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
SEPTEMBER 30, 2000 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 (641) 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 October 31, 2000, there were 3,939,314 shares of common stock $5 par value
outstanding.
<PAGE>
MAHASKA INVESTMENT COMPANY
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CONDITION
<TABLE>
<CAPTION>
(unaudited)
(dollars in thousands, except
for share amounts) September 30, December 31,
2000 1999
--------------- --------------
<S> <C> <C>
ASSETS
Cash and due from banks ...................... $ 9,087 $ 13,354
Interest-bearing deposits in banks ........... 1,899 1,700
Federal funds sold ........................... 1,260 7,865
--------- ---------
Cash and cash equivalents ................. 12,246 22,919
--------- ---------
Investment securities:
Available for sale ........................ 62,106 60,530
Held to maturity .......................... 26,902 29,445
Loans ........................................ 315,932 282,091
Allowance for loan losses .................... (3,325) (4,006)
--------- ---------
Net loans ................................. 312,607 278,085
--------- ---------
Loan pool participations ..................... 57,769 67,756
Premises and equipment, net .................. 6,966 6,795
Accrued interest receivable .................. 5,400 4,719
Goodwill and other intangible assets ......... 12,006 12,850
Other assets ................................. 4,675 3,090
--------- ---------
Total assets ............................ $ 500,677 $ 486,189
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Demand .......................................... $ 23,937 $ 23,197
NOW and Super NOW ............................... 45,222 42,378
Savings ......................................... 89,654 96,377
Certificates of deposit ......................... 200,282 186,720
--------- ---------
Total deposits ................................ 359,095 348,672
Federal funds purchased ............................ 1,900 2,965
Federal Home Loan Bank advances .................... 72,018 63,421
Note payable ....................................... 14,700 18,000
Other liabilities .................................. 4,693 2,896
--------- ---------
Total liabilities ............................. 452,406 435,954
--------- ---------
Shareholders' equity:
Common stock, $5 par value; authorized 20,000,000
shares; issued 4,912,849 shares as of
September 30, 2000 and December 31, 1999 ...... 24,564 24,564
Capital surplus ................................. 13,127 13,192
Treasury stock at cost, 973,535 shares as of
September 30, 2000, and 577,735 shares as
of December 31, 1999 .......................... (11,869) (8,525)
Retained earnings ............................... 22,703 21,511
Accumulated other comprehensive loss ............ (254) (507)
--------- ---------
Total shareholders' equity .................... 48,271 50,235
--------- ---------
Total liabilities and shareholders' equity .... $ 500,677 $ 486,189
========= =========
</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 Nine Months Ended
(dollars in thousands, September 30, September 30,
except per share) ------------------- ------------------
2000 1999 2000 1999
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Interest income:
Interest and fees on loans $ 6,634 $ 4,090 $18,669 $11,855
Interest and discount on loan pools 1,704 2,162 5,612 5,710
Interest on bank deposits 25 2 84 53
Interest on federal funds sold 14 4 141 178
Interest on investment securities:
Available for sale 1,067 404 3,175 1,277
Held to maturity 441 166 1,346 533
-------- -------- -------- --------
Total interest income 9,885 6,828 29,027 19,606
-------- -------- -------- --------
Interest expense:
Interest on deposits:
NOW and Super NOW 194 149 579 445
Savings 948 689 2,832 1,901
Certificates of deposit 2,754 1,510 7,756 4,649
Interest on federal funds purchased 96 57 176 61
Interest on Federal Home Loan Bank
advances 1,209 134 3,275 351
Interest on note payable 353 295 1,063 894
-------- -------- -------- --------
Total interest expense 5,554 2,834 15,681 8,301
-------- -------- -------- --------
Net interest income 4,331 3,994 13,346 11,305
Provision for loan losses 319 462 740 2,094
-------- -------- -------- --------
Net interest income after
provision for loan losses 4,012 3,532 12,606 9,211
-------- -------- -------- --------
Noninterest income:
Service charges 498 318 1,322 935
Data processing income 22 52 131 153
Other operating income 70 70 378 294
Investment security gains 0 0 17 0
-------- -------- -------- --------
Total noninterest income 590 440 1,848 1,382
-------- -------- -------- --------
Noninterest expense:
Salaries and employee benefits expense 1,641 1,239 4,872 3,830
Net occupancy expense 398 363 1,267 1,062
Professional fees 131 63 445 488
Other operating expense 810 464 2,534 1,729
Goodwill amortization 281 134 844 422
-------- -------- -------- --------
Total noninterest expense 3,261 2,263 9,962 7,531
-------- -------- -------- --------
Income before income tax expense 1,341 1,709 4,492 3,062
Income tax expense 414 622 1,481 1,137
-------- -------- -------- --------
Net income $ 927 $ 1,087 $ 3,011 $ 1,925
======== ======== ======== ========
Earnings per common share - basic $ 0.24 $ 0.30 $ 0.74 $ 0.53
Earnings per common share - diluted $ 0.24 $ 0.29 $ 0.74 $ 0.51
Dividends per common share $ 0.15 $ 0.15 $ 0.45 $ 0.45
</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 Nine Months Ended
(in thousands) September 30, September 30,
--------------------- ---------------------
2000 1999 2000 1999
--------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
Net income......................... $ 927 $ 1,087 $ 3,011 $ 1,925
Other Comprehensive Income:
Unrealized gains (losses) on
securities available for
sale:
Unrealized holding gains
(losses) arising during
the period, net of tax...... 442 (64) 266 (341)
Less: reclassification
adjustment for net (gains)
losses included in net
income, net of tax......... 0 0 (13) 0
--------- ---------- ---------- ---------
Other comprehensive income
(loss), net of tax............... 442 (64) 253 (341)
---------- ---------- ---------- ---------
Comprehensive income.............. $ 1,369 $ 1,023 $ 3,264 $ 1,584
========== ========== ========== =========
</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) Nine Months Ended
(dollars in thousands) September 30,
