UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(X) QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For quarter ended September 30, 1996
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 1-10602
MID-AMERICA BANCORP
(Exact name of registrant as specified in its charter)
KENTUCKY 61-1012933
(State or other jurisdiction of (I.R.S. Employer
I.D. No.)
incorporation or organization)
500 West Broadway, Louisville, Kentucky 40202
(Address of principal executive offices) (Zip Code)
(502) 589-3351
(Registrant's telephone number, including area code)
NONE
(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 a 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 Section 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
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
October 31, 1996: 9,140,032 shares of common stock, no par value
MID-AMERICA BANCORP
PART I. FINANCIAL INFORMATION
The consolidated financial statements of Mid-America Bancorp
and subsidiaries (Company) submitted herewith are unaudited.
However, in the opinion of management, all adjustments (consisting
only of adjustments of a normal recurring nature) necessary for a
fair presentation of the results for the interim periods have been
made.
ITEM 1. FINANCIAL STATEMENTS
The following consolidated financial statements of the Company
are submitted herewith:
Consolidated balance sheets - September 30, 1996 and December
31, 1995
Consolidated statements of income - three and nine months
ended September 30, 1996 and 1995
Consolidated statements of changes in shareholders' equity -
nine months ended September 30, 1996 and 1995
Consolidated statements of cash flows - nine months ended
September 30, 1996 and 1995
Notes to consolidated financial statements
MID-AMERICA BANCORP AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands except share and per share data) (Unaudited)
<TABLE>
<CAPTION>
September 30 December 31
----------- -------------
1996 1995
ASSETS ----------- -------------
<S> <C> <C>
Cash and due from banks $36,003 $50,962
Federal funds sold 34,400 38,200
Securities purchased under agreements to resell 70,000 75,000
Securities available for sale, amortized cost of $324,689 (1996)
and $287,470 (1995) (Note 3) 324,965 292,374
Securities held to maturity, market value of $16,810 (1996)
and $69,766 (1995) (Note 3) 16,622 69,326
Loans, net of unearned income 783,126 748,565
Allowance for loan losses (Note 4) (9,185) (9,318)
----------- -------------
Loans, net 773,941 739,247
Premises and equipment 20,793 20,265
Other assets 40,952 28,613
----------- -------------
TOTAL ASSETS $1,317,676 $1,313,987
=========== =============
LIABILITIES
Deposits:
Non-interest bearing $109,821 $132,931
Interest bearing 685,585 652,026
----------- -------------
Total deposits 795,406 784,957
Securities sold under agreements to repurchase 237,799 227,166
Federal funds purchased 4,000 3,050
Advances from the Federal Home Loan Bank 71,043 75,109
Money orders and similar payment instruments outstanding 54,510 79,409
Accrued expenses and other liabilities 17,359 11,346
----------- -------------
TOTAL LIABILITIES 1,180,117 1,181,037
SHAREHOLDERS' EQUITY
Preferred stock, no par value;
authorized - 750,000 shares; none issued -- --
Common stock, no par value, stated value $2.77 per
share; authorized - 12,000,000 shares; issued and outstanding -
9,134,181 shares (1996) and 9,091,642 shares (1995) 25,336 25,218
Additional paid-in capital 100,457 99,991
Retained earnings 11,586 4,554
Net unrealized securities gains (losses) (Note 3) 180 3,187
----------- -------------
TOTAL SHAREHOLDERS' EQUITY 137,559 132,950
----------- -------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $1,317,676 $1,313,987
=========== =============
See notes to consolidated financial statements.
