UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------
FORM 10-QSB
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended September 30, 1998
Commission file number 0-24606
NORTHWEST EQUITY CORP.
(exact name of small business issuer as specified in its charter)
Wisconsin 39-1772981
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
234 Keller Avenue South
Amery, Wisconsin 54001
(Address of principal executive offices) (Zip code)
(715) 268-7105
(Issuer's telephone number, including area code)
Check whether the issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12
months (or for such shorter period that the registrant was required to file such
report(s), 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, $1.00 par
value per share, was 825,301 at September 30, 1998.
SIGNATURES
In accordance with 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.
NORTHWEST EQUITY CORP.
Dated:___10/28/98______________ By: ___/s/Brian L. Beadle____
(Brian L. Beadle, President
Principal Executive Officer and
Principal Financial and
Accounting Officer)
1
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
Item 2. Management's Discussion and Analysis or Plan of Operation.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
The Registrant is not involved in legal proceedings involving amounts in
the aggregate which management believes are material to the financial condition
and results of operations of the Registrant. (Materiality is defined for
accounting purposes as $250,000 or more) On October 16, 1996, the Bank learned
that a Minnesota Bank had commenced a repleven lawsuit against a borrower of the
Bank that involves several parties claiming interests in collateral secured by a
General Business Security Agreement of the Bank. The proceedings were filed with
the Circuit Judge, Polk County Courthouse, Balsam Lake, Wisconsin. On November
20, 1996, the Bank filed its answer and a third party complaint seeking repleven
of its collateral and money judgments against its borrowers, the guarantors, and
other interested parties. Repleven judgment was entered in favor of the Bank on
January 15, 1997. A money judgment was filed against a guarantor on December 30,
1996. One of the guarantors filed personal bankruptcy and the Bank was awarded a
non-dischargeable judgment against the guarantor in the amount of $80,000. The
Board of Directors at its meeting October 8, 1996, decided to increase the
quarterly provision for loan losses to $25,000 until more information became
available to make a reasonable estimate of any loss that may occur. The Board
continued this policy at its meeting held December 10, 1996, and subsequent
meetings because a reasonable estimate could not be determined until the legal
issues were resolved. The Board expects the loss will be identifiable after the
trial scheduled for November 9, 1998, and the loss will be booked during the
quarter ending December 31, 1998. An auction of the business inventory and
equipment was held March 26, 1998. Proceeds of the auction and the recovery of
other equipment total $188,185 and will be held by the court appointed receiver.
Of that amount, approximately $72,000 is from the sale of property that is not
disputed by any third parties and should be recovered by the Bank. The remaining
$116,000 will continue to be held by the receiver pending further order of the
court. Attempts to settle the dispute amongst the parties were held April 28,
1998, and at trial court ordered mediation sessions held July 10, 1998 and
October 12, 1998; and all but three parties reached settlement agreements with
the Bank during the October session. The proceeds to the Bank of the various
settlement agreements if consummated and an estimate of proposed settlements
with the remaining three parties total approximately $262,000. Considering a
current loan balance and costs of $620,000; plus an overdraft of $80,291; plus
an estimated $10,000 of additional attorneys fees to settle the law suit; less
the estimated settlement proceeds of $262,000; less the current amount in the
allowance for loan losses of $110,000 allocated to this loan; would require a
provision for loan losses of $338,000 for the three months ended December 31,
1998, that would result in an after-tax loss of approximately $223,000.
Introducing this estimated loss in the allowance for loan losses calculation,
the anticipated allowance for loan losses balance will be approximately $375,000
at December 31, 1998.
Item 2. Changes in Securities.
None.
Item 3. Defaults upon Senior Securities.
None.
2
<PAGE>
Item 4. Submission of Matters to a Vote of Security Holders.
The Annual Meeting of Shareholders of the Company was held on July 14,
1998. There were 825,301 shares of common stock of the Company entitled to vote
at the Annual Meeting, and 784,599 shares present at the meeting by holders
thereof in person or by proxy, which constituted a quorum. The following is a
summary of the results of the votes:
<TABLE>
<CAPTION>
Number of Votes
For Withheld
<S> <C> <C> <C>
Nominees for Director for a Three-Year Term Expiring in 2001
Vern E. Albrecht............................................................ 780,374 4,225
Norman M. Osero............................................................. 780,016 4,583
Number of Votes
For Against Abstained
Ratification of Wipfli Ullrich Bertelson LLP as independent
auditors for the fiscal year ending March 31, 1999.......................... 780,674 0 3,925
</TABLE>
Item 5. Other Information.
None.
Item 6. Exhibits and Reports on Form 8-k.
a. No reports on Form 8-K were filed during the quarter for which this
report was filed.
