<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1997
---------------------------------
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: 0-20331
-------------------------------------------------------
Midwest Federal Financial Corp.
- ------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Wisconsin 39-1725856
- ------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
1159 Eighth Street, Baraboo, Wisconsin 53913
- ------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(608) 356-7771
- ------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
N/A
- ------------------------------------------------------------------------------
(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
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. X YES NO
------------ -------------
Registrant became subject to the filing requirements of the Act on July 7,
1992.
As of November 10, 1997 there were 2,069,998 shares, $.01 par value, of the
registrant's common stock issued and 1,627,674 shares or common shares
equivalents are outstanding.
<PAGE> 2
Midwest Federal Financial Corp.
And Subsidiary
Table of Contents
<TABLE>
<S> <C>
PART I - Financial Information
- ------------------------------
Consolidated Statements of Financial Condition (unaudited) 1
Consolidated Statements of Operations (unaudited) 2
Consolidated Statements of Cash Flows (unaudited) 3
Notes to Consolidated Financial Statements (unaudited) 4
Managements discussion and Analysis of financial
Condition and Results of Operations 11
PART II - Other Information
- ---------------------------
Item 1. Legal Proceedings 14
Item 2. Changes in Securities 14
Item 3. Defaults Upon Senior Securities 14
Item 4. Submission of Matters to Vote
of Securities Holders 14
Item 5. Other Information 14
Item 6. Exhibits and Reports on Form 8-K 14
</TABLE>
<PAGE> 3
Midwest Federal Financial Corp. And Subsidiary
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
September 30, 1997 and December 31, 1996
<TABLE>
<CAPTION>
Sept. 30, 1997 Dec. 31, 1996
-------------------- --------------------
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 4,880,988 $ 6,874,107
Other Interest-bearing deposits 0 100,000
Securities held to maturity (fair value 1997 $901,014; 1996 $1,093,240) 900,000 1,100,000
Securities available for sale 36,825,350 34,320,832
Loans held for sale 1,278,900 527,446
Loans, net of allowance for loan losses 1997 $1,644,423; 1996 $1,538,580 158,117,955 144,201,689
Accrued interest receivable 1,624,421 1,512,342
Premises and equipment, net 4,232,220 4,030,183
Other Assets 3,829,475 3,633,424
------------------- -------------------
$211,689,309 $196,300,023
=================== ===================
LIABILITIES AND STOCKHOLDERS EQUITY
Liabilities
Deposits:
Non-interest bearing $ 14,324,181 $ 13,204,354
Interest bearing 145,102,595 139,287,113
------------------- -------------------
159,426,776 152,491,467
Borrowed Funds 30,600,000 24,800,000
Advance payments by borrowers -- escrow accounts 409,195 141,893
Accrued interest payable and other liabilities 2,206,300 1,962,987
------------------- -------------------
192,642,271 179,396,347
------------------- -------------------
Commitments, Contingencies and Credit Risk
Stockholder's Equity
Common stock, par value $.01 per share, 9,000,000 shares authorized,
2,069,998 shares issued, outstanding 1,627,674 and 1,620,379 respectively 20,700 20,700
Additional paid-in capital 6,495,310 6,495,310
Retained earnings, substantially restricted 16,311,532 14,507,322
Unrealized gain (loss) on securities available for sale, net 137,500 (94,600)
Loan to ESOP (302,715) (350,142)
Treasury stock, at cost 442,324 and 449,619 shares respectively (3,615,289) (3,674,914)
------------------- -------------------
19,047,038 16,903,676
------------------- -------------------
$211,689,309 $196,300,023
=================== ===================
</TABLE>
Page 1
See accompanying notes to consolidated financial statements
<PAGE> 4
Midwest Federal Financial Corp.