/TABLE
<PAGE>
MID-AMERICA BANCORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(In thousands except per share data) (Unaudited)
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30 September 30
-------------------------- --------------------------
1996 1995 1996 1995
INTEREST INCOME: ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Interest and fees on loans $18,438 $16,966 $54,472 $51,444
Interest on securities:
U.S.Treasury and agencies 2,928 3,580 9,287 10,255
States and political subdivisions 356 176 823 479
Corporate and other 1,816 795 4,279 2,233
Interest on federal funds sold 484 560 1,415 1,953
Interest on securities purchased under agreements to resell 1,285 26 4,613 630
----------- ----------- ----------- -----------
Total interest income 25,307 22,103 74,889 66,994
----------- ----------- ----------- -----------
INTEREST EXPENSE:
Interest on deposits 7,766 7,433 22,702 21,715
Interest on federal funds purchased and
securities sold under agreements to repurchase 3,045 1,866 9,520 6,280
Interest on Federal Home Loan Bank advances 1,097 1,185 3,356 3,623
----------- ----------- ----------- -----------
Total interest expense 11,908 10,484 35,578 31,618
----------- ----------- ----------- -----------
Net interest income before provision for loan losses 13,399 11,619 39,311 35,376
Provision for loan losses (Note 4) 303 5,718 407 5,947
----------- ----------- ----------- -----------
Net interest income after provision for loan losses 13,096 5,901 38,904 29,429
----------- ----------- ----------- -----------
/TABLE
<PAGE>
MID-AMERICA BANCORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (Cont'd)
(In thousands except per share data) (Unaudited)
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30 September 30
-------------------------- --------------------------
1996 1995 1996 1995
NON-INTEREST INCOME: ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Income from trust department 258 242 757 695
Service charges on deposit accounts 1,160 1,135 3,346 3,342
Money order fees 938 912 2,897 2,690
Securities gains (losses), net (1,036) (18) 140 (30)
Other (Note 5) 2,651 665 4,083 1,855
----------- ----------- ----------- -----------
Total non-interest income 3,971 2,936 11,223 8,552
----------- ----------- ----------- -----------
OTHER OPERATING EXPENSES:
Salaries and employee benefits 6,779 5,730 19,277 16,888
Occupancy expense 774 801 2,243 2,282
Furniture and equipment expenses 1,125 1,257 3,555 3,696
Other (Note 6) 3,111 3,472 7,831 8,789
----------- ----------- ----------- -----------
Total other operating expenses 11,789 11,260 32,906 31,655
----------- ----------- ----------- -----------
Income (loss) before income taxes 5,278 (2,423) 17,221 6,326
Income tax expense (benefit) 1,800 (947) 5,719 1,771
----------- ----------- ----------- -----------
NET INCOME (LOSS) $3,478 ($1,476) $11,502 $4,555
=========== =========== =========== ===========
NET INCOME (LOSS) PER COMMON SHARE (Note 2) $0.38 ($0.16) $1.25 $0.50
=========== =========== =========== ===========
Weighted Average Number of Shares Outstanding 9,205 9,195 9,212 9,192
=========== =========== =========== ===========
See notes to consolidated financial statements.
/TABLE
<PAGE>
MID-AMERICA BANCORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands) (Unaudited)
<TABLE>
<CAPTION> Nine months
ended September 30
--------------------------
1996 1995
CASH FLOWS FROM OPERATING ACTIVITIES: ----------- -----------
<S> <C> <C>
Net income $11,502 $4,555
Adjustments to reconcile net income to net cash provided by (used in)
operating activities:
Depreciation, amortization and accretion, net 2,715 3,590
Provision for loan losses 407 5,947
Federal Home Loan Bank stock dividend (714) (642)
Loss (gain) on sales of securities (140) 30
Gain on sale of money order agent base (1,797) --
Deferred taxes (1,282) 930
Increase in interest receivable (112) (975)
Increase in other assets (270) (5,615)
Decrease in money orders and similar payment instruments outstanding (24,899) (186)
Increase (decrease) in other liabilities 5,699 (1,158)
----------- -----------
Net cash provided by (used in) operating activities (8,891) 6,476
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of securities available for sale (151,213) (43,837)
Proceeds from maturities of securities available for sale 47,584 35,866
Proceeds from sales of securities available for sale 69,937 13,591
Purchases of securities held to maturity 54,725 97,275
Proceeds from maturities of securities held to maturity (2,012) (82,140)
Proceeds from sales of securities held to maturity -- 12,982
Net increase in customer loans (47,079) (23,687)
Proceeds from sales of premises and equipment 900 242
Proceeds from sale of money order agent base 1,797 --
Payments for purchases of premises and equipment (3,558) (2,916)
----------- -----------
Net cash provided by (used in) investing activities (28,919) 7,376
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in deposits 10,449 5,539
Net increase (decrease) in securities sold under agreements to repurchase 10,633 (77,931)
Net increase (decrease) in federal funds purchased 950 (1,630)
Repayment of advances from the Federal Home Loan Bank (4,066) (4,852)
Stock options exercised 554 270
Dividends paid (4,469) (3,968)
----------- -----------
Net cash provided by (used in) financing activities 14,051 (82,572)
----------- -----------
Net decrease in cash and cash equivalents (23,759) (68,720)
Cash and cash equivalents at January 1 164,162 134,515
----------- -----------
Cash and cash equivalents at September 30 $140,403 $65,795
=========== ===========
During the nine months ended September 30, 1996 there was a transfer from loans to other assets (other
real estate owned) of $11,934,000.