-------------------------
2000 1999
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net income ....................................... $ 3,011 $ 1,925
----------- -----------
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization .................. 1,304 912
Provision for loan losses ...................... 740 2,094
Investment securities gains .................... (17) 0
(Gain) loss on sale of premises and
equipment ................................... (8) 4
Amortization of investment securities
premiums .................................... 190 144
Accretion of investment securities and loan
discounts ................................... (167) (369)
Increase in other assets ....................... (2,266) (729)
Increase (decrease) in other liabilities ....... 1,642 (3)
----------- ------------
Total adjustments ........................... 1,418 2,053
----------- ------------
Net cash provided by operating activities ... 4,429 3,978
----------- ------------
Cash flows from investing activities:
Investment securities available for sale:
Proceeds from sales ............................ 8,039 0
Proceeds from maturities ....................... 3,901 9,024
Purchases ...................................... (13,028) (7,177)
Investment securities held to maturity:
Proceeds from maturities ....................... 5,412 3,606
Purchases ...................................... (2,811) (2,221)
Net increase in loans ............................ (35,196) (20,924)
Purchases of loan pool participations ............ (16,616) (31,670)
Principal recovery on loan pool participations ... 26,603 20,252
Purchases of premises and equipment .............. (805) (318)
Proceeds from sale of premises and equipment ..... 44 0
Proceeds from acquisition ........................ 0 3,403
----------- ------------
Net cash used in investing activities ....... (24,457) (26,025)
----------- ------------
Cash flows from financing activities:
Net increase in deposits ......................... 10,495 1,846
Net (decrease) increase in federal funds
purchased ................................... (1,065) 8,665
Federal Home Loan Bank advances .................. 36,000 3,500
Repayment of Federal Home Loan Bank advances ..... (27,547) (24)
Advances on note payable ......................... 1,900 3,300
Principal payments on note payable ............... (5,200) (4,050)
Dividends paid ................................... (1,819) (1,644)
Purchases of treasury stock ...................... (3,433) 0
Proceeds from exercise of stock options .......... 24 373
----------- ------------
Net cash provided by financing activities ... 9,355 11,966
----------- ------------
Net decrease in cash and cash equivalents ... (10,673) (10,081)
Cash and cash equivalents at beginning of period .... 22,919 22,121
----------- ------------
Cash and cash equivalents at end of period .......... $ 12,246 $ 12,040
=========== ============
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest ....................................... $ 15,348 $ 8,359
=========== ============
Income taxes ................................... $ 719 $ 1,378
=========== ============
</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. Basis of Presentation
The accompanying consolidated statements of income and the consolidated
statements of comprehensive income for the three and nine months ended
September 30, 1999 and the consolidated statements of cash flow for the
nine months ended September 30, 1999 include the accounts and transactions
of the Company and its four wholly-owned subsidiaries, Mahaska State Bank,
Central Valley Bank, Pella State Bank and MIC Financial, Inc. The
consolidated statements of condition as of September 30, 2000 and December
31, 1999, the consolidated statement of income and the consolidated
statement of comprehensive income for the three and nine month periods
ended September 30, 2000 and the consolidated statement of cash flow for
the nine months ended September 30, 2000 includes the accounts of the
Company and its aforementioned subsidiaries plus Midwest Federal Savings
and Loan Association of Eastern Iowa ("Midwest Federal"). Midwest Federal
was acquired as a result of the merger with Midwest Bancshares,
Inc.("Midwest"), completed on September 30, 1999. All material intercompany
balances and transactions have been eliminated in consolidation.
The accompanying consolidated financial statements 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 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 contain all adjustments
(consisting of only normal recurring accruals) necessary to present fairly
the financial position as of September 30, 2000, and the results of
operations for the three months and the nine months ended September 30,
2000 and 1999, and cash flows for the nine months ended September 30, 2000
and 1999.
The results for the three months and the nine months ended September 30,
2000 may not be indicative of results for the year ending December 31,
2000, or for any other period.
2. Consolidated Statements of Cash Flows
In the consolidated 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, 2000 and 1999 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 September 30, 2000 and 1999 was 3,936,514 and 3,679,991,
respectively. The weighted average number of shares for the nine-month
periods ended September 30, 2000 and 1999 was 4,088,756 and 3,656,397,
respectively. Diluted earnings per share amounts are computed by dividing
net income by the weighted average number of shares and all dilutive
potential shares outstanding during the period. The computation of diluted
earnings per share used a weighted average number of shares outstanding of
3,937,973 and 3,768,483 for the three months ended September 30, 2000 and
1999, respectively. For the nine months ended September 30, 2000 and 1999,
the diluted earnings per share computation was based on weighted average
number of shares outstanding of 4,094,497 and 3,751,594, respectively.
5. Effect of New Financial Accounting Standards
SFAS No. 133, "Accounting for Derivative Instruments and Hedging
Activities," and SFAS No. 137, an amendment to SFAS 133, will be effective
for the Company beginning January 1, 2001. Management believes the adoption
of SFAS 133 and SFAS 137 will not have a material impact on the Company's
consolidated financial statements. The Company expects to adopt SFAS 133
and 137 when required.
