<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, 1999
-------------
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 10, 1999
- ---------------------------------------- -------------------------------------
Common stock, par value $1 7,477,359
<PAGE> 2
INDEPENDENT BANK CORPORATION AND SUBSIDIARIES
INDEX
Page
Number(s)
PART I - Financial Information
Item 1. Consolidated Statements of Financial Condition
June 30, 1999 and December 31, 1998 2
Consolidated Statements of Operations
Three- and six-month periods ended June 30, 1999 and 1998 3
Consolidated Statements of Cash Flows
Six-month periods ended June 30, 1999 and 1998 4
Consolidated Statements of Shareholders' Equity
Six-month periods ended June 30, 1999 and 1998 5
Notes to Interim Consolidated Financial Statements
Three- and six-month periods ended June 30, 1999 and 1998 6-8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 9-18
Item 3. Quantitative and Qualitative Disclosures about Market Risk 18
PART II - Other Information
Item 4. Submission of Matters to a Vote of Security-Holders 19
Item 6. Exhibits & Reports on Form 8-K 19
<PAGE> 3
Part I.
INDEPENDENT BANK CORPORATION AND SUBSIDIARIES
Consolidated Statements of Financial Condition
<TABLE>
<CAPTION>
June 30, December 31,
1999 1998
----------------- -----------------
(unaudited)
----------------- -----------------
<S> <C> <C>
Assets
Cash and due from banks $ 33,281,000 $ 42,846,000
Securities available for sale 110,874,000 99,515,000
Securities held to maturity (Fair value of $14,460,000 at June
30,1999; $19,029,000 at December 31, 1998) 14,076,000 18,349,000
Federal Home Loan Bank stock, at cost 12,589,000 12,589,000
Loans held for sale 22,254,000 39,741,000
Loans
Commercial and agricultural 247,285,000 238,863,000
Real estate mortgage 441,727,000 449,114,000
Installment 142,908,000 134,627,000
---------------- ----------------
Total Loans 831,920,000 822,604,000
Allowance for loan losses (10,183,000) (9,714,000)
---------------- ----------------
Net Loans 821,737,000 812,890,000
Property and equipment, net 29,462,000 27,255,000
Accrued income and other assets 33,055,000 32,073,000
---------------- ----------------
Total Assets $ 1,077,328,000 $ 1,085,258,000
================ ================
Liabilities and Shareholders' Equity
Deposits
Non-interest bearing $ 106,408,000 $ 112,930,000
Savings and NOW 378,138,000 377,592,000
Time 352,148,000 339,992,000
---------------- ----------------
Total Deposits 836,694,000 830,514,000
Federal funds purchased 31,550,000 22,650,000
Other borrowings 104,163,000 130,964,000
Guaranteed preferred beneficial interests in Company's subordinated
debentures 17,250,000 17,250,000
Accrued expenses and other liabilities 14,680,000 14,175,000
---------------- ----------------
Total Liabilities 1,004,337,000 1,015,553,000
---------------- ----------------
Shareholders' Equity
Preferred stock, no par value--200,000 shares authorized; none
outstanding
Common stock, $1.00 par value--14,000,000 shares authorized;
issued and outstanding: 7,474,792 shares at June 30, 1999
and 7,382,506 shares at December 31, 1998 7,475,000 7,383,000
Capital surplus 38,969,000 37,658,000
Retained earnings 26,275,000 22,749,000
Accumulated other comprehensive income 272,000 1,915,000
---------------- ----------------
Total Shareholders' Equity 72,991,000 69,705,000
---------------- ----------------
Total Liabilities and Shareholders' Equity $ 1,077,328,000 $ 1,085,258,000
================ ================
</TABLE>
See notes to interim consolidated financial statements.
2
<PAGE> 4
Consolidated Statements of Operations
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1999 1998 1999 1998
------------ --------------- ------------ -----------
(unaudited) (unaudited)
----------------------------- -------------------------
<S> <C> <C> <C> <C>
Interest Income
Interest and fees on loans $19,616,000 $19,146,000 $39,124,000 $37,529,000
Securities
Taxable 872,000 1,338,000 1,939,000 2,817,000
Tax-exempt 849,000 605,000 1,672,000 1,214,000
Other investments 249,000 252,000 498,000 499,000
----------- ----------- ----------- -----------
Total Interest Income 21,586,000 21,341,000 43,233,000 42,059,000
----------- ----------- ----------- -----------
Interest Expense
Deposits 6,479,000 6,112,000 12,923,000 11,951,000
Other borrowings 2,124,000 2,985,000 4,458,000 6,104,000
----------- ----------- ----------- -----------
Total Interest Expense 8,603,000 9,097,000 17,381,000 18,055,000
----------- ----------- ----------- -----------
Net Interest Income 12,983,000 12,244,000 25,852,000 24,004,000
Provision for loan losses 505,000 670,000 1,030,000 1,303,000
----------- ----------- ----------- -----------
Net Interest Income After
Provision for Loan Losses 12,478,000 11,574,000 24,822,000 22,701,000
----------- ----------- ----------- -----------
Non-interest Income
Service charges on deposit accounts 1,206,000 980,000 2,244,000 1,803,000
Net gains on asset sales
Real estate mortgage loans 1,008,000 1,048,000 2,256,000 1,955,000
Securities 7,000 14,000 144,000
Other income 1,605,000 1,336,000 2,996,000 2,097,000
----------- ----------- ----------- -----------
Total Non-interest Income 3,819,000 3,371,000 7,510,000 5,999,000
----------- ----------- ----------- -----------
Non-interest Expense
Salaries and employee benefits 6,993,000 6,430,000 13,803,000 12,341,000
Occupancy, net 871,000 752,000 1,741,000 1,451,000
Furniture and fixtures 776,000 670,000 1,521,000 1,249,000
Other expenses 3,692,000 3,517,000 7,413,000 6,659,000
----------- ----------- ----------- -----------
Total Non-interest Expense 12,332,000 11,369,000 24,478,000 21,700,000
----------- ----------- ----------- -----------
