FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Quarterly Report Under Section 13 or 15 (d)
of the Securities Exchange Act of 1934
For Quarter Ended March 31, 1995 Commission File Number 0-4742
HAWKEYE BANCORPORATION
----------------------
(Exact name of registrant as specified in its charter)
IOWA 42-0926317
---- ----------
(State or other jurisdiction of (IRS Employer identification
incorporation or organization) number)
222 Equitable Building, 604 Locust Street,
------------------------------------------
Des Moines, Iowa 50309-3723
---------------------------
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code (515) 284-1930
--------------
NOT APPLICABLE
--------------
(Former name and former fiscal year, if changed from last report)
"Indicate by check mark whether the Registrant (1) has
filed all reports required to be filed by Section 13 or
15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past
90 days."
Yes X No
------- -------
Common Shares Outstanding:
13,461,373 shares no par value common stock.
<PAGE>
FORM 10-Q
Part I - Financial Information
Item 1: Financial Statements
(a) Unaudited Consolidated Balance Sheets, Consolidated
Statements of Income and Notes to Financial Statements
are included in Registrant's Quarterly Report to
Shareholders attached hereto as Exhibit I on pages 6,7,9,
and 10. The Unaudited Consolidated Statements of Cash
Flows are attached hereto as Exhibit II.
(b) Earnings per common and common equivalent share and
weighted average shares outstanding are shown on the face
of the Consolidated Statements of Income in Registrant's
Quarterly Report to Shareholders attached hereto as
Exhibit I on page 7. Footnote 6 of the Notes to
Financial Statements, also included in the Registrant's
Quarterly Report to Shareholders attached hereto as
Exhibit I, provides an analysis of the computation of
weighted average shares outstanding used to determine
earnings per common and common equivalent share.
Item 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
SELECTED FINANCIAL INFORMATION
(In thousands except per share) Three Months Ended
March 31,
1995 1994
---- ----
Interest income $ 33,901 $ 29,282
Interest expense 15,237 12,238
Net interest income 18,664 17,044
Provision for loan losses 16 28
Other income 6,407 6,891
Other expenses 16,684 15,588
Income from operations,
before taxes 8,371 8,319
Income tax expense 2,640 2,772
Net income 5,731 5,547
Earnings per common and
common equivalent share 0.43 0.42
<PAGE>
At the Period Ended:
March 31, March 31, December 31,
1995 1994 1994
---- ---- ----
% Return on average
shareholders' equity 12.94% 13.50% 14.04%
% Return on average assets 1.21% 1.21% 1.27%
Average assets $1,925,507 $1,855,884 $1,868,308
Average earning assets 1,764,680 1,710,790 1,718,427
Average loans 1,237,569 1,107,530 1,167,150
Average deposits 1,666,079 1,621,592 1,630,026
Average shareholders' equity 179,569 166,626 169,147
Long-term debt 33,931 29,779 31,536
Total assets 1,951,061 1,877,663 1,926,875
Ratio of average equity
to average assets 9.33% 8.98% 9.05%
Results of Operations
- - ---------------------
Hawkeye recognized first quarter operating earnings of $5.7
million which compares to $5.5 million for the first quarter of
1994.
The following table presents the basic components of results
of operations:
(In thousands)
Three Months Ended
March 31,
1995 1994
---- ----
Net interest income $ 18,664 $ 17,044
Provision for loan losses (16) (28)
Noninterest income 6,407 6,891
Other noninterest expenses (16,684) (15,588)
Income tax expense (2,640) (2,772)
-------- --------
Net income $ 5,731 $ 5,547
======== ========
The Company is unaware of any current recommendations by the
regulatory authorities which, if they were to be implemented, would
have a material effect on the Company's liquidity, capital
resources, or results of operations.
Capital Resources
- - -----------------
The ratio of total shareholders' equity to total assets was
9.4% at March 31, 1995, as compared to 9.1% at December 31, 1994.
The increase in shareholders' equity resulted from net income in
the first quarter of $5.7 million, issuance of common stock of $2.2
million, and unrealized gain on securities available for sale of
$3.6 million, less $2.0 million of dividends paid.
March 31, December 31,
(In thousands) 1995 1994
- - ---------------- ------- -------
Total shareholders' equity $ 183,820 $ 174,354
Allowance for loan losses 21,620 21,334
Total assets 1,951,061 1,926,875
Equity to assets 9.42% 9.05%
Primary capital to assets 10.41% 10.04%
Dividends
- - ---------
Preferred and preference stock dividends of $226 thousand and
$43 thousand were paid during the first quarter of 1994. All
preferred and preference stock were converted into common stock by
December 31, 1994.
Common dividends of $1,457 thousand were paid in the first
quarter of 1994. This compares to common dividends of $2,019
thousand paid in the first quarter of 1995. The current quarterly
dividend rate of 15 cents per share will require payments of $8,077
thousand annually to common shareholders.
The Company's dividend policy goal is a payout similar to the
industry average of 30-35% of earnings. The actual dividend payout
in the first quarter of 1995 was 35%.
