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 quarterly period ended June 30, 2000
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 Identification 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
(continued)
MID-AMERICA BANCORP
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.
July 31, 2000: 10,683,119 shares of common stock, no par value
MIDAMERICA BANCORP
PART I. FINANCIAL INFORMATION
The consolidated financial statements of MidAmerica 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 unaudited consolidated financial statements of
the Company are submitted herewith:
Consolidated balance sheets - June 30, 2000 and December 31, 1999
Consolidated statements of income three and six months ended
June 30, 2000 and 1999
Consolidated statements of changes in shareholders' equity
six months ended June 30, 2000 and 1999
Consolidated statements of comprehensive income three and
six months ended June 30, 2000 and 1999
Consolidated statements of cash flows - six months ended June
30, 2000 and 1999
Notes to consolidated financial statements
CONSOLIDATED BALANCE SHEETS
In thousands, except share and per share amounts
Unaudited
<TABLE>
<CAPTION>
June 30 December 31
----------- -----------
2000 1999
ASSETS ----------- -----------
<S> <C> <C>
Cash and due from banks $41,708 $41,478
Federal funds sold 22,475 --
Securities purchased under agreements to resell 5,000 --
Securities available for sale, amortized cost
of $452,218 (2000) and $588,427 (1999) 450,436 586,523
Securities held to maturity, market value
of $3,618 (2000) and $4,001 (1999) 3,630 4,018
Loans, net of unearned income 1,052,051 1,063,949
Allowance for loan losses (9,935) (9,854)
----------- -----------
Loans, net 1,042,116 1,054,095
Premises and equipment 20,969 21,822
Other assets 37,054 36,770
----------- -----------
TOTAL ASSETS $1,623,388 $1,744,706
=========== ===========
LIABILITIES
Deposits:
Non-interest bearing $173,207 $156,720
Interest bearing 845,573 841,179
----------- -----------
Total deposits 1,018,780 997,899
Securities sold under agreements to repurchase 248,965 319,368
Federal funds purchased 33,590 42,390
Advances from the Federal Home Loan Bank 64,843 68,389
Gift certificates outstanding 58,538 123,354
Accrued expenses and other liabilities 11,366 14,758
----------- -----------
TOTAL LIABILITIES 1,436,082 1,566,158
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 - 15,000,000 shares; issued
and outstanding - 10,682,334 shares (2000);
10,642,873 shares (1999) 29,624 29,515
Additional paid-in capital 133,440 133,038
Retained earnings 25,486 17,233
Accumulated other comprehensive loss (1,244) (1,238)
----------- -----------
TOTAL SHAREHOLDERS' EQUITY 187,306 178,548
----------- -----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $1,623,388 $1,744,706
=========== ===========
See notes to unaudited consolidated financial statements.
</TABLE><PAGE>
CONSOLIDATED STATEMENTS OF INCOME
In thousands, except per share amounts
Unaudited
<TABLE>
<CAPTION>
Three months ended Six months ended
June 30 June 30
------------------ ------------------
2000 1999 2000 1999
-------- -------- -------- --------
<S> <C> <C> <C> <C>
INTEREST INCOME:
Interest and fees on loans $24,717 $22,608 $48,302 $44,810
Interest and dividends on:
Taxable securities 6,475 4,136 13,271 7,430
Tax-exempt securities 754 706 1,500 1,422
Interest on federal funds sold 51 70 98 109
Interest on securities purchased under
agreements to resell 423 1,435 808 3,425
-------- -------- -------- --------
Total interest income 32,420 28,955 63,979 57,196
-------- -------- -------- --------
INTEREST EXPENSE:
Interest on deposits 9,541 8,240 18,669 16,345
Interest on federal funds purchased
and securities sold under
agreements to repurchase 4,402 3,609 8,851 7,273
Interest on Federal Home
Loan Bank advances 981 1,080 1,989 2,198
-------- -------- -------- --------
Total interest expense 14,924 12,929 29,509 25,816
-------- -------- -------- --------
Net interest income before
provision for loan losses 17,496 16,026 34,470 31,380
Provision for loan losses 515 1,470 1,090 1,751
-------- -------- -------- --------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 16,981 14,556 33,380 29,629
-------- -------- -------- --------
NON-INTEREST INCOME:
Income from trust department 750 651 1,570 1,316
Service charges on deposit accounts 1,625 1,494 3,198 2,898
Gift certificate fees 623 388 1,179 716
Securities gains (losses) (1) 2 (1) 15
Other 1,205 2,974 2,663 5,309
-------- -------- -------- --------
Total non-interest income 4,202 5,509 8,609 10,254
-------- -------- -------- --------
OTHER OPERATING EXPENSES:
Salaries and employee benefits 7,046 7,068 14,007 14,037
Occupancy expense 769 826 1,634 1,619
Furniture and equipment expenses 1,132 1,129 2,269 2,293
Other 2,664 2,710 5,478 5,617
-------- -------- -------- --------
Total other operating expenses 11,611 11,733 23,388 23,566
-------- -------- -------- --------
Income before income taxes 9,572 8,332 18,601 16,317
Income tax expense 2,813 2,640 5,424 5,007
-------- -------- -------- --------
NET INCOME $6,759 $5,692 $13,177 $11,310
======== ======== ======== ========
WEIGHTED AVERAGE SHARES OUTSTANDING
Basic 10,680 10,624 10,675 10,602
Diluted 10,801 10,762 10,807 10,754
NET INCOME PER COMMON SHARE
Basic $0.63 $0.54 $1.23 $1.07
Diluted 0.63 0.53 1.22 1.05
See notes to unaudited consolidated financial statements.
