SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q/A
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ------------ to ----------
Commission File Number: 0-26184
FIRST MUTUAL BANCORP, INC.
- -----------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 37-1339075
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
135 East Main Street, Decatur, Illinois 62523
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(Address of principle executive offices)
Registrant's telephone number, including area code:
(217) 429-2306
- -----------------------------------------------------------------
Former name, former address and former fiscal year, if changed
since last report
Indicate by check whether the Registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the Registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes /X/ No ----
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: There were 3,506,670 shares of the Registrant's common
stock outstanding as of September 30, 1997. Included were
291,400 unearned ESOP shares.
<PAGE>
FIRST MUTUAL BANCORP, INC.
INDEX
<TABLE>
Page
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements 1
Consolidated Statements of Financial
Condition as of September 30, 1997, and
December 31, 1996 2
Consolidated Statements of Income for
the Three and Nine Months Ended
September 30, 1997 and 1996 3
Consolidated Statements of Changes in
Stockholders' Equity for the Nine Months
Ended September 30, 1997 4
Consolidated Statements of Cash Flows
for the Nine Months Ended Sepember 30, 1997
and 1996 5
Notes to Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 9
PART II. OTHER INFORMATION 15
</TABLE>
<PAGE>
FIRST MUTUAL BANCORP, INC.
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<TABLE>
September 30, 1997 December 31, 1996
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 4,010 $ 4,350
Interest-bearing deposits with financial institutions 14,153 6,730
Securities held-to-maturity
(Estimated fair value: September 30, 1997 $36,660) 36,487 --
(Estimated fair value: December 31, 1996 $19,063) -- 19,007
Securities available for sale 10,030 4,000
Loans held for sale 1,909 1,103
Loans receivable, net 305,959 282,066
Federal Home Loan Bank stock 2,349 3,200
Accrued interest receivable 2,516 1,969
Foreclosed real estate, net of allowance for losses 33 77
Premises and equipment 6,740 4,119
Cash surrender value of life insurance 3,457 3,215
Goodwill and core deposit intangibles 12,823 --
Other assets 1,923 1,940
--------- ---------
TOTAL ASSETS $ 402,389 $ 331,776
--------- ---------
--------- ---------
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Deposits $ 322,862 $ 202,923
Advances from borrowers for taxes and insurance 664 1,420
Advances from Federal Home Loan Bank 14,500 62,800
Securities sold under Agreements to Repurchase 7,000 --
Accrued expenses and other liabilities 3,445 2,416
TOTAL LIABILITIES 348,471 269,559
STOCKHOLDERS' EQUITY
Common stock $.10 par value;
8,000,000 shares authorized;
issued 4,700,000 shares 470 470
Additional paid in capital 45,277 45,104
Unearned ESOP shares (2,914) (3,196)
Unearned stock awards (1,126) (1,504)
Retained earnings, substantially restricted 29,583 29,578
Treasury Stock at cost - 611,400 shares (Dec.31, 1996) -- (8,231)
- 1,193,330 shares (September 30, 1997) (17,382) --
Unrealized gain (loss) on securities available for sale,
net of tax 10 (4)
TOTAL STOCKHOLDERS' EQUITY 53,918 62,217
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 402,389 $ 331,776
Number of Shares Outstanding, Net of Unearned
ESOP Shares 3,215,270 3,769,000
Book Value Per Share $ 16.77 $ 16.51
</TABLE>
<PAGE>
FIRST MUTUAL BANCORP, INC.
