SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q SB
(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, 1997
Commission File Number 0-19181
HURON NATIONAL BANCORP, INC.
(Exact name of small business issuer in its charter)
Michigan 38-2855012
(State or other jurisdiction of (IRS employer Identification No.)
incorporation or organization)
200 East Erie Street, Rogers City, Michigan 49779
(Address of principal executive offices) (Zip Code)
Telephone Number including area code: (517) 734-4734
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 shorter periods if 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[ ]
Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of the latest practical date.
$10.00 par value of common stock 62,500 shares as of April 30, 1997
(Class) (Outstanding)
<PAGE>
HURON NATIONAL BANCORP, INC.
CONTENTS
PART I FINANCIAL INFORMATION
ITEM 1 Consolidated Balance Sheets (Unaudited)
March 31, 1997 and December 31, 1996 ........................... 2
Consolidated Statements of Income (Unaudited)
Three months ended March 31, 1997 and 1996 ..................... 3
Consolidated Statements of Cash Flows (Unaudited)
Three months ended March 31, 1997 and 1996 ..................... 4
Consolidated Statements of Shareholders' Equity (Unaudited)
Three months ended March 31, 1997 and 1996 ..................... 5
Notes to the Consolidated Financial Statements (Unaudited)......... 6
ITEM 2 Management's Discussion and Analysis of Financial Condition
and Results of Operations ...................................... 8
PART II OTHER INFORMATION
Item 1 - Legal Proceedings.........................................15
Item 2 - Changes in Securities ....................................15
Item 3 - Defaults upon Senior Securities ..........................15
Item 4 - Submission of Matters to a Vote of Securities Holders.....15
Item 5 - Other Information.........................................15
Item 6 - Exhibits and Reports on Form 8-K..........................15
Index to Exhibits..................................................16
Signatures.........................................................17
Financial Data Schedule............................................18
<PAGE>
<TABLE>
HURON NATIONAL BANCORP, INC.
CONSOLIDATED BALANCE SHEETS
Unaudited
March 31, December 31,
ASSETS 1997 1996
<S> <C> <C>
Cash and due from banks .................................. $ 3,025,336 $ 2,438,015
Federal funds sold ....................................... 1,200,000 900,000
Cash and cash equivalents ................................ 4,225,336 3,338,015
Securities:
Available for Sale:
U.S. Treasury ........................................ 1,744,844 1,243,750
U.S. Government agencies ............................. 251,023 502,951
Held to maturity:
U.S. Government agencies ............................. 1,337,171 1,849,015
Tax exempt bonds and notes ........................... 2,008,558 2,231,791
Taxable bonds ........................................ 397,329 --
Corporate notes ...................................... 1,204,795 1,321,883
Total investment securities ........................ 6,943,720 7,149,390
Loans
Commercial ............................................. 2,710,159 2,402,382
Real Estate ............................................ 10,317,092 10,407,482
Installments ........................................... 6,363,349 6,376,320
Total Loans ........................................ 19,390,600 19,186,184
Allowance for loan losses ............................. (181,048) (174,955)
Net loans .......................................... 19,209,552 19,011,229
Bank premises and equipment - net ........................ 516,584 488,598
Accrued interest receivable .............................. 272,099 234,632
Other assets ............................................. 71,182 70,406
Total Assets ....................................... $ 31,238,473 $ 30,292,270
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
Deposits
Non interest-bearing
transaction accounts ................................ $ 3,120,058 $ 3,333,231
Interest-bearing
transaction accounts ................................ 4,695,309 3,769,530
Savings ............................................... 6,541,539 6,498,161
Time .................................................. 14,120,594 13,993,088
Total deposits ..................................... 28,477,500 27,594,010
Accrued interest payable ................................. 67,387 63,216
Other liabilities ........................................ 186,148 195,371
Total liabilities .................................. 28,731,035 27,852,597
Shareholders' Equity
Common stock, $10 par value:
100,000 shares authorized
and 62,500 outstanding .................................. 625,000 625,000
Additional paid in capital ............................... 625,000 625,000
Retained earnings ........................................ 1,258,211 1,185,666
Net unrealized gain (loss)
on securities available
for sale, net of income tax ............................. (773) 4,007
Total shareholders' equity ........................ 2,507,438 2,439,673
Total liabilities and
shareholders' equity .......................... $ 31,238,473 $ 30,292,270
</TABLE>
See notes to the interim consolidated financial statements
<PAGE>
<TABLE>
HURON NATIONAL BANCORP, INC.
