<PAGE> 1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended March 31, 1997
Commission File Number 0-21298
ST. FRANCIS CAPITAL CORPORATION
(Exact name of registrant as specified in its charter)
WISCONSIN 39-1747461
---------------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
13400 BISHOPS LANE, STE. 350
BROOKFIELD, WISCONSIN 53005-6203
---------------------------------------- -------------------
(Address of principal executive offices) (Zip Code)
(414) 744-8600
----------------------------------------
(Registrant's telephone number)
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.
(1) Yes x No
--- ---
(2) Yes x No
--- ---
The number of shares outstanding of the issuer's common stock, $.01 par
value per share, was 5,351,193 at April 30, 1997.
Page 1 of 30 pages
<PAGE> 2
ST. FRANCIS CAPITAL CORPORATION AND SUBSIDIARIES
CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements:
Consolidated Statements of Financial Condition .............. 3
Consolidated Statements of Income ........................... 4
Consolidated Statements of Shareholders' Equity ............. 5
Consolidated Statements of Cash Flows ....................... 6
Notes to Consolidated Financial Statements .................. 8
ITEM 2. Management's Discussion and Analysis .......................... 16
ITEM 3. Quantitative and Qualitative Disclosures About Market Risk .... N/A
PART II - OTHER INFORMATION
ITEM 1. Legal Proceedings .............................................. 28
ITEM 2. Changes In Securities .......................................... 28
ITEM 3. Defaults Upon Senior Securities ................................ 28
ITEM 4. Submission of Matters to a Vote of Security Holders ............ 28
ITEM 5. Other Information .............................................. 28
ITEM 6. Exhibits and Reports on Form 8-K ............................... 29
SIGNATURES ............................................................. 30
</TABLE>
2
<PAGE> 3
ST. FRANCIS CAPITAL CORPORATION AND SUBSIDIARIES
Consolidated Statements of Financial Condition
<TABLE>
<CAPTION>
March 31, September 30,
1997 1996
------------- -------------
(In thousands)
<S> <C> <C>
ASSETS
Cash and due from banks.................................................. $ 34,319 $ 17,604
Federal funds sold and overnight deposits................................ 46,474 4,855
------------- -------------
Cash and cash equivalents................................................ 80,793 22,459
------------- -------------
Trading account securities, at market.................................... - -
Assets available for sale, at market:
Debt and equity securities............................................. 63,832 60,001
Mortgage-backed and related securities................................. 552,999 519,766
Mortgage loans held for sale, at lower of cost or market................. 17,077 20,582
Securities held to maturity:
Debt and equity securities (market values of $4,768 and $6,331,
respectively).......................................................... 4,673 6,215
Mortgage-backed and related securities (market values of $65,412
and $65,316, respectively)............................................. 67,753 68,392
Loans receivable, net.................................................... 675,867 610,699
Federal Home Loan Bank stock, at cost.................................... 20,554 19,063
Accrued interest receivable.............................................. 8,426 8,067
Foreclosed properties.................................................... 122 80
Real estate held for investment.......................................... 41,357 36,865
Premises and equipment, net.............................................. 21,406 16,432
Other assets............................................................. 24,110 15,495
------------- -------------
Total assets............................................................. $1,578,969 $1,404,116
============= =============
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Deposits................................................................. $1,018,677 $ 877,684
Short term borrowings.................................................... 34,509 18,509
Long term borrowings..................................................... 383,568 356,525
Advances from borrowers for taxes and insurance.......................... 3,468 11,092
Accrued interest payable and other liabilities........................... 10,895 15,127
------------- -------------
Total liabilities........................................................ 1,451,117 1,278,937
------------- -------------
Commitments and contingencies............................................ - -
Shareholders' equity:
Preferred stock $.01 par value: Authorized, 6,000,000 shares;
None issued............................................................ - -
Common stock $.01 par value: Authorized 12,000,000 shares;
Issued, 7,289,620 shares;
Outstanding, 5,386,193 and 5,475,509 shares, respectively.............. 73 73
Additional paid-in-capital............................................... 72,740 72,243
Unrealized loss on securities available for sale, net of tax............. (2,017) (1,765)
Unearned ESOP compensation............................................... (3,271) (3,488)
Treasury stock at cost (1,903,427 and 1,814,111 shares, respectively).... (37,984) (35,529)
Retained earnings, substantially restricted.............................. 98,311 93,645
------------- -------------
Total shareholders' equity............................................... 127,852 125,179
------------- -------------
Total liabilities and shareholders' equity............................... $1,578,969 $1,404,116
============= =============
</TABLE>
See accompanying Notes to Consolidated Financial Statements
3
<PAGE> 4
ST. FRANCIS CAPITAL CORPORATION AND SUBSIDIARIES
Consolidated Statements of Income
<TABLE>
<CAPTION>
Six Months Ended Three Months Ended
March 31, March 31,
-------------------- --------------------
1997 1996 1997 1996
-------- -------- -------- --------
(In thousands, except per share data)
<S> <C> <C> <C> <C>
INTEREST AND DIVIDEND INCOME:
Loans...................................................................... $26,902 $22,840 $13,637 $11,523
Mortgage-backed and related securities..................................... 20,148 19,035 10,247 10,028
Debt and equity securities................................................. 2,013 1,567 1,004 744
Federal funds sold and overnight deposits.................................. 644 564 385 283
Federal Home Loan Bank stock............................................... 695 618 365 321
Trading account securities................................................. 123 3 53 -
-------- -------- -------- --------
Total interest and dividend income.......................................... 50,525 44,627 25,691 22,899
-------- -------- -------- --------
INTEREST EXPENSE:
Deposits................................................................... 21,749 17,777 10,990 9,376
Advances and other borrowings.............................................. 10,447 9,309 5,322 4,523
-------- -------- -------- --------
Total interest expense...................................................... 32,196 27,086 16,312 13,899
-------- -------- -------- --------
Net interest income before provision for loan losses........................ 18,329 17,541 9,379 9,000
Provision for loan losses................................................... 372 144 111 78
-------- -------- -------- --------
Net interest income......................................................... 17,957 17,397 9,268 8,922
-------- -------- -------- --------
OTHER OPERATING INCOME (EXPENSE), NET:
Loan servicing and loan related fees....................................... 969 623 511 223
Depository fees and service charges........................................ 846 685 443 330
Trading securities gains and commitment fees, net.......................... 507 109 122 (19)
Gain on debt and equity and mortgage-backed
and related securities, net............................................... 627 3,277 151 1,678
Gain on sales of mortgage loans held for sale, net......................... 370 658 143 437
Insurance and annuity commissions.......................................... 218 165 137 102
Gain (loss) on foreclosed properties....................................... (7) 872 7 740
Income from affordable housing............................................. 1,490 919 940 486
Other income............................................................... 287 320 196 192
-------- -------- -------- --------
Total other operating income, net........................................... 5,307 7,628 2,650 4,169
-------- -------- -------- --------
GENERAL AND ADMINISTRATIVE EXPENSES:
Compensation and employee benefits......................................... 7,319 6,353 3,693 3,349
Office building, including depreciation.................................... 1,181 1,005 638 526
Furniture and equipment, including depreciation............................ 1,105 853 578 453
Federal deposit insurance premiums......................................... 463 689 132 358
Real estate held for investment............................................ 1,831 1,080 1,210 580
Other general and administrative expenses.................................. 3,850 3,109 2,036 1,726
-------- -------- -------- --------
Total general and administrative expenses................................... 15,749 13,089 8,287 6,992
-------- -------- -------- --------
Income before income tax expense............................................ 7,515 11,936 3,631 6,099
Income tax expense.......................................................... 1,382 3,585 655 1,823
-------- -------- -------- --------
Net income.................................................................. $6,133 $8,351 $2,976 $4,276
======== ======== ======== ========
Earnings per share.......................................................... $1.15 $1.41 $0.56 $0.73
======== ======== ======== ========
</TABLE>
See accompanying Notes to Consolidated Financial Statements
4
<PAGE> 5
ST. FRANCIS CAPITAL CORPORATION AND SUBSIDIARIES
Consolidated Statements of Changes in Shareholders' Equity
<TABLE>
<CAPTION>
Unrealized
Shares of Losses on
Common Additional Securities Unearned Unearned
Stock Common Paid-In Available ESOP Restricted Treasury Retained
Outstanding Stock Capital For Sale Compensation Stock Stock Earnings Total
---------------------------------------------------------------------------------------------------------
(In thousands, except shares of common stock outstanding)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Six months ended
March 31, 1996
- - -----------------------
Balance at September
30, 1995............... 6,078,799 $ 73 $71,819 $ 2,332 $ (3,996) $ (701) $(20,142) $85,843 $135,228
Net income............. - - - - - - - 8,351 8,351
Cash dividend -
$0.20 per share........ - - - - - - - (1,123) (1,123)
Purchase of
treasury stock......... (222,100) - - - - - (5,494) - (5,494)
Exercise of
stock options.......... - - - - - - - (418) (418)
Amortization of
unearned compensation.. - - 262 - 316 467 - - 1,045
Unrealized loss on
securities available
for sale, net of tax... - - - (2,427) - - - - (2,427)
--------- ----- -------- --------- --------- ------ --------- ------- ---------
Balance at
March 31, 1996......... 5,856,699 $ 73 $72,081 $ (95) $ (3,680) $(234) $(25,636) $92,653 $135,162
========= ===== ======== ========= ========= ====== ========= ======= =========
Six months ended
March 31, 1997
- - -----------------------
Balance at September
30, 1996............... 5,475,509 $ 73 $72,243 $ (1,765) $ (3,488) $ - $ (35,529) $93,645 $125,179
Net income............. - - - - - - - 6,133 6,133
Cash dividend -
$0.24 per share........ - - - - - - - (1,167) (1,167)
Purchase of
treasury stock......... (119,430) - - - - - (3,056) - (3,056)
Exercise of
stock options.......... 30,114 - - - - - 601 (300) 301
Amortization of
unearned compensation.. - - 497 - 217 - - - 714
Unrealized loss on
securities available
for sale, net of tax.. - - - (252) - - - - (252)
--------- ----- -------- --------- --------- ------ --------- ------- ---------
Balance at
March 31, 1997......... 5,386,193 $ 73 $72,740 $ (2,017) $ (3,271) $ - $(37,984) $98,311 $127,852
========= ===== ======== ========= ========= ====== ========= ======= =========
</TABLE>
See accompanying Notes to Consolidated Financial Statements
5
<PAGE> 6
ST. FRANCIS CAPITAL CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flow
<TABLE>
<CAPTION>
Six Months Ended
March 31,
--------------------------
1997 1996
-------- --------
(In thousands)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income................................................................ $ 6,133 $ 8,351
Adjustments to reconcile net income to net cash used in
operating activities:
Provision for loan losses............................................... 372 144
Depreciation, accretion and amortization................................ 1,592 625
Deferred income taxes................................................... 2,311 (595)
Gain on debt and equity, mortgage-backed and related
securities and trading account securities, net.......................... (1,134) (3,386)
Gains on the sales of mortgage loans held for sale, net................. (370) (658)
Stock-based compensation expense........................................ 714 1,045
(Increase) decrease in loans held for sale.............................. (3,505) 3,798
Decrease in trading account securities, net............................. - 3,000
Other, net.............................................................. 4,909 9,543
---------- ----------
Total adjustments......................................................... 4,889 13,516
---------- ----------
Net cash provided by operating activities................................. $ 11,022 $ 21,867
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from maturities of debt and equity securities.................. $ 2,001 $ 25,527
Purchases of debt and equity securities................................. (459) (18,535)
Purchases of mortgage-backed and related securities..................... - (1,000)
Principal repayments on mortgage-backed and related securities.......... 639 5,310
Purchases of mortgage-backed securities available for sale.............. (131,067) (215,109)
Proceeds from sales of mortgage-backed securities available
for sale.............................................................. 57,482 106,195
Principal repayments on mortgage-backed securities available
for sale.............................................................. 40,352 31,591
Purchase of debt and equity securities available for sale............... (27,121) (22,424)
Proceeds from sales of debt and equity securities available for sale.... 18,845 18,969
Principal repayments on debt and equity securities available for sale... 12,091 -
Net cash used for acquisitions.......................................... (7,118) -
Purchases of Federal Home Loan Bank stock............................... (1,491) (264)
Redemption of Federal Home Loan Bank stock.............................. - 436
Purchase of loans....................................................... (7,678) (29,086)
(Increase) decrease in loans, net of loans held for sale................ 5,069 (6,830)
Increase in real estate held for investment............................. (4,492) (3,547)
Purchases of premises and equipment, net................................ (5,935) (2,703)
---------- ----------
Net cash used in investing activities..................................... $ (48,882) $(111,470)
---------- ----------
</TABLE>
See accompanying Notes to Consolidated Financial Statements
6
<PAGE> 7
ST. FRANCIS CAPITAL CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flow, cont.