CONSOLIDATED STATEMENTS OF INCOME
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<TABLE>
Nine Months Ended Three Months Ended
Sept. 30, 1997 Sept. 30, 1996 Sept. 30, 1997 Sept. 30, 1996
<S> <C> <C> <C> <C>
Interest Income
Loans receivable
First mortgage loans $ 14,325 $ 12,449 $ 4,852 $ 4,251
Consumer and other loans 3,037 1,201 1,091 595
Commercial loans 649 344 227 124
Investment securities 2,367 1,289 785 411
Other interest-earning assets 1,258 553 208 162
Total Interest Income 21,636 15,836 7,163 5,543
Interest Expense
Deposits 11,989 7,174 3,989 2,489
Federal Home Loan Bank advances
and other interest charges 1,056 870 305 472
Total Interest Expense 13,045 8,044 4,294 2,961
Net Interest Income 8,591 7,792 2,869 2,582
Provision for loan losses 396 75 143 25
Net Interest Income after provision
for loan losses 8,195 7,717 2,726 2,557
Noninterest income
Gain on sales of loans 160 154 76 38
Deposit service fee income 565 259 225 93
Loan servicing fees 88 92 29 31
Investment sales commissions 123 91 31 28
Other 289 194 98 66
Total noninterest income 1,225 790 459 256
Noninterest expense
Compensation and benefits 4,286 3,367 1,463 1,514
Occupancy and equipment 995 606 339 228
FDIC Deposit insurance premium 101 339 35 114
FDIC Special Assessment -- 1,314 -- 1,314
Advertising and promotion 409 329 141 110
Data processing 599 310 181 112
Printing, postage, stationery,
and supplies 352 235 116 104
Net expense on foreclosed
real estate operations 7 8 4 3
Net loss on sale of real estate
owned including provisions for losses 5 1 (11) 1
Amortization of Goodwill
and Core Deposit Intangibles 539 -- 179 --
Other 1,047 825 340 334
Total noninterest expense 8,340 7,334 2,787 3,834
Income (loss) before income taxes 1,080 1,173 398 (1,021)
Income taxes (benefit) 292 449 127 (416)
Net income (loss) $788 $724 $271 ($605)
Average Number of Shares Outstanding for
calculating earnings per share 3,444,384 4,251,462 3,351,098 4,124,719
Earnings (Loss) Per Common Share --
fully diluted $.23 $.17 $.08 ($.14)
</TABLE>
<PAGE>
FIRST MUTUAL BANCORP, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<TABLE>
Unrealized
Retained Gain (Loss) on
Additional Unearned Unearned Earnings - Securities
Common Paid In ESOP Stock Substantially Treasury Available
Stock Capital Shares Awards Restricted Stock For Sale Total
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1995 $ -- $ -- $ -- $ -- $27,811 $ -- $ -- $ 27,811
Issuance of Common Stock 470 44,930 (3,760) -- -- -- -- 41,640
ESOP shares earned -- 50 188 -- -- -- -- 238
Cash Dividends ($.07 per share) -- -- -- -- (605) -- -- (605)
Reclassification of securities
from held-to-maturity to
available-for-sale, net of tax -- -- -- -- -- -- 43 43
Change in unrealized gain on
securities available-for-sale,
net of tax -- -- -- -- -- -- 3 3
Net Income -- -- -- $ 2,398 -- -- $2,398
Balance at December 31, 1995 470 44,980 (3,572) -- 29,604 -- 46 71,528
Net Income -- -- -- -- 1,171 -- -- 1,171
Purchase of Treasury Shares -- -- -- -- -- (10,330) -- (10,330)
Unearned Stock Awards -- -- -- (2,099) -- 2,099 -- --
ESOP Shares earned -- 116 376 -- -- -- -- 492
Stock Awards Earned -- -- -- 595 -- -- -- 595
Tax benefit of stock awards -- 8 -- -- -- -- -- 8
Change in unrealized appreciation
(depreciation) on securities
available-for-sale, net of tax -- -- -- -- -- -- (50) (50)
Cash dividends ($.30 per share) -- -- -- -- (1,197) -- (1,197)
Balance at December 31, 1996 470 45,104 (3,196) (1,504) 29,578 (8,231) (4) 62,217
Net Income (1/1/97 - 9/30/97) -- -- -- -- 788 -- -- 788
Purchase of Treasury Shares -- -- -- -- -- (9,151) -- (9,151)
ESOP Shares Earned (1/1/97 -
9/30/97) -- 152 282 -- -- -- -- 434
