Securities and Exchange Commission
Washington, D.C. 20579
Form 8-K
Current Report
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) - September 30, 1999
MAHASKA INVESTMENT COMPANY
(Exact name of registrant as specified in its charter)
Iowa 0-24630 42-1003699
(State of other (Commission (IRS Employer
jurisdiction of File Number) Identification No.)
incorporation)
222 First Avenue East, Oskaloosa, Iowa 52577
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (515) 673-8448
Item 2. Acquisition or Disposition of Assets
Effective September 30, 1999, Mahaska Investment Company (the Company) completed
its acquisition of Midwest Bancshares, Inc. (Midwest). Midwest is a $165,000,000
thrift holding company headquartered in Burlington, Iowa and is the parent
company of Midwest Federal Savings and Loan Association of Eastern Iowa (Midwest
Federal). Under the terms of the transaction, Midwest shareholders received
1,105,348 shares of the Company's common stock in a tax-free exchange accounted
for as a purchase transaction. Midwest Federal became a wholly- owned subsidiary
of the Company and will retain the Midwest Federal name.
The terms of the Agreement and Plan of Merger (the Merger) dated February 2,
1999, are incorporated by reference to the information contained in the
Registration Statement No. 333- 79291 on Form S-4, as filed in connection with
the Merger.
Item 7. Financial Statements and Exhibits
(a) Financial Statements
The Company hereby incorporates by reference to Midwest's Annual Report on
Form 10-KSB for the year ended December 31, 1998 the Consolidated Balance Sheets
of Midwest as of December 31, 1998 and 1997 and Midwest's Consolidated Statement
of Operations, Consolidated Statement of Stockholders' Equity and Comprehensive
Income, and Consolidated Statement of Cash Flows for each of the years in the
three-year period ended December 31, 1998.
(b) Pro forma Financial Information
The following pro forma financial information giving effect to the Merger
is submitted herewith and is attached as Exhibit 99.1 to this Current Report on
Form 8-K.
(i) Pro forma Condensed Consolidated Statement of Financial Condition as
of June 30, 1999.
(ii) Pro forma Condensed Consolidated Statements of Income for the six
months ended June 30, 1999 and 1998.
(iii)Pro forma Condensed Consolidated Statement of Income for the year
ended December 31, 1998.
(c) Exhibits
Exhibit No. Exhibit
(23) Consent of Independent Auditors KPMG LLP.
(99.1) Pro Forma Financial Information.
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
By: /s/ David A. Meinert
Name: David A. Meinert
Title: Executive Vice President
and Chief Financial Officer
Date: October 14, 1999
<PAGE>
Exhibit 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors
Mahaska Investment Company:
We consent to the incorporation by reference in the Mahaska Investment Company
Form 8-K dated October 14, 1999, our report dated January 22, 1999, except for
note 16 which is as of February 2, 1999, relating to the consolidated balance
sheets of Midwest Bancshares, Inc. and Subsidiaries as of December 31, 1998 and
1997, and the related consolidated statements of operations, stockholders'
equity and comprehensive income, and cash flows for each of the years in the
three-year period ended December 31, 1998.