3
<PAGE>
<TABLE>
NORTHWEST EQUITY CORP. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(In Thousands)
ASSETS
<CAPTION>
September 30,
1998 March 31,
(unaudited) 1998
-------------------------
----------- ------------
<S> <C> <C>
Cash and cash equivalents:
Cash and due from banks $3,678 $2,642
Interest-bearing deposits with financial institutions 1,551 3,405
Total cash and cash equivalents 5,229 6,047
Investment securities - held-to-maturity - fair value
of $2,421 at September 30, 1998 and $2,999 at March 31, 1998 2,400 3,000
Mortgage backed securities - held to maturity - fair value of $6,791
at September 30, 1998 and $6,546 at March 31, 1998 6,607 6,398
Loans held for sale 236 142
Loans receivable - net 79,850 78,297
Foreclosed properties and properties subject to foreclosure 280 159
Investment in Federal Home Loan Bank stock - at
cost - which approximates fair value 953 1,159
Premises and equipment 2,232 2,250
Accrued interest receivable 576 578
Prepaid expenses and other assets 750 709
----------- ------------
TOTAL ASSETS $99,113 $98,739
=========== ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Savings accounts $62,081 $62,278
Advances from Federal Home Loan Bank 18,301 19,062
Other borrowed money 6,200 5,258
Accounts payable and accrued expenses 533 627
----------- ------------
Total liabilities 87,115 87,225
----------- ------------
Stockholders' equity
Preferred stock - $1 par value; 2,000,000 shares
authorized; none issued - - - -
Common stock - $1 par value; 4,000,000 shares authorized;
1,032,517 shares issued; 825,301 shares outstanding 1,033 1,033
Additional paid-in capital 6,582 6,584
Less unearned restricted stock plan award - - (26)
Less unearned Employee Stock Ownership Plan (297) (389)
Less treasury stock - at cost (2,549) (2,557)
Retained earnings - substantially restricted 7,229 6,869
----------- ------------
Total stockholders' equity 11,998 11,514
----------- ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $99,113 $98,739
=========== ============
See accompanying Notes to Consolidated Financial Statements
</TABLE>
4
<PAGE>
<TABLE>
NORTHWEST EQUITY CORP. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(In Thousands except for per share amounts)
<CAPTION>
Three Months Ended Six Months Ended
September 30, September 30,
1998 1997 1998 1997
------------- ------------ ----------- ------------
<S> <C> <C> <C> <C>
------------- ------------ ----------- ------------
Interest income:
Interest and fees on loans $1,780 $1,725 $3,525 $3,430
Interest on mortgage-backed securities 110 126 225 258
Interest and dividends on investments 79 77 176 154
------------- ------------ ----------- ------------
Total interest income 1,969 1,928 3,926 3,842
------------- ------------ ----------- ------------
Interest expense:
Interest on deposits 712 729 1,432 1,446
Interest on borrowings 322 337 648 670
------------- ------------ ----------- ------------
Total interest expense 1,034 1,066 2,080 2,116
------------- ------------ ----------- ------------
Net interest income 935 862 1,846 1,726
Provision for loan losses 25 25 50 50
------------- ------------ ----------- ------------
Net interest income after provision for loan losses 910 837 1,796 1,676
------------- ------------ ----------- ------------
Other income:
Mortgage servicing fees 23 20 44 39
Service charges on deposits 66 64 128 122
Gain(loss) on sale of investments - - (24) - - (24)
Gain on sale of mortgage loans 59 36 97 52
Other 36 40 119 74
------------- ------------ ----------- ------------
Total other income 184 136 388 263
------------- ------------ ----------- ------------
General and administrative expenses:
Salaries and employee benefits 323 306 659 616
Net occupancy expense 92 85 178 163
Data processing 37 33 72 65
Federal insurance premiums 10 9 20 19
Other 155 149 289 280
------------- ------------ ----------- ------------
Total general and administrative expense 617 582 1,218 1,143
------------- ------------ ----------- ------------
Income before provision for income taxes 477 391 966 796
Provision for income taxes 167 135 334 288
------------- ------------ ----------- ------------
Net income $310 $256 $632 $508
============= ============ =========== ============
Basic earnings per share $0.40 $0.33 $0.81 $0.65
============= ============ =========== ============
Diluted earnings per share $0.38 $0.32 $0.71 $0.62
============= ============ =========== ============
See accompanying Notes to Consolidated Financial Statements
</TABLE>
5
<PAGE>
<TABLE>
NORTHWEST EQUITY CORP. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(UNAUDITED)
(In Thousands)
<CAPTION>
Unrealized
Gain (Loss) Unearned
Additional on Securities Unearned ESOP
Common Paid-In Available Restricted Compen- Treasury Retained
Stock Capital For Sale Stock sation Stock Earnings Total
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Six Months Ended September 30, 1997
Balance - March 31, 1997 $1,033 $6,584 $(29) $(115) $(558) $(2,256) $6,200 $10,859
Net income - - - - - - - - - - - - 508 508
Adjustment of carrying value of securities available
for sale, net of deferred taxes of $20 - - - - 29 - - - - - - - - 29
Amortization of unearned ESOP and restricted stock
award - - - - - - 64 82 - - - - 146
Cash dividends - $.25 per share - - - - - - - - - - - - (209) (209)
--------------------------------------------------------------------------------
Balance - September 30, 1997 1,033 6,584 $ - (51) (476) (2,256) 6,499 11,333
================================================================================
Six Months Ended September 30, 1998
Balance - March 31, 1998 1,033 6,584 - - (26) (389) (2,557) 6,869 11,514
Net income - - - - - - - - - - - - 632 632
Exercise of stock options - - (2) - - - - - - 8 - - 6
Amortization of unearned ESOP and restricted stock
award - - - - - - 26 92 - - - - 118
Cash dividends - $.33 per share - - - - - - - - - - - - (272) - -
--------------------------------------------------------------------------------
Balance - September 30, 1998 $1,033 $6,582 $ - $ - $(297) $(2,549) $7,229 $11,998
================================================================================
See accompanying Notes to Consolidated Financial Statements
</TABLE>
6
<PAGE>
<TABLE>
NORTHWEST EQUITY CORP. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(In Thousands)
<CAPTION>
Six Months Ended
September 30,
1998 1997
----------- ------------
<S> <C> <C>
Cash flows from operating activities:
Net income $632 $508
Adjustments to reconcile net income to net cash
provided by operating activities:
Provision for depreciation 72 74
Provision for loan losses 50 50
Deferred income taxes - - (20)
Amortization of ESOP and restricted stock awards 118 146
Proceeds from sales of mortgage loans 8,632 2,438
Loans originated for sale (8,726) (2,064)
Changes in operating assets and liabilities:
Accrued interest receivable 2 35
Prepaid expenses and other assets (41) 34
Accrued interest payable 128 76
Accrued income taxes payable (94) (79)
Other accrued liabilities (130) 39
----------- ------------
Net cash provided by operating activities 643 1,237
----------- ------------
Cash flows from investing activities:
Available for sale securities:
Proceeds from sales 206 - -
Proceeds from maturity - - 2,528
Purchases of investment securities - - (810)
Held to maturity securities:
Proceeds from maturity 1,700 - -
Purchases of investment securities (1,100) (2,578)
Purchases of mortgage-backed securities (1,000) - -
