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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 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, 1997
or
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 0-24082
STANDARD FINANCIAL, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE
(STATE OR OTHER JURISDICTION OF 36-3941870
ORGANIZATION OR INCORPORATION) (IRS EMPLOYER IDENTIFICATION NUMBER)
800 BURR RIDGE PARKWAY 60521
BURR RIDGE, ILLINOIS (ZIP CODE)
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
(630) 986-4900
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
Indicate by check mark 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.
(1) Yes x No
(2) Yes x No
The number of shares outstanding of each of the issuer's classes of common
stock was 16,204,235 shares of common stock, $0.01 par value, as of April 30,
1997.
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STANDARD FINANCIAL, INC. AND SUBSIDIARIES
FORM 10-Q
TABLE OF CONTENTS
PAGE
-----
PART I. Financial Information
Item 1 Financial Statements.............................................................................
Consolidated Statements of Condition as of March 31, 1997 (unaudited) and December 31, 1996...... 2
Consolidated Statements of Income for the Three Months Ended March 31, 1997 and 1996
(unaudited)...................................................................................... 3
Consolidated Statement of Stockholders' Equity for the Three Months Ended March 31, 1997
(unaudited)...................................................................................... 4
Consolidated Statements of Cash Flows for the Three Months Ended March 31, 1997 and 1996
(unaudited)...................................................................................... 5
Notes to Consolidated Financial Statements (unaudited)........................................... 6
Item 2 Management's Discussion and Analysis of Financial Condition and Results of Operations............ 8
PART II. Other Information
Item 1 Legal Proceedings................................................................................ 19
Item 2 Changes in Securities............................................................................ 19
Item 3 Defaults upon Senior Securities.................................................................. 19
Item 4 Submission of Matters to a Vote of Security Holders.............................................. 19
Item 5 Other Information................................................................................ 19
Item 6 Exhibits and Reports on Form 8-K................................................................. 20
Signature Page................................................................................... 21
1
STANDARD FINANCIAL, INC. AND SUBSIDIARIES
PART 1--FINANCIAL INFORMATION
ITEM 1 FINANCIAL STATEMENTS
STANDARD FINANCIAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CONDITION
(DOLLARS IN THOUSANDS)
MARCH 31, DECEMBER 31,
1997 1996
(UNAUDITED) (AUDITED)
------------ ------------
ASSETS:
Cash................................................................................. $ 17,929 $ 17,464
Interest-bearing deposits at depository institutions................................. 27,375 25,834
------------ ------------
Cash and cash equivalents........................................................ 45,304 43,298
Investment securities................................................................ 197,108 153,501
Mortgage-backed and related securities............................................... 663,297 651,443
Loans receivable, net................................................................ 1,511,805 1,485,459
Real estate held for sale............................................................ 160 70
Investment in Federal Home Loan Bank stock........................................... 20,500 20,500
Office properties and equipment...................................................... 27,187 27,267
Accrued interest receivable.......................................................... 14,943 15,015
Other assets......................................................................... 7,893 8,236
Excess of cost over net assets of acquired association, less accumulated
amortization....................................................................... 387 432
------------ ------------
Total assets................................................................... $ 2,488,854 $2,405,221
------------ ------------
------------ ------------
LIABILITIES AND STOCKHOLDERS' EQUITY:
Liabilities:
Deposits........................................................................... $ 1,777,816 $1,719,300
Advances from Federal Home Loan Bank of Chicago.................................... 410,000 385,000
Advance payments by borrowers for taxes and insurance.............................. 12,728 11,470
Federal & state income taxes payable............................................... 3,337 1,270
Miscellaneous liabilities.......................................................... 13,716 20,103
------------ ------------
Total liabilities.............................................................. 2,217,597 2,137,143
Stockholders' equity:
Preferred stock, $0.01 par value; 1,000,000 shares authorized;
none outstanding................................................................. 0 0
Common stock, $0.01 par value; 25,000,000 shares authorized, 19,123,585 shares
issued, 16,204,235 shares outstanding at March 31, 1997; and 25,000,000 shares
authorized, 19,092,585 shares issued, 16,173,235 outstanding at December 31,
1996............................................................................. 191 191
Additional paid-in capital......................................................... 190,266 189,460
Unrealized gain, net of income taxes, on securities available-for-sale............. 1,750 2,431
Retained income.................................................................... 132,902 130,437
Treasury stock, at cost (2,919,350 shares at March 31, 1997; 2,919,350 shares at
December 31, 1996)............................................................... (41,085) (41,085)
