UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1999
[ ] TRANSACTION REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transaction period from __________ to __________
Commission File Number: 0-22140
FIRST MIDWEST FINANCIAL, INC.
(Exact name of registrant as specified in its charter)
Delaware 42-1406262
-------- ----------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
Fifth at Erie, Storm Lake, Iowa 50588
-------------------------------------
(Address of principal executive offices)
(712) 732-4117
--------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding twelve months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [ X ] No [ ]
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class: Outstanding at March 31, 1999:
- ---------------------------- ------------------------------
Common Stock, $.01 par value 2,529,796 Common Shares
Transitional Small Business Disclosure Format: Yes [ ] No [ X ]
<PAGE>
FIRST MIDWEST FINANCIAL, INC.
FORM 10-Q
INDEX
Part I. Financial Information
Item 1. Financial Statements (unaudited):
Consolidated Balance Sheets
at March 31, 1999 and September 30, 1998
Consolidated Statements of Income for the
Three Months and Six Months Ended March 31,
1999 and 1998
Consolidated Statements of Comprehensive Income
for the Three Months and Six Months Ended
March 31, 1999 and 1998
Consolidated Statement of Changes in Shareholders'
Equity for the Six Months Ended March 31, 1999
Consolidated Statements of Cash Flows for the
Six Months Ended March 31, 1999 and 1998
Notes to Consolidated Financial Statements
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosure About Market Risk
Part II. Other Information
Signatures
<PAGE>
Part I. Financial Information
Item 1. Financial Statements
<TABLE>
<CAPTION>
FIRST MIDWEST FINANCIAL, INC.
AND SUBSIDIARIES
Consolidated Balance Sheets (Unaudited)
March 31, 1999 September 30, 1998
<S> <C> <C>
Assets
Cash and due from banks $ 1,233,660 $ 908,984
Interest-bearing deposits in other financial institutions -
short-term (cost approximates market value) 8,672,842 5,818,460
------------ ------------
Total cash and cash equivalents 9,906,502 6,727,444
Securities available for sale, amortized cost of
$157,793,349 and $119,336,365 157,784,363 120,609,531
Loans receivable - net of allowances of $2,669,024
and $2,908,902 286,573,326 270,286,189
Foreclosed real estate, net 217,840 1,063,317
Accrued interest receivable 3,858,699 4,968,607
Federal Home Loan Bank stock, at cost 7,793,300 5,505,800
Premises and equipment, net 4,015,989 4,048,945
Excess of cost over net assets acquired 4,315,349 4,497,815
Other assets 627,981 672,747
------------- -------------
Total Assets $475,093,349 $418,380,395
============ ============
Liabilities and Shareholders' Equity
Liabilities
Deposits $298,383,183 $283,858,152
Advances from Federal Home Loan Bank 130,699,916 85,263,562
Securities sold under agreements to repurchase 2,067,902 4,074,567
Other borrowings - 550,000
Advances from borrowers for taxes and insurance 430,018 405,218
Accrued interest payable 767,748 834,741
Other liabilities 632,728 1,108,592
---------- -------------
Total Liabilities 432,981,495 376,094,832
----------- ------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FIRST MIDWEST FINANCIAL, INC.
AND SUBSIDIARIES
Consolidated Balance Sheets (Unaudited)
(continued)
March 31, 1999 September 30, 1998
<S> <C> <C>
Shareholders' Equity
Preferred stock, 800,000 shares authorized, no shares
issued or outstanding - -
Common stock, $.01 par value, 5,200,000 shares authorized,
2,957,999 shares issued and 2,529,796 shares
outstanding at March 31, 1999;
2,957,999 shares issued and 2,553,245
shares outstanding at September 30, 1998 29,580 29,580
Additional paid-in capital 21,244,977 21,330,075
Retained earnings - substantially restricted 29,000,795 27,985,814
Accumulated other comprehensive income (loss):
Unrealized gains (losses) on securities available for sale,
net of tax of ($2,797) and $474,346 (6,189) 798,820
Unearned Employee Stock Ownership Plan shares (267,150) (367,200)
Treasury stock, 428,203 and 404,754 common shares, at cost (7,890,159) (7,491,526)
------------- ---------------
Total Shareholders' Equity 42,111,854 42,285,563
------------ ------------
Total Liabilities and Shareholders' Equity $475,093,349 $418,380,395
============ ============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
<TABLE>
<CAPTION>
FIRST MIDWEST FINANCIAL, INC.
AND SUBSIDIARIES
Consolidated Statements of Income (Unaudited)
Three Months Ended Six Months Ended
March 31, March 31,
1999 1998 1999 1998
---------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
Interest and Dividend Income:
Loans receivable .................................. $5,748,647 $5,700,185 $11,780,103 $11,452,017
Securities available for sale ..................... 2,723,478 2,051,050 5,354,114 4,096,475
Dividends on Federal Home Loan Bank stock ......... 113,134 88,546 212,166 186,023
---------- ---------- ----------- -----------
Total interest and dividend income ........... 8,585,259 7,839,781 17,346,383 15,734,515
---------- ---------- ----------- -----------
Interest Expense:
Deposits .......................................... 3,552,305 3,265,793 7,199,726 6,488,588
Other borrowings .................................. 1,920,532 1,356,978 3,615,368 2,846,822
---------- ---------- ----------- -----------
Total interest expense ....................... 5,472,837 4,622,771 10,815,094 9,335,410
---------- ---------- ----------- -----------
Net interest income ................................... 3,112,422 3,217,010 6,531,289 6,399,105
Provision for loan losses ......................... 358,000 1,545,000 601,000 1,580,000
---------- ---------- ----------- -----------
Net interest income after provision for loan losses ... 2,754,422 1,672,010 5,930,289 4,819,105
---------- ---------- ----------- -----------
Non-interest income:
Loan fees and deposit account service charges ..... 335,669 281,097 695,217 609,305
Gain on sales of securities available for sale, net 271,645 108,786 293,756 222,925
Brokerage commissions from subsidiary ............. 16,475 29,817 31,389 44,068
Other ............................................. 22,643 40,679 74,101 73,178
---------- ---------- ----------- -----------
Total non-interest income .................... 646,432 460,379 1,094,463 949,476
---------- ---------- ----------- -----------
Non-interest expense:
Compensation and benefits ......................... 1,254,958 1,146,330 2,481,750 2,305,037
Occupancy and equipment ........................... 292,254 277,406 575,425 564,602
Federal deposit insurance ......................... 39,819 38,523 74,785 74,090
Data processing ................................... 89,140 89,740 187,106 172,750
Other ............................................. 452,643 396,264 916,886 785,835
---------- ---------- ----------- -----------
Total non-interest expense ................... 2,128,814 1,948,263 4,235,952 3,902,314
---------- ---------- ----------- -----------
Income before income taxes ............................ 1,272,040 184,126 2,788,800 1,866,267
Income tax expense ................................ 512,540 137,810 1,120,783 830,896
---------- ---------- ----------- -----------
Net income ............................................ $ 759,500 $ 46,316 $ 1,668,017 $ 1,035,371
========== ========== =========== ===========
Earnings Per Share (see Note 2):
Basic ............................................. $ .31 $ .02 $ .68 $ .40
========== ========== =========== ===========
Diluted ........................................... $ .30 $ .02 $ .66 $ .37
========== ========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
<TABLE>
<CAPTION>
FIRST MIDWEST FINANCIAL, INC.
