SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
FORM 10-Q
/X/ Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the quarterly period ended June 30, 1994, or
Transition Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the transition period from _______ to ___________
________________________
Commission File Number 0-12216
________________________
OLD KENT FINANCIAL CORPORATION
(Exact name of registrant as specified in its charter)
Michigan 38-1986608
(State of Incorporation) (I.R.S. Employer
Identification Number)
One Vandenberg Center
Grand Rapids, Michigan 49503
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code(616) 771-5000
Indicate by check mark whether the Registrant (1) has filed all
reports required to be filed by Section 13 or 15 (d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter periods that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes /X/ No / /
The number of shares outstanding of the registrant's Common
stock, without par value, as of July 31, was 40,599,465 shares.
<PAGE>
INDEX
OLD KENT FINANCIAL CORPORATION
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited)
Consolidated Balance Sheets as of June 30,1994
and December 31, 1993
Consolidated Statements of Income for the quarters
and six months ended June 30, 1994 and 1993
Consolidated Statements of Cash Flows for the
six months ended June 30, 1994 and 1993
Notes to consolidated financial statements
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
SIGNATURES
<PAGE>
OLD KENT FINANCIAL CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets (Unaudited)____________________________________
June 30, December 31,
(dollars in thousands) 1994 1993
ASSETS:
Cash and due from banks....................... $401,913 $371,789
Federal funds sold and resale agreements...... 260,075 93,200
-------- --------
Total cash and cash equivalents............... 661,988 464,989
Interest-earning deposits..................... 41,805 32,596
Trading account securities.................... 7,507 38,558
Mortgages held-for-sale....................... 192,411 474,898
Securities available-for-sale:
Collateralized mortgage obligations and
other mortgage-backed securities....... 250,498 394,251
Other securities........................... 930,502 988,373
---------- ----------
Total securities available-for-sale
(amortized cost of $1,196,845, in 1994,
and market value of $1433,744 in 1993).... 1,181,000 1,382,624
Securities held-to-maturity:
Collateralized mortgage obligations and
other mortgage-backed securities....... 1,125,355 990,759
Other securities........................... 1,016,335 1,193,949
---------- ----------
Total securities held-to-maturity
(market values of $2,119,071 and
$2,240,798, respectively)................. 2,141,690 2,184,708
Loans......................................... 5,836,788 5,016,686
Allowance for credit losses................... (158,580) (140,725)
---------- ----------
Net loans..................................... 5,678,208 4,875,961
---------- ----------
Premises and equipment........................ 154,254 133,888
---------- ----------
Other assets.................................. 346,066 267,482
Total Assets.................................. $10,404,929 $9,855,704
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY:
Liabilities:
Deposits:
Non-interest bearing....................... $1,261,777 $1,144,700
Interest-bearing........................... 6,997,146 6,478,800
Foreign deposits -- interest-bearing....... 149,770 347,652
---------- ----------
Total deposits........................... 8,408,693 7,971,152
Short-term borrowed funds..................... 1,024,085 958,295
Other liabilities............................. 123,971 112,275
Long-term debt................................ 1,172 1,215
---------- ----------
Total Liabilities............................. 9,557,921 9,042,937
---------- ----------
Shareholders' Equity:
Preferred stock: 25,000,000 shares authorized. -- --
Common stock, $1 par value: 150,000,000
share authorized; 40,611,843 and 40,538,910
shares issued and outstanding............... 40,612 40,539
Capital surplus............................... 120,973 120,109
Retained earnings............................. 695,709 652,119
Valuation adjustment of securities
available-for-sale.......................... (10,286) --
---------- ----------
Total Shareholders' Equity.................... 847,008 812,767
---------- ----------
Total Liabilities and Shareholders' Equity. $10,404,929 $9,855,704
========== ==========
<PAGE>
<TABLE>
Consolidated Statements of Income (Unaudited)_________________________________________________________
<CAPTION>
For the Three Months For the Six Months
Ended June 30, Ended June 30,
(in thousands, except per share data) 1994 1993 1994 1993
<S> <C> <C> <C> <C>
Interest Income:
Interest and fees on loans.............................$113,003 $102,350 $212,033 $202,348
Interest on mortgages held-for-sale.................... 3,861 3,862 8,806 7,064
