SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------------------------------------------
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2000
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Commission File No. 0-25914
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CASTLE BANCGROUP, INC.
(Exact name of registrant as specified in its charter)
Delaware 36-3238190
(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization) Number)
121 West Lincoln Highway
DeKalb, Illinois 60115-3609
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (815) 758-7007
---------------------------------------
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: [ X ] Yes [ ] No
The registrant had 4,395,731 shares of Common Stock outstanding as of October
31, 2000.
1
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEETS (dollars in thousands, except share data)
(UNAUDITED)
==================================================================================================================
Assets September 30, December 31,
2000 1999
------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Cash and due from banks $ 23,529 17,501
Federal funds sold 4,900 -
Investment securities available for sale (note 2) 121,964 126,159
Mortgage loans held for sale, at lower of cost or market 1,641 14,892
Loans (note 3) 378,047 364,419
Less:
Allowance for loan losses (note 3) 4,799 4,636
Unearned income and deferred loan fees, net 301 332
------------------------------------------------------------------------------------------------------------------
Net loans 372,947 359,451
Premises and equipment 11,497 11,547
Goodwill, net of amortization 1,981 2,210
Assets of discontinued operations (note 7) 163 2,878
Other assets 6,457 6,212
------------------------------------------------------------------------------------------------------------------
$ 545,079 540,850
==================================================================================================================
Liabilities and Stockholders' Equity
------------------------------------------------------------------------------------------------------------------
Liabilities:
Deposits:
Non-interest-bearing $ 59,797 52,274
Interest-bearing 423,977 408,143
------------------------------------------------------------------------------------------------------------------
Total deposits 483,774 460,417
Other borrowings 17,921 39,486
Other liabilities 2,386 3,539
------------------------------------------------------------------------------------------------------------------
Total liabilities 504,081 503,442
Stockholders' equity:
Common stock, $.33 1/3 par value; 25,000,000 shares authorized, 4,395,083 and
4,369,663 shares issued and outstanding in 2000 and 1999, respectively 1,465 1,457
Additional paid-in capital 7,105 6,830
Accumulated other comprehensive loss, net of tax (2,067) (3,164)
Retained earnings 34,495 32,285
------------------------------------------------------------------------------------------------------------------
Total stockholders' equity 40,998 37,408
Commitments and contingent liabilities
------------------------------------------------------------------------------------------------------------------
$545,079 540,850
==================================================================================================================
See accompanying notes to unaudited consolidated financial statements.
2
<PAGE>
CONSOLIDATED STATEMENTS OF EARNINGS (dollars in thousands, except share data)
(UNAUDITED)
==================================================================================================================
Three Months Ended
September 30, 2000 September 30, 1999
------------------------------------------------------------------------------------------------------------------
Interest income:
Interest and fees on loans $ 8,137 7,051
Interest and dividends on investment securities available for sale:
Taxable 1,697 1,721
Nontaxable 222 263
Interest on federal funds sold 10 3
Interest on mortgage loans held for sale 19 408
------------------------------------------------------------------------------------------------------------------
Total interest income 10,085 9,446
------------------------------------------------------------------------------------------------------------------
Interest expense:
Interest on deposits 4,861 4,170
Interest on other borrowings 324 479
------------------------------------------------------------------------------------------------------------------
Total interest expense 5,185 4,649
------------------------------------------------------------------------------------------------------------------
Net interest income before provision
for loan losses 4,900 4,797
Provision for loan losses 105 64
------------------------------------------------------------------------------------------------------------------
Net interest income after provision for loan losses 4,795 4,733
------------------------------------------------------------------------------------------------------------------
Other operating income:
Trust fees 267 205
Deposit service charges 101 102
Other service charges 601 483
Investment securities gains, net - 1
Mortgage loan origination income, net 213 235
Other income 115 289
------------------------------------------------------------------------------------------------------------------
Total other operating income 1,297 1,315
------------------------------------------------------------------------------------------------------------------
Other operating expenses:
Salaries and employee benefits 2,667 2,681
Net occupancy expense of premises 307 286
Furniture and fixtures 373 358
Office supplies 127 88
Outside services 119 224
Advertising expense 94 68
FDIC insurance assessment 24 13
Postage and courier 88 92
Telephone expense 83 91
Amortization expense - goodwill 76 76
Other expenses 534 494
------------------------------------------------------------------------------------------------------------------
Total other operating expenses 4,492 4,471
------------------------------------------------------------------------------------------------------------------
Earnings before income taxes 1,600 1,577
Income tax expense 481 474
------------------------------------------------------------------------------------------------------------------
Net earnings from continuing operations $ 1,119 1,103
------------------------------------------------------------------------------------------------------------------
Discontinued operations (note 7) $ - (323)
------------------------------------------------------------------------------------------------------------------
Net earnings $ 1,119 780
==================================================================================================================
Basic earnings per common share from:
Continuing operations $ 0.25 0.26
Discontinued operations - (0.08)
Net earnings 0.25 0.18
Diluted earnings per common share from:
Continuing operations $ 0.25 0.26
Discontinued operations - (0.08)
Net earnings 0.25 0.18
==================================================================================================================
See accompanying notes to unaudited consolidated financial statements.