</TABLE><PAGE>
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
In thousands, except per share amounts
Unaudited
<TABLE>
<CAPTION>
Six months
ended June 30
----------------------
2000 1999
---------- ----------
<S> <C> <C>
Balance, January 1 $178,548 $167,436
Net income 13,177 11,310
Other comprehensive income
(loss), net of tax (6) (1,459)
Cash dividends - $.46 (2000)
and $.427 (1999) (4,925) (4,528)
Stock options exercised, including
related tax benefits 512 906
---------- ----------
Balance, June 30 $187,306 $173,665
========== ==========
See notes to unaudited consolidated financial statements.
</TABLE>
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
In Thousands
Unaudited
<TABLE>
<CAPTION>
Three months Six months
ended June 30 ended June 30
---------- ---------
2000 1999 2000 1999
---------- ---------- --------- ---------
<S> <C> <C> <C> <C>
Net Income $6,759 $5,692 $13,177 $11,310
Other comprehensive income (loss), net of tax:
Unrealized gains (losses) on securities
available for sale:
Unrealized holding gains (losses)
arising during the period 72 (1,545) 79 (1,449)
Less reclassification adjustment for
(gains) losses included in net incom 1 (1) 1 (10)
---------- ---------- --------- ---------
73 (1,546) 80 (1,459)
Pension liability adjustment -- -- (86) --
---------- ---------- --------- ---------
Other comprehensive income (loss) 73 (1,546) (6) (1,459)
---------- ---------- --------- ---------
COMPREHENSIVE INCOME $6,832 $4,146 $13,171 $9,851
========== ========== ========= =========
See notes to unaudited consolidated financial statements.
</TABLE><PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
In Thousands
Unaudited
<TABLE>
<CAPTION> Six months
ended June 30
--------------------------
2000 1999
CASH FLOWS FROM OPERATING ACTIVITIES: ------------ ------------
<S> <C> <C>
Net income $13,177 $11,310
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation, amortization and accretion, net (284) 2,570
Provision for loan losses 1,090 1,751
Federal Home Loan Bank stock dividend (642) (580)
Loss (gain) on sales of securities 1 (15)
Gains on sales of real estate (442) (1,000)
Deferred taxes 604 635
Increase in interest receivable (438) (1,575)
Decrease (increase) in other assets (545) 2,227
Decrease in accrued expenses and other liabilities (4,081) (1,878)
------------ ------------
Net cash provided by operating activities 8,440 13,445
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of securities available for sale (1,227,916) (545,147)
Proceeds from maturities of
securities available for sale 1,356,549 486,460
Proceeds from sales of securities available for sale 10,065 6,245
Purchases of securities held to maturity (1,924) --
Proceeds from maturities of securities held to maturity 2,300 80,000
Decrease (increase) in loans 10,889 (7,720)
Proceeds from sales of other real estate 886 2,747
Payments for purchases of premises and equipment (973) (1,439)
Proceeds from sales of premises and equipment 530 39
------------ ------------
Net cash provided by investing activities 150,406 21,185
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in deposits 20,881 25,819
Net decrease in securities sold
under agreements to repurchase (70,403) (31,627)
Net increase (decrease) in federal funds purchased (8,800) 351
Advances from the Federal Home Loan Bank -- 15,000
Repayment of advances from the Federal Home Loan Bank (3,546) (17,651)
Decrease in gift certificates outstanding (64,816) (51,595)
Stock options exercised 468 805
Dividends paid (4,925) (4,528)
------------ ------------
Net cash used in financing activities (131,141) (63,426)
------------ ------------
Net increase (decrease) in cash and cash equivalents 27,705 (28,796)
Cash and cash equivalents at January 1 41,478 74,644
------------ ------------
Cash and cash equivalents at June 30 $69,183 $45,848
============ ============
See notes to unaudited consolidated financial statements.