Interest on securities available-for-sale.............. 20,723 19,926 43,213 39,851
Interest on investment securities:
Taxable.............................................. 33,854 37,433 67,173 73,364
Tax-exempt........................................... 2,753 2,595 5,522 5,405
Interest on deposits................................... 361 961 540 2,101
Interest on federal funds sold and resale agreements... 758 399 1,320 570
Interest on trading account securities................. 248 411 717 892
-------- -------- -------- --------
Total interest income.................................. 175,561 167,937 339,324 331,595
-------- -------- -------- --------
Interest Expense:
Interest on domestic deposits.......................... 55,630 57,348 107,871 114,824
Interest on foreign deposits........................... 2,628 1,498 5,586 3,269
Interest on short-term borrowed funds.................. 8,799 4,937 15,839 9,421
Interest on long-term debt............................. 32 35 57 196
-------- -------- -------- --------
Total interest expense................................. 67,089 63,818 129,353 127,710
-------- -------- -------- --------
Net Interest Income...................................... 108,472 104,119 209,971 203,885
Provision for credit losses.............................. 6,271 10,399 10,785 19,848
-------- -------- -------- --------
Net interest income after provision
for loan losses...................................... 102,201 93,720 199,186 184,037
-------- -------- -------- --------
Other Income:
Trust income........................................... 10,732 9,647 21,044 19,595
Service charges on deposit accounts.................... 8,502 7,543 15,936 14,530
Securities transactions................................ 1,200 (107) 626 (6)
Mortgage banking gains................................. 4,190 6,979 5,652 10,940
Mortgage loan servicing revenue........................ 3,308 2,507 6,005 4,861
Nonrecurring and other real-estate owned income........ 1,481 4 1,601 2,652
Other.................................................. 11,982 9,666 24,265 19,235
-------- -------- -------- --------
Total other income..................................... 41,395 36,239 75,129 71,807
-------- -------- -------- --------
Other Expenses:
Salaries and employee benefits......................... 41,421 36,077 79,425 72,135
Occupancy expense...................................... 6,528 5,481 12,734 11,038
Equipment expense...................................... 5,321 4,336 10,369 8,963
FDIC Insurance......................................... 4,465 4,079 8,738 8,162
Nonrecurring charges................................... -- -- -- 1,525
Other expenses......................................... 32,577 30,231 62,170 56,900
-------- -------- -------- --------
Total other expenses................................... 90,312 80,204 173,436 158,723
-------- -------- -------- --------
Income Before Income Taxes............................... 53,284 49,755 100,879 97,121
Income taxes........................................... 17,802 16,334 33,688 33,596
-------- -------- -------- --------
Net Income............................................... $35,482 $33,421 $67,191 $63,525
======== ======== ======== ========
Per Common Share:
Net income............................................. $0.87 $0.82 $1.66 $1.56
Dividends paid......................................... $0.29 $0.26 $0.58 $0.52
Number of Common Shares Used to Calculate
Net Income Per Share (thousands)....................... 40,776 40,738 40,441 40,735
See accompanying notes to consolidated financial statements
</TABLE>
<PAGE>
<TABLE>
OLD KENT FINANCIAL CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows (Unaudited)___________________________________________________
<CAPTION>
1994 1993
<S> <C> <C>
Six months ended June 30 (in thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income..........................................................$ 67,191 $ 63,525
Adjustments to reconcile net income
to net cash provided by operating activities:
Provision for credit losses................................. 10,785 19,848
Depreciation, amortization and accretion.................... 17,275 10,685
Deferred income taxes....................................... 0 0
Net gains on sales of assets................................ (2,767) (11,855)
Net decrease in trading account securities.................. 31,657 48,140
Originations and acquisitions of mortgages held-for-sale.... (1,011,639) (857,095)
Sales and prepayments of mortgages held-for-sale............ 1,346,088 719,751
Net increase in other assets................................ (17,241) (10,291)
Net decrease in other liabilities........................... (47,542) (8,276)
Net cash provided by (used for) operating activities................ 393,807 (25,568)
CASH FLOWS FROM INVESTING ACTIVITIES:
Maturities and prepayments of securities available-for-sale......... 59,952 58,636
