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, 1998, 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)
111 Lyon Street NW
Grand Rapids, Michigan 49503
(Address of principal executive (Zip Code)
Registrant's telephone number, including a(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 period 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, par value
$1, as of July 31, 1998, was 93,810,677 shares.
<PAGE>
INDEX
OLD KENT FINANCIAL CORPORATION
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets as of June 30, 1998,
and December 31, 1997
Consolidated Statements of Income for the three
and six months ended June 30, 1998, and 1997
Consolidated Statements of Cash Flows for the
six months ended June 30, 1998, and 1997
Notes to Consolidated Financial Statements
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures about Market Risk
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Item 2. Changes in Securities and Use of Proceeds
Item 6. Exhibits and Reports on Form 8-K
SIGNATURES
FORWARD-LOOKING STATEMENTS
This report 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 Old Kent Financial
Corporation ("Old Kent" or the "Corporation"). Words such as "anticipates",
"believes", "estimates", "expects", "forecasts", "intends", "is likely",
"plans", "predicts", "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 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. Future factors that could
cause a difference between an ultimate actual outcome and a preceding forward
looking statement include 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 regulations;
changes in tax laws; changes in prices, levies, and assessments; the impact of
technological advances; governmental and regulatory policy changes; the
outcomes of pending and future litigation and contingencies; trends in
customer behavior as well as their ability to repay loans; and the
vicissitudes of the world and national economy. Old Kent undertakes no
obligations to update, amend or clarify forward-looking statements, whether as
a result of new information, future events, or otherwise.
<PAGE>
<TABLE>
Item 1 Financial Statements
OLD KENT FINANCIAL CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets (Unaudited)_________________________________________________________
<CAPTION>
June 30, December 31,
(dollars in thousands) 1998 1997
<S> <C> <C>
ASSETS:
Cash and due from banks............................................ $ 554,155 $ 501,912
Federal funds sold and resale agreements........................... 53,245 48,330
Total cash and cash equivalents.................................... 607,400 550,242
Interest-earning deposits.......................................... 16,695 2,152
Trading account securities......................................... 10 986
Mortgages held-for-sale............................................ 1,505,127 1,271,784
Securities available-for-sale:
Collateralized mortgage obligations and other mortgage-backed
securities.................................................. 1,567,477 1,403,726
Other securities................................................ 540,009 633,141
Total securities available-for-sale (amortized cost of
$2,098,158 and $2,034,435, respectively)...................... 2,107,486 2,036,867
Securities held-to-maturity:
Collateralized mortgage obligations and other mortgage-backed
securities.................................................. 528,377 666,978
Other securities................................................ 159,464 153,861
Total securities held-to-maturity (market values of
$692,530 and $820,902, respectively).......................... 687,841 820,839
Loans.............................................................. 8,142,861 8,469,477
Allowance for credit losses........................................ (163,983) (157,417)
Net loans.......................................................... 7,978,878 8,312,060
Premises and equipment............................................. 186,733 184,738
Other assets....................................................... 649,901 593,854
Total Assets....................................................... $13,740,071 $13,773,522
LIABILITIES AND SHAREHOLDERS' EQUITY:
Liabilities:
Deposits:
Non-interest bearing............................................ $ 1,765,519 $ 1,669,063
Interest-bearing................................................ 8,685,095 8,529,215
Foreign deposits -- interest-bearing............................ 30,365 30,012
Total deposits................................................ 10,480,979 10,228,290
Other borrowed funds............................................... 1,865,232 2,074,791
Other liabilities.................................................. 229,154 242,988
Long term debt..................................................... 200,000 200,000
Total Liabilities.................................................. 12,775,365 12,746,069
Shareholders' Equity:
Preferred stock: 25,000,000 shares authorized and unissued......... -- --
Common stock, $1 par value: 300,000,000 shares authorized;
94,156,752 and 92,779,772 shares issued and outstanding ......... 94,157 92,780
Capital surplus.................................................... 237,996 204,788
Retained earnings.................................................. 626,490 728,304
Valuation adjustment of securities available-for-sale.............. 6,063 1,581
Total Shareholders' Equity......................................... 964,706 1,027,453
Total Liabilities and Shareholders' Equity........................ $13,740,071 $13,773,522
See accompanying notes to consolidated financial statements
</TABLE>
<PAGE>
<TABLE>
OLD KENT FINANCIAL CORPORATION AND SUBSIDIARIES
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) 1998 1997 1998 1997
<S> <C> <C> <C> <C>
Interest Income:
Interest and fees on loans....................................$182,779 $191,633 $370,858 $379,205
Interest on mortgages held-for-sale........................... 30,004 14,707 56,886 24,807
Interest on securities available-for-sale..................... 34,665 32,462 69,111 61,698
Interest on securities held-to-maturity:
Taxable..................................................... 10,723 12,778 22,618 25,899
Tax-exempt.................................................. 1,888 2,100 3,811 4,289
Interest on deposits.......................................... 219 68 395 123
Interest on federal funds sold and resale agreements.......... 224 1,187 477 3,333
Interest on trading account securities........................ 30 264 42 952
Total interest income......................................... 260,532 255,199 524,198 500,306
Interest Expense:
Interest on domestic deposits................................. 94,284 98,878 188,529 195,966
Interest on foreign deposits.................................. 503 654 1,163 1,063
Interest on other borrowed funds.............................. 30,413 20,773 61,553 36,708
Interest on subordinated debt................................. 3,387 3,403 6,753 6,188
Total interest expense........................................ 128,587 123,708 257,998 239,925
Net Interest Income............................................. 131,945 131,491 266,200 260,381
Provision for credit losses..................................... 11,358 11,741 26,439 21,962
Net interest income after provision
for credit losses........................................... 120,587 119,750 239,761 238,419
Other Income:
Mortgage banking revenue (net)................................ 36,867 24,817 66,772 43,627
Trust and investment management revenue....................... 14,807 12,841 28,849 25,693
Service charges on deposit accounts........................... 13,941 11,708 27,453 23,139
Insurance sales commissions................................... 4,783 3,281 10,343 6,775