AND SUBSIDIARIES
Consolidated Statements of Comprehensive Income (Unaudited)
Three Months Ended Six Months Ended
March 31, March 31,
1999 1998 1999 1998
--------- --------- ----------- -----------
<S> <C> <C> <C> <C>
Net income ..................................... $ 759,500 $ 46,316 $ 1,668,017 $ 1,035,371
--------- --------- ----------- -----------
Other comprehensive income (loss):
Change in unrealized gains or losses on
securities available for sale ............. (321,875) (400,295) (1,282,152) (326,563)
Less deferred income tax provision (benefit) (119,802) (148,960) (477,143) (120,155)
--------- --------- ----------- -----------
Net other comprehensive income (loss) ...... (202,073) (251,335) (805,009) (206,408)
--------- --------- ----------- -----------
Comprehensive income (loss) .................... $ 557,427 $(205,019) $ 863,008 $ 828,963
========= ========= =========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
<TABLE>
<CAPTION>
FIRST MIDWEST FINANCIAL, INC.
AND SUBSIDIARIES
Consolidated Statement of Changes in Shareholders' Equity (Unaudited)
For the Six Months Ended March 31, 1999
Unearned
Accumulated Employee
Other Stock
Additional Comprehensive Ownership Total
Common Paid-In Retained Income, Plan Treasury Shareholders'
Stock Capital Earnings Net of Tax Shares Stock Equity
--------- ----------- ----------- --------- --------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at September 30, 1998 $ 29,580 $21,330,075 $27,985,814 $ 798,820 $(367,200) $(7,491,526) $42,285,563
15,000 common shares committed
to be released under the ESOP - 136,928 - - 100,050 - 236,978
Cash dividends declared on
common stock ($0.26 per share) - - (653,036) - - - (653,036)
Purchase of 46,500 common
shares of treasury stock - - - - - (790,500) (790,500)
Issuance of 23,051 common
shares from treasury stock due
to exercise of stock options - (222,026) - - - 391,867 169,841
Change in unrealized gain on
securities available for sale,
net of income tax of ($477,143) - - - (805,009) - - (805,009)
Net income for the six months
ended March 31, 1999 - - 1,668,017 - - - 1,668,017
--------- ----------- ----------- --------- --------- ----------- -----------
Balance at March 31, 1999 $ 29,580 $21,244,977 $29,000,795 $ (6,189) $(267,150) $(7,890,159) $42,111,854
========= =========== =========== ========= ========= =========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
<TABLE>
<CAPTION>
FIRST MIDWEST FINANCIAL, INC.
AND SUBSIDIARIES
Consolidated Statements of Cash Flows (Unaudited)
Six Months Ended March 31,
1999 1998
------------- ------------
<S> <C> <C>
Cash flows from operating activities:
Net income ................................................................. $ 1,668,017 $ 1,035,371
Adjustments to reconcile net income to net cash from operating activities:
Depreciation, amortization and accretion, net ............................ 727,714 652,563
Provision for loan losses ................................................ 601,000 1,580,000
Gain on sales of securities available for sale, net ...................... (293,755) (222,925)
Loss on sales of real estate owned, net .................................. (1,750) 11,093
Proceeds from sales of loans held for sale ............................... 1,000,000 2,341,180
Originations of loans held for sale ...................................... (1,000,000) (2,341,180)
Net change in accrued interest receivable ................................ 1,109,908 1,069,715
Net change in other assets ............................................... 44,766 337,680
Net change in accrued interest payable ................................... (66,993) (168,933)
Net change in accrued expenses and other liabilities ..................... 1,304 481,288
------------- ------------
Net cash from operating activities ............................... 3,790,211 4,775,852
------------- ------------
Cash flows from investing activities:
Purchase of securities available for sale .................................. (19,308,844) (21,463,483)
Purchase of mortgage-backed securities available for sale .................. (61,618,382) (30,260,583)
Purchase of Federal Home Loan Bank stock ................................... (2,287,500) (6,200)
Proceeds from sales of securities available for sale ....................... 23,166,846 6,788,526
Proceeds from maturities of securities available for sale .................. 10,200,000 31,500,000
Proceeds from principal repayment of mortgage-backed securities ............ 9,229,127 6,526,071
Net change in loans receivable ............................................. 13,009,040 18,085,991
Loans purchased ............................................................ (30,111,614) (13,783,790)
Proceeds from sales of foreclosed real estate .............................. 1,102,001 162,028
Purchase of premises and equipment, net .................................... (147,653) (119,611)
------------- ------------
Net cash from investing activities ............................... (56,766,979) (2,571,051)
------------- ------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FIRST MIDWEST FINANCIAL, INC.
