SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
to the
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the Quarter Ended September 30, 1996
Commission File Number 0-24630
MAHASKA INVESTMENT COMPANY
(Exact name of registrant as specified in its charter)
IOWA 42-1003699
(State of Incorporation) (I.R.S. Employer
Identification Number)
222 First Avenue East, Oskaloosa, Iowa 52577
(Address of principal executive offices)
(515) 673-8448
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required by Section13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months and(2) has been subject to such filing requirements for the
past 90 days. YES X NO
As of November 6, 1996, 2,229,506 shares of common stock $5 par value were
outstanding. PART 1 -- Item 1. Financial Statementsial Statements
<PAGE>
PART 1 -- Item 1. Financial Statements
MAHASKA INVESTMENT COMPANY
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CONDITION
<TABLE>
<CAPTION>
(unaudited)
(dollars in thousands) .................... September 30, December 31,
1996 1995
------------- ------------
<S> <C> <C>
ASSETS
Cash and due from banks ...................... $ 9,049 $ 6,700
Interest-bearing deposits in banks ........... 4,002 3,439
Federal funds sold ........................... 0 10,682
--------- ---------
Cash and cash equivalents .................. 13,051 20,821
--------- ---------
Investment securities:
Available for sale ......................... 23,613 11,169
Held to maturity ........................... 31,767 31,451
Loans ........................................ 118,482 86,475
Less:
Unearned discount .......................... (844) (606)
Allowance for loan sses .................... (1,447) (1,001)
--------- ---------
Net loans ............................... 116,191 84,868
--------- ---------
Loan pool participations ..................... 59,248 45,318
Premises and equipment, net .................. 3,122 2,495
Accrued interest receivable .................. 3,136 2,203
Other assets ................................. 2,064 2,495
Goodwill ..................................... 6,971 4,342
--------- ---------
Total assets .............................. $ 259,163 205,162
--------- ---------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY
<S> <C> <C>
Deposits:
Demand .......................... $ 17,450 15,480
NOW and Super NOW ............... 31,887 26,188
Savings ......................... 61,319 46,556
Certificates of deposit ......... 93,791 73,280
--------- ---------
Total deposits ............... 204,447 161,504
Federal funds purchased ........... 4,725 0
Note payable ...................... 13,700 10,000
Other liabilities ................. 2,913 1,552
--------- ---------
Total liabilities ............... 225,785 173,056
--------- ---------
Shareholders' equity:
Common stock, $5 par value;
authorized 4,000,000 shares;
issued 2,284,506 shares ....... 11,423 11,423
Capital surplus ................. 7,787 7,787
Treasury stock at cost,
55,000 shares as of September 30, 1996,
and 15,000 shares as of
December 31, 1995 ............. (853) (231)
Retained earnings ............... 15,207 13,070
Unrealized (loss) gain on
investments available for sale (186) 57
--------- ---------
Total shareholders' equity .... 33,378 32,106
--------- ---------
Total liabilities and
SHAREHOLDERS' EQUITY ........ $ 259,163 205,162
--------- ---------
</TABLE>
See accompanying notes to consolidated financial statements
<PAGE>
PART 1 -- Item 1. Financial Statements, Continued
MAHASKA INVESTMENT COMPANY
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
(unaudited) ........ Three Months Ended Nine Months Ended
(dollars in ........ September 30, September 30,
thousands, except .. 1996 1995 1996 1995
per share) ......... --------------------------------------
<S> <C> <C> <C> <C>
INTEREST INCOME:
Interest and fees on loans ............ $2,759 2,021 7,428 5,651
Interest and discount on loan pools ... 2,376 1,700 6,230 5,772
Interest on bank deposits 92 52 204 126
Interest on federal funds sold ........ 6 23 83 86
Interest on investment
securities:
Available for sale .................. 359 173 901 458
Held to maturity .................... 419 415 1,265 1,268
-------- -------- -------- --------
Total interest income ............ 6,011 4,384 16,111 13,361
INTEREST EXPENSE:
Interest on deposits:
NOW and Super NOW ................... 163 155 443 463
Savings ............................. 555 446 1,484 1,334
Certificates of deposit ............. 1,328 1,060 3,514 2,899
Interest on federal
funds purchased ..................... 38 1 41 41
Interest on note payable .............. 292 210 714 439
