<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1996
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 0-17137
D&N FINANCIAL CORPORATION
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 38-2790646
------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
400 Quincy Street, Hancock, Michigan 49930
-------------------------------------------
(Address of principal executive offices)
(906) 482-2700
----------------------------------------------------
(Registrant's telephone number, including area code)
---------------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all
reports 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 [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Common Stock, $0.01 par value 7,552,667
----------------------------- ----------------------
(Class) (Shares Outstanding
as of April 30, 1996)
================================================================================
<PAGE> 2
D&N FINANCIAL CORPORATION
INDEX
<TABLE>
<CAPTION>
Page No.
<S> <C>
PART I Financial Information
Consolidated statements of condition -
March 31, 1996 and December 31, 1995 3
Consolidated statements of income -
three months ended March 31, 1996 and 1995 4
Consolidated statements of cash flows -
three months ended March 31, 1996 and 1995 5
Notes to consolidated financial statements 6
Management's Discussion and Analysis of
Financial Condition and Results of Operations 9
PART II Other Information 16
</TABLE>
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<PAGE> 3
D&N FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF CONDITION (UNAUDITED)
<TABLE>
<CAPTION>
March 31, December 31,
1996 1995
------------------------
(In thousands)
------------------------
<S> <C> <C>
ASSETS
Cash and due from banks $ 20,895 $ 8,923
Interest-bearing deposits in other banks 435 6,636
------------------------
Total cash and cash equivalents 21,330 15,559
Investment securities (market value of
$33,756,000 in 1996 and $47,062,000 in 1995) 33,736 46,925
Investment securities available for sale
(at market value) 29,581 40,899
Mortgage-backed securities (market value of
$64,443,000 in 1996 and $69,447,000 in 1995) 63,896 68,434
Mortgage-backed securities available for
sale (at market value) 49,040 55,041
Loans receivable (including loans held
for sale of $6,376,000 in 1996 and
$21,610,000 in 1995) 1,014,472 941,119
Allowance for loan losses ( 9,991) ( 9,931)
------------------------
Net loans receivable 1,004,481 931,188
Other real estate owned, net 1,073 1,319
Federal income taxes 6,337 5,380
Office properties and equipment, net 15,053 14,738
Other assets 7,400 7,178
------------------------
$1,231,927 $1,186,661
========================
LIABILITIES
Checking and NOW accounts $ 94,658 $ 91,621
Money market accounts 87,076 85,287
Savings deposits 151,165 145,241
Time deposits 566,954 564,289
Accrued interest 1,443 1,431
------------------------
Total deposits 901,296 887,869
Securities sold under agreements
to repurchase 26,876 --
FHLB advances and other borrowed money 219,334 216,232
Advance payments by borrowers and
investors held in escrow 9,709 11,093
Other liabilities 5,348 5,756
------------------------
Total liabilities 1,162,563 1,120,950
STOCKHOLDERS' EQUITY
Preferred stock (1,000,000 shares
authorized; none issued) -- --
Common stock, $.01 par value per share (shares
authorized - 10,000,000; shares outstanding-
6,850,858 in 1996 and 6,797,680 in 1995) 69 68
Additional paid-in capital 48,695 48,283
------------------------
Total paid-in capital 48,764 48,351
Retained earnings - substantially restricted 19,543 16,046
Less cost of treasury stock (21,456 shares
in 1996 and 1995) ( 213) ( 213)
Unrealized holding gains on debt securities
available for sale, net of tax 1,270 1,527
------------------------
Total stockholders' equity 69,364 65,711
------------------------
$1,231,927 $1,186,661
========================
</TABLE>
See notes to consolidated financial statements.
