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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, 2000 |
|
___ |
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
|
Michigan |
38-2758932 |
|
(State or Other Jurisdiction of |
(I.R.S. Employer Identification No.) |
|
Incorporation or Organization) |
|
|
823 Riverview Drive |
|
|
Benton Harbor, MI |
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, 2000 there were 10,935,052 issued and outstanding shares of the Registrant's Common Stock.
SHORELINE FINANCIAL CORPORATION
FORM 10-Q
INDEX
|
Page |
|||
|
FORWARD-LOOKING STATEMENTS |
2 |
||
|
PART I. FINANCIAL INFORMATION |
|||
|
Item 1. Financial Statements (Unaudited) |
|||
|
Independent Accountants' Report |
3 |
||
|
Condensed Consolidated Balance Sheets, |
|||
|
March 31, 2000 and December 31, 1999 |
4 |
||
|
Condensed Consolidated Statements of Income and |
|||
|
Comprehensive Income |
|||
|
Three Months Ended March 31, 2000 and 1999 |
5 |
||
|
Condensed Consolidated Statements of Cash Flows, |
|||
|
Three Months Ended March 31, 2000 and 1999 |
6 |
||
|
Notes to Condensed Consolidated Financial Statements |
7-9 |
||
|
Item 2. |
Management's Discussion and Analysis of Financial |
|
|
|
Item 3. |
Quantitative and Qualitative Disclosures about Market Risk |
12 |
|
|
PART II. OTHER INFORMATION |
|||
|
Item 6. |
Exhibits and Reports on Form 8-K |
13 |
|
|
SIGNATURES |
14 |
||
Forward-Looking Statements
This Form 10-Q Quarterly Report and the documents incorporated in this report by reference contain forward-looking statements that are based on management's beliefs, assumptions, current expectations, estimates and projections about the financial services industry, the economy, and about the Corporation itself. 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. Management's judgment relating to and discussions of the provision and allowance for loan losses involve judgments as to future events and are inherently 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, but are not limited to, changes in interest rates and interest rate relationships; demand for products and services; the degree of competition by traditional and non-traditional competitors; changes in banking 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 changes in the national economy. Shoreline undertakes no obligation to update, amend or clarify forward-looking statements, whether as a result of new information, future events, or otherwise.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
INDEPENDENT ACCOUNTANTS' REPORT
Board of Directors
Shoreline Financial Corporation
Benton Harbor, Michigan
We have reviewed the consolidated balance sheet of Shoreline Financial Corporation as of March 31, 2000, and the related consolidated statements of income and comprehensive income and cash flows for the quarters ended March 31, 2000 and 1999. These financial statements are the responsibility of the Corporation's management.
We conducted our reviews in accordance with standards established by the AICPA. A review of interim financial information consists principally of applying analytical procedures to financial data and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with generally accepted auditing standards, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.
Based on our reviews, we are not aware of any material modifications that should be made to the accompanying financial statements for them to be in conformity with generally accepted accounting principles.