</TABLE><PAGE>
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
1.The accounting and reporting policies of MidAmerica 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 have been prepared in accordance with the instructions to
Form 10-Q and Article 10 of Regulation S-X and do not include all
information and footnotes required by generally accepted accounting
principles for complete financial statements. For more information,
refer to the Summary of Significant Accounting Policies footnote
which appears in the Company's 1999 Annual Report and Form 10-K
filed with the Securities and Exchange Commission. The consolidated
financial statements reflect all adjustments (consisting only of
adjustments of a normal recurring nature) which are, in the opinion
of management, necessary for a fair presentation of financial
condition and results of operations for the interim periods.
2.The following table presents the numerators (net income) and
denominators (average shares outstanding) for the basic and
diluted net income per share computations for the three and
six months ended June 30:
<TABLE>
<CAPTION>
In thousands, except per share amounts
Three months ended Six months ended
June 30 June 30
------------------------ ------------------------
2000 1999 2000 1999
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net income, basic and diluted $6,759 $5,692 $13,177 $11,310
=========== =========== =========== ===========
Average shares outstanding 10,680 10,624 10,675 10,602
Effect of dilutive securities 121 138 132 152
Average shares outstanding including ----------- ----------- ----------- -----------
dilutive securities 10,801 10,762 10,807 10,754
=========== =========== =========== ===========
Net income per share, basic $0.63 $0.54 $1.23 $1.07
=========== =========== =========== ===========
Net income per share, diluted $0.63 $0.53 $1.22 $1.05
=========== =========== =========== ===========
</TABLE>
Appropriate share and per share information in the consolidated
financial statements has been adjusted for the 3% stock
dividend declared in November 1999.
3.The amortized cost and market value of securities available for
sale are summarized as follows:
<TABLE>
<CAPTION>
June 30, 2000 December 31, 1999
------------------------ ------------------------
In thousands Amortized Market Amortized Market
Cost Value Cost Value
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
U.S. Treasury and
U.S. government agencies $142,498 $142,284 $317,316 $317,106
Collateralized mortgage obligations 202,330 199,986 184,896 182,730
States and political subdivisions 53,957 54,733 52,448 52,918
Corporate obligations 32,135 32,135 13,110 13,112
Equity securities 21,298 21,298 20,657 20,657
----------- ----------- ----------- -----------
$452,218 $450,436 $588,427 $586,523
=========== =========== =========== ===========
</TABLE>
The amortized cost and market value of securities held to maturity are
summarized as follows:
<TABLE>
<CAPTION>
June 30, 2000 December 31, 1999
------------------------ ------------------------
In thousands Amortized Market Amortized Market
Cost Value Cost Value
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
U.S. Treasury and
U.S. government agencies $3,630 $3,618 $4,018 $4,001
=========== =========== =========== ===========
</TABLE>
4.Activity in the allowance for loan losses for the six months
ended June 30, 2000 and year ended December 31, 1999 follows:
<TABLE>
<CAPTION>
June 30, December 31,
In thousands 2000 1999
----------- -----------
<S> <C> <C>
Balance, January 1 $9,854 $9,010
Loans charged-off (1,138) (3,030)
Recoveries 129 423
----------- -----------
Net loans charged-off ($1,009) ($2,607)
Provision for loan losses 1,090 3,451
----------- -----------
Balance, end of period $9,935 $9,854
=========== ===========
</TABLE>
5.Significant components of other non-interest income and other operating
expenses are set forth below:
<TABLE>
<CAPTION>
Three months ended Six months ended
In thousands June 30 June 30
------------------------ ------------------------
2000 1999 2000 1999
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Other non-interest income:
Gains on sales of real estate $127 $159 $442 $1,000
Settlement proceeds on money order
processing contract termination -- 1,800 -- $1,800
Money order processing fees -- 120 -- 300
Other 1,078 895 2,221 2,209
----------- ----------- ----------- -----------
$1,205 $2,974 $2,663 $5,309
=========== =========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
Three months ended Six months ended
In thousands June 30 June 30
------------------------ ------------------------
2000 2000 2000 1999
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Other operating expenses:
Advertising and marketing $252 $318 $540 $649
Operating supplies 320 339 638 697
Legal and professional fees 356 421 703 879
Taxes, other than income taxes 420 387 837 745
Other 1,316 1,245 2,760 2,647
----------- ----------- ----------- -----------
$2,664 $2,710 $5,478 $5,617
=========== =========== =========== ===========
</TABLE>
6.Selected financial information by business segment for
June 30, 2000 and 1999 follows:
<TABLE>
<CAPTION>
Three months ended Six months ended
June 30 June 30
In thousands ------------------------ ------------------------
2000 1999 2000 1999
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net interest income
Banking $16,347 $15,245 $31,934 $29,648
Gift certificate subsidiary 1,021 585 2,237 1,335
Other 130 195 302 397
Eliminations (2) 1 (3) --
----------- ----------- ----------- -----------
Total $17,496 $16,026 $34,470 $31,380
=========== =========== =========== ===========
Non-interest income
Banking $3,600 $3,169 $7,444 $7,367
Gift certificate subsidiary 598 384 1,147 722
Other (a) 1,861 4,036 3,733 6,287
Eliminations (a) (1,857) (2,080) (3,715) (4,122)
----------- ----------- ----------- -----------
Total $4,202 $5,509 $8,609 $10,254
=========== =========== =========== ===========
Net income
Banking $6,044 $4,015 $11,499 $8,967
Gift certificate subsidiary 649 297 1,470 709
Other 68 1,379 211 1,634
Eliminations (2) 1 (3) --
----------- ----------- ----------- -----------
Total $6,759 $5,692 $13,177 $11,310
=========== =========== =========== ===========
Assets as of June 30
Banking $1,553,083 $1,533,907
Gift certificate subsidiary 68,036 50,355
Other 11,543 16,297
Eliminations (9,274) (60,889)
----------- -----------
Total $1,623,388 $1,539,670
=========== ===========
</TABLE>
(a) Data processing revenues, for services provided to the banking segment
and certain other operating areas by the data processing subsidiary, are
eliminated in the consolidated statement of income.