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<PAGE> 4
D&N FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1996 1995
---------------------------
(In thousands except per share)
-------------------------------
<S> <C> <C>
Interest income:
Loans $ 19,550 $ 15,904
Mortgage-backed securities 2,227 2,699
Investments and deposits 1,532 1,536
-------------------------
TOTAL INTEREST INCOME 23,309 20,139
Interest expense:
Deposits 10,577 7,945
Securities sold under agreements
to repurchase 94 365
FHLB advances and other borrowed money 3,173 3,173
Interest rate instruments -- 1,327
-------------------------
TOTAL INTEREST EXPENSE 13,844 12,810
-------------------------
NET INTEREST INCOME 9,465 7,329
Provision for loan losses 300 200
-------------------------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 9,165 7,129
Noninterest income:
Loan servicing and administrative fees, net 318 584
Deposit related fees 819 729
Gain on loans held for sale 491 3
Other income 80 46
-------------------------
TOTAL NONINTEREST INCOME 1,708 1,362
Noninterest expense:
Compensation and benefits 3,909 3,713
Occupancy 707 547
Other expense 2,922 2,253
-------------------------
General and administrative expense 7,538 6,513
Other real estate owned, net 40 ( 76)
Amortization of intangibles -- 134
Federal deposit insurance premiums 616 580
-------------------------
TOTAL NONINTEREST EXPENSE 8,194 7,151
-------------------------
INCOME BEFORE INCOME TAX EXPENSE (CREDIT) 2,679 1,340
Federal income tax expense (credit) ( 818) --
-------------------------
NET INCOME $ 3,497 $ 1,340
=========================
Earnings per common and common equivalent share:
PRIMARY $ 0.48 $ 0.20
=========================
FULLY DILUTED $ 0.48 $ 0.20
=========================
</TABLE>
See notes to consolidated financial statements.
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<PAGE> 5
D&N FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1996 1995
--------------------------
(In thousands)
--------------------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 3,497 $ 1,340
Adjustments to reconcile net income to
net cash provided by operating activities:
Provision for loan losses 300 200
Depreciation and amortization of
office properties and equipment 522 445
Amortization of net discounts on
purchased loans and securities ( 685) ( 160)
Originations and purchases of loans held for sale ( 12,121) --
Proceeds from sales of loans held for sale 26,930 700
Amortization and writedowns of loan servicing rights 201 55
Other ( 1,255) 3,250
------------------------
Net cash provided by operating activities 17,389 5,830
INVESTING ACTIVITIES
Proceeds from maturities of investment
securities 33,000 16,000
Purchases of investment securities ( 8,848) ( 40,632)
Principal collected on mortgage-backed securities 10,103 3,240
Loans purchased ( 72,483) ( 14,526)
Net change in loans receivable ( 15,172) 1,670
Decrease in other real estate owned 246 1,152
Purchases of office properties and equipment ( 827) ( 214)
------------------------
Net cash used by investing activities ( 53,981) ( 33,310)
FINANCING ACTIVITIES
Net change in time deposits 2,665 15,017
Net change in other deposits 10,749 ( 7,177)
Proceeds from notes payable, securities sold under
agreements to repurchase and other borrowed money 58,600 65,000
Payments on maturity of notes payable, securities
sold under agreements to repurchase and other
borrowed money ( 28,680) ( 50,565)
Net change in advance payments by borrowers
and investors held in escrow ( 1,384) ( 7,098)
Proceeds from issuance of stock 413 --
------------------------
Net cash provided by financing activities 42,363 15,177
------------------------
Increase (decrease) in cash and cash equivalents 5,771 ( 12,303)
Cash and cash equivalents at beginning of period 15,559 28,124
------------------------
Cash and cash equivalents at end of period $ 21,330 $ 15,821
========================
</TABLE>
See notes to consolidated financial statements.
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<PAGE> 6
D&N FINANCIAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1: BASIS OF PRESENTATION
The accompanying unaudited interim 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 solely of normal recurring accruals) considered
necessary for a fair presentation have been included. Operating results for
the three month period ended March 31, 1996 are not necessarily indicative of
the results that may be expected for the full year.
NOTE 2: EARNINGS PER SHARE
Per share data is based on the weighted average number of shares outstanding
for the periods presented. The weighted average number of common and common
equivalent shares used in computing primary earnings per share was 7,320,082
and 6,720,886 for the three months ended March 31, 1996 and March 31, 1995,
respectively. The weighted average number of common and common equivalent
shares used in computing fully diluted earnings per share was 7,331,483 and
6,720,886 for the three months ended March 31, 1996 and March 31, 1995,
respectively.
NOTE 3: ALLOWANCE FOR LOAN LOSSES
The allowance for possible losses on loans is maintained at a level believed
adequate by management to absorb potential losses from impaired loans as well
as losses from the remainder of the portfolio. Management's determination of
the level of the allowance is based upon evaluation of the portfolio, past
experience, current economic conditions, size and composition of the portfolio,
collateral location and values, cash flow positions, industry concentrations,
delinquencies, and other relevant factors. The allowance is increased by a
provision for losses charged against income.
