<PAGE> 1
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2000
-------------
OR
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
----- -----
Commission File Number: 0-15777
FIRST INDEPENDENCE CORPORATION
------------------------------
(Exact Name of Small Business Issuer as Specified in its Charter)
Michigan 38-2583843
-------- ----------
(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
44 Michigan, Detroit, Michigan 48226
(Address of Principal Executive Offices)
(313) 256-8400
(Issuer's Telephone Number, Including Area Code)
Check whether the issuer (1) filed all reports required to be filed by Section
13 of 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the issuer was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes X No .
--- ---
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date:
5,613 shares of Common Stock ($60 par value) as of July 31, 2000 (as adjusted
for the 1 for 60 Reverse Stock Split approved subsequent to June 30, 2000 to be
executed subsequent to this filing).
Transitional Small Business Disclosure Format (check one): Yes ; No X .
----- -----
<PAGE> 2
FIRST INDEPENDENCE CORPORATION
INDEX
<TABLE>
<CAPTION>
PART 1. FINANCIAL INFORMATION Page No.
--------------------- --------
<S> <C>
Item 1. Financial Statements
Report of Independent Accountants.................................................. 1
Condensed Consolidated Balance Sheet -
June 30, 2000 (Unaudited)........................................................ 2
Condensed Consolidated Statements of Income - Three
And Six Months Ended June 30, 2000 (Unaudited) and
June 30, 1999 (Unaudited)........................................................ 3
Consolidated Statements of Comprehensive Income - Three
And Six Months Ended June 30, 2000 (Unaudited) and
June 30, 1999 (Unaudited)........................................................ 4
Condensed Consolidated Statements of Cash Flows -
Six Months Ended June 30, 2000 (Unaudited) and
June 30, 1999 (Unaudited)........................................................ 5
Notes to Condensed Consolidated Financial
Statements (Unaudited)........................................................... 6-7
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations............................................................ 8-12
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.................................................................. 13
Item 2. Changes in Securities and Use of Proceeds.......................................... 13
Item 3. Defaults upon Senior Securities.................................................... 13
Item 4. Submission of Matters to a Vote of Security Holders................................ 13
Item 5. Other Information.................................................................. 13
Item 6. Exhibits and Reports on Form 8-K................................................... 13
SIGNATURES ................................................................................... 14
</TABLE>
<PAGE> 3
REPORT OF INDEPENDENT ACCOUNTANTS
Board of Directors and Shareholders
First Independence Corporation
Detroit, Michigan
We have reviewed the condensed consolidated balance sheet of First Independence
Corporation as of June 30, 2000, the related condensed consolidated statements
of income and comprehensive income for the three and six months ended June 30,
2000 and 1999, and the condensed consolidated statements of cash flows for the
six months ended June 30, 2000 and 1999. These financial statements are the
responsibility of the Corporation's management.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial
data and making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in accordance
with generally accepted auditing standards, the objective of which is the
expression of an opinion regarding the financial statements taken as a whole.
Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the accompanying financial statements for them to be in conformity
with generally accepted accounting principles.
Crowe, Chizek and Company LLP
Grand Rapids, Michigan
August 4, 2000
<PAGE> 4
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
FIRST INDEPENDENCE CORPORATION AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
June 30,
2000
----
(Unaudited)
<S> <C>
ASSETS
Cash and due from banks $ 10,962,331
Federal funds sold 24,700,000
----------------
Total cash and cash equivalents 35,662,331
Securities available for sale 51,823,734
Securities held to maturity (fair value of $1,000,630) 1,005,152
Federal Home Loan Bank and Federal Reserve Bank stock 465,300
Total loans 45,677,888
Allowance for loan losses (1,073,739)
----------------
44,604,149
Premises and equipment - net 4,043,292
Accrued interest receivable and other assets 2,734,416
----------------
Total assets $ 140,338,374
================
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
Deposits
Noninterest-bearing $ 49,964,488
Interest-bearing 49,297,865
----------------
99,262,353
Short-term borrowings 33,844,494
Accrued expenses and other liabilities 665,531
Long-term debt 900,000
----------------
Total liabilities 134,672,378
Mandatorily redeemable shares under ESOP, at fair value 365,400
Shareholders' equity
Preferred stock 2,482,086
Common stock, $60 par value: 1,000,000 shares authorized;
5,613 shares issued and outstanding; 5,033 shares
outstanding after reduction for 580 mandatorily
redeemable shares under ESOP 301,960
Capital surplus 2,039,182
Retained earnings 1,818,466
Accumulated other comprehensive income (loss) (1,341,098)
----------------
Total shareholders' equity 5,300,596
----------------
Total liabilities and shareholders' equity $ 140,338,374
================
</TABLE>
See accompanying notes to condensed consolidated financial statements.