Principal collected on mortgage-backed securities 791 437
Principal collected on long-term loans 10,464 15,017
Long-term loans originated or acquired (12,188) (16,978)
Purchase of office properties and equipment (54) (31)
----------- ------------
Net cash (used in) investing activities (1,181) (2,415)
----------- ------------
See accompanying Notes to Consolidated Financial Statements
</TABLE>
7
<PAGE>
<TABLE>
NORTHWEST EQUITY CORP. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
<CAPTION>
Six Months Ended
September 30,
1998 1997
----------- ------------
<S> <C> <C>
Cash flows from financing activities:
Net increase (decrease) in savings accounts (197) 1,056
Net increase (decrease) in short-term borrowings (1,093) 5,053
Repayments of long-term financing (3,666) (6,728)
Proceeds from long-term financing 4,940 1,966
Exercise of stock options 8 - -
Dividends paid (272) (209)
----------- -----------
Net Cash provided by (used in) financing activities (280) 1,138
----------- ------------
Increase (decrease) in cash and equivalents (818) (40)
Cash and equivalents - beginning 6,047 2,980
----------- ------------
Cash and equivalents - ending $5,229 $2,940
=========== ============
Supplemental disclosures of cash flow information:
Loans receivable transferred to foreclosed properties
and properties subject to foreclosure $166 $42
Loans charged off 58 47
Interest paid 1,952 2,040
Income taxes paid 428 367
See accompanying Notes to Consolidated Financial Statements
</TABLE>
8
<PAGE>
NORTHWEST EQUITY CORP. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1. Summary of Significant Accounting Policies:
The accompanying unaudited consolidated financial statements
have been prepared by the Company in accordance with the accounting
policies described in the Bank's audited financial statements for the
year ended March 31, 1998 and should be read in conjunction with the
financial statements and notes which appear in that report. These
statements do not include all the information and disclosures required
by generally accepted accounting principles. In the opinion of
management, all adjustments (consisting of normal recurring accruals)
considered for a fair presentation have been included.
Note 2. Subsequent Events:
As part of the Legal Proceedings listed under Part II, Item 1., a
court ordered mediation session was held on October 12, 1998. At that
session, all but three parties reached settlement agreements with the Bank.
The proceeds to the Bank of the various settlement agreements, if
consummated, and an estimate of proposed settlements with the remaining
three parties total approximately $262,000. Considering a current loan
balance and costs of $620,000; plus an overdraft of $80,291; plus an
estimated $10,000 of additional attorneys fees to settle the law suit; less
the estimated settlement proceeds of $262,000; less the current amount in
the allowance for loan losses of $110,000 allocated to this loan; would
require a provision for loan losses of $338,000 for the three months ended
December 31, 1998, that would result in an after-tax loss of approximately
$223,000. Introducing this estimated loss in the allowance for loan losses
calculation, the anticipated allowance for loan losses balance will be
approximately $375,000 at December 31, 1998.
9
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS OF
NORTHWEST EQUITY CORP.
Comparison of Operating Results for the Three Months Ended September 30, 1997
and September 30, 1998
Net Income
Net income for the three months ended September 30, 1998, increased
$54,000 or 21.1% to $310,000 compared to $256,000 for the three months ended
September 30, 1997. The increase in net income is due to an increase of $73,000
in net interest income from $862,000 for the three months ended September 30,
1997, to $935,000 for the three months ended September 30, 1998; an increase of
$48,000 in total other income from $136,000 for the three months ended September
30, 1997, to $184,000 for the three months ended September 30, 1998; that is
offset by an increase of $25,000 in general and administrative expense from
$582,000 for the three months ended September 30, 1997, to $617,000 for the
three months ended September 30, 1998, and an increase of $32,000 in the
provision for income taxes from $135,000 for the three months ended September
30, 1997, to $167,000 for the three months ended September 30, 1998.
Net Interest Income
Net interest income increased by $73,000 from $862,000 for the three
months ended September 30, 1997, to $935,000 for the three months ended
September 30, 1998. The increase in net interest income is a result of an
increase in interest income of $41,000 to $1,969,000 for the three months ended
September 30, 1998, compared to $1,928,000 for the three months ended September
30, 1997; combined with a decrease in interest expense of $32,000 to $1,034,000
for the three months ended September 30, 1998, from $1,066,000 for the three
months ended September 30, 1997.
Interest Income
Interest income increased $41,000 or 2.1% to $1,969,000 for the three
months ended September 30, 1998, compared to $1,928,000 for the three months
ended September 30, 1997. Interest and fees on loans increased $55,000 to
$1,780,000 for the three months ended September 30, 1998, compared to $1,725,000
for the three months ended September 30, 1997. This increase was due to the
increase in the average outstanding balance of total loans to $79.8 million for
the three months ended September 30, 1998, compared to $78.8 million for the
three months ended September 30, 1997. Interest on mortgage-backed and related
securities decreased $16,000 to $110,000 for the three months ended September
30, 1998, from $126,000 for the three months ended September 30, 1997. This
decrease was due to a decrease in the average outstanding balance of mortgage
backed and related securities of $0.8 million from $7.2 million for the three
months ended September 30, 1997, to an average outstanding balance of $ 6.4
million for the three months ended September 30, 1998. Interest on investments
remained virtually unchanged, increasing $2,000 to $79,000 for the three months
ended September 30, 1998, compared to $77,000 for the three months ended
September 30, 1997.
Interest Expense
Interest expense decreased $32,000 or 3.0% to $1,034,000 for the three
months ended September 30, 1998, compared to $1,066,000 for the three months
ended September 30, 1997. Interest on deposits decreased $17,000 or 2.3% from
$729,000 for the three months ended September 30, 1997, to $712,000 for the
three months ended September 30, 1998. The decrease in interest on deposits is a
result of a decrease in the average outstanding balance of total deposits to
$61.l million for the three months ended September 30, 1998, from $62.5 million
for the three months ended September 30, 1997. The average yield of total
deposits remained at 4.66% for the three months ended September 30, 1998, and
the three months ended September 30, 1997. Interest on borrowings decreased
$15,000 or 4.4% from $337,000 for the three
10
<PAGE>
MANAGEMENT'S DISCUSSION (CONT.)
months ended September 30, 1997, to $322,000 for the three months ended
September 30, 1998. The decrease reflects an decrease in the average yield/rate
of advances and other borrowings from 6.00% for the three months ended September
30, 1997, to 5.56% for the three months ended September 30, 1998.
