SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
__________________________
FORM 10-Q
_X_ QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1995
___ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM _____________ TO _____________.
Commission File No. 0-16444
SHORELINE FINANCIAL CORPORATION
(Exact Name of Registrant as Specified in its Charter)
Michigan 38-2758932
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
823 Riverview Drive
Benton Harbor, Michigan 49022
(Address of Principal Executive Offices) (Zip Code)
(616) 927-2251
(Registrant's Telephone Number, Including Area Code)
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 ________
As of July 31, 1995 there were 5,259,775 issued and outstanding shares of
the registrant's Common Stock.
SHORELINE FINANCIAL CORPORATION
FORM 10-Q
INDEX
Page
Number
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Condensed Consolidated Balance Sheet,
June 30, 1995 and December 31, 1994. . . . . . . . . . . 1-2
Condensed Consolidated Statement of Income,
Three Months and Six Months Ended June 30, 1995 and 1994. .3
Condensed Consolidated Statement of Cash Flows,
Six Months Ended June 30, 1995 and 1994 . . . . . . . . .4-5
Notes to Condensed Consolidated Financial Statements. . .6-8
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations. . . . . .9-14
PART II. OTHER INFORMATION. . . . . . . . . . . . . . . . . . . . . .15-16
Item 1. Legal Proceedings . . . . . . . . . . . . . . . . . . 15
Item 4. Submission to Matters to a Vote of Security-Holders . 15
Item 6. Exhibits and Reports on Form 8-K. . . . . . . . . . . 15
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
PART 1. FINANCIAL INFORMATION
ITEM 1. Financial Statements.
<TABLE>
SHORELINE FINANCIAL CORPORATION
CONSOLIDATED BALANCE SHEET
<CAPTION>
June 30, December 31,
1995 1994
<S> <C> <C>
ASSETS
Cash and Due from Banks $ 27,174,597 $ 31,287,807
Federal Funds Sold 6,500,000 20,350,000
Total Cash and Cash Equivalents 33,674,597 51,637,807
Securities Held to Maturity
(Approximate fair values of
$68,392,000 and $47,949,000
at June 30, 1995 and
December 31, 1994 respectively) 66,776,641 48,474,113
Securities Available for Sale
(Carried at fair value
in 1995 and 1994) 83,376,639 81,175,780
Total Loans 441,404,649 436,529,139
Less Allowance for Loan Losses 6,333,710 5,951,969
Net Loans 435,070,939 430,577,170
Premises and Equipment-Net 10,006,495 9,875,374
Other Assets 10,553,435 12,113,418
Total Assets $639,458,746 $633,853,662
LIABILITIES & SHAREHOLDERS'
EQUITY
Liabilities
Deposits:
Non Interest-Bearing $ 62,915,117 $ 70,973,801
Interest-Bearing 503,921,649 495,121,822
Total Deposits 566,836,766 566,095,623
Securities Sold Under
Agreements to Repurchase 2,906,653 2,875,112
Other Liabilities 3,393,620 3,674,459
Long-Term Debt 5,000,000 5,000,000
Total Liabilities 578,137,039 577,645,194
</TABLE>
<TABLE>
SHORELINE FINANCIAL CORPORATION
CONSOLIDATED BALANCE SHEET - Continued
<CAPTION>
June 30, December 31,
1995 1994
<S> <C> <C>
Shareholders' Equity
Common Stock:
10,000,000 shares authorized;
5,259,775 and 4,989,483
shares issued at June 30,
1995 and December 31, 1994
respectively
Additional Paid-in Capital 45,920,508 45,591,999
Net Unrealized Gain(Loss)
on Securities Available
for Sale, Net of Tax Effect 1,479,439 (1,016,801)
Retained Earnings 13,921,760 11,633,270
Total Shareholders' Equity 61,321,707 56,208,468
Total Liabilities &
Shareholders' Equity $639,458,746 $633,853,662
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
-2-
<TABLE>
SHORELINE FINANCIAL CORPORATION
CONSOLIDATED STATEMENT OF INCOME
<CAPTION>
Three Months Ended Six Months Ended
June 30 June 30
1995 1994 1995 1994
<S> <C> <C> <C> <C>
INTEREST INCOME
Interest and
Fees on Loans $10,328,320 $ 8,772,278 $20,094,804 $16,895,463
Interest on
Federal Funds
Sold 317,697 80,606 610,183 199,081
Interest on
Investments 2,411,842 1,946,172 4,613,828 3,732,873
Total Interest
Income 13,057,859 10,799,056 25,318,815 20,827,417