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
Three Months Ended
March 31, March 31,
Interest Income 1997 1996
<S> <C> <C>
Loans, including fees ....................... $449,860 $414,770
Federal funds sold .......................... 15,742 24,053
Securities available for sale:
U.S. Treasury ............................... 23,617 9,100
U.S. Government agencies .................... 5,015 19,367
Securities held to maturity:
U.S. Government agencies .................... 20,059 37,895
Tax exempt bonds and notes .................. 22,658 8,946
Taxable bonds ............................... 5,391 --
Corporate notes ............................. 19,309 21,395
Federal reserve stock ........................ 563 563
Total interest income ..................... 562,214 536,089
Interest Expense
Deposits .................................... 286,663 258,195
Net Interest Income .......................... 275,551 277,894
Provision for Loan Losses .................... 9,000 9,000
Net Interest Income After
Provision for Loan Losses ................... 266,551 268,894
Non-Interest Income
Service charges ............................. 24,862 26,377
Other ....................................... 5,785 11,366
Total non-interest income ............... 30,647 37,743
Non-Interest Expense
Salaries and benefits ....................... 87,303 90,689
Premises and equipment ...................... 34,289 29,959
Legal and accounting fees ................... 15,307 15,555
Other operating expense ..................... 59,282 60,048
Total non-interest expense .............. 196,181 196,251
Income Before Income Tax ..................... 101,017 110,386
Provision for Income Tax ..................... 28,472 34,716
Net Income ................................... $ 72,545 $ 75,670
Net Income Per Share.......................... $1.16 $1.21
</TABLE>
See notes to the interim consolidated financial statements.
<PAGE>
<TABLE>
HURON NATIONAL BANCORP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Three Months Ended
March 31, March 31,
1997 1996
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C>
Net income ................................... $ 72,545 $ 75,670
Adjustments to reconcile
net income to net cash
from operating activities
Depreciation and amortization ............. 11,512 8,829
Net premium amortization and
discount accretion on securities ........ 26,716 23,966
Provision for loan losses ................. 9,000 9,000
Increase/(decrease) in cash from
change in assets and liabilities:
Interest receivable ................ (37,467) (22,901)
Other assets ....................... (776) (7,978)
Interest payable ................... 4,171 6,973
Other liabilities .................. (6,761) 18,263
Net cash from operating
activities ..................... 78,940 111,822
CASH FLOWS FROM INVESTING ACTIVITIES
Available-for-sale securities:
Purchases ................................... (513,306) (493,438)
Maturities .................................. 250,000 --
Held-to-maturity securities:
Purchases ................................... (193,982) (1,412,715)
Maturities .................................. 629,000 63,000
Net increase in loans ........................ (207,323) 31,735
Purchase of property and equipment ........... (39,498) (1,007)
Net cash from (used in)
investing activities ....................... (75,109) (1,812,425)
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase/(decrease) in
deposit accounts .......................... 883,490 1,009,986
Net cash from financing activities ...... 883,490 1,009,986
NET INCREASE/(DECREASE) IN CASH
AND CASH EQUIVALENTS ........................ 887,321 (690,617)
CASH AND CASH EQUIVALENTS AT:
BEGINNING OF PERIOD .......................... 3,338,015 3,847,727
END OF PERIOD ................................ $ 4,225,336 $ 3,157,110
SUPPLEMENTAL DISCLOSURES OF
CASH FLOW INFORMATION
Cash paid during the period for:
Interest .................................. $ 282,492 $ 251,222
Federal income tax ........................ $ 60,213 $ -
</TABLE>
See notes to the interim consolidated financial statements.
