<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR QUARTER ENDED COMMISSION FILE NUMBER
MARCH 31, 1998 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 No.)
222 First Avenue East, Oskaloosa, Iowa 52577
Telephone Number (515) 673-8448
Indicate by check mark whether the registrant (1) has filed all reports
required by Section 13 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 April 30, 1998, there were 3,676,710 shares of common stock $5 par
value outstanding.
<PAGE>
PART I -- Item 1. Financial Statements
MAHASKA INVESTMENT COMPANY
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CONDITION
<TABLE>
<CAPTION>
(unaudited)
(dollars in thousands) MARCH 31, DECEMBER 31,
1998 1997
--------- ------------
<S> <C> <C>
ASSETS
Cash and due from banks.......................................... $ 9,254 10,854
Interest-bearing deposits in banks............................... 4,429 1,526
Federal funds sold............................................... 12,273 6,815
--------- ------------
Cash and cash equivalents..................................... 25,956 19,195
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Investment securities:
Available for sale............................................ 22,955 23,228
Held to maturity.............................................. 18,321 19,833
Loans............................................................ 146,999 144,333
Allowance for loan losses........................................ (1,872) (1,816)
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Net loans..................................................... 145,127 142,517
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Loan pool participations......................................... 48,120 54,326
Premises and equipment, net...................................... 4,234 4,183
Accrued interest receivable...................................... 2,950 2,927
Other assets..................................................... 2,341 2,502
Goodwill......................................................... 6,009 6,162
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Total assets................................................ $276,013 274,873
--------- ------------
--------- ------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Demand........................................................ $ 18,605 21,277
NOW and Super NOW............................................. 33,974 33,226
Savings....................................................... 61,874 59,020
Certificates of deposit....................................... 104,076 101,785
--------- ------------
Total deposits.............................................. 218,529 215,308
Federal funds purchased.......................................... 0 0
Federal Home Loan Bank advances.................................. 6,000 6,000
Note payable..................................................... 10,550 14,050
Other liabilities................................................ 3,140 2,761
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Total liabilities........................................... 238,219 238,119
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Shareholders' equity:
Common stock, $5 par value; authorized 4,000,000
shares; issued 3,807,501 shares............................... 19,038 19,038
Capital surplus............................................... 86 119
Treasury stock at cost, 130,791 shares as of March 31, 1998,
and 142,007 shares as of December 31, 1997.................... (1,613) (1,752)
Retained earnings............................................. 20,145 19,230
Accumulated other comprehensive income........................ 138 119
--------- ------------
Total shareholders' equity.................................. 37,794 36,754
--------- ------------
Total liabilities and shareholders' equity.................. $276,013 274,873
--------- ------------
--------- ------------
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
PART I -- Item 1. Financial Statements, Continued
MAHASKA INVESTMENT COMPANY
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
(unaudited) THREE MONTHS ENDEd
(dollars in thousands, except per share) MARCH 31,
--------------------
1998 1997
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<S> <C> <C>
INTEREST INCOME:
Interest and fees on loans................................ $3,400 2,721
Interest and discount on loan pools....................... 2,464 2,440
Interest on bank deposits................................. 41 42
Interest on federal funds sold............................ 107 49
Interest on investment securities:
Available for sale...................................... 372 437
Held to maturity........................................ 250 349
-------- -------
Total interest income................................. 6,634 6,038
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INTEREST EXPENSE:
Interest on deposits:
NOW and Super NOW....................................... 165 165
Savings................................................. 544 538
Certificates of deposit................................. 1,460 1,326
Interest on federal funds purchased....................... 0 3
Interest on Federal Home Loan Bank advances............... 89 3
Interest on note payable.................................. 254 158
-------- -------
Total interest expense.................................. 2,512 2,193
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Net interest income..................................... 4,122 3,845
Provision for loan losses.................................... 110 128
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Net interest income after provision for loan losses..... 4,012 3,717
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NONINTEREST INCOME:
Service charges........................................... 288 263
Data processing income.................................... 48 53
Other operating income.................................... 79 113
Investment security gains................................. 26 0
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Total noninterest income................................ 441 429
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NONINTEREST EXPENSE:
Salaries and employee benefits expense.................... 1,157 963
Net occupancy expense..................................... 324 271
FDIC assessment........................................... 12 6
