<PAGE>
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 MARCH 31, 1997
_____ 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 Identification No.)
Incorporation or Organization)
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 April 30, 1997, there were 5,603,718 issued and outstanding shares of
the Registrant's Common Stock.
<PAGE>
SHORELINE FINANCIAL CORPORATION
FORM 10-Q
INDEX
PAGE
NUMBER
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets,
March 31, 1997, and December 31, 1996 3-4
Condensed Consolidated Statements of Income,
Three Months Ended March 31, 1997 and 1996 5
Condensed Consolidated Statements of Cash Flows,
Three Months Ended March 31, 1997 and 1996 6-7
Notes to Condensed Consolidated Financial Statements 8-10
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 11-15
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 16
SIGNATURES 17
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<PAGE>
PART 1. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
<TABLE>
SHORELINE FINANCIAL CORPORATION
CONSOLIDATED BALANCE SHEETS
<CAPTION>
MARCH 31, DECEMBER 31,
1997 1996
------------ ------------
(unaudited)
<S> <C> <C>
ASSETS
Cash and due from banks $ 37,740,900 $ 38,266,519
Interest-earning deposits 27,172,520 18,142,151
Federal funds sold 8,150,000 5,150,000
------------ ------------
Total cash and cash equivalents 73,063,420 61,558,670
Securities held to maturity
(fair values of $48,449,269 and
$48,588,454 on March 31, 1997 and
December 31, 1996, respectively) 47,831,788 47,582,337
Securities available for sale (carried at fair value) 99,098,564 90,254,236
Total loans 499,761,522 500,591,353
Less allowance for loan losses 6,875,075 6,894,945
------------ ------------
Net loans 492,886,447 493,696,408
Premises and equipment, net 11,084,160 10,975,483
Other assets 12,995,188 12,027,685
------------ ------------
Total Assets $736,959,567 $716,094,819
============ ============
LIABILITIES & SHAREHOLDERS' EQUITY
Liabilities
Deposits:
Non interest-bearing $ 69,431,471 $ 74,142,067
Interest-bearing 562,409,819 542,335,458
------------ ------------
Total deposits 631,841,290 616,477,525
Securities sold under agreements to repurchase 6,387,242 7,166,563
Other liabilities 5,165,346 5,032,529
FHLB advances 23,000,000 18,000,000
------------ ------------
Total Liabilities 666,393,878 646,676,617
------------ ------------
</TABLE>
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<PAGE>
<TABLE>
SHORELINE FINANCIAL CORPORATION
CONSOLIDATED BALANCE SHEETS - CONTINUED
<CAPTION>
MARCH 31, DECEMBER 31,
1997 1996
------------ ------------
(unaudited)
<S> <C> <C>
Shareholders' Equity
Common Stock:
10,000,000 shares authorized;
5,603,718 and 5,555,672 shares issued
at March 31, 1997 and December 31, 1996,
respectively
Additional Paid-in Capital 57,306,358 56,388,553
Stock Incentive Plan (unearned shares) (586,040)
Unrealized gain on securities
available for sale, net 825,296 1,378,327
Retained earnings 13,020,075 11,651,322
------------ ------------
Total Shareholders' Equity 70,565,689 69,418,202
------------ ------------
Total Liabilities & Shareholders' Equity $736,959,567 $716,094,819
============ ============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
-4-
<PAGE>
<TABLE>
SHORELINE FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
-------------------------------
1997 1996
----------- -----------
<S> <C> <C>
INTEREST INCOME
Loans, including fees $10,962,075 $10,646,740
Securities 2,494,778 2,419,061
Deposits with banks 294,923 46,514
Federal funds sold 126,686 86,665
----------- -----------
Total interest income 13,878,462 13,198,980
----------- -----------
INTEREST EXPENSE
Deposits 6,240,586 6,040,498
Other 321,181 131,237
----------- -----------
Total interest expense 6,561,767 6,171,735
----------- -----------
NET INTEREST INCOME 7,316,695 7,027,245
Provision for loan losses 120,000 150,000
----------- -----------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 7,196,695 6,877,245
----------- -----------
OTHER INCOME
Service charges on deposit accounts 467,711 417,732
Trust fees 403,048 372,688
Securities gains 35,301 70,639