See notes to consolidated financial statements.
/TABLE
<PAGE>
MID-AMERICA BANCORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(In thousands except per share data) (Unaudited)
<TABLE>
<CAPTION>
Nine months ended
September 30
------------------------------
1996 1995
-------------- -------------
<S> <C> <C>
Balance, January 1 $132,950 $125,052
Net income 11,502 4,555
Cash dividends declared ($.49 and $.45 per share, respectively) (4,469) (3,968)
Stock options exercised, including related tax benefits 583 279
Net unrealized securities gains (losses) (3,007) 2,108
-------------- -------------
Balance, September 30 $137,559 $128,026
============== =============
See notes to consolidated financial statements.
/TABLE
<PAGE>
MID-AMERICA BANCORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. The accounting and reporting policies of Mid-America Bancorp and
its subsidiaries (the Company) conform with generally accepted
accounting principles and general practices within the banking
industry. The accompanying unaudited consolidated financial statements
should be read in conjunction with the Summary of Significant Accounting
Policies footnote which appears in the Company's 1995 Annual Report and
Form 10-K filed with the Securities and Exchange Commission.
2. Appropriate share information in the consolidated financial statements
has been adjusted for the 3% stock dividend of November 1995.
3. The amortized cost and market value of securities available for
sale are summarized as follows:
<TABLE>
<CAPTION>
September 30, 1996 December 31, 1995
---------------------- ------------------------
Amortized Market Amortized Market
Cost Value Cost Value
---------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
U.S. Treasury and agencies $244,057 $244,274 $232,934 $237,294
Obligations of states and political subdivisions 31,935 31,993 10,841 11,301
Corporate obligations 32,560 32,561 28,023 28,107
Equity securities 16,137 16,137 15,672 15,672
---------- ---------- ----------- -----------
$324,689 $324,965 $287,470 $292,374
========== ========== =========== ===========
</TABLE>
The book value and market value of securities held to maturity are
summarized as follows:
<TABLE>
<CAPTION>
September 30, 1996 December 31, 1995
---------------------- ------------------------
Book Market Book Market
Value Value Value Value
---------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
U.S. Treasury and agencies $16,522 $16,710 $69,226 $69,665
Corporate obligations 100 100 100 101
---------- ---------- ----------- -----------
$16,622 $16,810 $69,326 $69,766
========== ========== =========== ===========
/TABLE
<PAGE>
MID-AMERICA BANCORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands) (Unaudited)
4. Allowance for Loan Losses - Changes in the allowance for loan losses
are as follows:
<TABLE>
<CAPTION>
September 30, December 31,
1996 1995
---------- -----------
<S> <C> <C>
Balance, January 1 $9,318 $7,045
Provision for Loan Losses 407 6,047
Recoveries 229 271
Loans charged-off (769) (4,045)
---------- -----------
Balance, end of period $9,185 $9,318
========== ===========
</TABLE>
5. Other non-interest income for the three and nine months ended
September 30, 1996 includes a gain of approximately $1.8 million related to
the sale of a part of the money order subsidiary's agent base.
6. Other operating expenses consist of the following:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, 1996 September 30, 1996
----------------------- ------------------------
1996 1995 1996 1995
---------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Operating supplies $398 $434 $1,142 $1,465
Legal and professional fees 644 779 1,261 1,167
Taxes - Bank, property and other 475 286 1,246 1,017
Deposit insurance 3 (44) 9 764
Other 1,591 2,017 4,173 4,376
---------- ----------- ----------- -----------
$3,111 $3,472 $7,831 $8,789
========== =========== =========== ===========
</TABLE>
ITEM II. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
This item discusses the results of operations for Mid-America
Bancorp and its subsidiaries for the three and nine months ended
September 30, 1996 and compares those periods with the same periods
of the previous year. In addition, the discussion describes the
significant changes in the financial condition of the Company that
have occurred between December 31, 1995 and September 30, 1996.
This discussion should be read in conjunction with the consolidated
financial statements and accompanying notes presented in Part I,
Item 1 of this report.