INTEREST EXPENSE
Interest on
Deposits 6,014,475 4,371,590 11,496,512 8,611,077
Other Interest
Expense 94,476 83,665 181,240 157,882
Total
Interest
Expense 6,108,951 4,455,255 11,677,752 8,768,959
NET INTEREST
INCOME 6,948,908 6,343,801 13,641,063 12,058,458
Provision for
Loan Losses 200,000 174,993 400,000 349,993
NET INTEREST
INCOME AFTER
PROVISION FOR
LOAN LOSSES 6,748,908 6,168,808 13,241,063 11,708,465
OTHER INCOME
Service Charges
on Deposit
Accounts 458,824 482,805 916,108 902,178
Trust Income 357,320 305,454 689,887 649,256
Investment
Securities
Transactions (33,743) (1,064) (64,599) 95,908
-3-
Other Operating
Income 301,210 227,711 590,434 581,498
Total Other
Income 1,083,611 1,014,906 2,131,830 2,228,840
OTHER EXPENSES
Personnel 2,507,810 2,502,464 4,958,295 4,912,529
Occupancy 287,821 297,112 592,635 601,423
Equipment 461,827 396,975 888,653 797,470
Other
Operating
Expenses 1,754,752 1,723,029 3,316,460 3,297,907
Total
Other
Expense 5,012,210 4,919,580 9,756,043 9,609,329
INCOME BEFORE
INCOME TAXES 2,820,309 2,264,134 5,616,850 4,327,976
Federal Income
Tax Expense 724,000 522,000 1,478,000 977,000
NET INCOME $ 2,096,309 $ 1,742,134 $ 4,138,850 $ 3,350,976
EARNINGS PER
SHARE $0.40 $0.33 $0.79 $0.64
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
-4-
<TABLE>
SHORELINE FINANCIAL CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
<CAPTION>
Six Months Ended
June 30
1995 1994
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
NET INCOME $ 4,138,850 $ 3,350,976
Adjustments to Reconcile Net Income
to Net Cash from Operating Activities:
Depreciation and Amortization 712,390 646,964
Provision for Loan Losses 400,000 349,993
Net Amortization and Accretion
on Securities Held to Maturity 183,295 430,209
Net Amortization and Accretion
on Securities Available for Sale 206,170 643,934
Amortization of Goodwill and
Related Core Deposit Intangible 127,404 131,164
(Gains)Loss on Sales of Securities
Available for Sale 76,599 (95,898)
Gains on Calls of Securities Held
to Maturity (12,000) 0
Loss on Disposal of Premises
and Equipment 894 5,910
(Increase)Decrease in Income
Taxes Receivable 148,000 (251,436)
Increase(Decrease) in Deferred
Loan Fees (162,704) 42,593
Increase in Interest Receivable (111,397) (273,663)
Increase in Interest Payable 110,874 38,295
Increase in Other Assets (145,967) (1,106)
Decrease in Other Liabilities (135,715) (34,964)
Total Adjustments 1,397,843 1,631,995
NET CASH FROM OPERATING ACTIVITIES 5,536,693 4,982,971
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from Sales of Securities
Available for Sale 3,181,131 6,315,023
Proceeds from Maturities, Calls
and Principal Reductions of
Securities Held to Maturity 2,970,785 11,203,747
Proceeds from Maturities, Calls
and Principal Reductions of
Securities Available for Sale 3,425,002 11,352,288
Purchase of Securities Held to Maturity (21,444,608) (7,005,418)
Purchase of Securities Available for Sale (5,307,576) (25,564,369)
Net Increase in Loans (4,878,422) (16,852,533)
Recoveries of Loans Charged-Off 147,357 139,652
-5-
Premises and Equipment Expenditures (867,255) (1,739,427)
Proceeds from Disposal of
Premises and Equipment 22,850 16,000
NET CASH FROM INVESTING ACTIVITIES (22,750,736) (22,135,037)
</TABLE>
-6-
<TABLE>
SHORELINE FINANCIAL CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS - Continued
<CAPTION>
Six Months Ended
June 30
1995 1994
<S> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Net Increase (Decrease) in Deposits 741,143 (9,499,314)
Net Decrease in Borrowed Funds 31,541 444,641
Dividends Paid (1,850,360) (1,594,465)
Proceeds from Shares Issued
Under Dividend Reinvestment Plan 304,691 253,976
Proceeds from Shares Issued Under
Stock Option Plan 23,818 93,785
NET CASH FROM FINANCING ACTIVITIES (749,167) (10,301,377)
NET CHANGE IN CASH AND CASH EQUIVALENTS (17,963,210) (27,453,443)
Cash and Cash Equivalents at
Beginning of Year 51,637,807 61,028,786