<PAGE>
<TABLE>
HURON NATIONAL BANCORP, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (UNAUDITED)
For the Three Month Periods ended March 31, 1996 and 1995
Net Unrealized
Gain (Loss)
Additional On Securities Total
Common Paid In Retained Available Shareholders'
Stock Capital Earnings For Sale Equity
<S> <C> <C> <C> <C> <C>
BALANCE AT JANUARY 1, 1996 $625,000 $625,000 $972,478 $12,444 $2,234,922
Net income ............. -- -- 75,670 -- 75,670
Unrealized gain (loss)
on securities
available for sale,
net of tax ............ -- -- -- (8,071) (8,071)
BALANCE AT MARCH 31, 1996 $625,000 $625,000 $1,048,148 $4,373 $2,302,521
BALANCE AT JANUARY 1, 1997 625,000 625,000 1,185,666 4,007 2,439,673
Net income ............. -- -- 72,545 -- 72,545
Unrealized gain (loss)
on securities
available for sale,
net of tax ............ -- -- -- (4,780) (4,780)
BALANCE AT MARCH 31, 1997 $625,000 $625,000 $1,258,211 $(773) $2,507,438
</TABLE>
See notes to the interim consolidated financial statements.
<PAGE>
HURON NATIONAL BANCORP, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1. The consolidated financial statements include the accounts of the
Registrant and its wholly-owned subsidiary, Huron National Bank after
elimination of significant inter-company transactions and accounts.
2. In the opinion of management of the Registrant, the accompanying
consolidated financial statements contain all the adjustments (consisting
only of normal recurring accruals) necessary to present fairly the
consolidated financial position of the Registrant as of March 31, 1997 and
December 31, 1996, and the results of operations for the three month
periods ended March 31, 1997 and 1996.
3. During the three month period ended March 31, 1997, there were no sales of
available-for-sale securities. For this period, the change in net
unrealized holding gain or loss on available-for-sale securities was a
decrease of $7,242. There were no sales or transfers of securities
classified as held to maturity. The aggregate estimated fair value of
securities held to maturity as of March 31, 1997 and December 31, 1996 was
$4,951,000 and $5,450,000 respectively.
4. Management determines the adequacy of the allowance for loan losses based
on an evaluation of the loan portfolio, recent loss experience, current
economic conditions and other pertinent factors. An analysis of changes in
the allowance for loan losses follows:
<TABLE>
Three Months Ended Year Ended
March 31, December 31,
1997 1996 1996
<S> <C> <C> <C>
Balance at beginning of period .......... $ 174,955 $ 144,100 $ 144,100
Additions/(Deductions)
Provisions charged to operating expense 9,000 9,000 36,000
Recoveries credited to allowance ...... 1,894 435 1,381
Loans charged-off ..................... (4,801) (2,155) (6,526)
Balance at end of period ................ $ 181,048 $ 151,380 $ 174,955
</TABLE>
Continued
<PAGE>
<TABLE>
HURON NATIONAL BANCORP, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)(continued)
March 31, December 31,
1997 1996 1996
<S> <C> <C> <C>
Past due 90 days or more ............. $20,481 $- $-
Nonaccrual ........................... 2,072 3,224 36,952
Restructured ......................... 17,697 48,035 0
Totals .......................... $40,250 $51,259 $36,952
</TABLE>
Loans past due ninety days or more, nonaccruals and restructured loans have
adequate levels of collateral and/or loans are guaranteed and the Bank does
not expect any significant loss.
5. The provision for income taxes represents federal income tax expense
calculated using annualized rates on taxable income generated during the
respective periods.
6. Earnings and dividends per share are computed using the weighted average
number of shares outstanding. The number of shares used in the computations
of earnings and dividends per share were 62,500 for 1997 and 1996.
7. The accompanying unaudited consolidated financial statements should be read
in conjunction with the notes to the consolidated financial statements
contained in the Annual Report for the year ended December 31, 1996.
8. The results of the operations for the three months ended March 31, 1997 are
not necessarily indications of results to be expected for the full year.
