SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 0-6835
IRWIN FINANCIAL CORPORATION
(Exact name of registrant as specified in its charter)
INDIANA 35-1286807
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
500 Washington Street, Columbus, IN 47201
(Address of principal executive offices)
(Zip Code)
812/376-1020
__________________________________________
Registrant's telephone number, including area code)
(Former name, former address and former fiscal year
if changed since 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
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Indicate by check mark whether the registrant has filed all
documents and reports required to be filed by Sections 12, 13, or
15(d) of the Securities Exchange Act of 1934 subsequent to the
distribution of securities under a plan confirmed by a court.
Yes No
As of April 30, 1998, there were outstanding 10,906,248 common
shares, no par value, of the Registrant.
IRWIN FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
March 31, December 31
Assets: 1998 1997
<S> <C> <C>
Cash and due from banks $65,834,937 $56,523,723
Federal funds sold 1,750,000 0
Cash and cash equivalents 67,584,937 56,523,723
Interest-bearing deposits with financial institutions 11,411,599 18,240,229
Investment securities (Market value:$79,704,474 in 1998
and $78,028,672 in 1997)-Note 2 79,212,571 77,341,443
Mortgage loans held for sale 563,948,476 528,738,820
Loans and leases, net of unearned income - Note 4 614,811,385 611,092,809
Less: Allowance for loan and lease losses - Note 5 (9,452,285) (8,811,645)
605,359,100 602,281,164
Servicing assets - Note 6 90,171,920 83,043,939
Accounts receivable 69,348,279 54,260,792
Accrued interest receivable 14,339,807 14,778,885
Premises and equipment 18,557,112 21,040,206
Other assets 43,738,562 40,544,715
$1,563,672,363 $1,496,793,916
Liabilities and Shareholders' Equity:
Deposits
Noninterest-bearing $392,591,338 $287,555,280
Interest-bearing 343,187,721 346,012,401
Certificates of deposit over $100,000 96,143,257 86,027,844
831,922,316 719,595,525
Short-term borrowings- Note 7 462,646,036 512,275,185
Long-term debt- Note 8 10,729,055 7,095,718
Other liabilities 80,333,054 81,917,591
Total liabilities 1,385,630,461 1,320,884,019
Company-obligated mandatorily redeemable
preferred securities of subsidiary trust- Note 9 47,944,556 47,926,556
Shareholders' equity
Preferred stock, no par value - authorized
50,000 shares; none issued 0 0
Common stock; no par value - authorized 40,000,000 shares;
issued 11,701,040 shares in 1998 and 1997; including 796,150
and 700,640 shares in treasury in 1998 and 1997, respectively. 29,965,287 29,965,287
Additional paid in capital 986,324 779,976
Unrealized gains on investment securities 61,673 54,895
Retained earnings 121,605,947 115,413,986
152,619,231 146,214,144
Less treasury stock, at cost (22,521,885) (18,230,803)
Total shareholders' equity 130,097,346 127,983,341
$1,563,672,363 $1,496,793,916
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
IRWIN FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
<TABLE>
<CAPTION>
<S> <C> <C>
Three Monthes Ended March March
nterest income: 1998 1997
Loans and leases $16,412,587 $12,724,219
Investment securities:
Taxable 1,901,743 2,015,591
Tax-exempt 75,456 71,431
Loans held for sale 11,738,680 6,912,725
Federal funds sold 346,834 1,056,963
Total interest income 30,475,300 22,780,929
Interest expense:
Deposits 5,309,610 5,044,457
Short-term borrowings 10,843,983 4,801,781
Long-term debt 213,461 304,932
Total interest expense 16,367,054 10,151,170
Net interest income 14,108,246 12,629,759
Provision for loan and lease losses - Note 5 1,617,650 856,000
Net interest income after provision for possible
loan and lease losses 12,490,596 11,773,759
Other income:
Loan origination fees 12,971,660 8,588,346
Gain from sales of loans 14,277,177 8,155,414
Loan servicing fees 13,877,234 12,647,296
Gain on sale of mortgage servicing 9,956,576 6,818,812
Brokerage fees and commissions 218,683 346,827
Trust fees 546,523 580,145
Service charges on deposit accounts 403,328 502,610
Insurance commissions, fees and premiums 397,031 367,375
Unrealized gain/loss on trading securities 1,364,325 (3,912)
Other 1,091,991 694,717
55,104,528 38,697,630
Other expense:
Salaries 25,504,566 18,717,378
Pension and other employee benefits 4,443,033 3,786,227
Office expense 2,919,486 2,766,110
Premises and equipment 4,718,839 3,878,681
Amortization of mortgage servicing asset 5,269,403 3,298,758
Marketing and development 3,291,288 3,024,893
Other 8,330,046 5,359,351
54,476,661 40,831,398
Income before income taxes 13,118,463 9,639,991
Income taxes 4,880,000 3,490,000
8,238,463 6,149,991
Distribution on company-obligated mandatorily
redeemable preferred securities of subsidiary trust 1,174,250 953,715
Net income available to common shareholders $7,064,213 $5,196,276
Earnings per share of common stock:
Basic - Note 1 $0.65 $0.46
Diluted - Note 1 $0.63 $0.45
Dividends per share of common stock $0.08 $0.07
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
IRWIN FINANCIAL CORPORATION AND SUBSIDIARIES
STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE THREE MONTHS ENDED MARCH 31, 1998 AND 1997
<TABLE>
<CAPTION>
Accumulated
Other Additional
Retained Comprehensive Common Paid in Treasury
Total Earnings Income Stock Capital Stock
<S> <C> <C> <C> <C> <C> <C>
Balance at
January 1, 1998 $127,983,341 $115,413,986 $54,895 $29,965,287 $779,976 ($18,230,803)
Comprehensive Income: Note 1
Net Income 7,064,213
Other Comprehensive Income 6,778
Total 7,070,991
Cash dividends (872,252) (872,252)
Purchase of treasury stock (4,446,201) (4,446,201)
Sales of treasury stock 361,467 206,348 155,119
Balance March 31, 1998 $130,097,346 $121,605,947 $61,673 $29,965,287 $986,324 ($22,521,885)
Balance at
January 1, 1997 $118,902,080 $94,083,540 $56,523 $29,965,287 $0 ($5,203,270)
Comprehensive Income: Note 1
Net Income 5,196,276
Other Comprehensive Income (117,176)
Total 5,079,100
Cash dividends (791,100) (791,100)
Purchase of treasury stock (2,784,189) (2,784,189)
Sales of treasury stock 504,525 53,880 450,645
Balance March 31, 1997 $120,910,416 $98,488,716 ($60,653) $29,965,287 $53,880 ($7,536,814)
</TABLE>
IRWIN FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
March 31,
1998 1997
<S> <C> <C>
Net income $7,064,213 $5,196,276