A. RESULTS OF OPERATIONS
Net income for the nine months ended September 30, 1996 was
$11,502,000 or $1.25 per share, compared to $4,555,000 or $0.50 per
share for the nine months ended September 30, 1995, an increase of
152%. Net income for the third quarter of 1996 was $3,478,000 or
$0.38 per share, compared to a loss of ($1,476,000) or ($0.16) per
share for the third quarter of 1995.
Net income in 1996 for the quarter and nine months ended September 30,
1996 increased significantly over the comparable periods in 1995, due in part,
to a significant provision for loan losses, interest reversals, and expenses
in 1995 related to non-performing real estate development loans to one
borrower that reduced net income for the quarter and nine months ended
September 30, 1995 by approximately $4.9 million.
The results for the quarter and nine months ended September
30, 1996 reflected the following:
*Increased net interest income on a tax equivalent basis of
$1,863,000 for the quarter and $4,070,000 for the year-to-date,
resulting primarily from increases in earning assets. The impact
of lower interest rates in 1996 than in 1995 was not significant.
*A decrease in the provision for loan losses of $5,415,000 and
$5,540,000 for the quarter and year-to-date, respectively.
*Year-to-date securities gains of $140,000 and securities
losses for the third quarter of 1996 of $1,036,000. Securities
transactions throughout 1996 have been designed to extend the
maturity and enhance the yield of the securities portfolio.
*Increases in other non-interest income for the quarter and year-to-date
ended September 30, 1996, related to a $1.8 million gain on the sale of a part
of the money order agent base of Mid-America Money Order Company, a
wholly-owned subsidiary of the Company.
*Increases in non-interest income, excluding securities
transactions and the money order gain, of approximately 8% for both
the quarter and year-to-date.
*Increases in other operating expenses, excluding salaries and
benefits and expenses in 1995 related to the aforementioned problem
real estate loan, of 10.6% for the quarter. On the same basis as
above, there was a decrease of 1% in other operating expenses for
the nine months.
*Increases in salaries and benefits of 18% and 14% for the
quarter and year-to- date periods, respectively, arising from
staffing changes in the fourth quarter of 1995, annual salary
increases effective in April 1996 that averaged 4%, and increases
in certain benefit costs.
Net interest income
Net interest income is the difference between interest earned
on earning assets and interest expensed on interest bearing
liabilities. The net interest spread is the difference between the
average yield on earning assets and the average rate on interest
bearing liabilities. The net yield on earning assets (interest
margin) is net interest income divided by average earning assets.
The following table summarizes the above for the three and nine
months ending September 30, 1996 and 1995.
In thousands except percentages
Three Months Ended Nine Months Ended
September 30 September 30
1996 1995 1996 1995
Total interest income $25,307 $22,103 $74,889 $66,994
Tax equivalent adjustment 404 321 1,093 958
Tax equivalent interest income 25,711 22,424 75,982 67,952
Total interest expense 11,908 10,484 35,578 31,618
Tax equivalent net interest income $13,803 $11,940 $40,404 $36,334
Average rate on earning assets 8.25% 8.30% 8.25% 8.36%
Average rate on interest
bearing liabilities 4.77% 4.86% 4.79% 4.83%
Net interest spread, annualized 3.48% 3.44% 3.46% 3.53%
Net interest margin, annualized 4.43% 4.42% 4.39% 4.47%
Average earning assets $1,235,270 $1,068,554 $1,226,791 $1,080,001
Average interest bearing
liabilities $991,454 $855,413 $989,414 $875,437
Net interest income on a tax equivalent basis increased
approximately $1.9 million or 15.6% and $4.1 million or 11.2% for
the three and nine months ended September 30, 1996, respectively,
compared to comparable periods in 1995. The increases result
primarily from increases in average earning assets. The third
quarter and year-to-date data for 1995 was impacted by interest
reversals on the previously mentioned non-performing loans of
approximately $600,000. Excluding the effects of the interest
reversal in 1995, lower interest rates in 1996 caused a slight
decline in the net interest spread and margin.
Allowance for Loan Losses and Provision for Loan Losses
The allowance for loan losses is maintained at a level
adequate to absorb estimated potential credit losses. Management
determines the adequacy of the allowance based upon reviews of
individual credits, evaluation of the risk characteristics of the
loan portfolio, including the impact of current economic conditions
on the borrowers' ability to repay, past collection and loss
experience and such other factors, which, in management's
judgement, deserve current recognition. See "Non-Performing Loans
and Assets". The allowance for loan losses is established by
charges to operating earnings.