Cash and Cash Equivalents at June 30 $ 33,674,597 $ 33,575,343
CASH PAID DURING THE YEAR FOR:
Interest $ 11,566,878 $ 8,830,489
Income Taxes $ 1,330,000 $ 1,228,436
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements
-7-
SHORELINE FINANCIAL CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - Summary of Significant Accounting Policies
Basis of Presentation
The accompanying unaudited condensed consolidated financial
statements were prepared in accordance with Rule 10-01 of Regulation S-X
and the instructions for Form 10-Q and, therefore, do not include all
disclosures required by generally accepted accounting principles for
complete presentation of financial statements. In the opinion of
management, the condensed consolidated financial statements contain all
adjustments (consisting only of normal recurring accruals) necessary to
present fairly the financial condition of Shoreline Financial Corporation
as of June 30, 1995 and December 31, 1994, and the results of its opera-
tions for the three and six months ended June 30, 1995 and 1994, and its
cash flows for the six months then ended. The results of operations for
the six months ended June 30, 1995 are not necessarily indicative of the
results to be expected for the full year.
Principles of Consolidation
The accompanying consolidated financial statements include the
accounts of Shoreline Financial Corporation and its wholly owned
subsidiary, Shoreline Bank. All material intercompany accounts and
transactions have been eliminated in consolidation.
Investments in Debt and Equity Securities
Securities are classified into held to maturity, available for
sale and trading categories. Held to maturity securities are those which
the Corporation has the positive intent and ability to hold to maturity,
and are reported at amortized cost. Available for sale securities are
those which the Corporation may decide to sell if needed for liquidity,
asset-liability management or other reasons. Available for sale securities
are reported at fair value, with unrealized gains or losses included as a
separate component of equity, net of tax. Trading securities are bought
principally for sale in the near term, and are reported at fair value with
unrealized gains or losses included in earnings. The Corporation did not
hold any securities considered for this category at any time during the
second quarter of 1995.
Realized gains or losses are determined based on the amortized
cost of the specific security sold.
-8-
During the six-month period ended June 30, 1995, the proceeds
from sales of available for sale securities were $3,181,131, with gross
realized gains of $16,154 and gross realized losses of $92,753 from those
sales. For this period, the change in net unrealized holding gains on
available for sale securities was an increase of $3.8 million. There were
no sales or transfers of securities classified as held to maturity.
Intangible Assets
Goodwill represents the excess of the purchase price over the net
value of tangible assets acquired and related core deposit intangibles
identified in branch acquisitions. Goodwill is being amortized on a
straight-line basis for a period of ten years. The related core deposit
intangibles are amortized on an accelerated basis over the estimated life
of the deposits acquired. Goodwill totaled $202,388 and $222,290 at June
30, 1995 and December 31, 1994, respectively. Core deposit intangibles
totaled $2,261,536 and $2,369,038 at June 30, 1995 and December 31, 1994,
respectively. These amounts are included in Other Assets in the
accompanying balance sheet.
Income Taxes
Income tax expense for the quarter ended June 30, 1995 and 1994
is based upon the liability method, according to Statement of Financial
Accounting Standard No. 109, "Accounting for Income Taxes". Certain
income tax and expense items are reported in different time periods for
tax purposes. Deferred or prepaid taxes are recorded in the balance sheet
for these temporary differences.