2.
<PAGE> 5
FIRST INDEPENDENCE CORPORATION AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
---------Three Months Ended---------- --------Six Months Ended------------
June 30, 2000 June 30, 1999 June 30, 2000 June 30, 1999
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Interest income
Loans, including fees $ 1,076,158 $ 950,709 $ 2,065,400 $ 1,919,127
Federal funds sold 354,603 230,803 694,721 462,991
Securities 834,230 840,791 1,704,242 1,640,092
--------------- -------------- -------------- --------------
2,264,991 2,022,303 4,464,363 4,022,210
Interest expense
Deposits 462,228 404,084 910,060 840,527
Other borrowed funds 386,890 258,959 778,022 519,053
--------------- -------------- -------------- --------------
849,118 663,043 1,688,082 1,359,580
--------------- -------------- -------------- --------------
NET INTEREST INCOME 1,415,873 1,359,260 2,776,281 2,662,630
Provision for loan losses 30,000 45,000 60,000 90,000
--------------- -------------- -------------- --------------
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 1,385,873 1,314,260 2,716,281 2,572,630
Noninterest income
Service charges on deposit accounts 181,030 175,731 367,582 353,161
ATM Income 423,660 76,420 745,143 128,056
Other noninterest income 22,263 15,649 40,260 37,328
--------------- -------------- -------------- --------------
626,953 267,800 1,152,985 518,545
Noninterest expense
Salaries and employee benefits 631,706 676,721 1,296,985 1,337,295
Occupancy 335,653 319,377 701,805 622,495
Professional services 75,000 71,000 150,000 130,000
Other noninterest expense 479,348 280,309 843,086 532,882
--------------- -------------- -------------- --------------
1,521,707 1,347,407 2,991,876 2,622,672
--------------- -------------- -------------- --------------
INCOME BEFORE FEDERAL INCOME TAX 491,119 234,653 877,390 468,503
Federal income tax expense 179,920 0 315,280 0
--------------- -------------- -------------- --------------
NET INCOME 311,199 234,653 562,110 468,503
Preferred stock dividend requirement 0 0 17,100 17,100
--------------- -------------- -------------- --------------
INCOME ATTRIBUTABLE TO COMMON STOCK $ 311,199 $ 234,653 $ 545,010 $ 451,403
=============== ============== ============== ==============
Basic earnings per common share $ 55.44 $ 41.81 $ 97.10 $ 80.42
========= ======== ========= ==========
Diluted earnings per common share $ 55.31 $ 41.66 $ 96.75 $ 80.14
========= ======== ========= ==========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
3.
<PAGE> 6
FIRST INDEPENDENCE CORPORATION AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
<TABLE>
<CAPTION>
------Three months ended-------- ----Six months ended-------
June 30, June 30, June 30, June 30,
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net income $ 311,199 $ 234,653 $ 562,110 $ 468,503
Other comprehensive income, net of tax:
Change in unrealized gains (losses)
on securities (91,816) (411,599) (178,525) (811,054)
------------ ------------ ------------ ------------
Comprehensive income $ 219,383 $ (176,946) $ 383,585 $ (342,551)
============ ============ ============ ============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
4.
