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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
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 0-25484
DAMEN FINANCIAL CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE
(State or other jurisdiction of
incorporation or organization)
36-4029638
I.R.S. Employer
Identification Number
200 WEST HIGGINS ROAD, SCHAUMBURG, ILLINOIS
(Address of Principal executive offices)
60195
(Zip Code)
Registrant telephone number, including area code:
(847) 882-5320
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 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[ ]
As of May 7, 1999 there were 2,820,154 shares of the Registrant's common
stock issued and outstanding.
Transitional Small Business Disclosure Format(check one): Yes [ ] No [X]
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DAMEN FINANCIAL CORPORATION
FORM 10-Q
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Statements of Financial Condition at March
31, 1999 (Unaudited) and September 30, 1998............... 4
Consolidated Statements of Earnings for the three and six
months ended March 31, 1999 and 1998 (unaudited).......... 5
Consolidated Statements of Changes in Stockholders' Equity
for the six months ended March 31, 1999 (unaudited)....... 6
Consolidated Statements of Cash Flows for the six months
ended March 31, 1999 and 1998 (unaudited)................. 7
Notes to Unaudited Consolidated Financial Statements...... 8-9
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations................................... 10-16
Part II. OTHER INFORMATION.................................................... 17-18
Signatures.................................................. 19
Index to Exhibits........................................... 20
Earnings Per Share Analysis (Exhibit 11).................... 21
Financial Data Schedule (Exhibit 27)........................ 22
</TABLE>
2
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PART I -- FINANCIAL INFORMATION
3
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DAMEN FINANCIAL CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
<TABLE>
<CAPTION>
MARCH 31, SEPTEMBER 30,
1999 1998
--------- -------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Cash and amounts due from depository institutions........... $ 447,761 541,682
Interest-bearing deposits................................... 854,563 1,245,446
------------ -----------
Total cash and cash equivalents...................... 1,302,324 1,787,128
Investment securities held to maturity (fair value:
$1,612,700 at March 31, 1999 and $1,728,900 at September
30, 1998)................................................. 1,612,728 1,728,931
Investment securities, available for sale, at fair value.... 36,492,654 40,377,371
Mortgage-backed securities held to maturity (fair value:
$11,230,000 at March 31, 1999 and $16,478,500 at September
30, 1998)................................................. 11,206,698 16,434,332
Mortgage-backed securities, available for sale, at fair
value..................................................... 38,784,722 48,617,275
Loans receivable (net of allowance for loan losses:
$454,000 at March 31, 1999 and $449,000 at September 30,
1998).................................................. 117,558,425 109,417,586
Stock in Federal Home Loan Bank and Federal Reserve Bank of
Chicago................................................... 3,530,150 3,815,150
Accrued interest receivable................................. 1,562,686 1,755,466
Office properties and equipment -- net...................... 3,465,929 3,530,443
Prepaid expenses and other assets........................... 618,208 569,040
------------ -----------
Total assets........................................... 216,134,524 228,032,722
============ ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Deposits.................................................... 115,589,580 115,698,518
Borrowed money.............................................. 55,000,000 61,800,000
Advance payments by borrowers for taxes and insurance....... 897,430 2,598,991
Other liabilities........................................... 1,822,009 2,681,029
------------ -----------
Total liabilities...................................... 173,309,019 182,778,538
------------ -----------
Stockholders' Equity
Preferred stock, $.01 par value; authorized 100,000 shares;
none outstanding.......................................... -- --
Common stock, $.01 par value; authorized 4,500,000 shares;
3,981,434 shares issued and 2,820,154 shares outstanding
at March 31, 1999 and 2,957,154 shares outstanding at
September 30, 1998........................................ 39,814 39,814
Additional paid-in capital.................................. 38,892,061 38,837,468
Retained earnings, substantially restricted................. 22,822,590 22,882,928
Accumulated other comprehensive income, net of income
taxes..................................................... 1,004,980 1,740,980
Treasury stock, at cost (1,161,280 shares at March 31, 1999
and 1,024,280 shares at September 30, 1998)............... (16,892,277) (14,913,027)
Common stock acquired by Employee Stock Ownership Plan...... (2,233,400) (2,339,200)
Common stock awarded by Recognition and Retention Plan...... (808,263) (994,779)
------------ -----------
Total stockholders' equity........................... 42,825,505 45,254,184
------------ -----------
Total liabilities and stockholders' equity........... $216,134,524 228,032,722
============ ===========
</TABLE>
See accompanying notes to consolidated financial statements.