Stock Awards Earned (1/1/97 -
9/30/97) -- -- -- 378 -- -- -- 378
Tax Benefit of Stock Awards -- 21 -- -- -- -- -- 21
Change in unrealized appreciation
(depreciation) on securities available
for sale, net of tax -- -- -- -- -- -- 14 14
Cash dividends ($.24 per share) -- -- -- -- (783) -- -- (783)
Balance at Sept. 30, 1997 $470 $45,277 ($2,914) ($1,126) $29,583 ($17,382) ($10) $53,918
</TABLE>
<PAGE>
FIRST MUTUAL BANCORP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in Thousands)
(Unaudited)
<TABLE>
Nine Months Ended
September 30, 1997 September 30, 1996
<S> <C> <C>
Cash flows from operating activities
Net income 788 724
Adjustments to reconcile net income to
net cash from operating activities
Depreciation and amortization 1,011 269
Amortization of premiums and
discounts on mortgaged-backed
and investment securities, net 157 58
ESOP Compensation 434 358
Stock Awards Expense 378 490
Origination of loans held for sale (12,010) (10,326)
Proceeds from sale of loans 11,363 11,154
Change in net deferred loan
origination costs 24 (162)
Change in deferred income taxes 75 74
Provision for loan losses 396 75
Provision for losses on foreclosed real estate 3 --
Net (gain) loss on sales of investment securities 8 4
Net (gain) loss on sales of loans (160) (154)
Net (gain) loss on sale of foreclosed
real estate 1 1
Change in
Accrued interest receivable (547) 112
Cash surrender value of
life insurance (42) (106)
Other assets (138) (1,620)
Accrued expenses and other
liabilities 1,094 (2,570)
Net cash provided by (used in)
operating activities 2,835 (1,619)
Cash flows from investing activities
Net (increase) decrease in loans receivable (14,550) (36,074)
Proceeds from maturity of investment
securities - Held to Maturity 7,750 13,465
Proceeds from maturity of investment securities
Available for Sale 21,006 7,006
Proceeds from redemption of Federal Home
Loan Bank stock 851 --
Purchase of investment securities - Held to Maturity (25,365) (14,598)
Purchase of investment securities - Available for Sale (27,042) (3,022)
Investments in
Loans purchased (9,929) (12,450)
Federal Home Loan Bank stock -- (480)
Premises and equipment (3,051) (708)
Foreclosed real estate (29) (11)
Goodwill and core deposit intangibles (13,335) --
Cash surrender value of insurance (200) --
Net (increase) decrease in interest-bearing
deposits with financial institutions (7,423) 6,412
Proceeds from sales of foreclosed
real estate 236 72
Net cash used in investing activities (71,081) (40,388)
Cash flows from financing activities
Net increase in deposits 119,939 11,614
Net change in advances from
Federal Home Loan Bank (48,300) 40,500
Proceeds from securities sold under agreements
to purchase 7,000 --
Net decrease in advances from borrowers
for taxes and insurance (755) (678)
Purchase of Treasury Stock (9,151) (9,079)
Dividends paid (827) (593)
Net cash provided by financing activities 67,906 41,764
Net decrease in cash and cash equivalents (340) (243)
Cash and cash equivalents at beginning of period 4,350 3,005
Cash and cash equivalents at end of period 4,010 2,762
Supplemental disclosures of cash flow
information
Cash paid for
Interest $12,137 $7,842
Income taxes (refunds) (55) 998
Transfers from loans to real estate
acquired through foreclosure 166 88
</TABLE>
<PAGE>
Notes to Consolidated Financial Statements
(Unaudited)
(1) Basis of Presentation
The financial information of First Mutual Bancorp, Inc. (the
"Company") included herein is unaudited; however, such
information reflects all adjustments (consisting of normal
recurring adjustments) which are, in the opinion of management,
necessary for a fair statement of results for the interim
periods.