AND SUBSIDIARIES
Consolidated Statements of Cash Flows (Unaudited)
(continued)
Six Months Ended March 31,
1999 1998
------------- ------------
<S> <C> <C>
Cash flows from financing activities:
Net change in non-interest bearing demand, savings,
NOW and money market demand accounts ...................................... 3,043,296 6,166,800
Net change in other time deposits .......................................... 11,481,735 11,801,789
Proceeds from advances from Federal Home Loan Bank ......................... 206,600,000 56,100,000
Payments of advances from Federal Home Loan Bank ........................... (161,163,646) (70,956,182)
Net change in securities sold under agreements to repurchase ............... (2,006,665) 1,168,334
Net change in other borrowings ............................................. (550,000) (2,900,000)
Net change in advances from borrowers for taxes and insurance .............. 24,800 36,673
Cash dividends paid ........................................................ (653,036) (642,824)
Proceeds from exercise of stock options .................................... 169,842 28,695
Purchase of treasury stock ................................................. (790,500) (1,320,325)
------------- ------------
Net cash from financing activities ............................... 56,155,826 (517,040)
------------- ------------
Net change in cash and cash equivalents ........................................ 3,179,058 1,687,761
Cash and cash equivalents at beginning of period ............................... 6,727,444 12,852,426
------------- ------------
Cash and cash equivalents at end of period ..................................... $ 9,906,502 $ 14,540,187
============= ============
Supplemental disclosure of non-cash investing and
financing activities:
Loans transferred to foreclosed real estate ................................ $ 254,774 $ 1,571,930
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
FIRST MIDWEST FINANCIAL, INC.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accounting policies followed by First Midwest Financial, Inc.
("First Midwest" or the "Company") and its consolidated subsidiaries,
First Federal Savings Bank of the Midwest ("First Federal"), Security
State Bank ("Security"), First Services Financial Limited and Brookings
Service Corporation, for interim reporting are consistent with the
accounting policies followed for annual financial reporting. All
adjustments that, in the opinion of management, are necessary for a
fair presentation of the results for the periods reported have been
included in the accompanying unaudited consolidated financial
statements, and all such adjustments are of a normal recurring nature.
The accompanying financial statements do not purport to contain all the
necessary financial disclosures required by generally accepted
accounting principles that might otherwise be necessary in the
circumstances and should be read in conjunction with the Company's
consolidated financial statements, and notes thereto, for the year
ended September 30, 1998.
Comprehensive Income: Comprehensive income consists of net income and
other comprehensive income. Other comprehensive income includes the net
change in unrealized appreciation (depreciation) on securities
available for sale, net of tax, which is also recognized as a separate
component of shareholders' equity. The accounting standard that
requires reporting of comprehensive income first applied for the
quarter ended December 31, 1998, with prior information restated to be
comparable.
2. EARNINGS PER SHARE
Basic earnings per share is based on net income divided by the weighted
average number of shares outstanding during the period. Diluted
earnings per share shows the dilutive effect of additional common
shares issuable under stock options.
A reconciliation of the numerators and denominators of the basic
earnings per common share and earnings per common share assuming
dilution computations for the three months and six months ended March
31, 1999 and 1998 is presented below.
<PAGE>
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
March 31, March 31,
---------------------------- ----------------------------
1999 1998 1999 1998
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Basic Earnings Per Common Share:
Numerator:
Net Income .......................... $ 759,500 $ 46,316 $ 1,668,017 $ 1,035,371
=========== =========== =========== ===========
Denominator:
Weighted average common
shares outstanding .............. 2,519,436 2,664,178 2,516,048 2,679,856
Less: Weighted average
unallocated ESOP shares ......... (45,080) (75,080) (48,871) (78,872)
----------- ----------- ----------- -----------
Weighted average common shares
outstanding for basic earnings
per share ....................... 2,474,356 2,589,098 2,467,177 2,600,984
=========== =========== =========== ===========
Basic earnings per common share ..... $ 0.31 $ 0.02 $ 0.68 $ 0.40
=========== =========== =========== ===========
Diluted Earnings Per Common Share:
Numerator:
Net Income .......................... $ 759,500 $ 46,316 $ 1,668,017 $ 1,035,371
=========== =========== =========== ===========
Denominator:
Weighted average common
shares outstanding for basic
earnings per common share ....... 2,474,356 2,589,098 2,467,177 2,600,984
Add: Dilutive effects of assumed
exercises of stock options ...... 75,889 173,534 78,782 167,425
----------- ----------- ----------- -----------
Weighted average common and
dilutive potential common
shares outstanding .............. 2,550,245 2,762,632 2,545,959 2,768,409
=========== =========== =========== ===========
Diluted earnings per common share $ 0.30 $ 0.02 $ 0.66 $ 0.37
=========== =========== =========== ===========
</TABLE>
3. COMMITMENTS
At March 31, 1999 and September 30, 1998, the Company had outstanding
commitments to originate and purchase loans totaling $21.2 million and
$27.4 million, respectively, excluding undisbursed portions of loans in
process. It is expected that outstanding loan commitments will be
funded with existing liquid assets.
<PAGE>
Part I. Financial Information
Item 2. Management's Discussion and Analysis of Financial Condition and Results
FIRST MIDWEST FINANCIAL, INC.
AND SUBSIDIARIES
GENERAL
First Midwest Financial, Inc. ("First Midwest" or the "Company") is a bank
holding company whose primary assets are First Federal Savings Bank of the
Midwest ("First Federal") and Security State Bank ("Security"). The Company was
incorporated in 1993 as a unitary non-diversified savings and loan holding
company and, on September 20, 1993, acquired all of the capital stock of First
Federal in connection with First Federal's conversion from mutual to stock form
of ownership. On September 30, 1996, the Company became a bank holding company
in conjunction with the acquisition of Security.
The following discussion focuses on the consolidated financial condition of the
Company and its subsidiaries, at March 31, 1999, compared to September 30, 1998,
and the consolidated results of operations for the three months and six months
ended March 31, 1999, compared to the same periods in 1998. This discussion
should be read in conjunction with the Company's consolidated financial
statements, and notes thereto, for the year ended September 30, 1998.