Mergers and Acquisitions
- - ------------------------
On January 30, 1995 the Company acquired Taintor Savings Bank
in New Sharon, Iowa, for 111,124 shares of common stock with a
value of $2.2 million and $1.5 million cash. Taintor, with $22
million of assets, has been merged into the Hawkeye Bank of Pella,
N.A., with New Sharon remaining open as a branch office.
For the above acquisition accounted for as purchase, the
results of operations of the acquisition have been included in the
consolidated statement of income since the date of acquisition and
the excess of cost over net assets acquired is being amortized over
a period of 15 years on a straight-line basis.
Net Interest Income
- - -------------------
For the quarter ended March 31, 1995, net interest income
increased 9.5% to $18.7 million from $17.0 million for the same
period in 1994. On a taxable equivalent basis, net interest income
increased $1.6 million, or 9.1%, to $19.5 million in the current
quarter from $17.8 million in 1994. Compared to the first quarter
last year, the gross interest margin increased 25 basis points to
4.48% on a fully taxable equivalent basis. Interest income,
interest expense and net interest income on a taxable equivalent
basis for the two comparable periods are shown in the table below.
Three Months Ended
March 31,
(In millions) 1995 1994
---- ----
Interest income $33.9 $29.3
Interest expense 15.2 12.3
---- ----
Net interest income 18.7 17.0
Taxable equivalent adjustment
to interest income 0.8 0.8
Net interest income - ---- ----
taxable equivalent $19.5 $17.8
==== ====
The primary reason for the increase in net interest income is
a 11.7% growth in average loans over the last year.
Noninterest Income
- - ------------------
Noninterest income of $6.4 million for the first quarter of
1995 compared to $6.9 million for the same period a year ago. The
following table reflects the components of noninterest income:
Three Months Ended
March 31,
(In millions) 1995 1994
- - ------------- ---- ----
Fees $2.9 $3.0
Trust and agency services 1.3 1.3
Service charges 1.0 1.0
Insurance, real estate, and
advisory services 0.3 0.4
Security gains 0.3
Other 0.9 0.9
--- ---
$6.4 $6.9
=== ===
Mortgage loan refinancing fees are off $0.3 million primarily
due to prime increasing 300 basis points as compared to one year
ago. Opportunities to reposition comparable securities at higher
yields while taking advantage of pricing inefficiencies, resulted
in security gains of $0.3 million in 1994 versus an immaterial loss
in the first quarter of 1995.
Noninterest Expense
- - -------------------
Noninterest expense was $16.7 million and $15.6 million for the
first quarter of 1995 and 1994, respectively. The following table
reflects the components of noninterest expense:
Three Months Ended
March 31,
(In millions) 1995 1994
- - ------------- ---- ----
Salaries and benefits $ 7.6 $ 7.7
Computer 1.7 1.5
Fees 1.3 1.0
Occupancy 1.3 1.2
Furniture and equipment 1.0 0.8
Marketing 0.7 0.7
Insurance 1.0 1.0
Other expenses 2.1 1.7
---- ----
$16.7 $15.6
==== ====
Salaries and benefits, the biggest component of noninterest
expense, decreased one percent as compared to last year. Increased
operating expenses of about $0.3 million are associated with the
four acquisitions consummated since last March 31, 1994.
Liquidity and Capital Management
- - --------------------------------
The Company's primary source of funds are management fees and
dividends from the Subsidiaries. Dividends of $11.7 million and
$9.3 million were received from the bank subsidiaries during the
first quarter of 1995 and 1994, respectively, to meet cash flow
needs of the Parent Company. Management fees of $1.0 million were
received in the first quarter of 1995 and 1994.
Hawkeye's twenty-three Bank Subsidiaries ended the first
quarter with primary capital of $197.2 million, 10.1% of assets.
At March 31, 1995, approximately $64.7 million of dividends are
available to be paid by the Bank Subsidiaries without causing their
primary capital ratios to fall below 7.0%. The Parent Company
anticipates an additional $7.9 million of dividends from the
subsidiaries during the remainder of 1995, if needed. At March 31,
1995, all Bank Subsidiaries exceed minimum regulatory capital
requirements and are considered "well" capitalized.
The Company's Tier I capital ratio is 12.8% and its total risk
adjusted capital ratio is 14.1%. These ratios compare favorably to
the regulatory minimums of 4.0% for Tier I and 8.0% for total risk
adjusted capital. The comparable ratios at December 31, 1994 were
12.5% and 13.8%, respectively.
Regulatory agencies have also initiated a third capital
requirement, called a leverage ratio. Under the risk-based rules,
a financial institution with a very secure asset portfolio could
actually reduce the amount of its capital. To limit the amount of
leverage an institution could undertake, and to ensure a sufficient
capital level, a minimum leverage ratio of Tier I core capital of
3.0% of total assets has been required. The Company's leverage
ratio of 8.6% also exceeds this minimum. The comparable ratio at
December 31, 1994 was 8.4%.