Professional fees......................................... 86 164
Other operating expense................................... 475 440
Goodwill amortization..................................... 153 158
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Total noninterest expense............................... 2,207 2,002
-------- -------
Income before income tax expense........................ 2,246 2,144
Income tax expense........................................... 816 766
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NET INCOME.............................................. $1,430 1,378
-------- -------
-------- -------
Earnings per common share - basic............................ $ 0.39 0.37
Earnings per common share - diluted.......................... $ 0.37 0.36
Dividends per common share................................... $ 0.14 0.12
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
PART I -- Item 1. Financial Statements, Continued
MAHASKA INVESTMENT COMPANY
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
<TABLE>
<CAPTION>
(unaudited) THREE MONTHS ENDED
(in thousands) MARCH 31,
-------------------
1998 1997
-------- -------
<S> <C> <C>
NET INCOME............................................................ $1,430 1,378
Other Comprehensive Income:
Unrealized gains (losses) on securities available for sale:
Unrealized holding gains (losses) arising during the period,
net of taxes on income of $16 in 1998 and ($48) in 1997......... 29 (80)
Less: reclassification adjustment for gains included in net
income, net of taxes on income of $9 in 1998.................... (17) 0
-------- -------
OTHER COMPREHENSIVE INCOME, NET OF TAX................................ 12 (80)
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COMPREHENSIVE INCOME.................................................. 1,442 1,298
-------- -------
-------- -------
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
PART I -- Item 1. Financial Statements, Continued
MAHASKA INVESTMENT COMPANY
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
(unaudited) THREE MONTHS ENDED
(dollars in thousands) MARCH 31,
------------------
1998 1997
--------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income................................................. $ 1,430 1,378
-------- -------
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization............................ 303 275
Provision for loan losses................................ 110 128
Investment securities gains.............................. (26) 0
Amortization of investment securities premiums........... 38 60
Accretion of investment securities and loan discounts.... (104) (107)
Decrease (increase) in other assets...................... 138 (77)
Increase in other liabilities............................ 366 577
-------- -------
Total adjustments...................................... 825 856
-------- -------
Net cash provided by operating activities.............. 2,255 2,234
-------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Investment securities available for sale:
Proceeds from sales...................................... 175 0
Proceeds from maturities................................. 185 2,194
Purchases................................................ (32) (3,673)
Investment securities held to maturity:
Proceeds from maturities................................. 2,701 1,782
Purchases................................................ (1,220) (548)
Purchases of loan pool participations...................... 0 (8,396)
Principal recovery on loan pool participations............. 6,206 6,164
Net increase in loans...................................... (2,620) (6,574)
Purchases of bank premises and equipment................... (201) (91)
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Net cash provided by (used in) investing activities.... 5,194 (9,142)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in deposits................................... 3,221 734
Net increase in federal funds purchased.................... 0 810
Principal payments on note payable......................... (3,500) (1,000)
Federal Home Loan Bank advances............................ 0 1,500
Dividends paid............................................. (515) (446)
Purchases of treasury stock................................ 0 (302)
Proceeds from exercise of stock options.................... 106 47
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Net cash (used in) provided by financing activities.... (688) 1,343
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NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS... 6,761 (5,565)
Cash and cash equivalents at beginning of period.............. 19,195 16,484
-------- -------
Cash and cash equivalents at end of period.................... $25,956 10,919
-------- -------
-------- -------
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest $ 2,533 2,292
-------- -------
-------- -------
Income taxes $ 114 196
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-------- -------
</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 consolidated financial statements (unaudited) include the
accounts and transactions of the Company and its four wholly-owned
subsidiaries, Mahaska State Bank, Central Valley Bank, Pella State Bank
and On-Site Credit Services, Inc. All material intercompany balances and
transactions have been eliminated in consolidation.
The accompanying consolidated financial statements (unaudited) have been
prepared by the Company pursuant to the rules and regulations of the
Securities and Exchange Commission. Certain information and footnote
disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been
condensed or omitted pursuant to such rules and regulations. Although
management believes that the disclosures are adequate to make the
information presented not misleading, it is suggested that these interim
consolidated financial statements (unaudited) be read in conjunction with
the Company's most recent audited financial statements and notes thereto.
In the opinion of management, the accompanying consolidated financial
statements (unaudited) contain all adjustments (consisting of only normal
recurring accruals) necessary to present fairly the financial position as
of March 31, 1998, and the results of operations for the three months
ended March 31, 1998 and 1997, and changes in cash flows for the three
months ended March 31, 1998 and 1997.