The financial information has been prepared in accordance with
generally accepted accounting principles for interim financial
information and with the instructions to Form 10-Q and Regulation
S-X. Accordingly, they do not include all the information and
footnotes required by generally accepted accounting principles
for complete financial statements.
The results of the interim periods ended September 30, 1997 are
not necessarily indicative of the results expected for the year
ending December 31, 1997.
(2) Conversion
On June 30, 1995, First Mutual Bank, S.B. (the "Bank") converted
from a state-chartered mutual savings bank to a state-chartered
stock savings bank. The Bank issued all of its common stock to
the Company and at the same time the Company issued 4,700,000
shares of common stock at $10.00 per share to the ESOP, certain
depositors of the Bank, and certain members of the general
public, all pursuant to a plan of conversion (the "Conversion").
The ESOP purchased 376,000 shares of common stock representing 8%
of the total issued shares at a price of $10.00 per share. The
ESOP borrowed $3,760,000 from the Company to purchase the stock
using the stock as collateral for the loan. The loan is to be
repaid principally from the Bank's contributions to the ESOP over
a period of up to 10 years.
(3) Earnings Per Share of Common Stock
Primary and fully diluted earnings per share for the quarter were
computed by dividing net income by 3,311,874, and 3,351,098
respectively, the weighted average number of net shares of common
stock outstanding during the three months ended September 30,
1997. There were 407,600 outstanding stock options during the
entire quarter at an exercise price of $11.75 per share.
<PAGE>
(4) Accounting Changes
On March 3, 1997, the Financial Accounting Standards Board (FASB)
issued Statement 128, Earnings Per Share, which is effective for
financial statements beginning with year end 1997. Statement 128
simplifies the calculation of earnings per share (EPS) by
replacing primary EPS with basic EPS. It also requires dual
presentation of basic EPS and diluted EPS for entities with
complex capital structures. Basic EPS includes no dilution and
is computed by dividing income available to common shareholders
by the weighted-average common shares outstanding for the period.
Diluted EPS reflects the potential dilution of securities that
could share in earnings, such as stock options, warrants or other
common stock equivalents. The Company expects Statement 128 to
have little impact on its earnings per share calculations in
future years, other than changing terminology from primary EPS to
basic EPS. All prior period EPS data will be restated to conform
with the new presentation.
In June, 1996, the Financial Accounting Standard's Board released
SFAS No. 125, "Accounting for Transfers and Extinguishments of
Liabilities." SFAS No. 125 provides accounting and reporting
standards for transfers and servicing of financial assets and
extinguishments of liabilities. SFAS No. 125 requires a
consistent application of a financial-components approach that
focuses on control. Under that approach, after a transfer of
financial assets, an entity recognizes the financial and
servicing assets it controls and the liabilities it has incurred,
and derecognizes liabilities when extinguished. SFAS No. 125
also supersedes SFAS No. 122 and requires that servicing assets
and liabilities be subsequently measured by amortization in
proportion to and over the period of estimated net servicing
income or loss and requires assessment for asset impairment or
increases obligation based on their fair values. SFAS No. 125
applies to transfers and extinguishments occurring after December
31, 1996 and early or retroactive application is not permitted.
The adoption of SFAS No. 125 did not have a material impact on
the financial position or results of operations of the Bank.
(5) Use of Estimates in the Preparation of Financial Statements
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Financial Condition
Total assets increased $70.6 million, or 21.3%, to $402.4 million
at September 30, 1997, from $331.8 million at December 31, 1996,
primarily as a result of the Bank acquiring three branch offices
in Pontiac, Lincoln, and Taylorville, Illinois (the "Branch
Acquisitions") from First of America Bank-Illinois, N.A. on
January 3, 1997.
The following summarizes the assets purchased and liabilities
assumed as a result of the Branch Acquisitions.