FINANCIAL CONDITION
Total assets increased by $56.7 million, or 13.6%, from $418.4 million at
September 30, 1998, to $475.1 million at March 31, 1999. The increase was
attributable to an increase in the Company's net loans receivable and securities
available for sale, which was funded through internal growth of the deposit
portfolio and through Federal Home Loan Bank advances.
Cash and cash equivalents increased $3.2 million, or 47.8%, to $9.9 million at
March 31, 1999, from $6.7 million at September 30, 1998. The increase was due to
the accumulation of liquid funds from repayments of loans receivable and
internal growth in deposits during the period.
The portfolio of securities available for sale increased $37.2 million, or
30.8%, to $157.8 million at March 31, 1999, from $120.6 million at September 30,
1998. The increase was the result of securities purchased during the period in
an amount greater than sales, maturities and principal repayments received on
securities. Securities purchased during the period consist primarily of
fixed-rate mortgage-backed securities, and were funded by advances from the
Federal Home Loan Bank of Des Moines and through internal deposit growth.
The portfolio of net loans receivable increased by $16.3 million, or 6.0%, to
$286.6 million at March 31, 1999, from $270.3 million at September 30, 1998. The
increase was due to increases in residential mortgage loans, commercial and
multi-family real estate loans, and commercial business loans in the amounts of
$24.4 million, $3.5 million, and $442,000, respectively. The increase in
residential mortgage loans was due primarily to the purchase of adjustable-rate
loans totaling $25.5 million during the period. The increase in net loans
receivable was partially offset by decreases in consumer loans and agricultural
loans in the amounts of $3.9 million and $8.4 million, respectively. The
decrease in consumer loans was primarily due to prepayments as a result of the
relatively low interest rate environment. The reduction in agricultural loans
was primarily due to seasonal repayment of loans used in agricultural
operations.
<PAGE>
Deposit balances increased by $14.5 million, or 5.1%, to $298.4 million at March
31, 1999, from $283.9 million at September 30, 1998. The increase in deposit
balances resulted from increases in checking accounts, money market accounts and
certificates of deposit, which increased by $2.8 million, $12.1 million and $1.1
million, respectively. This increase resulted from the Company's emphasis on
promoting transaction accounts that generally carry a lower interest cost. The
increase was partially offset by a decrease in savings accounts in the amount of
$1.5 million.
The balance in advances from the Federal Home Loan Bank of Des Moines (FHLB)
increased by $45.4 million, or 53.2%, to $130.7 million at March 31, 1999 from
$85.3 million at September 30, 1998. The increase in FHLB advances was used to
fund the purchase of residential mortgage loans and available for sale
securities.
Other borrowings, consisting of short-term borrowings from the Federal Reserve
Bank, were reduced to zero at March 31, 1999 from $550,000 at September 30,
1998. The reduction was due to repayment of these short-term borrowings used
primarily to fund seasonal loans to agricultural customers.
Total shareholders' equity decreased $174,000, or 0.4%, to $42.1 million at
March 31, 1999 from $42.3 million at September 30, 1998. The decrease in
shareholders' equity was due to the purchase of treasury stock, the payment of
cash dividends to shareholders, and the reduction of unrealized gains on
securities available for sale in an aggregate amount that exceeded net earnings
during the period.
NON-PERFORMING ASSETS AND ALLOWANCE FOR LOAN LOSSES
Generally, when a loan becomes delinquent 90 days or more, or when the
collection of principal or interest becomes doubtful, the Company will place the
loan on non-accrual status and, as a result of this action, previously accrued
interest income on the loan is taken out of current income. The loan will remain
on non-accrual status until the loan has been brought current, or until other
circumstances occur that provide adequate assurance of full repayment of
interest and principal.
<PAGE>
The following table sets forth the Company's loan delinquencies by type, before
allowance for loan losses, by amount and by percentage of type at March 31,
1999. At March 31, 1999, loans delinquent 30 days and over totaled 4.7% of total
loans as compared to 6.2% at September 30, 1998.
<TABLE>
<CAPTION>
Loans Delinquent For:
30-59 Days 60-89 Days 90 Days and Over
---------------------------- --------------------------- ----------------------------
Percent Percent Percent
of of of
Number Amount Category Number Amount Category Number Amount Category
------ ------ -------- ------ ------ -------- ------ ------ --------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Real Estate:
One-to-four family ........ 27 $1,323 1.18% 21 $ 755 0.67% 17 $ 766 0.68%
Commercial and multi-family 5 2,671 2.67 0 0 0.00 3 1,402 1.39
Agricultural real estate .. 10 1,122 11.19 2 36 0.36 0 0 0.00
Consumer .................... 58 399 1.79 14 92 0.41 35 176 0.79
Agricultural operating ...... 44 3,090 10.52 15 408 1.39 33 660 2.25
Commercial business ......... 7 87 0.38 2 49 0.22 10 816 3.70
--- ------ -- ------ -- ------
Total ................... 151 $8,692 2.93% 54 $1,340 0.45% 98 $3,820 1.29%
=== ====== == ====== == ======
</TABLE>
At March 31, 1999, commercial and multi-family real estate loans delinquent 30
days and over totaled $4.1 million, or 1.4% of the total loan portfolio as
compared to $9.3 million, or 3.3% of total loans at September 30, 1998.
Multi-family and commercial real estate loans generally present a higher level
of risk than loans secured by one- to four-family residences. This greater risk
is due to several factors, including the concentration of principal in a limited
number of loans and borrowers, the effect of general economic conditions on
income producing properties and the increased difficulty of evaluating and
monitoring these types of loans. The majority of the Company's delinquent
commercial and multi-family real estate loans have been purchased as
participations with other lenders, are serviced by other lenders and are secured
by properties outside the Company's primary market area. These loans are being
closely monitored by management, however, there can be no assurance that all
loans will be fully collectible.