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation and amortization 6,559,285 4,401,392
Provision for loan and lease losses 1,617,650 856,235
Amortization of premiums, less accretion of discounts 308,929 233,916
Mortgage loan originations (1,996,541,539) (1,098,549,221)
Sales of mortgage loans 1,961,331,883 1,200,985,581
Gain on sale of mortgage servicing (9,956,576) (6,818,812)
Other, net (24,809,511) (12,898,360)
Net cash (used) provided by operating activities (54,425,666) 93,407,007
Lending and investing activities:
Proceeds from maturities/calls of investment securities:
Held-to-Maturity 2,715,000 95,000
Available-for-Sale 3,792,543 1,842,195
Proceeds from sales of investment securities:
Available-for-Sale 1,000,000 0
Purchase of investment securities:
Held-to-Maturity (3,640,000) 0
Available-for-Sale (1,006,458) (8,873,307)
Net (increase) decrease in interest-bearing
deposits with financial institutions 6,828,630 (799,930)
Net increase in loans, excluding sales (133,523,172) (64,912,371)
Sale of loans 128,827,586 68,730,444
Additions to mortgage servicing assets (23,092,314) (12,431,709)
Proceeds from sale of mortgage servicing assets 20,651,506 18,722,373
Other, net 1,541,566 (1,768,644)
Net cash provided by lending and investing activities 4,094,887 604,051
Financing activities:
Net increase in deposits 112,326,791 6,596,434
Net (decrease) in short-term borrowings (49,629,149) (152,985,065)
Proceeds (Repayment) of long-term debt 3,633,337 (6,033,259)
Sale of company-obligated manditorily redeemable
preferred securities of subsidiary trust 18,000 47,966,682
Purchase of treasury stock (4,446,201) (2,784,189)
Proceeds from sale of stock for employee benefit plans 361,467 505,904
Dividends paid (872,252) (792,478)
Net cash provided (used) by financing activities 61,391,993 (107,525,971)
Net increase (decrease) in cash and cash equivalents 11,061,214 (13,514,913)
Cash and cash equivalents at beginning of year 56,523,723 71,365,788
Cash and cash equivalents at end of year $67,584,937 $57,850,875
Supplemental disclosures of cash flow information:
Cash paid during the period:
Interest $16,275,411 $10,016,414
Income taxes $641,700 $160,025
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
Consolidations: Irwin Financial Corporation and its subsidiaries (the
Corporation) provide financial services throughout the United States. The
Corporation is engaged in the mortgage banking, commercial banking, home equity
lending, and equipment leasing lines of business. Intercompany balances and
transactions have been eliminated in consolidation. Significant accounting
policies followed by the Corporation are consistent with those followed for
annual financial reporting. The information furnished reflects all adjustments
which are, in the opinion of management, necessary for a fair presentation of
the results of interim periods.
Reclassifications: Certain amounts in the 1997 consolidated financial
statements have been reclassified to conform to the 1998 presentation.
Comprehensive Income: On January 1, 1998, the Corporation adopted Statement
of Financial Accounting Standards No. 130, "Reporting Comprehensive Income".
This statement established standards for reporting comprehensive income
in financial statements. Comprehensive income is defined as the change in
equity during a period from transactions and other events from nonowner
sources.
NOTE 2 - INVESTMENT SECURITIES
The carrying amounts of investment securities, including net unrealized gains
of $102,788 and $76,708 on available-for-sale securities at March 31, 1998 and
December 31, 1997, respectively, are summarized as follows:
<TABLE>
<CAPTION>
March 31, December 31,
1998 1997
<S> <C> <C>
Held-to-Maturity
US Treasury and Government obligations $24,865,661 $35,732,672
Obligations of states and political subdivisions $5,738,668 $4,813,919
Mortgage-backed securities $3,981,380 $5,968,340
Total Held-to-Maturity $34,585,709 $46,514,931
Trading:
Interest -only strips $27,174,910 $22,133,793
Available-for-Sale
US Treasury and Government obligations $14,572,773 $6,052,952
Mortgage-backed securities $2,481,760 $2,617,804
Other $397,419 $21,963
Total Available for Sale $17,451,952 $8,692,719
Total Investments $79,212,571 $77,341,443
</TABLE>
Securities which the Corporation has the positive intent and ability to hold
until maturity are classified as "held-to-maturity" and are stated at cost
adjusted for amortization of premium and accretion of discount. Securities
that might be sold prior to maturity are classified as "available-for-sale"
and are stated at fair value. Unrealized gains and losses on available-for-
sale securities, net of the future tax impact, are reported as a separate c
omponent of shareholders' equity until realized.
Interest- only strips are classified as "trading" and are stated at fair value.
Unrealized gains and losses on trading securities are included in earnings.
NOTE 3 - MORTGAGE LOANS HELD FOR SALE
Mortgage loans held for sale are stated at the lower of cost or market as of
the balance sheet date.
NOTE 4 - LOANS AND LEASES
<TABLE>
Loans and leases are summarized as follows:
<CAPTION>
March 31, December 31,
1998 1997
<S> <C> <C>
Real estate-mortgage $208,070,615 $222,817,979
Commercial, financial and agricultural 228,392,045 212,094,742
Real estate-construction 75,185,542 73,279,176
Consumer 35,969,996 39,984,692
Lease financing 83,165,446 78,079,206
Unearned income (15,972,259) (15,162,986)
$614,811,385 $611,092,809
</TABLE>
NOTE 5 - ALLOWANCE FOR LOAN AND LEASE LOSSES
<TABLE>
Changes in the allowance for loan and lease losses are summarized as follows:
<CAPTION>
March December 31,
1998 1997
<S> <C> <C>
Balance at beginning of year $8,811,645 $6,874,944
Provision for loan and lease losses 1,617,650 6,238,000
Reduction due to sale of loans (452,021) (1,694,316)
Recoveries 125,401 538,213
Charge-offs (650,390) (3,145,196)
Balance at end of period $9,452,285 $8,811,645
</TABLE>
NOTE 6- SERVICING ASSETS
Included on the consolidated balance sheet at March 31, 1998 and December 31,
1997 are $90,171,920 and $83,043,939, respectively, of servicing assets.
These amounts relate to the principal balances of loans serviced by the
Corporation for investors. Although they are not generally held for purposes
of sale, there is an active secondary market for servicing assets.