<TABLE>
<CAPTION>
Six Months Ended
March 31,
----------------------------
1997 1996
---------- ----------
(In thousands)
<S> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in deposits.................................................... $ 73,191 $ 118,050
Proceeds from advances and other borrowings................................. 72,688 10,869
Repayments on advances and other borrowings................................. (38,139) (14,533)
Decrease in advances from borrowers for taxes and insurance................. (7,624) (7,216)
Dividends paid.............................................................. (1,167) (1,123)
Stock option transactions................................................... 301 418
Purchase of treasury stock.................................................. (3,056) (5,494)
----------- -----------
Net cash provided by financing activities..................................... 96,194 100,971
----------- -----------
Increase in cash and cash equivalents......................................... 58,334 11,368
Cash and cash equivalents:
Beginning of period......................................................... 22,459 20,780
----------- -----------
End of period............................................................... $ 80,793 $ 32,148
=========== ===========
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest.................................................................. $ 32,262 $ 27,078
Income taxes.............................................................. 15 3,089
Supplemental schedule of noncash investing and financing activities:
The following summarizes significant noncash investing
and financing activities:
Mortgage loans secured as mortgage-backed securities...................... $ 31,945 -
Reclassification of assets held to maturity to assets available for sale.. - $ 117,300
Transfer of mortgage loans to mortgage loans held for sale................ 15,964 10,295
Acquisitions:
Assets acquired......................................................... 93,044 -
Cash paid for purchase of stock......................................... (25,283) -
Cash acquired........................................................... 18,165 -
----------- -----------
Net cash used for acquisitions.......................................... $ (7,118) $ -
=========== ===========
</TABLE>
See accompanying Notes to Consolidated Financial Statements
7
<PAGE> 8
ST. FRANCIS CAPITAL CORPORATION AND SUBSIDIARIES
Notes to Unaudited Consolidated Financial Statements
(1) Principles of Consolidation
The consolidated financial statements include the accounts and balances of
St. Francis Capital Corporation (the "Company"), St. Francis Bank, F.S.B.
(the "Bank"), Bank Wisconsin and the Bank's and Bank Wisconsin's
wholly-owned subsidiaries. All significant intercompany accounts and
transactions have been eliminated in consolidation.
(2) Basis of Presentation
The accompanying interim consolidated financial statements are unaudited
and do not include information or footnotes necessary for a complete
presentation of financial condition, results of operations or cash flows
in accordance with generally accepted accounting principles. However, in
the opinion of management, all adjustments (consisting of normal recurring
accruals) necessary for a fair presentation of the consolidated financial
statements have been included. Operating results for the three-month and
six-month periods ended March 31, 1997 are not necessarily indicative of
the results which may be expected for the entire year ending September 30,
1997. The September 30, 1996 Consolidated Statement of Financial
Condition presented with the interim financial statements was audited and
the auditors' report thereon was unqualified.
Certain previously reported balances have been reclassified to conform
with the 1997 presentation.
(3) Commitments and Contingencies
The Company is a party to financial instruments with off-balance sheet
risk in the normal course of business to meet the financing needs of its
customers and to reduce its own exposure to fluctuations in interest
rates. These financial instruments include commitments to extend credit
and involve, to varying degrees, elements of credit and interest rate risk
in excess of the amounts recognized in the consolidated financial
statements. The contract amounts of these instruments reflect the extent
of involvement the Company has in particular classes of financial
instruments.
The Company's exposure to credit loss in the event of nonperformance by
the other party to the financial instrument for the commitments to extend
credit is represented by the contractual notional amount of those
instruments. The Company uses the same credit policies in making
commitments and conditional obligations as it does for instruments that
are reflected in the consolidated financial statements.
8
<PAGE> 9
ST. FRANCIS CAPITAL CORPORATION AND SUBSIDIARIES
Notes to Unaudited Consolidated Financial Statements
Financial instruments whose contract amounts represent credit risk are as
follows:
<TABLE>
<CAPTION>
Contractual or Notional Amount(s)
March 31, September 30,
1997 1996
---------- ----------
(In thousands)
<S> <C> <C>
Commitments to extend credit
Fixed-rate loans......................................... $ 8,004 $ 18,487
Variable-rate loans...................................... 13,349 18,722
Guarantees under IRB issue................................ 11,220 4,200
Interest rate swap agreements............................. 70,000 55,000
Commitments to:
Purchase mortgage-backed securities..................... 8,000 12,800
Sell mortgage-backed securities......................... 6,150 1,100
Unused and open-ended lines of credit:
Consumer................................................ 120,405 107,052
Commercial.............................................. 24,220 14,935
Open option contracts written:
Short-put options....................................... 7,000 4,000
Short-call options...................................... 17,000 4,000
Commitments to fund equity investments.................... 8,578 13,796
</TABLE>
Commitments to extend credit are agreements to lend to a customer as long
as there is no violation of any condition established in the contract.
Commitments generally have fixed expiration dates of 45 days or less or
other termination clauses and may require a fee. Fixed rate loan
commitments as of March 31, 1997 have interest rates ranging from 7.50% to
8.50%. Because some commitments expire without being drawn upon, the
total commitment amounts do not necessarily represent cash requirements.
The Company evaluates the creditworthiness of each customer on a
case-by-case basis. The amount of collateral obtained if deemed necessary
by the Company upon extension of credit is based on management's credit
evaluation of the counterparty. The Company generally extends credit on a
secured basis. Collateral obtained consists primarily of one- to
four-family residences and other residential and commercial real estate.
The Company has entered into agreements whereby, for an initial and annual
fee, it will guarantee payment for an industrial revenue bond issue
("IRB"). The IRB was issued by a municipality to finance real estate
owned by a third party. Potential losses on the guarantees are the
notional amount of the guarantees less the value of the real estate
collateral. At March 31, 1997, appraised values of the real estate
collateral exceed the amount of the guarantees.
Interest rate swap agreements generally involve the exchange of fixed and
variable rate interest rate payments without the exchange of the
underlying notional amount on which the interest rate payments are
calculated. The fixed pay-floating receive agreements were entered into
as hedges of the interest rates on the Federal Home Loan Bank (the "FHLB")
advances used to fund fixed rate securities purchases. The fixed
receive-floating pay agreement was entered into as a hedge of the interest
rate on fixed rate brokered certificates used to fund floating rate
securities purchases. Interest receivable or payable on interest rate
swaps is recognized using the accrual method. The agreements at March 31,
1997 consist of the following:
9
<PAGE> 10
ST. FRANCIS CAPITAL CORPORATION AND SUBSIDIARIES
Notes to Unaudited Consolidated Financial Statements, continued
<TABLE>
<CAPTION>
Notional
Amount Maturity Fixed Variable
(000s) Type Date Rate Rate
---------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 10,000 Fixed Pay-Floating Receive 1998 5.04% 5.64%
10,000 Fixed Pay-Floating Receive 1998 4.93% 5.56%
15,000 Fixed Pay-Floating Receive 1998 5.25% 5.56%
10,000 Fixed Pay-Floating Receive 1998 5.23% 5.56%
10,000 Fixed Pay-Floating Receive 1998 5.43% 5.56%
15,000 Fixed Receive-Floating Pay 2007 5.60% 7.15%
</TABLE>
The fair value of interest rate swaps, which is based on the present value
of the swap using dealer quotes, represent the estimated amount the
Company would receive or pay to terminate the agreements taking into
account current interest rates and market volatility. The interest rate
swaps are off-balance sheet items; therefore, at March 31, 1997, the gross
unrealized gains and losses of $533,000 and $189,000, respectively, equals
the fair value of the interest rate swaps of $344,000.
Commitments to purchase and sell mortgage-backed securities are contracts
which represent notional amounts to purchase and sell mortgage-backed
securities at a future date and specified price. Such commitments
generally have fixed settlement dates.
The unused and open consumer lines of credit are conditional commitments
issued by the Company for extensions of credit such as home equity, auto,
credit card, or other similar consumer type financing. Furthermore, the
unused and open commercial lines of credit are also conditional
commitments issued by the Company for extensions of credit such as working
capital, agricultural production, equipment or other similar commercial
type financing. The credit risk involved in extending lines of credit is
essentially the same as that involved in extending loan facilities to
customers. Collateral held for these commitments may include, but may not
be limited to, real estate, investment securities, equipment, accounts
receivable, inventory, and Company deposits.
The open option contracts written represent the notional amounts to buy
(short-put options) or sell (short-call options) mortgage-backed
securities at a future date and specified price. The Company receives a
premium/fee for option contracts written which gives the purchaser the
right, but not the obligation to buy or sell mortgage-backed securities
within a specified time period for a contracted price. The Company has
been primarily utilizing these items to manage the interest rate and
market value risk relating to mortgage-backed securities that result from
the MBS loan swap program and mortgage loan pipeline.
The commitments to fund equity investments represent amounts St. Francis
Equity Properties ("SFEP"), a subsidiary of the Bank, is committed to
invest in low-income housing projects, which would qualify for tax credits
under Section 42 of the Internal Revenue Code (the "Code"). The Code
provides a per state volume cap on the amounts of low-income housing tax
credits ("LIHTCs") that may be taken with respect to low-income housing
projects in each state. In order to claim a LIHTC, a credit allocation
must be received from the appropriate state or local housing development
authority. SFEP is currently a limited partner in 24 projects. At March
31, 1997, SFEP's equity investments in such projects totaled $16.1
million. SFEP has committed to additional equity investments totaling
$8.6 million in five projects it currently has an investment in and in one
additional future project within the state of Wisconsin. Additionally, the
Bank has provided financing or committed to provide financing to 24 of
these projects. At March 31, 1997, the Bank had loans outstanding to such
projects of $23.2 million. The primary benefit to the Company on these
projects is in the form of tax credits.
10
<PAGE> 11
ST. FRANCIS CAPITAL CORPORATION AND SUBSIDIARIES
Notes to Unaudited Consolidated Financial Statements, continued
(4) Securities
The Company's securities available for sale and held to maturity at March
31, 1997 were as follows:
<TABLE>
<CAPTION>
SECURITIES AVAILABLE FOR SALE
----------------------------------------------------------
Gross Gross Estimated
Carrying Unrealized Unrealized Market
Value Gains Losses Value
--------- ---------- ---------- ---------
(In thousands)
<S> <C> <C> <C> <C>
DEBT AND EQUITY SECURITIES:
U. S. Treasury obligations and
obligations of U.S. Government
Agencies............................ $ 29,144 $ 70 $ 208 $ 29,006
State and municipal obligations...... 1,430 - 66 1,364
Corporate notes and bonds............ 7,546 26 14 7,558
Asset-backed securities.............. 19,431 - 119 19,312
Marketable equity securities......... 6,592 - - 6,592
-------- ------ ------ ---------
TOTAL DEBT AND EQUITY SECURITIES..... $ 64,143 $ 96 $ 407 $ 63,832
======== ====== ====== =========
MORTGAGE-BACKED & RELATED SECURITIES:
Participation certificates:
FHLMC............................... $ 4,279 $ 15 $ 25 $ 4,269
FNMA................................ 137 2 - 139
GNMA................................ 4,078 313 - 4,391
Private issue....................... 242,897 881 3,325 240,453
REMICs:
FHLMC............................... 104,775 472 376 104,871
FNMA................................ 41,956 494 114 42,336
GNMA................................ 5,044 1 - 5,045
Private issue....................... 151,129 895 2,235 149,789
Adjustable rate mortgage mutual fund. 1,648 - - 1,648
CMO residual......................... 58 - - 58
-------- ------ ------ ---------
TOTAL MORTGAGE-BACKED AND RELATED
SECURITIES.......................... $556,001 $3,073 $6,075 $ 552,999
======== ====== ====== =========
<CAPTION>
SECURITIES HELD TO MATURITY
----------------------------------------------------------
Gross Gross Estimated
Carrying Unrealized Unrealized Market
Value Gains Losses Value
--------- ---------- ---------- ---------
(In thousands)
<S> <C> <C> <C> <C>
DEBT AND EQUITY SECURITIES:
U. S. Treasury obligations and
obligations of U.S. Government
Agencies............................ $ 3,031 $ 60 $ - $ 3,091
State and municipal obligations...... 1,642 35 - 1,677
-------- ------ ------ ---------
TOTAL DEBT AND EQUITY SECURITIES..... $ 4,673 $ 95 $ - $ 4,768
======== ====== ====== =========
MORTGAGE-BACKED & RELATED SECURITIES:
REMICs:
FHLMC............................... $ 2,366 $ 39 $ - $ 2,405
FNMA................................ 2,523 15 23 2,515
Private issue....................... 62,864 - 2,372 60,492
-------- ------ ------ ---------
TOTAL MORTGAGE-BACKED AND RELATED
SECURITIES.......................... $ 67,753 $ 54 $2,395 $ 65,412
======== ====== ====== =========
</TABLE>
11
<PAGE> 12
ST. FRANCIS CAPITAL CORPORATION AND SUBSIDIARIES
Notes to Unaudited Consolidated Financial Statements, continued
During the six months ended March 31, 1997 and 1996, gross proceeds from
the sale of securities available for sale totaled approximately $76.3
million and $125.3 million, respectively. The gross realized gains on
such sales totaled approximately $661,000 and $3.3 million for the six
months ended March 31, 1997 and March 31, 1996, respectively. The gross
realized losses on such sales totaled approximately $34,000 and $24,000
for the six months ended March 31, 1997 and March 31, 1996, respectively.