Income Before Federal Income Tax 3,965,000 3,576,000 7,854,000 7,000,000
Federal income tax expense 1,122,000 1,037,000 2,246,000 2,028,000
----------- ----------- ----------- -----------
Net Income $ 2,843,000 $ 2,539,000 $ 5,608,000 $ 4,972,000
=========== =========== =========== ===========
Net Income Per Share
Basic $ .38 $ .35 $ .75 $ .68
Diluted .38 .34 .75 .67
Dividends Per Common Share
Declared $ .140 $ .124 $ .280 $ .248
Paid .140 .124 .270 .241
</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,
1999 1998
--------------- ---------------
(unaudited)
-------------------------------
<S> <C> <C>
Net Income $ 5,608,000 $ 4,972,000
--------------- ---------------
Adjustments to Reconcile Net Income
to Net Cash from Operating Activities
Proceeds from sales of loans held for sale 137,233,000 130,887,000
Disbursements for loans held for sale (117,490,000) (148,523,000)
Provision for loan losses 1,030,000 1,303,000
Deferred loan fees 114,000
Depreciation and amortization of premiums and accretion of
discounts on securities and loans 2,496,000 2,199,000
Net gains on sales of real estate mortgage loans (2,256,000) (1,955,000)
Net gains on sales of securities (14,000) (144,000)
Increase in accrued income and other assets (1,856,000) (961,000)
Increase in accrued expenses and other liabilities 2,039,000 1,573,000
--------------- ----------------
Total Adjustments 21,182,000 (15,507,000)
--------------- ----------------
Net Cash from Operating Activities 26,790,000 (10,535,000)
--------------- ----------------
Cash Flow from Investing Activities
Proceeds from the sale of securities available for sale 267,000 4,882,000
Proceeds from the maturity of securities available for sale 11,805,000 3,622,000
Proceeds from the maturity of securities held to maturity 4,452,000 1,790,000
Principal payments received on securities available for sale 7,944,000 9,297,000
Principal payments received on securities held to maturity 322,000 941,000
Purchases of securities available for sale (34,343,000) (8,973,000)
Principal payments on portfolio loans purchased 3,545,000 9,096,000
Portfolio loans made to customers, net of principal payments received (13,422,000) (45,590,000)
Acquisition of business, less cash received 1,459,000
Acquisition of branches, less cash received 16,168,000
Capital expenditures (3,805,000) (2,840,000)
--------------- ----------------
Net Cash from Investing Activities (23,235,000) (10,148,000)
--------------- ----------------
Cash Flow from Financing Activities
Net increase in total deposits 6,180,000 36,121,000
Net increase (decrease) in short-term borrowings 8,268,000 (4,268,000)
Proceeds from Federal Home Loan Bank advances 6,831,000 35,515,000
Payments of Federal Home Loan Bank advances (32,000,000) (41,000,000)
Retirement of long-term debt (1,000,000) (1,000,000)
Dividends paid (1,999,000) (1,762,000)
Proceeds from issuance of common stock 600,000 605,000
--------------- ----------------
Net Cash from Financing Activities (13,120,000) 24,211,000
--------------- ----------------
Net Increase (Decrease) in Cash and Cash Equivalents (9,565,000) 3,528,000
Cash and Cash Equivalents at Beginning of Period 42,846,000 30,371,000
--------------- ----------------
Cash and Cash Equivalents at End of Period $ 33,281,000 $ 33,899,000
=============== ================
Cash paid during the period for
Interest $ 17,479,000 $ 17,792,000
Income taxes 2,100,000 2,900,000
Transfer of loans to other real estate 990,000 399,000
</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,
1999 1998
-------------- -------------
(unaudited)
-----------------------------
<S> <C> <C>
Balance at beginning of period $ 69,705,000 $ 59,516,000
Net income 5,608,000 4,972,000
Cash dividends declared (2,086,000) (1,813,000)
Issuance of common stock 1,407,000 3,130,000
Net change in unrealized gain on securities
available for sale, net of related tax effect (note 4) (1,643,000) (122,000)
-------------- --------------
Balance at end of period $ 72,991,000 $ 65,683,000
============== ==============
</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, 1999 and December 31, 1998,
and the results of operations for the six-month periods ended June 30, 1999 and
1998.
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 $4,736,000 at June 30, 1999, and
$6,641,000 at December 31, 1998. (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 Registrant adopted Statement of Financial Accounting Standards, No. 130,
"Reporting Comprehensive Income", (SFAS #130) effective January 1, 1998. SFAS
#130 establishes standards for reporting and displaying comprehensive income and
its components, including but not limited to unrealized gains and losses on
securities available for sale.
Comprehensive income for the three-month and the six-month periods
ending June 30 follows:
<TABLE>
<CAPTION>
Three months ended Six months ended
June 30, June 30,
1999 1998 1999 1998
-------------- ------------ ------------- -------------
<S> <C> <C> <C> <C>
Net income $ 2,843,000 $ 2,539,000 $ 5,608,000 $ 4,972,000
Net change in unrealized gain
on securities available for sale,
net of related tax effect (1,237,000) (60,000) (1,643,000) (122,000)
------------- ------------- ------------- -------------
Comprehensive income $ 1,606,000 $ 2,479,000 $ 3,965,000 $ 4,850,000
============= ============= ============= =============
</TABLE>
5. The Registrant adopted Statement of Financial Accounting Standards, No. 131,
"Disclosures about Segments of an Enterprise and Related Information", (SFAS
#131) on January 1, 1998. SFAS #131 establishes standards for the way that
public entities report information about operating segments in financial
statements.