|
/s/ Crowe, Chizek and Company LLP |
South Bend, Indiana
May 5, 2000
SHORELINE FINANCIAL CORPORATION
CONSOLIDATED BALANCE SHEETS
(Unaudited)
|
|
|
|
|
|
|
|
|
March 31, 2000 |
|
December 31, 1999 |
|
|
|
Assets |
|
|
|
|
|
|
|
Cash and due from banks |
|
$33,071,000 |
|
$35,002,000 |
|
|
|
Interest-earning deposits |
|
6,225,000 |
|
11,125,000 |
|
|
|
Federal funds sold |
|
8,175,000 |
|
9,600,000 |
|
|
|
Total cash and cash equivalents |
|
47,471,000 |
|
55,727,000 |
|
|
|
Securities available for sale (carried at fair value) |
|
207,084,000 |
|
201,871,000 |
|
|
|
Securities held to maturity (fair values of $16,771,000 |
|
|
|
|
|
|
|
and $17,871,000, respectively) |
|
16,742,000 |
|
17,716,000 |
|
|
|
Loans: |
|
|
|
|
|
|
|
Commercial |
|
329,705,000 |
|
328,904,000 |
|
|
|
Mortgage |
|
265,562,000 |
|
259,160,000 |
|
|
|
Consumer |
|
116,545,000 |
|
114,489,000 |
|
|
|
Total loans |
|
711,812,000 |
|
702,553,000 |
|
|
|
Less allowance for loan losses |
|
8,051,000 |
|
7,984,000 |
|
|
|
|
703,761,000 |
|
694,569,000 |
|
|
|
Premises and equipment, net |
|
16,881,000 |
|
15,238,000 |
|
|
|
Intangible assets, net |
|
14,015,000 |
|
14,297,000 |
|
|
|
Other assets |
|
12,317,000 |
|
13,818,000 |
|
|
|
Total Assets |
|
$1,018,271,000 |
|
$1,013,236,000 |
|
|
|
|
|
|
|
|
|
|
Liabilities and Shareholders' Equity |
|
|
|
|
|
|
|
Liabilities |
|
|
|
|
|
|
|
Deposits: |
|
|
|
|
|
|
|
Non-interest-bearing |
|
$102,478,000 |
|
$96,592,000 |
|
|
|
Interest-bearing |
|
723,508,000 |
|
696,362,000 |
|
|
|
Total deposits |
|
825,986,000 |
|
792,954,000 |
|
|
|
Securities sold under agreements to repurchase |
|
17,206,000 |
|
20,879,000 |
|
|
|
Federal Home Loan Bank (FHLB) Advances |
|
88,234,000 |
|
110,825,000 |
|
|
|
Other liabilities |
|
6,807,000 |
|
8,761,000 |
|
|
|
Total Liabilities |
|
938,233,000 |
|
933,419,000 |
|
|
|
Shareholders' Equity |
|
|
|
|
|
|
|
Preferred stock, no par value; 1,000,000 shares authorized |
|
|
|
|
||
|
none issued or outstanding |
|
0 |
|
0 |
|
|
|
Common stock; no par value, 15,000,000 shares authorized; |
|
|
|
|||
|
10,953,932 and 10,986,376 issued and outstanding |
|
|
|
|||
|
at March 31, 2000 and December 31, 1999, respectively |
0 |
|
0 |
|
||
|
Additional paid-in capital |
|
61,242,000 |
|
61,554,000 |
|
|
|
Unearned stock incentive plan shares |
|
(671,000 |
) |
(723,000 |
) |
|
|
Accumulated other comprehensive loss |
|
(4,556,000 |
) |
(3,845,000 |
) |
|
|
Retained earnings |
|
24,023,000 |
|
22,831,000 |
|
|
|
Total Shareholders' Equity |
|
80,038,000 |
|
79,817,000 |
|
|
|
Total Liabilities and Shareholders' Equity |
|
$1,018,271,000 |
|
$1,013,236,000 |
|
|
|
|
|
|
|
|
|
|
See accompanying notes to condensed consolidated financial statements. |
|
|
|
|
||
SHORELINE FINANCIAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
AND COMPREHENSIVE INCOME
(Unaudited)
|
Three Months Ended |
||
|
|
2000 |
|
1999 |
|
Interest Income |
|
|
|
|
Loans, including fees |
$14,716,000 |
|
$13,142,000 |
|
Securities: |
|
|
|
|
Taxable |
3,387,000 |
|
2,896,000 |
|
Tax-exempt |
406,000 |
|
469,000 |
|
Federal funds sold |
242,000 |
|
107,000 |
|
Deposits with banks |
153,000 |
|
240,000 |
|
Total interest income |
18,904,000 |
|
16,854,000 |
|
Interest Expense |
|
|
|
|
Deposits |
7,891,000 |
|
7,223,000 |
|
Short-term borrowings |
241,000 |
|
161,000 |
|
FHLB advances |
1,402,000 |
|
728,000 |
|
Total interest expense |
9,534,000 |
|
8,112,000 |
|
Net Interest Income |
9,370,000 |
|
8,742,000 |
|
Provision for loan losses |
150,000 |
|
120,000 |
|
Net Interest Income After Provision |
|
|
|
|
For Loan Losses |
9,220,000 |
|
8,622,000 |
|
Other Income |
|
|
|
|
Service charges on deposit accounts |