And Subsidiary
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Quarter Ended Nine Months Ended
---------------------------------- ------------------------------
09/30/97 09/30/96 09/30/97 09/30/96
---------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
Interest and dividend income:
Mortgage loans $2,553,597 $2,226,211 $ 7,400,358 $ 6,486,808
Other loans 1,094,303 915,025 3,054,691 2,703,476
Investment securities and interest-bearing deposits 276,405 362,606 917,272 1,093,875
Mortgage-backed securities 281,107 285,950 796,637 729,197
Dividends on stock in Federal Home Loan Bank 27,341 18,679 75,373 48,539
---------- ---------- ----------- -----------
TOTAL INTEREST AND DIVIDEND INCOME 4,232,753 3,848,471 12,244,331 11,061,895
---------- ---------- ----------- -----------
Interest Expense:
Deposits 1,823,260 1,722,391 5,323,028 5,009,995
Borrowed funds 394,920 308,037 1,125,598 714,208
---------- ---------- ----------- -----------
TOTAL INTEREST EXPENSE 2,218,180 2,030,428 6,448,626 5,724,203
---------- ---------- ----------- -----------
Net interest income 2,014,573 1,818,043 5,795,705 5,337,692
Provision for loan losses 69,000 145,000 207,000 250,000
---------- ---------- ----------- -----------
Net interest income after provision for loan losses 1,945,573 1,673,043 5,588,705 5,087,692
---------- ---------- ----------- -----------
Non-interest income:
Loan fees and service charges 79,672 60,520 219,120 197,609
Deposit account fees and service charges - Net 222,326 207,612 650,352 591,553
Net gain on sale of investment and mortgage-backed
securities 194,768 100,008 527,605 258,942
Net gain on sale of loans 162,919 213,805 344,296 352,818
Other income 151,730 141,274 413,404 400,111
---------- ---------- ----------- -----------
TOTAL NON-INTEREST INCOME 811,415 723,219 2,154,777 1,801,033
---------- ---------- ----------- -----------
Operating Expenses:
Compensation and other employee benefits 846,835 755,933 2,387,185 2,182,923
Occupancy 195,249 192,539 584,573 589,189
Telephone and postage 55,168 65,581 165,826 172,123
Data processing 92,835 89,708 277,514 270,674
Federal deposit insurance premiums 21,603 914,121 65,129 1,051,815
Other 349,596 230,064 881,108 686,477
---------- ---------- ----------- -----------
TOTAL OPERATING EXPENSES 1,561,286 2,247,946 4,361,335 4,953,201
---------- ---------- ----------- -----------
Income before provision for income taxes 1,195,702 148,316 3,382,147 1,935,523
Provision for income taxes 419,000 45,600 1,152,500 688,800
---------- ---------- ----------- -----------
NET INCOME $ 776,702 $ 102,716 $ 2,229,647 $ 1,246,723
========== ========== =========== ===========
Total earning per share $ .45 $ .06 $ 1.29 $ .73
========== ========== =========== ===========
</TABLE>
See accompanying notes to consolidated financial statements
Page 2
<PAGE> 5
Midwest Federal Financial Corp.