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<PAGE> 7
Changes in the allowance for loan losses are summarized as follows:
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1996 1995
--------------------
(In thousands)
<S> <C> <C>
Balance at beginning of period $ 9,931 $ 8,199
Charge-offs:
Single family 49 35
Income producing property -- 200
Commercial -- --
Installment 257 199
--------------------
Total 306 434
Recoveries:
Single family -- 2
Income producing property -- 245
Commercial -- --
Installment 66 98
--------------------
Total 66 345
--------------------
Net charge-offs 240 89
Provision charged to operations 300 200
--------------------
Balance at end of period $ 9,991 $ 8,310
====================
</TABLE>
NOTE 4: FEDERAL INCOME TAXES
The liability method is used in accounting for federal income taxes. Under
this method, deferred tax assets and liabilities are determined based on
differences between financial reporting and tax bases of assets and liabilities
and are measured using the enacted tax rates and laws that will be in effect
when the differences are expected to reverse.
A federal income tax credit was recorded in the 1996 reporting period and no
federal income tax expense was recorded in the 1995 reporting period as the
Company offset taxes ordinarily payable by a realization, through a reduction
in the valuation allowance previously provided, of prior years' net operating
loss carryforwards.
NOTE 5: ACQUISITION
On April 10, 1996, Macomb Federal Savings Bank ("Macomb"), a $43 million asset
savings bank, was merged into the Company. The Company issued 716,497 shares of
common stock and cash in lieu of fractional shares for all of the outstanding
shares of Macomb. The merger will be accounted for
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<PAGE> 8
as a pooling-of-interests. The effect of the business combination on
results of operations for the three months ended March 31, 1996 would have been
to increase net interest income $200,000, decrease net income $9,000 and
decrease earnings per share $0.05. The effect of the business combination on
results of operations for the three months ended March 31, 1995 would have been
to increase net interest income $281,000, increase net income $83,000 and
decrease earnings per share $0.01. No changes in accounting methods are
anticipated as a result of the business combination.
NOTE 6: RECLASSIFICATIONS
Certain amounts in the 1995 consolidated financial statements have been
reclassified to conform with the current period presentation.
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<PAGE> 9
D&N FINANCIAL CORPORATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis provides information regarding
D&N Financial Corporation's (D&N or the Company) financial condition and
results of operations for the three-month periods ended March 31, 1996 and
1995. Ratios for the three-month periods are stated on an annualized basis.
Results of operations for the 1996 period are not necessarily indicative of
results which may be expected for the entire year. This discussion and
analysis should be read in conjunction with the consolidated financial
statements and the notes thereto appearing elsewhere in this Form 10-Q.
RESULTS OF OPERATIONS
NET INCOME
The Company recorded net income for the first quarter ended March 31,
1996 of $3.5 million, compared to net income of $1.3 million in the first
quarter of 1995. Return on assets and return on equity were 1.16% and 20.81%,
respectively, during the quarter ended March 31, 1996, compared to 0.50% and
9.81%, respectively, during the quarter ended March 31, 1995. The increase in
net income was due primarily to an increase in net interest income, increased
gains on loans held for sale and a credit for federal income taxes reduced by
increases in operating expenses and the provision for loan losses.
NET INTEREST INCOME
Net interest income, or the difference between interest earned on
interest earning assets such as loans and investment securities and interest
paid on sources of funds such as deposits and borrowings, is a significant
component of the Company's earnings. Net interest income is affected by
changes in both the balance of and the rates on interest earning assets and
interest bearing liabilities and the amount of interest earning assets funded
with non-interest or low-interest bearing funds.
Net interest income increased $2.1 million to $9.4 million for the
quarter ended March 31, 1996 compared to $7.3 million for the quarter ended
March 31, 1995. The increase was due to increased volume and improved yields
on variable rate and short lived assets and to lower expense on the Company's
borrowings due to repricing and more significantly to maturity of the Company's
interest rate exchange agreements, partially offset by increases in interest
paid on deposits due to higher volumes and general increases in market interest
rates.