The Registrant's reportable segments are based upon legal entities. The
Registrant has four reportable segments: Independent Bank ("IB"), Independent
Bank West Michigan ("IBWM"), Independent Bank South Michigan ("IBSM") and
Independent Bank East Michigan ("IBEM"). The Registrant evaluates performance
based principally on net income of the respective reportable segments.
6
<PAGE> 8
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
A summary of selected financial information for the Registrant's reportable
segments for the three-month and six-month period ended June 30, follows:
Three months ended June 30,
<TABLE>
<CAPTION>
IB IBWM IBSM IBEM OTHER(1) TOTAL
--------------------------------------------------------------------------------------
(in thousands)
<S> <C> <C> <C> <C> <C> <C>
1999
Total assets $ 362,783 $ 279,418 $ 164,119 $ 261,781 $ 9,227 $1,077,328
Interest income 6,968 6,413 3,279 4,918 8 21,586
Net interest income 4,308 4,109 1,990 3,099 (523) 12,983
Provision for loan losses 150 135 70 150 505
Income (loss) before
Income tax 1,583 1,541 668 986 (813) 3,965
Net income (loss) 1,100 1,063 511 744 (575) 2,843
1998
Total assets $ 347,291 $ 267,185 $ 166,285 $ 248,108 $ 6,089 $1,034,958
Interest income 7,021 6,155 3,382 4,771 12 21,341
Net interest income 4,224 3,762 1,939 2,905 (586) 12,244
Provision for loan losses 285 195 85 105 670
Income (loss) before
Income tax 1,606 1,310 710 917 (967) 3,576
Net income (loss) 1,121 919 521 654 (676) 2,539
<CAPTION>
Six months ended June 30,
IB IBWM IBSM IBEM OTHER(1) TOTAL
--------------------------------------------------------------------------------------
(in thousands)
<S> <C> <C> <C> <C> <C> <C>
1999
Total assets $ 362,783 $ 279,418 $ 164,119 $ 261,781 $ 9,227 $1,077,328
Interest income 14,185 12,620 6,636 9,779 13 43,233
Net interest income 8,774 7,984 4,058 6,121 (1,085) 25,852
Provision for loan losses 300 270 160 300 1,030
Income (loss) before
Income tax 3,250 2,977 1,461 1,891 (1,725) 7,854
Net income (loss) 2,250 2,052 1,088 1,424 (1,206) 5,608
1998
Total assets $ 347,291 $ 267,185 $ 166,285 $ 248,108 $ 6,089 $1,034,958
Interest income 13,975 11,946 6,706 9,415 17 42,059
Net interest income 8,346 7,346 3,829 5,671 (1,188) 24,004
Provision for loan losses 450 390 160 303 1,303
Income (loss) before
Income tax 3,179 2,637 1,465 1,691 (1,972) 7,000
Net income (loss) 2,208 1,848 1,069 1,205 (1,358) 4,972
</TABLE>
(1) Includes items relating to the Registrant and certain insignificant
operations.
7
<PAGE> 9
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
6. A reconciliation of basic and diluted earnings per share for the three-month
and the six-month periods ending June 30 follows:
<TABLE>
<CAPTION>
Three months ended Six months ended
June 30, June 30,
1999 1998 1999 1998
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Net income $ 2,843,000 $ 2,539,000 $ 5,608,000 $ 4,972,000
============= ============= ============= =============
Shares outstanding (Basic)(1) 7,451,000 7,351,000 7,431,000 7,308,000
Effect of dilutive securities - stock options 39,000 90,000 48,000 91,000
------------- ------------- ------------- -------------
Shares outstanding (Diluted) $ 7,490,000 $ 7,441,000 $ 7,479,000 $ 7,399,000
============= ============= ============= =============
Earnings per share
Basic $ .38 $ .35 $ .75 $ .68
Diluted .38 .34 .75 .67
</TABLE>
(1)Shares outstanding have been adjusted for a 5% stock dividend in 1998.
7. The Financial Accounting Standards Board adopted Statement of Financial
Accounting Standards, No. 133, "Accounting for Derivative Instruments and
Hedging Activities", ("SFAS #133") in June 1998.
SFAS #133, which has been subsequently amended by SFAS #137, requires companies
to record derivatives on the balance sheet as assets and liabilities measured at
fair value. The accounting for increases and decreases in the value of those
derivatives will depend upon the use of those derivatives and whether or not
they qualify for hedge accounting.
This statement is effective for all fiscal quarters of fiscal years beginning
after June 15, 2000 with earlier application allowed and is to be applied
prospectively. The adoption of this statement is not expected to have a material
impact on the Registrant's financial statements.
8. The results of operations for the six-month period ended June 30, 1999, are
not necessarily indicative of the results to be expected for the full year.
8
<PAGE> 10
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Management's discussion and analysis of financial condition and results of
operations contains forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995. Actual results could differ materially
from those projected in such forward-looking statements.
The following section presents additional information that may be necessary to
assess the financial condition and results of operations of the Registrant and
its subsidiary banks (the "Banks"). This section should be read in conjunction
with the consolidated financial statements contained elsewhere in this report as
well as the Registrant's 1998 Annual Report on Form 10-K.
FINANCIAL CONDITION
SUMMARY Assets totaled $1,077.3 million at June 30, 1999. The nominal decline in
total assets from $1,085.3 million at December 31, 1998, principally reflects a
$17.5 million decrease in loans held for sale. (See "Non-interest income.")
Loans, excluding loans held for sale ("Portfolio Loans"), increased to $831.9
million at June 30, 1999, from $822.6 million at December 31, 1998. The increase
in Portfolio Loans reflects increases in commercial and agricultural loans as
well as installment loans that were partially offset by a decline in real estate
mortgage loans. (See "Asset/liability management.") The $7.4 million decline in
real estate mortgage loans was the result of refinancing activity during the six
months ended June 30, 1999.
Deposits increased to $836.7 million at June 30, 1999, from $830.5 million at
December 31, 1998. The $6.2 million increase in deposits principally reflects
the issuance of brokered certificates of deposits ("Brokered CDs"). (See
"Deposits and borrowings.")