Proceeds from sales of securities available-for-sale................ 1,213,641 127,577
Purchases of securities available-for-sale.......................... (1,019,285) (173,284)
Maturities and prepayments of securities held-to-maturity........... 384,197 445,587
Proceeds from sales of securities held-to-maturity.................. 0 0
Purchases of securities held-to-maturity............................ (316,488) (684,094)
Net increase in interest-earning deposits........................... (6,582) (18,839)
Net (increase) decrease in loans.................................... (461,879) 69,911
Purchases of leasehold improvements, premises and equipment, net.... (14,576) (12,132)
Acquisition of subsidiaries (net of cash acquired).................. 23,763 (7,522)
Net cash used for investing activities.............................. (137,257) (194,160)
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase in time deposits........................................... 316,138 218,890
Decrease in demand and savings deposits............................. (346,361) (48,098)
Increase in short-term borrowed funds............................... 55,930 118,381
Payments of long-term debt obligations.............................. (43) (14,943)
Repurchases of common stock......................................... (64,177) -
Proceeds from common stock issuances................................ 2,563 588
Dividends paid to shareholders...................................... (23,601) (21,064)
Net cash provided by (used for) financing activities................ (59,551) 253,754
Net increase in cash and cash equivalents........................... 196,999 34,026
Cash and cash equivalents at beginning of year...................... 464,989 429,378
Cash and cash equivalents at end of period..........................$ 661,988 $ 463,404
Supplemental disclosures of cash flow information:
Interest paid on deposits, short-term borrowings and
long-term debt..................................................$ 127,962 $ 127,534
Federal income taxes paid......................................... 36,872 41,355
Significant non-cash transaction:
Stock issued to acquire subsidiary................................$ 62,551 -
See accompanying notes to consolidated financial statements
</TABLE>
<PAGE>OLD KENT FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
June 30, 1994
NOTE A: BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements
have been prepared in accordance with generally accepted
accounting principles for interim financial information and
with the instructions to Form 10-Q and Rule 10-01 of
Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted
accounting principles for complete financial statements. In
the opinion of management, all adjustments (consisting of
normal recurring accruals) considered necessary for a fair
presentation have been included. Operating results for the
three and six months ended June 30, 1994 are not necessarily
indicative of the results that may be expected for the year
ended December 31, 1994. For further information, refer to the
consolidated financial statements and footnotes thereto
included in the Corporation's annual report on Form 10-K for
the year ended December 31, 1993.
NOTE B: LOANS AND NONPERFORMING ASSETS
The following summarizes loans and nonperforming assets at the
dates indicated (in thousands of dollars):
June 30, December 31,
Loans: 1994 1993
Commercial.............................. $1,498,646 $1,351,693
Real estate - Commercial............... 1,209,500 1,167,979
Real estate - Construction............. 144,042 136,565
Real estate - Residential mortgages.... 904,933 754,544
Real estate - Consumer home equity .... 488,121 426,382
Consumer................................ 1,445,897 1,062,019
Credit card loans....................... 69,164 62,396
Lease financing......................... 76,485 55,108
Total Loans............................. $5,836,788 $5,016,686
Nonperforming assets:
Nonaccrual loans........................ $47,955 $53,330
Restructured loans...................... 6,054 5,426
Other real estate owned................. 11,297 9,480
Total nonperforming assets.............. $65,306 $68,236
NOTE C: ALLOWANCE FOR CREDIT LOSSES
The following summarizes the changes in the allowance for credit losses
(in thousands of dollars):
For the six months
ended June 30,
Allowance for Credit Losses 1994 1993
Balance at January 1,........................... $140,725 $120,790
Allowance of acquired entities................... 9,237 2,105
Provision for credit losses...................... 10,785 19,848
Gross loans charged-off.......................... (9,230) (14,649)
Gross recoveries of loans previously charged-off. 7,063 4,163
Balance at June 30,.............................. $158,580 $132,257
<PAGE>
OLD KENT FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- Continued (Unaudited)
June 30, 1994
<TABLE>