March 31, 1995
Tier 1 Total Leverage
Combined ratios of Bank ------ ----- --------
Subsidiaries - 13.1% 14.3% 8.8%
Management of the Company believes a strong capital position
is essential for operating a safe and sound financial institution
and safeguarding the funds entrusted to it by customers and
shareholders.
As long as the Subsidiaries maintain adequate capital, their
liquidity needs are not dependent on the Parent Company's source of
funds. Liquidity reserves, maintained to meet their deposit and
loan needs, consist of overnight and short-term investments
including: federal funds sold, interest bearing deposits in other
banks, other short-term investments, loans, and securities
available for sale. Additionally, the Subsidiaries may borrow
through the Federal Reserve System's discount window or through the
purchase of federal funds.
Public stock or debt offerings would be available to the
Company to raise additional capital, if necessary.
Interest Rate Sensitivity
- - -------------------------
The primary tool for managing the banks' interest margins is
interest sensitivity analysis -- an ongoing comparison of present
and prospective interest income with present and prospective
interest expense. Analysis of the amounts and yields of the
various asset and liability categories maturing or repricing in
various future periods serves as the basis for establishing loan
rates and terms as well as deposit pricing to protect and enhance
interest margins.
The key goal of interest sensitivity management is to protect
against unfavorable changes in margins arising from changes in the
general level of interest rates. This is achieved by balancing the
amount of assets maturing or repricing in any future period with
the amount of liabilities maturing or repricing in the same period.
Any imbalance in any future period is referred to as a "gap".
The following schedule summarizes the maturing or repricing of
Hawkeye's assets and liabilities at March 31, 1995.
0-90 91-180 181-365 One To Over
(In millions) Days Days Days Five Yrs Five Yrs Total
----- ------ ------- -------- -------- ------
Assets:
Loans $356.8 $112.6 $207.8 $424.1 $145.2 $1,246.5
Securities
and other 120.5 20.5 45.7 260.4 82.5 529.6
----- ----- ----- ----- ----- -------
477.3 133.1 253.5 684.5 227.7 1,776.1
----- ----- ----- ----- ----- -------
Liabilities:
Deposits 798.1 158.8 216.0 293.6 27.5 1,494.0
Borrowed
funds 28.8 7.6 4.8 6.1 11.0 58.3
----- ----- ----- ----- ----- -------
826.9 166.4 220.8 299.7 38.5 1,552.3
Rate sensi- ----- ----- ----- ----- ----- -------
tive gap $(349.6)$( 33.3) $ 32.7 $384.8 $189.2 $3,223.8
======= ======= ===== ===== ===== =======
The consolidated due-within-one-year-rate-sensitive assets on
March 31, 1995, were $863.9 million or 71% of the rate sensitive
liabilities also due within one year. Included in deposits
repricing within 90 days were $634.9 million of retail savings and
interest bearing transaction accounts that historically reprice
more slowly than time deposits in a changing interest rate
environment; and based on historical averages, about 65% or $412.7
million, would reprice over one year. Thus, an adjusted cumulative
one year gap of $62.5 million or 108% exists at March 31, 1995.
Securities Portfolio
- - --------------------
The securities portfolio, consisting of investment securities and
securities available for sale, is used to furnish liquidity,
balance interest rate risk, provide income and collateralize public
funds. The Company invests mainly in high quality liquid
investments with short to intermediate maturities. In addition to
credit risk analysis, the Company also monitors interest rate risk
using interest rate sensitivity analysis.
Occasionally, in response to market conditions, opportunities
result whereby certain securities available for sale can be sold
and the proceeds can be reinvested at comparatively better yields.
Proceeds from the sale of securities were $14.3 million and $13.5
million for the three months ended March 31, 1995 and 1994,
respectively. Such transactions are predicated on market
conditions and not the Company's desire to generate trading profits
and losses. These securities available for sale are used for
additional liquidity and to manage interest rate risk. Security
losses of $12 thousand for the first quarter of 1995 compare to
gains of $283 thousand for the same period last year.
At March 31, 1995, the fair market value of securities available
for sale was lower than amortized cost by $3.0 million. Thus, an
unrealized loss on securities available for sale of $1.9 million
was recorded in shareholders' equity; and a $1.1 million increase
of deferred tax assets was made.
Allowance for Loan Losses and Nonperforming Assets
- - --------------------------------------------------
The allowance for loan losses was 1.73% of loans on March 31,
1995, and December 31, 1994. Net loan recoveries of $0.2 million
for the first quarter of 1995 compare to $0.4 million net loan
recoveries for the same period in 1994.