SECURITIES The Banks maintain diversified securities portfolios that include
obligations of the U.S. Treasury and government-sponsored agencies as well as
securities issued by states and political subdivisions, corporate notes and
mortgage-backed securities. Management continually evaluates the Banks'
asset/liability management needs and attempts to maintain a portfolio structure
that provides sufficient liquidity and cash flow. (See "Asset/liability
management.")
SECURITIES
<TABLE>
<CAPTION>
Unrealized
----------------------------
Amortized Fair
Cost Gains Losses Value
-------------- -------------- ------------- -------------
(in thousands)
<S> <C> <C> <C> <C>
Securities available for sale
June 30, 1999 $110,456 $ 893 $475 $110,874
December 31, 1998 96,614 2,948 47 99,515
Securities held to maturity
June 30, 1999 $ 14,076 $ 388 $ 4 $ 14,460
December 31, 1998 18,349 688 8 19,029
</TABLE>
9
<PAGE> 11
The purchase or sale of securities is dependent upon Management's assessment of
reinvestment opportunities as well as the Banks' asset/liability management
needs. As a result of such ongoing evaluations, the Banks purchased securities
with a fair market value of $34,343,000 and $8,973,000 during the six months
ended June 30, 1999 and 1998, respectively. The Banks sold securities with an
aggregate market value of approximately $267,000 during the six-month period in
1999 compared to $4.9 million in 1998. The Banks realized net gains on the sale
of such securities totaling $14,000 and $144,000 during the six months ended
June 30, 1999 and 1998, respectively.
SALES OF SECURITIES AVAILABLE FOR SALE
<TABLE>
<CAPTION>
Three months ended Six months ended
June 30, June 30,
1999 1998 1999 1998
---------------- --------------- ---------------- ----------------
<S> <C> <C> <C> <C>
Proceeds $ 516,000 $ 267,000 $ 4,882,000
=============== ================ ================ ================
Gross gains $ 7,000 $ 14,000 $ 144,000
Gross losses
--------------- ---------------- ---------------- ----------------
Net Gains $ 7,000 $ 14,000 $ 144,000
=============== ================ ================ ================
</TABLE>
ASSET QUALITY Management believes that the Registrant's decentralized structure
provides important advantages in serving the credit needs of the Banks'
principal lending markets. In addition to the communities served by the Banks'
branch networks, principal lending markets include nearby communities and
metropolitan areas. Subject to established underwriting criteria, the Banks also
participate in commercial lending transactions with certain non-affiliated banks
and may also purchase real estate mortgage loans from third-party originators.
Although the Management and Board of Directors of each Bank retain authority and
responsibility for credit decisions, each of the Banks has adopted uniform
underwriting standards. Further, the Registrant's loan committee as well as the
centralization of commercial loan credit services and loan review functions
promote compliance with such established underwriting standards. The
centralization of retail loan services also provides for consistent service
quality and facilitates compliance with consumer protection laws and
regulations.
NON-PERFORMING ASSETS
<TABLE>
<CAPTION>
June 30, December 31,
1999 1998
--------------- -----------------
<S> <C> <C>
Non-accrual loans $2,776,000 $4,106,000
Loans 90 days or more past due and
still accruing interest 1,686,000 2,240,000
Restructured loans 274,000 295,000
--------------- -----------------
Total non-performing loans 4,736,000 6,641,000
Other real estate 1,263,000 936,000
--------------- ----------------
Total non-performing assets $5,999,000 $7,577,000
=============== =================
As a percent of Portfolio Loans
Non-performing loans 0.57 % 0.81 %
Non-performing assets 0.72 0.92
Allowance for loan losses 1.22 1.18
Allowance for loan losses as a percent of
non-performing loans 215 146
</TABLE>
10
<PAGE> 12
Impaired loans totaled approximately $3,200,000 at June 30, 1999. At that same
date, certain impaired loans with a balance of approximately $1,000,000, had
specific allocations of the allowance for loan losses calculated in accordance
with Statement of Financial Accounting Standards #114 totaling approximately
$200,000. The Banks' average investment in impaired loans was approximately
$3,300,000, for the six-month period ending June 30, 1999. Cash receipts on
impaired loans on non-accrual status are generally applied to the principal
balance. Interest recognized on impaired loans during that six-month period was
approximately $80,000.
Loans charged against the allowance for loan losses, net of recoveries, were
equal to .14% of average loans during the six months ended June 30, 1999,
compared to .12% during the comparable period of 1998.
ALLOWANCE FOR LOAN LOSSES
<TABLE>
<CAPTION>
Six months ended
June 30,
1999 1998
--------------- --------------
<S> <C> <C>
Balance at beginning of period $ 9,714,000 $7,670,000
Additions (deduction)
Provision charged to operating expense 1,030,000 1,303,000
Recoveries credited to allowance 287,000 329,000
Loans charged against the allowance (848,000) (764,000)
--------------- --------------
Balance at end of period $10,183,000 $8,538,000
=============== ==============
Net loans charged against the allowance to
average Portfolio Loans (annualized) 0.14% 0.12%
</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 as well as the level of non-performing and impaired loans. Based
upon such assessment, Management does not believe there has been a material
change in the adequacy of the allowance for loan losses. (See "Provision for
loan losses.")
DEPOSITS AND BORROWINGS The Banks' 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, Management employs pricing tactics that are intended to enhance the
value of core deposits and the Banks have implemented funding strategies that
incorporate other borrowings and Brokered CDs to finance a portion of the
Portfolio Loans. The use of such alternate sources of funds is also an integral
part of the Banks' asset/liability management efforts.