<PAGE> 7
FIRST INDEPENDENCE CORPORATION AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
June 30, 2000 June 30, 1999
------------- -------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 562,110 $ 468,503
Adjustments to reconcile net income
to net cash from operating activities:
Depreciation 405,770 289,657
Amortization of premiums and discounts on
securities, net 2,159 48,476
Provision for loan losses 60,000 90,000
Gain on sale of securities (9,079)
Net change in:
Accrued interest receivable and other assets 863,890 (436,506)
Accrued interest payable and other liabilities (38,050) 63,428
--------------- ----------------
Net cash from operating activities 1,846,800 523,558
CASH FLOWS FROM INVESTING ACTIVITIES
Net change in loans (974,820) (2,111,666)
Securities available for sale:
Proceeds from maturities and principal paydowns 6,973,922 6,017,706
Purchases (11,958,750) (9,288,575)
Securities held to maturity:
Proceeds from maturities 1,000,000 0
Premises and equipment expenditures, net (670,586) (609,649)
--------------- ----------------
Net cash from investing activities (5,630,234) (5,992,184)
CASH FLOWS FROM FINANCING ACTIVITIES
Net change in deposits (18,374,546) (7,028,770)
Net change in short-term borrowings 89,890 2,452,492
Interest paid on senior notes (13,500)
Dividends paid on preferred stock (17,100) (17,100)
--------------- ----------------
Net cash from financing activities (18,301,756) (4,606,878)
--------------- ----------------
Net change in cash and cash equivalents (22,085,190) (10,075,504)
Cash and cash equivalents at beginning of period 57,747,521 27,970,361
--------------- ----------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 35,662,331 $ 17,894,857
=============== ================
Supplemental disclosures of cash flow information
Cash paid during the period for
Interest 1,828,529 1,447,386
Income Taxes 316,000 0
</TABLE>
See accompanying notes to condensed consolidated financial statements.
5.
<PAGE> 8
FIRST INDEPENDENCE CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. BASIS OF PRESENTATION:
The unaudited condensed consolidated financial statements include the
consolidated results of operations of First Independence Corporation ("the
Corporation") and its wholly-owned subsidiary, First Independence National
Bank of Detroit ("the Bank"). These consolidated financial statements have
been prepared in accordance with the Instructions for Form 10-QSB and Item
310(b) of Regulation S-B and do not include all disclosures required by
generally accepted accounting principles for a complete presentation of the
Corporation's financial condition and results of operations. In the opinion
of management, the information reflects all adjustments (consisting only of
normal recurring accruals) which are necessary in order to make the
financial statements not misleading and for a fair presentation of the
results that may be achieved of operations for such periods. The results
for the period ended June 30, 2000 should not be considered as indicative
of results that may be achieved for a full year. For further information,
refer to the consolidated financial statements and footnotes included in
the Corporation's Annual Report on Form 10-KSB for the year ended December
31, 1999.
2. EARNINGS PER COMMON SHARE
A reconciliation of the numerators and denominators of basic and diluted
earnings per common share for the quarters ended June 30 are as follows:
<TABLE>
<CAPTION>
---Three months ended-------- ------Six months ended-------
June 30, June 30, June 30, June 30,
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Basic earnings per common share
Income attributable to common
shareholders $ 311,199 $ 234,653 $ 545,010 $ 451,403
------------ ------------ ------------ ------------
Weighted average common shares
outstanding 5,613 5,613 5,613 5,613
------------ ------------ ------------ ------------
Basic earnings per common share $ 55.44 $ 41.81 $ 97.10 $ 80.42
============ ============ ============ ============
Diluted earnings per common share
Income attributable to common
shareholders $ 311,199 $ 234,653 $ 545,010 $ 451,403
------------ ------------ ------------ ------------
Weighted average common shares
outstanding 5,613 5,613 5,613 5,613
Add: dilutive effects of assumed
exercise of stock options 13 20 20 20
------------ ------------ ------------ ------------
Weighted average common and
dilutive potential common shares
outstanding 5,626 5,633 5,633 5,633
------------ ------------ ------------ ------------
Diluted earnings per common share $ 55.31 $ 41.66 $ 96.75 $ 80.14
============ ============ ============ ============
</TABLE>
(Continued)
6.