Other 282,831 146,044
----------- -----------
Total other income 1,188,891 1,007,103
----------- -----------
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<PAGE>
OTHER EXPENSES
Personnel 2,693,344 2,641,562
Occupancy 360,273 345,847
Equipment 498,801 474,016
Other 1,296,821 1,174,365
----------- -----------
Total other expense 4,849,239 4,635,790
----------- -----------
INCOME BEFORE INCOME TAXES 3,536,347 3,248,558
Federal income tax expense 994,000 891,000
----------- -----------
NET INCOME $ 2,542,347 $ 2,357,558
=========== ===========
EARNINGS PER SHARE $ .46 $ .43
=========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
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<PAGE>
<TABLE>
SHORELINE FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
-------------------------------
1997 1996
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 2,542,347 $ 2,357,558
Adjustments to reconcile net income to net cash
from operating activities:
Depreciation and amortization 384,259 369,826
Provision for loan losses 120,000 150,000
Net amortization and accretion on securities 80,999 179,172
Amortization of goodwill and related core
deposit intangibles 64,069 70,583
Stock incentive expense 20,210
Gains on sales and calls of securities (35,301) (70,638)
Increase in other assets (746,677) (1,646,259)
Increase in other liabilities 132,817 1,710,881
----------- -----------
NET CASH FROM OPERATING ACTIVITIES 2,562,723 3,121,123
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Net (increase)/decrease in loans 689,961 (17,458,325)
Securities available for sale:
Purchase (12,725,693) (4,952,814)
Proceeds from sale 455,608 701,131
Proceeds from maturities, calls and principal
reductions 2,561,901 6,121,737
Securities held to maturity:
Purchase (3,000,000) (3,115,665)
Proceeds from maturities, calls and principal
reductions 2,730,781 2,272,673
Premises and equipment expenditures (492,936) (457,883)
----------- -----------
NET CASH FROM INVESTING ACTIVITIES (9,780,378) (16,889,146)
----------- -----------
</TABLE>
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<PAGE>
<TABLE>
SHORELINE FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED
(UNAUDITED)
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
------------------------------
1997 1996
----------- -----------
<S> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in deposits 15,363,765 11,086,939
Net decrease in short-term borrowing (779,321) (1,117,609)
Proceeds from FHLB advances 9,000,000 7,000,000
Repayment of FHLB advances (4,000,000)
Dividends paid (1,173,594) (1,051,070)
Proceeds from shares issued 311,555 224,310
Payments to retire common stock (354,726)
----------- -----------
NET CASH FROM FINANCING ACTIVITIES 18,722,405 15,787,844
----------- -----------
NET CHANGE IN CASH AND CASH EQUIVALENTS 11,504,750 2,019,821
Cash and Cash Equivalents at Beginning of Year 61,558,670 42,760,198
----------- -----------
Cash and Cash Equivalents at March 31 $73,063,420 $44,780,019
=========== ===========
CASH PAID DURING THE YEAR FOR:
Interest $ 6,554,346 $ 6,152,866
Income Taxes $ 0 $ 170,000
</TABLE>
SUPPLEMENTAL DISCLOSURE OF NONCASH ACTIVITIES:
Shares issued under stock incentive plan in the amount of $606,250.
The accompanying notes are an integral part of these consolidated financial
statements
-8-
<PAGE>
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 March 31, 1997 and December 31, 1996, and the results of its
operations for the three months ended March 31, 1997 and 1996, and its cash
flows for the three months then ended. The results of operations for the
three months ended March 31, 1997 are not necessarily indicative of the
results to be expected for the full year. For further information, refer
to the consolidated financial statements and notes thereto included in
Shoreline's Annual Report on Form 10-K for the year ended December 31, 1996.
The Financial Accounting Standards Board ("FASB") issued Statement
of Financial Accounting Standard ("SFAS") No. 125, "Accounting for Transfers
and Servicing of Financial Assets and Extinguishments of Liabilities."