Nonperforming assets represent assets where there is a concern
about future collectibility. The following table sets forth the
amounts (in thousands) of such nonperforming assets:
March 31, December 31,
1995 1994
-------- -----------
Nonaccrual loans $3,262 $2,963
Restructured loans 559 491
Other real estate owned 843 941
----- -----
$4,664 $4,395
===== =====
Percent of nonperforming
assets to total loans and
other real estate owned 0.37% 0.36%
==== ====
Hawkeye has recorded at March 31, 1995 and December 31, 1994, an
allowance for loan losses of $21.6 million and $21.3 million
respectively. Adequacy of the allowance is based on management's
review of each bank's loan portfolio, including known problem
loans, analysis of regulatory examinations and the possible impact
of economic conditions in the market areas served. Management
believes the allowance is at an adequate level for all periods
presented based on all available data.
Deposits
- - --------
Total deposits increased $12.5 million from December 31, 1994,
to $1,688.1 million at March 31, 1995. Bank subsidiaries are
encouraged to grow local deposits based upon safe and sound banking
principles as capital levels permit. The following table presents
the components of deposits (in millions) and the percentage
increase (decrease) from December 31, 1994 to March 31, 1995:
March 31 December 31 %
1995 1994 Change
--------- ----------- ------
Demand deposits $ 194.2 $ 216.7 (10.4)
Savings deposits 175.6 182.3 (3.7)
N.O.W. and money
market deposits 459.2 442.3 3.8
Jumbo time deposits 84.3 76.9 9.6
Other time deposits 774.8 757.4 2.3
------- ------- ---
$1,688.1 $1,675.6 0.7
======= ======= ===
Income Taxes
- - ------------
Income taxes on operating income differ from statutory rates
principally because of tax-exempt interest and goodwill
amortization.
Statements Issued by the Financial Accounting Standards Board
- - -------------------------------------------------------------
The Company adopted Statement of Financial Accounting
Standards No. 114, "Accounting by Creditors for Impairment of a
Loan", on January 1, 1995. Under the new standard, a loan is
considered impaired, based on current information and events, if it
is probable that the Company will be unable to collect the
scheduled payments of principal or interest when due according to
the contractual terms of the loan agreement. The measurement of
impaired loans is generally based on the present value of expected
future cash flows discounted at the historical effective interest
rate, except that all collateral-dependent loans are measured for
impairment based on the fair value of the collateral. When the
future collectability of the recorded loan balance is expected,
interest income may be recognized on a cash basis.
At March 31, 1995, the recorded investment in loans for which
impairment has been recognized in accordance with FAS 114 totaled
$4.0 million, of which $2.8 million related to loans with no
valuation allowance and $1.2 million related to loans with a
corresponding valuation allowance of $0.2 million. The Company
recognized $26 thousand of interest income on impaired loans for
the first quarter of 1995.
<PAGE>
Hawkeye Bancorporation Exhibit I
Registrant's Quarterly Report to Shareholders ---------
<PAGE>
Hawkeye Bancorporation Exhibit II
Consolidated Statements of Cash Flows ----------
(Unaudited)
Three Months Ended
March 31,
(In thousands) 1995 1994
- - -------------------------------------------------------------------------
Cash Flows from Operating Activities $5,731 $5,547
Net income
Adjustments to reconcile net income to net cash
provided by operating activities:
Cumulative effect of change in accounting
for income taxes
Depreciation 1,033 793
Amortization 360 259
Amortization (accretion) of securities 160 (134)
Loss (gain) on sales of securities 12 (283)
Loss on sales of premises and equipment 1
Provision for loan losses 16 28
Other real estate owned writedowns 27
Decrease (increase) in accrued interest receivable 915 (222)
Decrease (increase) in other assets (177) 434
Increase in other liabilities 2,510 632
- - -------------------------------------------------------------------------
Net cash provided by operating activities 10,588 7,054
- - -------------------------------------------------------------------------
Cash Flows from Investing Activities
Proceeds from sales of securities AFS 14,263 13,722
Proceeds from maturities of securities AFS 23,875 17,373
Proceeds from maturity of securities HTM 16,437 40,327
Purchases of securities AFS (36,087) (36,055)
Purchases of securities HTM (1,932) (21,884)
Net (increase) decrease in short-term investments
and interest bearing deposits in other banks 112 (2,145)
Net increase in loans (5,404) (20,185)
Purchases of premises and equipment (1,196) (850)
Proceeds from sales of premises and equipment 1
Net cash provided from acquisitions 394
- - --------------------------------------------------------------------------
Net cash provided by (used in) investing activities 10,462 (9,696)
- - --------------------------------------------------------------------------
Cash Flows from Financing Activities
Net decrease in deposits (5,781) (7,850)
Net increase (decrease) in short-term borrowings (2,710) 2,033
Payments of dividends (2,019) (1,726)
Issuance of common stock 28
Proceeds from long-term borrowings 2,500 2,250
Payments on long-term debt (105) (83)
- - --------------------------------------------------------------------------
Net cash used in financing activities (8,115) (5,348)
- - --------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents 12,935 (7,990)
Cash and cash equivalents at beginning of year 109,906 139,211
- - --------------------------------------------------------------------------
Cash and cash equivalents at end of period $122,841 $131,221
==========================================================================
Supplemental Disclosures of Cash Flow Information:
- - --------------------------------------------------
Cash paid for:
Interest $ 14,188 $ 12,498
Income taxes 61
See notes to financial statements.