<TABLE>
Assets purchased: (In Thousands)
<S> <C> <C>
Cash due from banks $121,222
Loans Receivable $9,901
Less: Allowance
for loan losses (68) 9,833
------
Premises & Equipment 2,706
Goodwill and Core
Deposit Intangibles 13,318
Other assets 83
--------
Total Assets purchased $147,162
--------
--------
Liabilities assumed:
Deposits $145,520
Other liabilities 1,642
--------
Total Liabilities assumed $147,162
--------
--------
</TABLE>
Loans receivable (excluding loans held for sale) increased $23.9
million, or 8.5%, to $306.0 million at September 30, 1997, from
$282.1 million at December 31, 1996, as a result of the Branch
Acquisitions in addition to the excess of loan originations
versus repayments during the nine-month period. A total of $9.9
million of loans receivable was acquired as a result of the
Branch Acquisitions.
Interest-bearing deposits with financial institutions and
securities held-to-maturity and available for sale increased
$31.0 million, or 104.4%, to $60.7 million from $29.7 million at
December 31, 1996. The increase was primarily due to the
investment of the proceeds received as a result of the Branch
Acquisitions.
Premises and equipment increased $2.6 million, or 63.4%, to $6.7
million at September 30, 1997, from $4.1 million at December 31,
<PAGE>
1996, primarily as a result of the Branch Acquisitions, which
resulted in an additional $2.7 million in premises and equipment.
Goodwill and Core Deposit Intangibles increased to $12.8 million
from $0 as a result of the Branch Acquisitions.
Deposits increased $120.0 million, or 59.1%, to $322.9 million at
September 30, 1997, from $202.9 million at December 31, 1996,
primarily as a result of the Branch Acquisitions.
Advances from the Federal Home Loan Bank decreased $48.3 million,
or 76.9%, to $14.5 million at September 30, 1997, from $62.8
million at December 31, 1996, primarily as a result of the use of
proceeds from the Branch Acquisitions to repay outstanding
advances.
Securities sold under Agreements to Repurchase increased $7.0
million to $7.0 million at September 30, 1997, from $0 at
December 31, 1996 as a result of a Repurchase Agreement with the
Macon County Collector.
Non-performing assets were $1,054,000 as of September 30, 1997,
compared to $577,000 as of December 31, 1996. The following
table sets forth the amounts and categories of non-performing
assets.
<TABLE>
September 30, 1997 December 31, 1996
(Dollars in Thousands)
<S> <C> <C>
Non-Performing Loans:
One to four family $ 651 $ 298
Consumer 319 128
Commercial 49 74
Total 1,019 500
Total Repossessed
Assets 2 --
Total Real Estate
Owned 33 77
Total Non-performing
Assets $1,054 $ 577
Total Non-performing assets
to total assets .26% .17%
</TABLE>
<PAGE>
Liquidity and Capital Resources
The Company's primary sources of funds are deposits, funds
received from the sale, amortization, and prepayment of loans,
advances from the Federal Home Loan Bank, and funds provided from
operations. While scheduled loan repayments are a relatively
predictable source of funds, deposit flows and loan prepayments
are greatly influenced by general interest rates, economic
conditions and competition. The Company also borrows funds from
the Federal Home Loan Bank based on need, comparative costs, and
availability at the time. Assets of the Company qualifying for
regulatory liquidity totalled $51.9 million at September 30,
1997.
As of September 30, 1997, the Company had total equity capital of
$53.9 million and the Bank had total equity capital of $50.5
million. All the minimum levels of regulatory capital required
by the Federal Reserve Board for the Company and the Federal
Deposit Insurance Corporation for the Bank were met.
Results of Operations
General. Net income for the three months ended September 30,
1997, was $271,000 compared to a loss of $605,000 for the same
period in 1996. The increase was primarily due to the decrease
in non-interest expense of $1.0 million, or 26.3%, related
primarily to the FDIC special assessment of $1,314,000 in the
period ended September 30, 1996. Additionally, net interest
income increased $287,000, or 11.1%, and non-interest income
increased $203,000, or 79.3%. These were partially offset by the
increase in the provision for loan losses of $118,000 to $143,000
from $25,000 in the earlier period.