4
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DAMEN FINANCIAL CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF EARNINGS
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
MARCH 31, MARCH 31,
----------------------- ----------------------
1999 1998 1999 1998
---- ---- ---- ----
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Interest income:
Loans.......................................... $2,256,801 2,067,464 4,443,242 4,113,487
Mortgage-backed securities..................... 844,044 1,386,650 1,856,451 2,811,219
Tax-exempt securities.......................... 259,690 340,367 543,011 672,904
Interest and dividends on other investments.... 317,189 372,841 710,367 650,301
Dividends on FHLB and FRB stock................ 54,162 60,354 114,919 124,082
---------- --------- --------- ---------
Total interest income....................... 3,731,886 4,227,676 7,667,990 8,371,993
---------- --------- --------- ---------
Interest expense:
Deposits....................................... 1,360,459 1,604,654 2,810,873 3,254,957
Borrowings..................................... 830,356 930,174 1,727,554 1,826,284
---------- --------- --------- ---------
Total interest expense...................... 2,190,815 2,534,828 4,538,427 5,081,241
---------- --------- --------- ---------
Net interest income before provision for
loan losses............................... 1,541,071 1,692,848 3,129,563 3,290,752
Provision for loan losses........................ 5,000 18,170 5,000 39,170
---------- --------- --------- ---------
Net interest income after provision for loan
losses.................................... 1,536,071 1,674,678 3,124,563 3,251,582
---------- --------- --------- ---------
Non-interest income:
Loan fees and service charges.................. 28,575 66,551 78,619 79,598
Gain on sale of investment securities,
available for sale.......................... -- 143,398 90,767 274,635
Rental income.................................. 41,457 21,639 85,320 36,181
Other income................................... 20,967 22,047 53,117 39,683
---------- --------- --------- ---------
Total non-interest income................... 90,999 253,635 307,823 430,097
---------- --------- --------- ---------
Non-interest expense:
Compensation, employee benefits, and related
expenses.................................... 720,479 693,050 1,463,171 1,354,906
Advertising and promotion...................... 143,734 39,280 169,731 182,706
Occupancy and equipment expense................ 199,391 169,499 408,245 355,458
Data processing................................ 33,834 33,324 65,834 65,622
Insurance expense.............................. 19,800 18,288 39,660 36,526
Federal insurance premiums..................... 17,877 19,721 35,796 38,836
Legal, audit, and examination services......... 388,594 148,046 444,731 210,238
Other operating expenses....................... 132,743 102,626 215,372 176,790
---------- --------- --------- ---------
Total non-interest expense.................. 1,656,452 1,223,834 2,842,540 2,421,082
---------- --------- --------- ---------
Net income (loss) before income taxes............ (29,382) 704,479 589,846 1,260,597
Provision for federal and state income taxes
(benefit)...................................... (107,471) 146,534 24,534 243,862
---------- --------- --------- ---------
Net income.................................. $ 78,089 557,945 565,312 1,016,735
========== ========= ========= =========
Earnings per share -- basic...................... $ .03 .19 .22 .35
---------- --------- --------- ---------
Earnings per share -- diluted.................... .03 .19 .21 .34
---------- --------- --------- ---------
Dividends declared per common share.............. $ .12 .10 .24 .16
---------- --------- --------- ---------
</TABLE>
See accompanying notes to consolidated financial statements.
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DAMEN FINANCIAL CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
SIX MONTHS ENDED MARCH 31, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
ACCUMULATED COMMON COMMON
ADDITIONAL OTHER STOCK STOCK
COMMON PAID-IN RETAINED COMPREHENSIVE TREASURY ACQUIRED AWARDED
STOCK CAPITAL EARNINGS INCOME STOCK BY ESOP BY RRP TOTAL
------ ---------- -------- ------------- -------- -------- ------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at September 30,
1998................... $39,814 38,837,468 22,882,928 1,740,980 (14,913,027) (2,339,200) (994,779) 45,254,184
------- ---------- ---------- --------- ----------- ---------- -------- ----------
Additions (deductions)
for the period ended
March 31, 1999:
Comprehensive income:
Net income............. 565,312 565,312
Other comprehensive
income, net of tax:
Unrealized holding
loss during the
period........... (676,720) (676,720)
Less:
reclassification
adjustment of
gains included in
net income....... (59,280) (59,280)
------- ---------- ---------- --------- ----------- ---------- -------- ----------
Total comprehensive
income........... -- -- 565,312 (736,000) -- -- -- (170,688)
------- ---------- ---------- --------- ----------- ---------- -------- ----------
Purchase of treasury
stock (137,000
shares).............. (1,979,250) (1,979,250)
Amortization of award
of RRP stock......... 186,516 186,516
Contribution to fund
ESOP loan............ 54,593 105,800 160,393
Dividends declared on
common stock......... (625,650) (625,650)
------- ---------- ---------- --------- ----------- ---------- -------- ----------
Balance at March 31,
1999................... $39,814 38,892,061 22,822,590 1,004,980 (16,892,277) (2,233,400) (808,263) 42,825,505
======= ========== ========== ========= =========== ========== ======== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
6
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DAMEN FINANCIAL CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
SIX MONTHS ENDED MARCH 31,
--------------------------
1999 1998
---- ----
(UNAUDITED)
<S> <C> <C>
Cash flows from operating activities:
Net income................................................ $ 565,312 1,016,735
Adjustments to reconcile net income to net cash from
operating activities:
Depreciation............................................ 143,525 118,825
Amortization of cost of stock benefit plans............. 346,909 363,635
Provision for loan losses............................... 5,000 39,170
Decrease in deferred loan income........................ (85,625) (181,149)
(Increase) decrease in prepaid and deferred federal and
state income taxes.................................... (114,086) 349,012
Gain on sale of investment securities, available for
sale.................................................. (90,767) (274,635)
(Increase) decrease in accrued interest receivable...... 192,780 (126,889)
Increase in accrued interest payable.................... 44,254 30,900
Decrease in other assets................................ 8,932 5,211
Decrease in other liabilities........................... (348,275) (100,187)
------------ -----------
Net cash provided by operating activities................... 667,959 1,240,628
------------ -----------
Cash flows from investing activities:
Purchase of investment securities, available for sale... (3,493,516) (9,844,976)
Purchase of investment securities....................... (132,757) (46,203)
Purchase of mortgage-backed securities, available for
sale.................................................. -- (6,043,208)
Proceeds from sales of investment securities, available
for sale.............................................. 1,160,823 674,622
Proceeds from maturities of investment securities,
available for sale.................................... 5,597,177 3,292,233
Proceeds from maturities of investment securities....... 248,960 91,604
Proceeds from maturities of mortgage-backed securities,
available for sale.................................... 9,296,553 7,134,349
Proceeds from maturities of mortgage-backed
securities............................................ 5,227,634 4,668,597
Purchase of Federal Home Loan Bank and Federal Reserve
Bank stock............................................ -- (105,000)
Proceeds from redemption of Federal Home Loan Bank
stock................................................. 285,000 --
Disbursements for loans................................. (25,329,414) (12,831,391)
Loan repayments......................................... 17,269,200 9,337,306
Property and equipment expenditures..................... (91,211) (78,181)
------------ -----------
Net cash provided by (for) investing activities............. 10,038,449 (3,750,248)
------------ -----------
Cash flows from financing activities:
Proceeds from exercise of stock options................. -- 161,983
Deposit receipts........................................ 53,104,606 35,771,078
Deposit withdrawals..................................... (55,955,320) (38,289,269)
Interest credited to deposit accounts................... 2,741,776 2,234,790
Proceeds from borrowed money............................ 3,300,000 30,800,000
Repayment of borrowed money............................. (10,100,000) (28,300,000)
Increase (decrease) in advance payments by borrowers for
taxes and insurance................................... (1,701,561) 177,153
Purchase of treasury stock.............................. (1,979,250) --
Dividends paid on common stock.......................... (601,463) (437,637)
------------ -----------
Net cash provided by (for) financing activities............. (11,191,212) 2,118,098
------------ -----------
Decrease in cash and cash equivalents....................... (484,804) (391,522)
Cash and cash equivalents at beginning of period............ 1,787,128 2,090,984
------------ -----------
Cash and cash equivalents at end of period.................. $ 1,302,324 1,699,462
============ ===========
Cash paid during the period for:
Interest................................................ $ 4,494,173 5,050,341
Income taxes............................................ 197,504 62,388
============ ===========
</TABLE>
See accompanying notes to consolidated financial statements.