3
<PAGE>
CONSOLIDATED STATEMENTS OF EARNINGS (dollars in thousands, except share data)
(UNAUDITED)
==================================================================================================================
Nine Months Ended
September 30, 2000 September 30, 1999
------------------------------------------------------------------------------------------------------------------
Interest income:
Interest and fees on loans $ 23,751 21,083
Interest and dividends on investment securities available for sale:
Taxable 5,134 5,070
Nontaxable 672 781
Interest on federal funds sold 133 13
Interest on mortgage loans held for sale 166 1,567
------------------------------------------------------------------------------------------------------------------
Total interest income 29,856 28,514
------------------------------------------------------------------------------------------------------------------
Interest expense:
Interest on deposits 13,799 12,539
Interest on other borrowings 1,254 1,417
------------------------------------------------------------------------------------------------------------------
Total interest expense 15,053 13,956
------------------------------------------------------------------------------------------------------------------
Net interest income before provision
for loan losses 14,803 14,558
Provision for loan losses 315 560
------------------------------------------------------------------------------------------------------------------
Net interest income after provision for loan losses 14,488 13,998
------------------------------------------------------------------------------------------------------------------
Other operating income
Trust fees 649 616
Deposit service charges 336 283
Other service charges 1,657 1,148
Investment securities gains, net - 250
Mortgage loan origination income, net 544 919
Other income 430 1,038
------------------------------------------------------------------------------------------------------------------
Total other operating income 3,616 4,254
------------------------------------------------------------------------------------------------------------------
Other operating expenses:
Salaries and employee benefits 7,852 8,095
Net occupancy expense of premises 882 1,018
Furniture and fixtures 1,035 1,063
Office supplies 256 275
Outside services 449 663
Advertising expense 298 303
FDIC insurance assessment 71 39
Postage and courier 259 290
Telephone expense 245 262
Amortization expense - goodwill 229 229
Loss on sale of loans - 513
Other expenses 1,506 1,638
------------------------------------------------------------------------------------------------------------------
Total other operating expenses 13,082 14,388
------------------------------------------------------------------------------------------------------------------
Earnings before income taxes 5,022 3,864
Income tax expense 1,581 1,130
------------------------------------------------------------------------------------------------------------------
Net earnings from continuing operations $ 3,441 2,734
------------------------------------------------------------------------------------------------------------------
Discontinued operations $ (837) (370)
------------------------------------------------------------------------------------------------------------------
Net earnings $ 2,604 2,364
==================================================================================================================
Basic earnings per common share from:
Continuing operations $ 0.79 0.63
Discontinued operations (0.19) (0.08)
Net earnings 0.59 0.55
Diluted earnings per common share from:
Continuing operations $ 0.79 0.63
Discontinued operations (0.19) (0.08)
Net earnings 0.59 0.55
==================================================================================================================
See accompanying notes to unaudited consolidated financial statements.
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (dollars in thousands, except share data)
(UNAUDITED)
==========================================================================================================
ACCUMULATED
OTHER
ADDITIONAL COMPREHENSIVE
COMMON PAID-IN RETAINED EARNINGS
STOCK CAPITAL EARNINGS (LOSS) TOTAL
<S> <C> <C> <C> <C> <C>
----------------------------------------------------------------------------------------------------------
Balance as of January 1, 2000 $ 1,457 6,830 32,285 (3,164) 37,408
Comprehensive earnings
Net earnings - - 2,604 - 2,604
Unrealized gains on investment
securities available for sale - - - 1,789 1,789
Income tax effect - - - (692) (692)
-------
Total comprehensive earnings - - - - 3,701
Issuance of 25,420 shares of common stock 8 275 - - 283
Cash dividends on common stock ($0.09 per share) - - (394) - (394)
---------------------------------------------------
Balance as of September 30, 2000 $ 1,465 7,105 34,495 (2,067) 40,998
==========================================================================================================
See accompanying notes to unaudited consolidated financial statements.
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOWS (dollars in thousands)
(UNAUDITED)
=================================================================================================================
Nine Months Ended
September 30, 2000 September 30, 1999
<S> <C> <C>
-----------------------------------------------------------------------------------------------------------------
Cash flows from continuing operating activities:
Interest received $ 29,307 26,532
Fees received 7,214 5,730
Net decrease in mortgage loans held for sale 13,251 49,611
Interest paid (15,016) (14,306)
Cash paid to suppliers and employees (15,466) (15,856)
Income taxes paid (850) (792)
-----------------------------------------------------------------------------------------------------------------
Net cash provided by continuing operating activities 18,440 50,919
-----------------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Proceeds from:
Maturities and calls of investment securities available for sale 9,372 14,911
Sales of investment securities available for sale 20 26,828
Purchases of investment securities available for sale (3,576) (44,294)
Net increase in loans (13,827) (17,035)
Premises and equipment expenditures (790) (1,603)
-----------------------------------------------------------------------------------------------------------------
Net cash used in investing activities (8,801) (21,193)
-----------------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Net increase (decrease) in demand deposits,
NOW accounts, and savings accounts 29,187 (1,366)
Net decrease in certificates of deposit (5,829) (3,528)
Dividends paid on common stock (787) (609)
Net change in other borrowings (21,039) (23,867)
Proceeds from issuance of common stock 282 362
Repayment of long-term debt (525) (1,250)
-----------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) financing activities 1,289 (30,258)
-----------------------------------------------------------------------------------------------------------------
Net change in cash and cash equivalents 10,928 (532)
Cash and cash equivalents at beginning of year 17,501 12,269
-----------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of the period $ 28,429 11,737
=================================================================================================================
Reconciliation of net earnings to net cash provided by
continuing operating activities:
Net earnings $ 3,441 2,734
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Discontinued operations (837) (370)
Depreciation and amortization 1,117 1,257
Provision for loan losses 315 560
Gains on sale of investment securities - (250)
Discount accretion (307) (273)
Premium amortization 160 248
(Decrease) increase in:
Income taxes payable 149 338
Interest payable 119 (350)
Unearned income (31) (1,969)
Other liabilities (1,407) (2,143)
Decrease (increase) in:
Interest receivable (431) 10
Other assets 2,901 1,516
Decrease in mortgage loans held for sale 13,251 49,611
-----------------------------------------------------------------------------------------------------------------
Net cash provided by continuing operating activities $ 18,440 50,919
=================================================================================================================
Net change in cash and cash equivalents from discontinued operations $ (660) (2,397)
=================================================================================================================
See accompanying notes to unaudited consolidated financial statements.
</TABLE>
6
<PAGE>
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The unaudited consolidated financial statements of Castle BancGroup, Inc.
(the "Company") and subsidiaries are prepared in conformity with generally
accepted accounting principles for interim financial information and with
the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. These
consolidated financial statements should be read in conjunction with the
Company's 1999 Annual Report on Form 10-K. In the opinion of management,
all normal recurring adjustments necessary for a fair presentation of the
financial position and the results of operations for the periods presented
have been included. Results of operations for interim periods are not
necessarily indicative of the results that may be expected for the year.