ATM fees...................................................... 1,667 1,600 3,141 2,565
Brokerage commissions......................................... 1,462 697 2,527 1,508
Securities gains / (losses)................................... 2,250 (774) 2,355 (1,411)
Nonrecurring and other real estate owned income............... 1,331 17,698 7,333 20,285
Other......................................................... 10,539 10,617 21,413 20,292
Total other income............................................ 87,647 82,485 170,186 142,473
Other Expenses:
Salaries and employee benefits................................ 66,844 62,054 136,062 123,578
Occupancy expense............................................. 9,100 8,425 18,162 17,042
Equipment expense............................................. 8,165 7,016 16,062 13,633
Advertising and promotion..................................... 2,897 2,830 5,060 4,857
Amortization of goodwill and intangibles...................... 3,341 3,340 6,709 6,710
Nonrecurring and other real estate owned expense.............. 416 2,079 583 2,306
Other expenses................................................ 41,080 36,118 80,127 70,749
Total other expenses.......................................... 131,843 121,862 262,765 238,875
Income Before Income Taxes...................................... 76,391 80,373 147,182 142,017
Income taxes.................................................. 26,436 27,562 51,053 48,202
Net Income......................................................$ 49,955 $ 52,811 $ 96,129 $ 93,815
Earnings Per Common Share:
Basic.........................................................$ 0.53 $ 0.53 $ 1.01 $ 0.93
Diluted.......................................................$ 0.52 $ 0.52 $ 1.00 $ 0.92
Dividends Per Common Share......................................$ 0.171 $ 0.154 $ 0.342 $ 0.309
Average number of shares used to compute: (in thousands)
Basic earnings per share..................................... 95,124 99,952 95,824 100,474
Diluted earnings per share................................... 96,004 100,803 96,724 101,239
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
OLD KENT FINANCIAL CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows (Unaudited)
<CAPTION>
Six months ended June 1998 (dollars in thousands) 1998 1997
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income...................................................................$ 96,129 $ 93,815
Adjustments to reconcile net income
to net cash provided by operating activities:
Provision for credit losses.......................................... 26,439 21,962
Depreciation, amortization and accretion............................. 20,434 23,172
Net gains on sales of assets......................................... (78,527) (48,530)
Net change in trading account securities............................. 1,072 51,689
Originations and acquisitions of mortgages held-for-sale............. (6,000,061) (2,065,799)
Proceeds from sales and prepayments of mortgages held-for-sale....... 5,751,830 1,869,220
Net change in other assets........................................... 19,581 (32,533)
Net change in other liabilities...................................... (16,534) (35,242)
Net cash used for operating activities....................................... (179,637) (122,246)
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from maturities and prepayments of securities available-for-sale.... 133,914 113,550
Proceeds from sales of securities available-for-sale......................... 344,236 1,212,235
Purchases of securities available-for-sale................................... (539,760) (1,410,790)
Proceeds from maturities and prepayments of securities held-to-maturity...... 158,451 145,572
Purchases of securities held-to-maturity..................................... (25,143) (103,260)
Net change in interest-earning deposits...................................... (14,542) (38,024)
Proceeds from sale of loans.................................................. 123,203 291,460
Net change in loans.......................................................... 186,959 (333,271)
Purchases of leasehold improvements, premises and equipment, net............. (10,502) (12,251)
Acquisition of business units (net of cash acquired)......................... - 14,284
Sale of business units (net of cash sold).................................... - 1,234
Net cash provided by (used for) investing activities......................... 356,816 (119,261)
CASH FLOWS FROM FINANCING ACTIVITIES:
Change in time deposits...................................................... (54,123) (48,747)
Change in demand and savings deposits........................................ 306,812 (71,015)
Change in other borrowed funds............................................... (209,558) 390,431
Proceeds of guaranteed preferred beneficial interests in the
Corporation's junior subordinated debentures............................ - 100,000
Repurchases of common stock.................................................. (143,916) (85,775)
Proceeds from common stock issuances......................................... 13,878 5,865
Dividends paid to shareholders............................................... (33,114) (30,959)
Net cash (used for) provided by financing activities......................... (120,021) 259,800
Net change in cash and cash equivalents...................................... 57,158 18,293
Cash and cash equivalents at beginning of year............................... 550,242 637,797
Cash and cash equivalents at June 30.........................................$ 607,400 $ 656,090
Supplemental disclosures of cash flow information:
Interest paid on deposits, other borrowed funds and
subordinated debt........................................................$ 267,246 $ 246,768
Federal income taxes paid.................................................. 42,000 34,900
Significant non-cash transactions:
Stock dividend issued...................................................... 164,831 122,474
Stock issued to acquire businesses......................................... - 71,767
The accompanying notes to consolidated financial statements are an integral part of these statements
</TABLE>
<PAGE>
OLD KENT FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
June 30, 1998
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 six month period
ended June 30, 1998, are not necessarily indicative of the results that may be
expected for the year ending December 31, 1998. 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, 1997.
Certain reclassifications have been made to prior periods' financial statements
to place them on a basis comparable with the current periods' financial
statements.
NOTE B: FINANCIAL INSTRUMENT ACCOUNTING POLICIES
Old Kent uses certain off-balance sheet derivative financial instruments,
including interest rate swaps, interest rate futures and options, interest rate
caps and floors and currency forwards in connection with risk management
activities. Provided these instruments meet specific criteria, they are
considered hedges and accounted for under the accrual or deferral methods, as
more fully discussed below.
Old Kent uses the accrual method for substantially all of its interest rate
swaps as well as for interest rate futures options. Amounts receivable or
payable under these agreements are recognized as an adjustment to the interest
income or expense of the hedged item. There is no recognition on the balance
sheet for changes in the fair value of the hedging instrument. Premiums earned
on or paid for interest rate options are deferred as a component of other
assets and amortized to interest income or expense over the contract term.