ESOP shares........................................................................ (9,292) (9,611)
MRP shares......................................................................... (3,475) (3,745)
------------ ------------
Total stockholders' equity..................................................... 271,257 268,078
------------ ------------
Total liabilities and stockholders' equity..................................... $ 2,488,854 $2,405,221
------------ ------------
------------ ------------
2
STANDARD FINANCIAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
THREE MONTHS ENDED
MARCH 31,
--------------------
1997 1996
--------- ---------
INTEREST INCOME:
Loans..................................................................................... $ 27,885 $ 20,303
Mortgage-backed and related securities.................................................... 11,586 13,660
Investments and interest-bearing deposits................................................. 3,408 3,425
--------- ---------
Total interest income................................................................... 42,879 37,388
INTEREST EXPENSE:
Deposits.................................................................................. 20,003 17,423
Borrowings................................................................................ 6,148 3,970
--------- ---------
Total interest expense.................................................................. 26,151 21,393
--------- ---------
Net interest income before provision for loan losses........................................ 16,728 15,995
Provision for loan losses................................................................... 475 800
--------- ---------
Net interest income after provision for loan losses......................................... 16,253 15,195
NON-INTEREST INCOME:
Fees for customer services................................................................ 885 1,085
Net gain/(loss) on sales of investments and mortgage-backed securities.................... (146) 1,569
Net gain on sales of loans................................................................ 192 28
Other..................................................................................... 160 318
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Total non-interest income............................................................... 1,091 3,000
NON-INTEREST EXPENSE:
Compensation and benefits................................................................. 5,133 5,036
Occupancy................................................................................. 2,058 2,079
Federal deposit insurance premiums........................................................ 148 948
Marketing................................................................................. 516 457
Other general and administrative expenses................................................. 3,159 1,872
Amortization of excess of cost over net assets of acquired association.................... 45 23
--------- ---------
Total non-interest expense.............................................................. 11,059 10,415
--------- ---------
Income before federal and state income taxes................................................ 6,285 7,780
Federal and state income taxes.............................................................. 2,201 2,859
--------- ---------
Net income.............................................................................. $ 4,084 $ 4,921
--------- ---------
--------- ---------
Primary earnings per share.................................................................. $ 0.26 $ 0.31
Fully dilutted earnings per share........................................................... $ 0.26 $ 0.31
Dividends declared per share................................................................ $ 0.10 $ 0.08
3
STANDARD FINANCIAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
THREE MONTHS ENDED MARCH 31, 1997
(DOLLARS IN THOUSANDS)
(UNAUDITED)
COMMON ADDITIONAL UNREALIZED
GAIN (LOSS)
COMMON ------------------------ ON SEC.
STOCK STOCK AT PAID-IN AVAILABLE- RETAINED TREASURY ESOP
ISSUED PAR VALUE CAPITAL FOR-SALE INCOME STOCK SHARES
----------- ------------- --------- ------------- ----------- ----------- ---------
Balance at January 1, 1997..... 19,093 $ 191 $ 189,460 $ 2,431 $ 130,437 ($ 41,085) ($ 9,611)
Net income for the period...... 0 0 0 0 4,084 0 0
Dividends paid................. 0 0 0 0 (1,619) 0 0
Change in unrealized gain
(loss), net of income taxes,
on securities
available-for-sale........... 0 0 0 (681) 0 0 0
Purchase of treasury stock..... 0 0 0 0 0 0 0
Options Exercised.............. 31 0 372 0 0 0 0
Tax Benefit from options
exercised.................... 0 0 100 0 0 0 0
ESOP shares earned............. 0 0 334 0 0 0 319
MRP shares forfeited........... 0 0 0 0 0 0 0
Issuance of MRP shares......... 0 0 0 0 0 0 0
MRP shares earned, net......... 0 0 0 0 0 0 0
----------- ----- --------- ------ ----------- ----------- ---------
Balance at March 31, 1997...... 19,124 $ 191 $ 190,266 $ 1,750 $ 132,902 ($ 41,085) ($ 9,292)
----------- ----- --------- ------ ----------- ----------- ---------
----------- ----- --------- ------ ----------- ----------- ---------
TOTAL
STOCK-
MRP HOLDERS'
SHARES EQUITY
--------- ---------
Balance at January 1, 1997..... ($ 3,745) $ 268,078
Net income for the period...... 0 4,084
Dividends paid................. 0 (1,619)
Change in unrealized gain
(loss), net of income taxes,
on securities
available-for-sale........... 0 (681)
Purchase of treasury stock..... 0 0
Options Exercised.............. 0 372
Tax Benefit from options
exercised.................... 0 100
ESOP shares earned............. 0 653
MRP shares forfeited........... 0 0
Issuance of MRP shares......... 0 0
MRP shares earned, net......... 270 270
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Balance at March 31, 1997...... ($ 3,475) $ 271,257
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4
STANDARD FINANCIAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
THREE MONTHS ENDED
MARCH 31,
--------------------
1997 1996
--------- ---------
OPERATING ACTIVITIES:
Net income..................................................................................... $ 4,084 $ 4,921