<PAGE> 9
FIRST INDEPENDENCE CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
2. EARNINGS PER COMMON SHARE (Continued)
All share and per share information have been adjusted for the 1 for 60
Reverse Stock Split, discussed below. Weighted average shares included in
the computation of earnings per common share include the fractional shares
anticipated to be paid in cash subsequent to the filing of this Form
10-QSB.
3. INCOME TAXES
Prior to the fourth quarter of 1999, a valuation allowance was considered
necessary to eliminate the Corporation's deferred tax asset as a result of
historical net operating losses. As a result, no income tax expense was
considered necessary for the first or second quarters of 1999. During the
fourth quarter of 1999, due to a trend of positive net income and
management's belief that such trend will continue, management reversed the
valuation allowance that was previously recorded for deferred tax assets
and recorded tax expense for taxable income during the quarter. The first
and second quarters of 2000 include federal income tax expense of $135,360
and $179,920, respectively, based upon the Corporation's effective tax rate
expected to be applicable for the entire year.
4. SUBSEQUENT EVENT - REVERSE STOCK SPLIT
The Board of Directors, shareholders and the Corporation's regulators
approved a Reverse Stock Split subsequent to June 30, 2000 whereby one
common share will be issued for every 60 shares held, with resulting
fractional shares to be paid in cash. The Reverse Stock Split will be
executed subsequent to the filing of this Form 10-QSB. The effect of the
transaction will reduce the number of shareholders below 300 and will allow
the Corporation to de-register as a public registrant such that periodic
filings will no longer be made with the Securities and Exchange Commission.
The number of fractional shares to be paid in cash as a result of the
Reverse Stock Split is contingent upon shares held as of the record date,
which is a date subsequent to this filing. However, it is estimated that
shareholders' equity will be reduced by an amount within the range of
approximately $300,000 to $400,000 for the payment of fractional shares.
All share and per share information have been adjusted for the Reverse
Stock Split.
7.
<PAGE> 10
Item 2. Management's Discussion and Analysis and Results of Operation
This Management's Discussion and Analysis should be read in conjunction with the
condensed consolidated financial statements contained herein. This discussion
provides information about the consolidated financial condition and results of
operations of First Independence Corporation ("Corporation") and its
wholly-owned subsidiary, First Independence National Bank of Detroit ("Bank").
FORWARD-LOOKING STATEMENTS
The following discussion contains forward-looking statements that are based on
management's beliefs, assumptions, current expectations, estimates and
projections about the financial services industry, the economy, and about the
Corporation and Bank. Words such as "anticipates," "believes," "estimates,"
"expects," "forecasts," "intends," "is likely," "plans," "projects," variations
of such words and similar expressions are intended to identify such
forward-looking statements. These statements are not guarantees of future
performance and involve certain risks, uncertainties and assumptions ("Future
Factors") that are difficult to predict with regard to timing, extent,
likelihood and degree of occurrence. Therefore, actual results and outcomes may
materially differ from what may be expressed or forecasted in such
forward-looking statements. The Corporation undertakes no obligation to update,
amend, or clarify forward-looking statements, whether as a result of new
information, future events (whether anticipated or unanticipated), or otherwise.
Future Factors include, but are not limited to, changes in interest rates and
interest rate relationships; demand for products and services; the degree of
competition by traditional and non-traditional competitors; changes in banking
regulation; changes in tax laws; changes in prices, levies, and assessments; the
impact of technological advances; governmental and regulatory policy changes;
changes in competition and competitive factors; the outcomes of contingencies;
trends in customer behavior as well as their ability to repay loans; and changes
in the national and local economy. These are representative of the Future
Factors that could cause a difference between an ultimate actual outcome and a
preceding forward-looking statement.
8.
(Continued)
<PAGE> 11
Item 2. Management's Discussion and Analysis and Results of Operation
FINANCIAL CONDITION
Federal Funds Sold: Federal funds sold, consisting of excess funds sold
overnight to correspondent banks, are used to manage daily liquidity needs and
interest rate sensitivity. Federal funds sold decreased $24,100,000 from
December 31, 1999 to $24,700,000 at June 30, 2000.