7
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DAMEN FINANCIAL CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. STATEMENT OF INFORMATION FURNISHED
The accompanying unaudited consolidated financial statements have been
prepared in accordance with Form 10-Q instructions and Article 10 of Regulation
S-X, and in the opinion of management contains all adjustments (all of which are
normal and recurring in nature) necessary to present fairly the financial
position as of March 31, 1999, the results of operations for the three and six
months ended March 31, 1999 and 1998 and cash flows for the six months ended
March 31, 1999 and 1998. These results have been determined on the basis of
generally accepted accounting principles. 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 disclosures 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. The attached consolidated statements are those of Damen Financial
Corporation (the "Company") and its consolidated subsidiaries Damen National
Bank (the "Bank") and Dasch Inc. The results of operations for the three and six
month periods ended March 31, 1999 are not necessarily indicative of the results
to be expected for the full year.
2. EARNINGS PER SHARE
Earnings per share for the three and six month periods ended March 31, 1999
and 1998 were determined by dividing net income for the periods by the weighted
average number of both basic and diluted shares of common stock and common stock
equivalents outstanding (see Exhibit 11 attached). Stock options are regarded as
common stock equivalents and are therefore considered in diluted earnings per
share calculations. Common stock equivalents are computed using the treasury
stock method. ESOP shares not committed to be released to participants are not
considered outstanding for purposes of computing earnings per share amounts.
3. INDUSTRY SEGMENTS
The Company operates principally in the banking industry through its
subsidiary bank. As such, substantially all of the Company's revenues, net
income, identifiable assets and capital expenditures are related to banking
operations.
4. AGREEMENT AND PLAN OF MERGER
On February 23, 1999, the Company announced that it had signed an Agreement
and Plan of Merger with MidCity Financial Corporation pursuant to which MidCity
will acquire all of the outstanding shares of Damen Financial Corporation at a
cash price of $18.35 per share. The merger agreement is subject to regulatory
and shareholder approval, and it is anticipated to be finalized by June 30,
1999.
5. IMPACT OF NEW ACCOUNTING STANDARDS
ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND FOR HEDGING ACTIVITIES. In June
1998, the FASB issued Statement of Financial Accounting Standards No. 133 ("SFAS
No. 133"), entitled "Accounting for Derivative Instruments and for Hedging
Activities." SFAS No. 133 provides a comprehensive and consistent standard for
the recognition and measurement of derivatives and hedging activities. The
statement requires all derivatives to be recorded on the balance sheet at fair
value and establishes special accounting for the following three different types
of hedges: hedges of changes in the fair value of assets, liabilities or firm
commitments (referred to as fair value hedges); hedges of the variable cash
flows of forecasted transactions (cash flow hedges); and hedges of foreign
currency exposures of net investments in foreign operations. Though the
accounting treatment and criteria for each of the three types of hedges is
unique, they all result in recognizing offsetting changes in value or cash flow
of both the hedge and the hedged item in earnings in the same period. Changes in
the fair value of derivatives that do not meet the criteria of one of these
three
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categories of hedges are included in earnings in the period of the change. SFAS
No. 133 is effective for years beginning after June 15, 1999, but companies can
adopt SFAS No. 133 as early as the beginning of any fiscal quarter that begins
after June 1998. Management does not believe that adoption of SFAS No. 133 will
have a material impact on the Company's consolidated financial condition or
results of operations.
ACCOUNTING FOR MORTGAGE-BACKED SECURITIES RETAINED AFTER THE SECURITIZATION
OF MORTGAGE LOANS HELD FOR SALE BY A MORTGAGE BANKING ENTERPRISE. In October
1998, the FASB issued Statement of Financial Accounting Standards No. 134,
"Accounting for Mortgage-Backed Securities Retained after the Securitization of
Mortgage Loans Held for Sale by a Mortgage Banking Enterprise" ("SFAS No. 134"),
which is effective for the first fiscal quarter after December 15, 1998. This
statement amends SFAS No. 65 "Accounting for Certain Mortgage Banking
Activities." This statement revises the accounting for retained securities and
beneficial interests. Management does not believe that adoption of SFAS No. 134
had a material impact on the Company's consolidated financial condition or
results of operations.