Gains and losses associated with forwards are deferred as an adjustment to the
carrying value of the related asset or liability and are recognized in the
corresponding interest income or expense accounts over the remaining life of
the hedged item. Gains and losses on terminated hedging instruments are also
deferred and amortized to interest income or expense over the remaining life of
the hedged item.
Derivative financial instruments, such as caps and floors, that do not meet the
required criteria are carried on the balance sheet at fair value with realized
and unrealized changes in that value recognized in earnings. If the hedged
item is sold or its outstanding balance otherwise declines below that of the
related hedging instrument, the derivative product (or applicable excess
portion thereof) is marked-to-market and the resulting gain or loss is included
in earnings.
NOTE C: ADOPTION OF FASB 133
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, Accounting for Derivative Instruments
and Hedging Activities. The Statement establishes accounting and reporting
standards requiring that every derivative instrument (including certain
derivative instruments embedded in other contracts) be recorded in the balance
sheet as either an asset or a liability measured at its fair value. The
Statement requires that changes in the derivative's fair value be recognized
currently in earnings unless specific hedge accounting criteria are met.
Special accounting for qualifying hedges allows a derivative's gains and losses
to offset related results on the hedged item in the income statement, and
requires that a company must formally document, designate, and assess the
effectiveness of transactions that receive hedge accounting.
Statement 133 is effective beginning January 1, 2000. A company may also
implement the Statement as of the beginning of any fiscal quarter after
issuance (that is, fiscal quarters beginning June 16, 1998, and thereafter).
Statement 133 cannot be applied retroactively. Statement 133 must be applied
to (a) derivative instruments and (b) certain derivative instruments embedded
in hybrid contracts that were issued, acquired, or substantively modified after
December 31, 1997, (and, at Old Kent's election, those issued or acquired
before January 1, 1998).
Old Kent has not yet quantified the impacts of adopting Statement 133 on the
consolidated financial statements and has not determined the timing of or
method of adoption of Statement 133. However, the Statement could increase
volatility in earnings and other comprehensive income.
<PAGE>
OLD KENT FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- Continued (Unaudited)
June 30, 1998
NOTE D: LOANS AND NONPERFORMING ASSETS
The following summarizes loans and nonperforming assets at the
dates indicated (dollars in thousands):
June 30, December 31,
Loans: 1998 1997
Commercial................................. $2,640,805 $2,576,008
Real estate - Commercial.................. 1,772,831 1,796,308
Real estate - Construction................ 598,090 557,007
Real estate - Residential mortgages...,... 637,525 766,047
Real estate - Consumer home equity ....... 899,171 906,824
Consumer................................... 1,426,766 1,694,136
Credit card loans.......................... -- 1,694
Lease financing............................ 167,673 171,453
Total Loans................................ $8,142,861 $8,469,477
June 30, December 31,
Nonperforming assets: 1998 1997
Nonaccrual loans .......................... $ 66,249 $ 52,036
Restructured loans......................... 3,019 2,688
Impaired loans........................... 69,268 54,724
Other real estate owned.................... 7,320 7,619
Total nonperforming assets................. $ 76,588 $ 62,343
Loans past due 90 days or more............. $ 12,935 $ 13,523
At June 30, 1998, the Corporation's management has identified loans totaling
approximately $23.1 million as potential problem loans. These loans are not
included as nonperforming assets in the table above. While these loans were
in compliance with repayment terms at June 30, 1998, other circumstances
caused management to seriously doubt the ability of the borrowers to continue
to remain in compliance with existing loan repayment terms.
Old Kent sold approximately $56.7 million of student loans during the quarter
ended March 31, 1998. Old Kent recognized a gain of approximately $1.1 million
on these sales. During the first quarter of 1998, Old Kent also sold
approximately $47 million of indirect auto loans and recognized a gain of
approximately $.2 million. During the quarter ended June 30, 1998, Old Kent
sold approximately $15.7 million of student loans. Old Kent recognized a gain
of approximately $.2 million on these sales.
<PAGE>
OLD KENT FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- Continued (Unaudited)
June 30, 1998
NOTE E: ALLOWANCE FOR CREDIT LOSSES AND NET CHARGE-OFFS
The following summarizes the changes in the allowance for credit losses, and
net charge-offs (in thousands of dollars):
<TABLE>
<CAPTION>
For the Six Months
ended June 30,
Allowance for Credit Losses 1998 1997
<S> <C> <C>
Balance at January 1,............................................. $157,417 $165,928
Changes in allowance due to acquisitions / divestitures / sales.... (475) (4,816)
Provision for credit losses........................................ 26,439 21,962
Gross loans charged-off............................................ (27,921) (33,226)
Gross recoveries of loans previously charged-off................... 8,523 7,412
Balance at end of period,.......................................... $163,983 $157,260
For the Six Months
ended June 30,
Net Loan Charge-Offs 1998 1997
Commercial & Commercial Real Estate Loans.......................... $ 9,255 ($783)
Consumer........................................................... 8,915 12,052
Credit Card........................................................ 1 12,913
Residential Mortgages.............................................. 225 1
Leases............................................................. 1,002 1,631
Total Net Charge-Offs.............................................. $ 19,398 $ 25,814
</TABLE>