NOTE 7- SHORT-TERM BORROWINGS
<TABLE>
Short-term borrowings are summarized as follows:
<CAPTION>
March 31, December 31,
1998 1997
<S> <C> <C>
Repurchase agreements and drafts payable related to
mortgage loan closings $248,306,596 $240,659,463
Lines of Credit 134,087,413 112,590,484
Federal funds 53,865,000 142,650,000
Commercial paper 26,387,027 16,375,238
Total $462,646,036 $512,275,185
</TABLE>
Repurchase agreements at March 31, 1998 and December 31, 1997, include
$63,174,482 and $141,919,483 respectively, in mortgage loans sold under
agreements to repurchase which are used to fund mortgage loans sold prior
to sale in the secondary market. These repurchase agreements are
collateralized by mortgage loans held for sale.
Drafts payable related to mortgage loan closings totaled $179,491,502
and $93,615,694 at March 31, 1998 and December 31, 1997. These
borrowings are related to mortgage closings at the end of the period which
have not been presented to banks for payment. When presented for payment
these borrowings will be funded internally or by borrowing from the lines
of credit.
The Corporation has lines of credit available to fund mortgage loans held
for sale. Interest on the lines of credit is payable monthly at variable
rates ranging from 6.04% to the lender's prime rate.
NOTE 8 -- LONG-TERM DEBT
Long-term debt at March 31, 1998 of $10,729,055 consists of various notes
payable at annual interest rates ranging from 6.3% to 9.6% and maturity
dates ranging from September 30, 1998 through April 30, 2002. Long -term
debt as of December 31, 1997 was $7,095,718 and consisted of various notes
payable at annual interest rates ranging from 6.3% to 9.6% and maturity dates
through April 30, 2002.
NOTE 9 -- COMPANY-OBLIGATED MANDATORILY REDEEMABLE PREFERRED SECURITIES
OF SUBSIDIARY TRUST
In January 1997, the Corporation issued $50,000,000 of trust preferred
securities through IFC Capital Trust I, a trust created and controlled
by the Corporation. The securities were issued at $25 per share with a
cumulative dividend rate of 9.25%, payable quarterly. They have an initial
maturity of 30 years with a 19-year extension option. The securities are
callable at par after five years, or immediately, in the event of an
adverse tax development affecting the Corporation's classification of the
securities for federal income tax purposes. They are not convertible into
common stock of the Corporation. The securities are shown on the
balance sheet net of capitalized issuance costs.
The sole assets of IFC Capital Trust I are subordinated debentures of the
Corporation with a principal balance of $51,546,400, an interest rate of
9.25% and an initial maturity of 30 years with a 19-year extension option.
NOTE 10 -- EARNINGS PER SHARE
<TABLE>
Earnings per share calculations are summarized as follows:
<CAPTION>
Basic Earnings Effects of Diluted Earnings
March 31, Per Share Stock Options Per Share
1998:
<S> <C> <C> <C>
Net income $7,064,213 $0 $7,064,213
Shares 10,931,073 249,032 11,180,105
Per-Share Amount $0.65 ($0.02) $0.63
1997:
Net income $5,196,276 $0 $5,196,276
Shares 11,340,789 197,932 11,535,639
Per-Share Amount $0.46 ($0.01) $0.45
</TABLE>
NOTE 11 -- CONTINGENCIES
In the normal course of business, Irwin Financial Corporation and its
subsidiaries are subject to various claims and other pending and possible
legal actions.
As of March 31, 1998, Irwin Mortgage Corporation (IMC) was a defendant
to four separate class action lawsuits relating to the following: IMC's
administration of mortgage escrow accounts, IMC's right to require its
borrowers to pay premiums for private mortgage insurance, IMC's right to
pay broker fees to mortgage brokers, and IMC's participation in a housing
opportunity program.
At present, it is not possible for the Corporation to predict the likelihood of
an unfavorable outcome or to establish the possible extent or amount of
liability or potential loss exposure with respect to the litigation.
NOTE 12 --SUBSEQUENT EVENT
On April 30, 1998, the Corporation's Board of Directors approved a two-for-one
stock split effective May 27, 1998, for all shareholders of record on May 15,
1998.
PART I
Item 2
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Management's discussion and analysis should be read in
conjunction with the accompanying consolidated financial
statements and footnotes. Forward-looking statements contained
in the following discussion are based on estimates and
assumptions that are subject to significant business, economic
and competitive uncertainties, many of which are beyond the
Corporation's control and are subject to change. These
uncertainties can affect the actual results and could cause
actual results to differ materially from those expressed in any
forward-looking statements in this discussion.
Overview
Net income for the first quarter ended March 31, 1998, was
$7.1 million, up 35.9% from the first quarter 1997 net income of
$5.2 million. Diluted earnings per share were $0.63 for the
first quarter of 1998 as compared to $0.45 for the same period in
1997. Return on equity for the first quarter of 1998 was 22.05%,
up from 17.31% in 1997.
Lines of Business
Irwin Financial Corporation is comprised of four lines of
business:
Mortgage banking (includes Irwin Mortgage Corporation and
the related activities of Irwin Union Bank and Trust)
Community banking (Irwin Union Bank and Trust)
Home equity lending (includes Irwin Home Equity and the
related activities of Irwin Union Bank and Trust)
Equipment leasing (includes Irwin Equipment Finance Corp.
and the related activities of Irwin Union Bank and Trust)
Listed below are the earnings by line of business for the three
months ended March 31, 1998, as compared to the same period in
1997:
Three Months
Ended March 31,
1998 1997
Mortgage banking $5,651,518 $3,919,851
Community banking 1,546,585 1,350,823
Home equity lending 795,607 1,186,411
Equipment leasing 9,594 5,273
Parent (including consolidating (939,091) (1,266,082)
entries)
$7,064,213 $5,196,276
Mortgage Banking
Selected Financial Data (shown in thousands):
Three months
ended March 31,
1998 1997
Selected Income Statement
Data:
Loan origination fees $12,844 $8,479
Gain from sales of loans 8,816 3,390
Loan servicing fees 12,740 11,973
Net interest income 4,366 3,537
Gain on sale of servicing 9,957 6,819
Other income 379 313
Operating expense 39,555 27,895
Income before tax 9,547 6,616
Income tax 3,895 2,696
Net income $5,652 $3,920
Return on average equity 28.40% 23.30%
Mortgage loan closings $1,996,542 $1,098,549
Selected Operating Data: March 31, December
31,
1998 1997
Servicing portfolio $10,773,143 $10,713,549
Mortgage loans held for sale 384,457 435,123
Mortgage servicing assets 88,018 81,610
The mortgage banking line of business consists of Irwin
Mortgage Corporation and the related activities of Irwin Union
Bank. The business is headquartered in Indianapolis and
originates, packages, sells, and services residential mortgage
loans throughout the United States.