815,000 |
|
565,000 |
|
Trust fees |
612,000 |
|
568,000 |
|
Net gain (loss) on security sales |
(37,000) |
|
246,000 |
|
Net gain on loan sales |
63,000 |
|
362,000 |
|
Other |
373,000 |
|
378,000 |
|
Total other income |
1,826,000 |
|
2,119,000 |
|
Other Expenses |
|
|
|
|
Salaries and employee benefits |
3,538,000 |
|
3,430,000 |
|
Occupancy |
498,000 |
|
425,000 |
|
Equipment |
668,000 |
|
559,000 |
|
Insurance |
78,000 |
|
36,000 |
|
Advertising and public relations |
184,000 |
|
180,000 |
|
Professional fees |
538,000 |
|
378,000 |
|
Other taxes |
128,000 |
|
156,000 |
|
Amortization of intangibles |
283,000 |
|
277,000 |
|
Other |
943,000 |
|
773,000 |
|
Total other expenses |
6,858,000 |
|
6,214,000 |
|
Income Before Income Taxes |
4,188,000 |
|
4,527,000 |
|
Federal income tax expense |
1,356,000 |
|
1,422,000 |
|
Net Income |
$2,832,000 |
|
$3,105,000 |
|
|
|
|
|
Comprehensive Income |
$2,121,000 |
|
$3,902,000 |
|
|
|
|
|
Basic Earnings Per Share |
$0.26 |
|
$0.27 |
|
Diluted Earnings Per Share |
$0.26 |
|
$0.27 |
|
Dividends Declared |
$0.15 |
|
$0.14 |
See accompanying notes to condensed consolidated financial statements
SHORELINE FINANCIAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
|
Three Months Ended |
|
||||
|
2000 |
|
1999 |
|
||
|
|
|
|
|
||
|
Net cash from operating activities |
$3,893,000 |
|
$4,353,000 |
|
||
|
|
|
|
|
||
|
Cash flows from investing activities: |
|
|
|
|
||
|
Net increase in loans |
(9,342,000 |
) |
(894,000 |
) |
||
|
Securities available for sale: |
|
|
|
|
||
|
Purchase |
(14,263,000 |
) |
(18,018,000 |
) |
||
|
Proceeds from sales |
3,973,000 |
|
2,482,000 |
|
||
|
Proceeds from maturities, calls and principal reductions |
3,762,000 |
|
4,850,000 |
|
||
|
Securities held to maturity: |
|
|
|
|
||
|
Purchase |
0 |
|
0 |
|
||
|
Proceeds from maturities, calls and principal reductions |
974,000 |
|
9,405,000 |
|
||
|
Premises and equipment expenditures |
(2,068,000 |
) |
(489,000 |
) |
||
|
Net cash used in investing activities |
(16,964,000 |
) |
(2,664,000 |
) |
||
|
|
|
|
|
||
|
Cash flows from financing activities: |
|
|
|
|
||
|
Net increase (decrease) in deposits |
33,032,000 |
|
(9,186,000 |
) |
||
|
Net increase (decrease) in short-term borrowings |
(3,673,000 |
) |
1,059,000 |
|
||
|
Proceeds from FHLB advances |
20,000,000 |
|
8,000,000 |
|
||
|
Repayment of FHLB advances |
(42,591,000 |
) |
(3,100,000 |
) |
||
|
Dividends paid |
(1,641,000 |
) |
(1,621,000 |
) |
||
|
Proceeds from shares issued |
309,000 |
|
329,000 |
|
||
|
Payments to retire common stock |
(621,000 |
) |
(2,319,000 |
) |
||
|
Net cash from (used in) financing activities |
4,815,000 |
|
(6,838,000 |
) |
||
|
|
|
|
|
||
|
Net change in cash and cash equivalents |
(8,256,000 |
) |
(5,149,000 |
) |
||
|
Cash and cash equivalents at beginning of year |
55,727,000 |
|
71,889,000 |
|
||
|
Cash and cash equivalents at March 31 |
$47,471,000 |
|
$66,740,000 |
|
||
|
|
|
|
|
||
|
Cash paid during the year for: |
|
|
|
|
||
|
Interest |
$9,676,000 |
|
$8,451,000 |
|
||
|
Income Taxes |
$510,000 |
|
$0 |
|
||
See accompanying notes to condensed consolidated financial statements
SHORELINE FINANCIAL CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 1 - Basis of Presentation
The accompanying unaudited condensed consolidated financial statements include the accounts of Shoreline Financial Corporation and its wholly owned subsidiary, Shoreline Bank. In the opinion of management, all adjustments, consisting only of recurring accruals, considered necessary for a fair presentation of the Corporation's consolidated financial position, results of operations and cash flows have been included.