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 ended March 31, 1998 and
1997 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 banks.
4. Earnings Per Common Share
Basic earnings per common share computations are based on the weighted
average number of shares of common stock actually outstanding during the
period. The weighted average number of shares for the three-month periods
ended March 31, 1998 and 1997 was 3,673,186 and 3,714,063 (restated to
reflect the five-for-three stock split effected in the form of a stock
dividend which occurred in November 1997), respectively. Diluted earnings
per share computations include the additional shares that could be
issued by the Company based on the number of unexercised option shares
granted to directors, officers and employees calculated using the
treasury stock method. The computation of diluted earnings per share used
a weighted average number of shares outstanding of 3,883,623 and 3,824,440
for the three months ended March 31, 1998 and 1997, respectively.
<PAGE>
Part I -- Item 1. Financial Statements, continued.
Notes to Consolidated Financial Statements, continued.
(Unaudited)
5. Effect of New Financial Accounting Standards
SFAS 130, "Reporting Comprehensive Income" became effective for the
Company on January 1, 1998, and establishes the standards for the
reporting and display of comprehensive income in the financial statements.
Comprehensive income represents net earnings and certain amounts reported
directly in shareholders' equity, such as net unrealized gain or loss on
available for sale securities. The adoption of SFAS 130 did not have a
material effect on the financial position and results of operations, nor
did the adoption require additional resources.
<PAGE>
Part I -- Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations.
Net income for the Company increased 4 percent to $1,430,000 for the quarter
ended March 31, 1998, compared with $1,378,000 for the three months ended
March 31, 1997. Basic earnings per share for the first quarter of 1998 were
$.39 versus basic earnings of $.37 per share for the first quarter of 1997.
Diluted earnings per share for the first quarter of 1998 were $.37 versus
diluted earnings per share of $.36 for the first quarter of 1997. All
historical per share amounts have been restated to reflect the five-for-three
stock split effected in the form of a stock dividend which occurred in
November 1997. Actual weighted average shares outstanding were 3,673,186 and
3,714,063 for the first quarter of 1998 and 1997, respectively. Return on
average assets is calculated by dividing annualized net income by average
total assets for the period. The Company's return on average assets for the
quarter ended March 31, 1998 was 2.13 percent compared with a return of 2.25
percent for the quarter ended March 31, 1997. Return on averge equity is
calculated by dividing annualized net income by average total shareholders'
equity for the period. The Company had a return on average equity of 15.51
percent for the three months ended March 31, 1998 versus 15.92 percent for
the three months ended March 31, 1997.
RESULTS OF OPERATIONS
Net Interest Income
Net interest income is computed by subtracting total interest expense from
total interest income. Fluctuations in net interest income can result from
the changes in the volumes of assets and liabilities as well as changes in
interest rates. The Company's net interest income for the quarter ended
March 31, 1998 increased $277,000 (7 percent) to $4,122,000 from $3,845,000
for the three months ended March 31, 1997. This was mainly due to increased
interest income earned on higher loan volumes. The increase in total
interest income was offset, in part, by additional interest expense related
to increased deposits and borrowed funds. Total interest income increased
$596,000 (10 percent) in the first quarter of 1998 compared with the same
period in 1997. The Company's total interest expense for the quarter
increased $319,000 (15 percent) compared with the same period in 1997. The
Company's net interest margin (on a federal tax-equivalent basis) for the
first quarter of 1998 declined to 6.73 percent from 6.89 percent in the first
quarter of 1997. Net interest margin is net return on interest-earning
assets and is computed by dividing annualized net interest income by the
average of total interest-earning assets for the period. The Company's
overall yield on earning assets increased to 10.80 percent for the first
quarter of 1998 compared to 10.77 percent for the first quarter of 1997. The
rate on interest-bearing liabilities also increased in the first quarter of
1998 to 4.79 percent compared with 4.57 percent for the first quarter of 1997.
<PAGE>
Interest income and fees on loans increased $679,000 (25 percent) in the
first quarter of 1998 compared to the same period in 1997 due to higher loan
volumes. The average yield on loans rose to 9.48 percent for the first three
months of 1998, up from 9.23 percent for the three months ended March 31,
1997. Average loans outstanding were $145,442,000 for the first three months
of 1998 compared with $119,533,000 for the first quarter of 1997, an increase
of $25,909,000 (22 percent). The majority of the increase in average loan
volume between the first quarter of 1997 and 1998 occurred at Mahaska State
Bank and Central Valley Bank. Average commercial loan volumes increased
$10,448,000 (38 percent), real estate loans averaged $8,049,000 (14 percent)
higher, and agricultural loans increased $5,079,000 (24 percent) in average
volume for the first quarter of 1998 compared with the first quarter of 1997.