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for depreciation................................................................... 695 812
Provision for loan losses.................................................................... 475 800
Amortization of other intangibles............................................................ 29 29
Amortization of cost over net assets of acquired association................................. 45 23
Amortization of premiums and discounts....................................................... 350 528
Amortization of net deferred loan fees....................................................... (53) (151)
Release of ESOP shares....................................................................... 653 451
Release of MRP shares........................................................................ 270 249
Deferred income taxes........................................................................ 100 3,219
Gain on sale of loans........................................................................ (192) (28)
Proceeds from loan sales..................................................................... 27,364 5,402
Loans originated for sale.................................................................... (37,510) (8,408)
Gain (loss) on sale of securities available-for-sale......................................... 146 (1,569)
(Increase) decrease in interest receivable................................................... 72 432
Increase in interest payable................................................................. 450 713
Increase (decrease) in miscellaneous liabilities............................................. (6,387) (1,461)
Other, primarily other assets................................................................ 2,577 (212)
--------- ---------
Net cash provided (used) by operating activities......................................... (6,832) 5,750
INVESTING ACTIVITIES:
Proceeds from sales of investment securities available-for-sale.............................. 29,659 34,132
Proceeds from maturity and repayment of investment securities available-for-sale............. 114,126 89,720
Purchases of investment securities available-for-sale........................................ (188,112) (120,216)
Repayments of mortgage-backed and related securities available-for-sale...................... 32,321 55,427
Purchases of mortgage-backed and related securities available-for-sale....................... (44,479) (54,816)
Loan principal repayments.................................................................... 117,159 73,390
Loans originated and purchased............................................................... (134,269) (192,193)
Office property and equipment, net........................................................... (644) (291)
Purchase of Federal Home Loan Bank stock..................................................... 0 (1,448)
--------- ---------
Net cash used by investing activities.................................................... (74,239) (116,295)
FINANCING ACTIVITIES:
Net decrease in passbook, NOW, and money market deposit accounts............................. (8) (6,790)
Net increase in certificates of deposit...................................................... 58,073 73,048
Proceeds of advances from Federal Home Loan Bank............................................. 25,000 50,000
Net increase in advance payments by borrowers................................................ 1,258 1,264
Options exercised............................................................................ 372 0
Purchase of treasury stock................................................................... 0 (12,513)
Dividends paid............................................................................... (1,618) (1,381)
--------- ---------
Net cash provided by financing activities................................................ 83,077 103,628
--------- ---------
Increase (decrease) in cash and cash equivalents......................................... 2,006 (6,917)
Cash and cash equivalents at beginning of period............................................... 43,298 69,571
--------- ---------
Cash and cash equivalents at end of period..................................................... $ 45,304 $ 62,654
--------- ---------
--------- ---------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during period for interest on:
Deposits..................................................................................... $ 19,347 $ 16,710
Borrowings................................................................................... 6,764 3,867
--------- ---------
$ 26,111 $ 20,577
--------- ---------
--------- ---------
Income taxes................................................................................... $ 134 $ 40
--------- ---------
--------- ---------
Transfer of loans to real estate held for sale................................................. $ 90 $ 170
--------- ---------
--------- ---------
5
STANDARD FINANCIAL, INC. & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(1) BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles ("GAAP")
for interim financial information and with the instructions to Form 10-Q and
Article 10 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, all adjustments
(consisting of only normal recurring accruals) necessary for a fair presentation
of the results for the interim periods presented have been included.
The results of operations and other data for the three months ended March
31, 1997 are not necessarily indicative of results that may be expected for the
entire fiscal year ending December 31, 1997.
The consolidated financial statements include the accounts of Standard
Financial, Inc. (the "Company") and its wholly-owned subsidiaries, Standard
Federal Bank for savings (the "Bank"), and Capital Equities Corporation, and the
Bank's wholly-owned subsidiaries SFB Insurance Agency, Inc., and Standard
Financial Mortgage Corporation (the "Mortgage Company")
(2) EARNINGS PER SHARE
Earnings per share are computed based on the weighted average number of
common shares and equivalents outstanding utilizing the treasury stock method.