9. As of March 31, 1997, the Bank had outstanding commitments to make loans
totaling $511,919 and outstanding letters of credit of $248,192.
Continued
<PAGE>
HURON NATIONAL BANCORP, INC.
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of financial condition and results of
operations provides additional information to assess the consolidated financial
statements of the Registrant and its wholly-owned subsidiary. The discussion
should be read in conjunction with those statements.
Introduction
The Bank was organized in 1980 under the laws of the United States. Located
in a rural northern Michigan area, this community bank has achieved a moderate
growth pattern consistent with maintaining a reasonable capital to asset ratio.
Summary of Financial Position
Total assets at March 31, 1997 increased from December 31, 1996 by 3.12%,
or $946,203. This increase primarily was the result of an increase in deposits
of $883,490. Since deposits increased and loans were essentially unchanged, the
loan to deposit ratio decreased from 69.53% at December 31, 1996 to 68.09% at
March 31, 1997. The allowance for loan losses was increased by $6,093.
During the first quarter of 1997, the Bank has seen a migration of balances
from noninterest bearing transaction accounts to interest-bearing transaction
accounts and time deposits. These deposits increased by $1,053,285 as depositors
are committing funds for an extended period of time due to interest rates. The
increase in total deposits of 3.20% or $883,490, from December 31, 1996 to March
31, 1997 is also impacted by changing deposit rate and service charge pricing by
institutions in Presque Isle County.
Results of Operations
Net income for the three months ended March 31, 1997 totaled $72,545
compared to $75,670 in 1996, a decrease of $3,125. The decrease is primarily the
result an increase in interest expense on deposits of $28,468. This amount was
offset by an increase in interest income of $26,125.
Continued
<PAGE>
HURON NATIONAL BANCORP, INC.
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
Results of Operations (continued)
The provision for loan losses for the three month periods ended March 31,
1997, and 1996 was $9,000. It is Management's intention to provide an adequate
allowance for loan losses based on an ongoing evaluation of the loan portfolio.
The consistent provision reflects Management's assessment that the overall
credit risk of the loan portfolio is generally unchanged.
Non-interest income for the three months ended March 31, 1997 totaled
$30,647 compared to $37,743 in 1996. The decrease was primarily related to a
reduction in service charges on returned checks, early redemption penaltites and
coin and currency fees. There was a decrease of $5,581 in Other income compared
to March 31, 1996.
Non-interest expense for the three months ended March 31, 1997 totaled
$196,181 compared to $196,251 at March 31, 1996. There were only slight changes
in the areas of Salaries and benefits and Premises and equipment.
The effective Federal income tax rate, derived by dividing Federal income
tax expense by income before taxes, was approximately 28.2% and 31.4% for the
three month periods ended March 31, 1997 and 1996, respectively. This decrease
between periods is primarily the result of an increase in interest income which
is exempt from Federal income tax.
Analysis of Net Interest Income
The difference between interest generated by the Bank's earning assets and
interest paid on liabilities is referred to as net interest income, the most
significant component of the Bank's earnings. The following three tables
summarize the components of and the changes in net interest income. For purposes
of this analysis, tax exempt interest on loans and investments has been
increased to an amount comparable to interest subject to federal income taxes.
This taxable equivalent adjustment is based on a federal income tax rate of 34%.
Continued
<PAGE>
HURON NATIONAL BANCORP, INC.