The primary decrease relates to the withdrawal of large year-end deposits
received from large corporations or government agencies. At December 31, 1999,
one customer had approximately $20.0 million in excess funds deposited with the
Bank which were subsequently withdrawn. In addition, additional funds previously
held have been reinvested into higher earning securities.
Securities: The Corporation had $53,294,186 of securities at June 30, 2000,
compared to $49,572,930 at December 31, 1999. The increase in securities is the
result of management's strategy to invest excess funds into higher earning
assets. Management continues to hold primarily U.S. Treasury and U.S. Government
and federal agency securities to ensure credit risk is minimized.
Loans: The following table sets forth the composition of the Bank's loan
portfolio (in thousands) at June 30, 2000:
<TABLE>
<S> <C> <C>
Commercial $ 10,915 24%
Commercial real estate 13,891 30
Residential real estate 16,467 36
Consumer 4,405 10
---------------- ------
$ 45,678 100%
================ ======
</TABLE>
Total loans decreased by approximately $2.8 million from December 31, 1999. The
majority of the decrease relates to approximately $3.9 million of loans
originated in 1999 by the Bank and participated with other financial
institutions. Due to control provisions included in the loan participation
agreements with such institutions, these loans were treated as a financing
arrangement and reported as loans, with a corresponding secured borrowing due to
the participating financial institutions, as of December 31, 1999. These
agreements were amended subsequent to December 31, 1999 and are currently
reported as net loan sales at June 30, 2000. Not considering these loans, the
loan portfolio increased approximately $1.1 million from December 31, 1999 to
June 30, 2000.
At June 30, 2000, the Bank had $1,206,000 of loans that were considered
nonperforming. Nonperforming loans include non-accrual loans, loans with
principal or interest past due 90 days or more, and other impaired loans.
Non-accrual loans are those loans on which the Bank does not accrue interest
income. Loans are placed on non-accrual status when principal or interest is in
default for a period of 90 days or more unless the loan is in the process of
collection and is well secured so that delinquent principal and interest would
be expected to be satisfied from the collateral. At June 30, 2000, total
nonperforming loans amounted to 2.64% of aggregate loans at June 30, 2000,
compared to 1.57% at December 31, 1999.
(Continued)
9.
<PAGE> 12
Item 2. Management's Discussion and Analysis and Results of Operation
At June 30, 2000, there were no significant loans other than those identified
above, for which information was known that would cause management to have
serious doubts as to the ability of borrowers to comply with loan repayment
terms.
The allowance for loan losses totaled $1,073,739 at June 30, 2000, compared to
December 31, 1999 of $905,873. The allowance for loan losses represented 2.35%
of total loans at June 30, 2000 compared with 1.87% at December 31, 1999. The
allowance for loan losses was 89% of nonperforming loans at June 30, 2000 as
compared to 119% of nonperforming loans at December 31, 1999. The total amount
of the allowance for loan losses is based on management's evaluation of the
portfolio, past experience, economic conditions, composition of the portfolio,
collateral location and values, cash flow positions of the borrowers,
delinquencies and other factors deemed relevant. The allowance for loan losses,
in management's opinion, is adequate taking all such considerations into
account.
The Corporation recorded net recoveries of $107,866 for the first six months of
2000 compared to net charge-offs of $234,993 for the same period in the prior
year. The decrease in net charge-offs is part of the Bank's continuing efforts
to address problem loans in the loan portfolio and improve the quality of the
loan assets.
The following table summarizes activity in the allowance for loan losses during
the six months ended June 30, 2000 and 1999.
<TABLE>
<CAPTION>
2000 1999
---- ----
<S> <C> <C>
Average loans outstanding during the period $ 44,878,673 $ 40,495,586
============== ===============
Allowance for loan losses
Beginning balance $ 905,873 $ 1,174,888
Provision for loan losses 60,000 90,000
Charge-offs (111,169) (258,000)
Recoveries 219,035 23,007
-------------- ---------------
Balance at end of period $ 1,073,739 $ 1,029,895
============== ===============
Provision for loan loss as a percentage of average loans .13% .22%
Net loans charged off (recovered) as a percent of average loans (.24%) .58%
Total loans charged off as a percent of average loans .25% .64%
</TABLE>
The table below presents management's allocation of the allowance for loan
losses by loan portfolio at June 30, 2000 (in thousands).