-------- -------- -------- --------
Total interest expense .............. 2,376 1,872 6,196 5,176
--------- -------- -------- --------
<PAGE>
Net interest income ...... 3,635 2,512 9,915 8,185
Provision for loan losses .. 208 47 320 122
--------- --------- --------- ---------
Net interest income
after provision for
loan losses ........... 3,427 2,465 9,595 8,063
--------- --------- --------- ---------
NONINTEREST INCOME:
Service charges .......... 257 203 658 562
Data processing income ... 57 52 173 199
Other operating income ... 104 64 304 249
Investment security losses (56) 0 (68) (15)
--------- --------- --------- ---------
Total noninterest income 362 319 1,067 995
--------- --------- --------- ---------
NONINTEREST EXPENSE:
Salaries and employee,
benefits expense ....... 957 761 2,616 2,364
Net occupancy expense .... 241 234 747 640
FDIC assessment .......... 237 14 281 181
Professional fees ........ 115 51 365 239
Other operating expense .. 408 316 1,167 1,049
Goodwill amortization .... 151 93 353 280
--------- --------- --------- ---------
Total noninterest
expense .............. 2,109 1,469 5,529 4,753
--------- --------- --------- ---------
Income before income
tax expense .......... 1,680 1,315 5,133 4,305
Income tax expense ....... 579 450 1,764 1,466
Net income ............ $ 1,101 865 3,369 2,839
--------- --------- --------- ---------
Earnings per common share .. $ 0.50 0.39 1.50 1.25
Dividends per common share . $ 0.1825 0.165 0.5475 0.495
</TABLE>
See accompanying notes to consolidated financial statements
<PAGE>
PART 1 -- Item 1. Financial Statements, Continued
MAHASKA INVESTMENT COMPANY
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
(unaudited) Six Months Ended
(dollars in thousands) September 30,
1996 1995
-------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income ............................ $ 3,369 2,839
------- -------
Adjustments to reconcile net
income to net cash
provided by operating activities:
Depreciation and amortization ....... 654 534
Provision for loan losses ........... 320 122
Investment securities losses ........ 69 15
Loss on sale of bank premises
and equipment ..................... 7 0
Amortization of investment securities
premiums .......................... 239 254
Accretion of investment securities
and loan discounts ................ (259) (164)
(Increase) decrease in other assets . (274) (822)
Increase in other liabilities ....... 1,288 387
------- -------
Total adjustments ................. 2,044 326
------- -------
Net cash provided by operating
activities ...................... 5,413 3,165
<PAGE>
CASH FLOWS FROM INVESTING ACTIVITIES:
Investment securities available for sale:
Proceeds from sales ................... 5,027 3,991
Proceeds from maturities .............. 3,135 2,000
Purchases ............................. (21,134) (4,008)
Investment securities held to maturity:
Proceeds from maturities .............. 5,178 8,305
Purchases ............................. (5,661) (6,313)
Purchases of loan pool participations ... (29,410) (9,956)
Principal recovery on loan pool
participations ........................ 15,479 10,741
Net increase in loans ................... (16,915) (11,820)
Purchases of bank premises and equipment (560) (284)
Proceeds from sales of bank premises
and equipment ......................... 1 0
Proceeds from branch acquisition ........ 14,246 0
------- -------
Net cash used in investing activities . (30,614) (7,344)
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in deposits ................ 10,860 7,579
Net increase (decrease) in federal
funds purchased ....................... 4,725 (4,700)
Advances on note payable ................ 6,400 6,500
Principal payments on note payable ...... (2,700) (2,500)
Dividends paid .......................... (1,232) (1,128)
Purchases of treasury stock ............. (622) (151)
------- -------
Net cash provided by financing
activities .......................... 17,431 5,600
------- -------
Net (decrease) increase in cash and
cash equivalents .................... (7,770) 1,421
<PAGE>
Cash and cash equivalents at
beginning of period ..................................... 20,821 7,691
Cash and cash equivalents at end of period ................. $13,051 9,112
------- -------
Supplemental disclosures of cash
flow information:
Cash paid during the period for:
Interest ............................................... $ 6,086 4,802
------- -------
Income taxes ........................................... $ 1,591 1,615
------- -------
</TABLE>
See accompanying notes to consolidated financial statements
<PAGE>
PART I -- Item 1. Financial Statements, continued.