Earnings Per Share
Earnings per share is computed by dividing net income by the
weighted average number of common shares outstanding and common equivalent
shares with a dilutive effect. On February 16, 1994, the Board of
Directors declared a three-for-two stock split, effective May 31, 1994, to
shareholders of record on May 16, 1994. On May 4, 1995, the Board of
Directors declared a 5% stock dividend, payable June 15, 1995, to
shareholders of record on June 1, 1995. Common equivalent shares are
shares which may be issuable to employees upon exercise of outstanding
stock options. The average number of shares was 5,252,830 in the second
quarter of 1995, and 5,217,122 in the second quarter of 1994. The average
number of shares was 5,247,584 in the six months ended June 30, 1995 and
5,209,870 in the six months ended June 30, 1994.
-9-
NOTE 2 - Income Taxes
Components for the provision of federal income taxes are as follows:
<TABLE>
<CAPTION>
June 30, 1995
<S> <C>
Taxes currently payable $ 2,070,000
Deferred tax benefit (592,000)
Income Tax Expense $ 1,478,000
</TABLE>
The deferred income taxes are due primarily to the temporary difference
related to depreciation, bad debt deductions, mark-to-market of securities
held for sale and deferred loan fees.
The difference between the provision for income taxes shown on the
statement of income and amounts computed by applying the statutory federal
income tax rate to income before tax expense is as follows:
<TABLE>
<CAPTION>
June 30, 1995
<S> <C>
Income tax calculated at statutory
federal rate of 34% $ 1,910,000
Increase (decrease) due to tax effect
of Tax-exempt income (575,000)
Nondeductible expense and other 143,000
Income Tax Expense $ 1,478,000
</TABLE>
The components of the net deferred tax asset recorded in the balance sheet
as of June 30, 1995 are as follows:
<TABLE>
<CAPTION>
<S> <C>
Total deferred tax liabilities $(1,307,000)
Total deferred tax assets 2,727,000
Total valuation allowance 0
Net Deferred Tax Asset $ 1,420,000
</TABLE>
-10-
ITEM 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Financial Condition
Total deposits averaged $575.9 million during the second quarter
of 1995. This represents a $12 million or 2.1% increase over average
deposits during the first quarter of 1995. A comparison of the quarterly
averages for the past three quarters follows:
<TABLE>
<CAPTION>
Avg Bal Avg Bal Avg Bal
(000s) 2nd Qtr 95 1st Qtr 95 4th Qtr 94
<S> <C> <C> <C>
Non-Interest Bearing
Demand Deposits $ 64,894 $ 62,454 $ 65,885
Interest-Bearing
Demand Deposits 70,441 67,907 55,602
Savings Deposits 184,261 184,703 191,074
Time Deposits 255,390 247,797 249,070
Total $574,986 $562,861 $561,631
</TABLE>
Growth in average time deposits was the largest contributor
toward the second quarter's growth in average deposits. Average time
deposits increased $7.6 million or 3.1% over the first quarter's average.
Approximately $4.6 million of this increase was in time deposits less than
$100,000. Continued success in promoting an interest-bearing demand deposit
product geared toward municipal depositors helped to produce growth of $2.5
million in this category. In addition, average non-interest bearing demand
deposits returned to the level held during the fourth quarter of 1994. At
June 30, 1995, total deposits had declined to $566.8 million, primarily
the result of reductions in deposits in the time and savings deposit
categories. Deposits totaled $566.1 million on December 31, 1994.
Average total loans increased to $441.8 million during the
second quarter of 1995 compared to the previous quarter's average of
$436.3 million. All three loan categories contributed toward this
increase. Increased activity in consumer lending, primarily auto and
home equity products, helped to grow the average consumer loans
portfolio by $2.5 million during the second quarter of 1995. Average
commercial loans increased $2.1 million, while average mortgage loans
grew $.9 million. At June 30, 1995, total loans amounted to $441.4
million, an increase of $4.9 million over December 31, 1994.
Total investments averaged $143.4 million in the second
quarter of 1995. This compares to the first quarter's average of $131.8
million. Increased investments in U.S. government agency securities
provided the majority of this increase. Federal funds sold averaged
$20.9 million during the second quarter of 1995. This is relatively
-11-
unchanged from the first quarter's average and represents approximately
3.2% of total average assets during that period.
Total non-performing assets for the second quarter of 1995
were unchanged from the first quarter. Non-performing assets totaled
$1.8 million at June 30, 1995 as well as March 31, 1995. Non-performing
assets include loans that are classified for regulatory purposes as
contractually past due 90 days or more, on non-accrual status or
"troubled debt restructurings" and other real estate owned. June 30,
1995's level of non-performing assets represents .40% of Shoreline's
total loans and compares to December 31, 1994's ratio of .51%.