NOTE F: SECURITIES AVAILABLE-FOR-SALE
The following summarizes amortized costs and estimated market values of
securities available-for-sale at the dates indicated (in thousands of dollars):
<TABLE>
<CAPTION>
Carrying
Gross Gross Value
Amortized Unrealized Unrealized at Market
June 30, 1998: Cost Gains Losses Value
<S> <C> <C> <C> <C>
U.S. Treasury and federal agency securities..... $ 410,727 $ 3,811 $ 141 $ 414,397
Collateralized mortgage obligations:
U.S. Government issued..................... 1,042,509 6,056 902 1,047,663
Privately issued........................... 358,719 1,209 971 358,957
Mortgage-backed pass-through securities......... 160,591 452 186 160,857
Other securities................................ 125,612 0 0 125,612
Total securities available-for-sale............. $2,098,158 $11,528 $2,200 $2,107,486
December 31, 1997:
U.S. Treasury and federal agency securities..... $ 519,016 $ 2,186 $1,975 $ 519,227
Collateralized mortgage obligations:
U.S. Government issued..................... 1,030,220 5,830 2,337 1,033,713
Privately issued........................... 237,363 1,066 2,688 235,741
Mortgage-backed pass-through securities......... 134,127 280 135 134,272
Other securities................................ 113,709 205 -- 113,914
Total securities available-for-sale............. $2,034,435 $ 9,567 $7,135 $2,036,867
</TABLE>
<PAGE>
OLD KENT FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- Continued (Unaudited)
June 30, 1998
NOTE G: 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):
<TABLE>
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized Market
June 30, 1998: Cost Gains Losses Value
<S> <C> <C> <C> <C>
U.S. Treasury and federal agency securities..... $ 15,244 $ 51 $ 11 $ 15,284
Collateralized mortgage obligations:
U.S. Government issued..................... 349,461 1,056 1,251 349,266
Privately issued........................... 102,458 434 682 102,210
Mortgage-backed pass-through securities......... 76,458 1,678 44 78,092
State and political subdivisions................ 144,220 4,277 819 147,678
Total securities held-to-maturity............... $687,841 $7,496 $2,807 $692,530
December 31, 1997:
U.S. Treasury and federal agency securities..... $ 15,248 $ 48 $ 11 $ 15,285
Collateralized mortgage obligations:
U.S. Government issued..................... 453,556 682 4,377 449,861
Privately issued........................... 119,526 329 992 118,863
Mortgage-backed pass-through securities......... 93,896 1,307 294 94,909
State and political subdivisions................ 138,613 4,517 1,146 141,984
Total securities held-to-maturity............... $820,839 $6,883 $6,820 $820,902
</TABLE>
NOTE H: SALE OF BRANCHES
During the first quarter of 1998, Old Kent sold three branches and related
deposits in its Big Rapids, Michigan market. When sold, the branches had total
deposits of approximately $41.6 million. As of June 30, 1998, Old Kent
realized a gain of approximately $4.6 million on the sale.
NOTE I: SHAREHOLDERS' EQUITY
During 1997, Old Kent's directors authorized management, at its discretion, to
purchase up to 6.0 million shares of the Corporation's common stock. These
shares were purchased by the Corporation in a systematic program of open market
or privately negotiated purchases. The shares are reserved for later reissue
in connection with potential future stock dividends, the dividend reinvestment
plan, employee benefit plans, and other general corporate purposes. As of
June 30, 1998, repurchase of Old Kent Common Stock under this authorization was
complete.
In June 1998, the Board of Directors of Old Kent Financial Corporation declared
a 5% stock dividend payable July 17, 1998, to shareholders of record on
June 26, 1998. All per share amounts included in this report have been
adjusted to reflect this dividend.
At that same meeting, Old Kent's Directors authorized management, at its
discretion, to purchase up to 6.0 million shares of the Corporation's common
stock. It is anticipated that these shares will be purchased by the
Corporation in a systematic program of open market or privately negotiated
purchases. They will be reserved for later reissue in connection with
potential future stock dividends, the dividend reinvestment plan, employee
benefit plans, and other general corporate purposes.
<PAGE>
OLD KENT FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- Continued (Unaudited)
June 30, 1998
NOTE J: MORTGAGE BANKING REVENUE (NET)
The following summarizes net mortgage banking revenues as shown in the
accompanying consolidated statements of income:
<TABLE>
<CAPTION>
For the Six Months
Net mortgage banking revenue: ended June 30,
1998 1997
<S> <C> <C>
Gross mortgage servicing revenue.................................... $24,443 $19,444
Less: amortization of mortgage servicing rights & direct costs.... (28,749) (12,889)
Net mortgage servicing revenue...................................... (4,306) 6,555
Mortgage banking gains (net)........................................ 70,570 28,724
Mortgage origination and processing fees (net)...................... 507 8,348
Total net mortgage banking revenue................................ $66,771 $43,627
NOTE K: OTHER ASSETS
Other assets, as shown in the accompanying consolidated balance sheets, included the following:
June 30, December 31,
1998 1997
Mortgage Servicing Rights (net of amortization)..................... $177,803 $150,988
Less servicing impairment reserve................................... (7,129) (4,629)
Carrying value of Mortgage Servicing Rights......................... 170,674 146,359
Goodwill............................................................ 104,486 108,813
Core Deposit Intangibles............................................ 21,252 23,130
Old Kent Mortgage Company actively manages interest rate prepayment risk inherent in its business by
selling mortgage servicing rights. During the third quarter of 1997, Old Kent Mortgage Company entered
into an agreement to sell between $1.8 to $3.6 billion of mortgage servicing rights during the period
September 1997 to August 1998. This forward bulk servicing sale agreement provides for monthly sales
of newly originated conventional mortgage servicing rights.