<PAGE>
Part II Other Information
On April 18, 1995, at the Annual Meeting of Stockholders of
Hawkeye Bancorporation, the shareholders voted to approve the
Hawkeye Bancorporation Senior Management Compensatory Stock Option
and Stock Appreciation Rights Plan (the "Plan") authorizing
issuance of Hawkeye common stock to key senior management employees
of Hawkeye and its subsidiaries. The plan was approved with
8,896,710 affirmative votes, 1,007,127 negative votes, and 212,957
votes abstained.
On January 24, 1995, the Compensation Committee selected seven
key senior executives to participate in the option portion of the
Plan and granted a total of 64,502 options subject to approval by
the requisite shareholder vote at the Annual Meeting. Each option
entitles the participant to purchase a like number of shares of
common stock at the exercise price of $17.91 per share commencing
six months after January 24, 1995, and until January 24, 2000,
unless sooner terminated pursuant to the Plan.
The Compensation Committee on January 24, 1995, also selected
four key senior executives to participate in the stock appreciation
rights portion of the plan and granted a total of 30,000 rights
subject to approval by the requisite shareholder vote at the Annual
Meeting. Each right becomes exercisable by the participant six
months after January 24, 1995, and expires January 24, 2000, unless
sooner terminated pursuant to the Plan. Upon exercise, the
participant is entitled to receive from Hawkeye in cash the
economic value of the right. The economic value of each right is
equal to the market value of one share of common stock on the date
the right is exercised reduced by the amount of $17.91.
On April 18, 1995, at the Annual Meeting of Stockholders of
Hawkeye Bancorporation, the shareholders voted to approve the
Hawkeye Bancorporation Deferred Compensation Plan for Directors
providing deferred compensation to directors. The Plan was
established to improve the ability of Hawkeye to attract and retain
as members of the Board of Directors of Hawkeye individuals of the
highest caliber. The Plan was approved with 8,129,726 affirmative
votes, 1,295,019 negative votes, and 692,049 votes abstained.
Only members of the Board of Directors who are not officers are
eligible to participate in the Plan because officers of Hawkeye who
are also directors do not receive annual retainers or meeting fees
for attending Board meetings. Eleven persons are currently
eligible to participate in the Plan. Hawkeye estimates that total
benefits payable under the plan for all eligible participants would
approximate $0.4 million if all such eligible participants retired
at the end of 1995.
Each participant in the Plan shall receive, after the
participant's retirement from the Board, three equal annual
installments of deferred compensation. The first such installment
shall be paid not less than thirty days after retirement, the
second installment shall be paid on the first anniversary of
retirement, and the third installment shall be paid on the second
anniversary of retirement.
<PAGE>
Other Information
Item 6 Exhibits and Reports on Form 8-K
None
<PAGE>
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.
HAWKEYE BANCORPORATION
Date 05/12/95 Robert W. Murray
------------- ------------------
Robert W. Murray
Chief Executive Officer &
President
Date 05/12/95 Michael Smith
------------- -----------------
Michael Smith
Vice President and Treasurer
<TABLE>
HAWKEYE BANCORPORATION
Financial Highlights & Historical Summary
(Unaudited in thousands)
<CAPTION>
- - ----------------------------------------------------------------------------------------------
At the Period Ending: Percent March 31,
Increase 1995 1994
- - ----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Total Assets 3.9 % $1,951,061 $1,877,663
Total Deposits 3.1 1,688,123 1,636,782
Total Loans 10.6 1,246,519 1,127,037
Total Shareholders' Equity 10.5 183,820 166,317
For the Quarter Ending:
- - ----------------------------------------------------------------------------------------------
Net Interest Income 9.5 % 18,664 $ 17,044
Net Income 3.3 5,731 5,547
Per Share
- - ----------------------------------------------------------------------------------------------
Net Income per Common & Common Equivalent Share 2.4 % $ .43 $ .42
Book Value per Common Share 9.8 13.66 12.44
- - ----------------------------------------------------------------------------------------------
At the Period Ending: March 31, March 31, December 31,
1995 1994 1994
- - ----------------------------------------------------------------------------------------------
Ratios:
Primary capital to assets 10.41% 9.89% 10.04%
Allowance for loan losses as a percent of loans 1.73 1.91 1.73
Return on average assets 1.21 1.21 1.27
Return on average equity 12.94 13.50 14.04
_______________________________________________________________________________________________
Graph Charts Data
Total Shareholders' Equity
1990 $118,981
1991 $129,444
1992 $147,085
1993 $162,552
1994 $174,354
3/31/95 $183,820
Book Value per Common Share
1990 $7.87
1991 $9.38
1992 $10.84
1993 $12.15
1994 $13.06
3/31/95 $13.66
</TABLE>
<PAGE>
<TABLE>
HAWKEYE BANCORPORATION
Financial Highlights & Historical Summary
(Unaudited in thousands)
<CAPTION>
- - ------------------------------------------------------------------------------------------------
At the Period Ending: March 31, March 31, December 31,
1995 1994 1994