Des Moines, Iowa
October 14, 1999
Exhibit 99.1
<TABLE>
<CAPTION>
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
MAHASKA AND MIDWEST
Six months ended June 30, 1999
(in thousands, except per share data)
Pro Forma
Acquisition Pro Forma
Mahaska Midwest Adjustments Consolidated
------- ------ ----------- ------------
<S> <C> <C> <C> <C>
Interest income:
Loans .......................... $ 7,765 $ 3,772 $ (40)(1) $11,497
Loan pool participations ....... 3,548 0 0 3,548
Bank deposits .................. 51 77 0 128
Federal funds sold ............. 174 0 0 174
Investment securities -
available for sale............ 873 1,108 0 1,981
Investment securities - held
to maturity .................. 367 708 (20)(2) 1,055
Total interest income .......... 12,778 5,665 (60) 18,383
Interest expense:
Deposits ....................... 4,647 2,378 (317)(3) 6,708
Federal funds purchased ........ 4 0 0 4
FHLB advances .................. 217 1,192 122(4) 1,531
Notes payable .................. 599 0 0 599
Total interest expense ......... 5,467 3,570 (195) 8,842
Net interest income ............ 7,311 2,095 135 9,541
Provision for losses on loans 1,632 24 0 1,656
Net interest income after
provision for losses on
loans ........................ 5,679 2,071 135 7,885
Other income:
Service charges ................ 617 203 0 820
Data processing ................ 101 0 0 101
Other operating ................ 224 13 0 237
Investment securities gains
(losses) ..................... 0 7 0 7
Total other income ............. 942 223 0 1,165
Other expense:
Salaries and employee benefits . 2,591 651 0 3,242
Occupancy ...................... 699 205 0 904
Professional fees .............. 425 42 0 467
Other operating ............... 1,265 493 0 1,758
Amortization of goodwill and
other intangibles ............ 288 0 249(5,6) 537
Total other expense ............ 5,268 1,391 249 6,908
Income before income taxes 1,353 903 (114) 2,142
Income taxes ................... 515 236 0(7) 751
Net income ..................... $ 838 $ 667 $ (114) $ 1,391
Earnings per share:
Basic .......................... $ 0.23 $ 0.61 $ 0.29
Diluted ........................ $ 0.22 $ 0.60 $ 0.29
Average weighted shares
outstanding - basic .......... 3,644 1,099 4,743
Average weighted shares
outstanding - diluted ........ 3,743 1,112 4,855
</TABLE>
(1) Represents amortization of the loan fair value adjustment for six months
using effective yield method.
(2) Represents amortization of the held to maturity security fair value
adjustment for six months using estimated useful life of 51 months.
(3) Represents amortization of the deposit fair value adjustment for six months
using effective yield method.
(4) Represents amortization of the FHLB advance fair value adjustment for six
months using effective yield method.
(5) Represents amortization of the core deposit intangible adjustment for six
months using effective yield method over 10 years.
(6) Represents goodwill amortization for six months using straight-line method
over 25 years.
7) Represents the income tax effect of the amortization of the purchase
accounting adjustments, excluding goodwill, using the current effective tax
rate.
<PAGE>
Exhibit 99.1
<TABLE>
<CAPTION>
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
MAHASKA AND MIDWEST
Six months ended June 30, 1998
(in thousands, except per share data)
Pro Forma
Acquisition Pro Forma
Mahaska Midwest Adjustments Consolidated
------- ------- ----------- ------------
<S> <C> <C> <C> <C>
Interest income:
Loans ........................ $ 7,052 $ 3,740 $ (40)(1) $10,752
Loan pool participations ..... 4,655 0 0 4,655
Bank deposits ................ 88 41 0 129
Federal funds sold ........... 223 0 0 223
Investment securities -
available for sale ......... 778 1,312 0 2,090
Investment securities -
held to maturity ........... 476 579 (20)(2) 1,035
Total interest income ........ 13,272 5,672 (60) 18,884
Interest expense:
Deposits ..................... 4,386 2,463 (317)(3) 6,532
Federal funds purchased ...... 1 0 0 1
FHLB advances ................ 179 1,117 122(4) 1,418
Notes payable ................ 479 0 0 479
Total interest expense ....... 5,045 3,580 (195) 8,430
Net interest income .......... 8,227 2,092 135 10,454
Provision for losses on loans 287 24 0 311
Net interest income after
provision for losses on
loans ...................... 7,940 2,068 135 10,143
Other income:
Service charges .............. 588 171 0 759
Data processing .............. 100 0 0 100
Other operating .............. 169 140 0 309
Investment securities gains
(losses) ................... 26 97 0 123
Total other income ........... 883 408 0 1,291
Other expense:
Salaries and employee benefits 2,330 704 0 3,034
Occupancy .................... 655 207 0 862
Professional fees ............ 249 35 0 284
Other operating .............. 895 477 0 1,372
Amortization of goodwill and
other intangibles .......... 306 0 249(5,6) 555
Total other expense .......... 4,435 1,423 249 6,107
Income before income taxes ... 4,388 1,053 (114) 5,327
Income taxes ................. 1,584 333 0(7) 1,917
Net income ................... $ 2,804 $ 720 $ (114) $ 3,410
Earnings per share:
Basic ........................ $ 0.76 $ 0.70 $ 0.72
Diluted ...................... $ 0.72 $ 0.65 $ 0.68
Average weighted shares
outstanding - basic ........ 3,677 1,032 4,709
Average weighted shares
outstanding - diluted ...... 3,881 1,102 4,983
</TABLE>
(1) Represents amortization of the loan fair value adjustment for six months
using effective yield method.