The American Institute of Certified Public Accountants has issued a
proposed Statement of Position ("SOP") which addresses the accounting for
differences between contractual and expected future cash flows from an
investor's initial investment in certain loans and debt securities. It
includes such loans acquired in purchase business combinations and would
apply to all enterprises. The proposed SOP would limit the yield that may
be accreted (accretable yield) to the excess of the investor's estimate of
undiscounted expected future principal and interest cash flows (expected
future cash flows) over the investor's initial investment in the loan. The
provisions of this proposed SOP would be effective for financial statements
issued for fiscal years beginning after June 15, 2000. Management of the
Company does not expect the adoption of this SOP to have a material effect
on its financial statements.
6. Use of Estimates in the Preparation of Financial Statements
The preparation of the consolidated financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of revenues and
expenses during the reported period. Actual results could differ from those
estimates. A significant estimate that is particularly sensitive to change
is the allowance for loan losses.
7. Sale of MIC Financial, Inc.
On April 23, 1999, the Company announced that it had elected to seek a
buyer for MIC Financial, Inc. (formerly known as On-Site Credit Services,
Inc.), its wholly-owned commercial finance subsidiary. The Company has now
sold a significant amount of the assets in several transactions. As of
September 30, 2000, MIC Financial's loan and lease portfolio totaled
$2,129,000, approximately 1 percent of the Company's total loans as of that
date.
8. Acquisition of Midwest Bancshares, Inc.
The Company acquired Midwest Federal Savings and Loan Association of
Eastern Iowa ("Midwest Federal"), a community-oriented thrift institution,
with locations in Burlington, West Burlington, Fort Madison, and Wapello,
Iowa on September 30, 1999.
The excess of the purchase price over the identifiable fair value of the
tangible and identifiable intangible assets acquired and the liabilities
assumed of $6,234,000 was recorded as goodwill and is being amortized over
25 years on a straight-line basis. The acquisition has been accounted using
the purchase method of accounting and, accordingly, the income and earnings
results of Midwest Federal are not included with the results of the Company
for the three months or the nine month period ended September 30, 1999.
<PAGE>
PART I -- Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations.
QUARTER ENDED SEPTEMBER 30, 2000
On September 30, 1999, the Company acquired all of the outstanding common stock
of Midwest Federal Savings and Loan Association of Eastern Iowa ("Midwest
Federal") as a result of an exchange of Company stock with the shareholders of
Midwest Bancshares, Inc. ("MWBI"), the thrift holding company for Midwest
Federal. A total of 1,105,348 shares of Company common stock were issued to the
former shareholders of MWBI in a transaction valued at $19,237,000, including
transaction expenses. The acquisition of Midwest Federal was accounted for using
the purchase method of accounting and, accordingly, the Company's results of
operations for the three months ended September 30, 1999 do not include the
results of Midwest Federal.
The Company recorded net income of $927,000 for the quarter ended September 30,
2000, compared with net income of $1,087,000 for the three months ended
September 30, 1999, a net decrease of $160,000. Basic and diluted earnings per
share for the third quarter of 2000 were $.24 versus basic earnings of $.30 per
share for the third quarter of 1999 and diluted earnings per share of $.29. Cash
earnings per share, which excludes goodwill amortization (net of income tax
effect), was $.29 per share for the third quarter of 2000 compared with $.32 per
share for the third quarter of 2000. Actual weighted average shares outstanding
were 3,936,514 and 3,679,991 for the third quarter of 2000 and 1999,
respectively. The issuance of 1,105,348 shares on September 30, 1999, to
shareholders of MWBI as a result of the merger into the Company increased the
average shares outstanding in the third quarter of 2000. The Company's return on
average assets for the quarter ended September 30, 2000 was .74 percent compared
with a return of 1.41 percent for the quarter ended September 30, 1999. The
Company's return on average equity was 7.62 percent for the three months ended
September 30, 2000 compared with 11.24 percent for the three months ended
September 30, 1999. The cash basis return on tangible equity (which deducts
goodwill and other intangible assets from shareholders' equity) was 12.73
percent for the third quarter of 2000 compared with 14.00 percent for the third
quarter of 1999.
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 additional earning assets and interest-bearing liabilities of Midwest
Federal included in the third quarter of 2000 significantly increased both
interest income on investments and loans and interest expense on deposits and
borrowed funds in comparison to the third quarter of 1999. The Company's net
interest income for the quarter ended September 30, 2000 increased $337,000 (8
percent) to $4,331,000 from $3,994,000 for the three months ended September 30,
1999. This increase was mainly due to increased interest income earned on higher
loan and investment volumes. Increased interest expense on deposits and borrowed
funds somewhat offset the higher interest income. Total interest income
increased $3,054,000 (45 percent) in the third quarter of 2000 compared with the
same period in 1999. Exclusive of the additional $3,319,000 interest income
generated by Midwest Federal in the third quarter of 2000, total interest income
would have decreased by $265,000 in comparison to the 1999 third quarter
primarily due to a decline in interest income and discount on loan pool
participations, offset by an increase in interest income on loans. The Company's
total interest expense for the third quarter of 2000 increased $2,716,000 (96
percent) compared with the same period in 1999. Total interest expense,
excluding the $2,838,000 related to Midwest Federal, increased $209,000 in the
third quarter of 2000 compared with 1999, primarily due to higher market
interest rates. The Company's net interest margin (on a federal tax-equivalent
basis) for the third quarter of 2000 decreased to 3.89 percent (4.28 percent
excluding Midwest Federal) from 5.61 percent in the third quarter of 1999. Net
interest margin is a measure of the 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 was 8.66 percent (8.94 percent without Midwest Federal) for the third
quarter of 2000 compared to 9.56 percent for the third quarter of 1999. The rate
on interest-bearing liabilities increased in the third quarter of 2000 to 5.25
percent (the same without Midwest Federal) compared to 4.63 percent for the
third quarter of 1999.