<TABLE>
<CAPTION>
Allowance Percent
--------- -------
<S> <C> <C>
Commercial/commercial real estate $ 452 42%
Real estate mortgage 135 13
Consumer 167 15
Unallocated 320 30
-------------- ------
$ 1,074 100%
============== ======
</TABLE>
(Continued)
10.
<PAGE> 13
Item 2. Management's Discussion and Analysis and Results of Operation
Deposits: The Corporation's major source of funds is from deposits. Total
deposits decreased from $117.6 million at December 31, 1999 to $99.3 million at
June 30, 2000, primarily in the interest-earning deposit category. The decrease
was largely the result of withdrawals of large deposits made by large
corporations or local government municipalities at the end of the year.
Generally such year end deposits relate to the collection of tax revenues
collected and not ready to be used at year end.
Shareholders' Equity and Capital Resources: The following table presents the
components of Tier 1 Capital and Total Capital for the Bank as of June 30, 2000
and December 31, 1999. Both Tier 1 and Total Capital exceed regulatory minimum
requirements of 4% and 8%, respectively. The Tier 1 Leverage Ratio, also
presented below, exceeds the regulatory minimum of 3%.
<TABLE>
<CAPTION>
June 30, December 31,
2000 1999
---- ----
<S> <C> <C>
Risk-Based Capital Ratios:
Tier 1 Capital Ratio 12.02% 10.08%
Total Capital Ratio 13.28% 11.33%
Tier 1 Leverage Ratio 5.68% 5.32%
</TABLE>
Liquidity: The Corporation's liquidity strategy is to fund loan and security
growth with deposits and repurchase agreements and to maintain an adequate level
of short- and medium-term investments to meet typical daily loan and deposit
activity. The Corporation also has the ability to borrow money on a daily basis
through correspondent banks (Federal funds purchased). In addition, securities
are primarily maintained in the available for sale category and provide a
secondary source of liquidity.
At June 30, 2000, Federal funds sold were $24.7 million, or 25% of total
deposits. Management believes the Corporation has adequate liquidity.
RESULTS OF OPERATIONS
Net income attributable to common stock for the second quarter of 2000 was
$311,199, or $55.31 per diluted common share, compared to $234,653 or $41.66 per
diluted common share for the second quarter of 1999. The increase in net income
for the second quarter 2000, as compared to 1999, was primarily the result of
increases in noninterest income, partially offset by an increase in noninterest
expense and federal income tax expense.
Net income attributable to common stock for the six months ended June 30, 2000
was $545,010, or $96.75 per diluted common share, compared to $451,403 or $80.14
per diluted common share for the same period in 1999. The increase in net income
was a combination of increases in net interest income and noninterest income,
offset by an increase in noninterest expense and federal income tax expense.
(Continued)
11.
<PAGE> 14
Item 2. Management's Discussion and Analysis and Results of Operation
Net Interest Income: Net interest income for the second quarter of 2000 was
$1,415,873, an increase of $56,613 from the second quarter of 1999 balance of
$1,359,260. Net interest income for the six months ended June 30, 2000 was
$2,776,281, an increase of $113,651 over the same period in 1999. The increase
for both the second quarter and the first six months of 2000 over the same
periods in 1999 was primarily attributable to a larger increase of average
earning assets in comparison to average earning liabilities. This increase was
offset by a reduction in net interest margin due to the cost of funds of
interest-bearing liabilities increasing by more than the yield on
interest-earning assets.
Provision for Loan Losses: The provision for loan losses in the second quarter
of 2000 was $30,000, a decrease of $15,000 from the second quarter of 1999. The
provision for loan losses for the six months ended June 30, 2000 was $60,000, a
decrease of $30,000 from six months ended June 30, 1999. The allowance for loan
losses as a percentage of total loans outstanding as of June 30, 2000 was 2.35%,
compared to 2.49% at June 30, 1999. The Bank maintains the allowance for loan
losses at a level management feels is adequate to absorb losses inherent in the
loan portfolio. The evaluation is based upon a continuous review of the Bank's
historical loan loss experience, known and inherent risks contained in the loan
portfolio, composition and growth of the loan portfolio, current and projected
economic conditions and other factors. The decrease in the needs of additional
provisions for loan losses is a result of management's continued efforts on
improving the quality of the loan portfolio.