And Subsidiary
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
------------------------------
09/30/97 09/30/96
----------- -----------
<S> <C> <C>
Cash Flows from operating activities:
Net Income $ 2,229,647 $ 1,246,723
Adjustments to reconcile net income to net cashprovided by
operating activities:
Depreciation 281,757 282,224
Amortization 65,408 65,408
Net amortization (accretion) of bond premiums and discounts 417,503 (17,611)
Provision for loan losses 207,000 250,000
Securities (gains) losses (527,605) (258,942)
Gain on sale of loans (344,296) (352,818)
Origination of loans held for sale (16,068,114) (17,476,401)
Proceeds from sale of loans held for sale 15,660,956 17,987,624
Deferred income taxes 0 0
Increase in accrued interest receivable and other assets (232,038) (496,823)
Increase in accrued interest payable and other liabilities 133,118 354,403
----------- -----------
Net cash provided by operating activities 1,823,336 1,583,787
----------- -----------
Cash flows from investing activities
Net (increase) decrease in other interest-bearing deposits 100,000 498,999
Purchases of securities held to maturity 0 0
Proceeds from maturities of securities held to maturity 200,000 800,000
Purchases of securities available for sale (25,924,034) (18,943,213)
Proceeds from sales of securities available for sale 21,672,022 13,576,943
Proceeds from maturities of securities available for sale 2,244,596 4,000,967
Net increase in loans (14,123,266) (17,655,273)
Purchases of premises and equipment (483,794) (289,624)
----------- -----------
Net cash (used in) investing activities (16,314,476) (18,011,201)
Cash Flows From Financing Activities
Net increase in deposits 6,935,309 10,687,466
Net increase (decrease) in borrowings 5,800,000 6,100,000
Net increase in advance payments by borrowers for escrow 267,302 336,182
Purchase of treasury stock 0 (751,688)
Proceeds from exercise of stock options 31,758 82,277
Dividends paid (536,348) (304,148)
----------- -----------
Net cash provided by financing activities 12,498,021 16,150,089
----------- -----------
Increase in cash and cash equivalents (1,993,119) 330,971
Cash and cash equivalents:
Beginning 6,874,107 6,479,903
----------- -----------
Ending $ 4,880,988 $ 6,810,874
=========== ===========
Supplemental Cash Flow Information
Cash payments for:
Interest $ 5,323,028 $ 5,009,995
Income taxes 1,152,500 688,800
</TABLE>
See Notes to Consolidated Financial Statements
Page 3
<PAGE> 6
Midwest Federal Financial Corp.
And Subsidiary
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accounting policies of Midwest Federal Financial Corp. and Subsidiary (the
Company) conform to generally accepted accounting principles and prevailing
practices within the thrift industry. A summary of the more significant
accounting policies follows:
PRINCIPLES OF CONSOLIDATION
The accompanying consolidated financial statements include the accounts of
Midwest Federal Financial Corp., its wholly-owned subsidiary, Baraboo Federal
Bank, FSB (the Bank), and the Bank's wholly-owned subsidiary, BF Financial
Services, Inc. All significant intercompany accounts and transactions have
been eliminated in consolidation. BF Financial Services, Inc. offers full
service brokerage services and insurance annuity contracts to its customers.
CASH EQUIVALENTS
The Company generally considers all highly liquid debt instruments with
original maturities when purchased of three months or less to be cash
equivalents.
SECURITIES HELD TO MATURITY AND AVAILABLE FOR SALE
Management determines the appropriate classification of debt securities at the
time of purchase. Debt securities are classified as held-to-maturity when the
Company has the positive intent and ability to hold the securities to maturity.
Held to maturity securities are stated at amortized cost.
Debt securities not classified as held to maturity and marketable equity
securities are classified as available for sale. Available for sale securities
are stated at fair value, with the unrealized gains and losses, net of tax,
reported as a separate component of shareholders' equity. Prior to fiscal
1994, investment securities and mortgage-backed and related securities held for
sale were carried at the lower of cost or market value.
The cost of debt securities classified as held to maturity or available for
sale is adjusted for amortization of premiums and accretion of discounts to
maturity, or in the case of mortgage-backed and related securities, over the
estimated life of the security. Such amortization is based on a level-yield
method and is included in interest income from the respective security.
Interest and dividends are included in interest and dividend income from
investments. The cost of securities sold is based on the specific
identification method.
LOANS HELD FOR SALE
Mortgage loans held for sale generally consist of current production of certain
fixed-rate first mortgage loans. Mortgage loans held for sale are carried at
the lower of cost (less principal payments received) or market value.
LOANS RECEIVABLE
Loans receivable are stated as unpaid principal balances, less the allowance
for loan losses and net deferred loan origination fees. Interest income is
recognized using methods which approximate a level yield on principal amounts
outstanding. Accrual of interest is discontinued either when reasonable doubt
exists as to the full, timely collection of interest or principal or when a
loan becomes contractually past due by 90 days or more with respect to interest
or principal. At that time, any accrued but uncollected interest is reversed,
and additional income is recorded only to the extent that payments are received
and the collection of principal is reasonably assured.