Interest income and fees on loans (excluding the $2,132,000 contributed by
Midwest Federal) increased $412,000 (10 percent) in the third quarter of 2000
compared to the same period in 1999, mainly due to higher loan volumes. The
average yield on loans exclusive of Midwest Federal declined to 8.81 percent for
the third quarter of 2000, compared to 8.94 percent in the third quarter of
1999. The average yield on loans including Midwest Federal in the third quarter
of 2000 was 8.48 percent. The yield on the Company's loan portfolio is effected
by the amount of nonaccrual loans (which do not earn interest income), the mix
of the portfolio (real estate loans generally have a lower overall yield than
commercial and agricultural loans), the effects of competition and the interest
rate environment on the amounts and volumes of new loan originations, and the
mix of variable rate versus fixed rate loans in the Company's portfolio. Recent
moves by the Federal Reserve to increase interest rates may benefit the Company
in future periods as variable rate loans tied to prime have been adjusted
upward. Competition for loans in the market areas served by the Company remains
strong. Average loans outstanding were $311,139,000 for the third quarter of
2000 compared with $181,547,000 for the third quarter of 1999, an increase of
$125,895,000 (73 percent).
Excluding the increase in average loan volume attributable to Midwest Federal,
the Company's average loans outstanding were $21,796,000 (12 percent) greater in
the third quarter of 2000 than in 1999.
Overall, the Company recognized $458,000 less interest and discount income on
loan pool participations in the third quarter of 2000 compared with 1999, mainly
due to lower collections and a reduction in the average balance of loan pools.
Interest income and discount collected on the loan pool participations for the
three months ended September 30, 2000 was $1,704,000 compared with $2,162,000
collected in the third quarter of 1999. The yield on loan pool participations
was 11.72 percent for the third quarter of 2000 compared with 13.69 percent for
the quarter ended September 30, 1999. The average loan pool participation
investment balance was $4,814,000 (8 percent) lower in the third quarter of 2000
than in 1999 as a result of sales of assets earlier in the year and lower than
anticipated purchases of new pools. Newly purchased loan pools typically do not
produce income for a period of up to 120 days from date of purchase which
significantly impacts the yield on the investment. These loan pool
participations are pools of performing and 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." The
Company recognizes interest income and discount recovery on its loan pool
participations on a cash basis. The loan pool participations have traditionally
been a high-yield activity for the Company, but this yield has fluctuated from
period to period based on the amount of cash collections, discount recovery, and
net collection expenses of the servicer in any given period. The income and
yield on loan pool participations may vary in future periods due to the volume
and discount rate on loan pools purchased.
For the third quarter of 2000, interest income on investment securities
increased $938,000 compared with the quarter ended September 30, 1999 primarily
due to the additional securities held by Midwest Federal. Without Midwest
Federal, interest income from investment securities was $45,000 higher in the
2000 quarter than in 1999, generally due to increased interest rates on newly
acquired securities.
The $1,549,000 increase in interest expense on deposits in the third quarter of
2000 compared with 1999 was attributable to the additional deposits of Midwest
Federal, generally higher market interest rates and to some increase in
deposits. Excluding the $1,201,000 deposit interest expense for Midwest Federal,
the Company's interest expense on deposits increased $348,000. Average
interest-bearing deposits for the third quarter of 2000 increased $113,813,000
(53 percent) from the same period in 1999. Excluding Midwest Federal, average
interest-bearing deposits were $7,015,000 greater in the third quarter of 2000
than in 1999. Interest expense on Federal Home Loan Bank advances was $1,074,000
higher in the third quarter of 2000 compared with the same period in the prior
year reflecting Midwest Federal's utilization of this alternative funding
method. Interest expense on notes payable was up $58,000 in the third quarter of
2000 compared with 1999 due to higher interest rates on the Company's commercial
bank line of credit reflecting an increased prime rate.
Provision for Loan Losses
The Company recorded a provision for loan losses of $320,000 in the third
quarter of 2000, of which $12,000 was recorded by Midwest Federal. MIC Financial
did not have any provision for loan losses in the third quarter of 2000. One of
the Company's subsidiary banks increased its provision for loan losses during
the period due to continued deterioration in the financial position of a large
agricultural line of credit. In the third quarter of 1999, the Company recorded
a provision for loan losses of $462,000, of which $207,000 was recorded by MIC
Financial. 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. Management believes that the allowance for loan
losses is adequate based on the inherent risk in the portfolio as of September
30, 2000, however, continued growth in the loan portfolio and the uncertainty of
the agricultural economy require that management continue to evaluate the
adequacy of the allowance for loan losses and make additional provisions in
future periods as deemed necessary.
Noninterest Income
Noninterest 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 noninterest income was $179,000 (41 percent) greater in the
third quarter of 2000 compared with 1999. Excluding the contribution of Midwest
Federal of $137,000, most of the increase was due to higher service charges
collected on nonsufficient funds checks written by bank customers.