(b) Other non-interest income in 1999 includes settlement proceeds related
to the discontinuance of a processing agreement between the Company and the
purchaser of the money order subsidiary.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
This item discusses the results of operations for the Company
for the three and six months ended June 30, 2000, 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 at June 30, 2000 as compared to
December 31, 1999. This discussion should be read in conjunction
with the unaudited consolidated financial statements and
accompanying notes presented in Part I, Item 1 of this report.
RESULTS OF OPERATION
Net income for the three months ended June 30, 2000 was
$6.759 million or $0.63 per share on a diluted basis compared to
$5.692 million or $0.53 per share on a diluted basis for the
three months ended June 30, 1999. Net income for the six months
ended June 30, 2000 was $13.177 million or $1.22 per share on a
diluted basis compared to $11.310 million or $1.05 per share on a
diluted basis for the six months ended June 30, 1999.
On a diluted per share basis, net income for the three months
ended June 30, 2000, increased 18.9% compared to the three months
ended June 30, 1999. For the six months ended June 30, 2000,
diluted net income per share increased 16.2%, compared to the first
six months of 1999. Excluding non-recurring revenue and gains in
each period, discussed below, net income in the second quarter of
2000 increased 47.1% over the second quarter of 1999, and net
income for the six months ended June 30, 2000, increased 34.1%
compared to the first six months of 1999.
Net income for the three and six month periods ended June 30,
2000, and 1999 includes non-recurring revenue and gains. In 2000,
the Company recognized gains on sales of other real estate and
three closed branch locations. Gains resulting from these
transactions totaled $127,000 for the second quarter and $442,000
for the six month period. In the second quarter of 1999, the
Company recognized as income the settlement proceeds of $1.8
million related to the discontinuance of a processing agreement
between the Company and the purchaser of the former money order
subsidiary. Gains on sales of other real estate in the second
quarter and six month period in 1999 were $159,000 and $1,000,000,
respectively.
The table below reflects operating results excluding the
previously discussed non-recurring items.
<TABLE>
<CAPTION>
Three Months Six Months
Ended June 30 Ended June 30
---------------------------- ----------------------------
2000 1999 % Chg 2000 1999 % Chg
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Net income (in 1000s) $6,759 $5,692 18.7% $13,177 $11,310 16.5%
Non-recurring revenue and
gains, net of taxes (in 1000s) (83) (1,154) (287) (1,701)
-------- -------- -------- --------
Net income excluding
non-recurring revenue and
gains (in 1000s) $6,676 $4,538 47.1% $12,890 $9,609 34.1%
======== ======== ======== ======== ======== ========
Diluted net income per share $0.63 $0.53 18.9% $1.22 $1.05 16.2%
Non-recurring revenue and
gains, net of taxes on a
diluted per share basis (0.01) (0.11) (0.03) (0.16)
-------- -------- -------- --------
Diluted net income per share
excluding non-recurring revenue
and gains $0.62 $0.42 47.6% $1.19 $0.89 33.7%
======== ======== ======== ======== ======== ========
</TABLE>
The Company had substantial improvement in operating net
income (net income excluding non-recurring revenue and gains) for
the three and six months ended June 30, 2000, compared to the
same periods in 1999.
The improved operating performance is attributed primarily
to the following factors:
*Increases in net interest income of 9.2% and 9.9% for
the quarter and six month periods, respectively.
*Increases in the core components of non-interest
income of 14.8% and 9.6% for the quarter and the six
month periods, respectively.