Loan pool investments provided the Company with little additional revenue in
the first quarter of 1998 compared to the same period in 1997. Interest
income and discount collected on the loan pools increased $24,000 (1 percent)
in the first quarter of 1998 to $2,464,000 compared with $2,440,000 earned in
the first quarter of 1997. The yield on loan pool investments declined to
19.23 percent for the first quarter of 1998 compared with 20.30 percent for
the quarter ended March 31, 1997. The average loan pool participation
investment balance was $3,203,000 (7 percent) greater in the first quarter of
1998 than in the first quarter of 1997. These loan pool investments are
pools of distressed and nonperforming loans that the Company has purchased at
a discount from the aggregate outstanding principal amount of the underlying
loans. Income is derived from this investment in the form of interest
collected and the repayment of the principal in excess of the purchase cost
which is herein referred to as "discount" recovery. Given the nonperforming
status of these loans, interest income and discount recovery is recognized on
a "cash" basis by the Company.
The increase in interest expense for the first quarter of 1998 compared with
1997 was mainly attributable to growth in deposits and an increase in
borrowed funds. Average interest-bearing deposits for the first quarter of
1998 increased $8,599,000 (5 percent) from the same period in 1997 with the
greatest increase occurring in the time deposit category. Borrowings on the
Company's commercial bank line of credit averaged $4,175,000 higher in the
first quarter of 1998 compared with the first quarter of 1997 as the Company
borrowed funds to provide operating cash to On-Site Credit Services, Inc. and
capital to the newly-chartered Pella State Bank. Federal Home Loan Bank
advances during the first quarter of 1998 averaged $5,817,000 greater in the
first quarter of 1998 compared with the first quarter of 1997. The higher
average balance of these borrowed funds resulted in increased interest
expense in 1998 compared with 1997.
<PAGE>
Provision for Loan Losses
The Company's provision for loan loss expense of $110,000 in the first
quarter of 1998 was $18,000 (14 percent) lower than in the first quarter of
1997. Management determines an appropriate provision based on its evaluation
of the adequacy of the allowance for loan losses in relationship to a
continuing review of problem loans, the current economic conditions, actual
loss experience and industry trends.
Other Income
Other income results from the charges and fees collected by the Company from
its customers for various services performed, data processing income received
from nonaffiliated banks, miscellaneous other income and gains (or losses)
from the sale of investment securities held in the available for sale
category. Total other income increased $12,000 (3 percent) in the first
quarter of 1998 compared with 1997, mainly due to higher service charge
income from overdraft fees at the bank subsidiaries.
Other Expense
Total other noninterest expense for the quarter ended March 31, 1998
increased $205,000 (10 percent) compared to noninterest expense for the first
quarter of 1997. Other expense includes all the costs incurred to operate
the Company except for interest expense, the loan loss provision and income
taxes. Salaries and benefits expense for the first quarter of 1998 increased
$194,000 (20 percent) over the first quarter of 1997, primarily as a result
of the additional employees at the newly-chartered Pella State Bank and also
due to increased staffing at other subsidiaries. Net occupancy expenses for
the first quarter of 1998 increased $53,000 (20 percent) in comparison to the
first quarter of 1997 with most of the increase due to the additional
facilities of Pella State Bank. The FDIC assessment expense incurred by the
Company during the first quarter of 1998 increased by $6,000 reflecting the
assessment charged to the new Pella State Bank. Professional fees decreased
$78,000 for the first three months of 1998 over the same period in 1997.
Other miscellaneous operating expense increased by $35,000 (8 percent) in the
first quarter of 1998 compared with the three months ended March 31, 1997,
mainly due to costs related to the Pella State Bank. Goodwill amortization
expense decreased $5,000 (3 percent) in the first quarter of 1998 versus 1997
due to utilization of the effective yield method of amortization.