Net income for the nine months ended September 30, 1997, was
$788,000 compared to $724,000 for the same period in 1996. The
increase was primarily due to the increase in net interest income
of $.8 million, or 10.3% and non-interest income of $435,000, or
55.1%. These increases were partially offset by the increase in
non-interest expenses of $1.0 million, or 13.7%.
Interest Income. Interest income for the three months ended
September 30, 1997 increased $1.7 million, or 30.9%, from the
three months ended September 30, 1996. The increase was
primarily due to the increase in average earning assets of $72.4
million, or 24.2%, to $371.5 million from $299.1 million in the
earlier period, reflecting primarily the investment of proceeds
from the Branch Acquisitions. The average yield also increased
to 7.71% from 7.41% in the earlier period.
Interest income for the nine months ended September 30, 1997
increased $5.8 million, or 36.7%, from the nine months ended
September 30, 1996. The increase was primarily due to the
<PAGE>
increase in average earning assets of $100.1 million, or 35.1%,
to $385.0 million from $284.9 million in the earlier period,
reflecting primarily the investment of proceeds from the Branch
Acquisitions. The average yield also increased to 7.49% from
7.41% in the earlier period.
Interest Expense. Interest expense increased $1.3 million, or
43.3%, to $4.3 million for the three months ended September 30,
1997, as compared to $3.0 million for the three months ended
September 30, 1996, primarily due to the increase in average
paying liabilities, which increased $104.6 million, or 43.4%, to
$345.5 million from $240.9 million in the earlier period. The
increase in the average paying liabilities was primarily due to
the Branch Acquisitions. The cost of the average paying
liabilities also increased to 4.97% from 4.92% in the earlier
period.
Interest expense increased $5.0 million, or 62.5%, to $13.0
million for the nine months ended September 30, 1997, from $8.0
million in the earlier nine-month period, primarily due to the
increase in average paying liabilities, which increased $134.7
million, or 60.7%, to $356.5 million from $221.8 million in the
earlier period, primarily as a result of the Branch Acquisitions.
The cost of the average paying liabilities also increased to
4.88% from 4.84% in the earlier period.
Net Interest Income. Net interest income increased $.3 million,
or 11.5%, during the current three-month period versus the
earlier three-month period. The increase was primarily due to
the increase in the net interest rate spread, which increased to
2.74% from 2.49% in the earlier period, and to a lesser extent to
the increase in earning assets of $72.4 million versus the
increase in paying liaibilities of $104.6 million.
Net interest income increased $.8 million, or 10.3%, for the
current nine-month period versus the earlier nine-month period.
The increase was primarily due to the increase in average earning
assets of $100.1 million, which was partially offset by the
$134.7 million increase in interest paying liabilities during the
current period versus the earlier period. To a lesser extent,
the increase was due to the increase in the spread to 2.61% for
the current nine-month period as compared to 2.57% for the
earlier nine-month period.
Provision for Loan Losses. The Bank maintains an allowance for
loan losses based upon management's periodic evaluation of known
and inherent risks in the loan portfolio including commercial
real estate and commercial business loans, the Bank's past loss
experience, adverse situations that may affect borrowers' ability
to repay loans, estimated value of underlying loan collateral,
current and to a lesser extent, expected future economic
conditions. During the three months ended September 30, 1997, a
<PAGE>
$143,000 provision for loan losses was recorded primarily as a
result of the overall increase in the loan portfolio, changes in
the loan portfolio mix, especially the increase in commercial and
consumer loans, and to the net charge-offs incurred during the
period. Bank management made a $25,000 provision to the
allowance for loan losses for the same period in 1996. The
Bank's ratio of allowance for loan losses to non-performing loans
was 143.3% at September 30, 1997, compared to 248.8% at December
31, 1996, primarily due to the increase in non-performing loans
to $1.0 million at September 30, 1997, compared to $.5 million at
December 31, 1996.