(2) INVESTMENT SECURITIES
Investments in debt and equity securities have been classified as available
for sale and reported at fair value. The amortized value is adjusted for
amortization of premiums and accretion of discounts using a method that
approximates level yield. Unrealized gains and losses, net of related
deferred income taxes, are reported as a component of accumulated other
comprehensive earnings (loss).
A comparison of amortized cost and fair value of investment securities
available-for-sale at September 30, 2000 and December 31, 1999 follows
(dollars in thousands):
<TABLE>
<CAPTION>
============================================================================================================
September 30, 2000
---------------------------------------------------------------
Gross Gross
Amortized cost unrealized gains unrealized losses Fair value
------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Treasury and agency
obligations $ 65,031 13 (1,651) 63,393
Obligations of state and political
subdivisions 19,169 4 (579) 18,594
Mortgage-backed securities 37,775 15 (1,211) 36,579
------------------------------------------------------------------------------------------------------------
Total debt securities 121,975 32 (3,441) 118,566
------------------------------------------------------------------------------------------------------------
Federal Home Loan Bank stock 2,052 - - 2,052
Other equity securities 1,346 - - 1,346
------------------------------------------------------------------------------------------------------------
Total securities $ 125,373 32 (3,441) 121,964
============================================================================================================
============================================================================================================
December 31, 1999
---------------------------------------------------------------
Gross Gross
Amortized cost unrealized gains unrealized losses Fair value
------------------------------------------------------------------------------------------------------------
U.S. Treasury and agency
obligations $ 66,617 3 (2,352) 64,268
Obligations of state and political
subdivisions 20,350 14 (930) 19,434
Mortgage-backed securities 41,569 6 (1,939) 39,636
------------------------------------------------------------------------------------------------------------
Total debt securities 128,536 23 (5,221) 123,338
------------------------------------------------------------------------------------------------------------
Federal Home Loan Bank stock 2,052 - - 2,052
Other equity securities 769 - - 769
------------------------------------------------------------------------------------------------------------
Total securities $ 131,357 23 (5,221) 126,159
============================================================================================================
</TABLE>
7
<PAGE>
The amortized cost and fair value of securities available for sale at
September 30, 2000 by contractual maturity, are shown below (dollars in
thousands). Actual maturities may differ from contractual maturities
because borrowers may have the right to call or prepay obligations with or
without call or prepayment penalties.
<TABLE>
<CAPTION>
September 30, 2000
----------------------------------
Amortized cost Fair value
--------------------------------------------------------------------------------
<S> <C> <C>
Due in one year or less $ 4,238 4,217
Due after one year through five years 47,705 46,805
Due after five years through ten years 19,760 19,207
Due after ten years 12,497 11,758
--------------------------------------------------------------------------------
84,200 81,987
Mortgage-backed securities 37,775 36,579
--------------------------------------------------------------------------------
Total debt securities 121,975 118,566
Federal Home Loan Bank stock 2,052 2,052
--------------------------------------------------------------------------------
Other equity securities 1,346 1,346
--------------------------------------------------------------------------------
Total securities $ 125,373 121,964
=================================================================================
</TABLE>
There were no realized losses or gains from security activity during the
nine months ended September 30, 2000. There were $62,000 in gross realized
losses and $312,000 in gross realized gains during the nine months ended
September 30, 1999. All security gains and losses were as a result of
transactions involving available for sale securities.
Investment securities carried at approximately $80,675,000 and $77,732,000
at September 30, 2000 and December 31, 1999, respectively, were pledged to
secure deposits and for other purposes as permitted or required by law.
(3) LOANS
The composition of the loan portfolio at the dates shown is as follows
(dollars in thousands):
<TABLE>
<CAPTION>
========================================================================================
September 30, 2000 December 31, 1999
----------------------------------------------------------------------------------------
<S> <C> <C>
Commercial, financial, and agricultural $ 107,073 105,163
Real estate mortgage 251,534 240,743
Consumer 19,067 18,144
Lease financing receivables 373 369
----------------------------------------------------------------------------------------
Total loans, gross $ 378,047 364,419
The following is a summary of activity in the allowance for loan losses (dollars in thousands):
========================================================================================
Nine months ended Nine months ended
September 30, 2000 September 30, 1999
----------------------------------------------------------------------------------------
Balance, beginning of period $ 4,636 4,750
Provision charged to expense 315 560
Recoveries on loans previously charged off 57 162
----------------------------------------------------------------------------------------
5,008 5,472
Less loans charged off 209 526
Less allowance on loans sold - 439
----------------------------------------------------------------------------------------
Balance, end of period $ 4,799 4,507
========================================================================================
</TABLE>
8
<PAGE>
(4) OPERATING SEGMENTS
The Company's operations include two primary segments: banking and mortgage
banking. Through its banking subsidiary's network of 11 retail banking
facilities in Northern Illinois, the Company provides traditional community
banking services such as accepting deposits and making loans. The Company's
three subsidiary banks were consolidated into one charter, Castle Bank
N.A., as of June 24, 2000. The mortgage-banking segment is entirely related
to the Company's subsidiary, CasBanc Mortgage, Inc. (CMI), which was
discontinued in January 2000 and included the origination and brokerage of
primarily residential mortgage loans for sale to various investors. The
Company's two reportable segments are strategic business units that are
separately managed as they offer different products and services and have
different marketing strategies. Smaller operating segments are combined and
consisted of consumer finance and holding company operations. The Company's
consumer finance subsidiary, Castle Finance Company (CFC), ceased all new
lending activities effective with the sale of a substantial portion of the
loan portfolio in the first quarter of 1999.