*Decreases in other operating expenses of 1.0% and
0.8% for the quarter and six month periods,
respectively.
*Decreases in the provision for loan losses of $955,000
and $661,000 for the quarter and six month periods,
respectively.
These factors are discussed in more detail below.
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 rate of interest earned on earning assets and the average
rate of interest expensed 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 six months ended June 30, 2000 and 1999.
<TABLE>
<CAPTION>
Dollars in thousands Three Months Ended Six Months Ended
June 30 June 30
------------------------ ------------------------
2000 1999 2000 1999
---------- ----------- ---------- -----------
<S> <C> <C> <C> <C>
Total interest income $32,420 $28,955 $63,979 $57,196
Tax equivalent adjustment 415 455 828 912
-------- -------- -------- --------
Tax equivalent interest income 32,835 29,410 64,807 58,108
Total interest expense 14,924 12,929 29,509 25,816
-------- -------- -------- --------
Tax equivalent net interest income $17,911 $16,481 $35,298 $32,292
======== ======== ======== ========
Average rate on earning assets 8.57% 7.87% 8.35% 7.83%
Average rate on interest bearing liabilities 4.92% 4.30% 4.81% 4.34%
Net interest spread, annualized 3.65% 3.57% 3.54% 3.49%
Net interest margin, annualized 4.67% 4.41% 4.55% 4.35%
Average earning assets $1,534,353 $1,499,971 $1,555,375 $1,497,685
Average interest bearing liabilities $1,219,483 $1,205,471 $1,234,737 $1,200,471
</TABLE>
Net interest income on a tax equivalent basis increased $1.430
million, or 8.7%, for the quarter and $3.005 million or 9.3% for
the six month period, as the Company benefited primarily from
higher earning asset volume. During the quarter and six month
periods of 2000, average earning assets increased 2.3% and 3.9%
respectively, compared to 1999. Average earning asset growth for
the quarter and six month periods included loan growth of $53.5
million, or 5.3%, and $55.2 million, or 5.5%, respectively. For
both periods, loan growth is predominantly related to commercial
and commercial real estate loans. The retail loan growth pattern
of the prior two years has slowed with the decline in indirect
automobile lending volume. In addition to the benefit of volume
increases, net interest income was favorably impacted by higher
interest rates in 2000 than in 1999, on both new and repricing
assets and liabilities. For the second quarter of 2000, compared
to the same period in 1999, the net interest margin increased 26
basis points to 4.67% and for the six months ended June 30, 2000,
compared to the same period in 1999, the net interest margin
increased 20 basis points to 4.55%. The average prime rate in the
first half of 2000 was 8.96%, an increase of 121 basis points
compared to the same period in 1999.
ALLOWANCE FOR LOAN LOSSES AND PROVISION FOR LOAN LOSSES
The allowance for loan losses is maintained at a level
adequate to absorb estimated probable credit losses. Management
determines the adequacy of the allowance based upon reviews of
individual credits, evaluation of the risk characteristics of
each segment 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 judgment, deserve current recognition.
Based on this process, management considers the allowance for
loan losses to be adequate at June 30, 2000.
The allowance for loan losses was $9,935,000 and 0.94% of
loans as of June 30, 2000, compared to $9,854,000 and 0.93% of
loans at December 31, 1999. The allowance for loan losses was
199% and 212% of non-performing loans at June 30, 2000 and
December 31, 1999, respectively. Non-performing loans were $5.0
million and 0.47% of loans outstanding at June 30, 2000, compared
to $4.7 million and 0.44% at December 31, 1999. Net loans
charged off were $456,000 in the second quarter of 2000 and
$1.009 million for the six months ended June 30, 2000, compared
to $1.253 million in the second quarter of 1999 and $1.483
million for the six months ended June 30, 1999. The second
quarter provision for loan losses in 2000 was $515,000, compared
to $1.470 million in 1999. For the six months ended June 30,
2000, the provision for loan losses was $1.090 million, compared
to $1.751 million for the same period in 1999. The decrease in
the provision for loan losses related to the decreased level of
charged-off loans. Despite an overall decrease, net loans
charged off related to indirect automobile lending activities
were $417,000 for the second quarter of 2000 and $933,000 for the
six month period ended June 30, 2000, compared to $399,000 in the
second quarter of 1999 and $590,000 for the six month period
ended June 30, 1999. The second quarter of 1999 also includes a
loan charge-off of $730,000 related to a loss on the sale of a
problem loan. See Non-Performing Loans and Assets on page 17.