The foregoing does not constitute a comprehensive summary of all material
changes or developments affecting the manner in which the Company keeps its
books and records and performs its financial accounting responsibilities. It is
intended only as a summary of some of the recent pronouncements made by the FASB
which are of particular interest to financial institutions.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
FINANCIAL CONDITION
MARCH 31, 1999 COMPARED TO SEPTEMBER 30, 1998
Total assets decreased $11.9 million to $216.1 million as of March 31, 1999
from $228.0 million as of September 30, 1998 as excess cash flows generated by
liquidating investment securities were used to fund loan originations, reduce
FHLB advances and fund treasury stock purchases. Investment securities
available-for-sale decreased $3.9 million to $36.5 million at March 31, 1999
from $40.4 million at September 30, 1998 due primarily to a market value
decrease of $711,000 and sales and maturities of $6.8 million, partially offset
by purchases of $3.5 million. Mortgage-backed securities held to maturity
decreased to $11.2 million at March 31, 1999 from $16.4 million at September 30,
1998 due primarily to repayments. Mortgage-backed securities available-for-sale
decreased $9.8 million to $38.8 million at March 31, 1999 from $48.6 million at
September 30, 1998 due primarily to repayments of $9.3 million and a market
value decrease of $536,000. Loans receivable increased $8.2 million to $117.6
million at March 31, 1999 from $109.4 million at September 30, 1998 due
primarily to new loan originations of $24.8 million exceeding repayments of
$17.3 million. Loan originations consisted primarily of mortgage loans and home
equity line of credit loans which increased due to favorable interest rates.
Total deposits decreased $109,000 to $115.6 million at March 31, 1999 from
$115.7 million at September 30, 1998. FHLB advances decreased $6.8 million to
$55.0 million at March 31, 1999 from $61.8 million at September 30, 1998. The
decreased advances were the result of excess cash flows generated by investment
maturities, accelerated repayments and sales.
Stockholders' equity decreased $2.5 million to $42.8 million at March 31,
1999 from $45.3 million at September 30, 1998 due primarily to the purchase of
treasury stock at a cost of $2.0 million, a decrease in net unrealized gains of
$736,000 due partially to a decrease in the available-for-sale portfolio, and
the payment of dividends totaling $626,000, partially offset by net income of
$565,000 for the six month period. At March 31, 1999, there were 2,820,154
shares of common stock outstanding.
RESULTS OF OPERATIONS
The Company's results of operations depend primarily upon the level of net
interest income, which is the difference between the interest income earned on
its interest-earning assets such as loans and investments, and the costs of the
Company's interest-bearing liabilities, primarily deposits and borrowing. Net
interest income depends upon the volume of interest-earning assets and
interest-bearing liabilities and the interest rate earned or paid on them,
respectively. Results of operations are also dependent upon the level of the
Company's non-interest income, including fee income and service charges, and
affected by the level of its non-interest expenses, including its general and
administrative expenses.
COMPARISON OF OPERATING RESULTS FOR THE
QUARTERS ENDED MARCH 31, 1999 AND 1998
NET INCOME. The Company's net income for the three months ended March 31,
1999 was $78,000 as compared to $558,000 for the same period in 1998, a decrease
of $480,000. This decrease was due primarily to a decrease in net interest
income of $151,000, a decrease of $144,000 in gains on the sale of investment
securities, and an increase in non-interest expense of $433,000 due primarily to
costs related to the proposed merger and other costs related to the annual
shareholders' meeting and related proxy solicitation process, partially offset
by a decrease in the provision for income taxes of $254,000.
INTEREST INCOME. Total interest income for the quarter ended March 31, 1999
decreased $496,000 compared to a year ago due to a decrease in average
interest-earning assets of $16.7 million to $209.9 million from $226.6 million,
as well as a decrease in the yield on average interest-earning assets from 7.46%
to 7.11%. The decrease in average interest-earning assets was partially due to
the utilization of $4.8 million during the
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current period for the repurchase of Company stock, and $12.9 million for
funding savings withdrawals and borrowed money repayments.
INTEREST EXPENSE. The Company's interest expense decreased $344,000 for the
quarter ended March 31, 1999 compared to a year ago due to a decrease in average
interest-bearing liabilities to $172.6 million at March 31, 1999 from $185.5
million a year ago, and a decrease in the average interest rate to 5.08% from
5.47%. The decrease in average interest-bearing liabilities resulted from a
decrease in the average balance of savings deposits of $8.8 million as well as a
decrease in the average balance of borrowed money of $4.1 million.
PROVISION FOR LOAN LOSSES. The determination of the allowance for loan
losses involves material estimates that are susceptible to significant change in
the near term. The allowance for loan losses is maintained at a level deemed
adequate to provide for losses through charges to operating expense. The
allowance is based upon past loss experience and other factors which, in
management's judgment, deserve current recognition in estimating losses. Such
other factors considered by management include the growth and composition of the
loan portfolio, the relationship of the allowance for losses to outstanding
loans, and economic conditions.
The Company's provision for loan losses was $5,000 for the quarter ended
March 31, 1999 compared to $18,170 for the same quarter the prior year. Mortgage
loans on commercial properties increased $1.9 million and secured lines of
credit increased $345,000, while non-performing loans decreased to $232,000 from
$459,000 at December 31, 1998.
The Company will continue to monitor its allowance for loan losses and make
future additions to the allowance through the provisions for loan losses in
light of its level of loans and as economic conditions dictate. There can be no
assurance that the Company will not make future provisions in an amount equal to
or greater than the amount provided during recent periods, or that future losses
will not exceed estimated amounts.
NON-INTEREST INCOME. The Company's non-interest income was $91,000 for the
quarter ended March 31, 1999 compared to $254,000 for the same quarter a year
ago due to a decrease in gains of the sale of investment securities of $143,000
and a decrease in loan-related fee income of $38,000, partially offset by an
increase in rental income of $20,000.
NON-INTEREST EXPENSE. The Company's non-interest expense increased $433,000
for the quarter ended March 31, 1999 due primarily to costs related to the
proposed merger and other costs related to the annual shareholders' meeting and
related proxy solicitation process.