(2) Represents amortization of the held to maturity security fair value
adjustment for six months using estimated useful life of 51 months.
(3) Represents amortization of the deposit fair value adjustment for six months
using effective yield method.
(4) Represents amortization of the FHLB advance fair value adjustment for six
months using effective yield method.
(5) Represents amortization of the core deposit intangible adjustment for six
months using effective yield method over 10 years.
(6) Represents goodwill amortization for six months using straight-line method
over 25 years.
(7) Represents the income tax effect of the amortization of the purchase
accounting adjustments, excluding goodwill, using the current effective tax
rate.
<PAGE>
Exhibit 99.1
<TABLE>
<CAPTION>
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
MAHASKA AND MIDWEST
Twelve months ended December 31, 1998
(in thousands, except per share data)
Pro Forma
Acquisition Pro Forma
Mahaska Midwest Adjustments Consolidated
------- ------- ----------- ------------
<S> <C> <C> <C> <C>
Interest income:
Loans ........................ $ 15,026 $ 7,537 $ (77)(1) $ 22,486
Loan pool participations ..... 7,970 0 0 7,970
Bank deposits ................ 122 100 0 222
Federal funds sold ........... 338 0 0 338
Investment securities -
available for sale ......... 1,617 2,362 0 3,979
Investment securities -
held to maturity ........... 893 1,343 (40)(2) 2,196
Total interest income ........ 25,966 11,342 (117) 37,191
Interest expense:
Deposits ..................... 8,999 4,925 (465)(3) 13,459
Federal funds purchased ...... 12 0 0 12
FHLB advances ................ 405 2,302 243(4) 2,950
Notes payable ................ 1,074 0 0 1,074
Total interest expense ....... 10,490 7,227 (222) 17,495
Net interest income .......... 15,476 4,115 105 19,696
Provision for losses on loans 1,179 48 0 1,227
Net interest income after
provision for losses on
loans ...................... 14,297 4,067 105 18,469
Other income:
Service charges .............. 1,215 376 0 1,591
Data processing .............. 195 0 0 195
Other operating .............. 389 170 0 559
Investment securities gains
(losses) ................... 58 118 0 176
Total other income ........... 1,857 664 0 2,521
Other expense:
Salaries and employee benefits 4,796 1,349 0 6,145
Occupancy .................... 1,349 423 0 1,772
Professional fees ............ 394 84 0 478
Other operating .............. 1,797 954 0 2,751
Amortization of goodwill and
other intangibles .......... 612 0 483(5,6) 1,095
Total other expense .......... 8,948 2,810 483 12,241
Income before income taxes ... 7,206 1,921 (378) 8,749
Income taxes ................. 2,583 549 -55(7) 3,077
Net income ................... $ 4,623 $ 1,372 $ (323) $ 5,672
Earnings per share:
Basic ........................ $ 1.26 $ 1.31 $ 1.20
Diluted ...................... $ 1.20 $ 1.25 $ 1.15
Average weighted shares
outstanding - basic ........ 3,660 1,048 4,708
Average weighted shares
outstanding - diluted ...... 3,842 1,102 4,944
</TABLE>
(1) Represents amortization of the loan fair value adjustment for twelve months
using effective yield method.
(2) Represents amortization of the held to maturity security fair value
adjustment for twelve months using estimated useful life of 51 months.
(3) Represents amortization of the deposit fair value adjustment for twelve
months using effective yield method.
(4) Represents amortization of the FHLB advance fair value adjustment for
twelve months using effective yield method.