<TABLE>
<CAPTION>
June 30, 1999 December 31, 1998
------------------------------- ---------------------------------
Average Average
Amount Maturity Rate Amount Maturity Rate
------ -------- ---- ------ -------- ----
(dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Brokered CDs $65,727 6.4 years 5.92% $54,885 4.4 years 5.64%
Fixed rate FHLB advances 51,344 2.9 years 5.71 50,569 3.5 years 5.75
Variable rate FHLB advances 42,556 0.2 years 4.96 68,500 0.5 years 5.21
</TABLE>
11
<PAGE> 13
Other borrowed funds, principally advances from the Federal Home Loan Bank (the
"FHLB"), decreased to $104.2 million at June 30, 1999, from $131.0 million at
December 31, 1998. The decline in other borrowed funds reflects the competitive
cost of Brokered CDs as well as Management's efforts to diversify the Banks'
funding sources. Brokered CDs totaled $65.7 million and $54.9 million at June
30, 1999 and December 31, 1998, respectively.
INTEREST-RATE DERIVATIVE FINANCIAL INSTRUMENTS
<TABLE>
<CAPTION>
SWAPS
----------------------------------
CAPS FLOORS COLLARS PAY FIXED PAY VARIABLE
- -------------------------------------------------------------------------------------------------------------
(dollars in thousands)
<S> <C> <C> <C> <C> <C>
Notional amount $18,000 $ 3,000 $10,000 $58,500 $47,000
Weighted-average 1.4 years 1.9 years 1.2 years 2.9 years 8.8 years
maturity
Cap strike 6.64% 6.42%
Floor strike 4.63% 5.71
Rate paying 5.29% 5.08%
Rate receiving 4.90 6.10
Premium paid $ 218 $ 5
Annual cost .28% .09%
Amortized cost $ 85 $ 5
Fair value 41 1 $ (47) $ 749 $(1,769)
</TABLE>
Derivative financial instruments are employed to reduce the cost of alternate
funding sources and manage the Banks' exposure to changes in interest rates.
Certain derivative financial instruments may also mitigate the interest-rate
risk associated with prepayments on fixed-rate loans. (See "Asset/liability
management.") At June 30, 1999, the Company employed interest-rate caps, floors
and collars with a notional amount of $18.0 million $3.0 million and $10.0
million, respectively. The Banks also employed interest-rate swaps with an
aggregate notional amount of $105.5 million.
LIQUIDITY AND CAPITAL RESOURCES Effective management of the Registrant's capital
resources is critical to Management's mission to create value for the
Registrant's shareholders. To profitably deploy capital within existing markets,
the Banks have implemented balance sheet management strategies that combine
effective loan origination efforts with disciplined funding strategies. Although
the Banks' balance sheet management strategies provide profitable opportunities
to leverage the balance sheet, Management believes that its acquisition strategy
may provide greater value to the Registrant's shareholders.
The Registrant's cost of capital is also an important factor in creating
shareholder value. Accordingly, the Registrant's capital structure includes
unsecured debt and Preferred Securities.
12
<PAGE> 14
CAPITALIZATION
<TABLE>
<CAPTION>
June 30, December 31,
1999 1998
------------------------------------
<S> <C> <C>
Unsecured debt $ 9,000,000 $10,000,000
Preferred Securities 17,250,000 17,250,000
Shareholders' Equity
Preferred stock, no par value
Common Stock, par value $1.00 per share 7,475,000 7,383,000
Capital surplus 38,969,000 37,658,000
Retained earnings 26,275,000 22,749,000
Accumulated other comprehensive income 272,000 1,915,000
----------- -----------
Total shareholders' equity 72,991,000 69,705,000
----------- -----------
Total capitalization $99,241,000 $96,955,000
=========== ===========
</TABLE>
Shareholders' equity totaled $73.0 million at June 30, 1999. In addition to the
retention of earnings, the $3.3 million increase from $69.7 million at December
31, 1998, reflects the issuance of common stock pursuant to various equity-based
incentive compensation plans. Shareholders' equity was equal to 6.78% of total
assets at June 30, 1999, compared to 6.42% at December 31, 1998.
CAPITAL RATIOS
<TABLE>
<CAPTION>
June 30, 1999 December 31, 1998
------------------- ----------------------
<S> <C> <C>
Equity capital 6.78% 6.42%
Average shareholders equity to average assets(1) 6.80 6.42
Tier 1 leverage (tangible equity capital) 6.81 6.23
Tier 1 risk-based capital 9.22 8.72
Total risk-based capital 10.47 9.97
</TABLE>
(1) Based on year to date average balances for the respective periods
ASSET/LIABILITY MANAGEMENT Interest-rate risk is created by differences in the
pricing characteristics of the Banks' assets and liabilities. Options embedded
in certain financial instruments, including caps on adjustable-rate loans as
well as borrowers' rights to prepay fixed-rate loans also create interest-rate
risk.
The asset/liability management efforts of the Registrant and the Banks are
intended to identify sources of interest-rate risk and to evaluate opportunities
to structure the balance sheet in a manner that is consistent with Management's
mission to maintain profitable financial leverage. The marginal cost of funds is
a principal consideration in the implementation of the Bank's balance sheet
management strategies, but such evaluations further consider interest-rate and
liquidity risk as well as other pertinent factors.
Management employs simulation analyses to monitor the Banks' interest-rate risk
profiles and evaluate potential changes in the Bank's net interest income and
market value of portfolio equity that result from changes in interest rates. At
June 30, 1999, each of the Banks was within established parameters for
interest-rate risk.
Management has determined that the retention of certain real estate mortgage
loans, generally 15- and 30-year fixed rate obligations, is inconsistent with
its goal to maintain profitable leverage or the Banks' interest-rate risk
profiles. Accordingly, the majority of such loans are sold to mitigate exposure
to changes in interest rates. Adjustable-rate and balloon real estate mortgage
loans may
13
<PAGE> 15
be profitably funded within established risk parameters. The retention
of such loans, together with commercial and agricultural loans, has been a
principal focus of the Banks' balance sheet management strategies. (See
"Non-interest income.")