<TABLE>
<CAPTION>
Operating segment information is as follows:
(Dollars in thousands)
Mortgage Consolidated
Banking Banking Other Total
<S> <C> <C> <C> <C>
---------------------------------------------------------------------------------------------------------
Three months ended September 30, 2000
-------------------------------------
Interest income $ 10,092 (7) 10,085
Interest expense 5,115 70 5,185
---------------------------------------------------------------------------------------------------------
Net interest income before provision for loan losses 4,977 (77) 4,900
Provision for loan losses 105 - 105
---------------------------------------------------------------------------------------------------------
Net interest income after provision for loan losses 4,872 (77) 4,795
Other operating income 1,289 8 1,297
Other operating expenses 3,708 784 4,492
---------------------------------------------------------------------------------------------------------
Earnings (loss) before income taxes 2,453 (853) 1,600
Income tax expense (benefit) 812 (331) 481
---------------------------------------------------------------------------------------------------------
Net earnings (loss) from continuing operations $ 1,641 (522) 1,119
---------------------------------------------------------------------------------------------------------
Discontinued operations $ - - - -
---------------------------------------------------------------------------------------------------------
Net earnings (loss) $ 1,641 - (522) 1,119
---------------------------------------------------------------------------------------------------------
September 30, 2000
------------------
Assets $ 543,139 163 1,777 545,079
=========================================================================================================
Three months ended September 30, 1999
-------------------------------------
Interest income $ 9,831 (385) 9,446
Interest expense 4,921 (272) 4,649
---------------------------------------------------------------------------------------------------------
Net interest income before provision for loan losses 4,910 (113) 4,797
Provision for loan losses 64 0 64
---------------------------------------------------------------------------------------------------------
Net interest income after provision for loan losses 4,846 (113) 4,733
Other operating income 1,302 13 1,315
Other operating expenses 3,695 776 4,471
---------------------------------------------------------------------------------------------------------
Earnings (loss) before income taxes 2,453 (876) 1,577
Income tax expense (benefit) 812 (338) 474
---------------------------------------------------------------------------------------------------------
Net earnings (loss) from continuing operations $ 1,641 (538) 1,103
---------------------------------------------------------------------------------------------------------
Discontinued operations $ - (323) - (323)
---------------------------------------------------------------------------------------------------------
Net earnings (loss) $ 1,641 (323) (538) 780
---------------------------------------------------------------------------------------------------------
September 30, 1999
Assets $ 525,518 3,854 (6,824) 522,548
=========================================================================================================
9
<PAGE>
Operating segment information is as follows:
(Dollars in thousands)
Mortgage Consolidated
Banking Banking Other Total
------------------------------------------------------------------------------------------------------------
Nine months ended September 30, 2000
------------------------------------
Interest income $ 29,821 35 29,856
Interest expense 14,767 286 15,053
------------------------------------------------------------------------------------------------------------
Net interest income before provision for loan losses 15,054 (251) 14,803
Provision for loan losses 315 - 315
------------------------------------------------------------------------------------------------------------
Net interest income after provision for loan losses 14,739 (251) 14,488
Other operating income 3,537 79 3,616
Other operating expenses 10,823 2,259 13,082
------------------------------------------------------------------------------------------------------------
Earnings (loss) before income taxes 7,453 (2,431) 5,022
Income tax expense (benefit) 2,521 (940) 1,581
------------------------------------------------------------------------------------------------------------
Net earnings (loss) from continuing operations $ 4,932 (1,491) 3,441
------------------------------------------------------------------------------------------------------------
Discontinued operations $ - (837) - (837)
------------------------------------------------------------------------------------------------------------
Net earnings (loss) $ 4,932 (837) (1,491) 2,604
------------------------------------------------------------------------------------------------------------
September 30, 2000
------------------
Assets $ 543,139 163 1,777 545,079
============================================================================================================
Nine months ended September 30, 1999
-------------------------------------
Interest income $ 28,425 89 28,514
Interest expense 13,889 67 13,956
------------------------------------------------------------------------------------------------------------
Net interest income before provision for loan losses 14,536 22 14,558
Provision for loan losses 248 312 560
------------------------------------------------------------------------------------------------------------
Net interest income after provision for loan losses 14,288 (290) 13,998
Other operating income 4,250 4 4,254
Other operating expenses 11,030 3,358 14,388
------------------------------------------------------------------------------------------------------------
Earnings (loss) before income taxes 7,508 (3,644) 3,864
Income tax expense (benefit) 2,525 (1,395) 1,130
------------------------------------------------------------------------------------------------------------
Net earnings (loss) from continuing operations $ 4,983 (2,249) 2,734
------------------------------------------------------------------------------------------------------------
Discontinued operations $ - (370) - (370)
------------------------------------------------------------------------------------------------------------
Net earnings (loss) $ 4,983 (370) (2,249) 2,364
------------------------------------------------------------------------------------------------------------
September 30, 1999
------------------
Assets $ 525,518 3,854 (6,824) 522,548
============================================================================================================
</TABLE>
10
<PAGE>
(5) COMPREHENSIVE EARNINGS
The Company's comprehensive earnings (loss) for the three month and nine
month periods ending September 30, 2000 and 1999, is as follows (dollars in
thousands):
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
2000 1999 2000 1999
<S> <C> <C> <C> <C>
=============== =================
Net earnings $1,119 $ 780 $2,604 $ 2,364
Other comprehensive earnings
Unrealized gain (loss) on investment securities 1,693 (457) 1,789 (5,089)
Reclass adjustment for net gains included in net earnings - (1) - (250)
Income tax effect (655) 177 (692) 2,062
------- ------ ------- --------
Total comprehensive earnings (loss) $2,157 $ 499 $3,701 $ (913)
------- ------ ------- --------
</TABLE>
(6) COMMITMENTS AND CONTINGENT LIABILITIES
Because of the nature of their activities, the Company and its subsidiaries
are subject to pending and threatened legal actions, which arise in the
normal course of business. In the opinion of management, based on the
advice of legal counsel, the disposition of any known pending legal actions
will not have a material adverse effect on the financial position or the
liquidity and results of operations of the Company.
(7) DISCONTINUED OPERATIONS
In January 2000, the Company formally adopted a plan to liquidate the
mortgage-banking segment, which is comprised entirely of the operations of
CMI. The mortgage-banking segment does not include the subsidiary bank's
mortgage lending activities, which are a component of continuing
operations. As a result of the decision to discontinue the mortgage-banking
segment, all related operating activity was reclassified and reported as
discontinued operations for financial reporting purposes at December 31,
1999.