________________________________________________________________________________________________
<S> <C> <C> <C>
Asset Quality:
Nonaccrual loans $3,262 $3,354 $2,963
Restructured loans 559 1,007 491
Loans past due ninety days or more as
to interest or principal payments 241 600 939
Other real estate owned 843 485 941
______ ______ ______
Total nonperforming assets $4,905 $5,446 $5,334
====== ====== ======
Ratio of nonperforming assets to total assets .25% .29% .28%
Ratio of net loan chargeoffs to average loans (.06)% (.15)% (.01)%
Average Balances:
Assets $1,925,507 $1,855,884 $1,868,308
Deposits 1,666,079 1,621,592 1,630,026
Loans, net 1,237,569 1,107,530 1,167,150
Earning Assets 1,764,680 1,710,790 1,718,427
Shareholders' equity 179,569 166,626 169,147
________________________________________________________________________________________________
Graph Charts Data
Allowance for Loan Losses to Nonperforming Loans
1990 152%
1991 162%
1992 240%
1993 419%
1994 486%
3/31/95 532%
Primary Capital Ratio
1990 8.43%
1991 8.74%
1992 8.94%
1993 9.68%
1994 10.04%
3/31/95 10.41%
</TABLE>
<PAGE>
<TABLE>
HAWKEYE BANCORPORATION
Consolidated Balance Sheets
(Unaudited)
<CAPTION>
________________________________________________________________________________________________________________
March 31, December 31,
(Dollars in thousands) 1995 1994 1994
________________________________________________________________________________________________________________
<S> <C> <C> <C>
Assets
Cash and due from banks $ 99,151 $ 102,191 $ 93,276
Federal funds sold 23,690 29,030 16,630
Interest bearing deposits in other banks 100 300 200
Other short-term investments 68,675 75,633 68,687
Securities available for sale(amortized cost--March 31, 1995--
$301,969; March 31, 1994--$304,515; and
December 31, 1994--$293,407) 298,933 304,379 284,682
Investment securities (market value--March 31, 1995--
$138,297; March 31, 1994--$175,270; and
December 31, 1994--$150,051) 138,157 172,770 152,077
Loans:
Commercial 246,341 240,667 272,103
Agricultural 141,286 142,354 159,854
Real estate 700,265 604,198 643,874
Consumer 158,627 139,818 158,297
________________________________________________________________________________________________________________
Total loans 1,246,519 1,127,037 1,234,128
Less allowance for loan losses 21,620 21,536 21,334
________________________________________________________________________________________________________________
Net loans 1,224,899 1,105,501 1,212,794
Premises and equipment, net 36,583 33,533 36,247
Accrued interest receivable 18,347 18,361 18,935
Goodwill and core deposit intangibles 22,300 17,115 21,185
Other assets 20,226 18,850 22,162
________________________________________________________________________________________________________________
Total assets $ 1,951,061 $ 1,877,663 $ 1,926,875
================================================================================================================
Liabilities
Deposits:
Noninterest bearing $ 194,198 $ 197,930 $ 216,729
Interest bearing 1,493,925 1,438,852 1,458,911
________________________________________________________________________________________________________________
Total deposits 1,688,123 1,636,782 1,675,640
Short-term borrowings:
Federal funds purchased and other 21,954 18,312 23,616
Short-term debt 2,452 6,000 3,500
Long-term debt 33,931 29,779 31,536
Other liabilities 20,781 20,473 18,229
________________________________________________________________________________________________________________
Total liabilities 1,767,241 1,711,346 1,752,521
================================================================================================================
Shareholders' Equity
Preference stock, no par value:
Authorized 200,000,000 shares
Issued: March 31, 1994 -- 315,397 shares 365
Preferred stock, $1 par value:
Authorized 5,000,000 shares
Issued: March 31, 1994 -- 113,244 shares 113
Common stock, no par, $.01 stated value
Authorized 200,000,000 shares
Issued: March 31, 1995 -- 13,461,373 shares
December 31, 1994 -- 13,350,249 shares
March 31, 1994 -- 12,139,273 shares 135 121 134
Capital surplus 105,129 101,705 102,977
Retained earnings 80,431 64,097 76,719
Unrealized loss on securities available for sale (1,875) (84) (5,476)
________________________________________________________________________________________________________________
Total shareholders' equity 183,820 166,317 174,354
________________________________________________________________________________________________________________
Total liabilities and shareholders' equity $ 1,951,061 $ 1,877,663 $ 1,926,875
================================================================================================================
See notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
HAWKEYE BANCORPORATION
Consolidated Statements of Income
(Unaudited)
<CAPTION>
___________________________________________________________________________________
Three Months Ended
March 31,
(In thousands except per share) 1995 1994
___________________________________________________________________________________
<S> <C> <C>
Interest Income
Loans $ 25,792 $ 21,435
Securities:
Taxable 5,739 5,812
Nontaxable 860 860
Federal funds sold and other 1,510 1,175
___________________________________________________________________________________
Total interest income 33,901 29,282
Interest Expense
Deposits 14,351 11,669
Federal funds purchased and other 302 143
Short-term debt 36 26
Long-term debt 548 400