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
Analysis of Net Interest Income (continued)
<TABLE>
Net Interest Income Three Months Ended March 31,
(In Thousands) 1997 1996
<S> <C> <C>
Interest Income (fully taxable
equivalent basis) ................................... $574 $541
Interest Expense ..................................... 287 258
Net Interest Income (fully taxable
equivalent basis) ................................... $287 $283
Increase in Net Interest Income ...................... $ 4 $ 4
Percent increase of Net Interest Income .............. 1.41% 1.43%
</TABLE>
The two variables that have the most significant effect on the change in
the net interest income are volume and rate. The change in interest due to both
volume and rate has been allocated to volume and rate changes in proportion to
the relationship of the absolute dollar amounts of the change in each. As can be
seen from the two tables below, the Bank has experienced an increase in net
interest income due to increases in the volume of both interest earning assets
and interest bearing liabilities. However, a decreased margin almost completely
offset the benefits of the increase in volume. The rate paid on interest bearing
liabilities increased 19 basis points because growth was centered in time
deposits, the most costly deposit category. Since loan volumes increased
slightly, the additional deposits were invested in securities, which have lower
yields than loans. This resulted in a slight decrease in the gross yield on
interest earning assets of 9 basis points. Consequently, the net yield on
interest earning assets decreased from 4.45% for the three months ended March
31, 1996 to 4.18% for the same period in 1997. The increased volume, partially
offset by the decrease in margin, increased the net interest income by $4,719 on
a fully tax equivalent basis.
<TABLE>
Change in Net Interest Income 1997 Over 1996
(In Thousands) Change Due to:
Interest Income Volume Rate Total
<S> <C> <C> <C>
Loans ...................................... $ 42 $ (7) $ 35
Taxable investment securities .............. (9) (5) (14)
Nontaxable investment
securities (fully taxable
equivalent basis) ......................... 21 (1) 20
Federal funds sold ......................... (8) 0 (8)
Total Interest Income ...................... 46 (13) 33
Interest Expense
Interest bearing DDA ....................... 0 0 0
Savings .................................... 1 0 1
Time deposits .............................. 20 8 28
Total Interest Expense ..................... 21 8 29
Net Interest Income ........................ $ 25 $(21) $ 4
Continued
</TABLE>
<PAGE>
HURON NATIONAL BANCORP, INC.
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
Analysis of Net Interest Income (continued)
The table below summarizes the Bank's average balances, interest
income/expense, interest rates and net yield on earning assets. The net yield on
earning assets employs an effective cost of funds by recognizing interest-free
liabilities and shareholders' equity which fund earning assets, and is computed
by dividing net interest income by interest earning assets.
<TABLE>
Interest Rate Spread and Net Three Months Ended March 31,
Yield on Earning Assets 1997 1996
(In Thousands) Average Average
Assets Balance Interest Rate Balance Interest Rate
<S> <C> <C> <C> <C> <C> <C>
Loans .......................... $19,429 $ 450 9.39% $17,621 $ 414 9.55%
Taxable investment
securities .................... 4,877 73 6.10% 5,506 88 6.46%
Nontaxable investment
securities (fully
taxable equivalent
basis) ........................ 2,075 34 6.71% 770 14 7.13%
Federal funds sold ............. 1,193 16 5.35% 1,815 24 5.37%
Other .......................... 38 1 6.09% 38 1 6.01%
Total Interest
Earning Assets ................ 27,612 574 8.43% 25,750 541 8.52%
Cash and due from banks ........ 2,700 -- -- 2,578 -- --
Other assets, net .............. 596 -- -- 540 -- --
Total Assets ................... $30,908 -- -- $28,868 -- --
Liabilities
Interest bearing DDA's ......... $ 4,516 $ 33 2.99% $4,537 34 3.02%
Savings ........................ 6,340 43 2.75% 6,140 42 2.77%
Time deposits .................. 14,146 211 6.03% 12,808 182 5.78%
Total interest bearing
liabilities ................... 25,002 287 4.65% 23,485 258 4.46%
DDA's .......................... 3,172 -- -- 2,885 -- --
Other liabilities .............. 259 -- -- 237 -- --
Shareholders' equity ........... 2,475 -- -- 2,261 -- --
Total liabilities
and equity .................... $30,908 -- -- $28,868 -- --
Net Interest Income ............ -- $ 287 -- -- $ 283 --
Net Yield on Interest
Earning Assets ................ -- -- 4.22% -- -- 4.45%
Net Interest Spread ............ -- -- 3.78% -- -- 4.06%
Interest earning assets/interest
bearing liabilities ........... 1.10% -- -- 1.10% -- --
</TABLE>
Continued
<PAGE>
HURON NATIONAL BANCORP, INC.