Certain information and note disclosures normally included with financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted as allowed by the Securities and Exchange Commission's interim reporting rules and regulations. The accompanying condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in Shoreline's Annual Report on Form 10-K for the year ended December 31, 1999.
Note 2 - Non-Performing Assets
|
|
|
|
March 31, |
||
|
|
|
2000 |
|
1999 |
|
|
|
|
|
|
|
|
|
Non-accrual loans |
|
|
$1,593,000 |
|
$806,000 |
|
|
Restructured loans |
|
|
0 |
|
0 |
|
|
Other real estate owned |
|
|
158,000 |
|
659,000 |
|
|
Total non-performing loans |
|
$1,751,000 |
|
$1,465,000 |
||
Note 3 - Allowance for Loan Losses
|
|
|
|
March 31, |
|
||
|
|
|
2000 |
|
1999 |
|
|
|
|
|
|
|
|
|
|
|
Beginning balance |
|
|
$7,984,000 |
|
$7,883,000 |
|
|
|
Provision charged against income |
|
150,000 |
|
120,000 |
|
||
|
Recoveries |
|
|
|
131,000 |
|
90,000 |
|
|
Loans charged off |
|
|
(214,000 |
) |
(234,000 |
) |
|
|
Balance, end of period |
|
$8,051,000 |
|
$7,859,000 |
|
||
At March 31, 2000, total loans considered impaired were $6,214,000 with an average for the quarter of approximately $6,749,000. At March 31, 1999, total loans considered impaired were $211,000 with an average for the quarter of approximately $211,000. The allowance for impaired loans was $932,000 and $106,000 at March 31, 2000 and 1999, respectively.
Subsequent to March 31, 2000, one commercial loan relationship totaling approximately $5.5 million became impaired. Events leading to the classification of this relationship as impaired were not known to management prior to March 31, 2000. Management is evaluating the events impacting the relationship to better understand the amount of impairment that exists. Based on information currently known, no impairment loss has been provided for in the financial statements.
Note 4 - Stock Options
A stock option plan exists under which options may be issued at market prices to employees. The right to exercise the options vests over a four year period, with 20% vesting on the date of the grant and 20% vesting each year thereafter.
|
|
|
|
Number |
|
|
Price Per |
|
of Options |
Issue Date |
Expiration Date |
Share |
|
Outstanding |
|
|
|
|
|
|
December 1, 1990 |
December 1, 2000 |
$3.90 |
|
3,464 |
|
January 1, 1994 |
January 1, 2004 |
$8.83 |
|
11,449 |
|
November 22, 1996 |
November 22, 2006 |
$10.53 |
|
35,439 |
|
August 12, 1998 |
August 12, 2008 |
$21.40 |
|
1,875 |
|
June 18, 1999 |
June 18, 2009 |
$20.40 |
|
1,250 |
|
January 18, 2000 |
January 18, 2010 |
$18.00 |
|
9,332 |
The weighted-average remaining contractual life of the options outstanding at March 31, 2000 was six years. The following pro forma information presents net income and earnings per share had the fair value method been used to measure compensation cost for stock option grants after 1994. The exercise price of the options granted is equivalent to the market value of the underlying stock at the grant date. Accordingly, compensation cost actually recognized for stock options was $0 for the first three months of 2000.
