EXHIBIT 99(b)
LAFAYETTE BANCORPORATION
CONSOLIDATED BALANCE SHEETS
(Dollar amounts in thousands)
- --------------------------------------------------------------------------------
(Unaudited)
September 30, December 31,
2001 2000
--------- ---------
ASSETS
Cash and due from banks $ 22,416 $ 26,452
Interest-bearing balances with other financial institutions 14,942 21,820
Federal funds sold 8,800 25,200
--------- ---------
Total cash and cash equivalents 46,158 73,472
Securities available-for-sale (at market) 94,235 78,857
Securities held-to-maturity (market value $4,095
and $4,580) 3,918 4,484
Loans held for sale 9,253 5,949
Loans 555,238 537,725
Less: Allowance for loan losses (5,445) (5,071)
--------- ---------
Loans, net 549,793 532,654
Federal Home Loan Bank stock (at cost) 2,344 2,200
Premises, furniture and equipment, net 10,756 11,353
Intangible assets 12,470 13,007
Accrued interest receivable and other assets 18,626 19,171
--------- ---------
Total assets $ 747,553 $ 741,147
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
Noninterest-bearing deposits $ 65,432 $ 70,866
Interest-bearing demand and savings deposits 259,973 230,984
Interest-bearing time deposits 278,055 276,447
--------- ---------
Total deposits 603,460 578,297
Short-term borrowings 32,519 55,572
FHLB advances 35,066 35,737
Note payable 10,500 11,550
Accrued interest payable and other liabilities 7,354 7,190
--------- ---------
Total liabilities 688,899 688,346
Shareholders' equity
Common stock, no par value: 20,000,000 shares authorized;
3,961,589 and 3,953,616 shares issued and outstanding 3,962 3,954
Additional paid-in capital 38,119 38,024
Retained earnings 15,461 11,086
Accumulated other comprehensive income 1,112 (263)
--------- ---------
Total shareholders' equity 58,654 52,801
--------- ---------
Total liabilities and shareholders' equity $ 747,553 $ 741,147
========= =========
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See accompanying notes to consolidated financial statements.
LAFAYETTE BANCORPORATION
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
For the three months ended September 30, 2001 and 2000
(Dollar amounts in thousands, except per share data)
(Unaudited)
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2001 2000
-------- --------
INTEREST INCOME
Loans $ 11,747 $ 12,036
Taxable securities 838 826
Tax exempt securities 427 413
Other 361 152
-------- --------
Total interest income 13,373 13,427
INTEREST EXPENSE
Deposits 5,468 6,069
Short-term borrowings 393 416
Other borrowings 677 716
-------- --------
Total interest expense 6,538 7,201
-------- --------
NET INTEREST INCOME 6,835 6,226
Provision for loan losses 300 300
-------- --------
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 6,535 5,926
Noninterest income
Income from fiduciary activities 296 245
Service charges on deposit accounts 541 507
Net realized gain on securities -- (12)
Net gain on loan sales 527 193
Other service charges and fees 267 271
Investment product commissions 93 135
Other operating income 126 64
-------- --------
Total noninterest income 1,850 1,403
-------- --------
Noninterest expense
Salaries and employee benefits 3,156 2,776
Occupancy expenses, net 320 325
Equipment expenses 466 446
Intangible amortization 179 185
Other operating expenses 1,279 1,203
-------- --------
Total noninterest expense 5,400 4,935
-------- --------
INCOME BEFORE INCOME TAXES 2,985 2,394
Income taxes 966 760
-------- --------
NET INCOME 2,019 1,634
-------- --------
Other comprehensive income, net of tax:
Change in unrealized gains / (losses) on securities 709 460
-------- --------
COMPREHENSIVE INCOME $ 2,728 $ 2,094
======== ========
Basic earnings per share $ .51 $ .41
======== ========
Diluted earnings per share $ .50 $ .41
======== ========
Dividend per share $ .11 $ .10
======== ========
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See accompanying notes to consolidated financial statements.