An analysis of the changes in the allowance for loan losses
and selected ratios follows:
Dollars in thousands Six Months Ended
June 30
-----------------------
2000 1999
-------- --------
Balance at January 1 $9,854 $9,010
Loans charged off ($1,138) ($1,639)
Recoveries $129 $156
-------- --------
Net loans charged off ($1,009) ($1,483)
Provision for loan losses $1,090 $1,751
-------- --------
Balance March 31 $9,935 $9,278
======== ========
Average loans, net of unearned income $1,057,776 $1,002,604
Provision for loan losses to average loans 0.10% 0.17%
Allowance for loan losses to average loans 0.94% 0.93%
Allowance for loan losses to period-end loans 0.94% 0.92%
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 six
months ended June 30, 2000 and 1999:
<TABLE>
<CAPTION>
In thousands Three Months Ended Six Months Ended
June 30 June 30
------------------ ------------------
2000 1999 2000 1999
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Non-Interest Income:
Income from trust department $750 $651 $1,570 $1,316
Service charges on deposit accounts 1,625 1,494 3,198 2,898
Gift certificate fees 623 388 1,179 716
Securities gains (losses) (1) 2 (1) 15
Gains on sales of real estate 146 159 431 1,000
Money order processing fees -- 1,800 -- 1,800
Other 1,059 1,015 2,232 2,509
-------- -------- -------- --------
Total non-interest income $4,202 $5,509 $8,609 $10,254
======== ======== ======== ========
Other Operating Expenses:
Salaries and employee benefits $7,046 $7,068 $14,007 $14,037
Occupancy expenses 769 826 1,634 1,619
Furniture and equipment expenses 1,132 1,129 2,269 2,293
Advertising and marketing 252 318 540 649
Operating supplies 320 339 638 697
Legal and professional fees 356 421 703 879
Taxes-Bank, property and other 420 387 837 745
Other 1,316 1,245 2,760 2,647
-------- -------- -------- --------
Total other operating expenses $11,611 $11,733 $23,388 $23,566
======== ======== ======== ========
</TABLE>
Excluding the non-recurring revenue and gains previously
discussed, non-interest income in the second quarter of 2000
increased $525,000, or 14.8%, over the second quarter of 1999 and
non-interest income for the six months ended June 30, 2000,
increased $713,000, or 9.6%, over 1999. Trust Department income
increased $99,000, or 15.1%, for the quarter and $254,000, or
19.3%, for the six month period as a result of the increased
level of assets under management since 1999. Deposit service
charges increased $131,000, or 8.7%, for the quarter and
$300,000, or 10.3%, for the six month period, primarily as the
result of increased service charge rates and other changes in
deposit account parameters implemented in the third quarter of
1999. Gift certificate income increased $235,000 in the second
quarter and $463,000 for the six month period, primarily as a
result of increased service charges on dormant gift certificates.
The increase in service charges on gift certificates is
attributed to the increased volume of dormant items and an
increase in the monthly service charge fee. Insurance premiums
and commissions on credit life and similar insurance, included in
the other category, increased $194,000 for the quarter and
$177,000 for the six month period, as insurance volume increased
with the increase in direct retail loan volume during 2000.
Processing fees for services provided to the purchaser of the
former money order subsidiary, which were phased out in the third
quarter of 1999, declined $120,000 for the quarter and $300,000
for the six month period.
Despite the increased level of business activity, other
operating expenses declined $122,000, or 1.0%, for the quarter and
$178,000, or 0.8%, for the six month period. Salaries and benefits
in 2000 were relatively unchanged from prior year levels. The
impact of normal salary increases was offset by lower staffing
levels. Staffing levels averaged 575 full-time equivalent (FTE)
employees in 2000, compared with 622 in 1999. The decrease in
staffing levels is attributed to normal attrition and the Company
expects staffing levels to return to approximate 600 FTE during the
remainder of 2000. There was no significant change in the level of
occupancy and equipment expenses in 2000, compared to 1999.
Equipment expenses are expected to increase later in the year as
several new initiatives, including internet banking, ATM upgrades
and check imaging, are implemented. These projects are projected
to increase 2000 equipment expenses by approximately $200,000.
There were minor declines in the overall level of other operating
expenses for the quarter and six month periods. Reductions in
legal and professional fees, advertising and marketing, and other
real estate expenses, aggregating $142,000 for the quarter and
$420,000 for the six month period, were partially offset by
individually insignificant increases in various other expense
categories.
INCOME TAXES
The Company had income tax expense of $2.813 million for the
second quarter of 2000 compared to $2.640 million for the same
period in 1999, which yielded effective tax rates of 29.4% for 2000
and 31.7% for 1999. The year-to-date tax expense and effective tax
rates were $5.424 million and 29.2% for 2000 and $5.007 million and
30.7% for 1999, respectively. The effective rate decline in 2000
is primarily attributed to lower state income taxes. The gift
certificate subsidiary is subject to state income taxes and in 2000
changed its investment strategy so that a majority of its interest
income is exempt from state tax.