During the third quarter of 1995 the Company recorded a
provision for loan losses of $5.7 million attributed primarily to
losses associated with loans totaling approximately $14.8 million
to a Louisville-based real estate development firm, that were
classified by management as impaired and non-accrual and adjusted
to fair value based on appraisals of the underlying collateral.
See "Non-Performing Loans and Assets".
An analysis of the changes in the allowance for loan losses
and selected ratios follows:
Dollars In thousands
Nine Months Ended
September 30
1996 1995
Balance at January 1 $9,318 $7,045
Provision for loan losses 407 5,947
Net loan charge-offs, net of recoveries (540) (3,692)
Balance September 30 $9,185 $9,300
Average loans, net of unearned income $759,511 $698,948
Provision for loan losses to average loans 0.05% 0.85%
Allowance for loan losses to average loans 1.21% 1.33%
Allowance for loan losses to period-end loans 1.17% 1.29%
Non-interest Income and Other Operating Expenses
The following table sets forth the major components of non-interest
income and other operating expenses for the three and nine months ending
September 30, 1996 and 1995:
Three months ended Nine months ended
In thousands September 30 September 30
1996 1995 Increase 1996 1995 Increase
(Decrease) (Decrease
Non-Interest Income:
Income from
trust department $258 $242 $16 $757 $695 $62
Service charges on
deposit accounts 1,160 1,135 25 3,346 3,342 4
Money order fees 938 912 26 2,897 2,690 207
Securities gains
(losses) (1,036) (18) (1,018) 140 (30) 170
Other 2,651 665 1,986 4,083 1,855 2,228
Total non-interest
income $3,971 $2,936 $1,035 $11,223 $8,552 $2,671
Other Operating Expenses:
Salaries and employee
benefits $6,779 $5,730 $1,049 $19,277 $16,888 $2,389
Occupancy expenses 774 801 (27) 2,243 2,282 (39)
Furniture and
equipment expenses 1,125 1,257 (132) 3,555 3,696 (141)
Operating supplies 398 434 (36) 1,142 1,465 (323)
Advertising and marketing 377 191 186 890 494 396
Professional fees 644 779 (135) 1,261 1,167 94
Taxes-Bank, property
and other 475 286 189 1,246 1,017 229
Deposit insurance 3 (44) 47 9 764 (755)
Other 1,214 1,826 (612) 3,283 3,882 (599)
Total other operating
expenses $11,789 $11,260 $529 $32,906 $31,655 $1,251
Non-interest income for the quarter and nine months ended September 30,
1996 reflected significant increases over the comparable periods in 1995. The
quarter and year-to-date results in 1996 include a $1.8 million gain related
to the sale of a part of the money order business of Mid-America Money Order
Company. Western Union Financial Services, Inc., exercised a contractual
option to purchase part of the money order business from Mid-America Money
Order Company (MOC). The purchase of this business by Western Union involved
approximately one-third of MOC's agent base and volume. However, the Company
does not expect the profit level of MOC to decline in the same proportion as
the lost volume because this portion of the agent base accounts for the lowest
margin business in the MOC portfolio and the sale will permit some cost
reductions. In addition to this transaction, the Company had securities
losses in the third quarter of 1996 aggregating $1,036,000. These losses were
incurred as the Company continued to extend the maturity structure of its
securities portfolio, in connection with its overall asset / liability
management strategies. Excluding the money order gain and securities gains
and losses from each period, non-interest income increased approximately 8%
for both the quarter and nine months ended September 30, 1996, compared to the
same periods in 1995. The third quarter increase included other real estate
gains of $86,000 and lease residual gains of $103,000. The nine month
increase included these items, as well as, interchange fees from the Company's
new debit card product and a gain on the disposition of a branch location.
Trust Department income in 1996 reflects improvement over 1995, as new
personal trust business has more than offset the continuing decline in stock
transfer revenue. The increase in money order fees in the third quarter,
which is less than the nine month rate of increase, reflects lower volume
subsequent to the aforementioned money order business sale.