LAFAYETTE BANCORPORATION
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
For the nine months ended September 30, 2001 and 2000
(Dollar amounts in thousands, except per share data)
(Unaudited)
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2001 2000
-------- --------
INTEREST INCOME
Loans $ 35,581 $ 34,276
Taxable securities 2,473 2,508
Tax exempt securities 1,279 1,239
Other 1,571 405
-------- --------
Total interest income 40,904 38,428
INTEREST EXPENSE
Deposits 17,876 16,696
Short-term borrowings 1,291 1,241
Other borrowings 2,114 1,884
-------- --------
Total interest expense 21,281 19,821
-------- --------
NET INTEREST INCOME 19,623 18,607
Provision for loan losses 900 900
-------- --------
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 18,723 17,707
Noninterest income
Income from fiduciary activities 890 878
Service charges on deposit accounts 1,551 1,373
Net realized gain on securities -- (12)
Net gain on loan sales 1,397 464
Other service charges and fees 793 796
Investment product commissions 308 574
Other operating income 376 216
-------- --------
Total noninterest income 5,315 4,289
-------- --------
Noninterest expense
Salaries and employee benefits 9,226 7,806
Occupancy expenses, net 965 907
Equipment expenses 1,395 1,279
Intangible amortization 537 555
Other operating expenses 3,732 3,536
-------- --------
Total noninterest expense 15,855 14,083
-------- --------
INCOME BEFORE INCOME TAXES 8,183 7,913
Income taxes 2,580 2,674
-------- --------
NET INCOME 5,603 5,239
-------- --------
Other comprehensive income, net of tax:
Change in unrealized gains / (losses) on securities 1,375 543
-------- --------
COMPREHENSIVE INCOME $ 6,978 $ 5,782
======== ========
Basic earnings per share $ 1.41 $ 1.33
======== ========
Diluted earnings per share $ 1.40 $ 1.31
======== ========
Dividend per share $ .31 $ .28
======== ========
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See accompanying notes to consolidated financial statements.
LAFAYETTE BANCORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the nine months ended September 30, 2001 and 2000
(Dollar amounts in thousands)
(Unaudited)
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2001 2000
-------- --------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 5,603 $ 5,239
Adjustments to reconcile net income to net cash
from operating activities
Depreciation 1,092 983
Net amortization 572 546
Provision for loan losses 900 900
Net realized (gain) loss on sale of:
Securities -- 12
Other real estate (5) (5)
Change in assets and liabilities:
Loans originated for sale (93,225) (37,190)
Loans sold 89,921 36,818
Accrued interest receivable and other assets (244) (1,206)
Accrued interest payable and other liabilities 164 442
-------- --------
Net cash from operating activities 4,778 6,539
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of securities available-for-sale (79,877) (49,160)
Proceeds from sales of securities available-for-sale -- 2,375
Proceeds from maturities of securities available-for-sale 66,746 49,520
Proceeds from maturities of securities held-to-maturity 566 229
Loans made to customers, net of payments collected (18,314) (45,687)
Purchase of Federal Home Loan Bank stock (144) (303)
Property and equipment expenditures (495) (1,975)
Proceeds from sales of other real estate 162 470
-------- --------
Net cash from investing activities (31,356) (44,531)
CASH FLOWS FROM FINANCING ACTIVITIES
Net change in deposit accounts 25,163 35,434
Net change in short-term borrowings (23,053) 791
Proceeds from FHLB advances -- 17,000
Payments on FHLB advances (671) (16,204)
Payments on note payable (1,050) (1,050)
Common stock issued 103 98
Dividends paid (1,228) (1,113)
-------- --------
Net cash from financing activities (736) 34,956
-------- --------
Net change in cash and cash equivalents (27,314) (3,036)
Cash and cash equivalents at beginning of period 73,472 30,570
-------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 46,158 $ 27,534
======== ========
Supplemental disclosures of cash flow information
Cash paid during the period for:
Interest $ 21,694 $ 19,386
Income taxes 3,040 2,610
Non-cash investing activity
Loans transferred to other real estate $ 298 $ 50
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See accompanying notes to consolidated financial statements.
LAFAYETTE BANCORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2001
(Dollar amounts in thousands, except per share data)
(Unaudited)
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NOTE 1 - BASIS OF PRESENTATION
The significant accounting policies followed by Lafayette Bancorporation (the
"Corporation") for interim financial reporting are consistent with the
accounting policies followed for annual financial reporting. The consolidated
interim financial statements have been prepared in accordance with Generally
Accepted Accounting Principles and in accordance with instructions to Form 10-Q
and may not include all information and footnotes normally disclosed for full
annual financial statements. All adjustments which are, in the opinion of
management, necessary for a fair presentation of the results for the periods
reported have been included in the accompanying unaudited consolidated financial
statements and all such adjustments are of a normal recurring nature. Certain
prior period information has been reclassified to correspond with the 2001
presentation.