RESULTS OF OPERATIONS
SUMMARY Net income totaled $2,843,000 and $2,539,000 during the three months
ended June 30, 1999 and 1998, respectively. During the six-month periods of 1999
and 1998, net income totaled $5,608,000 and $4,972,000, respectively. The
increases in earnings during these periods are principally the result of
increases in net interest income and non-interest income. Such increases in
revenue were, however, partially offset by increases in non-interest expense and
federal income tax expense.
Key performance ratios for the three- and six-month periods ended June 30, 1999
and 1998, are set forth below.
KEY PERFORMANCE RATIOS
<TABLE>
<CAPTION>
Three months Six months
ended June 30, ended June 30,
1999 1998 1999 1998
-------------------------- ----------------------------
<S> <C> <C> <C> <C>
Net income to
Average assets 1.07% 1.02% 1.06% 1.01%
Average equity 15.67 15.78 15.66 15.92
Earnings per common share
Basic $ .38 $ .35 $ .75 $ .68
Diluted .38 .34 .75 .67
Cash basis income to(A)
Average tangible assets 1.23% 1.18% 1.22% 1.17%
Average tangible equity 23.43 25.04 23.63 24.99
Cash basis income per share(A)
Basic $ .43 $ .39 $ .85 $ .77
Diluted .43 .39 .85 .76
</TABLE>
(A) Cash basis financial data exclude intangible assets and the related
amortization expense
NET INTEREST INCOME Tax equivalent net interest income totaled $13,465,000
during the three months ended June 30, 1999, compared to $12,593,000 during the
comparable period of 1998. Tax equivalent net interest income totaled
$26,801,000 and $24,705,000 during the six months ended June 30, 1999 and 1998,
respectively.
Management estimates that approximately 80% of the $872,000 increase in tax
equivalent net interest income during the three-month period and approximately
75% of the $2,906,000 increase during the six-month period reflects increases in
average earning assets. Average earning assets increased by 5.5% to $981.1
million during the three months ended June 30, 1999. During the six-month period
of 1999, average earning assets increased by 6% to $981.0 million.
14
<PAGE> 16
NET INTEREST INCOME AND SELECTED RATIOS
<TABLE>
<CAPTION>
Three months Six months
ended June 30, ended June 30,
1999 1998 1999 1998
----------- ------------ ----------- ------------
<S> <C> <C> <C> <C>
Average earning assets (in thousands) $981,097 $929,651 $980,999 $921,536
Tax equivalent net interest income 13,465 12,593 26,801 24,705
As a percent of average earning assets
Tax equivalent interest income 9.01% 9.35% 9.05% 9.32%
Interest expense 3.52 3.92 3.57 3.95
Tax equivalent net interest income 5.49 5.43 5.48 5.37
Average earning assets as a
percent of average assets 92.46% 92.99% 92.34% 93.05%
Free-funds ratio 11.42% 10.58% 11.07% 10.20%
</TABLE>
Increases in average earning assets have principally been funded with deposits.
Total deposits, excluding Brokered CDs ("Core Deposits") averaged $771.8 million
and $698.2 million during the six months ended June 30, 1999 and 1998,
respectively. (See "Liquidity and capital resources.")
Tax equivalent net interest income as a percent of average earnings assets ("Net
Yield") has increased from the corresponding periods of 1998. The Net Yield was
5.49% and 5.48% during the three- and six-month periods of 1999, respectively,
compared to 5.43% and 5.37% during 1998. Increases in Net Yield principally
reflect increases in Core Deposits as a percentage of average earning assets.
Core Deposits were equal to 78.7% and 75.8% of average earning assets for the
six months ended June 30, 1999 and 1998, respectively.
PROVISION FOR LOAN LOSSES The provision for loan losses was $505,000 during the
three months ended June 30, 1999, compared to $670,000 during the three-month
period in 1998. During the six-month periods, the provision was $1,030,000 and
$1,303,000, respectively.
The decrease in the provision during both the three- and six-month periods
reflects Management's assessment of the allowance for loan losses based upon the
composition of the loan portfolio, an evaluation of specific credits, historical
loss experience as well as the level of non-performing and impaired loans. (See
"Asset quality.")
NON-INTEREST INCOME Non-interest income totaled $3,819,000 during the three
months ended June 30, 1999, compared to $3,371,000 during the comparable period
in 1998. Non-interest income totaled $7,510,000 and $5,999,000 during the six
months ended June 30, 1999 and 1998, respectively.
The increase in non-interest income during both the three- and six-month periods
principally reflects increases in service charges on deposit accounts and
revenues associated with First Home Financial, Inc. Increases in mutual fund and
annuity commissions as well as real estate mortgage servicing fees also
contributed to the increase in non-interest income.
15
<PAGE> 17
On April 17, 1998, the Registrant purchased the outstanding capital stock of
First Home Financial, Inc. ("FHF"), an originator of manufactured home loans.
FHF's revenues during the three months ended June 30, 1999, totaled $508,000 and
account for 45% of the $448,000 increase in non-interest income.
NON-INTEREST INCOME
<TABLE>
<CAPTION>
Three months ended Six months ended
June 30, June 30,
1999 1998 1999 1998
--------------- --------------- --------------- --------------
<S> <C> <C> <C> <C>
Service charges on deposit
accounts $1,206,000 $ 980,000 $2,244,000 $1,803,000
Net gains on asset sales
Real estate mortgage loans 1,008,000 1,048,000 2,256,000 1,955,000
Securities 7,000 14,000 144,000
First Home Financial 508,000 306,000 934,000 306,000
Title insurance fees 239,000 229,000 424,000 425,000
Real estate mortgage loan
servicing fees 154,000 131,000 304,000 234,000
Mutual fund and annuity
commissions 143,000 48,000 284,000 70,000
Other 561,000 622,000 1,050,000 1,062,000
---------- ---------- ---------- ----------
Total non-interest income $3,819,000 $3,371,000 $7,510,000 $5,999,000
========== ========== ========== ==========
</TABLE>
Net gains on the sale of real estate mortgage loans totaled $1,008,000 during
the three months ended June 30, 1999, compared to $1,048,000 during the
comparable period in 1998. Net gains on the sale of such loans totaled
$2,256,000 and $1,955,000 during the six months ended June 30, 1999 and 1998,
respectively.