At March 31, 1999, agricultural operating loans delinquent 30 days and over
totaled $4.2 million, or 1.4% of the total loan portfolio as compared to $3.2
million, or 1.1% of total loans at September 30, 1998. A substantial number of
the Company's agricultural operating loans come up for renewal on an annual
basis during the quarter ending March 31. These loans are reviewed in detail to
determine the appropriate level of continued financing to be provided based on
the borrower's current situation. In several instances, loans became past due
prior to the review process being completed. This is reflected in the increased
level of deliquencies at March 31, 1999. The majority of these loans have since
been renewed and are no longer delinquent.
<PAGE>
Agricultural lending involves a greater degree of risk than one- to four-family
residential mortgage loans because of the typically larger loan amounts. In
addition, payments on loans are dependent on the successful operation or
management of the farm property securing the loan or for which an operating loan
is utilized. The success of the loan may also be affected by factors outside the
control of the agricultural borrower, such as the weather and grain and
livestock prices. Although management believes the Company's portfolio of
agricultural real estate and operating loans is well structured and adequately
secured, there can be no assurance that all loans will be fully collectible.
The table below sets forth the amounts and categories of non-performing assets
in the Company's loan portfolio. Foreclosed assets include assets acquired in
settlement of loans.
<TABLE>
<CAPTION>
March 31, 1999 September 30, 1998
-------------- ------------------
(Dollars in Thousands)
<S> <C> <C>
Non-accruing loans:
One-to four family .......................... $ 766 $ 298
Commercial and multi-family ................. 1,402 777
Consumer .................................... 174 142
Agricultural operating ...................... 660 1,738
Commercial business ......................... 816 209
------ ------
Total non-accruing loans .................. 3,818 3,164
Accruing loans delinquent 90 days or more ........ 2 3,905
------ ------
Total non-performing loans ................ 3,820 7,069
------ ------
Foreclosed assets:
One- to four family ......................... 158 19
Commercial real estate ...................... -- 1,324
Consumer .................................... 60 19
------ ------
Total ..................................... 218 1,362
Less: Allowance for losses .................. -- 299
------ ------
Total ..................................... 218 1,063
------ ------
Total non-performing assets ...................... $4,038 $8,132
====== ======
Total as a percentage of total assets ............ 0.85% 1.94%
====== ======
</TABLE>
For the three months ended March 31, 1999, gross interest income which would
have been recorded had the non-accruing loans been current in accordance with
their original terms amounted to approximately $99,000, of which none was
included in interest income.
<PAGE>
Other Loans of Concern. At March 31, 1999, there were loans totaling $3.1
million not included in the table above where known information about possible
credit problems of borrowers caused management to have concern as to the ability
of the borrower to comply with the present loan repayment terms. This amount
consisted of six one- to four-family residential real estate loans totaling
$200,000, two commercial real estate loans totaling $320,000, seven commercial
business loans totaling $334,000, eight consumer loans totaling $64,000, and
thirty agricultural loans totaling $2.2 million. At September 30, 1998, other
loans of concern totaled $3.9 million.
Classified Assets. Federal regulations provide for the classification of loans
and other assets as "substandard", "doubtful" or "loss", based on the level of
weakness determined to be inherent in the collection of the principal and
interest. When loans are classified as either substandard or doubtful, the
Company may establish general allowances for loan losses in an amount deemed
prudent by management. General allowances represent loss allowances which have
been established to recognize the inherent risk associated with lending
activities, but which, unlike specific allowances, have not been allocated to
particular problem loans. When assets are classified as loss, the Company is
required either to establish a specific allowance for loan losses equal to 100%
of that portion of the loan so classified, or to charge-off such amount. The
Company's determination as to the classification of its loans and the amount of
its valuation allowances are subject to review by its regulatory authorities,
who may require the establishment of additional general or specific loss
allowances.
On the basis of management's review of its loans and other assets, at March 31,
1999, the Company had classified a total of $5.6 million of its assets as
substandard, $540,000 as doubtful and none as loss as compared to
classifications at September 30, 1998 of $6.4 million substandard, $835,000
doubtful and none as loss.
Allowance for Loan Losses. The Company establishes its provision for possible
loan losses, and evaluates the adequacy of its allowance for loan losses based
upon a systematic methodology consisting of a number of factors including, among
others, historic loss experience, the overall level of non-performing loans, the
composition of its loan portfolio and the general economic environment within
which the Bank and its borrowers operate.
Current economic conditions in the agricultural sector of the Company's market
area indicate potential weakness due to historically low commodity prices. Price
levels for grain crops and livestock have generally been depressed since
mid-1998. Livestock prices have recovered to some extent, but are still
relatively low. Grain crop prices remain at historically low levels and are not
expected to increase significantly in the near term. The agricultural economy is
accustomed to commodity price fluctuations and is generally able to handle such
fluctuations without significant problem. Although the Company underwrites its
agricultural loans based on the current level of commodity prices, an extended
period of low commodity prices could result in weakness in the agricultural loan
portfolio that could create a need for the Company to increase its allowance for
loan losses through increased charges to provision for loan losses.
At March 31, 1999, the Company has established an allowance for loan losses
totaling $2.7 million. The allowance represents approximately 70% of the total
non-performing loans at March 31, 1999.
<PAGE>
The following table sets forth an analysis of the activity in the Company's
allowance for loan losses:
<TABLE>
<CAPTION>
(In Thousands)
<S> <C>
Balance, September 30, 1998 $ 2,909
Charge-offs (855)
Recoveries 14
Additions charged to operations 601
-------
Balance, March 31, 1999 $ 2,669
=======
</TABLE>
Based on currently available information, management believes that the allowance
for loan losses is adequate to absorb potential losses in the portfolio. Future
additions to the allowance for loan losses may become necessary based upon
changing economic conditions, increased loan balances or changes in the
underlying collateral of the loan portfolio.
RESULTS OF OPERATIONS
General. For the three months ended March 31, 1999, the Company recorded net
income of $760,000 compared to net income of $46,000 for the same period in
1998. For the six months ended March 31, 1999, net income was $1,668,000
compared to $1,035,000 for the same period in 1998. The increase in net income
for both periods reflects an additional charge to provision for loan losses
during the 1998 periods in the amount of $1,500,000, or $940,000 net of income
taxes, related to management's determination to increase the allowance for loan
losses as a result of mismanagement and possible fraud by one loan officer who
is no longer with the Company.