The financial statements for the nine months ended September 30, 2000,
reflect a loss from discontinued operations of $837,000, as follows:
Loss from operations of CMI (net of income tax
effect of $75,000) $ 116,000
Loss on disposal of CMI, including provision for
estimated operating losses during phase-out
period (net of income tax effect of $507,000) 721,000
---------
$ 837,000
=========
11
<PAGE>
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
FORWARD-LOOKING STATEMENTS
--------------------------
Certain statements in this Quarterly Report on Form 10-Q constitute
"forward-looking statements" within the meaning of Section 21E under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"). For example,
forward-looking statements may be made with respect to the Company's earnings
prospects, pricing and fee trends, credit quality and outlook, new business
results, expansion plans, and anticipated expenses. The Company intends these
forward-looking statements to be subject to the safe harbor created by the
Exchange Act and is including this statement to avail itself of these safe
harbor provisions. Forward-looking statements, which are based on certain
assumptions and describe future plans, strategies and expectations of the
Company, are identified by statements containing words and phrases such as
"may," "project," "are confident," "should be," "will be," "predict," "believe,"
"plan," "expect," "estimate," "anticipate" and similar expressions. These
forward-looking statements reflect the Company's current views with respect to
future events and financial performance, but are subject to many uncertainties
and factors relating to the Company's operations and business environment, which
could change at any time and which could cause actual results to differ
materially from those expressed or implied by the forward-looking statements.
There are inherent difficulties in predicting factors that may affect the
accuracy of forward-looking statements. Potential risks and uncertainties that
may affect the Company's operations, performance, development and business
results include the following:
- the risk of adverse changes in business conditions in the banking industry
generally and in the specific Midwestern markets in which the Company's
subsidiary bank operates;
- changes in the legislative and regulatory environment that result in
increased competition or operating expenses;
- changes in the interest rates and changes in monetary and fiscal policies
and the corresponding effect on the Company's interest rate spread and net
interest margin;
- effects on the Company's liquidity if CMI is required to repurchase a
significant amount of the fraudulent loans originated and sold by CMI as
described below;
- increased competition from other financial and non-financial institutions;
- the competitive impact of technological advances in the conduct of the
banking business; and
- other risks set forth from time to time in the Company's filings with the
Securities and Exchange Commission.
These risks and uncertainties should be considered in evaluating forward-looking
statements, and undue reliance should not be placed on such statements. The
Company does not assume any obligation to update or revise any forward-looking
statements subsequent to the date on which they are made.
RESULTS OF OPERATIONS
---------------------
The Company's net earnings were $2,604,000 for the nine months ended September
30, 2000, up from $2,364,000 for the nine months ended September 30, 1999. This
represents an increase of $240,000, or 10.2%. Net earnings for the nine months
ended September 30, 1999 included a $513,000 loss on the sale of a substantial
portion of the CFC portfolio, as well as other charges to close that business.
Net earnings of $1,119,000 for the three months ended September 30, 2000
compared to net earnings of $780,000 for the three months ended September 30,
1999, for an increase of $339,000, or 43.5%. The increase in net earnings for
the quarter is primarily attributable to the 1999 loss from discontinued
operations, which produced a loss of $323,000 for the quarter ended September
30, 1999. The discontinued operations relate to the Company's mortgage-banking
segment.
12
<PAGE>
The Company's Annual Report on Form 10-K for the year ended December 31, 1999
reported that the Company uncovered fraud and other irregularities in CMI's
underwriting and documentation of certain mortgage loans originated and sold by
CMI. A more detailed description of the fraud and other irregularities is
included in that Form 10-K. These mortgage loans were sold to investors in the
secondary mortgage market with recourse back to CMI, meaning that CMI may be
obligated to repurchase these loans from investors under certain circumstances,
which could include the fraud and other irregularities uncovered by the Company.
During its ongoing investigation into the fraud and other irregularities at CMI,
the Company decided to discontinue the mortgage-banking segment. All offices of
CMI, which had not been previously closed, were closed in January 2000. A
discussion of the discontinuance and the creation of a reserve liability for
possible losses on the loans affected by the fraud and the irregularities are
included in the Form 10-K for the year ended December 31, 1999.
The Company's net earnings from continuing operations for the nine months ended
September 30, 2000 were $3,441,000, a 25.9% increase from net earnings from
continuing operations of $2,734,000 for the nine months ended September 30,
1999. This increase is primarily attributable to the CFC losses in 1999, as
discussed above. Net earnings from continuing operations for the three months
ended September 30, 2000 were $1,119,000 compared to $1,103,000 for the three
months ended September 30, 1999, a 1.5% increase.
Basic earnings per share from continuing operations increased to $0.79 for the
nine months ended September 30, 2000 as compared to $0.63 for the nine months
ended September 30, 1999. If discontinued operations are included, basic
earnings per share increased to $0.59 for the nine months ended September 30,
2000 as compared to $0.55 for the nine months ended September 30, 1999. Basic
earnings (loss) per share from discontinued operations was ($.19) for the nine
months ended September 30, 2000 and ($0.08) for the nine months ended September
30, 1999. Per common share data reflects the May 1999 2-for-1 stock split in
the form of a 100% stock dividend. Basic earnings per share from continuing
operations was $0.25 for the three months ended September 30, 2000, as compared
$0.26 for the three months ended September 30, 1999. If discontinued operations
are included, basic earnings per share were again $0.25 for the three months
ended September 30, 2000 and $0.18 for the three months ended September 30,
1999.
The Company's banking segment posted net earnings of $4,932,000 for the nine
months ended September 30, 2000, as compared to $4,983,000 for the nine months
ended September 30, 1999, for a decrease of 1.0%. The decrease is primarily
attributable to the gain on sale of investment securities of $250,000 included
in the nine months ended September 30, 1999. There were no gains or losses
during the same period in 2000.