Net income for the first quarter was $5.7 million, up 44.2%
from the same period in 1997. Mortgage banking results were
affected by a favorable interest rate environment during the
quarter. Mortgage loan originations were up 81.7% to $2.0
billion. A significant factor in this increase was the rise in
refinancing activity. Refinanced loans originated in the first
quarter of 1998 accounted for 55.1% of total originations, up
from 23.3% during the same period in 1997. Loan origination fees
increased $4.4 million or 51.5% from the first quarter of 1997.
This increase is a result of the increased production in 1998.
Gains from the sales of mortgage loans were $8.8 million in the
first quarter of 1998, up from $3.4 million in 1997. This
increase was due to the increase in 1998 production combined with
better market pricing than in the previous year.
The mortgage banking business maintains the flexibility to
either sell servicing assets for current cash flow or retain
servicing for future cash flow. The decision to sell or retain
servicing is based on the current market conditions balanced with
the interest rate risk tolerance of the business. During the
first quarter of 1998, $0.9 billion of mortgage servicing rights
were sold, compared with first quarter 1997 servicing sales of
$1.2 billion. Gains on the sale of mortgage servicing totaled
$10.0 million in the first quarter of 1998, up from $6.8 million
a year earlier. The increase reflects an improvement in pricing
in 1998.
The mortgage servicing portfolio totaled $10.8 billion as
of March 31, 1998, an increase of 0.6% from December 31, 1997.
Mortgage servicing assets capitalized on the balance sheet
totaled $88.0 million at March 31, 1998, compared to $81.6 at
December 31, 1997 and $68.2 million at March 31, 1997. Included
in first quarter 1998 expenses is $5.0 million of amortization
expense relating to the mortgage servicing assets, up from $3.3
million in the first quarter of 1997. The increase in
amortization expense reflects the growth in the mortgage
servicing asset.
As a result of the increase in mortgage loan closings from
the same quarter in 1997, net interest income was up in the first
quarter of 1998. Net interest income after the provision for
loans losses was $4.4 million for the three months ended March
31, 1998, up 23.4% from the first quarter 1997.
Operating expenses, excluding mortgage servicing asset
amortization expense, were up $9.9 million or 40.1% from the
first quarter of 1997. The most significant increase occurred in
salaries and benefits which were up $6.2 million or 40.3%. This
increase resulted from the increased production activity during
the first quarter of 1998.
Community Banking
Selected Financial Data (shown in thousands):
Three months
ended March 31,
1998 1997
Selected Income Statement Data:
Net interest revenue $6,004 $5,076
Provision for loan and lease losses (570) (441)
Other income 2,905 2,427
Operating expense 5,864 4,892
Income before tax 2,475 2,170
Income tax 928 819
Net income $1,547 $1,351
Return on average equity 15.95% 15.86%
March 31, December
31,
Selected Balance Sheet Data: 1998 1997
Securities and short-term $93,074 $95,367
investments
Loans and leases 429,406 410,272
Allowance for loan and lease losses (5,929) (5,525)
All other assets 42,263 39,119
Total assets $558,814 $539,233
Deposits $476,675 $486,481
All other liabilities 42,201 14,362
Total liabilities 518,876 500,843
Shareholder's equity 39,938 38,390
Total liabilities and shareholder's $558,814 $539,233
equity
Community banking activities are conducted by Irwin Union
Bank through locations in eight counties in Indiana. Net income
was up $195.8 thousand from 1997, or 14.5% to $1.5 million. For
the first quarter, net interest income improved $928.5 thousand,
or 18.3%, from 1997. The increased net interest income is
reflective of a 23.5% increase in the loan and lease portfolio
from the first quarter of 1997. The growth results from the
community bank's continued penetration of new markets in Indiana.
The provision for loan and lease losses was $570.0 thousand, up
$128.7 thousand from a year earlier.
Following is an analysis of the community bank's net
interest income and net interest margin computed on a tax
equivalent basis:
<TABLE>
<CAPTION>
For the Three
Months ended 1998 1997
March 31,
Average Yield/ Average Yield/
(In thousands) Balance Interest Rate Balance Interest Rate
<S> <C> <C> <C> <C> <C> <C>
Interest -
earning assets $514,123 $11,123 8.77% $459,985 $ 9,561 8.43%
Interest -
bearing $435,879 $5,044 4.69% $406,032 $ 4,485 4.48%
liabilities
Net interest $6,079 $ 5,076
income
Net interest 4.80% 4.48%
margin
</TABLE>
The improvement in net interest margin reflects a shift in
the community bank's asset concentration to a higher percentage
of loans and a lower percentage of cash and investment
securities.
Other income in the first quarter was up $477.8 thousand or
19.7% from the first quarter of 1997. Sales of consumer and
mortgage loans generated a gain of $280.3 thousand in 1998
compared with a gain of $102.0 thousand in 1997. Additionally,
since the community bank continues to service the loans it sells,
servicing fee income was up 57.9% in 1998 to $407.7 thousand.
Other expenses were up $972.8 thousand, or 19.9%. The
increase was principally due to expanded operations in new
markets.
Home Equity Lending
Selected Financial Data (shown in thousands):
Three months
ended March 31,
1998 1997
Selected Income Statement Data:
Net interest revenue $887 $1,879
Provision for loan losses (407) 81
Gain on sale of loans 5,181 4,659
Loan servicing fees 730 431
Other income 1,488 48
Total net revenues 7,879 7,098
Operating expense 7,083 5,912
Pre-tax income $796 $1,186
March 31, December
31,
Other Selected Financial Data: 1998 1997
Home equity loans, net of allowance $91,581 $111,779
Interest-only strips 27,175 22,134
Total assets 143,531 165,242
Short-term debt 128,250 146,219
Shareholders' equity 8,731 10,936
Servicing portfolio 381,182 358,166
The home equity lending business includes Irwin Home Equity
Corporation and the related activities of Irwin Union Bank.
Irwin Home Equity is located in San Ramon, California. It
markets home equity loans through direct mail and telemarketing
and currently markets in 22 states.
The home equity lending business recorded pre-tax income of
$0.8 million in the first quarter of 1998, compared to $1.2
million in 1997. During the first quarter of 1998, the home
equity lending business originated $55.2 million of home equity
loans, up 23.1% from 1997. Gains recognized from the
securitization of home equity loans totaled $5.2 million in 1997
compared to $4.7 million a year earlier.
The home equity lending business continues to service the
loans it has securitized. The servicing portfolio, which
includes loans held on the balance sheet as well as securitized
loans, increased 45.5% from the same date in 1997. The business
earns a servicing fee equal to one percent of the outstanding
principal balance of securitized loans. As a result of the
increase in the servicing portfolio, servicing fee income
increased 69.2% to $0.7 million in the first quarter of 1997.