- 9 -
<PAGE> 10
After raising additional capital in December 1993 and by increasing its
consumer and commercial lending activities, the Company has been able to
increase its net interest earning assets and to realize increased net yields.
The result of these factors is that net interest margin has steadily improved
during recent quarters. Net interest margin was 3.23% for the first quarter of
1996 compared to 2.78% for the first quarter of 1995.
PROVISION FOR LOAN LOSSES
A provision for loan losses is charged to income based on the size and
quality of the loan portfolio measured against prevailing economic conditions.
This process is accomplished through a formal review analysis. The provision
is recorded in sufficient amounts to maintain the allowance for possible loan
losses at a level in excess of that expected by management to be required to
cover specific exposures in the portfolio.
The Company recorded a $300,000 provision for loan losses during the
quarter ended March 31, 1996 compared to $200,000 recorded during the quarter
ended March 31, 1995. The allowance for loan losses has been maintained at
approximately 1.00% of gross loans even as the loan portfolio has experienced
significant growth over the past several fiscal quarters.
NONINTEREST INCOME
Total noninterest income increased to $1.7 million during the quarter
ended March 31, 1996, from $1.4 million recorded during the quarter ended March
31, 1995. Approximately $500,000 of this increase was from gains from the sale
of loans originated or purchased for sale and from the recognition of
originated mortgage servicing rights. Net loan servicing and administrative
fees decreased $266,000 as the Company recorded impairments on its portfolio of
mortgage servicing rights due to decreased market values caused primarily by
higher loan prepayment experience. Additionally, the prior year's period
included significant prepayment penalty income from the early repayment of
certain commercial real estate loans. Deposit related fees were up
approximately $90,000 in the current year quarter primarily due to an increase
in ATM fee income.
NONINTEREST EXPENSE
Total noninterest expense increased $1.0 million to $8.2 million during
the quarter ended March 31, 1996, from $7.2 million recorded in the first
quarter of 1995. Compensation and benefits increased due to general wage and
benefit increases and to
- 10 -
<PAGE> 11
additional staffing at new banking facilities. Occupancy expense increased
primarily because of increased rental expense for new or expanded leased office
locations. The increase in other expense represents the higher cost of doing
business in additional and expanded facilities and locations and the resulting
cost of increased support operations. The primary areas of increase were
general office, data processing, furniture and equipment, marketing, legal and
state tax expenses.
FEDERAL INCOME TAXES
A federal income tax credit of $818,000 was recorded in the first
quarter of 1996 and no federal income tax was recorded in the first quarter of
1995 as the Company offset taxes ordinarily payable by a realization, through a
reduction in the valuation allowance previously provided, of prior years' net
operating loss carryforwards.
FINANCIAL CONDITION
Total assets at March 31, 1996 were $1.23 billion, an increase of $45.3
million from December 31, 1995. Earning assets represented approximately 98%
of total assets as of March 31, 1996, substantially the same as at year-end
1995.
CASH, DEPOSITS AND INVESTMENT SECURITIES
Cash, deposits and investment securities were $84.6 million at March
31, 1996, down $18.7 million from December 31, 1995. During the period, a
significant portion of the Company's liquidity portfolio was used to partially
fund loan demand.
MORTGAGE-BACKED SECURITIES
Mortgage-backed securities decreased $10.5 million from year-end 1995
to $112.9 million at March 31, 1996. The decrease was due to repayments and
amortization of $10.3 million plus a decrease of $253,000 in market value
recognized through stockholders' equity on mortgage-backed securities available
for sale.
NET LOANS RECEIVABLE
Net loans receivable increased $73.3 million during the period to $1.0
billion at March 31, 1996. Loan originations of $121.4 million and purchases
of $72.4 million exceeded repayments of $93.3 million and sales of $26.9
million. Loan originations during the three months ended March 31, 1996 were
substantially higher compared to the first three months of 1995. Consumer loan
originations were $43.3 million compared to $37.6 million, while real estate
and commercial loan originations were $78.1 million compared to $14.3 million.
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<PAGE> 12
NONPERFORMING ASSETS AND RISK ELEMENTS
The following table sets forth the amounts and categories of risk
elements in the Company's loan portfolio.