During the three months ended March 31, 1997 and 1996, gross proceeds from
the sale of securities available for sale totaled approximately $12.1
million and $62.1 million, respectively. The gross realized gains on such
sales totaled approximately $152,000 and $2.0 million for the three months
ended March 31, 1997 and March 31, 1996, respectively. The gross realized
losses on such sales totaled approximately $1,000 and $15,000 for the
three months ended March 31, 1997 and March 31, 1996, respectively.
(5) Loans
Loans receivable are summarized as follows:
<TABLE>
<CAPTION>
March 31, September 30,
(In thousands) 1997 1996
- - ----------------------------------------------------------------------------------
<S> <C> <C>
First mortgage - one- to four-family.................... $262,617 $270,614
First mortgage - residential construction............... 33,241 32,249
First mortgage - multi-family........................... 107,047 103,262
Commercial real estate.................................. 63,778 46,391
Home equity............................................. 101,101 90,579
Commercial and agriculture.............................. 52,745 25,177
Consumer secured by real estate......................... 67,233 66,346
Interim financing and consumer loans.................... 29,072 21,890
Education............................................... 10,550 12,142
-------- --------
Total gross loans..................................... 727,384 668,650
-------- --------
Less:
Loans in process...................................... 25,394 29,631
Unearned insurance premiums........................... 629 647
Deferred loan and guarantee fees...................... 1,318 851
Purchased loan discount............................... 977 1,023
Allowance for loan losses............................. 6,122 5,217
-------- --------
Total deductions...................................... 34,440 37,369
-------- --------
Total loans receivable.................................. 692,944 631,281
Less: First mortgage loans held for sale............... 17,077 20,582
-------- --------
Loans receivable, net................................... $675,867 $610,699
======== ========
</TABLE>
12
<PAGE> 13
ST. FRANCIS CAPITAL CORPORATION AND SUBSIDIARIES
Notes to Unaudited Consolidated Financial Statements, continued
(6) Allowance For Loan Losses
Activity in the allowance for loan losses is summarized as follows:
<TABLE>
<CAPTION>
Six months ended Three months ended
March 31, March 31,
------------------- --------------------
1997 1996 1997 1996
------ ------ ------ ------
<C> <C> <C> <C> <C>
Beginning Balance........ $ 5,217 $ 4,076 $ 5,060 $ 4,132
Charge-offs:
Real estate - mortgage.. - - - -
Commercial real estate.. - - - -
Commercial loans........ - - - -
Home equity loans....... - - - -
Consumer................ (1,219) (22) (746) (10)
-------- -------- -------- --------
(1,219) (22) (746) (10)
-------- -------- -------- --------
Recoveries:
Real estate - mortgage.. - - - -
Commercial real estate.. - - - -
Commercial loans........ - - - -
Home equity loans....... - 2 - -
Consumer................ 74 4 19 4
-------- -------- -------- --------
74 6 19 4
-------- -------- -------- --------
Net charge-offs.......... (1,145) (16) (727) (6)
-------- -------- -------- --------
Acquired bank's allowance 1,678 - 1,678 -
Provision................ 372 144 111 78
-------- -------- -------- --------
Ending balance........... $ 6,122 $ 4,204 $ 6,122 $ 4,204
======== ======== ======== ========
</TABLE>
(7) Earnings Per Share
Earnings per share of common stock for the three-month and six-month
periods ended March 31, 1997, have been determined by dividing net income
for the period by the weighted average number of shares of common stock
and common stock equivalents outstanding during the period. Book value
per share of common stock at March 31, 1997 and September 30, 1996 have
been determined by dividing total shareholders' equity by the number of
shares of common stock and common stock equivalents considered outstanding
at the respective dates. Stock options are regarded as common stock
equivalents and are, therefore, considered in per share calculations.
Common stock equivalents are computed using the treasury stock method.
Common shares outstanding have been reduced by the ESOP shares that have
not been committed to be released.
13
<PAGE> 14
ST. FRANCIS CAPITAL CORPORATION AND SUBSIDIARIES
Notes to Unaudited Consolidated Financial Statements, continued
The computation of earnings per common share is as follows:
<TABLE>
<CAPTION>
Six months ended Three months ended
March 31, March 31,
----------------------- -----------------------
1997 1996 1997 1996
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Net income for the period................ $6,133,000 $8,351,000 $2,976,000 $4,276,000
========== ========== ========== ==========
Common shares issued..................... 7,289,620 7,289,620 7,289,620 7,289,620
Net Treasury shares...................... 1,906,013 1,278,389 1,921,795 1,341,041
Unallocated ESOP shares.................. 332,245 374,221 326,160 367,927
---------- ---------- ---------- ----------
Weighted average common shares
outstanding during the period........... 5,051,362 5,637,010 5,041,665 5,580,652
Common stock equivalents based on the
treasury stock method................... 288,707 289,834 293,368 297,910
---------- ---------- ---------- ----------
Total weighted average common shares and
equivalents outstanding................. 5,340,069 5,926,844 5,335,033 5,878,562
========== ========== ========== ==========
Earnings per share....................... $1.15 $1.41 $0.56 $0.73
</TABLE>
The computation of book value per common share is as follows:
<TABLE>
<CAPTION>
March 31, September 30,
1997 1996
-------------- --------------
<S> <C> <C>
Common shares outstanding at the end
of the period...................................................... 5,060,033 5,127,092
Incremental shares relating to dilutive stock
options outstanding at the end of the period....................... 292,588 286,766
-------------- --------------
5,352,621 5,413,858
============== ==============
Total shareholders' equity at the end of the period.................. $ 127,852,000 $ 125,179,000
Book value per common share.......................................... $ 23.89 $ 23.12
</TABLE>
(8) Acquisitions
In February 1997, the Company completed the acquisition of Kilbourn State
Bank for $25.3 million cash. Under the terms of the agreement, the
Company acquired all of the outstanding shares of Kilbourn State Bank,
with Kilbourn subsequently merging into Bank Wisconsin, the Company's
commercial banking subsidiary. The acquisition was accounted for as a
purchase. The related accounts and results of operations are included in
the Company's consolidated financial statements from the date of
acquisition.
14
<PAGE> 15
ST. FRANCIS CAPITAL CORPORATION AND SUBSIDIARIES
Notes to Unaudited Consolidated Financial Statements, continued
The acquisition of Kilbourn State Bank added $93.0 million to assets,
including additions of $62.6 million to net loans and $67.8 million to
deposits.
The excess of cost over the fair value of tangible assets acquired is
accounted for as goodwill and will be amortized over varying periods of
fifteen to twenty five years using the straight-line method. Goodwill of
this acquisition, net of accumulated amortization, totaled $9.1 million at
March 31, 1997.
(9) Changes in Accounting Policy
In February 1997, Financial Accounting Standards Board (FASB) issued SFAS
128, "Earnings per Share," which is effective for financial statements
issued for periods ending after December 15, 1997. This statement
simplifies the standards for computing earnings per share previously found
in APB No. 15. It replaces the presentation of primary EPS with a
presentation of basic EPS. It also requires dual presentation of basic
EPS and diluted EPS on the face of the income statement for all entities
with complex capital structures and requires a reconciliation of the
numerator and denominator of the basic EPS computation to the numerator
and denominator of the diluted EPS computation. Earlier application of
this statement is not permitted. The Corporation has determined that the
impact of adoption will not have a material effect on the consolidated
statements of the Corporation.
15
<PAGE> 16
ST. FRANCIS CAPITAL CORPORATION AND SUBSIDIARIES
Item 2: Management's Discussion and Analysis of Financial Condition and
Results of Operations
FORWARD-LOOKING STATEMENTS
When used in this Quarterly Report on Form 10-Q or future filings by the
Company with the Securities and Exchange Commission, in quarterly reports or
press releases or other public or shareholder communications, or in oral
statements made with the approval of an authorized executive officer, various
words or phrases are intended to identify "forward-looking statements" within
the meaning of the Private Securities Litigation Reform Act of 1995. Such
forward-looking statements include words and phrases such as "will likely
result," "are expected to," "will continue," "is anticipated," "estimate,"
"project," or similar expressions and various other statements indicated herein
with an asterisk after such statements. The Company wishes to caution readers
not to place undue reliance on any such forward-looking statements, which speak
only as of the date made, and to advise readers that various factors could
affect the Company's financial performance and could cause actual results for
future periods to differ materially from those anticipated or projected. Such
factors include, but are not limited to: (i) general market rates, (ii) general
economic conditions, (iii) legislative/regulatory changes, (iv) monetary and
fiscal policies of the U.S. Treasury and Federal Reserve, (v) changes in the
quality or composition of the Company's loan and investment portfolios, (vi)
demand for loan products, (vii) deposit flows, (viii) competition, (ix) demand
for financial services in the Company's markets, and (x) changes in accounting
principles, policies or guidelines.
The Company does not undertake and specifically disclaims any obligation to
update any forward-looking statements to reflect the occurrence of anticipated
or unanticipated events or circumstances after the date of such statements.
FINANCIAL CONDITION
The Company's total assets increased $174.9 million or 12.5% to $1.579 billion
at March 31, 1997 from $1.404 billion at September 30, 1996. Loans receivable,
including loans held for sale, increased $61.7 million. Mortgage-backed and
related securities, including mortgage-backed and related securities available
for sale, increased $32.6 million. Funding the increase in assets was an
increase in deposits of $141.0 million. At March 31, 1997, the Company's
financial condition reflects the financial condition of Kilbourn State Bank
since the acquisition was consummated on February 28, 1997. The acquisition of
Kilbourn State Bank added $93.0 million to total assets, including additions of
$62.6 million to net loans and $67.8 million to deposits. The Company's ratio
of shareholders' equity to total assets was 8.10% at March 31, 1997, compared
to 8.92% at September 30, 1996. The Company's book value per share was $23.89
at March 31, 1997, compared to $23.12 at September 30, 1996.
Loans receivable, including mortgage loans held for sale, increased $61.7
million to $692.9 million at March 31, 1997 from $631.3 million at September 30,
1996, primarily due to $62.6 million of loans included in the Kilbourn
acquisition. The Company currently sells substantially all fixed rate mortgage
loans and retains adjustable-rate loans for its portfolio. Additionally, the
Company has increased its emphasis on consumer and interim financing products,
which are primarily retained in the Company's loan portfolio. The loan
originations were funded primarily by the increase in deposits and are
consistent with the Company's efforts to build earning assets. For the six
months ended March 31, 1997, the Company originated approximately $156.0 million
in loans, as compared to $140.8 million for the same period in the prior year.
Of the $156.0 million in loans originated, $12.5 million were in commercial
loans, $64.5 million were in consumer and interim financing loans and $79.0
million were in first mortgage loans.
16
<PAGE> 17
ST. FRANCIS CAPITAL CORPORATION AND SUBSIDIARIES
Item 2: Management's Discussion and Analysis, continued
Mortgage-backed and related securities, including mortgage-backed and related
securities available for sale, increased $32.6 million to $620.8 million at
March 31, 1997 from $588.2 million at September 30, 1996. The increase was the
result of the Company purchasing adjustable rate mortgage-backed securities and
short- and medium-term REMIC securities. At March 31, 1997, private-issue
mortgage-backed securities, CMO's and REMIC's totaled $456.9 million.