Provision for Loan Losses
The provision for loan losses remained at $25,000 for the three months
ended September 30, 1998, and the three months ended September 30, 1997. That
amount reflects the Board of Directors' recognition of a commercial loan that
appeared on the September 30, 1996, watch list for the first time. Unable to
make an informed estimate of the loss potential, the Board decided to increase
the provision for loan losses to $25,000 per quarter until more information is
available to make a reasonable estimate of any losses that may occur. The terms
of a proposed settlement on October 12, 1998, if consummated, would require an
additional $338,000 to the provision for loan losses and would create an
estimated balance of $375,000 in the allowance for loan losses at December 31,
1998. (See Part II, Item 1, Legal Proceedings). The allowance for loan losses
totaled $484,000 at September 30, 1998, compared to $470,000 at September 30,
1997, and represented 0.60% and 0.56% of gross loans and 34.3% and 33.2% of
non-performing loans, respectively. The non-performing assets to total assets
ratio was 1.71% at September 30, 1998, compared to 1.43% at September 30, 1997.
Other Income
Total other income increased 35.2% or $48,000 to $184,000 for the three
months ended September 30, 1998, compared to $136,000 for the three months ended
September 30, 1997. The increase results from a $23,000 increase in gain on sale
of mortgage loans to $59,000 for the three months ended September 30, 1998,
compared to $36,000 for the three months ended September 30, 1997, and a
decrease of $24,000 in the gain or (loss) on the sale of investments from
$(24,000) for the three months ended September 30, 1997, to $00 for the three
months ended September 30, 1998. The increase in the gain on sale of mortgage
loans results from the general decline of interest rates over the two comparable
periods which enhances the bank's ability to generate gains on sale of mortgage.
The loss on the sale of investments was a nonrecurring event.
General and Administrative Expenses
General and administrative expenses increased $35,000 or 6.0% to $617,000 for
the three months ended September 30, 1998, compared to $582,000 for the three
months ended September 30, 1997. The increase was primarily due to an increase
of $17,000 in salaries and employee benefits from $306,000 for the three months
ended September 30, 1997, to $323,000 for the three months ended September 30,
1998. The increase was due to adjustments in employee salaries in response to
intense wage competition for employees in the marketplace. The increase in
expenses was also partially due to an increase in net occupancy expense of
$7,000 from $85,000 for the three months ended September 30, 1997, to $92,000
for the three months ended September 30, 1998. The increase was due to some
extraordinary repairs and maintenance expense items.
Income Tax Expense
Income tax expense increased $32,000 or 23.7% from $135,000 for the three months
ended September 30, 1997, to $167,000 for the three months ended September 30,
1998. The increase in income tax expense is the direct result of the increase in
income before taxes of $86,000 from $391,000 for the three months ended
September 30, 1997, to $477,000 for the three months ended September 30, 1998.
The effective tax rate for the three months ended September 30, 1998, was 35.0%
compared to 34.3% for the three months ended September 30, 1997.
11
<PAGE>
Comparison of Operating Results for the Six Months Ended September 30, 1997 and
September 30, 1998
Net Income
Net income for the six months ended September 30, 1998, increased
$124,000 or 24.4% to $632,000 compared to $508,000 for the six months ended
September 30, 1997. The increase in net income was primarily due to an increase
in net interest income of $120,000 from $1,726,000 for the six months ended
September 30, 1997 to $1,846,000 for the six months ended September 30, 1998.
Total other income increased $125,000 from $263,000 for the six months ended
September 30, 1997, to $388,000 for the six months ended September 30, 1998.
However, that increase was offset by an increase of $75,000 in general and
administrative expenses from $1,143,000 for the six months ended September 30,
1997, to $1,218,000 to the six months ended September 30, 1998; and an increase
in provision for income taxes of $46,000 from $288,000 for the six months ended
September 30, 1997, to $334,000 for the six months ended September 30, 1998.
Net Interest Income
Net interest income increased by $120,000 from $1,726,000 for the six
months ended September 30, 1997, to $1,846,000 for the six months ended
September 30, 1998. The increase in net interest income is a result of an
increase in interest income of $84,000 to $3,926,000 for the six months ended
September 30, 1998, compared to $3,842,000 for the six months ended September
30, 1997; combined with a decrease in interest expense of $36,000 to $2,080,000
for the six months ended September 30, 1998, from $2,116,000 for the six months
ended September 30, 1997.
Interest Income
Interest income increased $84,000 or 2.1% to $3,926,000 for the six
months ended September 30, 1998, compared to $3,842,000 for the six months ended
September 30, 1997. Of the increase, $95,000 was due to an increase in interest
and fees on loans to $3,525,000 for the six months ended September 30, 1998,
compared to $3,430,000 for the six months ended September 30, 1997. This
increase was due to the increase in the average outstanding balance of total
loans to $79.5 million for the six months ended September 30, 1998, compared to
$78.1 million for the six months ended September 30, 1997. The increase in
interest and fees on loans was partially offset by a decrease of $33,000 in
interest on mortgage-backed and related securities to $225,000 for the six
months ended September 30, 1998, from $258,000 for the six months ended
September 30, 1997. This decrease was due to a decrease in the average
outstanding balance of mortgage backed and related securities from $7.2 million
for the six months ended September 30, 1997, to an average balance of $6.3
million for the six months ended September 30, 1998. The decrease was the result
of regularly scheduled principle payments and prepayments on the securities
throughout the period offset by the purchase of $1.0 million of mortgage-backed
securities during the current quarter. Interest on investments increased $22,000
to $176,000 for the six months ended September 30, 1998, compared to $154,000
for the six months ended September 30, 1997, as a result of an increase in the
average outstanding balances of interest-bearing deposits in other financial
institutions, securities held for sale, and Federal Home Loan Bank stock from
$5.3 million for the six months ended September 30, l997, to $5.9 million for
the six months ended September 30, 1998.