During the nine months ended September 30, 1997, a $396,000
provision for loan losses was recorded as a result of the overall
increase in the loan portfolio, changes in the loan portfolio
mix, especially the increases in commercial and consumer loans,
and to the net charge-offs incurred during the period. Bank
management made a $75,000 provision to the allowance for loan
losses for the same period in 1996.
Non-Interest Income. Non-interest income, consisting primarily
of service charges and fees on loans and deposit accounts, net
gain on sale of mortgage loans, investment sales commissions, and
loan servicing fees increased $203,000, or 79.3%, for the three-
month period ended September 30, 1997, as compared to the earlier
three-month period and $435,000, or 55.1% for the nine-month
period ended September 30, 1997 as compared to the earlier nine-
month period. The increases were primarily due to the increase
in deposit service fee income of $132,000 for the three-month
period and $306,000 for the nine-month period. Deposit service
fee income increased for both periods primarily due to the
increase in deposits as a result of the Branch Acquisitions.
Non-Interest Expense. Non-interest expense, consisting primarily
of employee compensation and benefits, premises and equipment
expenses, federal deposit insurance premiums, data processing,
advertising and promotion, amortization of goodwill and core
deposit intangibles, and other miscellaneous items decreased $1.0
million, or 26.3%, for the three-month period ended September 30,
1997, as compared to the earlier three-month period in 1996,
primarily due to the FDIC special assessment of $1.3 million in
the earlier period. Non-interest expense for the nine-month
period increased $1.0 million, or 13.7% in the current period
versus the earlier period. The increase in the nine-month period
was due primarily to the costs of adding new products and
services, the Branch Acquisitions, and the addition of three
supermarket branch facilities in the Decatur area. Compensation
and benefits increased $.9 million, or 26.5%, for the nine-month
period, primarily due to the increase in the number of full-time
equivalent employees to 168 at September 30, 1997, as compared to
122 at September 30, 1996. The amortization of goodwill and core
deposit intangibles resulting from the Branch
<PAGE>
Acquisitions, was $179,000 for the current three-month period and
$539,000 for the current nine-month period as compared to $0 in
the earlier periods. Occupancy and equipment expenses increased
$111,000 for the three-month period and $389,000 for the nine-
month period, primarily due to the Branch Acquisitions and the
addition of three supermarket branch facilities. Data Processing
costs increased $69,000 during the three-month period and
$289,000 during the nine-month period as compared to the earlier
periods primarily due to the Branch Acquisitions and adding new
products and services. These increases were partially offset by
the decrease in the FDIC Deposit Insurance Premium, which
decreased $79,000 during the current three-month period and
$238,000 during the current nine-month period as compared to the
earlier periods.
Income Tax Expenses. Income tax expenses increased $543,000 for
the three-month period and decreased $157,000 for the nine-month
period ended September 30, 1997, as compared to the same periods
in 1996. The increase for the three-month period was due to the
increase in earnings before taxes and the decrease for the nine-
month period was due primarily to the increased taxes in the
earlier 1996 period resulting from an audit by the Illinois
Department of Revenue for years prior to 1995.
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings
There are no material pending legal proceedings to
which the Company or any of its subsidiaries is a party
other than ordinary routine litigation incidental to
their respective businesses.
ITEM 2. CHANGES IN SECURITIES
NONE
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
NONE
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
NONE
ITEM 5. OTHER INFORMATION
NONE
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
NONE
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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 MUTUAL BANCORP, INC.
(Registrant)
Date: January 12, 1998 By: /s/ Paul K. Reynolds
-----------------------------------
Paul K. Reynolds, President
and Chief Executive Officer
Date: January 12, 1998 By: /s/ G. Lynn Brinkman
-----------------------------------
G. Lynn Brinkman, Vice President
Secretary, Treasurer and
Chief Financial Officer