Other operating expenses increased $1,251,000 or 4% for the
nine months ended September 30, 1996 and $529,000 or 4.7% for the
quarter ended September 30, 1996, compared to the same periods in
1995. Excluding the increases in salaries and benefits during the
periods and expenses in 1995 related to the aforementioned problem
real estate loans and certain other matters, the aggregate of
remaining other operating expenses increased 10.6% for the quarter
and declined 1% for the nine month period. Salaries and benefits
increased approximately 14% and 18% for the nine and three month
periods, respectively. These increases are attributed to annual
salary increases effective in April 1996 that averaged 4%, staffing
changes that occurred in the 4th quarter of 1995 (the addition of
a Vice-Chairman and Chief Executive Officer and several senior
commercial and real estate lending officers) and increases in
certain benefit costs, primarily pension expense. The number of
full-time equivalent employees at September 30, 1996 has increased
by 20 since September 1995. The third quarter of 1996 was also
impacted by the accrual of approximately $325,000 for severance pay
agreements related to the elimination of certain positions.
With respect to the other categories of other operating
expenses the following are significant factors when comparing the
quarter and nine months results in 1996 to comparable periods in
1995
*Several categories of expenses reflect the efforts of cost
control programs, as occupancy, furniture and equipment, and
operating supplies expenses declined.
*Advertising and marketing expenses in 1996 increased as the
level of advertising and other promotions increased over historical
levels, as the Company pursues an increase in market share.
*Professional fees include approximately $420,000 for the nine
months and $335,000 for the quarter ended September 30, 1996
of consulting fees related to a company-wide revenue enhancement
and cost reduction project being performed by a bank consulting
firm. Professional fees in 1995 include approximately $500,000 of
legal fees related to the aforementioned problem real estate loans.
*Taxes for property and the Kentucky bank tax have increased
in 1996 as property taxes for other real estate have increased, and
the basis for the Kentucky bank tax has changed and caused an
increase in such taxes, respectively.
*For the nine months ended September 30, 1996 there is a
significant decline in deposit insurance expense as a result of the
reduction in the FDIC assessment rate.
*The change in 1996 in the other category of other operating
expenses was minor, when excluding certain expenses in the third
quarter of 1995 related to losses on legal matters and
uncollectible money order fees of approximately $650,000.
Income Taxes
The Company had income tax expense of $1,800,000 for the third
quarter of 1996 and an income tax benefit of $947,000 for the third
quarter of 1995. The year-to-date tax expense and effective tax
rate were $5,719,000 and 33.2% for 1996, respectively and
$1,771,000 and 28.0% for 1995, respectively. The lower effective
tax rate in 1995 is attributed to tax exempt income sources being
a larger proportion of the reduced level of income before taxes.
B. FINANCIAL CONDITION
Total Assets
Total assets at September 30, 1996 of $1.318 billion were
relatively unchanged from December 31, 1995. Average assets for
the third quarter of 1996 were $1.308 billion compared to $1.194
billion during the last quarter of 1995 and $1.153 billion during
the third quarter of 1995. For the nine months ended September 30,
1996, average earning assets of $1.227 billion increased 13.6%
compared to the same period in 1995. For the nine month periods,
average loans increased $61 million or 8.7% and short-term assets
(federal funds sold and resale agreements) increased $92 million.
Loan growth has been in both the commercial and retail components
of the loan portfolio. This asset growth was funded by increases
in average deposits ($22 million), average repurchase agreement
($103 million) and average non-interest bearing liabilities ($16
million).
Nonperforming Loans and Assets
A summary of non-performing loans and assets follows:
Dollars in thousands September 30, 1996 December 31, 1995
Loans accounted for on a non-
accrual basis $2,456 $14,301
Loans contractually past due
ninety days or more as to
interest or principal payments 1,351 842
Total non-performing loans 3,807 15,143
Other real estate held for sale 10,548 1,085
Total non-performing assets $14,355 $16,228
Non-performing loans to total
loans .49% 2.02%
Non-performing assets to total
assets 1.09% 1.24%
Allowance for loan losses to
non-performing loans 241% 62%
Loans classified as impaired at September 30, 1996 aggregated
$2,456,000 and included all non-accrual loans. At December 31,
1995, impaired loans aggregated $14,328,000.
In April 1996, the Company obtained from bankruptcy court,
title to properties related to $11.9 million of non-performing
loans at December 31, 1995. The carrying value of these properties
and other properties acquired from the bankruptcy court and
transferred to other real estate owned was approximately $15.2
million. At September 30, 1996, the carrying value of these
properties has been reduced to $10.3 million as a result of
property sales. As of late October 1996 the Company has contracts
for additional property sales expected to close in 1996 that will
reduce the real estate carrying value by approximately $700
thousand and contracts expected to close in 1997 that will further
reduce the carrying value by $960 thousand. Also, the Company has
a sales contract for a portion of these properties with a carrying
value of approximately $1.5 million, that is contingent on zoning
changes which are not expected to be resolved until the middle of
1997. These properties had previously been adjusted to fair value
based on recent appraisals and current contracts support appraised
values.