Interest Expense
Interest expense decreased $36,000 or 1.7% to $2,080,000 for the six
months ended September 30, 1998, compared to $2,116,000 for the six months ended
September 30, 1997. Interest on deposits decreased $14,000 or 0.9% from
$1,446,000 for the six months ended September 30, 1997, to $1,432,000 for the
six months ended September 30, 1998. The decrease reflects an decrease in the
average outstanding balance of total deposits to $61.6 million for the six
months ended September 30, 1998, from an average balance of $62.0 million for
the six months ended September 30, 1997. The average interest rate paid remained
virtually unchanged from 4.66% for the six months ended September 30, 1997, to
4.65% for the
12
<PAGE>
MANAGEMENT'S DISCUSSION (CONT.)
six months ended September 30, 1998. Interest on borrowings decreased $22,000 or
3.2% from $670,000 for the six months ended September 30, 1997, to $648,000 for
the six months ended September 30, 1998. The decrease reflects an decrease in
average yield/rate of advances and other borrowings from 6.01% for the six
months ended September 30, 1997, to 5.62% for the six months ended September 30,
1998.
Provision for Loan Losses
The provision for loan losses remained at $50,000 for the six months ended
September 30, 1998, compared to $50,000 for the six months ended September 30,
1997. That amount reflects the Board of Directors' recognition of a commercial
loan that appeared on the September 30, 1996, watch list for the first time.
Unable to make an informed estimate of the loss potential, the Board decided to
increase the provision for loan losses to $25,000 per quarter until more
information is available to make a reasonable estimate of any losses that may
occur. The terms of a proposed settlement on October 12, 1998, if consummated,
would require an additional $338,000 to the provision for loan losses and would
create an estimated balance of $375,000 in the allowance for loan losses at
December 31, 1998. (See Part II, Item 1, Legal Proceedings). The allowance for
loan losses totaled $484,000 at September 30, 1998, compared to $470,000 at
September 30, 1997, and represented 0.60% and 0.56% of gross loans and 34.2% and
33.2% of non-performing loans, respectively. The non-performing assets to total
assets ratio was 1.71% at September 30, 1998, compared to 1.43% at September 30,
1997.
Other Income
Total other income increased $125,000 or 47.5% to $388,000 for the six
months ended September 30, 1998, compared to $263,000 for the six months
ended September 30, 1997. The increase results from an increase of $24,000 in
gain (loss) on the sale of investments from $(24,000) for the six months ended
September 30, 1997, and $00 for the six months ended September 30, 1998; a
$45,000 increase in the gain on sale of mortgage loans to $97,000 for the six
months ended September 30, 1998 compared to $52,000 for the six months ended
September 30, 1997; and an increase of $45,000 in other income from $74,000 for
the six months ended September 30, 1997 to $119,000 for the six months ended
September 30, 1998. The loss on the sale of investments was a nonrecurring
event. The increase in the gain on sale of mortgage loans results from the
general decline of interest rates over the two comparable periods which enhances
the bank's ability to generate gains on sale of mortgage loans. The increase in
other income reflects an increase of $38,000 in the profit on sale of real
estate held in the Bank's subsidiary to $50,000 for the six months ended
September 30, 1998, compared to $12,000 for the six months ended September 30,
1997, and an increase of $17,000 in brokerage commissions from $22,000 for the
six months ended September 30, 1997, to $39,000 for the six months ended
September 30, 1998. With the transaction consummated in the quarter ending June
30, 1998, the Bank's subsidiary divested all of its real estate holdings.
General and Administrative Expenses
General and administrative expenses increased $75,000 or 6.6% to
$1,218,000 for the six months ended September 30, 1998, compared to $1,143,000
for the six months ended September 30, 1997. The increase was primarily due to
an increase of $43,000 in salaries and employee benefits from $616,000 for the
six months ended September 30, 1997, to $659,000 for the six months ended
September 30, 1998. The increase was due to adjustments in employee salaries in
response to intense wage competition for employees in the marketplace. Net
occupancy expense increased $15,000 from $163,000 for the six months ended
September 30, 1997, to $178,000 for the six months ended September 30, 1998, and
reflects some extraordinary maintenance items occurring during the current
period. Data processing expenses increased $7,000 from $65,000 for the six
months ended September 30, 1997, to $72,000 for the six months ended September
30, 1998, and reflects an scheduled contractual increase in the fee based on
transaction volumes. Other expenses increased $9,000 from $280,000 for the six
months ended September 30, 1997, to $289,000 for the six months ended September
30, 1998.
13
<PAGE>
MANAGEMENT'S DISCUSSION (CONT.)
Income Tax Expense
Income tax expense increased $46,000 or 16.0% from $288,000 for the six
months ended September 30, 1997, to $334,000 for the six months ended September
30, 1998. The increase in income tax expense is the direct result of a increase
in income before taxes of $170,000 from $796,000 for the six months ended
September 30, 1997, to $966,000 for the six months ended September 30, 1998. The
effective tax rate for the six months ended September 30, 1998, was 34.6%
compared to 37.2% for the six months ended September 30, 1997. The reduction of
the effective tax rate reflects the establishment of a Nevada investment
subsidiary on May 30, 1997, which effectively eliminated the state tax
obligation of the company since that date.