The Company's mortgage-banking segment posted a net loss of $837,000 for the
nine months ended September 30, 2000, as compared to a net loss of $370,000 for
the same time period in 1999. As discussed above, in January 2000, the Company
formally adopted a plan to liquidate the mortgage-banking segment, which is
comprised entirely of the operations of CMI. The mortgage-banking segment does
not include the subsidiary bank's mortgage lending activities, which are a
component of continuing operations. As a result of the decision to discontinue
the mortgage-banking segment, all related operating activity was reclassified
and reported as discontinued operations for financial reporting purposes.
13
<PAGE>
The loss from discontinued operations included losses from operating activities
of CMI and the loss on disposal of the mortgage-banking segment. Included in
this charge are accruals for operating losses during the phase-out period,
accruals for salary and severance payments, write-downs of the value of fixed
assets, accruals for lease liabilities, and other items.
Segment information presented under "Other" in Note 4 includes the holding
company and consumer finance business. This segment produced a net loss of
$1,491,000 for the nine months ended September 30, 2000, compared to a net loss
of $2,249,000 for the nine months ended September 30, 1999. The decrease in net
losses for September 30, 2000 is primarily due to net losses associated with the
sale of a substantial portion of the CFC loan portfolio and other related
charges involved in closing that business taken in the first nine months of
1999.
NET INTEREST INCOME
-------------------
Net interest income before provision for loan losses, the Company's primary
source of earnings, was $14,804,000 for the nine months ended September 30,
2000, a $246,000, or 1.7% increase over the same period in 1999.
Management believes that net interest margins may narrow as competitive
pressures in the marketplace expand. Competition from financial institutions
and non-traditional competitors, as well as general economic trends, may
continue to impact future earnings. Earning asset mix, as well as the net
interest margin, are monitored and evaluated by management to develop strategies
to help maintain and improve earnings.
The average net interest margin, on a tax equivalent basis (including
non-accruing loans), decreased for the first nine months of 2000 to 4.10% as
compared to 4.11% for the same period in 1999. The decrease can primarily be
attributed to a decrease in the average yield on earning assets due to
repricing.
The ratio of average earning assets to average total assets was 93.2% for the
first nine months of 2000 as compared to 94.3% for the same time period in 1999.
14
<PAGE>
<TABLE>
<CAPTION>
ANALYSIS OF NET INTEREST INCOME-TAX EQUIVALENT BASIS
(IN THOUSANDS)
Average Balance Interest Earned or Paid Average Rate
--------------- ----------------------- ------------
Nine Months Ended September 30,
2000 1999 2000 1999 2000 1999
--------- -------- ------- ------- ----- ------
<S> <C> <C> <C> <C> <C> <C>
INTEREST EARNING ASSETS:
Taxable securities available for sale $104,604 107,792 5,134 5,070 6.54% 6.27%
Tax-exempt securities available for sale1 19,298 21,217 1,018 1,183 7.03% 7.44%
--------- -------- ------- ------- ----- ------
Total securities $123,902 129,009 6,152 6,253 6.62% 6.46%
--------- -------- ------- ------- ----- ------
Federal funds sold 2,959 - 133 13 5.99% -
Mortgage loans held for sale2 2,614 28,759 166 1,567 8.47% 7.26%
Net loans1,3 372,051 335,120 24,009 21,320 8.60% 8.48%
--------- -------- ------- ------- ----- ------
Total earning assets (FTE) $501,526 492,888 30,460 29,153 8.10% 7.89%
========= ======== ======= ======= ===== ======
INTEREST BEARING LIABILITIES:
Interest-bearing deposits $410,028 395,831 13,799 12,539 4.49% 4.22%
Other borrowings 27,838 34,178 1,254 1,417 6.01% 5.53%
--------- -------- ------- ------- ----- ------
Total interest-bearing liabilities 437,866 430,009 15,053 13,956 4.58% 4.33%
========= ======== ======= ======= ===== ======
Interest rate spread (FTE) 3.52% 3.56%
Net interest margin / Net interest income (FTE) 15,407 15,197 4.10% 4.11%
======= ======= ===== ======
<FN>
1 The interest on tax-exempt investment securities and tax-exempt loans is calculated on a tax
equivalent basis assuming a federal tax rate of 34.00%.
2 The yield-related fees recognized from the origination of mortgage loans held for sale are in
addition to the interest earned on the loans during the period in which they are warehoused
for sale as shown above.
3 The balances of nonaccrual loans are included in average loans outstanding. Interest on loans
includes yield-related loan fees.
</TABLE>
PROVISION FOR LOAN LOSSES
----------------------------
The Company establishes a provision for loan losses which management believes is
sufficient to maintain adequate reserve levels. The provision is a result of
credit analysis, historical trends in net charges to the allowance, loan
portfolio configuration, and loan growth. Management closely monitors loan
quality to minimize loan losses. The Company's loan review program closely
monitors credit conditions of specific loans, historical trends in charge-offs
at the subsidiaries as well as at companies within their peer group, experience
and quality of lending staff, and general economic conditions in the communities
that the subsidiaries serve. This system allows management to assess the
adequacy of the allowance for loan losses. The allowance for loan losses as a
percentage of total outstanding loans was to 1.27% at September 30, 2000,
unchanged from 1.27% at December 31, 1999.
The provision for loan losses recorded during the first nine months of 2000 was
$315,000 as compared to $560,000 during the same period in 1999. The decrease
is due to provisions recorded in 1999 related to CFC. The balance in the
allowance for loan loss account is derived from the quarterly assessment of
adequacy performed in the ordinary course of business by management. The
allowance for loan loss balance reflects the underlying credit risk in the loan
and lease portfolio. The Company continues to experience strong loan demand.
Should strong loan growth continue in the future, the quarterly assessment of
adequacy of the allowance might indicate the need for an increase in the
provision for loan losses.
15
<PAGE>
Management continues to closely monitor and control asset quality.