During the second quarter of 1995, Shoreline experienced net loan
charge-offs of only $2,336. This represents less than .01% of total average
loans during the quarter. This low level of net charge-offs combined with
expensing $200,000 in the provision for loan losses during the quarter
helped to increase the Corporation's allowance for loan losses to
$6,333,710 at June 30, 1995. At this level, the allowance for loan losses
represents 1.43% of total loans and provides a coverage of over 3.6 times
the level of non-performing assets identified at June 30, 1995.
Future Transactions
In previous filings, delays in consummating the pending
agreements to purchase the South Haven, Michigan branch from Great Lakes
Bancorp and the Adamsville, Michigan branch from Old Kent Bank were noted.
The lack of determination by regulatory authorities regarding these
transactions continues to delay these acquisitions. Total deposits
represented by these two branches total approximately $20 million.
Liquidity and Rate Sensitivity
During the second quarter of 1995, Shoreline's loan to deposit
ratio was 76.8%. This represents a slight decline from the first quarter
ratio of 77.5%. As noted previously, average federal funds sold represented
3.2% of the Corporation's total assets, which compares to the first
quarter's ratio of 2.7%. Approximately $83 million or 55% of Shoreline's
total securities portfolio was classified as available for sale on June
30, 1995 and $.3 million of loans were classified as held for sale. On
June 30, 1995, Shoreline had commitments to make or purchase loans,
including the unused portion of lines of credit, totaling $73.2 million.
-12-
On June 30, 1995, the cumulative funding gaps of interest-earning
assets and interest-bearing liabilities for selected maturity periods are
illustrated as follows:
<TABLE>
<CAPTION>
Repriceable or Maturing Within:
0 to 3 0 to 12 0 to 5
(000s) Months Months Years
<S> <C> <C> <C>
Interest-earning assets
Loans $ 156,095 $ 233,356 $400,008
Securities 10,000 25,717 117,544
Federal funds sold 6,500 6,500 6,500
Total $ 172,595 $ 265,573 $524,052
Interest-bearing
liabilities
Time deposits $ 46,352 $ 156,923 $249,756
Demand deposits 69,323 69,323 69,323
Savings deposits 182,448 182,448 182,448
Other borrowings 2,907 2,907 7,907
Total $ 301,030 $ 411,601 $509,434
Asset/(Liability) Gap $(128,435) $(146,028) $ 14,618
</TABLE>
This table indicates that total liabilities maturing or repricing
within one year exceed assets maturing or repricing within one year by
$128.4 million. The same presentation as of December 31, 1994 produced a
liability gap of $115.9 million. Competitive pressures and other influences
may cause certain assets and liabilities to mature or reprice in other
periods or at different volumes than indicated above. Specifically, all
demand and savings accounts are presented as repricing in the 0-3 month
period. Management believes that these types of accounts are not as
sensitive to changes in interest rates in the short term as this
presentation would indicate and that the positive funding gap in the 1-5
year period is more reflective of the Corporation's experience during 1994
and 1995.