This pronouncement revises the accounting for transfers of financial
assets, such as loans and securities, and for distinguishing between sales
and secured borrowings. SFAS No. 125, as amended by SFAS No. 127, is
effective for some transactions in 1997 and others in 1998. The effect of
adopting this standard was not material to the consolidated financial
statements of Shoreline Financial Corporation.
In March 1997, the FASB issued SFAS No. 128, "Earnings Per
Share," which revises the accounting requirements for calculating earnings
per share. Effective beginning with year-end 1997, basic earnings per
share will be calculated solely on average common shares outstanding.
Diluted earnings per share will reflect the potential dilution of stock
options and other common stock equivalents. All prior calculations will be
restated to be comparable to the new methods. As the Corporation has not
had significant dilution from stock options, the new calculation methods
will not significantly affect future basic earnings per share and diluted
earnings per share.
PRINCIPLES OF CONSOLIDATION
The accompanying consolidated financial statements include the
accounts of Shoreline Financial Corporation and its wholly owned sub-
-9-
<PAGE>
sidiary, Shoreline Bank, together referred to as "Shoreline." 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
Shoreline has the positive intent and ability to hold to maturity, and are
reported at amortized cost. Available for sale securities are those which
Shoreline 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. Shoreline did not hold any
securities considered for this category at any time during the first
quarter of 1997.
Realized gains or losses are determined based on the amortized
cost of the specific security sold.
During the three month period ended March 31, 1997, the proceeds
from sales of available for sale securities were $455,608, with gross
realized gains of $28,701 from those sales. For this period, net
unrealized holding gains on available for sale securities were $825,000,
a decrease of $838,000. 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 and core deposit intangibles totaled
approximately $2,313,000 and $2,377,000 at March 31, 1997 and December 31,
1996, respectively. These amounts are included in Other Assets in the
accompanying balance sheets.
INCOME TAXES
Income tax expense for the quarters ended March 31, 1997 and 1996
is based upon the asset and liability method. Shoreline records income tax
expense based on the amount of taxes due on its tax return plus deferred
taxes computed based on the expected future tax consequences of temporary
differences between the carrying amounts and tax bases of assets and
liabilities, using enacted rates.
-10-
<PAGE>
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. Common equivalent shares are shares which
may be issuable to employees upon exercise of outstanding stock options.
The average number of shares used in this calculation was 5,580,104 in the
three months ended March 31, 1997 and 5,511,548 in the three months ended
March 31, 1996.
NOTE 2 - INCOME TAXES
Components of the provision for federal income taxes are as follows:
<TABLE>
<CAPTION>
MARCH 31, 1997
--------------
<S> <C>
Taxes currently payable $750,000
Deferred tax expense 244,000
--------
Income Tax Expense $994,000
========
</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>
MARCH 31, 1997
--------------
<S> <C>
Income tax calculated at statutory federal rate of 34% $1,202,000
Increase (decrease) due to tax effect of
Tax-exempt income (218,000)
Nondeductible expense and other 10,000
----------
Income Tax Expense $ 994,000
==========
</TABLE>
-11-
<PAGE>
The components of the net deferred tax asset recorded in the balance sheet
as of March 31, 1997 are as follows:
<TABLE>
<CAPTION>
<S> <C>
Total deferred tax liabilities $ (892,000)
Total deferred tax assets 3,290,000
Total valuation allowance 0
----------
Net Deferred Tax Asset $2,398,000
==========
</TABLE>
-12-
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
FINANCIAL CONDITION
On March 31, 1997, total deposits were $631.8 million, up $15.4
million from December 31, 1996. Total deposits averaged $619.3 million
during the first quarter of 1997, an increase of $6.3 million over the
previous quarter's average of $613.0 million. A comparison of the
quarterly averages for the past two quarters follows:
<TABLE>
<CAPTION>
AVG BAL AVG BAL
1ST QTR 97 4TH QTR 96
---------- ----------
<S> <C> <C>
(000s)
Non-Interest Bearing Demand Deposits $ 66,883 $ 70,978
Interest-Bearing Demand Deposits 101,672 92,809
Savings Deposits 158,222 160,493
Time Deposits 292,693 288,731
-------- --------
Total $619,470 $613,011
======== ========
</TABLE>
Shoreline's growth in average deposits during the first quarter
of 1997 came primarily from the same two sources which funded 1996's
deposit growth. First, Shoreline Bank's Super Public Fund account, an
interest bearing demand deposit account geared toward municipalities,
increased $10.4 million during the first quarter. Secondly, time deposits
greater than $100,000 increased $7.1 million. The growth in these two areas
was offset primarily by declines in non-interest bearing demand deposits
and time deposits less than $100,000.