Interest-only strips are carried at their market values
which are determined using assumptions about the duration and
performance of the securitized loans. At March 31, 1998, the
assumed annual loss rates ranged from 0.50% to 0.64%, prepayment
speeds ranged from 30% to 40% CPR (conditional prepayment rate)
per year, and the discount rate was 15.0%. Included in other
income during the first quarter of 1998 was an unrealized gain of
$1.4 million recorded to adjust the carrying value of interest-
only strips to their market value. This compares to an
unrealized loss of $4.0 thousand recorded in 1997.
Net interest income before loan loss provision was $0.9
million in 1998, down from $1.9 million a year earlier. Included
in interest income is income earned on the interest-only strip,
net of amortization expense. The decline is due to the timing of
loan securitizations in 1998.
The business will maintain the flexibility of either
holding the loans it produces or securitizing them. Management
will evaluate these options throughout the year in light of
market conditions and financial objectives.
Operating expenses were $7.0 million in the first quarter
of 1998, up 19.8% from 1997. The increase reflects the increased
production activities of the company.
Equipment Leasing
The equipment leasing business recorded pre-tax income of
$9.6 thousand during the first quarter of 1998 compared to $5.3
thousand in the first quarter 1997. Net interest revenue was up
$258.7 thousand, or 23.0% year over year. Total net revenues
increased 9.1% to $1.2 million. Operating expenses were up $93.4
thousand or 8.8% to $1.2 million. Lease and loan volume totaled
$11.0 million during the first quarter of 1998, up 33.2% from
1997.
The equipment leasing business has developed a strategy to
expand its operations during 1998. Alternatives to be considered
will include becoming more active in the upper end of the medical
equipment price range, hiring additional field sales
representatives to cover manufacturing accounts more effectively,
and moving into new lines of equipment.
Parent Company (including Consolidating Entries)
For the period ended March 31, 1998, the parent company
recorded a net loss of $0.9 million compared with $1.3 million a
year earlier. The improvement was due in part to the income tax
expense or benefit generated at the home equity lending and
equipment leasing businesses which is recorded on the parent's
books. For the first quarter of 1998, the parent company
recorded $322.0 thousand of income tax expense relating to these
lines of business. During the same period a year earlier, the
parent company recorded an expense of $476.7 thousand.
Consolidated Income Statement Analysis
Net interest income for the first quarter of 1998 totaled
$14.1 million, up 11.7% from the first quarter of 1997. The
increase was the result of increased loan volume throughout the
Corporation.
The loan and lease loss provision was $1.6 million for the
first quarter of 1998, compared to $0.9 million for the same
period in 1997. See the section on credit risk for further
discussion.
Noninterest income was up $16.4 million or 42.4% in the
first quarter of 1998 to $55.1 million. This increase was driven
primarily by mortgage banking activities. Total income from
mortgage loan originations, loan sales, servicing, and servicing
sales was $44.4 million during the first quarter of 1998, up from
$30.7 million a year earlier.
Operating expenses also increased in 1998 as the first
quarter was up $13.6 million or 33.4% from 1997. This increase
is due to the increased loan production activities throughout the
Corporation.
The effective income tax rate for the Corporation was 40.9%
in the first quarter of 1998 compared to 40.2% in 1997.
Consolidated Balance Sheet Analysis
Total assets of the Corporation at March 31, 1998, were $1.6
billion, up from December 31, 1997 total assets of $1.5 billion.
The increase in assets was accompanied by an increase in deposits
of $112.3 million or 15.6%. A portion of noninterest bearing
deposits is associated with escrow accounts held on loans in the
servicing portfolio of Irwin Mortgage. These escrow accounts
totaled $325.0 million at March 31, 1998, up from $218.7 million
at December 31, 1997.
Shareholders' equity grew to $130.1 million, or $11.93 per
share, a 6.2% increase over the $123.5 million, or $11.23 per
share at the end of 1997. The Corporation's equity to assets
ratio ended the quarter at 8.32%, compared to 8.55% at the end of
1997.
Prior to the adoption of a new mortgage banking standard in
the second quarter of 1995, mortgage banking accounting did not
allow the full value of mortgage servicing assets to be reflected
on the balance sheet. Since a significant portion of the
Corporation's mortgage servicing portfolio was generated prior to
the adoption of the new accounting standard, the Corporation's
mortgage loan servicing portfolio represents substantial economic
value which is not recorded on the balance sheet. The following
table includes the estimated after-tax value of the servicing
portfolio at the end of the current quarter as well as the past
two year ends.
(In thousands) March 31, Dec. 31, Dec. 31,
1998 1997 1996
Servicing portfolio $10,773,143 $10,713,549 $10,810,988
balance
Value @1.5% $161,597 $160,703 $162,165
Less: capitalized 88,018 81,610 71,715
servicing
tax liability at 29,432 31,637 36,180
40%
Net value $44,147 $47,456 $54,270
Per share of common $4.05 $4.31 $4.77
stock
With the implementation of the new accounting standard in 1995,
this off-balance sheet value will decline over future years and
eventually be reduced to zero.
In January 1997, the Corporation issued $50.0 million of
trust preferred securities through a trust created and controlled
by the Corporation. The securities, which are publicly traded,
were issued at $25 per share with a cumulative dividend rate of
9.25%, payable quarterly. They have an initial maturity of 30
years with a 19-year extension option which the Corporation can
exercise at any point during the first 30 years. The securities
are callable at par after five years, or immediately, in the
event of an adverse tax development affecting the Corporation's
classification of the securities for federal income tax purposes.
The securities are not convertible into common stock of the
Corporation.
Credit Risk
The assumption of credit risk is a key source of earnings
for the community banking, home equity lending, and equipment
leasing businesses. In addition, the mortgage banking business
assumes credit risk despite the fact that the mortgages are
typically secured. The credit risk in the loan portfolio of the
community bank and home equity lending business has the most
potential to have a significant effect on consolidated financial
performance.
The community banking and home equity lending businesses
manage credit risk through the use of lending policies, credit
analysis and approval procedures, and personal contact with the
borrowers. Loans over a certain size are reviewed prior to
approval by a loan committee. The equipment leasing business
manages credit risk in a similar manner through the use of
lending policies, credit analysis procedures, and personal
contact with lessees.
The adequacy of the allowance for loan and lease losses is
critical to the fair valuation of net loans and leases recorded
on the Corporation's balance sheet. Management evaluates the
creditworthiness of significant borrowers, past loan and lease
loss experience, and current and anticipated economic conditions.