NOTE L: EARNINGS PER SHARE
The following table reconciles the numerators and denominators used in the calculations of basic and
diluted earnings per share:
For the Three Months For the Six Months
ended June 30, ended June 30,
1998 1997 1998 1997
<S> <C> <C> <C> <C>
Numerators: Numerator for both basic and diluted $49,955,000 $ 52,811,000 $96,129,000 $ 93,815,000
earnings per share, net income
Denominators:
Denominator for basic earnings per share, average 95,123,700 99,952,509 95,824,369 100,473,807
outstanding common shares
Potential dilutive shares resulting from employee stock plans 880,231 850,603 899,571 765,020
Denominator for diluted earnings per share 96,003,931 100,803,112 96,723,940 101,238,827
Earnings per share:
Basic $ 0.53 $ 0.53 $ 1.01 $ 0.93
Diluted $ 0.52 $ 0.52 $ 1.00 $ 0.92
</TABLE>
<PAGE>
OLD KENT FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- Continued (Unaudited)
June 30, 1998
NOTE M: COMPREHENSIVE INCOME
Effective January 1, 1998, Old Kent adopted Statement of Financial Accounting
Standard No. 130: "Reporting Comprehensive Income". This statement
establishes standards for reporting and display of comprehensive income and
its components. Comprehensive income reflects the change in equity of a
business enterprise during a period from transactions and other events and
circumstances from non-owner sources. For Old Kent, comprehensive income
represents net income adjusted for the change in unrealized gains and losses
on available-for-sale securities. Comprehensive income was approximately
$51,222 and $62,823 for the quarters ended June 30, 1998, and 1997,
respectively, and approximately $100,611 and $91,161 for the sixth month
period ended June 30, 1998, and 1997, respectively.
NOTE N: BUSINESS COMBINATIONS
On April 21, 1998, Old Kent signed a definitive agreement for the merger of
First Evergreen Corporation ("First Evergreen") into Old Kent. The merger
will be accounted for as a pooling-of-interest. Old Kent will exchange
32.0312 shares of Old Kent Common stock for each share of First Evergreen
Stock. Old Kent expects to issue approximately 12.8 million shares related to
this transaction. First Evergreen is a bank holding company headquartered in
Evergreen Park, Illinois, with assets of approximately $1.9 billion and
deposits of approximately $1.7 billion as of June 30, 1998. It is the parent
of First National Bank of Evergreen Park. First Evergreen provides banking
services through eight offices in Cook County, Illinois. The merger is subject
to shareholder approval and is expected to be completed in the fourth quarter
of 1998.
NOTE O: LONG TERM DEBT
Long term debt, as shown in the accompanying consolidated balance sheets,
consists of the following:
June 30, December 31,
1998 1997
Subordinated notes, 6 5/8% due November 15, 2005... 100,000 100,000
Capital securities, as described below............. 100,000 100,000
Total long term debt............................... 200,000 200,000
On January 31, 1997, Old Kent issued a floating rate junior subordinated
debenture (the "Debenture") having a principal amount of $103,092,784 to
Old Kent Capital Trust I (the "Trust"). Cumulative interest on the principal
sum of the Debenture accrues from January 31, 1997, and it is payable quarterly
in arrears on the first day of February, May, August and November of each year
at a variable rate per annum equal to LIBOR (London Interbank Offering Rate)
plus .80% until paid. Interest is computed on the actual number of days
elapsed in a year of twelve 30 day months. The Debentures rank subordinate and
junior in right of payment to all Indebtedness (as defined) of Old Kent. The
Debenture matures on February 1, 2027, but may be redeemed in whole or in part
beginning on February 1, 2007, or earlier upon the occurrence of certain
special events defined in the Indenture governing the Debenture.
On January 31, 1997, the Trust sold Floating Rate Subordinated Capital Income
Securities ("Preferred Securities") having an aggregate liquidation amount of
$100 million to investors and issued Common Capital Securities ("Common
Securities") having an aggregate liquidation amount of $3,092,784 to Old Kent.
All of the proceeds from sale of Preferred Securities and Common Securities
were invested in the Debenture. Preferred Securities and Common Securities
represent undivided beneficial interests in the Debenture, which is the sole
asset of the Trust. Holders of Preferred Securities and Common Securities are
entitled to receive distributions from the Trust on terms which correspond to
the interest and principal payments due on the Debenture. Payment of
distributions by the Trust and payments on liquidation of the Trust or
redemption of Preferred Securities are guaranteed by Old Kent to the extent the
Trust has funds available (the "Guarantee"). Old Kent's obligations under the
Guarantee, taken together with its obligations under the Debenture and the
Indenture, constitute a full and unconditional guarantee of all of the Trust's
obligations under the Preferred Securities issued by the Trust. Because the
Common Securities held by Old Kent represent all of the outstanding voting
securities of the Trust (in the absence of a default or other specified event),
the Trust is considered to be a wholly owned subsidiary of Old Kent for
reporting purposes and its accounts are reflected in the consolidated financial
statements of Old Kent.
The Preferred Securities qualify as Tier I capital for regulatory capital
purposes. Issuance of the Preferred Securities by the Trust had the effect of
increasing Old Kent's regulatory capital. Proceeds from the sale of the
Debenture to the Trust were available for general corporate purposes, including
repurchase of shares.
<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 Old Kent's financial condition and results of
operations during the periods included in the consolidated financial statements
included in this filing. Old Kent's form 10-Q for the quarterly period ended
March 31, 1998, is here incorporated by reference.
RESULTS OF OPERATIONS
Old Kent's net income was $50.0 million for the second quarter of 1998 compared
to $52.8 million for the same period in 1997. Second quarter diluted earnings
per share was $.52, even with last year's $.52. For the six month period ended
June 30, 1998, net income was $96.1 million compared to $93.8 million a year
ago and diluted earnings per share was $1.00, a 8.7% increase over last year's
$.92.
Total assets were $13.7 billion at quarter-end compared to $13.8 billion at
December 31, 1997. Return on average equity for the second quarter of 1998 was
20.47% compared to 20.85% for the second quarter of 1997. Return on average
assets was 1.43% for the second quarter of 1998 compared to 1.60% for the
second quarter of 1997.
Old Kent's net interest income for the second quarter of 1998 was $131.9
million, a .3% increase over the $131.5 million recorded in the same period of
1997. For the second quarter of 1998, the net interest margin was 4.16%
compared to 4.37% a year ago. The decrease in the net interest margin was
primarily due to increased funding costs, repurchases of common stock, and the
June 1997, sale of Old Kent's higher yielding credit card portfolio.