<TABLE>
<CAPTION>
March 31, December 31,
1996 1995
-----------------------
(Dollars in thousands)
<S> <C> <C>
Nonaccruing loans $ 6,144 $ 8,172
Accruing loans delinquent more
than 90 days -- --
Restructured loans -- --
--------------------
Total nonperforming loans 6,144 8,172
Other real estate owned (OREO) 1,073 1,452
--------------------
Total nonperforming assets $ 7,217 $ 9,624
====================
Nonperforming loans as a
percentage of total loans 0.61% 0.87%
====================
Nonperforming assets as a
percentage of total assets 0.59% 0.81%
====================
Allowance for loan losses as a
percentage of nonperforming loans 162.61% 121.53%
====================
Allowances for loan and OREO
losses as a percentage of
nonperforming assets 138.44% 104.57%
====================
</TABLE>
Nonperforming assets, before allowances for loan and OREO losses,
decreased $2.4 million during the period primarily as a large commercial real
estate loan secured by a hotel was restored to accrual status after several
months of performance in accordance with loan contract terms.
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<PAGE> 13
MORTGAGE SERVICING RIGHTS (MSRS)
The Company's net investment in MSRs increased slightly during the period
to $1.1 million at March 31, 1996. The following table details activity in the
portfolio for the periods indicated.
<TABLE>
<CAPTION>
Three Months Year
Ended Ended
March 31, 1996 December 31, 1995
------------------------------------
(Dollars in thousands)
<S> <C> <C>
Balance at beginning of period $ 1,113 $ 968
Additions:
Capitalized servicing 210 621
Purchased servicing -- --
------- --------
Total 210 621
Reductions:
Scheduled amortization 74 169
Additional amortization due
to changes in prepayment
assumptions 11 71
Impairment 116 234
Sales -- --
Transfers to loan portfolio under
recourse and other provisions -- 2
------- --------
Total 201 476
------- --------
Balance at end of period $ 1,122 $ 1,113
======= ========
Fair market value at end of period $ 1,381 $ 1,161
======= ========
</TABLE>
DEPOSITS
Deposits increased $13.4 million during the period to $901.3
million at March 31, 1996. Certificates of deposit increased $2.7 million and
savings deposits increased $5.9 million while checking accounts and money
market accounts increased $3.0 million and $1.8 million, respectively. The
Company's cost of deposits decreased to 4.66% at March 31, 1996, compared to
4.80% at December 31, 1995, as result of a general decrease in market rates of
interest.
BORROWINGS
Total borrowings increased $30.0 million during the period to $246.2
million at March 31, 1996 in order to fund anticipated loan demand. The
Company's cost of borrowings was 5.63% at March 31, 1996, compared to 6.09% at
December 31, 1995.
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<PAGE> 14
CAPITAL
According to federal regulations, the Bank must meet certain minimum
capital ratios. As the following table indicates, the Bank's capital ratios at
March 31, 1996 exceeded these requirements.
<TABLE>
<CAPTION>
Tangible Core Risk-Based
Capital Capital Capital
--------- --------- ----------
(Dollars in thousands)
<S> <C> <C> <C>
Actual capital $ 64,742 $ 64,742 $ 74,343
Required capital 18,749 37,498 61,428
--------- --------- ---------
Excess capital $ 45,993 $ 27,244 $ 12,915
========= ========= =========
Actual ratio 5.18% 5.18% 9.68%
========= ========= =========
Required ratio 1.50% 3.00% 8.00%
========= ========= =========
</TABLE>
Consolidated stockholders' equity was $69.4 million at March 31, 1996
and represents 5.63% of consolidated assets.
LIQUIDITY
Liquidity is the ability to meet financial obligations when due.
Regulatory authorities require that thrift institutions maintain liquidity
consisting of cash, short-term U. S. Government Securities and other specified
assets, equal to at least 5% of net withdrawable accounts and borrowings
payable in one year or less. At March 31, 1996, the Bank's average liquidity
ratio was 5.99%. At March 31, 1996, unused borrowing capacity as measured by
the Bank's inventory of readily available but unpledged collateral was
approximately $215 million. The Company considers its current liquidity and
other funding sources sufficient to fund its outstanding loan commitments and
scheduled liability maturities.