NOTE 2 - PENDING MERGER
On October 15, 2001, Lafayette Bancorporation signed a definitive agreement with
First Merchants Corporation, located in Muncie, Indiana, to merge with and into
First Merchants Corporation.
Under the terms of the agreement, upon the closing of this transaction,
Lafayette Bank and Trust Company will be a wholly-owned subsidiary of First
Merchants Corporation.
The transaction is subject to shareholder and regulatory approval and is
expected to be effective in the first quarter of 2002.
NOTE 3 - PER SHARE DATA
The following illustrates the computation of basic and diluted earnings per
share, and includes the weighted average number of shares used in calculating
earnings and dividends per share amounts for the periods presented. The weighted
average number of shares has been retroactively restated for stock dividends and
splits.
Nine Months Ended
-------------------------------
September 30, September 30,
2001 2000
---------- ----------
Basic earnings per share
Net income $ 5,603 $ 5,239
Weighted average shares outstanding 3,958,906 3,949,445
---------- ----------
Basic earnings per share $ 1.41 $ 1.33
========== ==========
Diluted earnings per share
Net income $ 5,603 $ 5,239
Weighted average shares outstanding 3,958,906 3,949,445
Dilutive effect of assumed exercise
of Stock Options 38,634 40,400
---------- ----------
Diluted average shares outstanding 3,997,540 3,989,845
---------- ----------
Diluted earnings per share $ 1.40 $ 1.31
========== ==========
LAFAYETTE BANCORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2001
(Dollar amounts in thousands, except per share data)
(Unaudited)
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Three Months Ended
-------------------------------
September 30, September 30,
2001 2000
------------- -------------
Basic earnings per share
Net income $ 2,019 $ 1,634
Weighted average shares outstanding 3,961,589 3,952,256
---------- ----------
Basic earnings per share $ .51 $ .41
========== ==========
Diluted earnings per share
Net income $ 2,019 $ 1,634
Weighted average shares outstanding 3,961,589 3,952,256
Dilutive effect of assumed exercise
of Stock Options 48,139 25,089
---------- ----------
Diluted average shares outstanding 4,009,728 3,977,345
---------- ----------
Diluted earnings per share $ .50 $ .41
========== ==========
NOTE 4 - SECURITIES
The amortized cost and estimated fair values of securities are as follows at
September 30, 2001:
Amortized Estimated
Cost Fair Value
--------- ----------
Securities Available-for-Sale
U.S. Government and its agencies $ 3,000 $ 3,030
Obligations of states and political subdivisions 31,352 32,109
Corporate obligations 10,108 10,534
Mortgage-backed and other asset-backed securities 45,379 45,996
Other securities 2,554 2,566
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$92,393 $94,235
======= =======
Securities Held-to-Maturity
Obligations of states and political subdivisions $ 3,918 $ 4,095
======= =======
The amortized cost and estimated fair values of securities are as follows at
December 31, 2000:
Amortized Estimated
Cost Fair Value
--------- ----------
Securities Available-for-Sale
U.S. Government and its agencies $ 4,201 $ 4,193
Obligations of states and political subdivisions 30,880 31,012
Corporate obligations 3,953 4,001
Mortgage-backed and other asset-backed securities 37,699 37,105
Other securities 2,560 2,546
------- -------
$79,293 $78,857
======= =======
Securities Held-to-Maturity
Obligations of states and political subdivisions $ 4,484 $ 4,580
======= =======
LAFAYETTE BANCORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2001
(Dollar amounts in thousands, except per share data)
(Unaudited)
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NOTE 5 - LOANS
Loans are comprised of the following:
September 30, December 31,
2001 2000
------------- ------------
Commercial and agricultural loans $228,914 $215,087
Real estate construction loans 64,171 54,768
Residential real estate loans 210,843 212,190
Installment loans to individuals 46,323 50,696
Commercial paper 4,987 4,984
-------- --------
Total loans $555,238 $537,725
======== ========
NOTE 6 - ALLOWANCE FOR LOAN LOSSES
The activity in the allowance for loan losses is as follows:
2001 2000
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Balance, January 1 $ 5,071 $ 4,618
Provision charged to operations 900 900
Loans charged-off (605) (527)
Recoveries on loans previously charged-off 79 95
------- -------
Balance, September 30 $ 5,445 $ 5,086
======= =======
NOTE 7 - SHORT-TERM BORROWINGS
Short-term borrowings are comprised of the following:
September 30, December 31,
2001 2000
------------- ------------
Repurchase agreements $29,719 $54,275
Treasury tax and loan open-end note 2,800 1,297
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Total short-term borrowings $32,519 $55,572
======= =======
LAFAYETTE BANCORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2001
(Dollar amounts in thousands, except per share data)
(Unaudited)
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NOTE 8 - SEGMENT INFORMATION
The Corporation's operations include three primary segments: banking, mortgage
banking, and trust. Through its banking subsidiary's locations in Tippecanoe,
White, and Jasper Counties, the Corporation provides traditional community
banking services, such as accepting deposits and making commercial, residential
and consumer loans. Mortgage banking activities include the origination of
residential mortgage loans for sale on a servicing released basis to various
investors. The Corporation's trust department provides both personal and
corporate trust services.