PROVISION FOR INCOME TAXES. The tax benefit for the quarter ended March 31,
1999 was $107,000 due to a pre-tax loss of $29,000, as well as the continuing
tax benefits of low-income housing tax credits and tax-exempt income.
COMPARISON OF OPERATING RESULTS FOR THE
SIX MONTHS ENDED MARCH 31, 1999 AND 1998
NET INCOME. The Company's net income for the six months ended March 31,
1999 was $565,000 as compared to $1.0 million for the same period in 1998, or a
decease of $452,000. This decrease was the result of a decease in net interest
income of $161,000, a decrease in gains on the sale of investment securities of
$184,000, and an increase in non-interest expense of $421,000, partially offset
by a decrease in the provision for loan losses of $34,000, an increase in rental
income of $49,000, and a decrease in income taxes of $219,000.
INTEREST INCOME. Total interest income for the six months ended March 31,
1999 decreased $704,000 to $7.7 million from $8.4 million a year ago due to a
decrease in average interest-earning assets of $11.9 million to $212.5 million
from $224.4 million, as well as a decrease in the yield or average
interest-earning assets to 7.22% from 7.46%. The decrease in average
interest-earning assets was partially due to the utilization of $4.8 million
during the current period for the repurchase of Company stock, and $9.0 million
for funding savings withdrawals and borrowed money repayments.
INTEREST EXPENSE. The Company's interest expense decreased $543,000 to $4.5
million for the six months ended March 31, 1999 from $5.1 million a year ago.
This decrease was due to a decrease in average interest-bearing
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liabilities of $9.0 million to $174.7 million at March 31, 1999 from $183.7
million a year ago, as well as a decrease in the average interest rate to 5.20%
from 5.53%. The decrease in average interest-bearing liabilities resulted from a
decrease in the average balance of savings deposits of $8.3 million, as well as
a decrease in the average balance of borrowed money of $622,000.
PROVISION FOR LOAN LOSSES. The determination of the allowance for loan
losses involves material estimates that are susceptible to significant change in
the near term. The allowance for loan losses is maintained at a level deemed
adequate to provide for losses through charges to operating expense. The
allowance is based upon past loss experience and other factors which, in
management's judgment, deserve current recognition in estimating losses. Such
other factors considered by management include growth and composition of the
loan portfolio, the relationship of the allowance for losses to outstanding
loans, and economic conditions.
The Company's provision for loan losses was $5,000 for the six months ended
March 31, 1999 compared to $39,000 for the same period in the prior year. This
year's provision was due primarily to an increase in mortgage loans, home equity
line of credit loans and commercial loans, partially offset by a decrease in
charge-offs.
The Company will continue to monitor its allowance for loan losses and make
future additions to the allowance through the provisions for loan losses in
light of its level of loans and as economic conditions dictate. There can be no
assurance that the Company will not make future provisions in an amount equal to
or greater than the amount provided during recent periods, or that future losses
will not exceed estimated amounts.
NON-INTEREST INCOME. The Company's non-interest income decreased $122,000
for the six months ended March 31, 1999 to $308,000 from $430,000 for the same
period one year ago. The decrease was due primarily to a decrease in gains on
the sale of investment securities of $184,000, partially offset by an increase
in rental income of $49,000.
NON-INTEREST EXPENSE. The Company's non-interest expense increased $421,000
for the six months ended March 31, 1999 to $2.8 million from $2.4 million for
the same period one year ago. The increase was primarily the result of increases
of $108,000 in compensation and benefits, $53,000 in occupancy and equipment
expenses, and $235,000 in professional fees related to the proposed merger and
the annual shareholders' meeting.
PROVISION FOR INCOME TAXES. Income tax expense for the six months ended
March 31, 1999 decreased $219,000 to $25,000 compared to $244,000 for the
comparable period in 1998. The decrease was primarily due to a decrease in
pre-tax income.
LIQUIDITY AND CAPITAL RESOURCES
The Company's principal sources of funds are deposits and borrowings,
amortization and prepayments of loan principal and mortgage-backed securities,
maturities of investment securities and income from operations. While scheduled
loan repayments and maturing investments are relatively predictable, deposit
flows and early loan repayments are more influenced by interest rates, floors
and caps on loan rates, general economic conditions and competition. The Company
generally manages the pricing of its deposits to be competitive and to increase
core deposit relationships, where practicable.
The Company's most liquid assets are cash and cash equivalents, which
consist of interest bearing deposits and short term highly liquid investments
with original maturities of less than three months that are readily convertible
to known amounts of cash. The level of these assets is dependent on the
Company's operating, financing and investing activities during any given period.
At March 31, 1999 and September 30, 1998, cash and cash equivalents totaled $1.3
million and $1.8 million respectively.
The primary financing activities of the Company are deposits and
borrowings. For the six months ended March 31, 1999, deposits decreased $109,000
and the Bank's net (proceeds less repayments) financing activity with the FHLB
decreased $6.8 million.
12
<PAGE> 13
The Company anticipates that it will have sufficient funds available to
meet current commitments. At March 31, 1999 the Company has outstanding loan
commitments totaling approximately $2.7 million, and unused lines of credit
granted totaling approximately $1.5 million.
The Bank is subject to the capital regulations of the Office of the
Comptroller of the Currency ("OCC"). The OCC's regulations establish two capital
standards for national banks: a leverage requirement and a risk-based capital
requirement. In addition, the OCC may, on a case-by-case basis, establish
individual minimum capital requirements for a national bank that vary from the
requirements which would otherwise apply under OCC regulations. A national bank
that fails to satisfy the capital requirements established under the OCC's
regulations will be subject to such administrative action or sanctions as the
OCC deems appropriate.