In addition to the deposit funding sources above, Shoreline
utilized its membership with the Federal Home Loan Bank of Indianapolis
(FHLB) by increasing its borrowings with the FHLB by $5 million over the
quarter ended December 31, 1996. At March 31, 1997, Shoreline had $23
million of advances outstanding with the FHLB.
Total loans averaged $499.0 million during the first quarter of
1997, comparable to the previous quarter's average of $497.9 million. All
loan portfolios remained relatively stable. Commercial and mortgage loan
portfolios increased $1.5 million and $500,000, respectively, while
consumer loans declined $1.0 million.
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<PAGE>
Increased securities and short-term investments provided the
majority of growth in Shoreline's total assets during the first quarter.
Total securities averaged $143.1 million, an increase of $4.6 million from
the previous quarter's average of $138.5 million. Increased investments in
US Government Agency and Treasury securities accounted for this growth.
Interest-earning deposits and Federal funds sold averaged $32.8 million for
the first quarter of 1997, up $4.0 million from the previous quarter. In
anticipation of Shoreline's pending cash acquisition of SJS Bancorp, Inc,
short-term investments have risen to levels higher than those at which
Shoreline normally operates.
Total non-performing assets at March 31, 1997 were $1.6 million,
which represents .33% of Shoreline's total loan portfolio at that date.
This ratio of non-performing assets is down slightly from December 31,
1996's ratio of .38%. 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.
During the first quarter of 1997, Shoreline experienced net loan
charge-offs of $139,870, which represented only .03% of average total loans
for the quarter. The provision for loan losses for the first quarter of
1997 was $120,000 as compared to $150,000 in the fourth quarter of 1996.
At March 31, 1997, Shoreline's allowance for loan losses amounted to
$6,875,075, which provides a coverage of over 4 times the level of non-
performing assets identified at March 31, 1997. As a percentage of total
loans, the allowance for loan losses at March 31, 1997 remains at the
December 31, 1996 level of 1.38%.
FUTURE TRANSACTIONS
On November 7, 1996, Shoreline Financial Corporation and SJS
Bancorp, Inc., ("SJS") announced a signed plan of merger under which SJS
would merge with and into Shoreline. SJS is a holding company with assets
of approximately $150 million and the parent of SJS Federal Savings Bank.
The transaction is expected to be completed during the second quarter of
1997, subject to necessary approvals and other customary conditions. SJS
shareholders will receive $27 in cash for each of their shares of SJS
stock. The total value of the transaction is approximately $25.4 million.
LIQUIDITY AND RATE SENSITIVITY
During the first quarter of 1997, Shoreline's loan to deposit
ratio was 80.6%, down slightly from the previous quarter's ratio of 81.2%.
During the first quarter of 1997, average interest-earning deposits and
Federal funds sold represented 4.6% of Shoreline's total assets. On March
31, 1997, interest-earning deposits and federal funds sold totaled $27
million and $8.2 million, respectively. Approximately $99 million or 67.4%
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<PAGE>
of Shoreline's total securities portfolio was classified as available for
sale on March 31, 1997 and $465,000 of loans were classified as held for
sale. On March 31, 1997, Shoreline had commitments to make or purchase
loans, including the unused portions of lines of credit, totaling $106.3
million.