Noninterest Expense
Total noninterest expense for the quarter ended September 30, 2000 increased
$1,026,000 (45 percent) compared to noninterest expense for the third quarter of
1999. Excluding the $980,000 expense for the operation of Midwest Federal, the
Company's noninterest expense increased $46,000 (2 percent). Noninterest 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 third quarter of 2000 increased $402,000 (32 percent) over 1999 as a
result of $431,000 in additional expense for Midwest Federal, which was
partially offset by the reduction in staff at MIC Financial. Net occupancy and
equipment expenses increased $48,000 (13 percent) in the third quarter of 2000
compared to 1999. Excluding the $105,000 increase due to Midwest Federal, third
quarter 2000 net occupancy expense was down $57,000 in comparison with 1999
mainly reflecting lower depreciation expense. Professional fees in the third
quarter of 2000 increased by $73,000 (116 percent) compared to 1999 as a result
of increased legal and loan collection costs. Other operating expense increased
by $319,000 (64 percent) in the third quarter of 2000 compared with the three
months ended September 30, 1999. Excluding Midwest Federal, other operating
expense increased $38,000 in the 2000 period. Goodwill amortization increased
$184,000 in 2000 due to the amortization of the core deposit intangible and the
goodwill attributable to the acquisition of Midwest Federal.
Income Tax Expense
The Company incurred income tax expense of $414,000 for the three months ended
September 30, 2000. For the three months ended September 30, 1999, the Company
recorded income tax expense of $622,000 attributable to the higher before-tax
income. The effective income tax rate as a percent of income before taxes for
the three months ended September 30, 2000 was 31.0 percent compared with 36.4
percent in the third quarter of 1999. The Company's effective income tax rate
may vary due to the volume of tax-exempt securities held in the investment
portfolio.
NINE MONTHS ENDED SEPTEMBER 30, 2000
The Company earned $3,011,000 during the first nine months of 2000 compared with
net income of $1,925,000 in the same period of 1999. The acquisition of Midwest
Federal was completed on September 30, 1999 through the issuance of 1,105,348
shares of Company stock. In accordance with purchase accounting requirements,
the income and expense of Midwest is not included with the Company for the nine
months ended September 30, 1999. Basic and diluted earnings per share were $.74
for the nine months ended September 30, 2000 compared with basic earnings per
share of $.53 and diluted earnings per share of $.51 for the first nine months
of 1999. Cash earnings per share for the nine months of 2000 was $.91 compared
with $.60 for the nine months ended September 30, 1999. Actual weighted- average
shares outstanding in the nine months of 2000 were 4,088,756 compared with
3,656,397 in the 1999 period. Weighted- average diluted shares outstanding were
4,094,497 and 3,751,594 for the nine months of 2000 and 1999, respectively. The
return on average assets for the nine months of 2000 was .82 percent compared
with .85 percent in 1999. Return on average shareholders' equity was 8.20
percent in 2000 compared with 6.68 percent for the nine months of 1999. The
Company's cash return on tangible equity for the nine months ended September 30,
2000 was 13.54 percent compared with 8.85 percent for the nine months of 1999.
RESULTS OF OPERATION
Net Interest Income
Net interest income increased $2,042,000 in the nine months ended September 30,
2000 compared with the same period in 1999 reflecting the additional net
interest income generated by Midwest Federal in 2000. Excluding the $3,655,000
net interest income of Midwest Federal, the Company's net interest income for
the nine months of 2000 was down $1,613,000 primarily due to higher interest
expense on interest-bearing liabilities and a lower overall yield on earning
assets. The Company's net interest margin for the nine months of 2000 was 4.00
percent (4.61 percent excluding Midwest Federal) compared with 5.42 percent in
1999. The yield on earning assets for the nine months of 2000 was 8.59 percent
(9.06 percent excluding Midwest Federal) compared with 9.37 percent in 1999. The
overall rate on interest-bearing liabilities rose to 5.06 percent for the nine
months of 2000 from 4.63 percent in 1999.
Interest and fees on loans increased $6,814,000 (57 percent) in the nine months
of 2000 compared with the same period in 1999. The additional interest income on
loans attributable to Midwest Federal was $6,085,000, with the Company's
previously existing subsidiaries having a net increase in interest income on
loans totaling $729,000 (6 percent). The net increase was due to the higher
average volume of loans outstanding since the average rate of 8.35 percent
earned on loans for the nine months of 2000 was lower than the 9.55 percent rate
in 1999. The average rate on loans excluding Midwest Federal was 8.69 percent in
the nine months of 2000.
The amount of interest income and discount collected on loan pool participations
decreased 2 percent in the nine months of 2000 to $5,612,000 from the nine
months of 1999 total of $5,710,000. This decrease was largely due to reduced
collections on loan pool participations in 2000 compared with 1999. The yield on
loan pool participations decreased to 12.49 percent for the nine months of 2000
compared with 13.57 percent in 1999.
Interest income on investments increased $2,711,000 (150 percent) in the nine
months of 2000 compared to 1999 as a result of the acquired securities portfolio
of Midwest Federal. The average balance of investment securities more than
doubled to $92,211,0000 in 2000 compared with $42,867,000 in 1999. The average
yield on the portfolio increased from 5.99 percent for 1999 to 6.98 percent in
2000. Without the addition of the Midwest Federal securities, the average
balance of investments would have declined in 2000 as the proceeds from maturing
securities were used to fund loan demand.
Total interest expense on liabilities increased $7,375,000 in the nine months of
2000 over 1999 due to the liabilities assumed with the acquisition of Midwest
Federal, increases in average deposits at existing banks, and the need to pay
higher market interest rates to retain and attract deposits. The rates paid on
borrowed funds such as fed funds purchased, FHLB advances, and borrowings on the
Company's bank line of credit all increased in 2000 as a result of higher market
rates, thereby increasing the interest expense of the Company compared to 1999.