Financial Condition
Total assets increased $374,000 or 0.4% to $99.1 million at September
30, 1998, compared to $98.7 million at March 31, 1998 due primarily to an
increase of $1.6 million in loans receivable to $79.9 million at September 30,
1998, compared to $78.3 million at March 31, 1998, that was offset by a decrease
in cash and cash equivalents of $0.8 million to $5.2 million at September 30,
1998, from $6.0 million at March 31, 1998. The cash was used to fund the
increase in loans receivable. The increase in net loans receivable was the
result of the expected seasonal increase of loan activity during the spring and
summer months. A decrease in investment securities of $0.6 million to $2.4
million at September 30, 1998, from $3.0 million at March 31, 1998, was offset
by a increase of $0.2 million in mortgage backed and related securities from
$6.4 million on March 31, 1998, to $6.6 million at September 30, 1998.
Total liabilities remained virtually unchanged at $87.1 million at
September 30, 1998, and $87.2 million at March 31, 1998. A $0.9 million increase
in other borrowed money from $5.3 million at March 31, 1998, to $6.2 million at
September 30, 1998, was offset by decreases in savings deposits of $0.2 million
to $62.1 million at September 30, 1998, from $62.3 million at March 31, 1998;
and a $0.8 million decrease in advances from the Federal Home Loan Bank from
$19.1 million at March 31, 1998, to $18.3 million at September 30, 1998.
Shareholders' equity increased $484,000 from $11.5 million at March 31,
1998, to $12.0 million at September 30, 1998, as a result of net income for the
six months ended September 30, 1998, less $272,000 in cash dividends and the
amortization of the common stock purchased by the employee stock ownership plan
of $92,000 from ($389,000) on March 31, 1998 to ($297,000) on September 30,
1998; and the amortization of the unearned restricted stock plan award of
$26,000 from ($26,000) at March 31, 1998, to $0 at September 30, 1998.
Asset/Liability Management Disclosures Involving Year 2000 Issues
Issues related to the century date change and the impact on computer
systems and business operations are receiving prominent publicity and attention.
Depositors, business partners, investors, and the general public are
specifically interested in the effect on the financial condition of each
depository institution. The FDIC has advised state savings banks that safe and
sound banking practices require them to address Year 2000 issues. The Securities
and Exchange Commission (SEC) issued a revised Staff Legal Bulletin NO. 5 to
provide specific guidance on disclosure associated with Year 2000 obligations
for companies registered under federal securities laws.
Computer programs generally abbreviated dates by eliminating the century
digits of the year. Many resources, such as software; hardware; telephones;
voicemail; heating; ventilating and air conditioning; alarms, etc. ("Systems")
are affected. These Systems were designed to assume a century value of "19"
to
14
<PAGE>
MANAGEMENT'S DISCUSSION (CONT.)
save memory and disk space within their programs. In addition, many Systems use
a value of "99" in a year or "99/99/99" in a date to indicate "no date" or "any
date" or even a default expiration date. As the year 2000 approaches, this
abbreviated date mechanism within Systems threatens to disrupt the function of
computer software at nearly every business which relies heavily on computer
systems for account and other recordkeeping functions. If the millennium issue
is ignored, system failures or miscalculations could occur, causing disruptions
of operations and a temporary inability to process business transactions.
The Bank has an inventory of personal computers that access a data
processing system provided by EDS in Des Moines, Iowa. If the personal computers
and data processing systems fail to process the century date change, it may
impair the Bank's ability to process loan payments, accept deposits, and address
other operational issues. The Bank's customers, suppliers, other constituents
may also be impaired to meet their contractual obligations with the Bank. The
Bank has developed a Year 2000 Plan (the "Plan"). The Bank's Plan attempts to
identify the systems, assess the risk, and conduct inventories as necessary to
assure compliance with the Plan. The Plan calls for identifying all systems in
need of remediation by June 30, 1999, and remedying all systems in need of
remediation by September 30, 1999. As of September 30, 1998, the Bank estimates
it will have to purchase hardware and equipment in the amount of $17,000
(pre-tax) to address the Y2K issues. The expenditures would be amortized over
5-year period, and would add approximately $3,400 in furniture and fixture
expense per year for the next 5 years. In addition, the Bank will be assessed in
the current fiscal year a one-time fee of $20,000 by EDS to support the FFIEC's
testing guidance regarding Year 2000 efforts of financial institutions as
outlined in the April 10, 1998, Interagency Statement. These amounts are not
considered to be material.
On February 24, 1998, the FDIC conducted an on-site visitation of the
Bank's Year 2000 process. The examiner followed guidelines and recommendations
contained in the FFIEC Interagency Statement on Year 2000 Project Management
Awareness, dated May 5, 1997, and subsequent publications. In a letter dated
March 17, 1998, the FDIC stated that the Bank's Year 2000 Committee is
adequately monitoring Year 2000 compliance. In a letter dated September 8, 1998,
The FDIC reported to the Board of Directors that the Federal Reserve Bank of
Dallas had conducted an examination of Electronic Data Systems, Inc.,(EDS)
Plano, Texas, the Bank's data processor. The Board of Directors reviewed the
Exam at its September 18, 1998, meeting and the record of this action was
entered into the minutes. The results of the examination are deemed to be
confidential by the FDIC. In a letter dated October 2, 1998, EDS reported that
the overall product line remediation was now 92% complete. On October 9, 1998,
the Bank received an extensive Y2k Contingency Plan from EDS.
Asset/Liability Management
Asset/liability management is an ongoing process of matching asset and
liability maturities to reduce interest rate risk. Management attempts to
control 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) encourage
medium and longer-term certificates of deposit. The Company's estimated
cumulative one-year gap between assets and liabilities was a negative 1.4-% of
total assets, at the latest available reporting date of June 30, 1998. A
negative gap occurs when a greater dollar amount of interest-earning liabilities
than interest-bearing assets are repricing or maturing during a given time
period. During periods of rising interest rates, a negative interest rate
sensitivity gap will tend to negatively affect net interest income. During
periods of falling interest rates, a negative interest rate sensitivity gap will
tend to positively affect the net interest income.
15
<PAGE>
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 decrease net interest income because
interest-bearing liabilities will reprice more quickly than interest-earning
assets. The
Company's analysis of the maturity and repricing of assets and liabilities
incorporates certain assumptions concerning the amortization and prepayment of
such assets and liabilities. Management believes that these assumptions
approximate actual experience and considers them reasonable, although the actual
amortization and repayment of assets and liabilities may vary substantially.