<TABLE>
<CAPTION>
Three months ended Six months ended
June 30, June 30,
1999 1998 1999 1998
------------------------------------ ------------------------------------
<S> <C> <C> <C> <C>
Real estate mortgage loans
originated $111,617,000 $131,295,000 $208,081,000 $250,125,000
Real estate mortgage loan
sales 62,039,000 71,418,000 134,977,000 128,932,000
Real estate mortgage loan
servicing rights sold 5,949,000 8,117,000 10,963,000 35,490,000
Net gains on the sale of real
estate mortgage loans 1,008,000 1,048,000 2,256,000 1,955,000
Net gains as a percent of real
estate mortgage loans sold 1.62% 1.47% 1.67% 1.52%
</TABLE>
The Banks capitalized approximately $987,000 and $756,000 of related servicing
rights during the six-month periods ended June 30, 1999 and 1998, respectively.
Amortization of capitalized servicing rights for those periods was $279,000 and
$152,000, respectively. The fair value of capitalized servicing rights
approximated the book value of $2,782,000 at June 30, 1999, and therefore, no
valuation allowance was considered necessary. The capitalized servicing rights
relate to approximately $424 million of loans sold and serviced at June 30,
1999.
16
<PAGE> 18
The volume of loans sold is dependent upon the Banks' ability to originate real
estate mortgage loans as well as the demand for fixed-rate obligations and other
loans that the Banks cannot profitably fund within established interest-rate
risk parameters. (See "Asset/liability management.") Net gains on real estate
mortgage loans are also dependent upon economic and competitive factors as well
as the Banks' ability to effectively manage exposure to changes in interest
rates. Given a decline in loans held for sale, together with a substantial
decline in refinancing activity, net gains on the sale of real estate mortgage
loans during subsequent periods may not be commensurate with the amount recorded
during the three months ended June 30, 1999.
NON-INTEREST EXPENSE Non-interest expense totaled $12,332,000 during the three
months ended June 30, 1999, compared to $11,369,000 during the comparable period
in 1998. Non-interest expense totaled $24,478,000 and $21,700,000 during the six
months ended June 30, 1999 and 1998, respectively.
Costs associated with the operation of FHF as well as direct mail marketing
costs related to deposit account promotions account for approximately 30% of
increase in non-interest expense. Costs associated with the operation of branch
facilities that were acquired in June of 1998 also contributed to the increase
in non-interest expense.
NON-INTEREST EXPENSE
<TABLE>
<CAPTION>
Three months ended Six months ended
June 30, June 30,
1999 1998 1999 1998
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Salaries $ 4,656,000 $ 4,211,000 $ 9,051,000 $ 7,919,000
Performance-based compensation
and benefits 1,344,000 1,323,000 2,613,000 2,627,000
Other benefits 993,000 896,000 2,139,000 1,795,000
----------- ----------- ----------- -----------
Salaries and benefits 6,993,000 6,430,000 13,803,000 12,341,000
Occupancy, net 871,000 752,000 1,741,000 1,451,000
Furniture and fixtures 776,000 670,000 1,521,000 1,249,000
Computer processing 582,000 462,000 1,152,000 866,000
Amortization of intangible assets 432,000 419,000 874,000 798,000
Communications 433,000 394,000 895,000 777,000
Advertising 475,000 432,000 1,026,000 818,000
Supplies 354,000 330,000 677,000 619,000
Loan and collection 406,000 280,000 795,000 534,000
Other 1,010,000 1,200,000 1,994,000 2,247,000
----------- ----------- ----------- -----------
Total non-interest expense $12,332,000 $11,369,000 $24,478,000 $21,700,000
=========== =========== =========== ===========
</TABLE>
PROPOSED ACQUISITION
On March 24, 1999, the Registrant announced that it had signed a definitive
agreement to acquire Mutual Savings Bank f.s.b. ("MSB"). As a result of the
transaction, the Registrant will issue 0.80 shares of its common stock for each
share of MSB common stock, subject to certain adjustments.
The transaction is structured as a tax-free exchange of shares and is expected
to qualify as a "pooling-of-interests". The transaction is subject to approval
by the shareholders of both
17
<PAGE> 19
companies as well as regulatory agencies. The transaction is expected to be
consummated in the third quarter of 1999. The Registrant anticipates
approximately $5 million, pretax, of nonrecurring, merger related charges.
The merger agreement contains a provision, which allows MSB the right to
terminate the transaction if the average price of the Registrant's common stock
falls below certain pre-determined levels prior to consummation of the
transaction. The merger agreement also provides the Registrant with an option to
purchase 19.9% of the outstanding shares of MSB's common stock under certain
specified circumstances.
At June 30, 1999, MSB had assets of $574 million, deposits of $426 million,
shareholder's equity of $37.2 million and shares outstanding of 4.3 million. It
provides banking services through a total of 22 offices and its common stock
trades on the Nasdaq Stock Market under the symbol MSBK.
YEAR 2000
The Year 2000 issue refers to computer-based operating systems that were
originally designed to recognize calendar years by their last two digits ("Year
2000"). The Registrant began preparing its computer-based operating systems for
2000 during 1997 and formed a committee to address such issues. A significant
portion of the Registrant's Year 2000 issue relates to its core data processing
applications which are provided by a third-party service provider, M&I Data
Services. The Registrant completed its conversion to M&I Data Services Year 2000
compliant application software in 1998. Testing of all other non-compliant
operating systems was completed during the second quarter of 1999. It is
anticipated that the replacement of such systems will be completed during the
third quarter of 1999.