FINANCIAL CONDITION
Total assets decreased approximately $121 million from
December 31, 1999 to June 30, 2000, while average assets increased
$37 million or 2.4% to $1.616 billion for the second quarter of
2000 compared to the last quarter of 1999. The decline in actual
assets since December 31, 1999 is not unusual considering the
seasonally high gift certificates outstanding and securities sold
under agreements to repurchase. During the three and six month
periods ended June 30, 2000, average earning assets increased
approximately $34 million and $57 million respectively, compared to
the prior year periods. The increase in average earning assets in
2000 has been funded by increases in average deposits, primarily
certificates of deposit, and an increase in gift certificates
outstanding.
NON-PERFORMING LOANS AND ASSETS
A summary of non-performing loans and assets follows:
Dollars in thousands
June 30 December 31
2000 1999
--------- ---------
Loans accounted for on a
non-accrual basis $1,576 $1,551
Restructured loans 773 811
Loans contractually past
due ninety days or more
as to interest or principal
payments 2,635 2,290
--------- ---------
Total non-performing loans 4,984 4,652
Other real estate held for sale 9,293 9,782
--------- ---------
Total non-performing assets $14,277 $14,434
========= =========
Non-performing loans
to total loans 0.47% 0.44%
Non-performing assets
to total assets 0.88% 0.83%
Allowance for loan losses
to non-performing loans 199% 212%
Loans classified as impaired at June 30, 2000 aggregated $4.3
million and included $1.965 million of indirect automobile loans
past due 45 days or more and all non-accrual and restructured
loans. At December 31, 1999, impaired loans aggregated $5.0
million and included $2.6 million of indirect automobile loans past
due 45 days or more.
As of June 30, 2000 and December 31, 1999, the Company had
$11.2 million and $16.7 million, respectively, of loans which were
not included in the past due, non-accrual or restructured
categories, but for which known information about possible credit
problems caused management to have doubts as to the ability of the
borrowers to comply with the present loan repayment terms. Based
on managements evaluation, including current market conditions,
cash flow generated and appraisals, no significant losses are
anticipated in connection with these loans. These loans are subject
to continuing management attention and are considered in
determining the level of the allowance for loan losses.
Management continually monitors lending and underwriting
activity and adjusts lending policies to respond to changes in
market conditions and risks. Policy revisions related to indirect
automobile lending, combined with changes in market conditions,
resulted in reduced indirect origination activity during the first
half of 2000. Since December 31, 1999, direct automobile loans
have declined from $103 million to $92 million.
The Company considers the level of nonperforming loans in its
evaluation of the adequacy of the allowance for loan losses. See
Allowance for Loan Losses and Provisions for Loan Losses on page 13.
Other real estate aggregated $9.3 million at June 30, 2000 and
was principally comprised of properties acquired in settlement of
real estate development loans in 1996, and a completed condominium
project acquired in settlement of loans in November 1997. The
carrying value of real estate development property has been
substantially reduced through sales from an original carrying value
of $15.2 million in 1996 to $1.5 million at June 30, 2000. The
Company has 13.5 acres of commercial property remaining. The
condominium project, which had 35 unsold units at the time of
acquisition, now involves 30 completed and readily marketable units
and 7.5 acres of adjacent developed land. This riverfront
development had a carrying value of $7.4 million on June 30, 2000.
Sales efforts, under a new listing agreement entered into during
the first quarter of 2000, have yielded sales contracts on 3 of the
remaining 30 units.
LIQUIDITY
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.
The parent Company's liquidity depends primarily on the
dividends paid to it as the sole shareholder of Bank of Louisville.
There were no dividends paid by the Bank to the Company during the
six months ended June 30, 2000.
CAPITAL RESOURCES
At June 30, 2000, shareholders' equity totaled $187.3 million,
an increase of $8.8 million since December 31, 1999. Net income of
$13.2 million after cash dividends of $4.9 million provided $8.3
million of the increase. Proceeds and tax benefits from stock
options exercised added $.5 million to shareholders equity in 2000.