The leverage ratio adopted by the OCC requires a minimum ratio of "Tier 1
capital" to adjusted total assets of 3% for national banks rated composite 1
under the CAMEL rating system for banks. National banks not rated composite 1
under the CAMEL rating system for banks are required to maintain a minimum ratio
of Tier 1 capital to adjusted total assets of 4% to 5%, depending upon the level
and nature of risks of their operations. For purposes of the OCC's leverage
requirement, Tier 1 capital generally consists of common stockholders' equity
and retained income and certain non-cumulative perpetual preferred stock and
related income, except that no intangibles and certain purchased mortgage
servicing rights and purchased credit card relationships may be included in
capital.
The risk-based capital requirements established by the OCC's regulations
require national banks to maintain "total capital" equal to at least 8% of total
risk-weighted assets. For purposes of the risk-based capital requirement, "total
capital" means Tier 1 capital (as described above) plus "Tier 2 capital",
provided that the amount of Tier 2 capital may not exceed the amount of Tier 1
capital, less certain assets. The components of Tier 2 capital include certain
permanent and maturing capital instruments that do not qualify as core capital
and general valuation loan and lease loss allowances up to a maximum of 1.25% of
risk-weighted assets.
The OCC has revised its risk-based capital requirements to permit the OCC
to require higher levels of capital for an institution in light of its interest
rate risk. In addition, the OCC has proposed that a bank's interest rate risk
exposure would be quantified using either the measurement system set forth in
the proposal or the institution's internal model for measuring such exposure, if
such model is determined to be adequate by the institution's examiner.
Management of the Bank has not determined what effect, if any, the OCC's
proposed interest rate risk component would have on the Bank's capital
requirement if adopted as proposed.
At March 31, 1999, the Bank had Tier 1 capital of $38.7 million or 18.1% of
adjusted total assets and Tier 2 capital of $39.2 million or 34.4% of total
risk-weighted assets.
13
<PAGE> 14
NON-PERFORMING ASSETS
The following table sets forth the amounts and categories of non-performing
assets in the Company's portfolio. Loans are placed on non-accrual status when
principal and interest are 90 days or more past due, unless, in the judgment of
management, the loan is well collaterized and in the process of collection.
Loans are also reviewed monthly and any loan whose collectibility is doubtful is
placed on non-accrual status. Interest accrued and unpaid at the time a loan is
placed on non-accrual status is charged against interest income. Subsequent
payments are either applied to the outstanding principal balance or recorded as
interest income, depending on the assessment of the ultimate collectibility of
the loan. Restructured loans include troubled debt restructuring (which involved
forgiving a portion of interest or principal on any loans or making loans at a
rate materially less than the market rate).
<TABLE>
<CAPTION>
MARCH 31, SEPTEMBER 30,
1999 1998
--------- -------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Non-accruing loans:
One-to-four family........................................ $156 $257
Multi-family.............................................. 54 280
Commercial real estate.................................... -- --
Consumer.................................................. 22 25
---- ----
Total................................................ 232 562
---- ----
Total non-performing assets................................. $232 $562
==== ====
Total as a percentage of total assets....................... .11% .27%
==== ====
</TABLE>
For the six 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 $10,200.
In addition to the non-performing assets set forth in the table above, as
of March 31, 1999, there were no loans with respect to which known information
about the possible credit problems of the borrowers or the cash flows of the
secured properties have caused management to have concerns as to the ability of
the borrowers to comply with present loan repayment terms and which may result
in the future inclusion of such items in the non-performing asset categories.
Management has considered the Company's non-performing and "of concern"
assets in establishing the allowance for loan losses.
IMPACT OF INFLATION AND CHANGING PRICES
The consolidated financial statements and related data presented herein
have been prepared in accordance with generally accepted accounting principles
which require the measurement of financial position and operating results in
terms of historical dollars without considering changes in the relative
purchasing power of money over time due to inflation. The primary impact of
inflation on the operations of the Company is reflected in increased operating
costs. Unlike most industrial companies, virtually all of the assets and
liabilities of a financial institution are monetary in nature. As a result,
interest rates, generally, have a more significant impact on a financial
institution's performance than does inflation. Interest rates do not necessarily
move in the same direction or to the same extent as the prices of goods and
services.
RECENT DEVELOPMENTS
On April 21, 1999 the Board of Directors approved a cash dividend of $.12
per share to be payable May 14, 1999 to shareholders of record on April 30,
1999.
14
<PAGE> 15
YEAR 2000 READINESS DISCLOSURE
Notice is hereby given that the Year 2000 statement set forth below is
being designated a Year 2000 Readiness Disclosure in accordance with Section
7(b) of the Year 2000 Information and Readiness Disclosure Act. For more than
eighteen months, the Company has been engaged in the process of addressing a
potential problem that is facing all users of automated information systems,
including personal computers, that is generally referred to as the Year 2000
Issue. The problem is the result of computer systems processing transactions
based upon 2 digits representing the year of the transaction rather than 4 full
digits (e.g., 98 for 1998). These computer systems may not operate properly when
the last two digits become "00", as will occur on January 1, 2000. In some
cases, this could result in a system failure, miscalculations causing
disruptions of operations, temporary inability to process transactions, send
invoices or engage in similar normal business activities. The problem could
affect a wide variety of automated information systems such as main frame
computer applications, personal computers, communication systems, including
telephone systems, and other information systems utilized not only by the
Company, but also by its vendors and customers. The most significant of the
Company's automated information systems affected by the Year 2000 issue is the
data processing system used to process transactions and information for loan and
deposit customers. The Company currently purchases the services for this system
from a nationally recognized data processing vendor. Other programs and
applications used in the Company's operations that will be affected by the Year
2000 issue include building and security system equipment, ATM modems, loan
document processing systems, investment accounting programs, and computer
software and hardware. All software and hardware has been purchased from outside
vendors. The Company has not developed any in-house computer applications or
equipment. All data processing is done off-site. The Company has maintenance
agreements with vendors on the majority of its equipment and systems.