Interest and Dividend Income. Total interest and dividend income for the three
months ended March 31, 1999 increased by $745,000, or 9.5%, to $8,585,000,
compared to $7,840,000 during the same period in 1998. For the six months ended
March 31, 1999, interest and dividend income increased $1,611,000, or 10.2%, to
$17,346,000 from $15,735,000 during 1998. The increase for both periods was due
to higher balances in interest earning assets during the 1999 periods compared
to the previous year as a result of increased purchases of securities available
for sale and the increased origination and purchase of loans.
Interest Expense. Total interest expense for the three months ended March 31,
1999 increased by $850,000, or 18.4%, to $5,473,000 from $4,623,000 during the
same period in 1998. For the six months ended March 31, 1999, interest expense
increased $1,480,000, or 15.9%, to $10,815,000 from $9,335,000 for the same
period in 1998. The increase in interest expense for both periods reflects a
higher average balance in deposit accounts during the 1999 periods due to
internal growth of the deposit portfolio. In addition, the increase reflects
increased balances in Federal Home Loan Bank advances used to fund the purchase
of securities available for sale and the origination and purchase of loans.
<PAGE>
Net Interest Income. Net interest income decreased by $105,000, or 3.3%, to
$3,112,000 for the three months ended March 31, 1999 from $3,217,000 for the
same period in 1998. For the six months ended March 31, 1999, net interest
income increased $132,000, or 2.1%, to $6,531,000 from $6,399,000 for the same
period in 1998. The decrease in net interest income for the three month period
reflects the general reduction of the interest rate spread between
interest-earning assets and interest-bearing liabilities due to the historically
low interest rate environment. As borrowers have taken the opportunity to
refinance higher yielding loans, these loans have been replaced at relatively
lower interest rates thus reducing the Company's overall yield on its loan
portfolio. As interest-bearing liabilities continue to reprice in the lower
interest rate environment, the Company's cost of funds is also declining. The
reduction in cost of funds, however, has not occurred at the same pace as the
reduction in the yield on assets. The increase in net interest income for the
six month period is due to the overall increase in net earning assets between
the comparable periods, which was partially offset by the reduction in the
spread between interest-earning assets and interest-bearing liabilities.
Provision for Loan Losses. For the three month and six month periods ended March
31, 1999, the provision for loan losses was $358,000 and $601,000, respectively.
For the comparable periods in 1998, the provision for loan losses was $1,545,000
and $1,580,000, respectively. The decrease reflects an additional charge to
provision for loan losses taken during the 1998 periods as a result of an
increase in the level of classified assets and the related determination by
management that the allowance for loan losses should be increased.
Non-Interest Income. Non-interest income increased by $186,000, or 40.4%, to
$646,000 for the three months ended March 31, 1999, from $460,000 for the same
period in 1998. For the six months ended March 31, 1999, non-interest income
increased $145,000, or 15.3%, to $1,094,000 from $949,000 for the same period in
1998. The increase in non-interest income for both periods reflects the higher
collection of fees from the origination, purchase and prepayment of loans,
service charges on deposit accounts, and the gain on sales of securities
available for sale.
Non-Interest Expense. Non-interest expense increased $181,000, or 9.3%, to
$2,129,000 for the three months ended March 31, 1999, from $1,948,000 for the
same period in 1998. For the six months ended March 31, 1999, non-interest
expense increased $334,000, or 8.6%, to $4,236,000 from $3,902,000 for the same
period in 1998. The increase in non-interest expense for both periods is due
primarily to recruitment, compensation, and benefits expenses related to
additions to the Company's staff of officers and employees. The additions to
staff reflect the Company's previous growth and enhances the level of expertise
available to support continued growth in the future.
Income Tax Expense. Income tax expense was $513,000 for the three months ended
March 31, 1999 as compared to $138,000 for the same period in 1998. For the six
months ended March 31, 1999, income tax expense was $1,121,000 as compared to
$831,000 in 1998. The increase for both periods is due to higher levels of
taxable income between the comparable periods.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary sources of funds are deposits, borrowings, principal and
interest payments on loans, investments and mortgage-backed securities, and
funds provided by operations. While scheduled payments on loans, mortgage-backed
securities and short-term investments are relatively predictable sources of
funds, deposit flows and early loan repayments are greatly influenced by general
interest rates, economic conditions and competition.
<PAGE>
Federal regulations require First Federal to maintain minimum levels of liquid
assets. Currently, First Federal is required to maintain liquid assets of at
least 4% of the average daily balance of net withdrawable savings deposits and
borrowings payable on demand in one year or less during the preceding calendar
quarter. Liquid assets for purposes of this ratio include cash, certain time
deposits, U.S. Government, government agency and corporate securities and
obligations, unless otherwise pledged. First Federal has historically maintained
its liquidity ratio at levels in excess of those required. First Federal's
regulatory liquidity ratios at March 31, 1999 and September 30, 1998, were 21.0%
and 15.4%, respectively.
The Company uses its capital resources principally to meet ongoing commitments
to fund maturing certificates of deposits and loan commitments, to maintain
liquidity, and to meet operating expenses. At March 31, 1999, the Company had
commitments to originate and purchase loans totalling $21.2 million. The Company
believes that loan repayment and other sources of funds will be adequate to meet
its foreseeable short- and long-term liquidity needs.