Capital Resources
Total shareholders' equity amounted to $61.3 million on June 30,
1995. Included in this total are net unrealized gains on available for sale
securities of $1,479,000. During the second quarter of 1995, the
Corporation's Board of Directors approved and paid a 5% stock dividend and
a cash dividend of $.18 per share. A summary of Shoreline's capital
position follows:
-13-
<TABLE>
<CAPTION>
June 30, 1995 December 31, 1994
<S> <C> <C>
Equity to assets 9.59% 9.02%
Tier I leverage 9.01% 8.65%
Risk-based:
Tier I Capital 14.28% 13.62%
Total Capital 15.53% 14.87%
</TABLE>
Results of Operations
Net income for the quarter ended June 30, 1995 was $2,096,309,
an increase of 20.3% over the same period in 1994. Increased net interest
income produced the increase in earnings over the prior year. Shoreline's
net income for the preceding quarter was $2,042,541. For the six months
ended June 30, 1995, net income totaled $4,138,850, which represents an
increase of $787,874 or 23.5% over the same period in 1994. Again,
increased net interest income helped to produce the improved results. The
following table illustrates the effect that changes in rates and volumes of
earning assets and interest-bearing liabilities had on net interest income:
<TABLE>
THREE MONTHS ENDED JUNE 30
<CAPTION>
(000s) 1995 1994
<S> <C> <C>
Interest Income (taxable equivalent) $ 13,414 $ 11,173
Interest Expense 6,109 4,455
Net Interest Income $ 7,305 $ 6,718
Average Volume:
Interest-Earning Assets $606,249 $574,194
Interest-Bearing Liabilities 518,003 497,747
Net Differential $ 88,246 $ 76,447
Average Yields/Rates:
Yield on earning assets 8.85% 7.78%
Rate paid on liabilities 4.72% 3.58%
Interest Spread 4.13% 4.20%
Net Interest Margin 4.82% 4.68%
</TABLE>
The change in net interest income (in thousands) is attributable
to the following:
-14-
<TABLE>
<CAPTION>
Volume Rate Inc/(Dec)
<S> <C> <C> <C>
Interest-Earning Assets $647 $1,594 $2,241
Interest-Bearing Liabilities 187 1,467 1,654
Net Interest $460 $127 $ 587
</TABLE>
<TABLE>
SIX MONTHS ENDED JUNE 30
<CAPTION>
(000s) 1995 1994
<S> <C> <C>
Interest Income (taxable equivalent) $ 26,053 $ 21,589
Interest Expense 11,678 8,769
Net Interest Income $ 14,375 $ 12,820
Average Volume:
Interest-Earning Assets $597,719 $568,510
Interest-Bearing Liabilities 512,916 487,020
Net Differential $ 84,803 $ 81,490
Average Yields/Rates:
Yield on earning assets 8.72% 7.59%
Rate paid on liabilities 4.55% 3.58%
Interest Spread 4.17% 4.01%
Net Interest Margin 4.81% 4.51%
</TABLE>
The change in net interest income (in thousands) is attributable
to the following:
<TABLE>
<CAPTION>
Volume Rate Inc/(Dec)
<S> <C> <C> <C>
Interest-Earning Assets $1,145 $3,319 $4,464
Interest-Bearing Liabilities 469 2,440 2,909
Net Interest $ 676 $ 879 $1,555
</TABLE>
The Corporation expensed $200,000 for the provision for loan
losses in the second quarter of 1995, the same level as the first quarter.
Shoreline provided $175,000 in the first and second quarters of 1994. The
provision for loan losses is based upon loan loss experience and such other
factors which, in management's judgment, deserve current recognition in
maintaining an adequate allowance for loan losses.
-15-
Total other income for the quarter ended June 30, 1995 amounted
to $1,083,611, an increase of $68,705 over the second quarter in 1994.
Increased trust income, gains on the sale of mortgage loans and gains on
the sale of other real estate owned offset the decline in deposit service
charge income of $23,981 and increased losses on the sale of securities of
$32,679. For the six months ended June 30, 1995, total other income
amounted to $2,131,830, which is a decline of $97,010 from the same period
in 1994. Losses from the sale of securities totaling $64,599 were recorded
during the first six months of 1995, which compares to gains recorded
during the same period in 1994 of $95,908, a change of over $130,000. This
negative variance was offset by increased trust income of $40,000 and
slight increases in service charge and other income.
Total other expense amounted to $5,012,210 for the quarter ended
June 30, 1995. This represents a modest increase of 1.9% or $92,630 over
the same period in 1994. Increased equipment depreciation and repair
expense accounted for the majority of this increase. Personnel expense
remained virtually unchanged in comparison to the prior year. For the six
months ended June 30, 1995, total other expense amounted to $9,756,043,
which compares to $9,609,309 recorded during the same period in 1994, an
increase of only 1.5%. Equipment and personnel expense accounted for the
modest increase in this area. Shoreline's ratio of total other expenses to
total average assets decreased from 3.17% during the six months ended June
30, 1994 to 3.08% in the six months ended June 30, 1995. Over the same
period of time, Shoreline's efficiency ratio has declined from 63.92% to
58.39%. The Federal Deposit Insurance Corporation recently announced a
reduction in the rates it charges banks for deposit insurance. This
reduction in rates is expected to favorably affect the Corporation's
results of operations during the second half of 1995.