Non-performing assets, defined as loans 90 days or more past due and still
accruing interest, loans in non-accrual status, restructured loans, and other
real estate owned, represented .52% of total assets as of September 30, 2000,
which has decreased from 0.66% at December 31, 1999. The following table
summarizes the components of non-performing assets at September 30, 2000 and at
December 31, 1999:
SEPTEMBER 30, 2000 DECEMBER 31, 1999
------------------ -----------------
(dollars in thousands)
Non-accrual loans $2,578 $2,685
Loans past due 90+ days & still accruing 178 573
Restructured loans 104 120
Other real estate owned - 201
------ ------
TOTAL NON-PERFORMING ASSETS $2,860 $3,579
====== ======
Year-to-date net charge-offs at September 30, 2000 were $152,000 as compared to
$364,000 at September 30, 1999. Management continues to closely monitor all
past dues and to improve collection efforts.
OTHER OPERATING INCOME
----------------------
Total other operating income is comprised of mortgage loan origination income
from the subsidiary bank, trust services, deposit service charges, other
customer service charges, and other miscellaneous income. Excluding security
gains and losses, other operating income was $3,616,000 for the nine months
ended September 30, 2000, a decrease of 9.7% from $4,004,000 for the nine months
ended September 30, 1999. This change can be primarily attributed to a decrease
in mortgage loan origination income of $375,000. The decreased mortgage loan
activity at the subsidiary bank was a result of the unfavorably high interest
rate environment in effect for fifteen and thirty year mortgages on
one-to-four-family residential properties. For the three months ended September
30, 2000, other operating income, excluding security gains and losses, was
$1,297,000 as compared to $1,314,000 for the same period in 1999.
There was no security sale activity for the nine months ended September 30, 2000
as compared to net gains of $250,000 for the same time period in 1999. The
entire investment portfolio is classified as available-for-sale and the 1999
sales were made from the available-for-sale classification. During 1999,
several securities were sold at a gain to take advantage of market conditions at
the time of the sale. The portfolio is recorded at current market value in the
accompanying financial statements. It is management's expectation to classify
all investment securities purchased as available-for-sale for the foreseeable
future. Changes in the market value of these securities are reflected in
equity, net of applicable income taxes. The decision to purchase or sell a
security is based on a number of factors including, but not limited to, the
potential for increased yield, improved liquidity, asset mix adjustment,
improvement in the interest rate gap, and collateral (pledging) requirements of
local municipalities.
OTHER OPERATING EXPENSES
------------------------
Other operating expenses were $13,082,000 for the nine months ended September
30, 2000 as compared to $14,388,000 for the nine months ended September 30,
1999. Salaries and employee benefits expense represents the largest component
of other operating expenses. This category decreased $243,000, or 3.0% from the
nine month period ended September 30, 1999 to September 30, 2000. The decrease
is primarily attributable to the closure of CFC and also reduced staff levels at
the subsidiary bank and the holding company, as the Company has consolidated
certain "back office" functions.
16
<PAGE>
Occupancy and furniture and fixtures expenses were $1,917,000 for the nine
months ended September 30, 2000, a decrease of $164,000, or 7.9%, from the same
period in 1999. Outside services and other expenses decreased 15.0% to
$1,955,000 during the nine months ended September 30, 2000 as compared to
$2,301,000 for the same period in 1999. Advertising expense decreased 1.7% in
the first nine months of 2000 to $298,000 versus $303,000 for the first nine
months of 1999. Other operating expenses for 1999 included a $513,000 loss on
the sale of loans discussed above, as well as other expenses associated with the
closure of CFC. Management continues to control overhead expenses by
emphasizing cost containment and by taking advantage of available economies of
scale at the holding company level. However, management's cost containment
measures are tempered by the need to maintain consistently high levels of
customer service and the need to attract and retain qualified staff. For the
quarter ended September 30, 2000, total other operating expenses decreased
$21,000 over the corresponding three-month period in 1999.
FINANCIAL CONDITION
-------------------
Total assets at September 30, 2000, increased $4,229,000 as compared to December
31, 1999. This increase is primarily due to an increase in net loans of
$13,496,000 and Federal funds sold of 4,900,000 offset by a decrease in mortgage
loans held for sale of $13,251,000. A $23,357,000 increase in deposits allowed
for a decrease in other borrowings of $21,565,000. Average assets for the
first nine months of 2000 increased by $10,882,000 or approximately 2.1% as
compared to the corresponding period in 1999. This increase was primarily
attributed to a $36,809,000 increase in the average net loan portfolio offset by
a decrease in average mortgage loans held for sale of $27,087,000. Average
total deposits grew 4.7% over the corresponding period in 1999 to $464,812,000.
Despite this growth in average deposits, the subsidiary bank continues to
experience competition for deposits that continues to put pressure on the
overall cost of funds. Management continues to view "core" deposits
(individuals, partnerships and corporate deposits) as the primary long term
funding source for internal growth of the Company, but also recognizes the need
to use wholesale funding sources, such as Federal Loan Home Bank advances, to
fund loan portfolio growth.
CAPITAL
-------
The Company is committed to maintaining a strong capital position at the
subsidiary bank and on a consolidated basis. Management monitors, analyzes and
forecasts capital positions to ensure that adequate capital is available to
support growth and maintain financial soundness. The Company's Tier 1 leverage
ratio as of September 30, 2000 was 7.75%, an increase from 7.26% at December 31,
1999. The ratio exceeds the regulatory well-capitalized levels, and management
believes the Company is maintaining a strong capital position. The Company's
September 30, 2000 total risk weighted capital ratio also increased to 11.73%
from 11.11% at December 31, 1999. The Tier 1 capital ratio at September 30,
2000 increased to 10.50% from 9.91% at December 31, 1999. Both the total risk
weighted and Tier 1 Capital ratios also continue to exceed regulatory
well-capitalized levels.
Total stockholder's equity increased $3,590,000 from December 31, 1999 to
September 30, 2000. This resulted from net earnings for the nine months ended
September 30, 2000 of $2,604,000, the issuance of common stock totaling
$283,000, offset in part by cash dividends on common stock of $394,000. In
addition, accumulated other comprehensive loss decreased $1,097,000 due to the
change in fair value of investment securities.