NOTE D: SECURITIES AVAILABLE-FOR-SALE
Note H to the consolidated financial statements contains further
information regarding accounting for certain investments in debt and
equity securities. The following summarizes amortized costs and
estimated market values of securities available-for-sale at the dates
indicated (in thousands of dollars):
<CAPTION>
Carrying
Gross Gross Value
Amortized Unrealized Unrealized at Market
Cost Gains Losses Value
<S> <C> <C> <C> <C>
June 30, 1994:
U.S. Treasury and federal agencies...... $920,630 $10,525 $14,797 $916,358
Collateralized mortgage obligations and
other mortgage-backed securities...... 263,640 162 13,304 250,498
Equity securities....................... 12,575 1,569 0 14,144
Total securities available-for-sale..... $1,196,845 $12,256 $28,101 $1,181,000
Carrying
Value at Gross Gross
Amortized Unrealized Unrealized Market
December 31, 1993: Cost Gains Losses Value
U.S. Treasury and federal agencies...... $976,097 $50,615 $958 $1,025,754
Collateralized mortgage obligations and
other mortgage-backed securities...... 394,251 1,765 4,642 391,374
Equity securities....................... 12,276 4,340 0 16,616
Total securities available-for-sale..... $1,382,624 $56,720 $5,600 $1,433,744
</TABLE>
<TABLE>
NOTE E: SECURITIES HELD-TO-MATURITY
The following summarizes amortized costs and estimated market values of
securities held-to-maturity at the dates indicated (in thousands of dollars):
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
<S> <C> <C> <C> <C>
June 30, 1994:
U.S. Treasury and federal agencies...... $817,923 $14,250 $2,542 $829,631
Collateralized mortgage obligations and
other mortgage-backed securities...... 1,125,355 4,210 42,459 1,087,106
State and political subdivision
securities............................ 198,389 5,714 1,819 202,284
Other securities........................ 23 28 1 50
Total securities held-to-maturity....... $2,141,690 $24,202 $46,821 $2,119,071
December 31, 1993:
U.S. Treasury and federal agencies...... $986,151 $40,103 $1,059 $1,025,195
Collateralized mortgage obligations and
other mortgage-backed securities...... 990,759 16,894 8,441 999,212
State and political subdivision
securities............................ 204,685 9,019 896 212,808
Other securities........................ 3,113 471 1 3,583
Total securities held-to-maturity....... $2,184,708 $66,487 $10,397 $2,240,798
</TABLE>
<PAGE>
OLD KENT FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- Continued (Unaudited)
June 30, 1994
NOTE F: ACQUISITIONS
Effective March 1, 1994, Old Kent purchased Princeton Financial
Corp. (Princeton) in a cash transaction. Princeton is an Orlando,
Florida based mortgage company with thirteen offices. If this
purchase had been in effect as of January 1, 1993, there would have
been no material effect on the consolidated results of operation or
financial condition. At the date of acquisition, Princeton had
assets of approximately $70 million and serviced approximately $360
million of residential mortgages for third party investors.
Effective May 2, 1994, Old Kent acquired EdgeMark Financial
Corporation (EdgeMark) with assets of $522 million. Old Kent
exchanged 1,917,566 shares of its common stock for all of the
outstanding EdgeMark common stock. The aggregate value of Old Kent
common stock issued was $62.6 million. The acquisition of EdgeMark
was accounted for as a purchase. If this purchase and related
stock repurchase (Note G) had been effective as of January 1, 1993,
there would have been no material effect on Old Kent's results of
operation or financial condition.
NOTE G: CAPITAL STOCK
During the six months ended June 30, 1994, Old Kent repurchased
almost two million shares of its common stock on the open market
for an aggregate price of $64 million. The shares are similar in
number to those issued for the purchase of EdgeMark Financial
Corporation.
NOTE H: ACCOUNTING POLICIES
Effective January 1, 1994, Old Kent adopted the provisions of
Statement of Financial Accounting Standards No. 115, "Accounting
for Certain Investments in Debt and Equity Securities". Adoption
of this statement had the effect of increasing the carrying value
of securities available- for-sale by approximately $15.8 million
and increasing total equity by approximately $10.3 million at June
30, 1994. Adoption of this statement had no effect on net income
or cash flows.
Effective January 1, 1994, Old Kent adopted the provisions of
Statement of Financial Accounting Standards No. 112, "Employer'
Accounting for Postemployment Benefits". Adoption of this
statement had no material impact on the consolidated financial
statements included in this report.
As reflected in the accompanying consolidated balances sheets,
certain residential mortgages, held by Old Kent with the positive
intent to be sold to third party investors, have been classified as
such in 1994. Financial statements dated prior to 1994 reflect
these assets as a component of total loans.