(5) Represents amortization of the core deposit intangible adjustment for
twelve months using effective yield method over 10 years.
(6) Represents goodwill amortization for twelve months using straight-line
method over 25 years.
(7) Represents the income tax effect of the amortization of the purchase
accounting adjustments, excluding goodwill, using the current effective tax
rate.
<PAGE>
Exhibit 99.1
<TABLE>
<CAPTION>
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL CONDITION
MAHASKA AND MIDWEST
As of June 30, 1999
(in thousands, except per share data)
Pro Forma
Acquisition Pro Forma
Mahaska Midwest Adjustments Consolidated
------- -------- ----------- ------------
<S> <C> <C> <C> <C>
ASSETS:
Cash and due from bank $ 8,210 $1,257 $ 0 $ 9,467
Interest-bearing deposits
in banks 111 814 0 925
Federal funds sold 0 0 0 0
Cash and cash equivalen $ 8,321 $2,071 0 $10,392
Investment securities:
Available for sale 27,286 38,685 0 65,971
Held to maturity 13,507 21,601 143(1) 35,251
Net loans 174,388 98,794 556(1) 273,738
Loan pool participations 62,446 0 0 62,446
Premises and equipment, net 3,918 2,394 0 6,312
Accrued interest receivable 2,885 1,386 0 4,271
Core deposit intangible 277 0 1,273(1) 1,550
Unamortized goodwill 4,985 0 5,767(2) 10,752
Other assets 2,456 335 0 2,791
Total assets $ 300,469 $ 165,266 $ 7,739 $473,474
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Demand $ 19,665 $ 616 $ 0 $ 20,281
NOW and Super NOW 31,582 7,713 0 39,295
Savings 69,499 26,281 0 95,780
Certificates of deposit 114,402 73,285 665(1) 188,352
Total deposits 235,148 107,895 665 343,708
Federal funds purchased 2,898 0 0 2,898
Federal Home Loan Bank advances 7,581 44,000 (1,240)(1) 50,341
Notes payable 14,600 0 0 14,600
Other liabilities 2,291 1,063 2,025(1)(3) 5,379
Total liabilities 262,518 152,958 1,450 416,926
Shareholders' equity:
Common stock 19,038 11 5,516(4) 24,565
Capital surplus 0 1,886 11,184(4) 13,070
Treasury stock at cost (2,425) 0 0 (2,425)
Retained earnings 21,445 10,375 (10,375)(4) 21,445
Accumulated other comprehensive
income (107) 36 (36)(4) (107)
Total shareholders' equity 37,951 12,308 6,289 56,548
Total liabilities and share-
holders' equity $300,469 $165,266 $7,739 $473,474
Book value per common share $ 10.37 $ 11.13 $ 11.87
Tangible book value per share $ 8.93 $ 11.13 $ 9.29
Total Shares Outstanding 3,659 1,105 4,764
</TABLE>
(1) Represents the mark-to-market adjustments to reflect the fair value of the
Midwest tangible and identifiable intangible assets acquired and the
liabilities assumed under the purchase method of accounting. Assets
adjusted include investment securities, loans, and core deposit intangible.
Liabilities adjusted include certificates of deposit, Federal Home Loan
Bank advances. Deferred income tax liabilities have been established
relating to these mark-to-market adjustments.
(2) Represents the excess of market value of the Mahaska stock issued to
acquire Midwest, plus transaction costs, over the fair value of the
tangible and identifiable intangible assets acquired and the fair value of
the liabilities assumed under the purchase method of accounting.
(3) Represents the expected costs to effect the merger. These costs are
estimated to be approximately $1,07'5,000 which includes $865,000 of
transaction costs (including legal, accounting, and investment advisor
fees) and $210,000 related to termination of employment agreements. and
investment advisor fees) and $210,000 related to termination of employment
agreements.
(4) Represents the market value of the Mahaska stock issued to acquire Midwest
plus the elimination of Midwest's stockholders' equity under the purchase
method of accounting. This adjustment is based on the issuance of 1,105,348
shares of Mahaska common stock at the average market price of the stock
($16.825) during the period immediately preceding and following the public
announcement of the merger.