MAHASKA INVESTMENT COMPANY
Notes to Consolidated Financial Statements
(Unaudited)
1. Adjustments and Reclassifications
The accompanying financial statements for the interim periods were prepared
without audit. In the opinion of management, all adjustments which were
necessary for a fair presentation of financial position and results of
operations have been made. These adjustments were of a normal recurring nature.
2. Statements of Cash Flows
In the statements of cash flows, cash and cash equivalents include cash and
due from banks, interest-bearing deposits with banks, and federal funds sold.
3. Income Taxes
Federal income tax expense for the three months and the nine months ended
September 30, 1996 and 1995 was computed using the consolidated effective
federal tax rate. The Company also recognized income tax expense pertaining to
state franchise taxes payable individually by the subsidiary bank and thrift.
4. Earnings Per Common Share
Earnings per common share computations are based on the weighted average
number of shares of common stock outstanding during the period. The weighted
average number ofshares for the three-month and nine-month periods ended
September 30, 1996 was 2,239,452 and 2,252,407, respectively. The weighted
average number of shares for the three- month and nine-month periods ended
September 30, 1995 was 2,274,506 and 2,279,982, respectively.
<PAGE>
PART I -- Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
The Company earned $1,101,000 ($.50 per share) for the three months ended
September 30, 1996, compared with $865,000 ($.39 per share) for the three months
ended September 30,1995. Weighted average shares outstanding were 2,239,452 and
2,274,506 for the third quarters of 1996 and 1995, respectively. Return on
average assets for the quarter ended September 30, 1996 was 1.72% compared with
a return of 1.76% for the quarter ended September 30, 1995. The Company had a
return on average equity of 12.84% for the three months ended September 30, 1996
versus 10.99% for the three months ended September 30,1995.
For the nine months ended September 30, 1996, the Company earned net income
of $3,369,000 ($1.50 per share) compared with $2,839,000 ($1.25 per share) for
the nine months ended September 30, 1995. Weighted average shares outstanding
for the nine months ended September 30, 1996 were 2,252,407 compared with an
average of 2,279,982 shares outstanding during the first nine months of 1995.
For the first nine months of both 1996 and 1995, the Company had a return on
average assets of 2.00%. The return on average equity was 13.66% for the nine
months ended September 30, 1996 compared to 12.39% for the nine months ended
September 30, 1995.
On September 30, 1996, the Company incurred a one-time assessment of
$213,000 to recapitalize the Savings Association Insurance Fund (SAIF) which is
reflected in the increased FDIC Assessment expense category for 1996. The
effects of the acquisition of a bank office by one of the Company's subsidiaries
in late June 1996 were evidenced in the third quarter of 1996 by increased
interest income and expense, noninterest income, and operating expenses. Many
balance sheet items also increased in 1996 as a result of the acquisition.
<PAGE>
RESULTS OF OPERATIONS
Net Interest Income
Net interest income for the quarter ended September 30, 1996 increased
$1,123,000 (44.7%) to $3,635,000 from $2,512,000 for the three months ended
September 30, 1995. This increase is due to greater interest income which was
partially offset by increased interest expense. Total interest income increased
$1,627,000 (37%) in the third quarter of 1996 compared with the same period in
1995 mainly due to increased volumes in loans, investment securities, and loan
pool participations. An increase in the yield on loan pool participations also
contributed to the increase in interest income. A $504,000 (27%) increase in the
amount of interest expense was noted as the volume of deposits and borrowed
funds grew. The Company's net interest margin for the third quarter of 1996
increased to 6.27% from 5.68% in the third quarter of 1995 as the rate earned on
interest-earning assets increased and the rate paid on interest-bearing
liabilities decreased. The Company's overall yield on earning assets increased
to 10.3% for the third quarter of 1996 compared to 9.8% for the third quarter of
1995. The rate paid on interest-bearing liabilities decreased in the third
quarter of 1996 to 4.7% from 5.0% in the third quarter of 1995.