LOAN FEES AND RELATED COSTS
Certain loan origination fees, commitment fees and direct loan origination
costs are being deferred and the net amounts amortized as an adjustment of the
related loan's yield. The Bank is amortizing these amounts into interest
income, using the level yield method, over the contractual life of the related
loan.
Other origination and commitment fees not required to be recognized as a yield
adjustment are included in loan fees and service charges.
Page 4
<PAGE> 7
MIDWEST FEDERAL FINANCIAL CORP.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
FORECLOSED PROPERTIES
Real estate acquired by foreclosure or deed in lieu of foreclosure, is adjusted
to its fair market value upon acquisition and is subsequently carried at the
lower of cost or net realizable value. Costs related to the development and
improvement of property are capitalized; holding costs are charged to expense.
ALLOWANCE FOR LOSSES ON LOANS AND FORECLOSED PROPERTIES
Management periodically reviews loans and foreclosed properties to determine
whether the estimated realizable value of the related asset is less than the
carrying amount. In making such determinations, consideration is given to
estimated sales price, refurbishing costs, and direct holding and selling
costs. When a loss is anticipated, an allowance for the estimated loss is
provided. In addition, general loss allowances are established in excess of
identifiable losses. This allowance is based on the Bank's own loss
experience, that of the financial services industry, and management's ongoing
assessment of the credit risk inherent in the portfolio.
OFFICE PROPERTIES AND EQUIPMENT
Office properties and equipment are recorded at cost. Maintenance and repair
costs are charged to expense as incurred. When property is retired or
otherwise disposed of, the related cost and accumulated depreciation are
removed from the respective accounts and the resulting gain or loss is recorded
in income. The cost of office properties and equipment is being depreciated
principally by accelerated and straight-line methods over the estimated useful
lives of the assets for both financial reporting and tax reporting purposes.
INCOME TAXES
Deferred income taxes have been provided under the liability method. Deferred
tax assets and liabilities are determined based upon the difference between the
financial statement and tax bases of assets and liabilities, as measured by the
enacted tax rates which will be in effect when these differences are expected
to reverse. Deferred tax expense is the result of changes in the deferred tax
asset and liability.
EARNINGS PER SHARE
Earnings per share of common stock for the periods ending September 30, 1997
and 1996 were computed based on consolidated net income and weighted average
outstanding shares. The weighted average outstanding shares for the quarter
ending September 30, 1997 and 1996 were 1,720,142 and 1,744,313 respectively.
Page 5
<PAGE> 8
MIDWEST FEDERAL FINANCIAL CORP.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
ACCOUNTING CHANGES
In February 1997, the Financial Accounting Standards Board Issued Statement No.
128, "Earnings Per Share" (SFAS No. 128). SFAS 128 simplifies the standards
for computing earnings per share and makes the calculation comparable to
international standards. SFAS 128 replaces primary earnings per share with a
presentation of basic earnings per share. It also requires dual presentation
of basic and diluted earnings per share and a reconciliation of basic to
diluted earnings per share.
Basic earnings per share is computed by dividing income available to common
stockholders by the weighted-average number of common shares outstanding for
the period. Diluted earnings per share reflects the potential dilution that
could occur if securities or other contracts to issue common stock were
exercised or converted into common stock or resulted in the issuance of common
stock that then shared in the earnings of the Company.
SFAS 128 is effective for financial statements issued for periods ending after
December 15, 1997, and requires restatement of all prior period earnings per
share data. That is, SFAS 128 will be implemented in the fourth quarter of
1997 and restated back to January 1, 1997. If SFAS 128 had been in effect
during the third quarter of 1997, basic earnings per share would have been $.48
per share and diluted earnings per share would have been $.45 per share for the
period ended September 30, 1997.