Management Strategy
Asset Quality
The Company emphasizes high asset quality in both its investment portfolio
and lending activities. Non-performing assets have ranged between .95% and 1.71%
of total assets during the last three years and were 1.71% of total assets at
September 30, 1998. Cumulative gross charge-offs over the last three fiscal
years totaled $193,000 and were offset by $38,000 in recoveries. The last three
years cumulative gross charge-offs of commercial loans have totaled $19,000. The
cumulative gross charge-offs, $169,000 were installment loans and were offset by
$9,000 in recoveries. The remaining $5,000 in cumulative gross charge-offs were
real estate loans and were offset by $29,000 in recoveries.
On October 16, 1996, the Bank learned that a Minnesota Bank had commenced a
repleven lawsuit against a borrower of the Bank that involves several parties
claiming interests in collateral secured by a General Business Security
Agreement of the Bank. The proceedings were filed with the Circuit Judge, Polk
County Courthouse, Balsam Lake, Wisconsin. On November 20, 1996, the Bank filed
its answer and a third party complaint seeking repleven of its collateral and
money judgments against its borrowers, the guarantors, and other interested
parties. Repleven judgment was entered in favor of the Bank on January 15, 1997.
A money judgment was filed against a guarantor on December 30, 1996. One of the
guarantors filed personal bankruptcy and the Bank was awarded a
non-dischargeable judgment against the guarantor in the amount of $80,000. The
Board of Directors at its meeting October 8, 1996, decided to increase the
quarterly provision for loan losses to $25,000 until more information became
available to make a reasonable estimate of any loss that may occur. The Board
continued this policy at its meeting held December 10, 1996, and subsequent
meetings because a reasonable estimate could not be determined until the legal
issues were resolved. The Board expects the loss will be identifiable after the
trial scheduled for November 9, 1998, and the loss will be booked during the
quarter ending December 31, 1998. An auction of the business inventory and
equipment was held March 26, 1998. Proceeds of the auction and the recovery of
other equipment total $188,185 and will be held by the court appointed receiver.
Of that amount, approximately $72,000 is from the sale of property that is not
disputed by any third parties and should be recovered by the Bank. The remaining
$116,000 will continue to be held by the receiver pending further order of the
court. Attempts to settle the dispute amongst the parties were held April 28,
1998, and at trial court ordered mediation sessions held July 10, 1998 and
October 12, 1998; and all but three parties reached settlement agreements with
the Bank during the October session. The proceeds to the Bank of the various
settlement agreements and an estimate of proposed settlements with the remaining
three parties total approximately $262,000. Considering a current loan balance
and costs of $620,000 plus an overdraft of $80,291 and an estimated $10,000 of
additional attorneys fees to settle the law suit less the estimated settlement
proceeds of $262,000 and less the current amount in the allowance for loan
losses of $110,000 allocated to this loan, would require a provision for loan
losses of $338,000 that would result in an after-tax loss of approximately
$223,000. Introducing this loss in the allowance for loan losses calculation,
the anticipated allowance for loan losses will be approximately $375,000 for the
quarter ending December 31, 1998.
16
<PAGE>
MANAGEMENT'S DISCUSSION (CONT.)
During the fiscal years ended March 31, 1998, 1997 and 1996, the Company
recorded provisions for loan losses of $100,000, $81,000, and $24,000,
respectively, to its allowance for loan losses and had net charge-offs of
$77,000, $53,000, and $25,000, respectively. The Company's allowance for loan
losses at September 30, 1998, totaled $484,000 or 250.8% of cumulative gross
charge-offs during the last three fiscal years. Management currently believes
the allowance for loan losses at September 30, 1998, is at an adequate level and
that future provisions for loan losses will be maintained at current levels
until more information is available concerning the large commercial loan
mentioned in the previous paragraph.
Total non-performing loans remained $1.4 million at March 31, 1998 and
September 30, 1998. Total loans delinquent 31-89 days increased from $1.5
million at March 31, 1998, to $1.7 million at September 30, 1998. The latest
available peer group comparison of the average nonperforming loans and real
estate owned as a percentage of total loans as prepared by America's Community
Bankers was 2.17% for the Company at March 31, 1998, compared to 1.25% on a
nation wide basis, 0.94% on a geographic basis, 1.27% on an asset size basis,
and 1.42% on an owner type basis. Allowing for the commercial loan mentioned
above with a delinquent balance of $620,000, that ratio would be 1.38% and be
comparable to the peer group.
Selected Financial Ratios and Other Data: At or For the
Three months ended Six months ended
September 30, September 30,
Performance Ratios 1998 1997 1998 1997
---- ---- ---- ----
Return on average assets 1.26% 1.06% 1.29% 1.06%
Return on average equity 10.51% 9.22% 10.88% 9.27%
17
<PAGE>
MANAGEMENT'S DISCUSSION(CONT.)