Private-issue MBS's represent a significant portion of the Company's portfolio
due to the Company's view of the benefit of higher interest rates generally
available on private issue MBS's versus the additional credit risk associated
with such securities in comparison with agency MBS's. The Company has been an
active purchaser of adjustable rate mortgage-backed securities as well as
short-term mortgage-related securities because of the lower level of interest
rate risk and low credit risk in relation to the interest earned on such
securities. However, repayments and sales of existing securities have
partially offset the increases.
Deposits increased $141.0 million to $1.02 billion at March 31, 1997 from
$877.7 million at September 30, 1996. The increase in deposits was primarily
due to an increase of $67.8 million from the Kilbourn State Bank acquisition
and an increase of $63.8 million in money market demand account deposits. The
Company has continued to offer new deposit products in an effort to attract new
deposits and maintain current relationships with customers. Significant new
deposit products offered which have contributed to the increase include
certificates of deposit and a money market demand account with an interest rate
tied to a nationally recognized money market index. At March 31, 1997, the
Company had approximately $128.6 million in brokered certificates of deposit
compared with $138.6 million at September 30, 1996. The brokered deposits are
generally of terms from three months to two years in maturity with interest
rates that approximate the Company's retail certificate rates. Although the
Company has experienced growth in its deposit liabilities during the six months
ended March 31, 1997, there can be no assurance that this trend will continue
in the future, nor can there be any assurance the Company will retain the
deposits it now has.* The level of deposit flows during any given period is
heavily influenced by factors such as the general level of interest rates as
well as alternative yields that investors may obtain on competing instruments,
such as money market mutual funds.
Advances and other borrowings increased by $43.0 million to $418.1 million at
March 31, 1997 from $375.0 million at September 30, 1996. The Company
primarily uses borrowed funds to fund purchases of mortgage-backed and related
securities. At March 31, 1997, the Company had a borrowing capacity available
of $147.0 million from the FHLB, however, additional securities may have to be
pledged as collateral.
At March 31, 1997, the Company had $70.0 million in interest rate swaps
outstanding compared with $55.0 million at September 30, 1996. The swaps are
designed to offset the changing interest payments of some of the Company's
borrowings and brokered certificates. Fixed pay-floating receive swaps totaled
$55.0 million at March 31, 1997 and were entered into to hedge interest rates
on borrowings from the FHLB used to fund purchases of fixed rate securities.
Fixed pay-floating receive swaps will provide for a lower interest expense (or
interest income) in a rising rate environment while adding to interest expense
in a falling rate environment. Floating receive-fixed pay swaps totaled $15.0
million at March 31, 1997 and were entered into to hedge interest rates on
brokered deposits used to fund the purchase of floating rate securities.
Floating receive-fixed pay swaps will provide for a lower interest expense (or
interest income) in a falling rate environment while adding to interest expense
in a rising rate environment. During the six months ended March 31, 1997, the
Company recorded a net reduction of interest expense of $127,000 as a result of
the Company's interest rate swap agreements.
RESULTS OF OPERATIONS
NET INCOME. Net income for the six months ended March 31, 1997 was $6.1 million
compared to $8.4 million for the six months ended March 31, 1996. Net income
for the three months ended March 31, 1997 was $3.0 million compared to $4.3
million for the three months ended March 31, 1996. The decrease for the six
month period was
17
<PAGE> 18
ST. FRANCIS CAPITAL CORPORATION AND SUBSIDIARIES
Item 2: Management's Discussion and Analysis, continued
the result of a decrease in other operating income, which consisted primarily of
a $2.6 million decrease in gains on the sale of mortgage-backed and related
securities, coupled with a $2.7 million increase in general and administrative
expenses, partially offset by a $2.2 million decrease in income tax expense. The
decrease for the three month period was the result of a decrease in other
operating income, which consisted primarily of a $1.5 million decrease in gains
on the sale of mortgage-backed and related securities, coupled with a $1.3
million increase in general and administrative expenses, partially offset by a
$1.2 million decrease in income tax expense. The following table shows the
return on average assets and return on average equity ratios for each period:
<TABLE>
<CAPTION>
Six months ended Three months ended
March 31, March 31,
-------------------------------------
1997 1996 1997 1996
------ ------ ------ ------
<S> <C> <C> <C> <C>
Return on average assets... 0.85% 1.36% 0.83% 1.36%
Return on average equity... 9.73% 12.09% 9.46% 12.49%
</TABLE>
NET INTEREST INCOME. Net interest income before provision for loans losses
increased $788,000 or 4.5% and $379,000 or 4.2% for the six and three months
ended March 31, 1997, respectively, compared to the same periods in the prior
year. The net interest margin was 2.73% and 3.04% for the six months ended
March 31, 1997 and 1996, respectively, and 2.79% and 3.05% for the three months
ended March 31, 1997 and 1996, respectively. The decline in the net interest
margin in both periods is due to decreasing interest rate spreads that the
Company has been experiencing in its asset and liability base and a changing
asset mix which includes a higher level of non-interest earning assets. The
Company increased its investment in affordable housing units to $41.4 million
at March 31, 1997 compared with $27.8 million at March 31, 1996. This
investment strategy provides returns primarily through income tax credits but
is not an interest earning asset and thus has the effect of decreasing the
Company's net interest margin.
Total interest income increased $5.9 million or 13.2% to $50.5 million for the
six months ended March 31, 1997, compared to $44.6 million for the six months
ended March 31, 1996, and increased $2.8 million or 12.2% to $25.7 million for
the three months ended March 31, 1997, compared to $22.9 million for the three
months ended March 31, 1996. The increase in interest income was primarily the
result of increases in interest on loans and securities. The increase in
interest on loans was due to an increase in the average balance of loans to
$645.8 million from $529.3 million for the six months ended March 31, 1997 and
1996, respectively, partially offset by decreases in the average yield on loans
to 8.35% from 8.63% for the same period in the prior year. The increase in net
interest income on loans for the three months ended March 31, 1997 compared
with the three months ended March 31, 1996 was the result of an increase in the
average balance of loans to $654.9 million from $534.6 million, partially
offset by decreases in the average yield on loans to 8.45% from 8.67% for the
same period in the prior year. The decrease in the average yield is primarily
due to the Company now selling substantially all new originations of initially
higher yielding long-term, fixed-rate single-family mortgage loans in the
secondary market and retaining new originations of initially lower yielding
adjustable-rate single family mortgage loans. The increase in the average
balance of loans is due primarily to the Company's recent efforts to emphasize
commercial, consumer and home equity lending in addition to the Kilbourn State
Bank acquisition. The increase in interest income on mortgage-backed and
related securities was due to an increase in the average balance of such
securities to $584.1 million from $535.2 million for the six months ended March
31, 1997 and 1996, respectively, partially offset by decreases in the average
yield on such securities to 6.92% from 7.11% for the same periods. The
increase in net interest income on mortgage-backed and related securities for
the three months ended March 31, 1997 compared with the three months ended
March 31, 1996 was primarily the result of an increase in the average balance
of securities to $588.2 million from $563.1 million, partially offset by
decreases in the average yield on such securities
18
<PAGE> 19
ST. FRANCIS CAPITAL CORPORATION AND SUBSIDIARIES
Item 2: Management's Discussion and Analysis, continued
to 7.07% from 7.16% for the same periods. The Company has been active during
the past year repositioning its available for sale mortgage-backed and related
securities portfolio by selling significant amounts of securities and replacing
them with securities with more favorable maturity positions and characteristics
which reflect the Company's overall asset/liability management strategies.
Total interest expense increased $5.1 million or 18.9% to $32.2 million for the
six months ended March 31, 1997, compared to $27.1 million for the six months
ended March 31, 1996. For the three months ended March 31, 1997, total
interest expense increased $2.4 million, or 17.4%, to $16.3 million compared to
$13.9 million for the three months ended March 31, 1996. The increase in
interest expense was the result of increases in the average balances of
deposits and advances and other borrowings as well as a slight increase in the
cost of deposits. The average balances of deposits were $874.0 million and
$889.2 million for the six and three months ended March 31, 1997, respectively,
as compared to $714.5 million and $755.2 million for the same periods in the
prior year. The increases in the balances of deposits are due to the Company's
offering of additional deposit products, the use of brokers to sell
certificates of deposit and the Kilbourn State Bank acquisition. The average
cost of deposits increased slightly to 4.99% and 5.01% for the six and three
months ended March 31, 1997, respectively, from 4.98% and 4.99% for the same
periods in the prior year. Deposit rates paid by the Company reflected the
general increase in market rates of interest as a result of the increased
competition with other financial products offered in the marketplace. The
average balance of advances and other borrowings were $383.3 million and $396.0
million for the six and three months ended March 31, 1997, respectively, as
compared to $334.5 million and $333.1 million for the same periods in the prior
year. The average cost of advances and other borrowings decreased to 5.46% and
5.45% for the six and three months ended March 31, 1997, respectively, from
5.56% and 5.46% for the same periods in the prior year. The borrowings are
primarily adjustable-rate FHLB advances which have repriced to reflect the
slight decrease in rate levels associated with the respective borrowing rate
indexes from the same period in the prior year.
The following table sets forth information regarding: (1) average assets and
liabilities, (2) average yield on assets and average cost on liabilities, (3)
net interest margin, (4) net interest rate spread, and (5) the ratio of earning
assets to interest-bearing liabilities for the six- and three-month periods
ended March 31, 1997 and 1996, respectively.
19
<PAGE> 20
ST. FRANCIS CAPITAL CORPORATION AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis, continued
<TABLE>
<CAPTION>
SIX MONTHS ENDED MARCH 31,
-----------------------------------------------------------------
1997 1996
-----------------------------------------------------------------
AVERAGE AVERAGE
AVERAGE YIELD/ AVERAGE YIELD/
BALANCE INTEREST COST BALANCE INTEREST COST
-----------------------------------------------------------------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Federal funds sold and overnight deposits...... $ 24,601 $ 644 5.25 % $ 20,633 $ 564 5.47 %
Trading account securities..................... 3,530 123 6.99 82 3 7.32
Debt and equity securities..................... 69,013 2,013 5.85 52,152 1,567 6.01
Mortgage-backed and related securities......... 584,071 20,148 6.92 535,240 19,035 7.11
Loans:
First mortgage................................ 416,981 16,755 8.06 343,145 13,935 8.12
Home equity................................... 95,525 4,450 9.34 80,155 3,964 9.89
Consumer...................................... 100,442 4,429 8.84 88,464 4,133 9.34
Commercial and agricultural................... 32,827 1,268 7.75 17,581 808 9.19
---------------------- ----------------------
Total loans.................................. 645,775 26,902 8.35 529,345 22,840 8.63
Federal Home Loan Bank stock................... 19,658 695 7.09 17,554 618 7.04
---------------------- ----------------------
Total earning assets......................... 1,346,648 50,525 7.52 1,155,006 44,627 7.73
------- -------
Valuation allowances........................... (7,222) (1,188)
Cash and due from banks........................ 18,403 13,829
Other assets................................... 80,899 62,796
---------- ----------
Total assets.................................. $1,438,728 $1,230,443
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest-bearing deposits:
NOW accounts.................................. $ 45,541 365 1.61 $ 41,318 315 1.52
Money market demand accounts.................. 196,617 4,535 4.63 131,690 3,095 4.70
Passbook...................................... 80,253 1,135 2.84 86,360 1,227 2.84
Certificates of deposit....................... 551,621 15,714 5.71 455,154 13,140 5.77
---------------------- ----------------------
Total interest-bearing deposits................ 874,032 21,749 4.99 714,522 17,777 4.98
Advances and other borrowings.................. 383,254 10,433 5.46 334,509 9,292 5.56
Advances from borrowers for taxes and insurance 5,304 14 0.53 5,383 17 0.63
---------------------- ----------------------
Total interest-bearing liabilities........... 1,262,590 32,196 5.11 1,054,414 27,086 5.14
Non interest-bearing deposits.................. 35,575 25,627
Other liabilities.............................. 14,171 12,273
Shareholders' equity........................... 126,392 138,129
---------- ----------
Total liabilities and shareholders' equity..... $1,438,728 $1,230,443
========== ==========
Net interest income............................ $18,329 $17,541
======= =======
Net yield on interest-earning assets........... 2.73 3.04
Interest rate spread........................... 2.41 2.59
Ratio of earning assets to interest-bearing
liabilities.................................. 106.66 109.54
<CAPTION>
THREE MONTHS ENDED MARCH 31,
------------------------------------------------------------------------
1997 1996
------------------------------------------------------------------------
AVERAGE AVERAGE
AVERAGE YIELD/ AVERAGE YIELD/
BALANCE INTEREST COST BALANCE INTEREST COST
------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Federal funds sold and overnight deposits...... $ 28,743 $ 385 5.43 % $ 21,470 $ 283 5.30 %
Trading account securities..................... 2,691 53 7.99 - - -
Debt and equity securities..................... 69,613 1,004 5.85 49,405 744 6.06
Mortgage-backed and related securities......... 588,201 10,247 7.07 563,106 10,028 7.16
Loans:
First mortgage................................ 416,581 8,407 8.18 341,644 6,932 8.16
Home equity................................... 97,974 2,321 9.61 79,783 1,931 9.73
Consumer...................................... 99,945 2,242 9.10 93,770 2.227 9.55
Commercial and agricultural................... 40,380 667 6.70 19,381 433 8.99
----------------------- ------------------------
Total loans.................................. 654,880 13,637 8.45 534,578 11,523 8.67
Federal Home Loan Bank stock................... 20,057 365 7.38 17,631 321 7.32
----------------------- ------------------------
Total earning assets......................... 1,364,185 25,691 7.64 1,186,190 22,899 7.76
------- -------
Valuation allowances........................... (7,522) (1,463)
Cash and due from banks........................ 20,368 14,111
Other assets................................... 83,614 61,703
---------- ----------
Total assets.................................. $1,460,645 $1,260,541
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest-bearing deposits: $ 47,583 209 1.78 $ 41,163 155 1.51
NOW accounts.................................. 206,044 2,361 4.65 139,591 1,607 4.63
Money market demand accounts.................. 83,469 582 2.83 83,400 588 2.84
Passbook...................................... 552,107 7,838 5.76 491,095 7,026 5.75
----------------------- ------------------------
Certificates of deposit....................... 889,203 10,990 5.01 755,249 9,376 4.99
Total interest-bearing deposits................ 395,968 5,320 5.45 333,082 4,520 5.46
Advances and other borrowings.................. 2,130 2 0.38 2,276 3 0.53
----------------------- ------------------------
Advances from borrowers for taxes and insurance 1,287,301 16,312 5.14 1,090,607 13,899 5.13
Total interest-bearing liabilities........... 35,422 23,763
Non interest-bearing deposits.................. 10,281 8,444
Other liabilities.............................. 127,641 137,727
---------- ----------
Shareholders' equity........................... $1,460,645 $1,260,541
========== ==========
Total liabilities and shareholders' equity..... $ 9,379 $ 9,000
======= =======
Net interest income............................ 2.79 3.05
Net yield on interest-earning assets........... 2.50 2.64
Interest rate spread...........................