|
|
|
March 31, 2000 |
|
|
|
|
|
Net income as reported |
|
|
$2,832,000 |
|
Pro forma net income |
|
|
$2,821,000 |
|
|
|
|
|
Basic earnings per share as reported |
|
|
$0.26 |
|
Pro forma basic earnings per share |
|
|
$0.26 |
|
|
|
|
|
Diluted earnings per share as reported |
|
|
$0.26 |
|
Pro forma diluted earnings per share |
|
|
$0.26 |
The weighted average fair value of the options granted January 18, 2000 was $5.20 based on the following estimates: risk-free interest rates of 6.5%, an expected life of 8 years, expected stock price volatility of 22.66% and expected dividends of 3.0%. In future years, the pro forma effect of applying this standard may increase as additional options are granted.
The following is summarized option activity for the period January 1, 1998 through March 31, 2000:
|
|
Available |
|
Options |
|
Weighted-Average |
|
Balance at January 1, 1998 |
10,095 |
|
136,859 |
|
$7.17 |
|
|
Options granted |
(1,875) |
|
1,875 |
|
21.40 |
|
Options exercised |
0 |
|
(53,793) |
|
4.88 |
|
Options forfeited |
2,362 |
|
(2,362) |
|
10.53 |
|
Balance at December 31, 1998 |
10,582 |
|
82,579 |
|
8.88 |
|
|
Options granted |
(1,250) |
|
1,250 |
|
20.40 |
|
Options exercised |
0 |
|
(12,124) |
|
8.74 |
|
Options forfeited |
1,968 |
|
(1,968) |
|
10.53 |
|
Balance at December 31, 1999 |
11,300 |
|
69,737 |
|
9.90 |
|
|
Options granted |
(9,332) |
|
9,332 |
|
18.00 |
|
Options exercised |
0 |
|
(16,260) |
|
4.80 |
|
Balance at March 31, 2000 |
1,968 |
|
62,809 |
|
11.49 |
|
The number of exercisable options and the weighted average exercise price at March 31, 2000 was 44,262 and $10.13, respectively.
Note 5 - Common Stock and Earnings Per Share
A reconciliation of the numerators and denominators of the basic earnings per share and diluted earnings per share computations is presented below.
|
|
March 31, |
|
||
|
|
2000 |
|
1999 |
|
|
Basic earnings per share: |
|
|
|
|
|
|
Net income available to common shareholders |
|
$2,832,000 |
|
$3,105,000 |
|
|
|
|
|
|
|
|
Weighted average common shares outstanding |
|
10,951,134 |
|
11,268,178 |
|
|
Less: Non-vested stock incentive plan shares |
|
(36,454 |
) |
(49,098 |
) |
|
Weighted-average common shares outstanding |
|
|
|
|
|
|
for basic earnings per share |
|
10,914,680 |
|
11,219,643 |
|
|
|
|
|
|
|
|
Basic earnings per share |
|
$0.26 |
|
$0.27 |
|
|
Diluted earnings per share: |
|
|
|
|
|
|
Net income available to common shareholders |
|
$2,832,000 |
|
$3,105,000 |
|
|
Weighted-average common shares outstanding |
|
|
|
|
|
|
for basic earnings per share |
|
10,914,680 |
|
11,219,643 |
|
|
Add: Dilutive effect of assumed exercise of |
|
|
|
|
|
|
stock options |
|
19,461 |
|
46,431 |
|
|
Add: Dilutive effect of non-vested stock |
|
|
|
|
|
|
incentive plan shares |
|
3,786 |
|
11,251 |
|
|
Weighted-average common and potentially |
|
|
|
|
|
|
dilutive common shares outstanding |
|
10,937,927 |
|
11,277,325 |
|
|
|
|
|
|
|
|
Diluted earnings per share |
|
$0.26 |
|
$0.27 |
|
At its May 1999 Board of Directors meeting, the Directors declared a 5 for 4 stock split distributed to shareholders July 2, 1999 to shareholders of record June 18, 1999. All 1999 per share information was restated to reflect the above mentioned stock split.