Prior year's amounts included in these financial statements have
been reclassified to conform with the 1994 presentation to place
them on a basis comparable with the current periods' financial
statements.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following is management's discussion and analysis of certain significant
factors which have affected the Registrant's financial condition and results
of operations during the periods included in the consolidated financial
statements included in this filing. The Registrant's form 10-Q for the
quarterly period ended March 31, 1994 is herein incorporated by reference.
RESULTS OF OPERATIONS
The Registrant's net income was $35,482,000 for the second quarter compared
to $33,421,000 for the same period in 1993. Second quarter earnings per share
was $.87, a 6.1% increase over last year's $.82. Year-to-date net income was
$67,191,000 compared to $63,525,000 a year ago and earnings per share was
$1.66, a 6.4% increase over last year's $1.56.
Total assets were $10.4 billion at quarter-end compared to 1993's second
quarter-end assets of $9.3 billion. Return on average equity for the second
quarter of 1994 was 16.88% and return on average assets was 1.40% (calculated
on a basis excluding the balance sheet effect of unrealized gains/losses on
securities available-for-sale). For the second quarter of 1993, return on
average equity was 17.67% and return on average assets was 1.45%.
The Registrant's net interest income for the second quarter of 1994 was
$108.5 million, a 4.2% increase over the $104.1 million recorded in the same
period of 1993. This increase primarily resulted from a 10.5% increase in
average interest earning assets, which was partially offset by a decrease of
27 basis points in the net interest margin. The net interest margin for the
second quarter of 1994 was 4.67% compared to 4.94% for the second quarter of
1993. In general, the decrease in the net interest margin is mainly due to an
extended period of low interest rates.
The provision for credit losses was $6.3 million in the second quarter of
1994 and $10.4 million in the second quarter of 1993. This decrease is
related to improved asset quality. The allowance for credit losses as a
percent of loans and leases outstanding was 2.72% at June 30, 1994 and 2.70%
at June 30, 1993. Nonperforming assets as a percent of total loans was 1.12%
at June 30, 1994 and 1.63% at June 30, 1993. Net credit losses were
$1,651,000 or .12% of average loans for the second quarter of 1994 compared
to $5,598,000 or .46% of average loans for the same period a year ago.
Total other operating income, excluding security transactions and
nonrecurring items, increased 6.5% to $38.7 million during the second quarter
of 1994 over the same period a year ago. Growth occurred despite a fall off
in mortgage banking gains, which decreased $2.8 million or 40.0% from a year
ago. The decrease in mortgage banking gains was largely influenced by
reduced refinancing demand coupled with the effect of a rising interest rate
environment during 1994. All other categories increased during the second
quarter as compared to the same period in 1993, including an 11.2% increase
in trust income, a 12.7% increase in service charges on deposits, a 32.0%
increase in mortgage servicing revenue and a 24.0% increase in other service
charges and fees. The latter increase was mainly due to a $1.3 million
increase in merchant discount revenue on credit card transactions resulting
from increased volume and improved pricing practices. Nonrecurring other
real estate owned income (primarily gains on sales of properties) was $1,481
thousand for the second quarter 1994 compared to $4 thousand a year ago.
The Registrant sold approximately $428.5 million of residential mortgage
loans during the quarter. The Registrant's residential third party mortgage
servicing portfolio increased 47% to $4.2 billion at June 30, 1994, from $2.8
billion at June 30, 1993. This increase includes the $360 million servicing
portfolio of Princeton Financial Corporation described in Note F to the
consolidated financial statements.
Total net securities gains for the second quarter of 1994 was $1,200,000
compared to net losses of $107,000 for the same period of 1993.
Total operating expenses, excluding nonrecurring charges, increased during
the second quarter 12.6% over the similar period of 1993. Salaries, wages
and employee benefits increased 14.8% over 1993. The number of full-time
equivalent employees increased 7.0% (or 335) to 5,130 at June 30, 1993.
Equipment and net occupancy expenses increased 20.7% over 1993, and other
operating expenses increased 7.8% over 1993. The increase in operating
expenses includes the effect of acquisitions, as the Registrant acquired
three Michigan banking sites in the latter part of 1993, Princeton Financial
Corp. in February and EdgeMark Financial Corporation in May of 1994. Also,
the Registrant's expansion of it's operations facilities in mid-1993
influenced other expenses and occupancy and equipment expense.