___________________________________________________________________________________
Total interest expense 15,237 12,238
___________________________________________________________________________________
Net interest income 18,664 17,044
Provision for loan losses 16 28
___________________________________________________________________________________
Net interest income after provision for loan losses 18,648 17,016
___________________________________________________________________________________
Other Income
Insurance, real estate and advisory services 303 432
Trust and agency services 1,318 1,280
Service charges 958 996
Fees 2,906 3,043
Investment security gains (12) 283
Other 934 857
___________________________________________________________________________________
Total other income 6,407 6,891
Other Expenses
Salaries and employee benefits 7,599 7,661
Occupancy 1,317 1,218
Furniture and equipment 945 770
Other 6,823 5,939
___________________________________________________________________________________
Total other expenses 16,684 15,588
Income from operations, before taxes 8,371 8,319
Income tax expense 2,640 2,772
___________________________________________________________________________________
Net income $ 5,731 $ 5,547
===================================================================================
Weighted average number of common shares,
dilutive common share equivalents and other
dilutive items 13,479 13,324
Earnings per common and common equivalent share $ .43 $ .42
===================================================================================
See notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
HAWKEYE BANCORPORATION
Statements of Changes in Shareholders' Equity *
(Unaudited)
<CAPTION>
_________________________________________________________________________________________________________________________________
Preference Preferred Common Capital Retained Unrealized
(Dollars in thousands) Stock Stock Stock Surplus Earnings Loss Total
_________________________________________________________________________________________________________________________________
<S> <C> <C> <C> <C> <C> <C> <C>
Balances, January 1, 1994 $365 $113 $121 $101,677 $60,276 $162,552
Net income 5,547 5,547
Issuance of common stock 28 28
Dividends:
Preference stock (43) (43)
Preferred stock (226) (226)
Common stock (1,457) (1,457)
Unrealized loss on securities available for sale (84) (84)
_________________________________________________________________________________________________________________________________
Balances, March 31, 1994 $365 $113 $121 $101,705 $64,097 ($84) $166,317
=================================================================================================================================
Balances, January 1, 1995 $134 $102,977 $76,719 ($5,476) $174,354
Net income 5,731 5,731
Issuance of common stock 1 2,152 2,153
Dividends:
Common stock (2,019) (2,019)
Unrealized loss on securities available for sale 3,601 3,601
_________________________________________________________________________________________________________________________________
Balances, March 31, 1995 $135 $105,129 $80,431 ($1,875) $183,820
=================================================================================================================================
</TABLE>
<TABLE>
HAWKEYE BANCORPORATION
Consolidated Average Funds and Rates *
(Unaudited)
<CAPTION>
_____________________________________________________________________________________________
Three Months Ended March 31,
1995 1994
Average Average
(Dollars in thousands) Balance Rate Balance Rate
_____________________________________________________________________________________________
<S> <C> <C> <C> <C>
Interest Earning Assets
Loans $ 1,237,569 8.57% $ 1,107,530 7.98%
Securities 438,602 6.53 485,817 5.96
Federal funds sold and other 88,509 6.92 117,443 4.06
_____________________________________________________________________________________________
Total 1,764,680 7.98% $ 1,710,790 7.13%
_____________________________________________________________________________________________
Interest Bearing Liabilities
Deposits $ 1,476,795 3.94% $ 1,436,045 3.30%
Federal funds purchased and other 23,756 5.16 17,514 3.31
Short-term debt 2,498 5.87 3,542 3.00
Long-term debt 31,517 7.05 28,548 5.67
_____________________________________________________________________________________________
Total $ 1,534,566 4.03% $ 1,485,649 3.40%
_____________________________________________________________________________________________
Rate Analysis
Interest income/earning assets 7.98% 7.13%
Interest expense/earning assets 3.50 2.90
Net yield 4.48 4.23
=============================================================================================
* See notes to financial statements.
The March 31, 1995 and 1994 rates in the table "Consolidated Average Funds and Rates" include the
effect of taxable equivalent adjustments, using the statutory federal tax rate of 35%, in adjusting
interest on tax-exempt loans and securities to a fully taxable basis. The applicable taxable
equivalent adjustments for 1995 were: loans $352 and securities $463. Without these adjustments
rates would have been: loans 8.45%, securities 6.10%, total 7.79% and net yield 4.29%.
The applicable taxable equivalent adjustments for 1994 were: loans $346 and securities $463.
Without these adjustments rates would have been: loans 7.85%, securities 5.57%, total 6.94% and
and net yield 4.04%.