Regulations require First Federal to maintain minimum amounts and ratios of
tangible capital and leverage capital to average assets, and risk-based capital
to risk-weighted assets. The following table sets forth First Federal's actual
capital and required capital amounts and ratios at March 31, 1999 which, at that
date, exceeded the capital adequacy requirements:
<TABLE>
<CAPTION>
Minimum
Requirement
Minimum To Be Well
Requirement Capitalized Under
For Capital Prompt Corrective
Actual Adequacy Purposes Action Provisions
-------------------- --------------------- ---------------------
Amount % Amount % Amount %
------- ---- ------- --- ------- ----
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>
Total Capital (to risk
weighted assets) $33,925 12.7% $21,341 8.0% $26,676 10.0%
Tier 1 (Core) Capital (to
risk weighted assets) $31,588 11.8% $10,670 4.0% $16,005 6.0%
Tier 1 (Core) Capital (to
adjusted total assets) $31,588 7.3% $12,986 3.0% N/A N/A
Tangible Capital (to
adjusted total assets) $31,588 7.3% $ 6,493 1.5% N/A N/A
Tier 1 (Core) Capital
(to average assets) $31,588 7.2% $17,670 4.0% $22,087 5.0%
</TABLE>
Regulations require Security to maintain minimum amounts and ratios of total
risk-based capital and Tier 1 capital to risk-weighted assets and a leverage
ratio consisting of Tier 1 capital to average assets. The following table sets
forth Security's actual capital and required capital amounts and ratios at March
31, 1999 which, at that date, exceeded the capital adequacy requirements:
<PAGE>
<TABLE>
<CAPTION>
Minimum
Requirement
Minimum To Be Well
Requirement Capitalized Under
For Capital Prompt Corrective
Actual Adequacy Purposes Action Provisions
-------------------- --------------------- ---------------------
Amount % Amount % Amount %
------- ---- ------- --- ------- ----
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>
Total Capital (to risk
weighted assets) $3,855 16.2% $1,904 8.0% $2,380 10.0%
Tier 1 Capital (to risk
weighted assets) $3,735 15.7% $ 952 4.0% $1,428 6.0%
Tier 1 Capital
(to average assets) $3,735 9.3% $1,599 4.0% $1,999 5.0%
</TABLE>
The Federal Deposit Insurance Corporation Improvement Act of 1991 (FDICIA)
established five regulatory capital categories and authorized the banking
regulators to take prompt corrective action with respect to institutions in an
undercapitalized category. At March 31, 1999, First Federal and Security
exceeded minimum requirements for the well-capitalized category.
The Year 2000 Issue
The Company is aware of the issues associated with the programming code in
existing computer systems as the year 2000 approaches. The issue is whether
computer systems will properly recognize date sensitive information when the
year changes to 2000. Systems that do not properly recognize such information
could generate erroneous data or cause a system to fail. The Company is heavily
dependent on computer processing in its business activities and the Year 2000
issue creates risk for the Company from unforeseen problems in the Company's
computer system and from third parties whom the Company uses to process
information. Such failures of the Company's computer system and/or third parties
computer systems could have a material impact on the Company's ability to
conduct its business.
The Company's primary data processing is provided by a major third party vendor.
This provider has advised the Company that it has completed the renovation of
its system to be Year 2000 ready, and has provided users of the system the
opportunity to test the system for readiness. The Company has completed testing
of its primary data processing system for Year 2000 readiness.
The Company has performed an assessment of its internal computer hardware and
software and, where needed, has upgraded those systems to be Year 2000 ready. In
addition, the Company has reviewed other external third party vendors that
provide services to the Company (i.e. utility companies, electronic funds
transfer providers, alarm companies, insurance providers, loan participation
companies, and mortgage loan secondary market agencies), and has requested or
already received certification letters from these vendors that their systems
will be Year 2000 ready on a timely basis. Testing has been, or will be,
performed with these service providers, where possible, to determine their Year
2000 readiness.
<PAGE>
The Company could incur losses if loan payments are delayed due to Year 2000
problems affecting significant borrowers. The Company is communicating with such
parties to assess their progress in evaluating and implementing any corrective
measures required by them to be Year 2000 ready. To date, the Company has not
been advised by such parties that they do not have plans in place to address and
correct the issues associated with the Year 2000 problem; however, no assurance
can be given as to the adequacy of such plans or to the timeliness of their
implementation. As part of the current credit approval process, new and renewed
loans are evaluated as to the borrower's Year 2000 readiness.
Based on the Company's review of its computer systems, management believes the
direct cost of the remediation effort to make its systems Year 2000 ready will
be approximately $60,000, of which approximately $40,000 has been spent. Such
costs will be charged to expense as they are incurred.
The Company, as with all financial institutions, has reviewed the possibility of
some level of reduction in deposits during the latter part of 1999. Based on its
review, the Company has determined that alternate sources of funds should be
available to maintain adequate funding throughout this period.
The Company has developed a Year 2000 contingency plan that addresses, among
other issues, critical operations and potential failures thereof, and strategies
for business continuation. Virtually all of the Company's mission critical
systems are dependent upon third party vendors or service providers, therefore,
contingency plans include the selection of a new vendor or service provider and
the conversion to a new system. For some systems, contingency plans consist of
using internal spreadsheet software or reverting to manual systems until system
problems can be corrected.
Although management believes the Company's computer systems and service
providers will be Year 2000 ready, there can be no assurance that these systems,
or those systems of other companies on which the Company's systems rely, will be
fully functional in the Year 2000. Such failure could have a significant adverse
impact on the financial condition and results of operations of the Company.
<PAGE>
Part I. Financial Information
Item 3. Quantitative and Qualitative Disclosure About Market Risk
Market Risk
The Company is exposed to the impact of interest rate changes and changes in the
market value of its investments.
The Company currently focuses lending efforts toward originating and purchasing
competitively priced adjustable-rate loan products and fixed-rate loan products
with relatively short terms to maturity. This allows the Company to maintain a
portfolio of loans which will be sensitive to changes in the level of interest
rates while providing a reasonable spread to the cost of liabilities used to
fund the loans.
The Company's primary objective for its investment portfolio is to provide the
liquidity necessary to meet loan funding needs. This portfolio is used in the
ongoing management of changes to the Company's asset/liability mix, while
contributing to profitability through earnings flow. The investment policy
generally calls for funds to be invested among various categories of security
types and maturities based upon the Company's need for liquidity, desire to
achieve a proper balance between minimizing risk while maximizing yield, the
need to provide collateral for borrowings, and to fulfill the Company's
asset/liability management goals.