Excluding the interest expense on the interest-bearing liabilities of Midwest
Federal, the Company's total interest expense increased $1,167,000 (14 percent)
in the nine months ended September 30, 2000 compared with 1999.
Provision for Loan Losses
The year-to-date 2000 provision for loan losses of $740,000 was $1,354,000 less
than the $2,094,000 for the first nine months of 1999. The loss provision of MIC
Financial was $1,534,000 in the first nine months of 1999. Of the year-to-date
provision for losses in 2000, only $27,000 was attributable to MIC Financial.
Noninterest Income
Total noninterest income for the nine months of 2000 increased $494,000 over
that recorded in 1999. Of that increase, $392,000 was due to noninterest income
for Midwest Federal. The remaining $102,000 increase was largely due to
increased service charges and gains on the sale of investment securities
classified as "available for sale" that were sold to meet liquidity needs.
Noninterest Expense
The Company's noninterest expense increased $2,461,000 during the first nine
months of 2000 over 1999. The noninterest expense incurred by Midwest Federal in
2000 totaled $2,744,000. Excluding Midwest Federal, the Company's noninterest
expense decreased $283,000 in 2000 compared to 1999 with reductions noted in
professional fees (15 percent), occupancy expense (13 percent), and salaries and
benefits expense (3 percent). Much of this reduction was due to the down-sizing
of the MIC Financial operation.
Income Tax Expense
The Company's income tax expense of $1,481,000 for the nine months of 2000 was
$344,000 greater than the $1,137,000 tax expense for 1999. Taxable income was
greater in 2000 compared with the year- to-date 1999.
FINANCIAL CONDITION
Total assets as of September 30, 2000 were $500,677,000, an increase of
$14,488,000 (3 percent) from December 31, 1999. As of September 30, 2000, the
Company had $1,260,000 in federal funds sold and $1,900,000 federal funds
borrowed compared with $7,865,000 sold and $2,965,000 borrowed as of December
31, 1999. The Company's liquidity needs are usually highest during the second
and third quarters of each year due to seasonal loan demand and minimal deposit
growth in the first nine months of the year. Federal funds are borrowed on a
short-term basis to meet this liquidity need.
Investment Securities
Investment securities available for sale increased $1,576,000 from December 31,
1999 to the September 30, 2000 total of $62,106,000 as securities were purchased
for the portfolio. Investment securities classified as held to maturity declined
to $26,902,000 as of September 30, 2000, compared with $29,445,000 on
December 31, 1999, with the net decrease of $2,543,000 due to the maturity of
securities.
Loans
Overall loan volumes continued to increase, with total loans outstanding of
$315,933,000 on September 30, 2000, reflecting growth of $33,642,000 (12
percent) from December 31, 1999. As of September 30, 2000, the Company's loan to
deposit ratio (excluding loan pool investments) was 88.0 percent. This compares
with a year-end 1999 loan to deposit ratio of 80.7 percent. As of September 30,
2000, MIC Financial had total loans outstanding of $2,129,000, mostly in the
commercial loan category. This compares with a December 31, 1999 loan total for
MIC Financial of $5,081,000.
The Company has recently added an experienced commercial loan officer to the
staff of Midwest Federal in Burlington. This addition will allow the Company to
originate commercial and agricultural loans in the markets served by Midwest
Federal and will in time provide diversification and expansion in its loan
portfolio.
Loan Pool Participations
As of September 30, 2000, the Company had loan pool participations of
$57,769,000, a decrease of $9,987,000 (15 percent) from the December 31, 1999
balance. The reduction in the loan pool participations is due to collections
made in the normal course of business and the sale of most of the loans still
held by the Central States Resources Corporation, Midstates Resources
Corporation and All States Resources Corporation servicing entities. The sale of
the majority of the assets of these servicing corporations was completed in May
with minimal profits recognized at that time. The collection of proceeds from
the remaining assets is expected to continue through the fourth quarter with the
recognition of any additional income deferred until the receipt of all remaining
settlements. Management of the Company and the servicer determined that it was
in the best interest of all parties to sell these remaining assets in order to
maximize the potential return on investment and to reduce credit risk. The
assets in these servicing corporations were purchased from various sources
between 1988 and 1997. These remaining assets were becoming increasingly costly
to service and the cash flow from them was projected to decline. The assets were
felt to be subject to greater than average credit risk in the event of
deterioration in the national economy.
The Company's involvement in the loan pool participations continues through
States Resources Corporation which was created by the servicer in 1998. All pool
purchases since then have been through this entity. The loan pool investment
balance shown as an asset on the Company's Statement of Condition represents the
discounted purchase cost of the loan pool participations. During the third
quarter of 2000 the Company was successful in purchasing two loan pool packages
totaling $1,295,000. For the nine months of 2000, the Company has purchased loan
pools totaling $16,616,000. This compares with purchases of $36,651,000 in the
first nine months of 1999. The average loan pool participation balance of
$60,036,000 for the nine months of 2000 was $3,773,000 (7 percent) higher than
the average balance of $56,263,000 for the first nine months of 1999. Throughout
the year 2000 the Company has remained active in evaluating and bidding on loan
pool packages. There has been substantial competition for these assets resulting
in the number of pools acquired and the amount purchased in 2000 being less than
desired by the Company. Subsequent to the end of the third quarter, the Company
has been successful in acquiring additional loan pools totaling approximately
$9,302,000.
Deposits
Total deposits as of September 30, 2000 were $359,095,000 compared with
$348,672,000 as of December 31,1999. The Company typically experiences some
growth in total deposits from December to September. Competition for deposits
has been intense in many of the markets served by the Company with management
electing not to pay the highest rates in order to attract depositor funds.