The Company considers the level of non-performing loans in its
evaluation of the adequacy of the allowance for loan losses.
C. LIQUIDITY AND INTEREST SENSITIVITY
Liquidity represents the Company's ability to generate cash or
otherwise obtain funds at a reasonable price to satisfy commitments
to borrowers as well as demands of depositors. The loan and
securities portfolios are managed to provide liquidity through
maturity or payments related to such assets.
Interest rate sensitivity management is managing the
difference or gap between rate sensitive assets and rate sensitive
liabilities to minimize the impact of changing interest rates on
profitability and allow for adequate liquidity.
The Company's adjusted one year cumulative interest
sensitivity gap was (3.85%) at September 30, 1996 compared to 6.76%
at December 31, 1995. The cumulative interest sensitivity gap
through 90 days was .54% at September 30, 1996 compared to 10.97%
at December 31, 1995. Interest rate swap contracts with notional
amounts aggregating $150 million that pay the floating prime rate
for the right to receive a weighted average fixed of 8.56% have
been utilized to supplement on-balance sheet strategies to reduce
the Company's sensitivity to interest rate changes. At September
30, 1996 and December 31, 1995, the aggregate fair value of
interest rate swap contracts was approximately ($2,193,000) and
$2,444,000, respectively.
The parent company's liquidity depends primarily on the
dividends paid to it as the sole shareholder of the Mid-America
Bank of Louisville and Trust Company.
D. CAPITAL RESOURCES
At September 30, 1996 shareholders' equity totaled
$137,559,000, an increase of $4.6 million since December 31, 1995.
The increase is attributed to net income less dividends, net of
depreciation in the value of securities available for sale of
approximately $3 million.
Company Company Minimum
September December Required
30, 1996 31, 1995
Leverage Ratio 10.41% 9.86% 3.00%
Tier 1 risk based capital
ratio 14.97% 14.90% 4.00%
Total risk based capital
ratio 15.97% 15.97% 8.00%
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
27 Financial Data Schedule
(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.
Mid-America Bancorp
(Registrant)
Date: November , 1996 By:
Steven Small
Executive Vice President and
Chief Financial Officer
Date: November , 1996 By:
R.K. Guillaume
Chief Executive Officer
INDEX TO EXHIBITS
27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1000
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JUL-01-1996
<PERIOD-END> SEP-30-1996
<PERIOD-TYPE> 3-MOS
<CASH> 36,003
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 104,400
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 324,965
<INVESTMENTS-CARRYING> 16,622
<INVESTMENTS-MARKET> 16,810
<LOANS> 783,126
<ALLOWANCE> (9,185)
<TOTAL-ASSETS> 1,317,676
<DEPOSITS> 795,406
<SHORT-TERM> 241,799
<LIABILITIES-OTHER> 71,869
<LONG-TERM> 71,043
0
0
<COMMON> 25,336
<OTHER-SE> 112,223
<TOTAL-LIABILITIES-AND-EQUITY> 1,317,676
<INTEREST-LOAN> 18,438
<INTEREST-INVEST> 5,100
<INTEREST-OTHER> 1,769
<INTEREST-TOTAL> 25,307
<INTEREST-DEPOSIT> 7,766
<INTEREST-EXPENSE> 11,908
<INTEREST-INCOME-NET> 13,399
<LOAN-LOSSES> 303
<SECURITIES-GAINS> (1,036)
<EXPENSE-OTHER> 11,789
<INCOME-PRETAX> 5,278
<INCOME-PRE-EXTRAORDINARY> 5,278
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,478
<EPS-PRIMARY> 0.38
<EPS-DILUTED> 0.38
<YIELD-ACTUAL> 4.43
<LOANS-NON> 2,456
<LOANS-PAST> 1,351
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 21,429
<ALLOWANCE-OPEN> 9,318
<CHARGE-OFFS> 769
<RECOVERIES> 229
<ALLOWANCE-CLOSE> 9,185
<ALLOWANCE-DOMESTIC> 9,185
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