The Company's cost of funds responds to changes in interest rates due to the
relatively short-term nature of its deposit portfolio. Consequently, the results
of operations are generally influenced by the levels of short-term interest
rates. The Company offers a range of maturities on its deposit products at
competitive rates and monitors the maturities on an ongoing basis.
The Company emphasizes and promotes its savings, money market, demand and NOW
accounts and, subject to market conditions, certificates of deposit with
maturities of six months through five years, principally from its primary market
area. The savings and NOW accounts tend to be less susceptible to rapid changes
in interest rates.
In managing its asset/liability mix, the Company, at times, depending on the
relationship between long- and short-term interest rates, market conditions and
consumer preference, may place somewhat greater emphasis on maximizing its net
interest margin than on strictly matching the interest rate sensitivity of its
assets and liabilities. Management believes that the increased net income which
may result from an acceptable mismatch in the actual maturity or repricing of
its asset and liability portfolios can, during periods of declining or stable
interest rates, provide sufficient returns to justify the increased exposure to
sudden and unexpected increases in interest rates which may result from such a
mismatch. The Company has established limits, which may change from time to
time, on the level of acceptable interest rate risk. There can be no assurance,
however, that in the event of an adverse change in interest rates the Company's
efforts to limit interest rate risk will be successful.
<PAGE>
Net Portfolio Value The Company uses a Net Portfolio Value ("NPV") approach to
the quantification of interest rate risk. This approach calculates the
difference between the present value of expected cash flows from assets and the
present value of expected cash flows from liabilities, as well as cash flows
from off-balance sheet contracts. Management of the Company's assets and
liabilities is performed within the context of the marketplace, but also within
limits established by the Board of Directors on the amount of change in NPV
which is acceptable given certain interest rate changes.
Presented below, as of March 31, 1999, is an analysis of the Company's interest
rate risk as measured by changes in NPV for an instantaneous and sustained
parallel shift in the yield curve, in 100 basis point increments, up and down
200 basis points. As illustrated in the table, the Company's NPV is more
sensitive to declining rate changes than rising rates. This occurs primarily
because, as rates decline, the market value of the Company's longer-term
fixed-rate borrowings decline. In a rising rate environment, these longer-term
fixed-rate borrowings increase in market value and substantially offset the
decline in market value of fixed-rate loans, which decline in value due both to
the rate increase and the related slowing of prepayments. When rates decline,
the Company does not experience a significant rise in market value for these
loans because borrowers prepay at relatively higher rates. The value of the
Company's deposits change in approximately the same proportion in rising and
falling rate scenarios.
<TABLE>
<CAPTION>
At March 31, 1999
- -------------------------------------------------------------------------------------------
Change in Interest Rate Board Limit
(Basis Points) % Change $ Change % Change
-------------- -------- -------- --------
(Dollars in Thousands)
<S> <C> <C> <C> <C>
+200 bp (40)% $ (497) (1.2)%
+100 bp (25) 601 1.5
0 bp - - -
-100 bp (10) (1,878) (4.6)
-200 bp (15) (4,826) (11.8)
</TABLE>
Certain shortcomings are inherent in the method of analysis presented in the
foregoing table. For example, although certain assets and liabilities may have
similar maturities or periods to repricing, they may react in different degrees
to changes in market interest rates. Also, the interest rates on certain 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 mortgage loans, 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,
prepayments and early withdrawal levels would likely deviate from those assumed
in calculating the tables. Finally, the ability of some borrowers to service
their debt may decrease in the event of an interest rate increase. The Company
considers all of these factors in monitoring its exposure to interest rate risk.
<PAGE>
FIRST MIDWEST FINANCIAL, INC.
PART II - OTHER INFORMATION
FORM 10-Q
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits: None
(b) Reports on Form 8-K: None
All other items have been omitted as not required or not applicable under the
instructions.
<PAGE>
FIRST MIDWEST FINANCIAL, INC.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
FIRST MIDWEST FINANCIAL, INC.
Date: May 14, 1999 By: /s/ James S. Haahr
------------ ------------------
James S. Haahr, Chairman of the Board,
President and Chief Executive Officer
Date: May 14, 1999 By: /s/ Donald J. Winchell
------------ ----------------------
Donald J. Winchell, Vice President,
Treasurer and Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1999
<PERIOD-END> MAR-31-1999
<CASH> 1,233,660
<INT-BEARING-DEPOSITS> 7,297,842
<FED-FUNDS-SOLD> 1,375,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 157,784,363
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 289,242,350
<ALLOWANCE> 2,669,024
<TOTAL-ASSETS> 475,093,349
<DEPOSITS> 298,383,183
<SHORT-TERM> 19,767,902
<LIABILITIES-OTHER> 1,830,494
<LONG-TERM> 112,999,916
0
0
<COMMON> 29,580
<OTHER-SE> 42,082,274
<TOTAL-LIABILITIES-AND-EQUITY> 475,093,349
<INTEREST-LOAN> 11,780,103
<INTEREST-INVEST> 5,566,280
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 17,346,383
<INTEREST-DEPOSIT> 7,199,726
<INTEREST-EXPENSE> 10,815,094
<INTEREST-INCOME-NET> 6,531,289
<LOAN-LOSSES> 601,000
<SECURITIES-GAINS> 293,756
<EXPENSE-OTHER> 4,235,952
<INCOME-PRETAX> 2,788,800
<INCOME-PRE-EXTRAORDINARY> 1,668,017
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,668,017
<EPS-PRIMARY> .68
<EPS-DILUTED> .66
<YIELD-ACTUAL> 0
<LOANS-NON> 3,817,878
<LOANS-PAST> 2,386
<LOANS-TROUBLED> 1,164,000
<LOANS-PROBLEM> 3,109,647
<ALLOWANCE-OPEN> 2,908,902
<CHARGE-OFFS> 855,034
<RECOVERIES> 14,156
<ALLOWANCE-CLOSE> 2,669,024
<ALLOWANCE-DOMESTIC> 2,502,556
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 166,468
</TABLE>