RECLASSIFICATIONS
Certain amounts in these financial statements for prior years have been
reclassified to conform to the September 30, 1997, presentation.
Page 6
<PAGE> 9
MIDWEST FEDERAL FINANCIAL CORP.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2 - DEBT AND EQUITY SECURITIES
Debt and equity securities have been classified in the consolidated statements
of financial condition according to management's intent. The carrying amount
of securities and their approximate fair values are shown below.
<TABLE>
<CAPTION>
Gross Gross Estimated
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
----------------------------------------------------
<S> <C> <C> <C> <C>
SECURITIES HELD TO MATURITY:
September 30, 1997
U.S. Government and agency securities $ 900,000 $ 1,311 $ 297 $ 901,014
============= ========== =========== ============
December 31, 1996
U.S. Government and agency securities $ 1,100,000 $ 440 $ 7,200 $ 1,093,240
============= ========== =========== ============
SECURITIES AVAILABLE FOR SALE:
September 30, 1997
U.S. Government and agency securities $ 8,228,073 $ 30,799 $ 11,354 $ 8,247,518
State and municipal securities 6,246,033 141,768 2,099 6,385,702
Mortgage-backed and related securities 21,454,980 97,496 104,609 21,447,867
Equity securities 679,263 74,375 9,375 744,263
------------- ---------- ----------- ------------
$36,608,349 $344,438 $127,437 $36,825,350
============= ========== =========== ============
December 31, 1996
U. S. Government and agency securities $11,907,933 $ 30,599 $129,628 $11,808,904
State and municipal securities 5,576,226 94,514 6,373 5,664,367
Mortgage-backed securities 15,827,399 46,298 270,410 15,603,287
Equity securities 1,158,874 87,975 2,575 1,244,274
------------- ---------- ----------- ------------
$34,470,432 $259,386 $408,986 $34,320,832
============= ========== =========== ============
</TABLE>
Page 7
<PAGE> 10
MIDWEST FEDERAL FINANCIAL CORP.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 3 - LOANS RECEIVABLE
Details of loans receivable
<TABLE>
<CAPTION>
09/30/97 12/31/96
------------ ------------
<S> <C> <C>
Commercial real estate $ 40,687,273 $ 35,245,601
Residential real estate 64,961,656 66,615,603
Construction 6,640,510 4,911,600
Consumer installment 20,631,434 16,435,287
Home equity 16,114,563 13,347,187
Commercial 12,970,458 10,643,378
------------ ------------
$162,005,894 $147,198,656
Less:
Undisbursed loan proceeds 2,243,516 1,458,387
Allowance for loan losses 1,644,423 1,538,580
------------ ------------
$158,117,955 $144,201,689
============ ============
</TABLE>
Page 8
<PAGE> 11
MIDWEST FEDERAL FINANCIAL CORP.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 4 - DEPOSIT ACCOUNTS
Deposit accounts are summarized as follows:
<TABLE>
<CAPTION>
09/30/97 12/31/96
--------------------- ----------------------
Amount Percent Amount Percent
------------ ------- ------------- -------
<S> <C> <C> <C> <C>
Demand Deposit accounts (noninterest-bearing)
Negotiable Orders of Withdrawal (NOW) accounts $ 13,384,025 8.40% $ 13,204,352 8.66%
(2.25% at December 31, 1996 and September 30, 1997) 11,092,403 6.96% 10,775,861 7.07%
Savings Accounts
(2.25% at December 31, 1996 and September 30, 1997) 11,549,795 7.24% 11,255,467 7.38%
Money market accounts
(2.40% to 5.30% at December 31, 1996 and September 30,
1997) 33,984,528 21.32% 30,711,114 20.14%
Certificate Accounts:
Less than 3.00% 0 0 0 0
3.00% to 3.99% 550,339 0.35% 2,398,461 1.57%
4.00% to 4.99% 3,191,304 2.00% 3,474,756 2.28%
5.00% to 5.99% 49,396,376 30.98% 48,399,408 31.74%
6.00% to 6.99% 34,498,566 21.64% 29,819,655 19.55%
7.00% and over 1,779,440 1.11% 2,452,393 1.61%
------------ ------ ------------- ------
Totals $159,426,776 100.00% $152,491,467 100.00%
============ ====== ============= ======
Weighted Average Savings Interest Rate 5.23% 5.10%
====== ======
</TABLE>
Page 9
<PAGE> 12
MIDWEST FEDERAL FINANCIAL CORP.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 5 - RETAINED EARNINGS - SUBSTANTIALLY RESTRICTED
Under the provisions of FIRREA, the Savings Bank is required to meet certain
tangible, core and risk-based capital requirements. Tangible capital generally
consists of stockholders' equity minus certain intangible assets. Core capital
generally consists of stockholders' equity. The risk-based capital
requirements presently address risk related to both recorded assets and
off-balance-sheet commitments and obligations.