Costs incurred to date have approximated $1.3 million, which relate primarily to
the replacement of systems and fully depreciated non-compliant personal computer
equipment. Management estimates that total costs will not exceed $1.6 million
and will not have a material impact on the consolidated financial statements. A
substantial portion of these costs represent an acceleration of expenditures to
replace or upgrade systems that will become obsolete or otherwise inadequate to
meet the Registrant's growing technology needs.
While the Registrant is not aware of any Year 2000 problems for which a solution
is not available, other unanticipated issues could arise. These unanticipated
issues may include the ability to identify and correct all relevant computer
code, the availability and cost of trained personnel, the impact of the Year
2000 on our customers and other uncertainties.
Item 3.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
No material changes in the market risk faced by the Registrant has occurred
since December 31, 1998.
18
<PAGE> 20
Item 4. Submission of Matters to a Vote of Security-Holders
The Registrant's Annual Meeting of Shareholders was held on April 20,
1999. As described in the Registrant's proxy statement, dated March 17,
1999, matters to be considered at that meeting were:
(1) Election of three incumbent nominees to the board of directors
All nominees were nominated to serve three-year terms expiring in 2002.
Tabulation in the election of directors is set forth below.
<TABLE>
<CAPTION>
Broker Non-Votes
----------------
Nominee Votes FOR Votes AGAINST and Abstentions
------- --------- ------------- ---------------
<S> <C> <C> <C>
Keith E. Bazaire 5,878,593 0 53,143
Terry L. Haske 5,881,946 0 49,790
Thomas F. Kohn 5,871,229 0 60,507
</TABLE>
Directors whose term of office as a director continued after the
meeting were Charles A. Palmer, Charles C. Van Loan, Robert J. Leppink,
and Arch V. Wright, Jr.
Item 6. Exhibits & Reports on Form 8-K
(a) Exhibit Number & Description
11. Computation of Earnings Per Share
27. Financial Data Schedule
(b) Reports on Form 8-K
A report on Form 8-K was filed on May 25, 1999, under items 5 and 7.
The following exhibits were filed under item 7:
Exhibit 99.1 Annual report on Form 10-K for the year ended
December 31, 1998 for Mutual Savings Bank,
f.s.b.
Exhibit 99.2 Quarterly Report on Form 10-Q for the quarterly
period ended March 31, 1999 for Mutual Savings
Bank, f.s.b.
Exhibit 99.3 Current Report on Form 8-K, dated March 26,
1999, filed by Mutual Savings Bank, f.s.b.
19
<PAGE> 21
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 10, 1999 By s/William R. Kohls
-------------------------------- ----------------------------------
William R. Kohls, Principal
Financial Officer
Date August 10, 1999 By s/James J. Twarozynski
-------------------------------- ----------------------------------
James J. Twarozynski,
Principal Accounting
Officer
20
<PAGE> 22
Exhibit Index
-------------
<TABLE>
<CAPTION>
Exhibit No. Description
- ---------- -----------
<S> <C>
11 Computation of Earnings Per Share
27 Financial Data Schedule
</TABLE>
<PAGE> 1
Exhibit 11
A reconciliation of basic and diluted earnings per share for the
three-month and six-month periods ending June 30 follows:
<TABLE>
<CAPTION>
Three months ended Six months ended
June 30, June 30,
1999 1998 1999 1998
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Net income $ 2,843,000 $ 2,539,000 $ 5,608,000 $ 4,972,000
============= ============= ============= =============
Shares outstanding (Basic) (1) 7,451,000 7,351,000 7,431,000 7,308,000
Effect of dilutive securities - stock options 39,000 90,000 48,000 91,000
------------- ------------- ------------- -------------
Shares outstanding (Diluted) 7,490,000 7,441,000 7,479,000 7,399,000
============= ============= ============= =============
Earnings per share
Basic $ .38 $ .35 $ .75 $ .68
Diluted .38 .34 .75 .67
</TABLE>
(1) Shares outstanding have been adjusted for a three-for-two stock
split and a 5% stock Dividend in 1998.
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> JUN-30-1999
<CASH> 33,281
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 110,874
<INVESTMENTS-CARRYING> 14,076
<INVESTMENTS-MARKET> 14,460
<LOANS> 831,920
<ALLOWANCE> 10,183
<TOTAL-ASSETS> 1,077,328
<DEPOSITS> 836,694
<SHORT-TERM> 133,213
<LIABILITIES-OTHER> 14,680
<LONG-TERM> 19,750
0
0
<COMMON> 7,475
<OTHER-SE> 65,516
<TOTAL-LIABILITIES-AND-EQUITY> 1,077,328
<INTEREST-LOAN> 39,124
<INTEREST-INVEST> 3,611
<INTEREST-OTHER> 498
<INTEREST-TOTAL> 43,233
<INTEREST-DEPOSIT> 12,923
<INTEREST-EXPENSE> 17,381
<INTEREST-INCOME-NET> 25,852
<LOAN-LOSSES> 1,030
<SECURITIES-GAINS> 14
<EXPENSE-OTHER> 24,478
<INCOME-PRETAX> 7,854
<INCOME-PRE-EXTRAORDINARY> 7,854
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,608
<EPS-BASIC> 0.75
<EPS-DILUTED> 0.75
<YIELD-ACTUAL> 5.48
<LOANS-NON> 2,776
<LOANS-PAST> 1,686
<LOANS-TROUBLED> 274
<LOANS-PROBLEM> 3,200
<ALLOWANCE-OPEN> 9,714
<CHARGE-OFFS> 848
<RECOVERIES> 287
<ALLOWANCE-CLOSE> 10,183
<ALLOWANCE-DOMESTIC> 4,728
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 5,455
</TABLE>