Borrowed Funds
The Company had $1,900,000 in Federal Funds purchased on September 30, 2000.
There was $2,965,000 in Federal Funds purchased on December 31, 1999. During the
nine months of 2000, the Company had an average balance of Federal Funds
purchased of $3,957,000 compared with an average of $1,493,000 during the first
nine months of 1999. Advances from the Federal Home Loan Bank totaled
$72,018,000 as of September 30, 2000 compared with $63,421,000 as of December
31, 1999. The increases in Federal Funds purchased and Federal Home Loan Bank
advances provided the funds to meet loan demand by customers.
Notes Payable
The notes payable balance was reduced to $14,700,000 on September 30, 2000 from
a balance of $18,000,000 on December 31, 1999. The Company's term loan balance
on September 30, 2000 was $8,600,000 with a payment of $500,000 due December 31,
2000. The Company maintains a revolving line of credit of up to $9,000,000 (of
which $6,100,000 was utilized as of September 30, 2000) that matures June 30,
2001. The interest rate for both the term loan and the revolving line remain at
prime rate less .375% (currently 9.125 percent).
Nonperforming Assets
The Company's nonperforming assets totaled $4,074,000 (1.06 percent of total
loans) as of September 30, 2000, compared to $4,965,000 (1.76 percent of total
loans) as of December 31, 1999. All nonperforming asset totals and related
ratios exclude the loan pool investments. The following table presents the
categories of nonperforming assets for the bank subsidiaries and for MIC
Financial, Inc. as of September 30, 2000 compared with December 31, 1999:
<TABLE>
<CAPTION>
Nonperforming Assets
(dollars in thousands)
September 30, 2000
MIC
Banks Financial Total
----- --------- -----
<S> <C> <C> <C>
Nonaccrual $1,810 $1,007 $2,817
Loans 90 days past due 494 38 532
Other real estate owned 725 0 725
------ ------ ------
$3,029 $1,045 $4,074
</TABLE>
<TABLE>
<CAPTION>
December 31, 1999
MIC
Banks Financial Total
----- --------- -----
<S> <C> <C> <C>
Nonaccrual $1,969 $ 905 $2,874
Loans 90 days past due 1,025 401 1,426
Restructured loans 0 515 515
Other real estate owned 150 0 150
------ ------ ------
$3,144 $1,821 $4,965
</TABLE>
From December 31, 1999 to September 30, 2000, nonaccrual loans decreased
$57,000. Loans ninety days past due decreased $894,000 with most of the
reduction attributable to charge-off. Restructured loans decreased $515,000 as
the performance on one MIC Financial credit deteriorated and it was reclassified
as nonaccrual. Other real estate owned increased by $575,000 as the Company
foreclosed on a residential real estate loan, a hotel in which one of the bank
subsidiaries participated was foreclosed, and a strip mall participation was
also foreclosed. The Company's allowance for loan losses as of September 30,
2000 was $3,325,000, which was 1.05 percent of total loans as of that date. This
compares with an allowance for loan losses of $4,006,000 as of December 31,
1999, which was 1.42 percent of total loans. As of September 30, 2000, the
allowance for loan losses was 99.28 percent of nonperforming loans compared with
83.20 percent as of December 31, 1999. Based on the inherent risk in the loan
portfolio, management believes that as of September 30, 2000, the allowance for
loan losses is adequate. For the three months ended September 30, 2000, the
Company recognized net charge-offs of $610,000 compared with net charge-offs of
$359,000 during the quarter ended September 30, 1999. Net charge-offs recorded
by MIC Financial totaled $202,000 while the bank subsidiaries charged off
$408,000 during the quarter ended September 30, 2000. For the nine months ended
September 30, 2000, the Company recognized net charge- offs of $1,421,000
compared with $1,438,000 for the nine months of 1999. For the year-to-date 2000,
MIC Financial has charged off a of $620,000 versus a net charge-off of
$1,024,000 in the comparable 1999 period.
Capital Resources
As of September 30, 2000, total shareholders' equity as a percentage of total
assets was 9.64 percent compared with 10.33 percent as of December 31, 1999.
Tangible shareholders' equity (adjusted for goodwill and intangible assets) was
7.42 percent of tangible assets as of September 30, 2000 compared with 7.90
percent as of December 31, 2000. Through September 30, 2000, the Company has
repurchased a total of 403,100 shares of its common stock on the open market at
an average price of $8.52. No additional shares were repurchased during the
third quarter of 2000. Under risk- based capital rules, the Company's tier 1
capital ratio was 10.68 percent of risk-weighted assets as of September 30,
2000, and was 11.42 percent of risk-weighted assets as of December 31, 1999,
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. Management believes that, as of
September 30, 2000, the Company and its subsidiary banks meet all capital
adequacy requirements to which they are subject. As of that date, all the bank
subsidiaries were "well capitalized" under regulatory prompt corrective action
provisions.
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 $12,246,000 as of September 30, 2000, compared with $22,919,000
as of December 31, 1999. Much of the decrease during the period was utilized to
fund loan growth and to purchase investment securities. 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 a major commercial bank that provides liquidity
for the purchase of loan pool participation investments and other corporate
needs. Management believes that the Company has sufficient liquidity as of
September 30, 2000 to meet the needs of borrowers and depositors.
Market Risk Management
Market risk is the risk of earnings volatility that results from adverse changes
in interest rates and market prices. The Company's market risk is primarily
comprised of interest rate risk arising from its core banking activities of
lending and deposit taking. Interest rate risk is the risk that changes in
market interest rates may adversely affect the Company's net interest income.