For the nine months ended September 30, 1996, net interest income was
$9,915,000, an increase of $1,729,000 (21%) compared to net interest income of
$8,185,000 for the nine months ended September 30, 1995. This increase in net
interest income was mainly attributable to increased volumes and rates on
interest-earning assets offset by increases in the volume of interest-bearing
liabilities. The net interest margin increased slightly to 6.5% for the first
nine months of 1996 compared with 6.4% for the first nine months of 1995. The
yield on earning assets was 10.5% for the first nine months of 1996 compared
with 10.4% for the nine months ended September 30, 1995, while the rate on
interest-bearing liabilities for 1996 was 4.7% compared with 4.8% in 1995.
Interest income and fees on loans increased $738,000 (37%) in the third
quarter of 1996 compared to the same period in 1995 due to increased loan
volumes. The increase attributable to volume was partially offset by a decrease
in the overall yield on loans for the quarter which was due to a slightly lower
market interest rate environment. For the nine months ended September 30, 1996,
interest income and fees on loans increased $1,777,000 (31%) compared with the
first nine months of 1995. The average yield on loans increased to 9.8% for the
first nine months of 1996, up from 9.5% for the nine months ended September 30,
1995. Average loans outstanding increased to $101,130,000 for the first nine
months of 1996 compared with $79,687,000 for the same period in 1995, an
increase of $21,443,000 (27%).
<PAGE>
Loan pool investments continued to provide the Company with increased
amounts of revenue compared to prior year periods. Interest income and discount
earned on the loan pools increased $676,000 (40%) in the third quarter of 1996
to $2,375,000 compared with $1,700,000 earned in the third quarter of 1995. The
yield on loan pool investments increased to 16.3% for the third quarter of 1996
compared with 14.3% in the third quarter of 1995. The average loan pool
participation investment balance was $10,881,000 (23%) greater in the third
quarter of 1996 than in 1995. For the first nine months of 1996, loan pool
interest income and discount totaled $6,230,000, an increase of $458,000 (8%)
compared to the 1995 year-to-date total of $5,772,000. Year-to-date 1996 average
loan pool participation investments increased to $48,484,000, up from
$45,761,000 for the first nine months of 1995. Loan pool yield for the first
nine months of 1996 was 17.2% compared with a yield of 16.9% for the nine months
ended September 30, 1995.
For the third quarter of 1996 the Company experienced an increase of
$185,000 (107%) in interest income on investment securities available for sale
compared with the same periodin 1995. This increase was mainly due to the
increased level of securities held in this category in 1996 compared to the
prior year. For the nine months ended September 30,1996, interest income on
securities available for sale increased $443,000 (97%) due to increased volume.
Most of the securities the Company has purchased during 1996 have been
classified as "available for sale."
Interest expense for the third quarter of 1996 increased compared with the
third quarter of 1995 as a result of the increase in total deposits (much of
this due to the deposits acquired by Central Valley Bank) and an increased level
of borrowed funds. The average interest rates paid on all deposit categories and
on borrowed funds were lower in the third quarter of 1996 compared to 1995 which
somewhat offset the higher balances. Average interest-bearing deposits for the
third quarter of 1996 increased $44,335,000 (32%) from the same period in 1995.
Average federal funds purchased and notes payable increased during the third
quarter of 1996 by $2,545,000 and $4,436,000, respectively, compared with the
third quarter of 1995 with a resultant increase in interest expense on these
liabilities. Federal funds were purchased to meet loan pool funding needs, and
the increase in notes payable wasused to provide additional capital to Central
Valley Bank. For the nine months ended September 30, 1996, total interest
expense was $1,020,000 (20%) greater than in the first nine months of 1995. The
average rate paid on interest-bearing liabilities was 4.7% for the first nine
months of 1996 compared with 4.8% in the first nine months of 1995. Average
interest-bearing liabilities for the nine months ended September 30, 1996
increased $29,394,000 compared with the same period in 1995 due to growth in
deposits at existing subsidiaries and the acquisition of the bank office by
Central Valley Bank.