BALANCE SHEET CHANGES
Total loans increased 16.3% or $820 million from year-end 1993. This
increase includes approximately $370 million of loans acquired with EdgeMark
Financial Corporation. Excluding this purchase, since the beginning of the
year, commercial loans have grown at an annualized rate of 8.4% and consumer
loan outstandings have grown at an annualized rate of 33.4%. The primary
reason for the significant growth in consumer loans has been strong loan
demand, particularly for automobile financings. As a result of increased loan
demand, other interest-earning assets decreased 9.0% or $379 million. Total
interest-earning assets increased 4.9% or $454 million from year-end 1993.
Total deposits increased 5.5% or $438 million from year-end 1993. Non-
interest bearing deposits increased 10.2% or $117 million and interest-
bearing deposits increased by 4.7% or $320 million. Short-term borrowed
funds increased 6.9% or 66 million from year-end 1993.
LIQUIDITY AND CAPITAL RESOURCES
The maintenance of an adequate level of liquidity is necessary to ensure that
sufficient funds are available to meet customer's loan demand and deposit
withdrawals. The banking subsidiaries' liquidity sources consist of short-
term marketable securities, maturing loans and federal funds loaned.
Liquidity has also been obtained through liabilities such as customer-related
core deposits, funds borrowed, certificates of deposit and public funds
deposits.
At June 30, 1994, shareholders' equity was $847 million, compared to $769
million at June 30, 1993, an increase of $78 million, or 10.1%. Total equity
at June 30, 1994 includes an after-tax unrealized loss of $10.3 million on
securities available-for-sale (see note H to the consolidated financial
statements). Shareholders' equity as a percentage of total assets as of June
30, 1994 was 8.14%. The following table represents the Registrant's
regulatory capital position as of June 30, 1994.
Regulatory capital at June 30, 1994
(in millions) Tier 1 Total
Leverage Risk-Based Risk-Based
Ratio Capital Capital
Actual capital $744.5 $751.0 $837.0
Required regulatory minimum capital 308.9 272.1 544.3
Capital in excess of requirements $435.6 $478.9 $292.7
Actual ratio 7.23% 11.04% 12.30%
Regulatory Minimum Ratio 3.00% 4.00% 8.00%
Ratio considered "well capitalized"
by regulatory agencies 5.00% 6.00% 10.00%
During the first six months of 1994, the Registrant repurchased approximately
two million shares of it's common stock for an aggregate price of $64.0
million. As described in note G to the consolidated financial statements,
these repurchases were directly related to the Registrant's purchase of
EdgeMark Financial Corporation (note F to the consolidated financial
statements). These repurchases had the effect of decreasing book value per
common share as shown in the table below.
Book value per common share, December 31, 1993 $20.05
Net income per common share for the six months
ended June 30, 1994 (including $.02 estimated
beneficial effect of common stock repurchased
during the period) 1.66
Dividends per common share (.58)
Effect of common stock repurchases during the
first six months of 1994 (1.60)
Effect of stock issuances during the first six months of 1994 1.58
Book value per common share, June 30, 1994 (*) $21.11
(*) Excludes valuation adjustment of securities available-for-sale.
<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.
OLD KENT FINANCIAL CORPORATION
Date: August 12, 1994 /s/ John C. Canepa
------------------------------
Chairman of the Board
and Chief Executive Officer
Date: August 12, 1994 /s/ Richard W. Wroten
-------------------------------
Executive Vice President and
Chief Financial Officer
<PAGE>
PART II OTHER INFORMATION
Item 1. Legal Proceedings
Old Kent Financial Corporation ("Old Kent") and its subsidiary
Old Kent Bank and Trust Company are named, among other
defendants, in a proceeding pending in the United States District
Court for the Southern District of New York. That case was filed
originally in the Supreme Court, State of New York, County of New
York by Grow Group, Inc. against Perrigo Company, Michael J.
Jandernoa, (Chairman of the Board and Chief Executive Officer of
Perrigo Company, and presently a director of Old Kent), certain
other persons believed to have been directors and officers of
Perrigo Company, Old Kent, Old Kent Bank and Trust Company and
another major bank with whom Old Kent Bank and Trust Company
participated in a financing arrangement which is apparently the
subject of the claim. The case was filed on April 13, 1994, but
not then served on Old Kent or Old Kent Bank and Trust Company.
It has subsequently been removed to Federal Court.