The Company's capital ratios exceed minimum regulatory
requirements and are as follows:
Company Company
June 30 December 31 Minimum
2000 1999 Required
-------- -------- --------
Leverage Ratio 11.6% 11.5% 4.00%
Tier I risk based capital ratio 15.3% 14.4% 4.00%
Total risk based capital ratio 16.1% 15.2% 8.00%
RECENTLY ISSUED ACCOUNTING STANDARD
Statement of Financial Accounting Standards No. 133,
Accounting for Derivative Instruments and Hedging Activities
(Statement 133) was issued by the Financial Accounting Standards
Board in June 1998. During 1999, Statement of Financial Accounting
Standards No. 137, Accounting for Derivative Financial Instruments
and Hedging Activities-Deferral of the Effective Date of FASB
Statement No. 133 was issued, and the effective date of Statement
133 was delayed one year. Statement 133 standardizes the
accounting for derivative instruments and will be effective for the
Company January 1, 2001. Statement 133 currently applies to the
Companys interest rate swap contracts. Under the standard,
entities are required to carry all derivative instruments on the
balance sheet at fair value. The accounting for changes in the
fair value (i.e., gains or losses) of a derivative instrument
depends on whether it has been designated and qualifies as part of
a hedging relationship and, if so on the reason for holding it. If
certain conditions are met, entities may elect to designate a
derivative instrument as a hedge of exposures to changes in fair
value, cash flows, or foreign currencies. If the hedged exposure
is a fair value exposure, the gain or loss on the derivative
instrument is recognized in earnings in the period of change
together with the offsetting loss or gain on the hedged item
attributable to the risk being hedged. If the hedged exposure is
a cash flow exposure, the effective portion of the gain or loss on
the derivative instrument is reported initially as a component of
other comprehensive income and subsequently reclassified into
earnings when the forecasted transaction affects earnings. Any
amounts excluded from the assessment of hedge effectiveness as well
as the ineffective portion of the gain or loss is reported in
earnings immediately.
The Company is in the process of determining the impact that
Statement 133 will have on its financial statements and believes
that such determination will not be meaningful until closer to the
date of initial adoption. Depending on asset/liability management
issues, market interest rates and other factors, the Companys
current interest rate swap positions may be increased or reduced by
the time Statement 133 is adopted.
Statement of Financial Accounting Standards No. 138,
Accounting for Derivative Instruments and Hedging Activities an
amendment of FASB Statement No. 133 (Statement 138) was issued in
June 2000. Statement 138 provides guidance with respect to certain
implementation issues regarding Statement 133.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Companys June 30, 2000 analysis of the impact of changes
in interest rates on net interest income over the next 12 months
indicates an exposure to lower interest rates similar to the
position at March 31, 2000. The table below illustrates the
simulation analysis of the impact of a 50 or 100 basis point upward
or downward movement in interest rates. The impact of the rate
movement was simulated as if rates changed immediately from June
30, 2000 levels, and remained constant at those levels thereafter.
Management continually evaluates this data and could make
adjustments to the assets and liability structure interest rate
swap levels, or pricing in the future to minimize the actual impact
of rate changes. In late July 2000, the Company entered into new
interest rate swap positions to partially mitigate the interest
rate risk reflected in the table below.
Movement in interest rates from
June 30, 2000 rates
Increase Decrease
+50bp +100bp -50bp -100bp
Net interest income
decrease (in 1000's) ($717) ($441) ($1,762) ($2,382)
Net income per
share decrease ($0.04) ($0.03) ($0.11) ($0.14)
FORWARD LOOKING STATEMENTS
The statements contained in this report that are not purely
historical are forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934. The use of words such as
believes, estimates, plans, expects, and similar
expressions is intended to identify forward-looking statements.
All forward-looking statements included in this document are based
on information available to the Company on the date hereof, and the
Company assumes no obligation to update any such forward-looking
statement. It is important to note that the Companys actual
results could differ materially from those in such forward-looking
statement. Factors that could cause actual results to differ
materially from those projected include, among others: customer
concentration; cyclicality; fluctuation of interest rates; risk of
business interruption; adequacy of the allowance for loan losses;
valuation of other real estate; dependence on key personnel; and
government regulation.
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a) The regular annual meeting of shareholders of MidAmerica
Bancorp was held on April 25, 2000.
(b) Proxies for the meeting were solicited pursuant to
Section 14(a) of the Securities Exchange Act of 1934 and
there was no solicitation in opposition to managements
solicitations. All of managements nominees for
directors were elected.
(c) The following item was submitted to a vote of security
holders.
(1) Election of 7 persons as Class III directors of
MidAmerica Bancorp for terms expiring at the 2003
annual meeting of shareholders.
Class III For Withheld
Leslie D. Aberson 8,768,436 36,247
William C. Ballard, Jr. 8,755,429 49,254
Peggy Ann Markstein 8,783,039 21,645
Orson Oliver 8,782,984 21,700
Benjamin K. Richmond 8,776,971 27,713
Victor A. Staffieri 8,771,511 33,173
Henry C. Wagner 8,761,871 42,813
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
27 Financial Data Schedule
(b) Reports on Form 8-K
There were no reports filed on Form 8-K during the second
quarter of 2000.
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: August 11, 2000 By: /s/ Steven Small
Steven Small
Treasurer
Date: August 11, 2000 By: /s/ Rick Guillaume
R.K. Guillaume
Chief Executive Officer
INDEX TO EXHIBITS
27 Financial Data Schedule