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 Shoreline's financial condition and results of operations during the periods specified in the condensed consolidated financial statements included earlier in this filing.
Results of Operations
First quarter net income was $2.8 million, or $.26 per diluted common share. In the same period last year, net income was $3.1 million, or $.27 per diluted common share. The year-to-year decline in net income was 8.8% but the decline in earnings per share was only 6.2% due to the Corporation's share repurchase program.
The Corporation's annualized return on average equity was 14.28% and the annualized return on average assets was 1.11%. In the same quarter of 1999, the returns were 14.50% and 1.32%, respectively.
Shoreline's net interest income on a fully taxable equivalent basis was $9.7 million, a 6.6% increase over the $9.1 million recorded for the first quarter of 1999 due to a higher level of earning assets and strong commercial loan fees. The net interest margin for the first quarter of 2000 was 4.04%, down nine basis points from last year's ratio as the cost of funds increased 29 basis points. The yields on earning assets also rose for the quarter over quarter comparison, but only by 19 basis points. Shoreline is liability sensitive and as a result when the interest rates rise, the rates paid on many of the bank's deposit products rise as well. The yields earned on earning assets, however, increase at a slower pace, over a longer period of time.
Asset quality remained strong during the quarter with the non-performing assets to loans ratio at .27%, level with last year's ratio. The net charge-offs to average loans ratio for the first quarter of 2000 was .05%, an improvement from the .08% reported for this same ratio a year ago. While the allowance for loan losses to period end loans ratio declined to 1.13% from the 1.24% reported on March 31, 1999, the decrease was due in part to growth in the loan portfolio, which was up 11.9%, and the quality of the portfolio which did not require additional allowance.
Non-interest income for the first quarter of 2000, excluding securities transactions and gains on the sale of mortgages, increased 19.2% over the year ago quarter as service charges on deposit accounts and trust income were up 44.3% and 7.9%, respectively. Negatively affecting non-interest income were losses recorded from securities transactions and a decline in gains on the sale of mortgages. For the first quarter of 2000, the Corporation reported securities transaction losses of $37,000. For the same period a year ago, the Corporation had securities transaction gains of $246,000. Gains on the sale of mortgages for the first quarter of 2000 were $63,000, compared with gains of $362,000 a year ago.
Non-interest expense was up 10.4% for the quarter to quarter comparison as a result of the Corporation's recent expansion activities into the Sister Lakes, Coloma, Byron Center and Kalamazoo/Portage markets. Also contributing to the higher expense level were the Corporation's ongoing investments in technology. Total salary and benefits, the largest category within non-interest expense, however, was up only 3.1% over last year's first quarter.
Balance Sheet Changes
Total earning assets at March 31, 2000 were up $7.2 million from year-end as loans were up $9.3 million and investment securities were up $4.2 million. The increase in loans occurred primarily in the mortgage loan portfolio, which was up $6.4 million from year-end. Partially offsetting the increases in loans and investments was a $6.3 million decrease in interest earning deposits and federal funds sold.
Total deposits were up $33.0 million from year-end as a result of growth in Super Public Funds (+$21.1 million), Time Deposits greater than $100,000 (+$9.1 million), and Demand Deposits (+$5.9 million).
Over the same time period, Federal Home Loan Bank borrowings decreased $22.6 million, as the additional liquidity desired for possible Year 2000 issues was not required and the growth in deposits was sufficient to cover earning asset growth.