<PAGE>
Provision for Loan Losses
Other Income
Total noninterest income increased $43,000 (14%) in the third quarter of
1996 compared with 1995. The greater total of noninterest income was mainly due
to increased service charge income at Central Valley Bank (much of this
attributable to the acquisition), increased trust fees collected at Mahaska
State Bank, and higher loan charges and fees recognized at both bank
subsidiaries. These increases were partially offset by a loss taken on the sale
of some investment securities held as available for sale that allowed Mahaska
State Bank to reposition a portion of its investment portfolio. For the first
nine months of 1996, total noninterest income for the Company was up $73,000
(7%) over that recorded in the same period of 1995.
Other Expense
Total noninterest expense for the quarter ended September 30, 1996
increased $640,000 (44%) compared to noninterest expense for the third quarter
of 1995. Of this increase, approximately $209,000 (including goodwill
amortization) was attributable to the acquisition by Central Valley of the
Sigourney bank office, $213,000 was the SAIF assessment, and the remainder was
mainly due to an increase in the number of employees at Central Valley and
On-Site, resulting in higher personnel expense for the quarter.
Salaries and employee benefits expense increased $196,000 (26%) in the
third quarter of 1996 compared with 1995. Of this increase, approximately
$76,000 was attributable to eight additional employees of the acquired bank
office, while the remaining $120,000 was attributable to an increase of eleven
full-time equivalent employees spread between On- Site and Central Valley
(including the new In-Store branch).
<PAGE>
The Company's FDIC assessment expense increased in the third quarter of
1996 primarily because of the one-time assessment of $213,000 incurred on
September 30, 1996 to recapitalize the SAIF by bringing it to its required
funding level. This will benefit the Company through an approximately 72%
reduction in FDIC premium rates charged on SAIF-insured deposits beginning in
1997. The current SAIF rate charged of $.23 per $100 of insured deposits will be
reduced to $.06. As of September 30, 1996, the Company s subsidiaries had
approximately $43 million in SAIF insured deposits and approximately $161
million of deposits insured by the Bank Insurance Fund (BIF). In conjunction
with the SAIF assessment, the BIF rate will increase to $.013 per $100 of
deposits beginning in 1997. The current BIF rate is zero, thus there will be an
increase in FDIC assessment related to the BIF deposits. The overall result to
the Company will be favorable in terms of 1997 expense reduction.
Professional fees for the third quarter of 1996 rose $64,000, with
approximately $29,000 of that amount attributable to one-time data processing
conversion and legal costs associated with the branch office acquisition. The
remaining increase is primarily due to higher legal fees associated with credit
administration and other litigation.
Other operating expenses increased $92,000 for the third quarter of 1996
over 1995 with approximately $42,000 of this due to the acquisition of the bank
office. During the third quarter of 1996, amortization of goodwill increased
$57,000 versus the same period in 1995 primarily due to the $50,000 additional
amortization related to the Sigourney office in 1996.
Total noninterest expense for the nine months ended September 30, 1996
increased $777,000 (16%) compared with the first nine months of 1995. Much of
this increase is due to the costs of additional personnel, the costs associated
with the acquisition and operation of the Sigourney branch office, and the SAIF
assessment.
Income Tax Expense
Income tax expense for the three months ended September 30, 1996, increased
$129,000 (29%) compared to the amount for the three months ended September 30,
1995, due to the overall increase in taxable income for the period. For the nine
months ended September 30, 1996, the Company's income tax expense increased
$298,000 (20%) compared with the first nine months of 1995. The Company's
effective tax rate was 34% for all periods.
<PAGE>
FINANCIAL CONDITION
The Company's total assets as of September 30, 1996 were $259,163,000, an
increase of $54.0 million (26%) from December 31, 1995. Total deposits increased
$42.9 million during this time period with approximately $32.1 million of the
increase attributable to the acquired bank office. Subsequent to the acquisition
on June 21, 1996, there has been very minimal run-off of acquired deposits.