The provision for credit losses was $11.4 million in the second quarter of 1998
and $11.7 million in the second quarter of 1997. Net credit losses were $9.6
million or .47% of average loans for the second quarter of 1998 compared to
$14.8 million or .71% of average loans for the same period a year ago. The
allowance for credit losses as a percent of loans and leases outstanding was
2.01% at June 30, 1998, and 1.86% at December 31, 1997. Impaired loans as a
percent of total loans was .85% at June 30, 1998, and .65% at December 31,
1997.
Total other operating income, excluding securities transactions and other
nonrecurring income, increased 28.2% or $18.5 million during the second quarter
of 1998 over the same period a year ago. The mortgage banking business
contributed $12 million of this increase, primarily as a result of growth and
expansion of Old Kent Mortgage Company. Trust income increased 15.3% or $2.0
million and service charges on deposits increased 19.1% or $2.2 million. All
other service charges and fees increased $2.3 million over the same period a
year ago.
<PAGE>
Nonrecurring and other real-estate owned income totaled $1,331,000 for the
quarter ended June 30, 1998, and consisted of:
Gain on sale of loans $ 196,000
Gain on sale of branches and other
buildings 864,000
Gain on sale of Other Real Estate 271,000
Total $1,331,000
Old Kent sold approximately $3.2 billion of residential mortgage loans during
the quarter. Old Kent's residential third party mortgage servicing portfolio
increased 28% to $13.9 billion at June 30, 1998, from $10.9 billion at June 30,
1997, primarily due to geographical expansion. The residential third party
mortgage servicing portfolio was $13.0 billion at December 31, 1997.
Total net securities gains for the second quarter of 1998 were $2,250,000,
compared to losses of $774,000 for the same period of 1997.
As discussed in Note M to the accompanying consolidated financial statements,
Old Kent expects to complete its acquisition of First Evergreen Corporation
during the fourth quarter of 1998. Upon consummation, the Corporation expects
to recognize, as other expense, one-time merger related costs of up to $25
million.
Total operating expenses for the second quarter of 1998 increased $10.0
million, or 8.2%, over the same period in 1997. This reflects the impact of
increased staffing, as shown in the table below. Salaries, wages and employee
benefits increased $4.8 million or 7.7% for the second quarter of 1998 over the
second quarter of 1997. The number of full-time equivalent employees increased
by 280 over a year ago, to 6,455 at June 30, 1998.
June 30,
1998 1997 Change
Full-time equivalent staff:
Banking units 4,228 4,575 (347)
Mortgage banking 1,909 1,365 544
Insurance, leasing & brokerage 318 235 83
Total 6,455 6,175 280
During the second quarter of 1998 compared to the same period a year ago,
occupancy expenses increased 8.0%, and equipment expenses increased 16.4%.
Other operating expenses increased by 11.9% or $5.0 million over the prior
year.
<PAGE>
YEAR 2000
Old Kent has completed an analysis of its needs for its mainframe and
centrally controlled systems to be able to deal with the advent of the year
2000. Diagnosis, reprogramming and other remedies are expected to result in
expenditures of approximately $12 million, over the two years ended
December 31, 1999. For the six months ended June 30, 1998, approximately $3.0
million of these expenses were expensed as incurred by Old Kent. As of
June 30, 1998, Old Kent's management believes that renovation is more than 50%
complete, that all "critical" software components expected to be needed to
accommodate the year 2000 conversion have been acquired, but that installation
and testing will still be required.
BALANCE SHEET CHANGES
Total interest-earning assets decreased 1.1% or $144 million from December 31,
1997. Total securities decreased $69 million since year-end 1997. Mortgages
held-for-sale increased 18.3% or $233 million. This increase was largely due
to a favorable refinancing environment coupled with growth and expansion of
Old Kent Mortgage Company. Other interest earning assets increased $13.6
million since year end 1997.
Loans decreased $326.6 million since year end 1997. This decrease was the
result of residential mortgage loan runoff and the implementation of strategies
aimed at improving profitability by exiting or altering certain consumer
lending activities.
Total deposits increased $253 million or 2.5% from year-end 1997: noninterest
bearing deposits increased 5.8% or $97 million and interest-bearing deposits
increased 1.8% or $156 million. Other borrowed funds decreased $210 million
or 10.0% from December 31, 1997.
LIQUIDITY AND CAPITAL RESOURCES
The maintenance of an adequate level of liquidity is necessary to ensure that
sufficient funds are available to meet customers' loan demand and deposit
withdrawals. Old Kent Bank's liquidity sources consist of securities
available-for-sale, maturing loans and securities held-to-maturity, and other
short-term investments. Liquidity has also been obtained through liabilities
such as customer-related core deposits, funds borrowed, certificates of deposit
and public funds deposits.
<PAGE>
At June 30, 1998, shareholders' equity was $965 million compared to $1,027
million at December 31, 1997. The changes in total shareholders' equity and
book value per common share are summarized in the tables below.
Total Share-
holders' Equity Book Value Per
(in millions) Common Share
Balance, December 31, 1997 $1,027.5 $10.54
Net income for the six months ended
June 30, 1998 96.1 1.01
Cash dividends paid (33.1) (.34)
Net change in valuation adjustment of securities
available-for-sale 4.5 .05
Stock repurchases (net of stock issued) (130.0) (1.01)
Balance, June 30, 1998 $ 965.0 10.25
As shown in the table below, the Corporation repurchased approximately 2.2
million shares of its common stock during the three months ended June 30, 1998.
These shares were repurchased pursuant to previously announced authorizations
by Old Kent's board of directors. The repurchase of these shares had a
beneficial effect on earnings per common share and return on average equity for
the three month period ended June 30, 1998.
During June 1998, Old Kent completed a 6.1 million share stock repurchase
program pursuant to a June 1997 authorization.