Ratio of earning assets to interest-bearing
liabilities.................................. 105.97 108.76
</TABLE>
20
<PAGE> 21
ST. FRANCIS CAPITAL CORPORATION AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis, continued
PROVISION FOR LOAN LOSSES. The following table summarizes the allowance for
loan losses for each period:
<TABLE>
<CAPTION>
Six months ended Three months ended
March 31, March 31,
-------------------------- -------------------------
1997 1996 1997 1996
---------- ---------- ---------- ----------
(Dollars in thousands)
<S> <C> <C> <C> <C>
Beginning balance...................... $5,217 $4,076 $5,060 $4,132
Provision for loan losses.............. 372 144 111 78
Recoveries............................. 74 6 19 4
Charge-offs............................ (1,219) (22) (746) (10)
Acquired bank's allowance.............. 1,678 - 1,678 -
---------- ---------- ---------- ----------
Ending balance......................... $6,122 $4,204 $6,122 $4,204
========== ========== ========== ==========
Ratio of allowance for loan losses to
gross loans receivable at the end
of the period......................... 0.84% 0.74% 0.84% 0.74%
Ratio of allowance for loan losses to
total non-performing loans at the
end of the period..................... 156.77% 1053.63% 156.77% 1053.63%
Ratio of net charge-offs to average
gross loans (annualized).............. 0.36% 0.00% 0.45% 0.00%
</TABLE>
Management believes that the allowance for loan losses is adequate to provide
for potential losses as of March 31, 1997, based upon its current evaluation of
loan delinquencies, non-performing loans, charge-off trends, economic
conditions and other factors. The increase in the provision for loan losses in
the current quarter reflects the continued growth in the Company's loan
portfolio and also reflects the Company's increased mix of higher yielding,
higher risk loans. Repossessed autos sold during the six and three months
ended March 31, 1997 resulted in charge-offs of $1.1 million and $0.7 million,
respectively. It is anticipated that as more loans default and repossessed
autos are sold, additional charge-offs will be incurred.* The Company believes
that the allowance for loan losses is adequate to provide for potential
anticipated losses based upon current known conditions.
OTHER OPERATING INCOME. Other operating income decreased by $2.3 million and
$1.5 million for the six and three months ended March 31, 1997, compared to the
same periods in the prior year. The following table shows the percentage of
other operating income to average assets for each period:
<TABLE>
<CAPTION>
Six months ended Three months ended
March 31, March 31,
------------------------ ----------------------
1997 1996 1997 1996
-------- -------- -------- --------
(Dollars in thousands)
<S> <C> <C> <C> <C>
Other operating income................... $5,307 $7,628 $2,650 $4,169
Percent of average assets (annualized)... 0.74% 1.24% 0.74% 1.33%
</TABLE>
The decreases were due primarily to decreases in gains on investments and
mortgage-backed and related securities, partially offset by an increase in
gains on trading account activity and income from the Company's affordable
housing subsidiary. Gains on investments and mortgage-backed and related
securities decreased $2.6 million to
21
<PAGE> 22
ST. FRANCIS CAPITAL CORPORATION AND SUBSIDIARIES
Item 2: Management's Discussion and Analysis, continued
$627,000, and $1.5 million to $151,000, for the six and three months
ended March 31, 1997, respectively, compared to gains of $3.3 million and $1.7
million for the same periods in the prior year. However, the Company does not
consider gains on the sales of securities as a predictable source of earnings
as such sales are primarily based on the Company's ongoing review of the
individual securities within the Company's available for sale portfolio whereby
securities may be sold and replaced with ones that offer a better combination
of interest income, interest rate risk or credit risk than the security sold.
Gain/(loss) on foreclosed properties decreased to a loss of $7,000 and a gain
of $7,000 for the six and three months ended March 31, 1997, respectively,
compared to gains of $872,000 and $740,000 for the same periods in the prior
year. For the six and three months ended March 31, 1996, the gains were the
result of the sale of one foreclosed property which had a carrying value of
$5.8 million. The gain on sale of this property was $684,000. Gains from the
trading account were $507,000 and $122,000 for the six and three months ended
March 31, 1997, respectively, compared to a gain of $109,000 and a loss of
$19,000 for the same periods in the prior year. The increase in trading gains
was the result of the sale of mortgage-backed securities which the Company had
exchanged for its own mortgage loans ("loan swaps"). This method of selling
the Company's salable mortgage production is required, under accounting rules,
to be accounted for as a "trading" activity, and as such, the resulting
realized and unrealized gains or losses are classified as trading income. The
level of trading gains may fluctuate due to the volume of originations of
single-family mortgage loans which in turn can fluctuate due to changes in
interest rates. Sales of loans for cash as opposed to loan swaps are recorded
as sales of mortgage loans in the income statement. The operations of the
Company's affordable housing subsidiary had increases in income (which
represents primarily rental income) of $571,000 and $454,000 for the six and
three months ended March 31, 1997, as compared to the same periods in the
previous year. The Company currently has nineteen properties fully in
operation compared to twelve in the prior year.
GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses
increased by $2.7 million or 20.3% and $1.3 million or 18.5% for the six and
three months ended March 31, 1997, compared to the same periods in the prior
year. The following table shows the percentage of general and administrative
expenses to average assets for each period:
<TABLE>
<CAPTION>
Six months ended Three months ended
March 31, March 31,
------------------------- ------------------------
1997 1996 1997 1996
---------- ---------- ---------- ----------
(Dollars in thousands)
<S> <C> <C> <C> <C>
General and administrative expenses...... $15,749 $13,089 $8,287 $6,992
Percent of average assets (annualized)... 2.20% 2.13% 2.30% 2.23%
</TABLE>
The increases were due primarily to increased levels of compensation and other
costs associated with the Kilbourn State Bank acquisition, the opening of three
new branches and a centralized call center, and other increased activity
connected with the Company's higher level of earning assets. The affordable
housing subsidiary showed increases in operating expenses of $751,000 and
$630,000 for the six and three months ended March 31, 1997, as compared to the
same periods in the prior year. The Company currently has nineteen properties
fully in operation compared to twelve in the prior year.
INCOME TAX EXPENSE. Income tax expense decreased to $1.4 million and $655,000
for the six and three months ended March 31, 1997 from $3.6 million and $1.8
million for the six and three months ended March 31, 1996. The effective tax
rate for the six and three months ended March 31, 1997 was 18.39% and 18.04%,
respectively compared with 30.04% and 29.89% for the six and three months ended
March 31, 1996. The decrease in effective rates reflects the effect of the tax
credits earned by the Company's affordable housing subsidiary. Income tax
credits increased to $1.4 million and $719,000, for the six and three months
ended March 31, 1997, compared to $756,000 and $397,000 for the same periods in
the prior year.
22
<PAGE> 23
ST. FRANCIS CAPITAL CORPORATION AND SUBSIDIARIES
Item 2: Management's Discussion and Analysis, continued
ASSET QUALITY
Total non-performing assets were $4.0 million or 0.26% of total assets at March
31, 1997, unchanged from the $4.0 million or 0.28% of total assets at September
30, 1996. Non-performing assets include loans which have been placed on
nonaccrual status and property upon which a judgment of foreclosure has been
entered but prior to the foreclosure sale, as well as property acquired as a
result of foreclosure.
Non-performing assets as of March 31, 1997 included $3.1 million of purchased
auto loans which are past due or in default. These auto loans were purchased
in 1995 and 1996 under a warehouse financing arrangement the Company had with
the originator of the sub-prime automobile loans. The intent of the financing
was to warehouse the loans until the originator could originate sufficient
quantities to securitize the loans and sell to institutional investors. At
that time, the loans would be sold back to the originator. The loans were
serviced by an independent third party servicer and the loans had various
levels of insurance and in addition were guaranteed as to principal and
interest payments by the originator of the loans. The maximum amount that the
Company had outstanding at any point in time was a balance of $14.6 million
during February, 1996. The Company has not funded any loans since that time
and as of March 31, 1997, the balance of the sub-prime auto loans was $3.1
million compared to $7.7 million at September 30, 1996. During the six months
ended March 31, 1997, $2.7 million of loans were sold back to the originator
for face value plus a gain of $50,000 which was treated as a recovery. Actions
have been taken to repossess the collateral on the delinquent loans and to
enforce the guarantee of the originator of these loans; however, it is
anticipated that some portion of these loans will ultimately result in a
charge-off due to the possible inability of the originator to perform under its
guaranty.* In addition, the level of insurance collected on policies paying
for credit losses on the loans has been lower than anticipated. The Company is
still pursuing repossession and disposition of the autos and enforcement of the
guarantee of the originator. Repossessed autos sold during the six and three
months ended March 31, 1997 resulted in charge-offs of $1.1 million and
$719,000. It is anticipated that as more loans default and the repossessed
autos are sold, additional charge-offs will be incurred.* The Company believes
that the allowance for loan losses is adequate to provide for potential
anticipated losses based upon current known conditions.
Non-performing assets are summarized as follows:
<TABLE>
<CAPTION>
March 31, September 30,
1997 1996
--------- -------------
(Dollars in thousands)
<S> <C> <C>
Non-performing loans................... $ 3,905 $ 3,890
Foreclosed properties.................. 122 80
-------- --------
Non-performing assets.................. $ 4,027 $ 3,970
======== ========
Non-performing loans to gross loans.... 0.54% 0.58%
Non-performing assets to gross assets.. 0.26% 0.28%
</TABLE>
There are no material loans about which management is aware that there exists
serious doubts as to the ability of the borrower to comply with the loan terms,
except as disclosed above.
Impaired loans totaled $3.1 million at March 31, 1997 compared to $3.6 million
at September 30, 1996. These loans had associated impairment reserves of
$1.2 million and $1.1 million at March 31, 1997 and September 30, 1996,
respectively. The average balance of impaired loans was $3.5 million and $1.4
million at March 31, 1997 and September 30, 1996, respectively. No interest
income was recorded in either reporting period.
23
<PAGE> 24
ST. FRANCIS CAPITAL CORPORATION AND SUBSIDIARIES
Item 2: Management's Discussion and Analysis, continued
ASSET/LIABILITY MANAGEMENT
Asset and liability management is an ongoing process of managing asset and
liability maturities to control the interest rate risk of the Company.