The allowance for loan and lease losses is reduced by loans and
leases which, in the opinion of management, are deemed to be
uncollectible. The allowance is increased by provisions against
income. The ending allowance at any reporting period reflects
management's opinion of the future loss potential of all loans
and leases currently recorded on the Corporation's books.
As of March 31, 1998, the allowance for loan and lease
losses as a percentage of total loans and leases was 1.54%,
compared to 1.44% at December 31, 1997. For the three months
ended March 31, 1998, the provision for loan and lease losses
totaled $1.6 million, 88.9% higher than the amount recorded in
the first quarter of 1997. The increase in the provision for
loan losses results from an increase in nonperforming loans as
discussed below. Net charge-offs for the quarter were $525.0
thousand as compared to $382.8 thousand in 1997.
Nonperforming assets (loans 90 days past due, nonaccrual,
and owned real estate) were $11.8 million or 0.75% of total
assets as of March 31, 1998, up from $9.5 million or 0.64% at
December 31, 1997 and $9.4 million or 0.72% at December 31, 1996.
The first quarter 1998 increase was attributable to a $2.6
million increase in nonperforming assets at the mortgage bank.
Although most mortgages are either government-insured or conform
to the underwriting guidelines of the government-sponsored
agencies that support the secondary mortgage market, the mortgage
bank has credit risk on those loans that do not receive
government insurance or that must be repurchased from agencies
due to lack of conformity to underwriting guidelines. Over the
last two years, the government-sponsored agencies which provide
credit enhancement on the loans underwritten by the mortgage bank
have become more stringent in their adherence to their right to
seek recourse from the originator of loans. As such, the
mortgage bank has had an increase in the number of loans it has
repurchased from the agencies. This has resulted in an increase
in the nonperforming loans and other real estate owned at the
mortgage bank. The mortgage bank seeks to cure the underwriting
defect in these loans and resell them to the agencies or sell
them to alternative investors.
Additionally, during 1997 the mortgage bank entered into
the nonprime mortgage market which is comprised of borrowers who
do not qualify under the underwriting guidelines established by
the government-sponsored agencies for conforming first mortgages.
The majority of these loans are sold on a non-recourse, service
released basis to private investors. However, the mortgage bank
retains the credit risk on any loans that are not sold. Of the
total increase in nonperforming assets, $0.5 million relates to
these nonprime loans.
Nonperforming Assets March December December
(In Thousands) 31, 31, 31,
1998 1997 1996
Accruing loans past
due
90 days or more:
Real Estate $0 $534 $234
Commercial 452 382 256
Leasing 0 0 0
Consumer 52 86 205
Subtotal 504 1,002 695
Nonaccrual loans:
Real Estate 5,955 5,333 2,481
Commercial 1,139 777 2,739
Leasing 829 506 1,261
Consumer 229 63 --
Subtotal 8,152 6,679 6,481
Total nonperforming $8,656 7,681 7,176
loans
Other real estate 3,127 1,828 2,239
owned
Total nonperforming
assets $11,783 $9,509 $9,415
Nonperforming assets
to 0.75% 0.64% 0.72%
total assets
Liquidity
Liquidity is the availability of funds to meet the daily
requirements of the business. For financial institutions, demand
for funds comes principally from extensions of credit and
withdrawal of deposits. Liquidity is provided by asset
maturities, sales of investment securities, or short-term
borrowings. Seasonal fluctuations in deposit levels and loan
demand require differing levels of liquidity at various times
during the year. Liquidity measures are formally reviewed by
management monthly, and they continue to show adequate liquidity
in all areas of the organization.
Interest Rate Sensitivity
Interest rate sensitivity refers to the degree to which the
Corporation's short- and long-term earnings would change due to
changes in market rates of interest. The Corporation's goal in
addressing this risk is to manage its businesses so that
movements of interest rates have an immaterial impact on net
income and on the value of its assets and liabilities. To
measure its sensitivity to changes in interest rates and
appropriate hedging strategies, the Corporation uses a
combination of measurement techniques including simulation, rate
shock analysis, and gap analysis.
The following table shows in summary form the Corporation's
interest rate sensitivity based on expected interest rate
repricing intervals for the balance sheet as of March 31, 1998 (a
"gap" analysis). For example, a 30-year adjustable rate
residential mortgage held in the portfolio of Irwin Union Bank is
included in the "4-12 month" category since that is the time
frame over which the asset will reprice. Some items, such as
certain deposit accounts, are non-interest bearing, but will vary
in balance due to interest rate changes. Since the Corporation
relies on such accounts in its operations and would need to
replace them with "at market" liabilities should the non-interest
bearing ones be unavailable, they are included in the gap table
and in simulations as "non-market" items.
<TABLE>
<CAPTION>
Within 4-12 1-5 Over 5 Subtotal Non- Total
3 Months Years Years market
Months
(In Thousands)
<S> <C> <C> <C> <C> <C> <C>
Assets:
Interest-bearing
deposits with $4,426 $6,191 $795 $0 $11,412 $0 $11,412
banks
Federal Funds 1,750 0 0 0 1,750 0 1,750
Sold
Taxable
investment 23,585 15,982 27,748 6,159 73,474 0 73,474
securities
Tax-exempt
investment 0 500 1,117 4,122 5,739 0 5,739
securities
Mortgages held
for sale 563,948 0 0 0 563,948 0 563,948
Loans, net of
unearned
income 278,718 91,917 144,303 99,873 614,811 0 614,811
Total interest-
earning assets 872,427 114,590 173,963 110,154 1,271,134 0 1,271,134
Liabilities:
Non-interest
bearing deposits 0 0 0 0 0 389,470 389,470
Money Market 18,888 0 46,803 11,420 77,111 0 77,111
checking
Money Market 1,954 0 6,076 0 8,030 0 8,030
savings
Regular savings 25,852 1,994 10,635 8,217 46,698 0 46,698
Time deposits 176,751 80,319 53,001 544 310,615 0 310,615
Short-term 462,646 0 0 0 462,646 0 462,646
borrowings
Long-term debt 945 2,269 7,515 0 10,729 0 10,729
Total interest-
bearing 687,036 84,582 124,030 20,181 915,829 389,470 1,305,299
liabilities
Trust preferred
securities 0 0 0 50,000 50,000 0 50,000
Interest
sensitivity gap 185,391 30,008 49,933 39,973 305,305 (389,470) (84,165)
Cumulative
interest 185,391 215,399 265,332 305,305 (84,165) (84,165)
sensitivity gap
</TABLE>
As the above table shows, the consolidated one-year gap at
March 31, 1998 was a positive $215.4 million. This compares to a
positive gap of $143.0 million at December 31, 1997.