</TABLE>
<PAGE>
HAWKEYE BANCORPORATION
Consolidated Statements of Changes in Allowance for Loan Losses *
(Unaudited)
________________________________________________________________________________
Three Months Ended
March 31,
(Dollars in thousands) 1995 1994
________________________________________________________________________________
Balance, beginning of period $21,334 $21,110
Provision charged to operating expense 16 28
Loans charged off (166) (188)
Recoveries 355 586
Allowance of acquired subsidiary at date of acquisition 81
________________________________________________________________________________
Balance, end of period $21,620 $21,536
================================================================================
*See notes to financial statements.
HAWKEYE BANCORPORATION
NOTES TO FINANCIAL STATEMENTS
(dollars in thousands except per share)
1. In the opinion of the Company, the accompanying unaudited financial
statements contain all the adjustments (consisting of normal recurring
accruals) necessary to present fairly its financial positions as of March
31, 1995 and 1994 and December 31, 1994, and its results of operations
and changes in shareholders' equity for the periods ended March 31, 1995 and
1994.
2. On January 30, 1995, the Company acquired Taintor Savings Bank for
111,124 shares of common stock with a value of $2.2 million and $1.5 million
cash. Taintor with $22 million in assets has been merged into the Hawkeye
Bank of Pella, N.A. This acquisition was accounted for as a purchase
transaction. Under the purchase method of accounting, the earnings of this
bank are included in the consolidated financial statments only from the
date of acquisition.
3. The Company adopted Statement of Financial Accounting Standards No. 114,
"Accounting by Creditors for Impairment of a Loan", on January 1, 1995. Under
the new standard, a loan is considered impaired, based on current information
and events, if it is probable that the Company will be unable to collect the
scheduled payments of principal or interest when due according to the
contractual terms of the loan agreement. The measurement of impaired loans is
generally based on the present value of expected future cash flows
discounted at the historical effective interest rate, except that all
collateral-dependent loans are measured for impairment based on the fair value
of the collateral. When the future collectability of the recorded loan balance
is expected, interest income may be recognized on a cash basis.
At March 31, 1995, the recorded investment in loans for which impairment
has been recognized in accordance with FAS 114 totaled $4.0 million, of which
$2.8 million related to loans with no valuation allowance and $1.2 million
related to loans with a corresponding valuation allowance of $0.2 million.
The Company recognized $26 thousand of interest income on impaired loans for
the first quarter of 1995.
4. Income taxes on operating income differ from statutory rates principally
because of tax-exempt interest and goodwill amortization.
5. The Company entered into a new term loan agreement in April of 1994, which
provides for long-term financing of $16 million; that a $2.5 million principal
payment is required on the first day of April of each year, and the balance of
the principal is payable on April 1, 2001; that interest is payable quarterly
at a rate of per annum equal to 90% of the Corporate Base Rate subject to a
5% floor and an 8% ceiling until April 1, 1997; that the Company must comply
with various financial and operating covenants; and that essentially all common
stock of the Subsidiary Banks are pledged as collateral. At March 31, 1995,
$16.0 million was outstanding under this agreement.
6. The following table sets forth the number of shares (in thousands) used
to determine earnings per common and common equivalent share:
Three Months Ended
March 31,
1995 1994
- - -------------------------------------------------------------
Common shares 13,426 12,139
Common share equivalents:
Incremental shares for
stock option plans 53 36
Preference shares 315
Preferred shares 834
- - --------------------------------------------------------------
13,479 13,324
- - --------------------------------------------------------------
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> MAR-31-1995
<CASH> 99,151
<INT-BEARING-DEPOSITS> 100
<FED-FUNDS-SOLD> 23,690
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 298,933
<INVESTMENTS-CARRYING> 138,157
<INVESTMENTS-MARKET> 138,297
<LOANS> 1,246,519
<ALLOWANCE> 21,620
<TOTAL-ASSETS> 1,951,061
<DEPOSITS> 1,688,123
<SHORT-TERM> 24,406
<LIABILITIES-OTHER> 20,781
<LONG-TERM> 33,931
<COMMON> 135
0
0
<OTHER-SE> 183,685
<TOTAL-LIABILITIES-AND-EQUITY> 1,951,061
<INTEREST-LOAN> 25,792
<INTEREST-INVEST> 6,599
<INTEREST-OTHER> 1,510
<INTEREST-TOTAL> 33,901
<INTEREST-DEPOSIT> 14,351
<INTEREST-EXPENSE> 15,237
<INTEREST-INCOME-NET> 18,664
<LOAN-LOSSES> 16
<SECURITIES-GAINS> (12)
<EXPENSE-OTHER> 16,684
<INCOME-PRETAX> 8,371
<INCOME-PRE-EXTRAORDINARY> 5,731
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,731
<EPS-PRIMARY> .43
<EPS-DILUTED> .43
<YIELD-ACTUAL> 7.79
<LOANS-NON> 3,262
<LOANS-PAST> 241
<LOANS-TROUBLED> 559
<LOANS-PROBLEM> 25,141
<ALLOWANCE-OPEN> 21,334
<CHARGE-OFFS> 166
<RECOVERIES> 355
<ALLOWANCE-CLOSE> 21,620
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 21,620
</TABLE>