Management controls this risk through pricing of assets and liabilities and
maintaining specific levels of maturities. In recent periods, management's
strategy has been to (1) sell substantially all new originations of long-term,
fixed-rate, single-family mortgage loans in the secondary market, (2) invest in
various adjustable-rate and short-term mortgage-backed and related securities,
(3) invest in adjustable-rate, single-family mortgage loans, and (4) increase
its investments in consumer and commercial loans with generally shorter
interest rate characteristics. Although management believes that its
asset/liability management strategies have reduced the potential effects of
changes in interest rates on its operations, increases in interest rates may
adversely affect the Company's results of operations because interest-bearing
liabilities will reprice more quickly than interest-earning assets.
At March 31, 1997, the Company's estimated cumulative one-year gap between
assets and liabilities was a negative 9.23% of total assets. A negative gap
occurs when a greater dollar amount of interest-bearing liabilities are
repricing or maturing than interest earning assets. The Company's three-year
cumulative gap as of March 31, 1997 was a negative 6.25% of total assets. With
a negative gap position, during periods of rising interest rates it is expected
that the cost of the Company's interest-bearing liabilities will rise more
quickly than the yield on its interest-earning assets, which will have a
negative effect on its net interest income.* Although the opposite effect on
net interest income would occur in periods of falling interest rates, the
Company could experience substantial prepayments of its fixed-rate mortgage
loans and mortgage-backed and related securities in periods of falling interest
rates, which would result in the reinvestment of such proceeds at market rates
which are lower than current rates.*
24
<PAGE> 25
ST. FRANCIS CAPITAL CORPORATION AND SUBSIDIARIES
Item 2: Management's Discussion and Analysis, continued
The following table summarizes the Company's gap position as of March 31,
1997.
<TABLE>
<CAPTION>
More than More than
Within Four to One Year Three
Three Twelve to Three Years to Over Five
Months Months Years Five Years Years Total
------------------------------------------------------------------------------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
INTEREST-EARNING ASSETS: (1)
Loans: (2)
Fixed........................................ $ 21,300 $ 31,768 $ 47,948 $ 24,451 $ 52,428 $ 177,895
Variable..................................... 43,918 88,845 109,602 45,308 10,710 298,383
Consumer loans (2)............................. 97,799 41,914 18,090 21,826 19,960 199,589
Mortgage-backed and related securities......... 1,194 4,708 14,616 26,328 20,907 67,753
Assets available for sale:
Mortgage loans............................... 17,077 - - - - 17,077
Fixed rate mortgage related.................. 5,550 17,409 31,623 19,797 15,412 89,791
Variable rate mortgage related............... 305,820 156,557 - - - 462,377
Other........................................ 14,994 12,631 33,643 2,971 424 64,663
Trading account securities..................... 0 - - - - 0
Investment securities and other assets......... 80,793 2,003 - - 6,561 89,357
------------------------------------------------------------------------------
Total........................................ $ 588,445 $355,835 $255,522 $140,681 $126,402 $1,466,885
------------------------------------------------------------------------------
INTEREST-BEARING LIABILITIES:
Deposits: (3)
NOW accounts................................. $ 5,307 $ 15,921 $ 21,798 $ 8,652 $ 5,694 $ 57,372
Passbook savings accounts.................... 4,388 13,162 26,657 18,364 40,666 103,237
Money market deposit accounts................ 50,204 150,610 16,716 4,179 1,393 223,102
Certificates of deposit...................... 280,790 206,594 73,393 29,448 - 590,225
Borrowings..................................... 403,008 9 15,000 60 - 418,077
Impact of interest rate swap (4)............... (40,000) - 55,000 - (15,000) -
------------------------------------------------------------------------------
Total........................................ $ 703,697 $386,296 $208,564 $ 60,703 $ 32,753 $1,392,013
==============================================================================
Excess (deficiency) of interest-earning
assets over interest-bearing liabilities....... $(115,252) $(30,461) $ 46,958 $ 79,978 $ 92,621 $ 74,872
==============================================================================
Cumulative excess (deficiency) of
interest-earning assets over interest-
bearing liabilities............................ (115,252) (145,713) (98,755) (18,777) 73,844
===============================================================
Cumulative excess (deficiency) of
interest-earning assets over interest-
bearing liabilities as a percent of total
assets......................................... -7.30% -9.23% -6.25% -1.19% 4.68%
===============================================================
</TABLE>
(1) Adjustable and floating rate assets are included in the period in which
interest rates are next scheduled to adjust rather than in the period in
which they are due, and fixed rate assets are included in the periods in
which they are scheduled to be repaid based on scheduled amortization, in
each case adjusted to take into account estimated prepayments utilizing
the Company's historical prepayment statistics, modified for forecasted
statistics using the Public Securities Association model of prepayments.*
For fixed rate mortgage loans and mortgage-backed and related securities,
annual prepayment rates ranging from 8% to 30%, based on the loan coupon
rate, were used.
(2) Balances have been reduced for undisbursed loan proceeds, unearned
insurance premiums, deferred loan fees, purchased loan discounts and
allowances for loan losses, which aggregated $34.4 million at March 31,
1997.
(3) Although the Company's negotiable order of withdrawal ("NOW") accounts,
passbook savings accounts and money market deposit accounts generally are
subject to immediate withdrawal, management considers a certain portion of
such accounts to be core deposits having significantly longer effective
maturities based on the Company's retention of such deposits in changing
interest rate environments. NOW accounts, passbook savings accounts and
money market deposit accounts are assumed to be withdrawn at annual rates
of 37%, 17% and 88%, respectively, of the declining balance of such
accounts during the period shown. The withdrawal rates used are higher
than the Company's historical rates but are considered by management to be
more indicative of expected withdrawal rates in a rising interest rate
environment. If all the Company's NOW accounts, passbook savings accounts
and money market deposit accounts had been assumed to be repricing within
one year, the one-year cumulative deficiency of interest-earning assets to
interest-bearing liabilities would have been $289.8 million or 19.97% of
total assets.
(4) Adjustable and floating rate borrowings are included in the period in
which their interest rates are next scheduled to adjust rather than in the
period in which they are due.
25
<PAGE> 26
ST. FRANCIS CAPITAL CORPORATION AND SUBSIDIARIES
Item 2: Management's Discussion and Analysis, continued
Assumptions regarding the withdrawal and prepayment are based on historical
experience, and management believes such assumptions reasonable, although the
actual withdrawal and repayment of assets and liabilities may vary
substantially.* Certain shortcomings are inherent in the method of analysis
presented in the gap table. For example, although certain assets and
liabilities may have similar maturities to repricing, they may react in
different degrees to changes in market interest rates.* Also, the interest
rates on other types of assets and liabilities may fluctuate in advance of
changes in market interest rates, while interest rates on other types may lag
behind changes in market rates.* Additionally, certain assets, such as
adjustable-rate loans and mortgage-backed and related securities, have features
which restrict changes in interest rates on a short-term basis and over the
life of the asset. Further, in the event of a change in interest rates,
prepayment and early withdrawal levels could deviate significantly from those
assumed in calculating the data in the table.*
LIQUIDITY AND CAPITAL RESOURCES
The Company's most liquid assets are cash and cash equivalents, which include
investments in highly-liquid, short-term investments. The level of these
assets is dependent on the Company's operating, financing and investing
activities during any given period. Cash and cash equivalents totaled $80.8
million and $22.5 million as of March 31, 1997 and September 30, 1996,
respectively.
The Company's primary sources of funds are deposits, including brokered
certificates, borrowings from the FHLB and proceeds from principal and interest
payments on loans and mortgage-backed and related securities. Although
maturities and scheduled amortization of loans are predictable sources of
funds, deposit flows, prepayments on mortgage loans and mortgage-backed and
related securities are influenced significantly by general interest rates,
economic conditions and competition. Additionally, the Bank is limited by the
FHLB to borrowing up to 35% of its assets. At March 31, 1997, the Company had
a borrowing capacity available of $147.0 million from the FHLB, however,
additional securities may have to be pledged as collateral.
Under federal and state laws and regulations, the Company and its wholly-owned
subsidiaries are required to meet certain tangible, core and risk-based capital
requirements. Tangible capital generally consists of shareholders' equity
minus certain intangible assets. Core capital generally consists of tangible
capital plus qualifying intangible assets. The risk-based capital requirements
presently address credit risk related to both recorded and off-balance sheet
commitments and obligations.
Bank Wisconsin is required to follow FDIC capital adequacy guidelines which
prescribe minimum levels of capital and require that institutions meet certain
risk-based and leverage capital requirements. Under the FDIC capital
regulations, Bank Wisconsin is required to meet the following capital
standards: (i) "Tier 1 capital" in an amount not less than 3% of total assets;
(ii) "Tier 1 capital" in an amount not less than 4% of risk-weighted assets;
and (iii) "total capital" in an amount not less than 8% of risk-weighted
assets.
The following table summarizes Bank Wisconsin's capital ratios at the dates
indicated:
<TABLE>
<CAPTION>
March 31, 1997 September 30, 1996
---------------- --------------------
Capital Capital
---------------- --------------------
Capital Standard Amount Percent Amount Percent
- - ----------------------------- ------ ------- -------- ---------
(Dollars in thousands)
<S> <C> <C> <C> <C>
Tier 1 capital/average assets 25,700 13.35% 8,789 9.12%
Tier 1 capital/risk-based 25,700 17.01% 8,789 12.38%
Total capital/risk-based 27,595 18.26% 9,478 13.35%
</TABLE>
26
<PAGE> 27
ST. FRANCIS CAPITAL CORPORATION AND SUBSIDIARIES
Item 2: Management's Discussion and Analysis, continued
The changes in the capital amounts from September 30, 1996 to March 31, 1997
are primarily due to the aforementioned Kilbourn State Bank acquisition.
The Bank is required to follow OTS capital regulations which require savings
institutions to meet three capital standards: (i) "tangible capital" in an
amount not less than 1.5% of adjusted total assets; (ii) "core capital" in an
amount not less than 3% of adjusted total assets; and (iii) "risk-based
capital" of at least 8% of risk-weighted assets. Savings institutions must
meet all of the standards in order to comply with the capital requirements.
The following table summarizes the Bank's capital ratios at the dates
indicated:
<TABLE>
<CAPTION>
March 31, 1997 September 30, 1996
---------------- -------------------
Capital Capital
---------------- -------------------
Capital Standard Amount Percent Amount Percent
- - ------------------ ------- ------- -------- --------
(Dollars in thousands)
<S> <C> <C> <C> <C>
Tangible capital 91,904 6.72% 89,092 6.86%
Core capital 91,904 6.72% 89,092 6.86%
Risk-based capital 94,799 12.75% 92,764 13.12%
</TABLE>
As evidenced by the foregoing, the capital of each of the Company's financial
institution subsidiaries exceeded all capital requirements as mandated by the
requirements of the FDIC and OTS.
27
<PAGE> 28
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Neither the Registrant nor the Bank is involved in any pending legal
proceedings involving amounts in the aggregate which management
believes are material to the financial condition and results of
operations of the Registrant and the Bank.
ITEM 2. CHANGES IN SECURITIES
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Annual Meeting of Shareholders was held on January 22, 1997. Only
shareholders of record at the close of business on December 1, 1996
(the "Voting Record Date") were entitled to vote at the annual meeting.
On the Voting Record Date, there were 5,371,064 shares of Common Stock
outstanding, and 4,842,344 shares present at the meeting by the holders
thereof in person or by proxy, which constituted a quorum. The
following is a summary of the matters voted upon at the meeting.
<TABLE>
<CAPTION>
NUMBER OF VOTES
-------------------------------------------
BROKER
FOR WITHHELD ABSTENTIONS NON-VOTES
--------- -------- ----------- ---------
<S> <C> <C> <C> <C>
NOMINEES FOR DIRECTOR FOR
THREE-YEAR TERM EXPIRING IN
2000
Jeffrey A. Reigle 4,767,483 74,861 - -
John C. Schlosser 4,782,256 60,088 - -
Edmund O. Templeton 4,781,507 60,837 - -
APPROVAL OF THE ST. FRANCIS
CAPITAL CORPORATION 1997
STOCK OPTION PLAN 4,228,016 450,703 82,126 81,499
RATIFICATION OF APPOINTMENT OF
KPMG PEAT MARWICK LLP AS
AUDITORS 4,749,228 55,865 37,251 -
</TABLE>
ITEM 5. OTHER INFORMATION
On April 30, 1997, the Company announced the declaration of a dividend
of $0.12 per share on the Company's common stock for the quarter ended
March 31, 1997. The dividend is payable on May 22, 1997 to
shareholders of record as of May 9, 1997. This will be the seventh
cash dividend payment since the Company became a publicly-held company
in June 1993.