Since the gap was positive at March 31, 1998, it means that
the Corporation's net interest income was positioned to benefit
from rising rates, or to be harmed from declining rates. While
traditional interest rate risk focuses on the changes in net
interest income due to interest rate changes, the Corporation
engages in other activities which are also affected by interest
rate changes. Principal among these are mortgage loan
origination and servicing. Through the use of simulations using
regression modeling and option-adjusted valuation techniques for
modeling expected customer behavior, the Corporation attempts to
analyze and mitigate the interest rate risks associated with the
negatively correlated activities of mortgage loan origination and
servicing. For example, if interest rates decline, management
expects an increase in mortgage loan origination income and a
decline in the value of mortgage servicing rights. Management
attempts to monitor this exposure to traditional interest rate
risk as well as interest rate influences on production and
servicing value in a comprehensive manner.
Capital Adequacy
Capital is a major focus of regulatory attention, with the
risk-based capital standard being the principal capital adequacy
measure. Based on this standard, financial institutions are
currently required to have a risk-based capital ratio of at least
10.0% to be considered well-capitalized. In addition to the
requirements for the risk-based capital ratio, Tier I capital of
at least 6.0% of total assets must be maintained to be considered
well-capitalized. Equity and risk-based capital ratios for the
Corporation are as follows:
March 31, December 31, December 31,
1998 1997 1996
Equity to Assets 8.32% 8.55% 9.15%
Risk-Based Capital 16.64% 17.54% 14.23%
Ratio
Tier I Capital Ratio 15.21% 16.02% 13.47%
Year 2000
The Year 2000 issue is the result of practices within the
information technology industry initiated years ago to program
software and computer chips to store dates in a six digit,
shortcut format. For example, January 15, 1998, may be written
as 01/15/98 and the computer is programmed to assume that the
first two digits of the year are "19". As a result, certain
computer systems will not accurately interpret dates beyond
December 31, 1999, and will consider dates beginning January 1,
2000 to represent January 1, 1900. This could result in a
computer failure or miscalculations, causing operating
disruptions, including an inability to process transactions, send
invoices or engage in similar normal business activities. The
Year 2000 issue exists across all industries and could affect all
businesses that use computers, but is particularly relevant in
the financial services industry served by the Corporation.
The Corporation is actively addressing its exposure to the
Year 2000 issue and has five teams (one at each of its four
operating entities and at the parent company) focusing on the
issue. The Corporation has developed a six-stage project plan
that is expected to culminate in final testing and implementation
by mid-1999. The six stages include: (i) an awareness campaign
throughout the Corporation to raise the level of importance and
attention beyond that of a typical "information technology"
issue; (ii) assessment of the Corporation's Year 2000 problem,
including contract review, a technical audit and an estimation of
remediation costs; (iii) remediation of non-compliant systems
through repairs, upgrades or replacements of computer programs
and chips; (iv) testing of the Corporation's systems for Year
2000 compliance; (v) implementation of the remediated systems and
(vi) auditing of the completed processes and remediation for post-
year 2000 compliance. The Corporation has engaged a leading
technology-consulting firm to increase its level of confidence
that the methods and standards it employs to address the Year
2000 issue are appropriate and comprehensive.
The Corporation, together with its consultants, is currently
in varying stages of the assessment, remediation and testing
steps of its plan and cannot definitively estimate the extent of
the problem for the Corporation or the cost to remedy it.
However, the Corporation does not currently believe that the
costs of the remediation will have a material impact on the
Corporation's results of operations, liquidity and capital.
The Corporation has developed a technology strategy that
primarily uses systems developed by third parties and has very
few internally developed applications. Consequently, the
Corporation's principal focus is on assuring Year 2000 compliance
from its commercial application vendors. In those instances
where the Corporation believes a vendor may not be compliant in a
timely manner, the Corporation is taking additional steps to
address its needs with alternative systems.
Financial services require exact calculations and prompt
delivery. If the Corporation's products are not accurate and
timely, it increases its exposure to risks such as client service
failure, regulatory compliance problems and disruption of third
party operations when it interacts with third parties.
The Corporation currently expects to implement the necessary
changes to ensure that its internal operations are Year 2000
compliant prior to December 31, 1999. To achieve this goal, the
Corporation is reliant upon its information system vendors to
provide Year 2000 compliant systems sufficiently before December
31, 1999 to allow ample time to test the systems. There can be
no assurance that all of the Corporation's key suppliers will
achieve Year 2000 compliance in a timely manner. The failure of
the Corporation's vendors to successfully address the Year 2000
issue in a timely manner would have a materially adverse effect
on the Corporation's ability to successfully address the Year
2000 issue. In addition, if the Year 2000 issue adversely
affects the Corporation's customers, this in turn could have a
material adverse effect on the Corporation's ability to collect
and service outstanding loans. Finally, even if the Corporation's
internal operations and customers are Year 2000 compliant, the
Corporation's operations can be materially adversely affected if
agencies and third parties (such as the Federal Reserve) with
whom the Corporation interacts fail to address the Year 2000
issue successfully.
Any of the failures mentioned above could have a material
adverse effect on the financial condition and results of
operations of the Corporation.
PART II
Item 1
Legal Proceedings
As a part of the ordinary course of business, the Registrant and
its subsidiary companies are parties to litigation involving
claims to the ownership of funds in particular accounts, the
collection of delinquent accounts, challenges to security
interests in collateral, and foreclosure interests, that is
incidental to their regular business activities. In addition to
such claims, the Registrant was involved, as of March 31, 1998,
in the following action:
Banda et al. v. City of Houston et al. Irwin Mortgage was served
as a defendant in a class action lawsuit initiated in the
district court of Harris County, Texas in mid-March, 1998. The
suit alleges that a Houston housing opportunity program, in which
Irwin Mortgage was a participating lender, used inaccurate lead
paint tests that resulted in a class of homeowners being
subjected to harmful levels of lead and property devaluations.
The litigation is at an early stage and it is impossible to
predict the likelihood of an unfavorable outcome or to establish
the possible extent or amount of liability or potential loss, if
any, to which Irwin Mortgage might be exposed.
PART II
Item 6
(a) Exhibits to Form 10-Q
Number Assigned Sequential Numbering
In Regulation S-K System Page Number
Item 601 Description of Exhibit
(2) No Exhibit
(3) No Exhibit
(4) No Exhibit
(10) No Exhibit
(11) Computation of earnings per
share is included in the
footnotes to the financial
statements
(15) No Exhibit
(18) No Exhibit
(19) No Exhibit
(22) No Exhibit
(23) No Exhibit
(24) No Exhibit
(99) No Exhibit
(b) Reports on Form 8-K
None
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.