Income Tax Expense
Income tax expense for the three months ended March 31, 1998, increased
$50,000 compared to the amount for the three months ended March 31, 1997,
primarily due to the overall increase in taxable
<PAGE>
income for the period. The effective income tax rate rose slightly in the
first quarter of 1997 to 36.35 percent compared with 35.72 percent in the
first quarter of 1997. The Company's effective income tax rate varies from
the statutory rate principally due to interest income from tax-exempt
securities and loans. Changes in the effective rate for one period in
comparison to another are primarily due to changes in the amount of
tax-exempt income.
FINANCIAL CONDITION
The Company's total assets as of March 31, 1998 were $276,013,000, an
increase of $1,140,000 from December 31, 1997. As of March 31, 1998, the
Company had federal funds sold of $12,273,000 compared with $6,815,000 as of
December 31, 1997.
Investment Securities
Investment securities available for sale decreased $273,000 from December 31,
1997 to the March 31, 1998 total of $22,955,000 as a result of the
amortization of premium on these securities. Investment securities classified
as held to maturity were $18,321,000 as of March 31, 1998, a decline of
$1,512,000 as securities matured or were called during the three-month period
from December 31, 1997.
Loans
Overall loan volumes continued to increase, with total loans outstanding of
$146,999,000 as of March 31, 1998 reflecting growth of $2,666,000 (2 percent)
from December 31, 1997. Most of the growth from December 31, 1997 to March
31, 1998 was in real estate loans with some growth noted in commercial and
agricultural loans. Consumer loans outstanding as of the quarter-end declined
approximately $894,000 from the December 31, 1997 balance. As of March 31,
1998, the Company's loan to deposit ratio (excluding loan pool investments)
was 67.27 percent. This compares with a year-end 1997 loan to deposit ratio
of 67.04 percent.
Loan Pool Participations
As of March 31, 1998, the Company had investments in loan pool participations
of $48,120,000, a decline of $6,206,000 (11 percent) from the prior year-end
balance. The loan pool investment balance shown as an asset on the Company's
Balance Sheet represents the discounted purchase cost of the loan pool
participations. Although the Company actively continued to evaluate and bid
on loan pool packages, there were no new loan pool investments made during
the quarter. The loan pool participation investment as of December 31, 1997
was $54,326,000 with the reduction in balance attributable to collections of
principal by the loan pool servicer. The average
<PAGE>
loan pool participation investment of $51,957,000 for the first three months
of 1998 was greater than the average balance of $48,754,000 for the first
three months of 1997.
Deposits
Total deposits grew $3,221,000 (1 percent) during the first quarter of 1998
with the most growth noted in savings and certificate of deposit accounts.
Demand deposit accounts as of March 31, 1998 decreased $2,672,000 (13
percent) from December 31, 1997, mostly due to seasonal fluctuation.
Borrowed Funds/Notes Payable
The Company did not have any Fed Funds purchased on either March 31, 1998 or
December 31, 1997. During the first quarter of 1998, Fed Funds Purchased
averaged $7,000. Fixed-rate advances from the Federal Home Loan Bank totaled
$6,000,000 as of March 31, 1998 and December 31, 1997. Notes payable
decreased to $10,550,000 on March 31, 1998 from $14,050,000 on December 31,
1997 as the Company used a dividend from Mahaska State Bank and cash flow
from operations to reduce debt.
Nonperforming Loans
The Company's nonperforming loans totaled $1,854,000 (1.26 percent of total
loans) as of March 31, 1998, compared to $1,848,000 (1.28 percent of total
loans) as of December 31, 1997. All nonperforming loan totals and related
ratios exclude the loan pool investments. The following table presents the
categories of nonperforming loans as of March 31, 1998:
Nonperforming Loans
(dollars in thousands)
March 31, 1998
<TABLE>
<S> <C>
Nonaccrual $ 972
Loans 90 days past due 519
Renegotiated loans 351
Other real estate owned 12
------
$1,854
------
------
</TABLE>
From December 31, 1997 to March 31, 1998, nonaccrual loans increased $45,000,
loans ninety days past due decreased $3,000, restructured loans decreased
$36,000 and other real estate owned remained unchanged. The Company's
allowance for loan losses as of March 31, 1998 was $1,872,000, which was 1.27
percent of total loans as of that date. This compares with an allowance for
loan losses of $1,816,000 as of December 31, 1997, which was also 1.26
percent of total loans. As of March 31, 1998, the allowance for
<PAGE>
loan losses was 100.97 percent of nonperforming loans compared with 98.24
percent as of December 31, 1997. Management believes that as of March 31,
1998 the allowance for loan losses is adequate. For the three months ended
March 31, 1998, the Company recognized a net loan charge-off of $54,000
compared with a net charge-off of $41,000 during the quarter ended March 31,
1997.