In summary, Shoreline's net income of $2,096,309 for the second
quarter of 1995 produced a return on average shareholders' equity of 14.14%
and a return on average assets of 1.30%. This compares to the prior year's
ratios of 12.78% and 1.13%, respectively. On a year-to-date basis,
Shoreline's return on average shareholders' equity stands at 14.18% and its
return on average assets is 1.30%. 1994's ratios were 12.52% and 1.10%,
respectively. Earnings per share through June 30, 1995 was $.79 and
dividends per share was $.35, which produces a dividend payout ratio of 44%.
Earnings per share through June 30, 1994 was $.64 and dividends per share
was $.30.
-16-
PART II - OTHER INFORMATION
ITEM 1. Legal Proceedings
Shoreline Bank is a party, as plaintiff or defendant, to a number
of legal proceedings, none of which is considered material, and all of
which arose in the normal course of its operations.
ITEM 4. Submission of Matters to a Vote of Security Holders.
The information required by this Item was previously reported
in the Corporation's Quarterly Report on Form 10-Q for the quarter ended
March 31, 1995.
ITEM 6. Exhibits and Reports on Form 8-K
(a) Exhibits. The following documents are filed as exhibits to
this report on Form 10-Q:
Exhibit
Number Document
3.1 Restated Articles of Incorporation. Previously
filed as Exhibit 1(a) to the registrant's Quarterly
Report on Form 10-Q for the period ended June 30,
1994. Here incorporated by reference.
3.2 Bylaws. Previously filed as Exhibit 3(b) to the
registrant's Form S-1 Registration Statement filed
March 23, 1990. Here incorporated by reference.
27 Financial Data Schedule
(b) No reports on Form 8-K were filed during the quarter
covered by this report.
-17-
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.
SHORELINE FINANCIAL CORPORATION
(Registrant)
Date August 14, 1995 s/Dan L. Smith
Dan L. Smith
Chairman, President and
Chief Executive Officer
Date August 14, 1995 s/Wayne R. Koebel
Wayne R. Koebel
Executive Vice President,
Chief Financial Officer,
Secretary and Treasurer
-18-
EXHIBIT INDEX
Exhibit
Number Document
3.1 Restated Articles of Incorporation. Previously filed
as Exhibit 1(a) to the registrant's Quarterly Report
on Form 10-Q for the period ended June 30, 1994. Here
incorporated by reference.
3.2 Bylaws. Previously filed as Exhibit 3(b) to the
registrant's Form S-1 Registration Statement filed
March 23, 1990. Here incorporated by reference.
27 Financial Data Schedule
-19-
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND> THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS OF
SHORELINE FINANCIAL CORPORATION FOR THE PERIOD ENDED JUNE 30, 1995
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> JUN-30-1995
<CASH> 27,175
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 6,500
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 83,377
<INVESTMENTS-CARRYING> 66,777
<INVESTMENTS-MARKET> 68,392
<LOANS> 441,405
<ALLOWANCE> 6,334
<TOTAL-ASSETS> 639,459
<DEPOSITS> 566,837
<SHORT-TERM> 2,907
<LIABILITIES-OTHER> 3,394
<LONG-TERM> 5,000
<COMMON> 0
0
0
<OTHER-SE> 61,322
<TOTAL-LIABILITIES-AND-EQUITY> 639,459
<INTEREST-LOAN> 20,095
<INTEREST-INVEST> 4,614
<INTEREST-OTHER> 610
<INTEREST-TOTAL> 25,319
<INTEREST-DEPOSIT> 11,497
<INTEREST-EXPENSE> 11,678
<INTEREST-INCOME-NET> 13,641
<LOAN-LOSSES> 400
<SECURITIES-GAINS> (65)
<EXPENSE-OTHER> 9,756
<INCOME-PRETAX> 5,617
<INCOME-PRE-EXTRAORDINARY> 5,617
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,139
<EPS-PRIMARY> .79
<EPS-DILUTED> .79
<YIELD-ACTUAL> 4.11
<LOANS-NON> 360
<LOANS-PAST> 944
<LOANS-TROUBLED> 1
<LOANS-PROBLEM> 1,401
<ALLOWANCE-OPEN> 5,952
<CHARGE-OFFS> 166
<RECOVERIES> 147
<ALLOWANCE-CLOSE> 6,334
<ALLOWANCE-DOMESTIC> 3,209
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 3,125
</TABLE>