28
<PAGE> 29
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
10.24 St. Francis Capital Corporation 1997 Stock Option Plan
11.1 Statement Regarding Computation of Earnings Per Share (See
Footnote 7 in "Notes to Unaudited Consolidated Financial
Statements")
27.1 Financial Data Schedule
(b) No reports on Form 8-K were filed during the quarter for which this
report was filed.
29
<PAGE> 30
SIGNATURE
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.
ST. FRANCIS CAPITAL CORPORATION
Dated: May 15, 1997 By: /s/ Thomas R. Perz
- - --------------------- -----------------------------------------
Thomas R. Perz
President and Chief Executive Officer
Dated: May 15, 1997 By: /s/ Jon D. Sorenson
- - --------------------- -----------------------------------------
Jon D. Sorenson
Chief Financial Officer
30
<PAGE> 1
ST. FRANCIS CAPITAL CORPORATION
1997 STOCK OPTION PLAN
1. PURPOSE.
The purpose of the St. Francis Capital Corporation (the "Holding
Company") 1997 Stock Option Plan (the "Plan") is to advance the interests of
the Holding Company and its shareholders by providing those key employees and
directors of the Holding Company and its Affiliates, including St. Francis
Bank, F.S.B. (the "Bank"), upon whose judgment, initiative and efforts the
successful conduct of the business of the Holding Company and its affiliates
largely depends, with additional incentive to perform in a superior manner. A
purpose of the Plan is also to attract people of experience and ability to the
service of the Holding Company and its Affiliates.
2. DEFINITIONS.
(a) "Affiliate" means (i) a member of a controlled group of
corporations of which the Holding Company is a member or (ii) an unincorporated
trade or business which is under common control with the Holding Company as
determined in accordance with Section 414(c) of the Internal Revenue Code of
1986, as amended, (the "Code") and the regulations issued thereunder. For
purposes hereof, a "controlled group of corporations" shall mean a controlled
group of corporations as defined in Section 1563(a) of the Code determined
without regard to Section 1563(a)(4) and (e)(3)(C).
(b) "Award" means a grant of Non-statutory Stock Options or
Incentive Stock Options under the provisions of this Plan.
(c) "Board of Directors" or "Board" means the board of directors
of the Holding Company.
(d) "Change in Control" of the Holding Company means a Change in
Control of a nature that: (i) would be required to be reported in response to
Item 1 of the current report on Form 8-K, as in effect on the date hereof,
pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 (the
"Exchange Act"); or (ii) results in a Change in Control of the Bank or the
Holding Company within the meaning of the Home Owners Loan Act of 1933 and the
Rules and Regulations promulgated by the Office of Thrift Supervision (or its
predecessor agency), as in effect on the effective date of this Plan; or (iii)
without limitation shall be deemed to have occurred at such time as (a) any
"person" (as the term is used in Sections 13(d) and 14(d) of the Exchange Act)
is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of securities of the Bank or the Holding
Company representing 25% or more of the Bank's or the
<PAGE> 2
Holding Company's outstanding securities ordinarily having the right to vote at
the election of directors except for any securities of the Bank purchased by
the Holding Company in connection with the conversion of the Bank to the stock
form and any securities purchased by the Bank's employee stock benefit plans;
or (b) individuals who constitute the Board on the date hereof (the "Incumbent
Board"), cease for any reason to constitute at least a majority thereof,
provided that any person becoming a director subsequent to the date hereof
whose election was approved by a vote of at least three-quarters of the
directors comprising the Incumbent Board, or whose nomination for election by
the Holding Company's shareholders was approved by the same Nominating
Committee serving under an Incumbent Board, shall be, for purposes of this
clause (b), considered as though he were a member of the Incumbent Board; or
(c) a plan of reorganization, a merger, consolidation, sale of all or
substantially all the assets of the Bank or the Holding Company or similar
transaction in which the Bank or Holding Company is not the surviving
institution is approved by shareholders and becomes effective; or (d) a proxy
statement soliciting proxies from stockholders of the Holding Company, by
someone other than the current management of the Holding Company, seeking
stockholder approval of a plan of reorganization, merger or consolidation of
the Holding Company or the Bank or similar transaction with one or more
corporations as a result of which the outstanding shares of the class of
securities then subject to such plan or transaction are exchanged for or
converted into cash or Property or securities not issued by the Bank or the
Holding Company shall be distributed and shareholders approve the action
disclosed in the proxy materials.
(e) "Committee" means a committee consisting of two or more
Non-Employee Directors appointed by the Board pursuant to Section 3 hereof.
"Non-Employee Director," as defined in Rule 16b-3 promulgated by the Securities
and Exchange Commission ("SEC") under the Exchange Act, means a director who
(i) is not currently an officer or otherwise employed by the Holding Company or
the Bank, or a parent or other subsidiary of the Holding Company, (ii) does not
receive compensation for consulting services or in any other capacity from the
Holding Company or the Bank in excess of $60,000 in any one year, (iii) does
not possess an interest in and is not engaged in business relationships
required to be reported under Items 404(a) or 404(b) of Regulation S-K
promulgated under the Exchange Act and (iv) is an Outside Director as defined
in Treas. Reg. 1.162-27.
(f) "Common Stock" means the Common Stock of the Holding Company,
par value, $.01 per share.
(g) "Date of Grant" means the date an Award is effective pursuant
to the terms hereof.
2
<PAGE> 3
(h) "Disability" means the permanent and total inability by reason
of mental or physical infirmity, or both, of an Employee to perform the work
customarily assigned to him and the inability of an Outside Director to perform
the services customarily performed by an Outside Director. Additionally, a
medical doctor selected or approved by the Committee must advise the Committee
that it is either not possible to determine when such Disability will terminate
or that it appears probable that such Disability will be permanent during the
remainder of said participant's lifetime.
(i) "Employee" means any person who is currently employed by the
Holding Company or any Affiliate.
(j) "Fair Market Value" means, when used in connection with the
Common Stock on a certain date, the closing price as reported by the National
Association of Securities Dealers Automated Quotation System (as published by
the Wall Street Journal, if published) on such date or if the Common Stock was
not traded on such date, on the next preceding day on which the Common Stock
was traded thereon or the last previous date on which a sale is reported.
(k) "Incentive Stock Option" means an Option granted by the
Committee to a Participant, which Option is designed as an Incentive Stock
Option pursuant to Section 8 of this Plan.
(l) "Non-statutory Stock Option" means an Option granted to a
participant and which is not an Incentive Stock Option.
(m) "Option" means an Award granted under Section 7 or Section 8
of this Plan.
(n) "Outside Director" means a member of the Board of Directors of
the Holding Company or the Bank, not also serving as an Employee of the Holding
Company or any of its Affiliates.
(o) "Participant" means an employee of the Holding Company or its
affiliates chosen by the Committee to participate in the Plan, or an Outside
Director.
(p) "Plan Year(s)" means a calendar year or years commencing on or
after January 1, 1997.
(q) "Termination for Cause" means the termination upon personal
dishonesty, incompetence, willful misconduct, any breach of fiduciary duty
involving personal profit, intentional failure to perform stated duties, or the
willful violation of any law, rule or regulation (other than traffic violations
or similar offenses) or final cease-and-desist order or the material breach of
any provisions of an Employee's employment contract.
3
<PAGE> 4
3. ADMINISTRATION.
The Plan shall be administered by the Committee. The Committee is
authorized, subject to the provisions of the Plan, to establish such rules and
regulations as it sees necessary for the proper administration of the Plan and
to make whatever determinations and interpretations in connection with the Plan
it sees as necessary or advisable with respect to Participants. All
determinations and interpretations made by the Committee shall be binding and
conclusive on such Participants and on their legal representatives and
beneficiaries.
4. TYPES OF AWARDS.
Awards under the Plan may be granted in any one or a combination of:
(a) Non-statutory Stock Options; and
(b) Incentive Stock Options;
as defined in paragraphs 7 and 8 of the Plan.
5. STOCK SUBJECT TO THE PLAN.
Subject to adjustment as provided in Section 14, the maximum number of
shares reserved for purchase pursuant to the exercise of options granted under
the Plan is 220,000 shares of Common Stock of the Holding Company, par value
$.01 per share. Of the total shares of Common Stock available under the Plan,
no more than 50,000 options shall be issued to any Participant in any period of
three (3) calendar years. These shares of Common Stock may be either
authorized but unissued shares or shares previously issued and reacquired by
the Holding Company. To the extent that options are granted under the Plan,
the shares underlying such options will be unavailable for future grants under
the Plan except that, to the extent that options granted under the Plan
terminate, expire or are canceled without having been exercised new Awards may
be made with respect to these shares.
6. ELIGIBILITY.
Officers and other Employees (including Employees who are also
directors of the Holding Company or its Affiliates) shall be eligible to
receive Incentive Stock Options and Non-statutory Stock Options under the Plan.
Outside Directors shall be eligible to receive Non-statutory Stock Options
under the Plan.
4
<PAGE> 5
7. NON-STATUTORY STOCK OPTIONS.
7.1 Grant of Non-statutory Stock Options.
(a) Grants to Employees. The Committee may, from time to time,
grant Non-statutory Stock Options to Employees and, upon such terms and
conditions as the Committee may determine, grant Non-statutory Stock Options in
exchange for and upon surrender of previously granted Awards under this Plan.
(b) Grants to Outside Directors. The Board may, from time to
time, grant Non-statutory Stock Options to Outside Directors and, upon such
terms and conditions as the Board may determine, grant Non-statutory Stock
Options in exchange for and upon surrender of previously granted Awards under
this Plan.
(c) Terms of Non-Statutory Options. Non-statutory Stock Options
granted under this Plan are subject to the following terms and conditions:
(i) Price. The purchase price per share of Common Stock
deliverable upon the exercise of each Non-statutory Stock Option shall be
determined on the date the option is granted. Such purchase price shall be
the Fair Market Value of the Holding Company's Common Stock on the Date of
Grant or such greater amount as determined by the Committee with respect to
Employees or by the Board with respect to Outside Directors. Shares may be
purchased only upon full payment of the purchase price. Payment of the
purchase price may be made, in whole or in part, through the surrender of
shares of the Common Stock of the Holding Company at the Fair Market Value of
such shares on the date of surrender determined in the manner described in
Section 2(j) of the Plan.
(ii) Terms of Options. The term during which each
Non-statutory Stock Option may be exercised shall be 10 years from the Date of
Grant, or such shorter period determined by the Committee with respect to
Employees or by the Board with respect to Outside Directors. The Committee
shall determine with respect to Employees, and the Board shall determine with
respect to Outside Directors the date on which each Non-statutory Stock Option
shall become exercisable and may provide that a Non-statutory Stock Option
shall become exercisable in installments. The shares comprising each
installment may be purchased in whole or in part at any time after such
installment becomes purchasable. The Committee may, in its sole discretion,
accelerate the time at which any Non-statutory Stock Option granted to an
Employee may be exercised in whole or in part. The Board may, in its sole
discretion accelerate the time at which any Non-statutory Stock Option granted
to an Outside Director may be exercised in whole or in part. Notwithstanding
the above, in the event of a Change in Control of the Holding Company, all
Non-statutory Stock Options shall become immediately exercisable.
5
<PAGE> 6
(iii) Termination of Service. Upon the termination of a
Participant's service for any reason other than Disability, death, retirement
or Termination for Cause, the Participant's Non-statutory Stock Options shall
be exercisable only as to those shares which were immediately purchasable by
the Participant at the date of termination and only for a period of three
months following termination. In the event of Termination for Cause, all
rights under the Participant's Non-statutory Stock Options shall expire upon
termination. In the event of the death, retirement or Disability of any
Participant or a Change in Control, all Non-statutory Stock Options held by the
Participant, whether or not exercisable at such time, shall be exercisable by
the Participant or his legal representatives or beneficiaries of the
Participant for one year or such longer period as determined by the Committee
following the date of the Participant's death, or cessation of service due to
Disability or retirement, or following a Change in Control; provided that in no
event shall the period extend beyond the expiration of the Non-statutory Stock
Option term. For purposes of this Section a Participant who has served as both
an Employee and as a member of the Board of Directors shall have terminated
service only when he has terminated service as both an Employee and a director.