Exclusive of the growth in deposits attributable to the acquisition, the Company
experienced deposit growth of approximately $10.8 million (7%). Deposit growth
at Mahaska State Bank from December 31, 1995 through September 30, 1996 was
approximately $5.4 million and existing branches of Central Valley Bank also
grew approximately $5.4 in the same time period. The Company had $4.0 million in
interest-bearing deposits in banks and no federal funds sold on September 30,
1996, compared with interest-bearing bank deposits of $3.4 million and fed funds
sold of $10.7 million on December 31, 1995. Fed funds purchased were $4.7
million on September 30, 1996 with none on December 31, 1995. The note payable
balance was $13.7 million on September 30, 1996, compared with $10.0 million on
December 31, 1995 reflecting the additional borrowing of $5.0 million incurred
by the Company to inject additional capital into Central Valley Bank required by
the bank office acquisition. The Company did pay down $1.3 million on the notes
payable as loan pool collections were received.
Loan Pool Participations
As of September 30, 1996, the Company had investments in loan pool
participations of $59,248,000. New loan pool investments during the quarter
totaled $6,869,000, with the year-to-date investment for 1996 totaling
$29,410,000. The new loan pool investments purchased during the third quarter of
1996 were acquired from a private seller. The loan pool participation investment
as of December 31, 1995 was $45,318,000. The Company received a total of $15.5
million in recovery of loan pool investment for the first nine months of 1996.
Loans
Loan volumes continued to increase, with total loans as of September 30,
1996 reflect inggrowth of $32.0 million from December 31, 1995. Central Valley
purchased approximately $14.6 million in loans from Boatmen's as part of the
Sigourney acquisition. Most of the approximately $17.4 million (20%) in loan
growth at existing subsidiaries was in the real estate, agricultural, and
commercial loans categories. Central Valley Bank experienced much of the loan
growth (approximately $9.0 million), while loan volumes at Mahaska State Bank
and leases and receivables at On-Site Commercial Services also increased.
<PAGE>
Nonperforming Loans
The Company's nonperforming loans totaled $2,582,000 (2.2% of total loans)
as of September 30, 1996, compared to $694,000 (.8% of total loans) as of
December 31, 1995. All nonperforming loan totals and related ratios exclude the
loan pool investments. The following table presents the categories of
nonperforming loans as of September 30, 1996:
<TABLE>
<CAPTION>
Nonperforming Loans
(dollars in thousands)
September 30, 1996
<S> <C>
90 days past due $ 678
Renegotiated 375
Nonaccrual 1,529
Other real estate owned 0
--------
$ 2,582
</TABLE>
From December 31, 1995 to September 30, 1996, loans 90 days past due and
still accruing increased $544,000 while restructured loans decreased $34,000,
nonaccrual loans increased $1,405,000, and other real estate owned of $27,000
was sold. The increase in loans past due 90 days and still accruing was mainly
due to slow payment by two agricultural lines that are ninety percent guaranteed
by the FmHA. These two loans were placed on nonaccural subsequent to September
30, 1996, and both are now in mediation. It is anticipated that both lines will
be liquidated with minimal loss. The increase in nonaccrual loans is due to
concerns with some accounts receivable financing lines at On-Site Commercial
Services. On-Site Commercial Services provides leasing, accounts receivable
financing, and factoring services to small business customers. These types of
activities are inherently more risky than the traditional commercial and
agricultural lending activities of the bank subsidiaries. The final resolution
of these credits is undetermined at this time, however, management felt it was
prudent to increase the loan loss provision for the third quarter of 1996 in
light of the situation. The Company's allowance for loan losses as of September
30, 1996 was $1,447,000, which was 1.2% of total loans as of that date. This
compares with an allowance for loan losses of $1,001,000 as of December 31,
1995, which was 1.1% of total loans. As of September 30, 1996, the allowance for
loan losses to nonperforming loans was 56.0% compared with 144.3% as of
December 31, 1995. Management believes that as of September 30, 1996, the
allowance for loan losses is adequate. For the three months ended September 30,
1996, the Company recognized a net loan charge-off of $28,000 compared
<PAGE>
with a net charge-off of $3,000 during the quarter ended September 30,
1995. The Company recognized a net charge-off of $44,000 for the nine months
ended September 30, 1996 and net recovery of loans previously charged-off of
$5,000 during the nine months ended September 30, 1995.