REGULATORY ISSUES
Deposits of savings institutions such as the Bank are presently
insured by the SAIF, which along with the BIF, is one of the two insurance
funds administered by the FDIC. Financial institutions which are members of
the BIF are likely to experience lower deposit insurance premiums in the future
because the BIF has higher reserves and is expected to be responsible for fewer
troubled institutions than the SAIF. As a result of the BIF achieving its
statutory reserve ratio, the FDIC has proposed that the premium schedule for
BIF members be revised so that well capitalized and healthy BIF members
- 14 -
<PAGE> 15
would pay the lowest premiums. It is not anticipated that the SAIF will be
adequately recapitalized for several years, absent a substantial increase in
premium rates or the imposition of special assessments or other significant
developments, such as a merger of the SAIF and the BIF. As a result of this
disparity, SAIF members could be placed at a significant, competitive
disadvantage to BIF members with respect to pricing of loans and deposits and
the ability to achieve lower operating costs. A recapitalization plan recently
under consideration by the Congress reportedly would provide for a special
assessment of .80% to .90% to be imposed on all SAIF insured deposits to
eliminate the disparity. No assurance can be given, however, as to whether the
FDIC's proposal or a recapitalization plan will be implemented or as to the
nature or extent of any competitive disadvantage which may be experienced by
SAIF-member institutions.
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<PAGE> 16
D&N FINANCIAL CORPORATION
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None
ITEM 2. CHANGES IN SECURITIES
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a) The annual meeting of stockholders was held on
April 23, 1996.
(b) The matters approved by stockholders at the annual meeting
and the number of votes cast for, against and withheld (as
well as the number of abstentions and broker non-votes) as
to each matter are set forth below:
Elections of the following
Directors for a Broker
three-year term: For Withheld Non-Votes
--------- -------- ---------
George J. Butvilas 5,703,746 248,474 --
B. Thomas M. Smith, Jr. 5,705,597 246,623 --
Thomas J. St. Dennis 5,701,988 250,232 --
Ratification of Coopers and Lybrand L.L.P. as
auditors for the fiscal year ending December 31,
1996:
For 5,835,070
Against 30,449
Abstain 86,701
Broker Non-Votes --
- 16 -
<PAGE> 17
D&N FINANCIAL CORPORATION
PART II - OTHER INFORMATION - CONTINUED
Approving and adopting an amendment to the
Certificate of Incorporation to increase the number
of authorized shares of common stock to 25,000,000:
For 5,283,714
Against 637,681
Abstain 30,825
Broker Non-Votes --
ITEM 5: OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) The following exhibits are included herein:
(11) Statement re: computation of per share
earnings
(27) Financial Data Schedule
(99) Additional exhibits
i. Interest rate/volume analysis:
quarter ended 3/31/96 vs.
quarter ended 3/31/95
(b) Reports on Form 8-K:
As previously announced, the Registrant and Macomb Federal
Savings Bank ("Macomb") entered into an Agreement and Plan of
Reorganization dated November 8, 1995.
On February 28, 1996, the Registrant filed as an exhibit to
Form 8-K Macomb's quarterly Report on Form 10-Q for the quarter
ended December 31, 1995 filed by Macomb with the Office of Thrift
Supervision pursuant to the Securities Exchange Act of 1934.
- 17 -
<PAGE> 18
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.
D&N FINANCIAL CORPORATION
\s\ George J. Butvilas
----------------------------------
George J. Butvilas, President and
Chief Executive Officer
\s\ Kenneth R. Janson
----------------------------------
Kenneth R. Janson,
Executive Vice President/Chief
Financial Officer and Treasurer
Date: May 10, 1996
<PAGE> 19
EXHIBIT INDEX
Exhibit Number Description
- -------------- -----------
11 Computation of Per Share Earnings
27 Financial Data Schedule
99i Interest Rate/Volume Analysis
<PAGE> 1
EXHIBIT (11)
STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS
<TABLE>
<CAPTION>
Three Months Ended March 31,
----------------------------------
1996 1995
---------------- ----------------
Fully Fully
Primary Diluted Primary Diluted
------- ------- ------- -------
(In thousands, except per share)
<S> <C> <C> <C> <C>
Net income $3,497 $3,497 $1,340 $1,340
====== ====== ====== ======
Average shares
Common 6,799 6,799 6,721 6,721
Common equivalents 521 532 27 120
------ ------ ------ ------
Total 7,320 7,331 6,748 6,841
====== ======= ====== ======
Earnings per common share $ 0.48 $ 0.48 $ 0.20 $ 0.20
====== ====== ====== ======
</TABLE>
Common share equivalents assume exercise of stock options and warrants, if
dilutive.
