,000 $5,053,000
Additions (deduction)
Provision charged to operating expense 318,000 252,000
Recoveries credited to allowance 164,000 253,000
Loans charged against the allowance (326,000) (488,000)
---------- ----------
Balance at end of period $5,210,000 $5,070,000
---------- ----------
</TABLE>
Management's assessment of the allowance for loan losses is based on
the composition of the loan portfolio, an evaluation of specific credits,
historical loss experience, the level of non-performing loans and loans that
have been identified as loans of concern. At June 30, 1995, approximately 44%
of the allowance for loan losses was allocated to specific loans or loan
portfolios compared to 46% at December 31, 1994.
ALLOCATION OF THE ALLOWANCE FOR LOAN LOSSES
<TABLE>
<CAPTION>
June 30, 1995 December 31, 1994
-------------------------- ----------------------------
Percent of Percent of
Allowance Loans to Allowance Loans to
Amount Total Loans Amount Total Loans
---------- ----------- --------- ----------
<S> <C> <C> <C> <C>
Commercial and
agricultural $1,619,000 28.4% $1,655,000 30.9%
Real estate mortgage 161,000 51.3 177,000 49.5
Installment 516,000 20.3 474,000 19.6
Unallocated 2,914,000 2,748,000
---------- ----- ---------- -----
Total $5,210,000 100.0% $5,054,000 100.0%
---------- ----- ---------- -----
</TABLE>
LIQUIDITY AND CAPITAL RESOURCES
Management views the ability to profitably deploy its capital or
otherwise maintain financial leverage as a fundamental challenge. In addition
to the Banks' loan origination efforts, the Registrant's share repurchase plan,
implemented during 1994, and its dividend policies are integral components of
Management's capital management strategies.
The Banks' ability to generate Portfolio Loans currently exceeds the
ability to profitably generate core deposits within the markets served by the
branch networks. Accordingly, future increases in Portfolio Loans will likely
require that the Banks continue to utilize non deposit funding sources,
including advances from the FHLBI. (See "Asset/liability management.")
9
<PAGE> 11
CAPITAL RATIOS
<TABLE>
<CAPTION>
June 30, 1995 December 31, 1994
------------- -----------------
<S> <C> <C>
Equity capital 7.95% 7.81%
Tangible equity capital 7.58 7.40
Primary capital 8.82 8.70
Tangible primary capital 8.45 8.30
Risk-based capital 12.97 13.03
</TABLE>
Shareholders' equity totaled $43.6 million at June 30, 1995, compared
to $40.3 million at December 31, 1994. The $3.3 million increase reflects the
retention of earnings and a decrease in net unrealized losses on securities
available for sale.
Notwithstanding the $32.4 million increase in total assets,
shareholders' equity increased to 7.95% of total assets at June 30, 1995,
compared to 7.81% at December 31, 1994. Excluding the impact of net unrealized
losses on securities available for sale, however, shareholders' equity
decreased to 8.01% of total assets from 8.17%.
ASSET/LIABILITY MANAGEMENT
The Bank's competitive position within many of the markets served by
the branch networks limits the ability to materially increase deposits without
adversely impacting the weighted-average cost of core deposits. Accordingly,
the Banks have implemented strategies that utilize non deposit funding sources
and employ pricing tactics that are intended to enhance the value of core
deposits.
The Banks continue to sell the majority of fixed-rate real estate loan
production to mitigate exposure to changes in interest rates. Adjustable-rate
and balloon products have recently comprised a substantial portion of demand
for real estate loans. Although the retention of such rate-sensitive loans is
consistent with Management's desire to maintain profitable leverage, the
reduced volume of salable fixed-rate loans has had an adverse impact on
non-interest income. (See "Non-interest income".)
The Banks continue to maintain portfolios of U.S. Treasury notes that
are included in securities available for sale. During the six months ended
June 30, 1995, the Banks sold such securities with an aggregate market value of
$11,156,000 compared to $18,909,000 during the comparable period of 1994. The
decline in sales of securities available for sale reflects Management's
assessment of reinvestment opportunities and the Banks' asset/liability
management needs.
RESULTS OF OPERATIONS
SUMMARY
Net income increased to $1,636,000 during the three months ended June
30, 1995, from $1,468,000 during the comparable period of 1994. Net income for
the six-month periods in 1995
10
<PAGE> 12
and 1994 totaled $3,192,000 and $2,844,000, respectively. The increases in net
income during both the three- and six-month periods principally reflect
increases in net interest income.
Key performance ratios for the three- and six month periods ended June
30, 1995 and 1994, are set forth below.
KEY PERFORMANCE RATIOS
<TABLE>
<CAPTION>
Three months Six months
ended June 30, ended June 30,
1995 1994 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
Return on
Average assets 1.25% 1.23% 1.24% 1.20%
Average equity 15.24 14.95 15.23 14.69
Earnings per common share $.63 $.56 $1.23 $1.08
</TABLE>
NET INTEREST INCOME
Net interest income for both the three- and six-month periods of 1995
increased by approximately 11% from the comparable periods in 1994. Such
increases in net interest income principally reflect similar increases in
average earning assets that resulted from implementation of Management's
strategies to maintain financial leverage.
An increase in Portfolio Loans and loans held for sale as a percent of
average earning assets also had a positive impact on net interest income.
During the six months ended June 30, 1995 and 1994, Portfolio Loans and loans
held for sale were equal to 73.3% and 65.3% of average earning assets,
respectively. The Banks' funding strategies which compliment a stable base of
core deposits with alternative funding sources also contributed to the increase
in net interest income.