8. INCENTIVE STOCK OPTIONS.
8.1 Grant of Incentive Stock Options.
The Committee may, from time to time, grant Incentive Stock Options to
Employees. Incentive Stock Options granted pursuant to the Plan shall be
subject to the following terms and conditions:
(a) Price. The purchase price per share of Common Stock
deliverable upon the exercise of each Incentive Stock Option shall be not less
than 100% of the Fair Market Value of the Holding Company's Common Stock on the
Date of Grant. However, if a Participant owns Common Stock possessing more
than 10% of the total combined voting power of all classes of Common Stock of
the Holding Company (or under Section 425(d) of the Code is deemed to own
Common Stock representing more than 10% of the total combined voting power of
all such classes of Common Stock), the purchase price per share of Common Stock
deliverable upon the exercise of each Incentive Stock Option shall not be less
than 110% of the Fair Market Value of the Holding Company's Common Stock on the
Date of Grant. Payment of the purchase price may be made, in whole or in part,
through the surrender of shares of the Common Stock of the Holding Company at
the Fair Market Value of such shares on the date of surrender determined in the
manner described in Section 2(j).
(b) Amounts of Options. Incentive Stock Options may be granted to
any Employee in such amounts as determined by the Committee. In the case of an
option intended to qualify as an
6
<PAGE> 7
Incentive Stock Option, the aggregate Fair Market Value (determined as of the
time the option is granted) of the Common Stock with respect to which Incentive
Stock Options granted are exercisable for the first time by the Participant
during any calendar year (under all plans of the Participant's employer
corporation and its parent and subsidiary corporations) shall not exceed
$100,000. The provisions of this Section 8.1(b) shall be construed and applied
in accordance with Section 422(d) of the Code and the regulations, if any,
promulgated thereunder. To the extent an award under this Section 8.1 exceeds
this $100,000 limit, the portion of the award in excess of such limit shall be
deemed a Non-statutory Stock Option.
(c) Terms of Options. The term during which each Incentive Stock
Option may be exercised shall be determined by the Committee, but in no event
shall an Incentive Stock Option be exercisable in whole or in part more than 10
years from the Date of Grant. If at the time an Incentive Stock Option is
granted to an Employee, the Employee owns Common Stock representing more than
10% of the total combined voting power of the Holding Company (or, under
Section 425(d) of the Code, is deemed to own Common Stock representing more
than 10% of the total combined voting power of all such classes of Common
Stock) the Incentive Stock Option granted to such Employee shall not be
exercisable after the expiration of five years from the Date of Grant. No
Incentive Stock Option granted under this Plan is transferable except by will
or the laws of descent and distribution and is exercisable in his lifetime only
by the Employee to whom it is granted.
The Committee shall determine the date on which each Incentive Stock
Option shall become exercisable and may provide that an Incentive Stock Option
shall become exercisable in installments. The shares comprising each
installment may be purchased in whole or in part at any time after such
installment becomes purchasable, provided that the amount able to be first
exercised in a given year is consistent with the terms of Section 422 of the
Code. The Committee may, in its sole discretion, accelerate the time at which
any Incentive Stock Option may be exercised in whole or in part, provided that
it is consistent with the terms of Section 422 of the Code. Notwithstanding
the above, in the event of a Change in Control of the Holding Company, all
Incentive Stock Options shall become immediately exercisable.
(d) Termination of Employment. Upon the termination of a
Participant's service for any reason other than Disability, Change in Control,
death, retirement or Termination for Cause, the Incentive Stock Options shall
be exercisable only as to those shares which were immediately purchasable by
the Participant at the date of termination and only for a period of three
months following termination. In the event of Termination for Cause all rights
under the Participant's Incentive Stock Options shall expire upon termination.
7
<PAGE> 8
In the event of death, retirement or Disability of any Employee, all
Incentive Stock Options held by such Participant, whether or not exercisable at
such time, shall be exercisable by the Participant or the Participant's legal
representatives or beneficiaries for one year following the date of the
Participant's death, retirement or cessation of employment due to Disability;
provided, however, that such option shall not be eligible for treatment as an
Incentive Stock Option in the event such option is exercised more than three
months following the date of the Participant's cessation of employment. Upon
termination of the Participant's service due to a Change in Control, all
Incentive Stock Options held by such Participant, whether or not exercisable at
such time, shall be exercisable for a period of one year following the date of
Participant's cessation of employment; provided however, that such option shall
not be eligible for treatment as an Incentive Stock Option in the event such
option is exercised more than three months following the date of the
Participant's cessation of employment. In no event shall the exercise period
extend beyond the expiration of the Incentive Stock Option term. For purposes
of this Section a Participant who has served as both an Employee and as a
member of the Board of Directors shall have terminated service only when he has
terminated service as both an Employee and a director.
(e) Compliance with Code. The options granted under this Section
8 of the Plan are intended to qualify as incentive stock options within the
meaning of Section 422 of the Code, but the Holding Company makes no warranty
as to the qualification of any option as an incentive stock option within the
meaning of Section 422 of the Code.
9. SURRENDER OPTION.
In the event of a Participant's termination of employment (or service
as a Director), the Participant (or the Participant's Personal
representative(s), heir(s), or devisee(s)) may, in a form acceptable to the
Committee make application to surrender all or part of options held by such
Participant in exchange for a cash payment from the Holding Company of an
amount equal to the difference between the Fair Market Value of the Common
Stock on the date of termination and the exercise price per share of the
option on the Date of Grant. Whether the Committee accepts such application or
determines to make payment, in whole or part, is within its absolute and sole
discretion, it being expressly understood that the Committee is under no
obligation to any Participant whatsoever to make such payments. In the event
that the Committee accepts such application and the Holding Company determines
to make payment, such payment shall be in lieu of the exercise of the
underlying option and such option shall cease to be exercisable.
8
<PAGE> 9
10. RIGHTS OF A SHAREHOLDER; LIMITED TRANSFERABILITY.
No Participant shall have any rights as a shareholder with respect to
any shares covered by a Non-statutory and/or Incentive Stock Option until the
date of issuance of a stock certificate for such shares. Nothing in this Plan
or in any Award granted confers on any person any right to continue in the
employ of the Holding Company or its Affiliates or to continue to perform
services for the Holding Company or its Affiliates or interferes in any way
with the right of the Holding Company or its Affiliates to terminate a
Participant's services as an officer or other Employee at any time.
No Incentive Stock Option granted under this Plan is transferable
except by will or the laws of descent and distribution and is exercisable in
his or her lifetime only by the Participant to whom it is granted.
Non-statutory Stock Options granted hereunder may be exercised only
during a Participant's lifetime by the Participant, the Participant's guardian
or legal representative or by a permissible transferee. Non-statutory Stock
Options shall be transferable by Participants pursuant to the laws of descent
and distribution upon a Participant's death, and during a Participant's
lifetime, Non-statutory Stock Options shall be transferable by Participants to
members of their immediate family, trusts for the benefit of members of their
immediate family, and charitable institutions ("permissible transferee") to the
extent permitted under Section 16 of the Exchange Act and subject to federal
and state securities laws. The term "immediate family" shall mean any child,
stepchild, grandchild, parent, stepparent, grandparent, spouse, sibling,
mother-in-law, father-in-law, son-in-law, sister-in-law, or brother-in-law and
shall include adoptive relationships.
The Committee shall have the authority to establish rules and
regulations specifically governing the transfer of stock options granted under
this Plan as it deems necessary and advisable.
11. AGREEMENT WITH GRANTEES.
Each Award of Options will be evidenced by a written agreement,
executed by the Participant and the Holding Company or its Affiliates which
describes the conditions for receiving the Awards including the date of Award,
the purchase price if any, applicable periods, and any other terms and
conditions as may be required by applicable securities law.
12. DESIGNATION OF BENEFICIARY.
A Participant may, with the consent of the Committee, designate a
person or persons to receive, in the event of death,
9
<PAGE> 10
any stock option Award to which the Participant would then be entitled. Such
designation will be made upon forms supplied by and delivered to the Holding
Company and may be revoked in writing. If a Participant fails effectively to
designate a beneficiary, then the Participant's estate will be deemed to be the
beneficiary.
13. DILUTION AND OTHER ADJUSTMENTS.
In the event of any change in the outstanding shares of Common Stock
of the Holding Company by reason of any stock dividend or split,
recapitalization, merger, consolidation, spin-off, reorganization, combination
or exchange of shares, or other similar corporate change, or other increase or
decrease in such shares without receipt or payment of consideration by the
Holding Company, the Committee will make such adjustments to previously granted
Awards, to prevent dilution or enlargement of the rights of the Participant,
including any or all of the following:
(a) adjustments in the aggregate number or kind of shares of
Common Stock which may be awarded under the Plan;
(b) adjustments in the aggregate number or kind of shares of
Common Stock covered by Awards already made under the Plan;
(c) adjustments in the purchase price of outstanding Incentive
and/or Non-statutory Stock Options.
No such adjustments may, however, materially change the value of
benefits available to a Participant under a previously granted Award.
14. WITHHOLDING.
There may be deducted from each distribution of cash and/or Common
Stock under the Plan the amount of tax required by any governmental authority
to be withheld.
15. AMENDMENT OF THE PLAN.
The Board of Directors may at any time, and from time to time, modify
or amend the Plan in any respect; provided however, that Sections 7.1 and 8.1
governing grants shall not be amended more than once every six months other
than to comport with the Code or the Employee Retirement Income Security Act of
1974, as amended, if applicable.
The Board may determine that shareholder approval of any amendment to
this Plan may be advisable for any reason, including but not limited to, for
the purpose of obtaining or retaining any
10
<PAGE> 11
statutory or regulatory benefits under tax, securities or other laws or
satisfying applicable stock exchange listing requirements.
No such termination, modification or amendment may affect the rights
of a Participant under an outstanding Award.
16. EFFECTIVE DATE OF PLAN.
The Plan shall become effective as of the date the Plan is approved by
shareholders at an annual or special meeting of shareholders (the "Effective
Date"). The Plan also shall be presented to shareholders of the Holding
Company for ratification for purposes of: (i) satisfying one of the
requirements of Section 422 of the Code governing the tax treatment for
Incentive Stock Options; and (ii) maintaining listing on the NASDAQ National
Market System.
17. TERMINATION OF THE PLAN.
No Awards under the Plan shall be granted more than ten (10) years
after the Effective Date of the Plan. The Board of Directors has the right to
suspend or terminate the Plan at any time. No termination shall, without the
consent of a Participant, adversely affect such individual's rights under a
previously granted award.
18. APPLICABLE LAW.
The Plan will be administered in accordance with the laws of the State
of Wisconsin to the extent not Preempted by Federal law as now or hereafter in
effect.
11
<PAGE> 12
19. COMPLIANCE WITH SECTION 16.
With respect to persons subject to Section 16 of the Exchange Act,
transactions under this Plan are intended to comply with all applicable
conditions of Rule 16b-3 or its successors under the Exchange Act. To the
extent any provision of the Plan or action by the Committee fails to so comply,
it shall be deemed null and void, to the extent permitted by law and deemed
advisable by the Committee.
12/14/96 /s/ Thomas R. Perz
- - -------------------- ------------------------
Date Adopted (Signature)
Title
1/22/97 /s/ Brian T. Kaye
- - -------------------- ------------------------
Date Approved by Secretary
Stockholders
12
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S UNAUDITED FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED MARCH 31,
1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-START> OCT-01-1996
<PERIOD-END> MAR-31-1997
<CASH> 34,319
<INT-BEARING-DEPOSITS> 46,474
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 616,831
<INVESTMENTS-CARRYING> 72,426
<INVESTMENTS-MARKET> 70,180
<LOANS> 692,944
<ALLOWANCE> 6,122
<TOTAL-ASSETS> 1,578,969
<DEPOSITS> 1,018,677
<SHORT-TERM> 34,509
<LIABILITIES-OTHER> 14,363
<LONG-TERM> 383,568
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0
<COMMON> 0
<OTHER-SE> 127,779
<TOTAL-LIABILITIES-AND-EQUITY> 1,578,969
<INTEREST-LOAN> 26,902
<INTEREST-INVEST> 22,161
<INTEREST-OTHER> 1,462
<INTEREST-TOTAL> 50,525
<INTEREST-DEPOSIT> 21,749
<INTEREST-EXPENSE> 32,196
<INTEREST-INCOME-NET> 18,329
<LOAN-LOSSES> 372
<SECURITIES-GAINS> 627
<EXPENSE-OTHER> 3,850
<INCOME-PRETAX> 7,515
<INCOME-PRE-EXTRAORDINARY> 7,515
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,133
<EPS-PRIMARY> 1.15
<EPS-DILUTED> 1.15
<YIELD-ACTUAL> 2.73
<LOANS-NON> 3,905
<LOANS-PAST> 252
<LOANS-TROUBLED> 0
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<ALLOWANCE-OPEN> 5,217
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</TABLE>