Management continually develops and applies strategies to mitigate this risk.
Management does not believe that the Company's primary market risk exposures and
how those exposures were managed in the first nine months of 2000 changed when
compared to 1999.
The Company uses a third-party computer software simulation modeling program to
measure its exposure to potential interest rate changes. For various assumed
hypothetical changes in market interest rates, numerous other assumptions are
made such as prepayment speeds on loans and securities backed by mortgages, the
slope of the Treasury yield curve, the rates and volumes of the Company's
deposits and the rates and the volumes of the Company's loans. This analysis
measures the estimated change in net interest income in the event of
hypothetical changes in interest rates. This analysis of the Company's interest
rate risk was presented in the Form 10-K filed by the Company for the year ended
December 31, 1999.
Year 2000 Compliance
A critical issue that emerged in the banking industry and for the economy
overall was how existing computer application software programs, operating
systems and hardware would accommodate the date value for the year 2000. The
Company established Year 2000 Committees and Plans at its subsidiary banks to
minimize the risk of potential disruption related to computers and other
equipment with date-sensitive software. Based on the Company's assessment of
operations through October 2000, no significant year 2000 issues have been
experienced. The Company has surveyed its larger clients, vendors and
significant third parties and believes they have experienced no significant year
2000 issues, which could adversely affect the Company. The Company will continue
to monitor year 2000 compliance issues.
Commitments and Contingencies
In the ordinary course of business, the Company is engaged in various
litigation. Management believes that none of this litigation is material to the
Company's results of operations.
ESOP Merger
The Company has maintained an Employee Stock Ownership Plan ("ESOP") for its
employees since 1984. Midwest Federal employees were also covered by an ESOP. As
part of the merger agreement with Midwest Bancshares, Inc., it was agreed that
the Midwest ESOP would be merged into the Company's ESOP as soon as practicable.
The merger of the two ESOP's was completed as of July 31, 2000.
The ESOP has borrowed funds from the Company to purchase additional shares of
Company stock. The Company's board of directors approved a loan of up to
$700,000 to the ESOP to purchase Company stock. This loan is at the same rate of
interest as the Company's bank line of credit (prime less .375%). As of
September 30, 2000, the ESOP had borrowed $700,000 from the Company to purchase
shares.
Midwest Federal Data Processing Conversion
On September 22, 2000, the data processing for Midwest Federal was converted
from an outside service bureau to the in-house system utilized by the Company's
other subsidiary banks. It is anticipated that this conversion will provide
Midwest Federal the ability to offer products and services comparable to those
provided by the Company's other subsidiaries and will result in an expense
savings to the Company as a whole in future periods.
"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
competitive 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:
Exhibits
3.1 Articles of Incorporation of Mahaska Investment Company. (e)
3.2 Bylaws of Mahaska Investment Company. (e)
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. (c)
10.2.3 1998 Stock Incentive Plan. (d)
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 Resources 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)
10.3.4 States Resources Corp. Loan Participation and Servicing
Agreement dated February 5, 1999 between States Resources Corp.
and Mahaska Investment Company. (g)
10.5.1 Amended and Restated Credit Agreement dated June 30, 2000
between Mahaska Investment Company and Harris Trust & Savings
Bank. (h)
10.6 Agreement and Plan of Merger By and Between Mahaska Investment
Company and Midwest Bancshares, Inc. dated February 2, 1999. (f)
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.
(c) Incorporated by reference to the Form 10-K for the year ended
December 31, 1996 filed by Mahaska Investment Company.
(d) Incorporated by reference to the Form 10-K for the year ended
December 31, 1997 filed by Mahaska Investment Company.
(e) Incorporated by reference to the Form 10-Q for the quarter
ended September 30, 1998 filed by Mahaska Investment Company.
(f) Incorporated by reference to the Amendment No. 1 to the Form
S-4 Registration number 333-79291 filed by Mahaska Investment
Company on August 17, 1999.
(g) Incorporated by reference to the Form 10-K for the year ended
December 31, 1999 filed by Mahaska Investment Company.
(h) Incorporated by reference to the Form 10-Q for the quarter
ended June 30, 2000 filed by Mahaska Investment Company.
(b) Reports on Form 8-K -- The Company did not file any report on Form 8-K
during the three months ended September 30, 2000.
<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)
November 10, 2000 /s/ Charles S. Howard
----------------------- --------------------------------------
Dated Charles S. Howard, President
November 10, 2000 /s/ David A. Meinert
----------------------- --------------------------------------
Dated David A. Meinert
Executive Vice President and
Chief Financial Officer
(Principal Accounting Officer)
<PAGE>
<TABLE>
<CAPTION>
Exhibit 11
MAHASKA INVESTMENT COMPANY
AND SUBSIDIARIES
STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS
Three Months Ended Nine Months Ended
September 30, September 30,
------------------- -------------------
2000 1999 2000 1999
--------- -------- -------- --------
Earnings per Share Information:
-------------------------------
<S> <C> <C> <C> <C>
Weighted average number of shares
outstanding during the year 3,936,514 3,679,991 4,088,786 3,656,397
Weighted average number of shares
outstanding during the year
including all dilutive potential
shares 3,937,973 3,768,483 4,094,497 3,751,594
Net earnings $ 926,134 1,087,288 3,010,554 1,925,360
Earnings per share - basic $ 0.24 $ 0.30 $ 0.74 $ 0.53
Earnings per share - duluted $ 0.24 $ 0.29 $ 0.74 $ 0.51
</TABLE>