NET INTEREST INCOME AND SELECTED RATIOS
<TABLE>
<CAPTION>
Three months Six months
ended June 30, ended June 30,
1995 1994 1995 1994
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Average earning assets (In thousands) $495,524 $442,017 $489,513 $443,104
As a percent of average earning assets
Tax equivalent interest income 9.24% 8.58% 9.09% 8.51%
Interest expense 3.43 2.71 3.35 2.78
Tax equivalent net interest income 5.81 5.87 5.74 5.72
Average earning assets as a
percent of average assets 94.09% 92.15% 94.22% 92.36%
Free-funds ratio 11.44% 11.60% 11.29% 11.36%
</TABLE>
11
<PAGE> 13
NON-INTEREST INCOME
Non-interest income totaled $884,000 during the three months ended
June 30, 1995, compared to $836,000 during the comparable period in 1994. The
$48,000 increase principally reflects increases in service charges on deposit
accounts and other income that totaled $10,000 and $26,000, respectively.
Non-interest income during the six months ended June 30, 1995, totaled
$1,599,000. The $321,000 decrease from $1,920,000 during the comparable period
of 1994 is attributable to a decline in net gains on asset sales.
Net gains on the sale of real estate mortgage loans totaled $104,000
during the six months ended June 30, 1995, compared to $248,000 during the
comparable period of 1994. The decrease principally reflects current consumer
demand for adjustable-rate and balloon loans and the corresponding decline in
salable, fixed-rate real estate mortgage loans.
The Banks' realized net losses of $86,000 on the sale of securities
available for sale during the six-month period in 1995, compared to net gains
of $168,000 during the comparable period of 1994. (See "Asset/liability
management".) Gross gains and losses during the six month period ending June
30, 1995, were $8,000 and $94,000, respectively. Future sales of securities
available for sale will be dependent upon the Banks' asset/liability management
needs and available reinvestment opportunities.
NON-INTEREST EXPENSE
Non-interest expense totaled $5,401,000 and $10,319,000 during the
three- and six-month periods of 1995, respectively. The increases from the
comparable periods of 1994 principally reflect real estate mortgage loan
commissions as well as the costs relating to the loan production offices that
were established during the first quarter of 1995. An increase in incentive
compensation accruals and certain costs relating to indirect automobile
financing also contributed to the increase in non-interest expense.
STATEMENT OF FINANCIAL ACCOUNTING STANDARDS
The Financial Accounting Standards Board has adopted Statement of
Financial Accounting Standards, No. 122 ("SFAS 122"), "Accounting for Mortgage
Servicing Rights".
SFAS #122 will require the banks to recognize as separate assets
rights to service mortgage loans for others, however those servicing rights are
acquired.
Although earlier adoption is permitted, the banks will adopt the
standard in 1995 as required. Based upon the Bank's present volume of loan
sales, implementation will not have a material effect on the Registrants'
financial statements.
12
<PAGE> 14
Item 6. Exhibits & Reports on Form 8-K
(a) Exhibit Number & Description
None.
(b) Reports on Form 8-K
During the quarter ended June 30, 1995, there were no
reports filed on Form 8-K
13
<PAGE> 15
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.
Date August 11, 1995 By s/ William R. Kohls
-------------------- ---------------------------------------------
William R. Kohls, Principal Financial
Officer
Date August 11, 1995 By s/ James J. Twarozynski
-------------------- ---------------------------------------------
James J. Twarozynski, Principal
Accounting Officer
<PAGE> 16
EXHIBIT INDEX
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
------- ----------- ------------
<S> <C> <C>
27 -- Financial Data Schedule
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> JUN-30-1995
<CASH> 21,673
<INT-BEARING-DEPOSITS> 200
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 43,985
<INVESTMENTS-CARRYING> 82,177
<INVESTMENTS-MARKET> 84,174
<LOANS> 379,446
<ALLOWANCE> 5,210
<TOTAL-ASSETS> 548,578
<DEPOSITS> 398,219
<SHORT-TERM> 100,073
<LIABILITIES-OTHER> 6,668
<LONG-TERM> 0
<COMMON> 2,575
0
0
<OTHER-SE> 41,043
<TOTAL-LIABILITIES-AND-EQUITY> 548,578
<INTEREST-LOAN> 17,394
<INTEREST-INVEST> 4,181
<INTEREST-OTHER> 18
<INTEREST-TOTAL> 21,593
<INTEREST-DEPOSIT> 6,024
<INTEREST-EXPENSE> 8,128
<INTEREST-INCOME-NET> 13,465
<LOAN-LOSSES> 318
<SECURITIES-GAINS> (86)
<EXPENSE-OTHER> 10,319
<INCOME-PRETAX> 4,427
<INCOME-PRE-EXTRAORDINARY> 3,192
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,192
<EPS-PRIMARY> 1.23
<EPS-DILUTED> 1.23
<YIELD-ACTUAL> 5.74
<LOANS-NON> 2,235
<LOANS-PAST> 323
<LOANS-TROUBLED> 261
<LOANS-PROBLEM> 2,200
<ALLOWANCE-OPEN> 5,054
<CHARGE-OFFS> 326
<RECOVERIES> 164
<ALLOWANCE-CLOSE> 5,210
<ALLOWANCE-DOMESTIC> 2,296
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 2,914
</TABLE>