17
<PAGE>
LIQUIDITY
---------
The Company ensures the subsidiary bank maintains appropriate liquidity and
provides access to secondary sources of liquidity in case of unusual or
unanticipated demand for funds. Primary bank sources of liquidity are
repayments of loans, high-quality marketable investment securities available for
sale, Federal Home Loan Bank advances, and the bank's federal funds position
that, together, are more than sufficient to satisfy liquidity needs arising in
the normal course of business. The Company is a secondary source of liquidity
for its subsidiary bank through its discretionary access to short-term funding
provided by its line of credit, in case of unanticipated demand for funds.
Should the subsidiary bank's loan portfolio continue to grow faster than
customer deposits, the Company may need to increase its use of alternative
funding sources.
As presented in the Consolidated Statement of Cash Flows, the Company has
experienced significant changes in the cash flows from operating, investing and
financing activities during the first nine months of 2000 as compared to the
same period in 1999. These fluctuations primarily relate to the changes in the
loan, investment, and mortgage loans held for sale portfolios, as explained
above.
INTEREST RATE SENSITIVITY
-------------------------
The Company's overall success is dependent upon its ability to manage interest
rate risk. Interest rate risk can be defined as the exposure of the Company's
net interest income to adverse movements in interest rates. Because the Company
has no trading portfolio, the Company is not exposed to significant market risk
from trading activities. Other types of market risk, such as foreign currency
exchange and commodity price risk, do not arise in the normal course of the
Company's business activities. The Company does not currently use derivatives
to manage market and interest rate risks. A derivative financial instrument
includes futures, forwards, interest rate swaps, option contracts, and other
financial instruments with similar characteristics.
The Company is party to financial instruments with off-balance sheet risk in the
normal course of business to meet the financing needs of its customers. These
financial instruments include commitments to extend credit and standby letters
of credit. These instruments involve to varying degrees, elements of credit and
interest rate risk in excess of the amount recognized in the consolidated
balance sheets. Commitments to extend credit are arrangements to lend to a
customer as long as there is no violation of any condition in the contract.
Commitments generally have fixed expiration dates and may require collateral
from the borrower if deemed necessary by the Company. Standby letters of credit
are conditional commitments issued by the Company to guarantee the performance
of a customer to a third party up to a stipulated amount and with specified
terms and conditions. Commitments to extend credit and standby letters of
credit are not recorded as an asset or liability by the Company until the
instrument is exercised.
The Funds Management Committee reviews interest rate exposure on a regular
basis. The principal objective of the Company's interest rate risk management
function is to evaluate the interest rate risk included in certain balance sheet
accounts, determine the level of risk appropriate given the Company's business
strategy, operating environment, capital and liquidity requirements and
performance objectives, and manage the risk consistent with the funds management
policy of the Company. Through such management, the Company seeks to monitor
the vulnerability of its operations to changes in interest rates. The extent of
the movement of interest rates is an uncertainty that could have a negative
effect on the earnings of the Company.
18
<PAGE>
ACCOUNTING STANDARDS
--------------------
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities." This statement established accounting and
reporting standards for derivative instruments, including certain derivative
instruments embedded in other contracts and for hedging activities. It requires
that any entity recognize all derivatives as either assets or liabilities in the
statement of financial position and measure those instruments at fair value.
The accounting for changes in the fair value of a derivative depends on the
intended use of the derivative and the resulting designation. In June 1999, the
FASB issued SFAS No. 137, "Accounting for Derivative Instruments and Hedging
Activities--Deferral of the effective date of Statement No. 133." This
statement defers the adoption of SFAS 133 to fiscal quarters of fiscal years
beginning after June 15, 2000. In June 2000, the FASB issued SFAS No. 138,
"Accounting for Certain Derivative Instruments and Certain Hedging
Activities--an Amendment of Statement No. 133," which statement addresses
various implementation issues relative to SFAS No. 133. SFAS No. 133 is not
expected to have a material impact on the Company's financial position, results
of operations or liquidity.
In September 2000, the FASB issued SFAS No. 140, "Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities." This
statement replaces FASB Statement No. 125, "Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities". It revises
the standards for accounting for securitizations and other transfers of
financial assets and collateral and requires certain disclosures, but it carries
over most of Statement 125's provisions without reconsideration. This statement
provides accounting and reporting standards for transfers and servicing of
financial assets and extinguishments of liabilities. The majority of the
provisions of SFAS No. 140 will become effective for transactions entered into
after March 31, 2001; however, certain disclosure requirements are effective for
financial statements for fiscal years ending after December 15, 2000. SFAS No.
140 is not expected to have a material impact on the Company's financial
position, results of operations or liquidity.
19
<PAGE>
ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
There have been no material changes in the market risks faced by the Company
since December 31, 1999. For information regarding the Company's market risk,
refer to its Annual Report on Form 10-K for the year ended December 31, 1999.
20
<PAGE>
PART II
ITEM 1--LEGAL PROCEEDINGS
Neither the Company nor any subsidiary is a party to, and none of their property
is subject to, any material legal proceeding at this time. However, the Company
and its subsidiaries are from time to time parties to routine litigation
incidental to their businesses.
ITEM 2--CHANGES IN SECURITIES
Not applicable.
ITEM 3--DEFAULTS UPON SENIOR SECURITIES
Not applicable.
ITEM 4-- SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS
Not applicable.
ITEM 5-- OTHER INFORMATION
Not applicable.
ITEM 6--EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
--------
11 Computation of Per Share Earnings
27 Financial Data Schedule
(b) Reports on Form 8-K
-----------------------
None
21
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Castle BancGroup, Inc.
/s/ John W. Castle
---------------------------
By: John W. Castle, Chairman of the Board
Chief Executive Officer and Director
Castle BancGroup, Inc.
Date: November 10, 2000
/s/ Micah R. Bartlett
------------------------------
By: Micah R. Bartlett, Chief Accounting Officer
and Controller
Castle BancGroup, Inc.
Date: November 10, 2000
22
<PAGE>
EXHIBIT INDEX
Exhibit 11 Computation of Per Share Earnings
Exhibit 27 Financial Data Schedule
23
<PAGE>