IRWIN FINANCIAL CORPORATION
By: /s/ Thomas D. Washburn
________________________
Thomas D. Washburn
Chief Financial Officer
By: /s/ Marie C. Strack
_________________________
Marie C. Strack
Corporate Controller
(Chief Accounting Officer)
<TABLE> <S> <C>
<ARTICLE> 9
<CIK> 0000052617
<NAME> IRWIN FINANCIAL CORPORATION
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1998
<CASH> 65,835
<INT-BEARING-DEPOSITS> 11,412
<FED-FUNDS-SOLD> 1,750
<TRADING-ASSETS> 27,175
<INVESTMENTS-HELD-FOR-SALE> 17,452
<INVESTMENTS-CARRYING> 52,038
<INVESTMENTS-MARKET> 52,530
<LOANS> 614,811
<ALLOWANCE> 9,452
<TOTAL-ASSETS> 1,563,672
<DEPOSITS> 831,922
<SHORT-TERM> 462,646
<LIABILITIES-OTHER> 80,333
<LONG-TERM> 10,729
47,945
0
<COMMON> 29,965
<OTHER-SE> 100,132
<TOTAL-LIABILITIES-AND-EQUITY> 1,563,672
<INTEREST-LOAN> 16,413
<INTEREST-INVEST> 1,902
<INTEREST-OTHER> 12,161
<INTEREST-TOTAL> 30,475
<INTEREST-DEPOSIT> 5,310
<INTEREST-EXPENSE> 16,367
<INTEREST-INCOME-NET> 14,108
<LOAN-LOSSES> 1,618
<SECURITIES-GAINS> 1,364
<EXPENSE-OTHER> 54,477
<INCOME-PRETAX> 11,944
<INCOME-PRE-EXTRAORDINARY> 11,944
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,064
<EPS-PRIMARY> .65<F1>
<EPS-DILUTED> .63<F1>
<YIELD-ACTUAL> .04<F2>
<LOANS-NON> 8,656
<LOANS-PAST> 503
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 8,812
<CHARGE-OFFS> 650
<RECOVERIES> 125
<ALLOWANCE-CLOSE> 9,452
<ALLOWANCE-DOMESTIC> 9,452
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 3,786
<FN>
<F1>Information not in 1,000 and earnings per share reported in basic
and diluted.
<F2>Information not in 1,000
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
Restated earnings per share for 1995 year-end and 1996 Quarters 1, 2, 3
</LEGEND>
<RESTATED>
<S> <C> <C> <C> <C>
<PERIOD-TYPE> YEAR 3-MOS 6-MOS 9-MOS
<FISCAL-YEAR-END> DEC-31-1995 DEC-31-1996 DEC-31-1996 DEC-31-1996
<PERIOD-END> DEC-31-1995 MAR-31-1996 JUN-30-1996 SEP-30-1996
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<INT-BEARING-DEPOSITS> 0 0 0 0
<FED-FUNDS-SOLD> 0 0 0 0
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0 0 0 0
0 0 0 0
<COMMON> 0 0 0 0
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<EXTRAORDINARY> 0 0 0 0
<CHANGES> 0 0 0 0
<NET-INCOME> 0 0 0 0
<EPS-PRIMARY> 1.78 .40 .88 1.36
<EPS-DILUTED> 1.76 .43 .86 1.34
<YIELD-ACTUAL> 0 0 0 0
<LOANS-NON> 0 0 0 0
<LOANS-PAST> 0 0 0 0
<LOANS-TROUBLED> 0 0 0 0
<LOANS-PROBLEM> 0 0 0 0
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<ALLOWANCE-CLOSE> 0 0 0 0
<ALLOWANCE-DOMESTIC> 0 0 0 0
<ALLOWANCE-FOREIGN> 0 0 0 0
<ALLOWANCE-UNALLOCATED> 0 0 0 0
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<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
Restated earnings-per-share for 1996 year-end and 1997 quarters 1, 2, 3
</LEGEND>
<RESTATED>
<S> <C> <C> <C> <C>
<PERIOD-TYPE> 12-MOS 3-MOS 6-MOS 9-MOS
<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1997 DEC-31-1997 DEC-31-1997
<PERIOD-END> DEC-31-1996 MAR-31-1997 JUN-30-1997 DEC-31-1997
<CASH> 0 0 0 0
<INT-BEARING-DEPOSITS> 0 0 0 0
<FED-FUNDS-SOLD> 0 0 0 0
<TRADING-ASSETS> 0 0 0 0
<INVESTMENTS-HELD-FOR-SALE> 0 0 0 0
<INVESTMENTS-CARRYING> 0 0 0 0
<INVESTMENTS-MARKET> 0 0 0 0
<LOANS> 0 0 0 0
<ALLOWANCE> 0 0 0 0
<TOTAL-ASSETS> 0 0 0 0
<DEPOSITS> 0 0 0 0
<SHORT-TERM> 0 0 0 0
<LIABILITIES-OTHER> 0 0 0 0
<LONG-TERM> 0 0 0 0
0 0 0 0
0 0 0 0
<COMMON> 0 0 0 0
<OTHER-SE> 0 0 0 0
<TOTAL-LIABILITIES-AND-EQUITY> 0 0 0 0
<INTEREST-LOAN> 0 0 0 0
<INTEREST-INVEST> 0 0 0 0
<INTEREST-OTHER> 0 0 0 0
<INTEREST-TOTAL> 0 0 0 0
<INTEREST-DEPOSIT> 0 0 0 0
<INTEREST-EXPENSE> 0 0 0 0
<INTEREST-INCOME-NET> 0 0 0 0
<LOAN-LOSSES> 0 0 0 0
<SECURITIES-GAINS> 0 0 0 0
<EXPENSE-OTHER> 0 0 0 0
<INCOME-PRETAX> 0 0 0 0
<INCOME-PRE-EXTRAORDINARY> 0 0 0 0
<EXTRAORDINARY> 0 0 0 0
<CHANGES> 0 0 0 0
<NET-INCOME> 0 0 0 0
<EPS-PRIMARY> 1.97 .46 .98 1.64
<EPS-DILUTED> 1.95 .45 .96 1.61
<YIELD-ACTUAL> 0 0 0 0
<LOANS-NON> 0 0 0 0
<LOANS-PAST> 0 0 0 0
<LOANS-TROUBLED> 0 0 0 0
<LOANS-PROBLEM> 0 0 0 0
<ALLOWANCE-OPEN> 0 0 0 0
<CHARGE-OFFS> 0 0 0 0
<RECOVERIES> 0 0 0 0
<ALLOWANCE-CLOSE> 0 0 0 0
<ALLOWANCE-DOMESTIC> 0 0 0 0
<ALLOWANCE-FOREIGN> 0 0 0 0
<ALLOWANCE-UNALLOCATED> 0 0 0 0
</TABLE>