On March 31, 1997, 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 $ 156,583 $ 236,304 $ 469,599
Securities 10,721 29,069 82,453
Federal funds sold 8,150 8,150 8,150
Interest-earning deposits 27,173 27,173 27,173
--------- --------- ---------
Total $ 202,627 $ 300,696 $ 587,375
========= ========= =========
Interest-Bearing Liabilities
Time deposits $ 69,741 $ 192,253 $ 289,320
Demand and savings deposits 271,212 271,212 271,212
Other borrowings 6,387 19,387 29,387
--------- --------- ---------
Total $ 347,340 $ 482,852 $ 589,919
========= ========= =========
Asset/(Liability) Gap $(144,713) $(182,156) $ (2,544)
========= ========= =========
</TABLE>
As shown, Shoreline had a cumulative liability gap position of
$182.2 million within the one-year time frame. This position suggests that
if market interest rates decline in the next 12 months, Shoreline has the
potential to earn more net interest income. The same presentation as of
December 31, 1996 produced a similar liability gap of $163.9 million within
the one-year time frame. A limitation of the traditional static gap
analysis, however, is that it does not consider the timing or magnitude of
noncontractual repricing. In addition, the static gap analysis treats
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<PAGE>
demand and savings accounts as resistant to rate sensitivity. Because of
these and other limitations of the static gap analysis, Shoreline's
Asset/Liability Committee utilizes simulation modeling as its primary tool
to project how changes in interest rates will impact net interest income.
These models indicate, and management believes, that Shoreline is
positioned such that changes in rates within anticipated ranges and under
anticipated circumstances would not severely alter operating results.
CAPITAL RESOURCES
Total shareholders' equity amounted to $70.6 million on March 31,
1997. Included in this total are net unrealized gains on securities
available for sale totaling $825,000, decreasing approximately $550,000
from December 31, 1996. During the first quarter of 1997, Shoreline's
Board of Directors approved and paid a cash dividend of $.21 per share. On
February 1, 1997, 25,000 shares of common stock were issued under
Shoreline's Stock Incentive Plan of 1996. Shoreline's capital position
remained strong as of March 31, 1997. A summary of its capital position
follows. The pending second quarter acquisition of SJS Bancorp, Inc. will
have the affect of reducing Shoreline's capital ratios. However, management
projects that Shoreline's capital ratios upon consummation of the
transaction will remain above regulatory standards to be considered a
"well-capitalized" institution.
<TABLE>
<CAPTION>
MARCH 31, 1997 DECEMBER 31, 1996
-------------- -----------------
<S> <C> <C>
Equity to assets 9.56% 9.69%
Tier I leverage 9.39% 9.30%
Risk-based:
Tier I Capital 15.38% 15.10%
Total Capital 16.63% 16.33%
</TABLE>
RESULTS OF OPERATIONS
Net income for the quarter ended March 31, 1997 was $2,542,347,
an increase of 7.8%, or $184,789, over the same period in 1996. Revenue
growth, both net interest income and non-interest income, was the primary
reason behind the improved profitability. The following table illustrates
the effect that changes in rates and volumes of earning assets and
interest-bearing liabilities had on net interest income:
-16-
<PAGE>
<TABLE>
THREE MONTHS ENDED MARCH 31
<CAPTION>
1997 1996
---- ----
(000s)
<S> <C> <C>
Interest Income (taxable equivalent) $ 14,051 $ 13,508
Interest Expense 6,562 6,172
-------- --------
Net Interest Income $ 7,489 $ 7,336
======== ========
Average Volume:
Interest-Earning Assets $674,918 $632,926
Interest-Bearing Liabilities 578,172 541,443
-------- --------
Net Differential $ 96,746 $ 91,483
======== ========
Average Yields/Rates:
Yield on earning assets 8.44% 8.56%
Rate paid on liabilities 4.60% 4.57%
-------- --------
Interest Spread 3.84% 3.99%
======== ========
Net Interest Margin 4.50% 4.65%
======== ========
</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 $757 $(214) $543
Interest-Bearing Liabilities 356 34 390
---- ----- ----
Net Interest $401 $(248) $153
==== ===== ====
</TABLE>
-17-
<PAGE>
Shoreline expensed $120,000 for the provision for loan losses in
the first quarter of 1997, reduced from the previous quarter's provision of
$150,000. 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.