Noninterest Income: Noninterest income for the second quarter of 2000 amounted
to $626,953, an increase of $359,153, or 134.11%, from the second quarter of
1999. Noninterest income for the six months ended June 30, 2000 increased
$634,440 to $1,152,985 over the same period in 1999. The increase for both
periods was primarily the result of an increase in ATM surcharge income. The
Bank continues to add additional ATMs, primarily within the casinos in Detroit,
and anticipates that such income will continue to be a large component of
noninterest income in the future.
Noninterest Expense: Noninterest expense for the second quarter of 2000 amounted
to $1,521,707, an increase of $174,300, or 12.94%, from the second quarter of
1999. Noninterest expenses for the six months ended June 30, 2000 increased
$369,204 to $2,991,876 over the same period in 1999. The primary cause of the
increase for both periods related to expenses for the maintenance of ATMs,
increasing $117,840 in the second quarter of 2000 as compared to the second
quarter in 1999, and $266,506 for the six months ended June 30, 2000 as
compared to the same period in 1999. Such increases are the result of the
maintenance and depreciation of the additional ATMs purchased primarily to
service the casinos in Detroit.
INCOME TAX EXPENSE: Prior to the fourth quarter of 1999, as a result of
historical net operating losses, a valuation allowance was considered necessary
to eliminate the Corporation's deferred tax asset. Thus, no income tax expense
was considered necessary for the first or second quarters of 1999. Due to a
trend of positive net income and management's belief that such trend will
continue, management reversed the valuation allowance in the fourth quarter of
1999 and recorded tax expense during the quarter. As a result of taxable income
during 2000, income tax expense was recorded in the amount of $179,920 for the
second quarter of 2000 and $315,280 for the six months ended June 30, 2000.
12.
<PAGE> 15
FIRST INDEPENDENCE CORPORATION
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
There are no matters required to be reported under this item.
ITEM 2. CHANGES IN SECURITIES.
There are no matters required to be reported under this item.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
There are no matters required to be reported under this item.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
On August 10, 2000, an annual meeting of shareholders of First Independence
Corporation was held with respect to matters described in the Proxy Statement
dated July 10, 2000. There was no solicitation of opposition votes. At the
meeting, each of the following persons were elected as directors with 263,893
votes or more out of a total of 264,961 present at the meeting.
Rev. Wendell Anthony Barry Clay
Don Davis William Fuller
Georgis I. Garmo Joseph Scott
Dr. Charles E. Morton Jamal Shallal
Geneva J. Williams Alan C. Young
At the meeting, the shareholders also approved a proposal to amend the
Corporation's Articles of Incorporation to effect a one for 60 reverse stock
split with respect to the Corporation's Common Stock, $1.00 par value per share.
The reverse stock split is described in detail in the Corporation's July 10,
2000 Proxy Statement. The vote on the reverse stock split was 262,037 for the
proposal, 1,391 against the proposal and 1,175 abstaining, which represent the
broker non-votes.
ITEM 5. OTHER INFORMATION.
There are no matters required to be reported under this item.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
(1) Exhibit 27 - Financial Data Schedule
13.
<PAGE> 16
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
FIRST INDEPENDENCE CORPORATION
Registrant
Date: August 14, 2000 /s/ William Fuller
---------------------------- ----------------------------------------
William Fuller, President
Date: August 14, 2000 /s/ Rose Ann Lacy
---------------------------- ----------------------------------------
Rose Ann Lacy, Chief Financial Officer
14.
<PAGE> 17
Exhibit Index
-------------
<TABLE>
<CAPTION>
Exhibit No. Description
----------- -----------
<S> <C>
27 Financial Data Schedule
</TABLE>