Capital Resources
As of March 31, 1998, total shareholders' equity as a percentage of total
assets was 13.69 percent compared with 13.37 percent as of December 31, 1997.
The Company held 130,791 shares of treasury stock at a cost of $1,613,000 as
of March 31, 1998. These shares were repurchased in prior periods to
satisfy options granted under the Company's Stock Incentive Plans. During
the first quarter of 1998 the Company reissued 11,216 shares of treasury
stock as options were exercised by employees, officers and directors. On
January 22, 1998, the Board of Directors voted to continue the Company's
stock repurchase plan that provides for the repurchase of up to 200,000
shares through January 31, 1999. The Company did not repurchase any shares
of its stock during the first quarter of 1998. Under risk-based capital
rules, the Company's tier 1 capital ratio was 15.45 percent of risk-weighted
assets as of March 31, 1998, and was 14.74 percent of risk-weighted assets as
of December 31, 1997, compared to a 4.00 percent requirement. Risk-based
capital guidelines require the classification of assets and some off-balance
sheet items in terms of credit-risk exposure and the measuring of capital as
a percentage of the risk-adjusted asset totals. Tier 1 capital is the
Company's total common shareholders' equity reduced by goodwill.
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 $25,956,000 as of March 31, 1998, compared with
$19,195,000 as of December 31, 1997. Some of this increase is attributable
to the maturity of investment securities and to the decrease in loan pool
participations. 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 and the
Federal Home Loan Bank that would allow them to borrow federal funds on a
short-term basis if necessary. The Company also maintains a line of credit
with Harris Trust & Savings Bank of Chicago, Illinois that provides liquidity
for the purchase of loan pool participation investments and other corporate
needs. Management believes that
<PAGE>
the Company has sufficient liquidity as of March 31, 1998 to meet the needs
of borrowers and depositors.
"SAFE HARBOR" STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT
With the exception of the historical information contained in this report,
the matters described herein contain forward-looking statements that involve
risk and uncertainties that individually or mutually impact the matters
herein described, including but not limited to financial projections, product
demand and market acceptance, the effect of economic conditions, the impact
of conpetitive products and pricing, governmental regulations, results of
litigation, technological difficulties and/or other factors outside the
control of the Company, which are detailed from time to time in the Company's
SEC reports. The Company disclaims any intent or obligation to update these
forward-looking statements.
<PAGE>
Part II -- Item 6. Exhibits and Reports on Form 8-K.
(a) The following exhibits are filed with this Report or, if so
indicated, incorporated by reference:
<TABLE>
<CAPTION>
Exhibits
<C> <S>
3.1 Articles of Incorporation of Mahaska Investment
Company. (d)
3.2 Bylaws of Mahaska Investment Company. (d)
10.1 Mahaska Investment Company Employee Stock Ownership
Plan & Trust as restated and amended. (b)
10.2.1 1993 Stock Incentive Plan. (a)
10.2.2 1996 Stock Incentive Plan. (d)
10.2.3 1998 Stock Incentive Plan. (e)
10.3.1 Midstates Resources Corp. Loan Participation and
Servicing Agreement dated December 9, 1992 between
Midstates Resources Corp., Mahaska Investment
Company, and Mahaska State Bank. (a)
10.3.2 Central States Resources Corp. Liquidation
Agreement dated April 18, 1988 between Central
States Rseources Corp., Mahaska State Bank,
National Bank & Trust Co., and Randal Vardaman. (a)
10.3.3 All States Resources Corp. Loan Participation and
Servicing Agreement dated September 13, 1993
between All States Resources Corp., Mahaska
Investment Company, and West Gate Bank. (a)
10.5.1 Revolving Loan Agreement dated January 31, 1996
between Mahaska Investment Company and Harris Trust
& Savings Bank. (c)
10.5.2 Third Amendment to Revolving Loan Agreement and
Revolving Loan Note between Mahaska Investment
Company and Harris Trust & Savings Bank dated
June 19, 1996. (e)
11 Computation of Per Share Earnings.
27 Financial Data Schedule.
- --------------------
(a) Incorporated by reference to the Form S-1
Registration Number 33-81922 of Mahaska Investment
Company.