The case could be considered to be a material pending legal
proceeding, even though the filing does not articulate a factual
basis for material liability to Old Kent or Old Kent Bank and
Trust Company. The case was initiated by the filing of a "Summons
with Notice". The Summons with Notice is unlike a conventional
Complaint, in that it includes only a very general statement of
the nature of the claims asserted and the relief sought, but does
not detail the specific legal basis for the claims or the facts
alleged in support of the claims. The recitations in the Summons
with Notice suggest that Old Kent Bank and Trust Company, and
another bank are alleged to have conspired with and aided and
abetted certain members of the management of Perrigo Company in
alleged breaches of fiduciary duty, usurpation of corporate
opportunities, and intentional interference with prospective
contractual relationships and economic advantages of Grow Group,
Inc., a former shareholder of Perrigo Company.
The Summons with Notice recites that Grow Group, Inc., seeks
relief against the defendants jointly and severally in the nature
of recision, seeks an accounting by defendants of their stock and
ownership interest in Perrigo and all income profits and returns
received by the defendants, restitution of any benefits conferred
as a result of the transactions that are the subject of the
action, money damages, punitive damages, interest, costs,
disbursements and attorney's fees.
Because of the very general nature of the recitation of claims
and relief sought in the Summons with Notice, Old Kent Financial
Corporation presently lacks sufficient information to make an
informed assessment of the materiality of the claims which may be
asserted against it or the probability of success on the merits.
The language of the Summons and Notice suggests, however, that
claims for damages may be made asserted in amounts which could be
material. Old Kent intends to investigate the claims when they
are stated with sufficient specificity to permit it to do so and
to defend the case vigorously.
Item 2. Changes in Securities.
This item is inapplicable or is omitted pursuant to
the instructions to Part II.
Item 3. Defaults on Senior Securities.
This item is inapplicable or is omitted pursuant to
the instructions to Part II.
Item 4. Submission of Matters to a Vote of Security Holders.
This item is inapplicable or is omitted pursuant to
the instructions to Part II.
Item 5. Other Information.
This item is inapplicable or is omitted pursuant to
the instructions to Part II.
Item 6. Exhibits and Reports on Form 8-K.
a.) Exhibits.
Exhibit 11 - Statement Re Computation of
Earnings Per Share.
b.) Reports on Form 8-K.
No Form 8-K was filed during the second
quarter of 1994.
<PAGE>
EXHIBIT INDEX
Exhibit Page Number
11 Statement of Earnings per Share 15
<TABLE>
EXHIBIT 11
OLD KENT FINANCIAL CORPORATION
EARNINGS PER SHARE CALCULATIONS - PRIMARY AND FULLY DILUTED
<CAPTION>
Three Months Ended June 30 Six Months Ended June 30
1 9 9 4 1 9 9 3 1 9 9 4 1 9 9 3
<S> <C> <C> <C> <C>
PRIMARY:
NET INCOME...................... $35,482,000 $33,421,000 $67,191,000 $63,525,000
Deduct dividends on
preferred stock............... - 0 - - 0 - - 0 - - 0 -
INCOME FOR PRIMARY
E.P.S. CALCULATION............. $35,482,000 $33,421,000 $67,191,000 $63,525,000
Average common
shares outstanding............. 40,504,105 40,493,496 40,203,131 40,477,006
Common stock equivalents........ 271,462 244,911 238,297 257,946
SHARES FOR PRIMARY
E.P.S. CALCULATION............. 40,775,567 40,738,407 40,441,428 40,734,952
PRIMARY E.P.S................... $0.87 $0.82 $1.66 $1.56
FULLY DILUTED:
NET INCOME...................... $35,482,000 $33,421,000 $67,191,000 $63,525,000
Add back interest on convertible
debt (net of income tax)...... 0 0 0 0
INCOME FOR FULLY DILUTED
E.P.S. CALCULATION............. $35,482,000 $33,421,000 $67,191,000 $63,525,000
Average common
shares outstanding............. 40,504,105 40,493,496 40,203,131 40,477,006
Common stock equivalents........ 271,462 244,911 238,297 257,946
Additional common shares
issuable to debt holders...... 0 0 0 0
SHARES FOR FULLY DILUTED
E.P.S. CALCULATION............. 40,775,567 40,738,407 40,441,428 40,734,952
FULLY DILUTED E.P.S............. $0.87 $0.82 $1.66 $1.56
</TABLE>