The following table summarizes the Savings Bank's capital ratios and the ratios
required by FIRREA and subsequent regulations at September 30, 1997:
<TABLE>
<CAPTION>
Tangible Core Risk-Based
Capital Capital Capital
------------ ------------ ------------
<S> <C> <C> <C>
Savings Bank's regulatory percentage 7.27% 7.27% 10.01%
Required regulatory percentage 1.50% 3.00% 8.00%
----------- ----------- -----------
Excess regulatory percentage 5.77% 4.27% 2.01%
=========== =========== ===========
Savings Bank's regulatory capital $15,262,000 $15,262,000 $16,906,000
Required regulatory capital 3,147,000 6,293,000 13,510,000
----------- ----------- -----------
Excess regulatory capital $12,115,000 $ 8,969,000 $ 3,396,000
=========== =========== ===========
</TABLE>
Page 10
<PAGE> 13
MIDWEST FEDERAL FINANCIAL CORP.
AND SUBSIDIARY
MANAGEMENT'S DISCUSSIONS AND ANALYSIS
OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
FINANCIAL DATA SUMMARY
TOTAL ASSETS
Total assets have increased by $15.4 million from December 31, 1996, to
September 30, 1997, an increase of 7.8%. Deposit growth, and to a lessor
extent, borrowings, have funded increases in earning assets.
LOANS
Net loans receivable have increased by $13.9 million from December 31, 1996, to
September 30, 1997, an increase of 9.7 %. Commercial mortgage loans account
for $5.4 million of this increase and consumer loans account for $7.0 million.
Adjustable rate mortgage loans, commercial and consumer loans are held in the
portfolio of the Bank. Fixed rate mortgage originations continue to be sold to
FHLMC.
CASH AND INVESTMENTS
Mortgage backed securities and investments have increased by $2.3 million from
December 31, 1996 to September 30, 1997, an increase of 6.5%.
DEPOSITS
Deposit growth from December 31, 1996, to September 30, 1997, was $6.9 million,
an increase of 4.5%. Deposit growth was used to fund the growth in loans and
investments.
BORROWED FUNDS
The borrowed funds of the Bank have increased by $5.8 million from December 31,
1996 to September 30, 1997, an increase of 23.4%. The increase in borrowed
funds has helped fund growth in earning assets.
EQUITY
Equity increased $2.1 million or 12.7% since December 31, 1996. The increase
is primarily due to increased retained earnings.
OPERATING DATA SUMMARY
NET INTEREST INCOME
Net interest income for the third quarter of 1997 is up 10.8% over the third
quarter of 1996. The increase in net interest income is due to growth in
assets of 8.7% from one year ago. Year to date net interest income is up 7.9%
due to similar increases in asset growth year to date. Third quarter 1997 net
interest margin was 4.13% compared to 4.10% for the third quarter of 1996.