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 20,895
<INT-BEARING-DEPOSITS> 435
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 78,621
<INVESTMENTS-CARRYING> 97,632
<INVESTMENTS-MARKET> 98,199
<LOANS> 1,014,472
<ALLOWANCE> 9,991
<TOTAL-ASSETS> 1,231,927
<DEPOSITS> 901,296
<SHORT-TERM> 26,876
<LIABILITIES-OTHER> 15,057
<LONG-TERM> 219,334
0
0
<COMMON> 48,764
<OTHER-SE> 20,600
<TOTAL-LIABILITIES-AND-EQUITY> 1,231,927
<INTEREST-LOAN> 19,550
<INTEREST-INVEST> 3,759
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 23,309
<INTEREST-DEPOSIT> 10,577
<INTEREST-EXPENSE> 13,844
<INTEREST-INCOME-NET> 9,465
<LOAN-LOSSES> 300
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 8,194
<INCOME-PRETAX> 2,679
<INCOME-PRE-EXTRAORDINARY> 3,497
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,497
<EPS-PRIMARY> 0.48
<EPS-DILUTED> 0.48
<YIELD-ACTUAL> 3.23
<LOANS-NON> 6,144
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 16,662
<ALLOWANCE-OPEN> 9,931
<CHARGE-OFFS> 306
<RECOVERIES> 66
<ALLOWANCE-CLOSE> 9,991
<ALLOWANCE-DOMESTIC> 9,991
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
<PAGE> 1
EXHIBIT (99)i.
INTEREST RATE/VOLUME ANALYSIS
QUARTER ENDED 3/31/96 VS. 3/31/95
<TABLE>
<CAPTION>
Average balance Average Rate Interest Variance due to:
--------------------- ------------------ ----------------------------- ----------------
Increase
Quarter ended 03/31/96 03/31/95 03/31/96 03/31/95 03/31/96 03/31/95 (Decrease) Volume Rate
- ----------------------------- ---------- -------- -------- --------- -------- -------- ---------- -------- ------
(Dollars in thousands) (Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Loans receivable $ 968,149 $ 807,293 8.08% 7.90% $19,550 $15,904 $3,646 $3,273 $ 373
Mortgage-backed securities 116,199 144,678 7.67% 7.46% 2,227 2,699 ( 472) ( 544) 72
Investments 87,065 96,732 7.08% 6.44% 1,532 1,536 ( 4) ( 146) 142
---------- ---------- ------ ------ ------ ------- ------ ------ -------
1,171,414 1,048,703 7.96% 7.70% 23,309 20,139 3,170 2,583 587
---------- ---------- ------ ------ ------ ------- ------ ------ -------
Interest-bearing liabilities:
Deposits 893,000 783,540 4.76% 4.11% 10,577 7,945 2,632 1,284 1,348
Borrowings
Securities sold w/repo 6,920 24,632 5.37% 6.01% 94 365 ( 271) ( 236) ( 35)
Notes payable 206,003 186,448 5.61% 6.17% 2,919 2,875 44 318 ( 274)
Other borrowed money 10,280 11,932 9.88% 9.99% 254 298 ( 44) ( 41) ( 3)
---------- ---------- ------ ------ ------ ------- ------ ----- -------
Subtotal - Borrowings 223,203 223,012 5.80% 6.35% 3,267 3,538 ( 271) 42 ( 313)
Interest rate instruments n/a n/a 0.00% 0.52% 0 1,327 ( 1,327) 0 ( 1,327)
---------- --------- ------ ------ ------ ------- ------ ------ ------
1,116,204 1,006,552 4.97% 5.13% 13,844 12,810 1,034 1,325 ( 291)
---------- ---------- ------ ------ ------ ------- ------ ------ -------
Interest rate spread 2.99% 2.58%
Excess average earning assets $ 55,210 $ 42,151
========== ==========
Net interest margin 3.23% 2.78% $ 9,465 $ 7,329 $2,136 $1,258 $ 878
======= ======= ====== ====== =======
Net interest margin w/o swaps 3.23% 3.28%
======= ======
</TABLE>