The Corporation's three reportable segments are determined by the products and
services offered. Interest on loans, investments and deposits comprise the
primary revenues and expenses of the banking operation, net gains on loans sold
account for the revenues in the mortgage banking segment, and trust
administration fees provide the primary revenues in the trust department.
The following segment financial information has been derived from the internal
profitability reporting system utilized by management to monitor and manage the
financial performance of the Corporation. The accounting policies of the three
segments are the same as those described in the summary of significant
accounting policies of the annual report. The Corporation evaluates segment
performance based on profit or loss before income taxes. The evaluation process
for the mortgage banking and trust segments include only direct expenses, while
certain indirect expenses, including goodwill, are absorbed by the banking
operation. The difference between segment totals and consolidated totals are
holding company amounts and income tax expense.
Quarter ended September 30:
Mortgage Total
2001 Banking Banking Trust Segments
- ---- -------- -------- -------- --------
Net interest income $ 6,894 $ 81 $ -- $ 6,975
Net gain on loan sales -- 527 -- 527
Other revenue 1,027 -- 296 1,323
Noncash items:
Depreciation 347 14 12 373
Provision for loan loss 300 -- -- 300
Segment profit 2,864 287 92 3,243
Segment assets 737,532 9,408 145 747,085
Mortgage Total
2000 Banking Banking Trust Segments
- ---- -------- -------- -------- --------
Net interest income $ 6,434 $ 35 $ -- $ 6,469
Net gain on loan sales -- 193 -- 193
Other revenue 965 -- 245 1,210
Noncash items:
Depreciation 324 13 12 349
Provision for loan loss 300 -- -- 300
Segment profit 2,646 (21) 62 2,687
Segment assets 682,097 3,700 191 685,988
LAFAYETTE BANCORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2001
(Dollar amounts in thousands, except per share data)
(Unaudited)
- --------------------------------------------------------------------------------
Nine months ended September 30:
Mortgage Total
2001 Banking Banking Trust Segments
- ---- -------- -------- -------- --------
Net interest income $ 19,912 $ 207 $ -- $ 20,119
Net gain on loan sales -- 1,397 -- 1,397
Other revenue 3,027 1 890 3,918
Noncash items:
Depreciation 1,013 43 36 1,092
Provision for loan loss 900 -- -- 900
Segment profit 8,018 692 230 8,940
Segment assets 737,532 9,408 145 747,085
Mortgage Total
2000 Banking Banking Trust Segments
- ---- -------- -------- -------- --------
Net interest income $ 19,201 $ 105 $ -- $ 19,306
Net gain on loan sales -- 464 -- 464
Other revenue 2,941 6 878 3,825
Noncash items:
Depreciation 912 35 36 983
Provision for loan loss 900 -- -- 900
Segment profit 7,993 85 312 8,390
Segment assets 682,097 3,700 191 685,988
NOTE 9 - NEW ACCOUNTING PRONOUNCEMENT
In 2001, new accounting guidance was issued that will, beginning in 2002, revise
the accounting for goodwill and intangible assets. Intangible assets with
indefinite lives and goodwill will no longer be amortized, but will periodically
be reviewed for impairment and written down if impaired. Additional disclosures
about intangibles assets and goodwill may be required. An initial goodwill
impairment test is required during the first six months of 2002. The
Corporation's management is currently evaluating the impact of this new
guidance.