NON-INTEREST INCOME
Non-interest income increased by 10.9% from the quarter ending September 30,
1996, compared to the quarter ending September 30, 1997, and is up 19.6% year
to date. Increases in gain on sale of securities are primarily responsible for
this increase.
NON-INTEREST EXPENSE
Non-interest expenses decreased by 30.5% for the quarter ending September 30,
1997, when compared to the quarter ending September 30, 1996, and is
down 11.9% year to date. The decrease is due to a one time FDIC insurance
assessment of $842,600 booked on September 30, 1996. Non-interest expense, net
of the one time assessment in 1996, is up 11.1% for the quarter and 6.1% year
to date.
NET INCOME
Net income for the third quarter of 1997 is 27.6% higher than pre-FDIC
assessment earnings for the third quarter of 1996 and
pre-FDIC assessment earnings per share increased from $.35 to $.45, or 29%.
Net income year to date is 27.2% higher than pre-FDIC assessment earnings in
1996 and year to date pre-FDIC assessment earnings per share increased from
$1.02 to $1.29, or 26.5%.
Page 11
<PAGE> 14
ASSET QUALITY
Midwest Federal Financial Corp. and its subsidiary has specific targets in
evaluating asset quality.
The allowance for loan losses as of September 30, 1997, amounts to $1,644,423
or 1.02% of total loans. This exceeds the internally established target of
1.00% and compares relatively unchanged when compared to 1.04% as of September
30, 1996.
The ratio of non-performing assets to total assets is at .09% as of September
30, 1997, well below the internally acceptable standard of .33% and has
improved from the September 30, 1996, ratio of .24%
Net charge-offs to average outstanding loans during the third quarter ending
September 30, 1997, is at .03%. This ratio at September 30, 1996, was at .05%
Page 12
<PAGE> 15
MIDWEST FEDERAL FINANCIAL CORP.
AND SUBSIDIARY
KEY OPERATING RATIOS
(UNAUDITED)
ENDED SEPTEMBER 30
<TABLE>
<CAPTION>
Three Month Period
---------------------
1997 1996
--------- ---------
<S> <C> <C>
Return on assets
(Net income divided by average assets) (1) 1.49% .21%(2)
Return on average equity
(net income divided by average equity) (1) 16.66% 2.44%(3)
Average equity to average assets 8.91% 8.78%
Interest rate spread
(difference between average yield on interest earning assets and
average cost of interest bearing liabilities) (1) 3.59% 3.62%
Net interest margin
(net interest income as a percentage of average interest
earning assets) (1) 4.13% 4.10%
Non-interest expense to average assets (1) 2.99% 4.69%(4)
Average interest earning assets to interest bearing deposits 111.98% 110.57%
Allowance for loan losses to total loans at end of period 1.02% 1.04%
Net charge-offs to average outstanding loans during the period .03% .05%
Ratio of non-performing assets to total assets .09% .24%
Risk-based capital (of the Bank) 10.01% 12.08%
</TABLE>
(1) Annualized
(2) Before one-time FDIC assessment: 1.27% (1)
(3) Before one-time FDIC assessment: 14.45% (1)
(4) Before one-time FDIC assessment: 2.93% (1)
Page 13
<PAGE> 16
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Not Applicable
Item 2. Changes in Securities
Not Applicable
Item 3. Defaults upon Senior Securities
Not Applicable
Item 4. Submission of Matters to Vote of Securities Holders
Not Applicable
Item 5. Other information
Not Applicable
Item 6. Exhibits and Reports on Form 8-K
During the quarter ended September 30, 1997, the
Registrant was not required to file any Current Reports on Form
8-K, and no reports on Form 8-K were filed.
Page 14
<PAGE> 17
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
MIDWEST FEDERAL FINANCIAL CORP.
\s\ Gary E. Wegner
-------------------------------------------------
Gary E. Wegner, President & CEO
\s\ Dean C. Carter
-------------------------------------------------
Dean C. Carter, Chief Financial Officer
Date: November 13, 1997
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0
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