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
Analysis of Net Interest Income (continued)
Average balances for loans include non-accrual, restructured and impaired
loans. The inclusion of these loans does not have a material effect on either
the average balance or the interest income.
Capital Management
Huron National Bank believes that a strong capital position is paramount to
its continued profitability and continued depositor and investor confidence. It
also provides Huron National Bank flexibility to take advantage of growth
opportunities and to accommodate larger Bank loan customers. Regulators have
established risk-based capital guidelines for banks and bank holding companies.
Because of the Corporation's and Bank's size, regulatory capital requirements
apply only to the Bank.
Under the guidelines, minimum capital levels are established for risk based
and total assets. For the risk based computation, the ratio is based on the
perceived risk in asset categories and certain off-balance-sheet items, such as
standby letters of credit. The guidelines define Tier 1 capital and Tier 2
capital. Tier 1 capital includes common shareholders' equity, while Tier 2
capital adds the allowance for loan losses. Tier 1 capital cannot exceed Tier 2
capital. Banks are required to have ratios of Tier 1 capital to risk weighted
assets of 4% and total capital (Tier 1 plus Tier 2) of 8%. At March 31, 1997
Huron National Bank had capital ratios well above the minimum regulatory
guidelines.
As of March 31, 1997, the Bank's consolidated actual capital levels and
minimum required levels were:
<TABLE>
Minimum Required To
Minimum Required Be Well Capitalized
For Capital Under Prompt Corrective
Actual Adequacy Purposes Action Regulations
Amount Ratio Amount Ratio Amount Ratio
<S> <C> <C> <C> <C> <C> <C>
Total capital (to risk
weighted assets) ..... 2,681 14.54% 1,475 8.00% 1,843 10.00%
Tier 1 capital (to risk
weighted assets) ..... 2,500 13.56% 737 4.00% 1,106 6.00%
Tier 1 capital (to
average assets) ...... 2,500 8.09% 1,236 4.00% 1,545 5.00%
</TABLE>
Continued
<PAGE>
HURON NATIONAL BANCORP, INC.
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
Liquidity and Interest Rate Sensitivity
The Bank's principal asset/liability management objectives include the
maintenance of adequate liquidity and appropriate interest rate sensitivity
while maximizing net interest income.
The Bank's primary sources of short term liquidity are short-term
investments and the ability to raise money through federal funds purchased.
Longer term sources of liquidity are through longer term investment security
maturities and loan repayments, as well as through normal deposit growth and
negotiable certificates of deposit. The primary source of funds for the parent
company is the upstream of dividends from the Bank.
Management believes that the sources of liquidity are sufficient for the
Bank and parent company to continue with their current business plans.
As previously noted, interest income and interest expense are also
dependent on changing interest rates. The relative impact of changing interest
rates on the net interest income depends on the rate sensitivity to such
changes. Rate sensitivity generally depends on maturity structures, call
provisions, repayment penalties etc. of the respective financial instruments.
The Bank's exposure or sensitivity to changing interest rates is measured by the
ratio of rate-sensitive assets to rate-sensitive liabilities. The Bank feels
that its rate sensitive position is adequate in a normal interest rate movement
environment.
Gap Analysis
The following table reflects how Management has matched assets to
liabilities that mature or have the ability to reprice as of March 31, 1997:
<TABLE>
Assets 0 - 90 Days 90-180 Days 181-365 Days 1 - 3 Years 3 Years + Total
<S> <C> <C> <C> <C> <C> <C>
Loans ................. $ 1,610,528 $ 945,135 $ 731,029 $ 4,559,037 $ 11,552,041 $ 19,397,770
Federal Funds ......... 1,200,000 0 0 0 0 1,200,000
Investments ........... 71,065 499,652 869,202 4,042,019 1,461,782 6,943,720
Total .............. 2,881,593 1,444,787 1,600,231 8,601,056 13,013,823 27,541,490
Liabilities
Interest-bearing
transaction accounts 4,695,309 0 0 0 0 4,695,309
Savings ............... 6,541,539 0 0 0 0 6,541,539
Certificates of Deposit 4,614,891 3,106,444 1,611,695 2,794,290 1,978,274 14,105,594
Total .............. 15,851,739 3,106,444 1,611,695 2,794,290 1,978,274 25,342,442
Asset (liabilities) GAP ($12,970,146) ($ 1,661,657) ($ 11,464) $ 5,806,766 $ 11,035,549 $ 2,199,048
Cumulative GAP ........ ($12,970,146) ($14,631,803) ($14,643,267) ($ 8,836,501) $ 2,199,048
</TABLE>
Continued
<PAGE>
HURON NATIONAL BANCORP, INC.