The Company's Year 2000 plan process began in the summer of 1997. At that
time, a Year 2000 plan coordinator was appointed and assessment of mission
critical systems began. The Company upgraded much of its computer hardware and
software during 1998, in large part to meet the system requirements when it
converted to a new data processing company in July 1998. The Company believes
that Year 2000 compliance had been achieved for substantially all mission
critical applications by the end of 1998. Further renovation and testing
occurred during the first quarter of 1999 and additional renovation and testing
is expected to occur during the second quarter of 1999, with the timing dictated
by external vendors. The Company's vendors have been providing updates regarding
their progress in assessment, renovation and testing on a regular basis, and the
Year 2000 Coordinator periodically presents regular updates regarding Year 2000
issues to the Board of Directors.
The predominant risk associated with the Year 2000 issue for the Company
rests with the functionality of the data processing system. In order to offset
the inherent risk with its main data processing system, the Company has prepared
contingency plans to handle various functions should a Year 2000 problem arise.
The Company has not identified any customers who present potential risk relative
to their compliance with Year 2000 within their own organizations. Loan officers
are aware of the Year 2000 issue, and the issue is being addressed with new
commercial customers. The Company has a large investment portfolio which carries
a potential liquidity risk should the companies handling the investments
experience a Year 2000 issue. These companies appear to be well advanced in
renovating and testing their systems. The Company outsources its item processing
operations to a nationally recognized data processing company. That company
appears to be well advanced in its Year 2000 compliance efforts. Other vendors
also appear to be progressing in their Year 2000 efforts. The most difficult
risks for the Company to assess are the risks associated with the utilities
offered by gas, electric and telephone companies. Those are risks shared by
everyone and cannot be accurately quantified at this time.
The Company has generally identified critical requirements for minimum
levels of outputs and services and established recovery plans to implement those
requirements. The Company is considering increasing its liquidity levels during
the last quarter of 1999 in preparation for possible extreme customer reaction
to the Year 2000 issue.
15
<PAGE> 16
The Company has planned for the Year 2000 with its officers and staff. It
does not intend to use outside consultants. Because the Company relies
predominantly on outsourced vendors for its core applications, it does not
expect significant costs related to Year 2000 renovation. Expenses incurred to
date which are directly related to the Year 2000 issue total approximately
$55,000. Based on the Year 2000 plan as currently being executed and the best
available information, the Company does not anticipate that the cost to address
the Year 2000 issues will have a material adverse impact on its financial
condition, results of operation or liquidity.
FORWARD-LOOKING STATEMENTS
The preceding "Management's Discussion and Analysis of Financial Condition
and Results of Operations" section of this Form 10-Q contains various
"forward-looking statements" within the meaning of Section 27A of the Securities
Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934,
as amended, which represents Damen Financial Corporation's expectations and
beliefs concerning future events including, without limitation, the following:
the Company's efforts in retaining and expanding its customer base and
differentiating it from its competition; future FDIC insurance premium
assessments; the impact of conversion to a National Bank and its plan of
restructuring on its financial performance and future growth; the impact of
interest rates on its net interest income as a result of its balance sheet
structure; the impact of its policy guidelines and strategies on its net
interest income based on future interest rate projections; the ability to
provide funding sources for both the Bank and the Parent Company; Management's
assessment of its provision and allowance for loan loss levels based upon future
changes in the composition of its loan portfolio, loan losses, collateral value
and economic conditions; and Management's assessment of the impact of the Year
2000 on the financial condition, results of operations and liquidity of the
Company.
The Company cautions that these statements are further qualified by
important factors that could cause actual results to differ materially from
those set forth in the forward looking statements due to market, economic and
other business related risks and uncertainties effecting the realization of such
statements. Certain of these risks and uncertainties included in such forward
looking statements include, without limitation, the following: dynamics of the
market served in terms of competition from traditional and nontraditional
financial service providers can effect both the funding capabilities of the
Company in terms of deposit garnering as well as asset generation capabilities,
future legislation to combine the BIF and the SAIF, as well as future financial
losses in the bank and savings and loan industries and actions by the Federal
Reserve Board may result in the imposition of costs and constraints on the
Company through higher FDIC insurance premiums; significant fluctuations in
market interest rates and operational limitations; deviations from the
assumptions used to evaluate the appropriate level of the allowance for loan
losses as well as future purchases and sales of loans may affect the appropriate
level of the allowance for loan losses and thereby affect the future levels of
provisioning; and the steps necessary to address the Year 2000 Issue include
ensuring that not only the Company's automated systems, but also those of
vendors and customers, can become Year 2000 compliant.
Accordingly, results actually achieved may differ materially from expected
results in these statements. Damen Financial Corporation does not undertake, and
specifically disclaims, any obligation to update any forward looking statements
to reflect events or circumstances occurring after the date of such statements.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company's interest rate risk position is discussed under the heading
"Results of Operations" on page 10. Other types of market risk, such as foreign
currency exchange risk and commodity price risk, do not arise in the normal
course of the Company's business activities.
16
<PAGE> 17
PART II -- OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None.
ITEM 2. CHANGES IN SECURITIES
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a) The Annual Meeting of Stockholders (the "Meeting") of Damen Financial
Corporation was held March 12, 1999 at 9:30 AM at the Marriott Hotel located at
50 North Martingale Road, Schaumburg, Illinois.
(b) Proxies for the meeting were solicited pursuant to Section 14 of the
Securities and Exchange Act.