<TABLE>
<CAPTION>
Three Months Ended September 30,
1998 1997
Average Interest Average Average Interest Average
Outstanding Earned/ Yield/ Outstanding Earned/ Yield/
Balance Paid Rate Balance Paid Rate
<S> <C> <C> <C> <C> <C> <C>
Assets
Interest-earning assets:
Mortgage loans.................. $67,623 $1,502 8.88% $66,565 $1,460 8.78%
Commercial loans................ 4,304 81 7.53% 4,692 77 6.55%
Consumer loans.................. 7,920 197 9.93% 7,566 188 9.92%
-------- ------- ----- -------- ------- -----
Total loans................... 79,847 1,780 8.92% 78,823 1,725 8.75%
Mortgage-backed securities...... 6,358 110 6.95% 7,155 126 7.02%
Interest-bearing deposits in other
financial institutions........ 1,679 22 5.32% 848 12 5.53%
Investment securities........... 2,772 43 6.19% 3,427 48 5.60%
Federal Home Loan Bank stock.... 953 13 6.63% 912 17 6.75%
-------- ------- ----- ------- ------- -----
Total interest-earning assets 91,609 1,969 8.60% 91,165 1,928 8.46%
Non-interest earning assets..... 6,535 5,149
-------- --------
Total assets.................. $98,144 $96,314
-------- --------
-------- --------
Liabilities and Stockholders' Equity
Deposits:
NOW accounts(1)................. $10,275 $37 1.44% $9,582 $36 1.48%
Money market deposit accounts... 6,313 84 4.70% 5,514 64 4.61%
Passbook........................ 6,103 33 2.15% 6,114 33 2.18%
Certificate of deposit.......... 38,411 558 5.74% 41,280 596 5.78%
-------- ------ ----- -------- ------ -----
Total deposits............... 61,102 712 4.66% 62,490 729 4.66%
Advances and other borrowings..... 23,176 322 5.56% 22,241 337 6.00%
-------- ------ ----- -------- ------ -----
Total interest-bearing liabilities 84,278 1,034 4.91% 84,731 1,066 5.03%
Non-interest bearing liabilitie... 2,075 484
Equity............................ 11,791 11,099
-------- --------
Total liabilities and retained earnings $98,144 $96,314
-------- --------
-------- --------
Net interest income/interest rate spread(2) $935 3.69% $862 3.43%
------ ------ ------ -----
------ ------ ------ -----
Net earning assets/net interest margin (3) $7,331 4.08% $6,434 3.78%
-------- ------ -------- -----
-------- ------ -------- -----
Average interest-earning assets to average
interest-bearing liabilities.......... 1.09 1.08
-------- --------
-------- --------
<CAPTION>
Six Months Ended September 30,
1998 1997
Average Interest Average Average Interest Average
Outstanding Earned/ Yield/ Outstanding Earned/ Yield/
Balance Paid Rate Balance Paid Rate
Assets
Interest-earning assets:
Mortgage loans..................... $67,225 $2,951 8.78% $65,985 $2,884 8.74%
Commercial loans................... 4,352 185 8.50% 4,713 178 7.56%
Consumer loans..................... 7,879 389 9.87% 7,397 368 9.96%
-------- ------- ------ -------- ------- -----
Total loans...................... 79,455 3,525 8.87% 78,095 3,430 8.79%
Mortgage-backed securities......... 6,335 225 7.11% 7,191 258 7.16%
Interest-bearing deposits in other
financial institutions........... 2,009 54 5.41% 1,156 32 5.51%
Investment securities.............. 2,875 90 6.21% 3,246 89 5.46%
Federal Home Loan Bank stock....... 993 32 6.63% 912 33 6.75%
-------- ------- ------ -------- ------ -----
Total interest-earning assets.... 91,667 3,926 8.57% 90,600 3,842 8.48%
Non-interest earning assets........ 5,917 5,224
-------- --------
Total assets...................... $97,584 $95,824
-------- --------
-------- --------
Liabilities and Stockholders' Equity
Deposits:
NOW accounts(1).................... $10,059 $72 1.43% $9,321 $70 1.50%
Money market deposit accounts...... 6,242 160 4.78% 5,227 120 4.58%
Passbook........................... 6,125 66 2.15% 6,038 65 2.15%
Certificate of deposit............. 39,216 1,134 5.75% 41,460 1,191 5.75%
-------- ------- ------ -------- ------ -----
Total deposits................... 61,641 1,432 4.65% 62,046 1,446 4.66%
Advances and other borrowings........ 23,075 648 5.62% 22,255 670 6.01%
-------- ------- ------ -------- ------ -----
Total interest-bearing liabilities.. 84,716 2,080 4.91% 84,301 2,116 5.02%
Non-interest bearing liabilities...... 1,246 574
Equity................................ 11,607 10,949
-------- --------
Total liabilities and retained earnings $97,568 $95,824
-------- --------
-------- --------
Net interest income/interest rate spread(2) $1,846 3.66% $1,726 3.46%
------- ------ ------- -----
------- ------ ------- -----
Net earning assets/net interest margin(3) $6,951 4.03% $6,299 3.81%
-------- ------ -------- -----
-------- ------ -------- -----
Average interest-earning assets to average
interest-bearing liabilities 1.08 1.07
-------- --------
-------- --------
<FN>
(1) Includes non-interest bearing NOW accounts.
(2) Interest rate spread represents the difference between the average yield on interest-earning assets and the average rate on
interest-bearing liabilities.
(3) Net interest margin represents net interest income divided by average interest-earning assets.
</FN>
</TABLE>
18
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> Mar-31-1999
<PERIOD-END> SEP-30-1998
<CASH> 3,678
<INT-BEARING-DEPOSITS> 1,551
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 0
<INVESTMENTS-CARRYING> 9,007
<INVESTMENTS-MARKET> 9,212
<LOANS> 80,086
<ALLOWANCE> 484
<TOTAL-ASSETS> 99,113
<DEPOSITS> 62,081
<SHORT-TERM> 8,380
<LIABILITIES-OTHER> 533
<LONG-TERM> 16,121
0
0
<COMMON> 1,033
<OTHER-SE> 10,965
<TOTAL-LIABILITIES-AND-EQUITY> 99,113
<INTEREST-LOAN> 3,525
<INTEREST-INVEST> 401
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 3,926
<INTEREST-DEPOSIT> 1,432
<INTEREST-EXPENSE> 2,080
<INTEREST-INCOME-NET> 1,846
<LOAN-LOSSES> 50
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 1,218
<INCOME-PRETAX> 966
<INCOME-PRE-EXTRAORDINARY> 632
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 632
<EPS-PRIMARY> .81
<EPS-DILUTED> .71
<YIELD-ACTUAL> 3.66
<LOANS-NON> 1,397
<LOANS-PAST> 10
<LOANS-TROUBLED> 5
<LOANS-PROBLEM> 262
<ALLOWANCE-OPEN> 484
<CHARGE-OFFS> 58
<RECOVERIES> 8
<ALLOWANCE-CLOSE> 484
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