Total other income for the quarter ended March 31, 1997 amounted
to $1,188,891, an increase of $181,788 or 18.1% from the first quarter in
1996. Increased service charge, trust and other income more than offset
the $35,000 decline in gains from securities transactions. Service charges
on deposit accounts increased $50,000, or 12.0%, over the same period in
1996, largely attributable to increased non-sufficient fund and overdraft
charge income. Trust income increased $30,360 over the first quarter of
1996. Other income increased $136,787 in the first quarter of 1997 compared
to the same period in 1996. Gains on the sale of mortgage loans of $33,000
in the first quarter of 1997 compared to losses of $62,000 in the first
quarter of 1996 largely accounted for the overall increase in this
category.
Total other expense amounted to $4,849,239 for the quarter ended
March 31, 1997, an increase of $209,624 or 4.5% over the same period in
1996. An increase of $122,456 in other expense, along with moderate
increases in personnel, occupancy, and equipment expense, contributed to the
overall increase in overhead expense. Increased marketing, outsourced
services expenses and correspondent bank charges represent the primary
contributors to the increase in other expense. Personnel expense, the
largest overhead item, increased only $51,782 or 2.0% in the first quarter
of 1997 compared to same period in 1996.
Shoreline's ratio of total other expenses to total average assets
declined from 2.79% for the quarter ended March 31, 1996 to 2.73% for the
quarter ended March 31, 1997. Over the same period of time, Shoreline's
efficiency ratio also declined from 55.98% to 55.33%.
In summary, Shoreline's net income of $2,542,347 for the first
quarter of 1997 produced a return on average shareholders' equity of 14.60%
and a return on average assets of 1.43%. This compares to the prior year's
ratios of 14.45% and 1.40%, respectively. Earnings per share through
March 31, 1997 were $.46 and dividends per share were $.21, which produce a
dividend payout ratio of 45.7%. Earnings per share through March 31, 1996
were $.43 and dividends per share were $.19.
-18-
<PAGE>
PART II - OTHER INFORMATION
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 September 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) REPORTS ON FORM 8-K. No reports on Form 8-K were filed
during the quarter covered by this report.
-19-
<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.
SHORELINE FINANCIAL CORPORATION
(Registrant)
Date May 14, 1997 /S/ DAN L. SMITH
Dan L. Smith
Chairman, President and Chief Executive
Officer
Date May 14, 1997 /S/ WAYNE R. KOEBEL
Wayne R. Koebel
Executive Vice President, Chief Financial
Officer, Secretary and Treasurer (Principal
Financial and Accounting Officer)
-20-
<PAGE>
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 September 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
-21-
<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 MARCH 31, 1997 AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 37,913
<INT-BEARING-DEPOSITS> 27,000
<FED-FUNDS-SOLD> 8,150
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 99,099
<INVESTMENTS-CARRYING> 47,832
<INVESTMENTS-MARKET> 48,449
<LOANS> 499,762
<ALLOWANCE> 6,875
<TOTAL-ASSETS> 736,960
<DEPOSITS> 631,841
<SHORT-TERM> 6,387
<LIABILITIES-OTHER> 5,165
<LONG-TERM> 23,000
<COMMON> 0
0
0
<OTHER-SE> 70,566
<TOTAL-LIABILITIES-AND-EQUITY> 736,960
<INTEREST-LOAN> 10,962
<INTEREST-INVEST> 2,495
<INTEREST-OTHER> 422
<INTEREST-TOTAL> 13,878
<INTEREST-DEPOSIT> 6,241
<INTEREST-EXPENSE> 321
<INTEREST-INCOME-NET> 7,317
<LOAN-LOSSES> 120
<SECURITIES-GAINS> 35
<EXPENSE-OTHER> 4,849
<INCOME-PRETAX> 3,536
<INCOME-PRE-EXTRAORDINARY> 3,536
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,542
<EPS-PRIMARY> .46
<EPS-DILUTED> .46
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<LOANS-NON> 203
<LOANS-PAST> 1,240
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<LOANS-PROBLEM> 6,907
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<RECOVERIES> 55
<ALLOWANCE-CLOSE> 6,875
<ALLOWANCE-DOMESTIC> 4,224
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 2,651
</TABLE>