(c) The following are the results of each matter voted upon at the Meeting:
(i) The election of three Directors:
<TABLE>
<CAPTION>
FOR WITHHELD
--- --------
<S> <C> <C>
Edward R. Tybor........................................... 1,030,389 36,205
Janine M. Poronsky........................................ 1,030,389 36,205
Charles J. Caputo......................................... 1,030,289 36,305
Paul J. Duggan............................................ 1,325,673 300
Vincent Cainkar........................................... 1,325,173 800
J. Dennis Huffman......................................... 1,321,173 4,800
</TABLE>
The continuing Directors are:
<TABLE>
<CAPTION>
EXPIRATION
OF TERM AS
DIRECTOR
----------
<S> <C>
Mary Beth Poronsky Stull.................................... 2000
Albert C. Baldermann........................................ 2000
Carol A. Diver.............................................. 2001
Nicholas J. Raino........................................... 2001
</TABLE>
(ii) The ratification of the appointment of Cobitz, VandenBerg &
Fennessy as auditor for the Company for the fiscal year ended September 30,
1999:
<TABLE>
<S> <C>
Votes For: ................................................. 2,345,594
---------
Votes Against: ............................................. 22,098
---------
Abstentions: ............................................... 24,875
---------
</TABLE>
(iii) A proposal by a stockholder of the Company directing the Board
of Directors to appoint an investment banker to pursue merger or
acquisition candidates for the Company and to establish a committee
consisting of all directors who are not current or former officers or
employees or relatives of
17
<PAGE> 18
such persons in order to recommend to the Board of Directors the best
available offer to acquire the Company.
<TABLE>
<S> <C>
Votes For: ................................................. 1,351,678
---------
Votes Against: ............................................. 1,024,939
---------
Abstentions: ............................................... 15,950
---------
Non-Votes: ................................................. 0
---------
</TABLE>
ITEM 5. OTHER INFORMATION
Not applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Computation of earnings per share (Exhibit 11 filed herewith)
(b) The Company filed a Form 8-K dated February 23, 1999 attaching (i) the
Agreement and Plan of Merger, dated February 22, 1999, by and between Damen
Financial Corporation and MidCity Financial Corporation and a wholly owned
subsidiary of MidCity Financial Corporation, (ii) its press release, dated
February 23, 1999, announcing the above Agreement and Plan of Merger, and (iii)
its letter to shareholders, dated February 23, 1999, announcing the Agreement
and Plan of Merger including all relevant terms and details.
18
<PAGE> 19
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of the Securities and
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
DAMEN FINANCIAL CORPORATION
Registrant
DATE: May 7, 1999
BY: /s/ MARY BETH PORONSKY STULL
--------------------------------------------------------
Mary Beth Poronsky Stull
President, Chief Executive Officer and Director
(Duly Authorized Representative)
BY: /s/ GERALD J. GARTNER
--------------------------------------------------------
Gerald J. Gartner
Chief Financial Officer and Treasurer
(Principal Financial and Accounting Officer)
19
<PAGE> 20
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NO. PAGE
- ----------- ----
<C> <S> <C>
11 Statement regarding Computation of Earnings Per Share....... 21
27 Financial Data Schedule..................................... 22
</TABLE>
20
<PAGE> 21
EXHIBIT 11
STATEMENT REGARDING COMPUTATION OF EARNINGS PER SHARE
<TABLE>
<CAPTION>
THREE MONTHS SIX MONTHS
ENDED MARCH 31, ENDED MARCH 31,
----------------------- ----------------------
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net Income....................................... $ 78,089 557,945 565,312 1,016,735
========== ========= ========= =========
Weighted average shares outstanding.............. 2,820,154 3,122,845 2,835,904 3,117,116
Reduction for common shares not yet released by
Employee Stock Ownership Plan.................. (228,630) (249,790) (231,275) (252,435)
---------- --------- --------- ---------
Total weighted average common shares outstanding
for basic computation.......................... 2,591,524 2,873,055 2,604,629 2,864,681
========== ========= ========= =========
Basic earnings per share......................... $ .03 .19 .22 .35
========== ========= ========= =========
Total weighted average common shares outstanding
for basic computation.......................... 2,591,524 2,873,055 2,604,629 2,864,681
Common stock equivalents due to dilutive effect
of stock options............................... 99,906 123,346 84,561 122,997
---------- --------- --------- ---------
Total weighted average common shares and
equivalents outstanding for diluted
computation.................................... 2,691,430 2,996,401 2,689,190 2,987,678
========== ========= ========= =========
Diluted earnings per share....................... $ .03 .19 .21 0.34
========== ========= ========= =========
</TABLE>
21
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1999
<PERIOD-START> OCT-01-1998
<PERIOD-END> MAR-31-1999
<CASH> 447,761
<INT-BEARING-DEPOSITS> 854,563
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 75,277,376
<INVESTMENTS-CARRYING> 12,819,426
<INVESTMENTS-MARKET> 12,842,700
<LOANS> 117,558,425
<ALLOWANCE> (454,000)
<TOTAL-ASSETS> 216,134,524
<DEPOSITS> 115,589,580
<SHORT-TERM> 12,000,000
<LIABILITIES-OTHER> 1,822,009
<LONG-TERM> 43,000,000
0
0
<COMMON> 39,814
<OTHER-SE> 42,785,691
<TOTAL-LIABILITIES-AND-EQUITY> 216,134,524
<INTEREST-LOAN> 4,443,242
<INTEREST-INVEST> 3,224,748
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 7,667,990
<INTEREST-DEPOSIT> 2,810,873
<INTEREST-EXPENSE> 4,538,427
<INTEREST-INCOME-NET> 3,129,563
<LOAN-LOSSES> 5,000
<SECURITIES-GAINS> 90,767
<EXPENSE-OTHER> 2,842,540
<INCOME-PRETAX> 589,846
<INCOME-PRE-EXTRAORDINARY> 565,312
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 565,312
<EPS-PRIMARY> .22
<EPS-DILUTED> .21
<YIELD-ACTUAL> 2.95
<LOANS-NON> 231,931
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 449,000
<CHARGE-OFFS> 0
<RECOVERIES> 0
<ALLOWANCE-CLOSE> 454,000
<ALLOWANCE-DOMESTIC> 454,000
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