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
Gap Analysis (continued)
Not included in the totals are non-accrual loans of $2,072, impaired loans
of $20,481, non-repricing investments of $37,500 and matured certificates of
deposit of $15,000.
The Bank's cumulative 1 year GAP position has increased slightly from
($13,624,098) at December 31, 1996 to ($14,641,850) at March 31, 1997 primarily
due to the increase in certificates of deposits maturing within one year.
Management believes that the GAP overstates true interest sensitivity. Interest
exposure is not as significant as expressed in the above schedule as rates on
interest-bearing transaction and savings accounts may not reprice on an "instant
basis". Management believes liabilities do not need to be repriced as soon as
rates begin to move which gives them a "lag time" in the market and for the
assets to reprice. It is also their belief that they are in a sufficient
position to minimize the adverse effect for the change in interest rates.
Accounting Standards
On March 3, 1997, the Financial Accounting Standards Board issued Statement
128, "Earnings Per Share" (SFAS No. 128), which is effective for financial
statements beginning with year end 1997. Basic earnings per share for 1997 and
later 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 Bank 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.
<PAGE>
HURON NATIONAL BANCORP, INC.
PART II
OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS
The Corporation is not involved in any material legal proceedings. The
Corporation's sole subsidiary, Huron National Bank (the "Bank"), is involved in
ordinary routine litigation incident to its business; however, no such
proceedings are expected to result in any material adverse effect on the
operations or earnings of the Bank. Neither the Bank nor the Corporation is
involved in any proceedings to which any director, principal officer, affiliate
thereof, or person who owns of record or beneficially five percent (5%) or more
of the outstanding stock of the Corporation or the Bank, or any associate of the
foregoing, is a party or has a material interest adverse to the Corporation or
the Bank.
ITEM 2 - CHANGES IN SECURITIES
No changes in securities relevant to the requirements of this section occurred
during the three months ended March 31, 1997.
ITEM 3 - DEFAULTS UPON SENIOR SECURITIES
There have been no defaults upon senior securities relevant to the requirements
of this section during the three months ended March 31, 1997.
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There have been no matters submitted to a vote of the Registrant's security
holders during the three months ended March 31, 1997.
ITEM 5 - OTHER INFORMATION
No other information to report during the three months ended March 31, 1997.
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
1. Exhibits required by Item 601 of Regulation S-K. See Index to Exhibits on
page 16.
2. Reports on Form 8-K. No reports on Form 8-K were filed for the three months
ended March 31, 1997.
<PAGE>
HURON NATIONAL BANCORP, INC.
INDEX TO EXHIBITS
The following exhibits are filed or incorporated by reference as part of this
report:
2 Plan of Acquisition, Reorganization, Arrangement, Liquidation or Succession-
Consolidation
Agreement included in Amendment No. 1 to Form S-4 Registration Statement No.
33-33874.
27 Financial data schedule
<PAGE>
HURON NATIONAL BANCORP, INC.
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.
HURON NATIONAL BANCORP, INC.
By: /s/ Michael L. Cahoon
Michael L. Cahoon
President and Chief Executive Officer
Dated: 5/5/97
By: /s/ Paulette D. Kierzek
Paulette D. Kierzek
Chief Financial Officer
Dated: 5/5/97
<PAGE>
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<PERIOD-START> JAN-01-1996
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