Liquidity and Capital Resources
The maintenance of an adequate level of liquidity is necessary to ensure sufficient funds are available to meet customers' loan demand and deposit withdrawals. Shoreline's liquidity sources consist of securities available for sale, maturing loans and short term investments. Shoreline's liquidity is also supported by its core deposit base.
At March 31, 2000, shareholders' equity was $80.0 million compared with the $79.8 million recorded on December 31, 1999. The increase in shareholders' equity was mainly the result of the net retention of earnings.
The table below represents Shoreline's consolidated regulatory capital position as of March 31, 2000.
|
Regulatory |
|
|
||
|
Risk based: |
|||||
|
Tier 1 capital |
4.00% |
6.00% |
11.19% |
||
|
Total capital |
8.00% |
10.00% |
12.44% |
||
|
Tier 1 leverage |
3.00% |
5.00% |
6.89% |
||
Item 3. Quantitative and Qualitative Disclosures about Market Risk
The information concerning quantitative and qualitative disclosures about market risk contained in Shoreline's Form 10-K Annual Report for its fiscal year ended December 31, 1999, is incorporated herein by reference
Shoreline faces market risk to the extent that both earnings and the values of its financial instruments are affected by changes in interest rates. Shoreline manages this risk through simulation modeling. Throughout the first three months of 2000, the modeling results were within Shoreline's policy guidelines. Shoreline does not believe that there has been a material change in the nature of Shoreline's primary market risk exposures, including the categories of market risk to which Shoreline is exposed and the particular markets that present the primary risk of loss to Shoreline. As of the date of this Form 10-Q Quarterly Report, Shoreline 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 used by Shoreline to manage its primary market risk exposures, as described in the sections of its annual report incorporated herein 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, Shoreline does not expect to change its methods used to manage its market risk exposures in the near term. However, Shoreline may change those methods in the future to adapt to changes in circumstances or to implement new techniques.
Shoreline's market risk exposure is mainly comprised of its vulnerability to interest rate risk. Prevailing interest rates and interest rate relationships in the future will be primarily determined by market factors that are outside of Shoreline'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 document for a discussion of the limitations on Shoreline's responsibility for such statements.
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 |
|
||
|
3.1 |
Restated Articles of Incorporation. Previously filed as Exhibit 3.1 to Shoreline's Quarterly Report on Form 10-Q for the period ended June 30, 1998. Herein incorporated by reference. |
||
|
3.2 |
By-laws. Previously filed as Exhibit 3(b) to Shoreline's Form S-1 Registration Statement filed March 23, 1990. Herein incorporated by reference. |
||
|
11 |
Statement Regarding Computation of Earnings per Common Share. The computation of earnings per share is described in Note 5 of the Notes to the Condensed Consolidated Financial Statements. |
||
|
15 |
Letter Regarding Unaudited Interim Financial Information. |
||
|
27 |
Financial Data Schedule for the Three Months Ended March 31, 2000. |
|
(b) |
Reports on Form 8-K. None |
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 Dan L. Smith Chairman and Chief Executive Officer |
| Date May 11, 2000 |
/s/Wayne R. Koebel Wayne R. Koebel Executive Vice President, Chief Financial Officer and Treasurer (Principal Financial and Accounting Officer) |
EXHIBIT INDEX
|
Exhibit |
|
|
|
3.1 |
Restated Articles of Incorporation. Previously filed as Exhibit 3.1 to Shoreline's Quarterly Report on Form 10-Q for the period ended June 30, 1998. Herein incorporated by reference. |
|
|
3.2 |
By-laws. Previously filed as Exhibit 3(b) to Shoreline's Form S-1 Registration Statement filed March 23, 1990. Herein incorporated by reference. |
|
|
11 |
Statement Regarding Computation of Earnings per Common Share. The computation of earnings per share is described in Note 5 of the Notes to the Condensed Consolidated Financial Statements. |
|
|
15 |
Letter Regarding Unaudited Interim Financial Information. |
|
|
27 |
Financial Data Schedule for the Three Months Ended March 31, 2000. |
|
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