Old Kent Common Stock repurchased and reserved for future reissuance in
connection with:
Dividend
Reinvestment General
Stock and Employee Corporate
Total Dividends Stock Plans Purposes
Shares reserved at 3/31/98 4,421,000 3,070,000 1,270,000 81,000
Shares repurchased 2,172,948 1,713,941 277,264 181,743
Shares reissued (1) (4,781,205) (4,533,941) (247,264) 0
Shares reserved at 6/30/98 1,812,743 250,000 1,300,000 262,743
(1) Includes shares issued on July 17, 1998, to shareholders of record
on June 26, 1998 in a 5% stock dividend.
For a number of years, Old Kent has been authorized by its board of directors
to repurchase shares in connection with the Corporation's Dividend Reinvestment
and Employee Stock Plans, and on a quarterly basis has systematically
maintained a level of shares equivalent to permissible needs.
<PAGE>
At June 30, 1998, Old Kent held 1,812,743 shares of its common stock reserved
for reissuance as detailed in the table above. These shares were repurchased
under June 1998 and 1997 board of directors authorizations allowing management
to repurchase up to 6 million shares (under each authorization) of Old Kent
Common Stock intended for future reissuance in connection with stock dividends,
dividend reinvestment and employee stock plans, and other corporate purposes.
Under the most recent (June 1998) authorization, approximately 4.6 million of
the total 6.0 million shares authorized are intended for anticipated future
stock dividends. Management intends that this number of shares would be
repurchased prior to August 1998 in a systematic pattern (on a quarterly
ratable basis) of open market and privately negotiated transactions. The
remaining 1.4 million shares of the authorization are intended for reissue in
connection with the Corporation's dividend reinvestment and employee stock
plans, as well as other unspecified corporate purposes such as business
acquisitions accounted for as purchases.
Total equity at June 30, 1998, was increased by an after-tax unrealized gain of
$6.1 million on securities available-for-sale. Shareholders' equity as a
percentage of total assets as of June 30, 1998, was 7.02%.
The following table represents the Registrant's consolidated regulatory capital
position as of June 30, 1998:
Regulatory capital at June 30, 1998
(in millions) Tier 1 Total
Leverage Risk-Based Risk-Based
Ratio Capital Capital
Actual capital $936.9 $936.9 $1,167.8
Required minimum regulatory capital 415.7 419.5 839.1
Capital in excess of requirements $521.2 $517.4 $ 328.7
Actual ratio 6.76% 8.93% 11.13%
Regulatory Minimum Ratio 3.00% 4.00% 8.00%
Ratio considered "well capitalized"
by regulatory agencies 5.00% 6.00% 10.00%
<PAGE>
Item 3. Quantitative and Qualitative Disclosures about Market Risk.
The information concerning quantitative and qualitative disclosures about
market risk contained and incorporated by reference in Item 7A of the
Corporation's Form 10-K Annual Report for its fiscal year ended December 31,
1997, is here incorporated by reference.
Old Kent faces market risk to the extent that both earnings and the fair values
of its financial instruments are affected by changes in interest rates. The
Corporation manages this risk with three tools: static GAP analysis,
simulation modeling, and economic value of equity estimation. Throughout the
first six months of 1998, the results of these three measurement techniques
were within the Corporation's policy guidelines. The Corporation does not
believe that there has been a material change in the Corporation's primary
market risk exposures, including the categories of market risk to which the
Corporation is exposed and the particular markets that present the primary risk
of loss to the Corporation. As of the date of this Form 10-Q Quarterly Report,
the Corporation does not know of or expect there to be any material change in
the general nature of its primary market risk exposure in the near term.
The methods by which the Corporation manages its primary market risk exposures,
as described in the sections of its Form 10-K Annual Report incorporated by
reference in response to this item, have not changed materially during the
current year. As of the date of this Form 10-Q Quarterly Report, the
Corporation does not expect to change those methods in the near term. However,
the Corporation may change those methods in the future to adapt to changes in
circumstances or to implement new techniques.
The Corporation's market risk exposure is mainly comprised of it vulnerability
to interest rate risk. Prevailing interest rates and interest rate
relationships are primarily determined by market factors which are outside of
Old Kent's control. All information provided in response to this item consists
of forward looking statements. Reference is made to the section captioned
"Forward Looking Statements" at the beginning of this Form 10-Q Quarterly
Report for a discussion of the limitations on Old Kent's responsibility for
such statements. In this discussion, "near term" means a period of one year
following the date of the most recent balance sheet contained in this report.
<PAGE>
PART II OTHER INFORMATION
Item 1. Legal Proceedings
Old Kent's subsidiaries are parties, as plaintiff or defendant, to a number of
legal proceedings. Except as described below, all of these proceedings are
considered to be ordinary routine litigation incidental to their business, and
none is considered to be a material pending legal proceeding.
Old Kent Bank was named, among other defendants, in a lawsuit filed by Grow
Group, Inc. ("Grow") in 1994 in the United States District Court for the
Western District of Michigan. Principal defendants in the case included
Perrigo Company ("Perrigo"), Michael J. Jandernoa (Chairman of the Board and
Chief Executive Officer of Perrigo, and presently a director of Old Kent),
certain other persons who are believed to have been directors and officers of
Perrigo, Old Kent Bank, and National Bank of Detroit ("NBD"; now NBD Bank),
with which Old Kent Bank participated in the financing arrangement that was in
part the subject of the case. In 1988, Old Kent Bank participated in a credit
facility that partially financed the purchase of all of the stock of Perrigo
from Grow by individual and corporate defendants in the case. In its
complaint, Grow alleged that NBD and Old Kent Bank conspired with and aided
and abetted the individual defendants in certain breaches of duties, fraud,
and usurpation of corporate opportunity; misappropriated and used confidential
and proprietary information for their own benefit; and breached a relationship
of trust and confidence with Grow. Grow demanded judgment against the
defendants, jointly and severally, for damages in an unspecified but apparently
material amount, profits and benefits accruing to the defendants as a result of
the alleged wrongful acts, punitive damages, interest, and costs. On March 24,
1998, the court dismissed Old Kent Bank from the case on Old Kent Bank's motion
for summary judgment, finding that "Plaintiff has not come forward with any
evidence to support its claims" against Old Kent Bank. On July 17, 1998, Grow
filed an appeal of this decision, and the case is currently in the preliminary
stage of the appeal process.