Capital Resources
As of September 30, 1996, total shareholders' equity as a percentage of
total assets was 12.9% compared with 15.7% as of December 31, 1995. The decrease
in total equity to assets was due to the increase in the Company's total assets,
a substantial portion of which was the acquisition of the bank office by Central
Valley. The Company held 55,000 shares of treasury stock at a cost of $853,000
as of September 30, 1996. The Company repurchased 20,000 shares during the third
quarter of 1996 at an average cost of $15.72 per share. During the first nine
months of 1996, the Company has repurchased 40,000 shares of stock at an average
cost of $15.55 per share. Under risk-based capital rules, the Company's total
capital was 17.5% of risk-weighted assets as of September 30, 1996, and was
20.6% of risk-weighted assets as of December 31, 1995, compared to an 8.0%
requirement.
Liquidity
Liquidity management involves meeting the cash flow requirements of
depositors and borrowers. The Company conducts liquidity management on both a
daily and long- term basis; and it adjusts its investments in liquid assets
based on expected loan demand, projected loan maturities and payments, estimated
cash flows from the loan pool participations, expected deposit flows, yields
available on interest-bearing deposits, and the objectives of its
asset/liability management program. The Company had liquid assets (cash and cash
equivalents) of 13,051,000 as of September 30, 1996, compared with $20,821,000
as of December 31, 1995. Some of this decrease is attributable to the increase
in loans, investment securities available for sale, and to the increase in loan
pool participations (all of which utilized liquid assets). Investment securities
classified as available for sale could be sold to meet liquidity needs, if
necessary. Additionally, the bank subsidiaries maintain lines of credit with
correspondent banks that would allow them to borrow federal funds on a short-
term basis if necessary. Management believes that the Company has sufficient
liquidity as of September 30, 1996 to meet the needs of borrowers and
depositors.
<PAGE>
PART II -- Item 5. Other Information.
William E. Masterson, a director of the Company since 1981, passed away
suddenly on September 2, 1996. As of the date of this filing, no replacement for
Mr. Masterson has been found.
PART II -- Item 6. Exhibits and Reports on Form 8-K.
(b) Reports on Form 8-K -- There were no reports on Form 8-K filed for the
three month sended September 30, 1996.
<PAGE>
SIGNATURE
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.
MAHASKA INVESTMENT COMPANY
Date: November 12, 1996 By: /S/Charles S. Howard
--------------------
Charles S. Howard
President
Date: November 12, 1996 By: /s/ David A. Meinert
--------------------
David A. Meinert,
Chief Financial Officer
and Executive Vice
President
(Principal Accounting Officer)
[TEST]
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE QUARTERLY REPORT ON FORM 10-Q FOR THE FISCAL QUARTER
ENDED SEPTEMBER 30, 1996 OF MAHASKA INVESTMENT COMPANY AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 9,049
<INT-BEARING-DEPOSITS> 4,002
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 0
<INVESTMENTS-CARRYING> 31,767
<INVESTMENTS-MARKET> 31,502
<LOANS> 117,638
<ALLOWANCE> (1,447)
<TOTAL-ASSETS> 259,163
<DEPOSITS> 204,447
<SHORT-TERM> 18,425
<LIABILITIES-OTHER> 2,913
<LONG-TERM> 0
0
0
<COMMON> 11,423
<OTHER-SE> 21,955
<TOTAL-LIABILITIES-AND-EQUITY> 259,163
<INTEREST-LOAN> 2,759
<INTEREST-INVEST> 778
<INTEREST-OTHER> 2,474
<INTEREST-TOTAL> 6,011
<INTEREST-DEPOSIT> 2,046
<INTEREST-EXPENSE> 2,376
<INTEREST-INCOME-NET> 3,635
<LOAN-LOSSES> 208
<SECURITIES-GAINS> (56)
<EXPENSE-OTHER> 2,109
<INCOME-PRETAX> 1,680
<INCOME-PRE-EXTRAORDINARY> 1,101
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,101
<EPS-PRIMARY> 0.50
<EPS-DILUTED> 0.50
<YIELD-ACTUAL> 10.30
<LOANS-NON> 1,529
<LOANS-PAST> 678
<LOANS-TROUBLED> 375
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> (1,267)
<CHARGE-OFFS> 33
<RECOVERIES> (5)
<ALLOWANCE-CLOSE> (1,447)
<ALLOWANCE-DOMESTIC> (1,447)
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> (1,332)
</TABLE>