(b) Incorporated by reference to the Form 10-K for the
year ended December 31, 1994 filed by Mahaska
Investment Company.
<PAGE>
(c) Incorporated by reference to the Form 8-K filed by
Mahaska Investment Company on February 29, 1996.
(d) Incorporated by reference to the Form 10-K for the
year ended December 31, 1996 filed by Mahaska
Investment Company.
(e) Incorporated by reference to the Form 10-K for the
year ended December 31, 1997 filed by Mahaska
Investment Company.
</TABLE>
(b) Reports on Form 8-K -- No reports on Form 8-K were filed
during the three months ended March 31, 1998.
<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.
MAHASKA INVESTMENT COMPANY
(Registrant)
May 12, 1997 /s/ Charles S. Howard
- ------------------------------- --------------------------------
Dated Charles S. Howard
President
May 12, 1997 /s/ David A. Meinert
- ------------------------------- --------------------------------
Dated David A. Meinert
Executive Vice President and
Chief Financial Officer
(Principal Accounting Officer)
<PAGE>
Exhibit 11
MAHASKA INVESTMENT COMPANY
AND SUBSIDIARIES
STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
---------------------
1998 1997
---------- ----------
EARNINGS PER SHARE INFORMATION:
- ---------------------------------------------------
<S> <C> <C>
Weighted average number of shares
outstanding during the year...................... 3,673,186 3,714,063
Weighted average number of shares
outstanding during the year
including all dilutive potential shares.......... 3,883,623 3,824,440
Net earnings....................................... $1,429,547 1,378,232
Earnings per share - basic......................... $ 0.39 0.37
Earnings per share - diluted....................... $ 0.37 0.36
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
QUARTERLY REPORT ON FORM 10-Q FOR THE FISCAL QUARTER ENDED MARCH 31, 1998 OF
MAHASKA INVESTMENT COMPANY AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 3-MOS
<FISCAL-YEAR-END> DEC-31-1998 DEC-31-1997
<PERIOD-START> JAN-01-1998 JAN-01-1997
<PERIOD-END> MAR-31-1998 MAR-31-1997
<CASH> 9,254 9,635
<INT-BEARING-DEPOSITS> 4,429 1,284
<FED-FUNDS-SOLD> 12,273 0
<TRADING-ASSETS> 0 0
<INVESTMENTS-HELD-FOR-SALE> 0 0
<INVESTMENTS-CARRYING> 18,321 26,427
<INVESTMENTS-MARKET> 18,387 26,280
<LOANS> 146,999 124,052
<ALLOWANCE> (1,872) (1,578)
<TOTAL-ASSETS> 276,013 254,946
<DEPOSITS> 218,529 207,686
<SHORT-TERM> 16,550 9,810
<LIABILITIES-OTHER> 3,140 2,657
<LONG-TERM> 0 0
0 0
0 0
<COMMON> 19,038 11,423
<OTHER-SE> 18,756 23,370
<TOTAL-LIABILITIES-AND-EQUITY> 276,013 254,946
<INTEREST-LOAN> 3,400 2,721
<INTEREST-INVEST> 622 786
<INTEREST-OTHER> 2,612 2,531
<INTEREST-TOTAL> 6,634 6,038
<INTEREST-DEPOSIT> 2,169 2,029
<INTEREST-EXPENSE> 2,512 2,193
<INTEREST-INCOME-NET> 4,122 3,845
<LOAN-LOSSES> 110 128
<SECURITIES-GAINS> 26 0
<EXPENSE-OTHER> 2,207 2,002
<INCOME-PRETAX> 2,246 2,144
<INCOME-PRE-EXTRAORDINARY> 1,430 1,378
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 1,430 1,378
<EPS-PRIMARY> .39 .37
<EPS-DILUTED> .37 .36
<YIELD-ACTUAL> 10.80 10.77
<LOANS-NON> 972 1,031
<LOANS-PAST> 519 199
<LOANS-TROUBLED> 351 356
<LOANS-PROBLEM> 0 0
<ALLOWANCE-OPEN> 1,816 1,491
<CHARGE-OFFS> 64 64
<RECOVERIES> 10 23
<ALLOWANCE-CLOSE> 1,872 1,578
<ALLOWANCE-DOMESTIC> 1,872 1,578
<ALLOWANCE-FOREIGN> 0 0
<ALLOWANCE-UNALLOCATED> 1,872 1,578
</TABLE>