<PAGE>
Item 2. Changes in Securities and Use of Proceeds
On April 20, 1998, the corporation's shareholders approved an amendment to
the corporation's Restated Articles of Incorporation to increase the number
of authorized shares of common stock from 150 million shares to 300 million
shares.
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
(a) The following exhibits are filed as part of this report:
Number Exhibit
3(i) Restated Articles of Incorporation
previously filed as an exhibit to the
Corporation's Form S-4 Registration
Statement (#333-56209) filed June 5,
1998. Here incorporated by reference.
12 Ratio of Earnings to Fixed Charges
27 Financial Data Schedule
(b) The following reports on Form 8-K were filed during the second
quarter of 1998:
Date of Event Item Financial Statements
Reported Reported Filed
April 23, 1998 5,7
June 15, 1998 7
<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, 1998 David J. Wagner
Chairman of the Board, President and
Chief Executive Officer
Date: August 12, 1998 Robert H. Warrington
Vice Chairman of the Board and
Chief Financial Officer
<PAGE>
EXHIBIT INDEX
3(i) Restated Articles of Incorporation previously filed as an exhibit
to the Corporation's Form S-4 Registration Statement
(#333-56209) filed June 5, 1998. Here incorporated by
reference.
12 Ratio of Earnings to Fixed Charges
27 Financial Data Schedule
<TABLE>
<CAPTION>
Exhibit 12
OLD KENT FINANCIAL CORPORATION
Ratio of Earnings to Fixed Charges
Six Months Ended
June 30
Years Ended December 31
(dollar amounts in thousands)
1998 1997 1997 1996 1995 1994 1993
<S> <C> <C> <C> <C> <C> <C> <C>
Earnings:
Income before income taxes $147,182 $142,017 $273,885 $238,722 $214,613 $205,702 $198,298
Fixed charges 68,326 42,916 99,490 70,477 70,682 38,646 22,137
$215,508 $184,933 $373,375 $309,199 $285,295 $244,348 $220,435
Fixed charges:
Interest expense
(other than interest on deposits) $ 68,306 $ 42,896 $ 99,449 $ 70,436 $ 70,641 $ 38,605 $ 22,096
Interest factor in rent expense -- -- -- -- -- -- --
Other 20 20 41 41 41 41 41
$ 68,326 $ 42,916 $ 99,490 $ 70,477 $ 70,682 $ 38,646 $ 22,137
Ratio of earnings to fixed charges,
excluding interest on deposits 3.15 4.31 3.75 4.39 4.04 6.32 9.96
Including Interest On Deposits
Earnings:
Income before income taxes $147,182 $142,017 $273,885 $238,722 $214,613 $205,702 $198,298
Fixed charges 258,018 239,945 495,383 453,060 433,167 303,592 264,605
$405,200 $381,962 $769,268 $691,782 $647,780 $509,294 $462,903
Fixed charges:
Interest expense $257,998 $239,925 $495,342 $453,019 $433,126 $303,551 $264,564
Interest factor in rent expense -- -- -- -- -- -- --
Other 20 20 41 41 41 41 41
$258,018 $239,945 $495,383 $453,060 $433,167 $303,592 $264,605
Ratio of earnings to fixed charges,
including interest on deposits 1.57 1.59 1.55 1.53 1.50 1.68 1.75
The Corporation had no preferred stock outstanding during any period presented.
Accordingly, its ratio of earnings to combined fixed charges and preferred stock
dividends is the same as its ratio of earnings to fixed charges.
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND> This schedule contains summary financial information extracted from
SEC Form 10-Q and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-98
<PERIOD-START> JAN-01-98
<PERIOD-END> JUN-30-98
<CASH> 554,155
<INT-BEARING-DEPOSITS> 16,695
<FED-FUNDS-SOLD> 53,245
<TRADING-ASSETS> 10
<INVESTMENTS-HELD-FOR-SALE> 2,107,486
<INVESTMENTS-CARRYING> 687,841
<INVESTMENTS-MARKET> 722,530
<LOANS> 8,142,861
<ALLOWANCE> 163,983
<TOTAL-ASSETS> 13,740,071
<DEPOSITS> 10,480,979
<SHORT-TERM> 1,865,232
<LIABILITIES-OTHER> 229,154
<LONG-TERM> 200,000
<COMMON> 94,157
0
0
<OTHER-SE> 870,549
<TOTAL-LIABILITIES-AND-EQUITY> 13,740,071
<INTEREST-LOAN> 427,744
<INTEREST-INVEST> 95,540
<INTEREST-OTHER> 914
<INTEREST-TOTAL> 524,198
<INTEREST-DEPOSIT> 189,692
<INTEREST-EXPENSE> 257,998
<INTEREST-INCOME-NET> 266,200
<LOAN-LOSSES> 26,439
<SECURITIES-GAINS> 2,355
<EXPENSE-OTHER> 262,765
<INCOME-PRETAX> 147,182
<INCOME-PRE-EXTRAORDINARY> 147,182
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 96,129
<EPS-PRIMARY> 1.01
<EPS-DILUTED> 1.00
<YIELD-ACTUAL> 4.21
<LOANS-NON> 66,249
<LOANS-PAST> 12,935
<LOANS-TROUBLED> 3,019
<LOANS-PROBLEM> 69,268
<ALLOWANCE-OPEN> 157,417
<CHARGE-OFFS> 27,921
<RECOVERIES> 8,523
<ALLOWANCE-CLOSE> 163,983
<ALLOWANCE-DOMESTIC> 163,983
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