Stock options and shares granted under the Management Recognition and Retention
Plan (the "MRP") represent the common stock equivalents of the Company.
The weighted average number of common shares and equivalents outstanding for
the first quarters of 1997 and 1996 were 15,558,809 and 16,027,852,
respectively.
(3) COMMITMENTS
The Bank had outstanding lending commitments at March 31, 1997 and December
31, 1996 comprised of the following (in thousands):
MARCH 31, 1997 DECEMBER 31, 1996
-------------- -----------------
Mortgage loans............................................ $ 55,531 $ 53,209
Equity lines.............................................. 7,763 7,459
------- -------
$ 63,294 $ 60,668
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------- -------
6
STANDARD FINANCIAL, INC. & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
(4) LOANS RECEIVABLE
Loans Receivable at March 31, 1997 and December 31, 1996 consisted of the
following:
MARCH 31, DECEMBER 31,
(IN THOUSANDS) 1997 1996
- ----------------------------------------------------------------- ------------ ------------
Mortgage loans originated:
One-to-four family............................................. $ 1,376,450 $1,371,776
Multifamily.................................................... 11,777 12,634
Commercial..................................................... 7,318 7,322
Mortgage loans and participations purchased, primarily
one-to-four family............................................. 54,358 57,831
------------ ------------
Total mortgage loans............................................. 1,449,903 1,449,563
Consumer loans................................................... 61,033 35,511
------------ ------------
1,510,936 1,485,074
Less:
Allowance for losses........................................... (7,400) (6,988)
Undisbursed portions of loan proceeds.......................... 23 (805)
Unearned premiums on loans..................................... 10,293 10,130
Unearned discounts on loans.................................... (1,582) (1,247)
Net deferred loan origination fees............................. (465) (705)
------------ ------------
Loans receivable, net............................................ $ 1,511,805 $1,485,459
------------ ------------
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7
ITEM 2 STANDARD FINANCIAL, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
GENERAL
Standard Financial, Inc. (the "Company") was organized as the holding
company for Standard Federal Bank for savings (the "Bank") in connection with
the Bank's conversion from the mutual to stock form of ownership. On July 28,
1994, the Company issued and sold 18,630,000 shares of its common stock at an
issuance price of $10.00 per share to complete the conversion. Net proceeds to
the Company were $182.5 million after deduction of conversion expenses and
underwriting fees of $3.8 million. The Company used $91.3 million of the net
proceeds to acquire all of the stock of the Bank. The Bank owns a mortgage
banking subsidiary which is in the wholesale mortgage business throughout the
Chicago metropolitan area, and an insurance subsidiary which sells insurance and
brokerage services.
The Company's primary business is offering residential first mortgage loans
and consumer financing and providing conveniently located deposit facilities
with transaction, savings and certificate accounts. The Bank's deposit gathering
and lending markets are primarily concentrated in the communities surrounding
its full service offices located in the southwestern and western part of the
city of Chicago and neighboring suburbs in Cook and DuPage counties, Illinois.
At March 31, 1997, the Bank had fourteen full service offices, three of which
are located on the southwest side of the City of Chicago and eleven of which are
located in Chicago's western and southwestern suburbs, and two limited service
offices.
Net income declined to $4.1 million, a 16.3% or $0.8 million decrease over
the same period in 1996. This equated to $0.26 per share for the first three
months of 1997 compared to $0.31 per share for the same period in 1996. Total
assets of the organization rose to $2.5 billion at the end of March, 1997.
Capital remained strong at $271.3 million at quarter end 1997. The Company paid
a cash dividend of ten cents per share during the quarter, up from eight cents
per share in each of the quarters of 1996.
BUSINESS REGARDING AGREEMENT DATED MARCH 16, 1997
The Company and TCF Financial Corporation, a Delaware corporation ("TCF"),
entered into an Agreement and Plan of Reorganization (the "Reorganization
Agreement"), dated March 16, 1997, providing for the combination of the Company
and TCF (the "Transaction"). For Company shareholders, the Transaction will be
structured as a cash election merger in which the holders of Company Common
Stock will have the right to elect cash, TCF Common Stock or a combination
thereof, subject to certain limitations set forth in the Reorganization
Agreement. At the Effective Time of the Transaction, each outstanding share of
Company Common Stock will be converted into TCF Common Stock, cash or a
combination thereof, based on a value of TCF Common Stock determined over the 30
consecutive trading days ending on the Determination Date (as that term is
defined in the Reorganization Agreement). The Transaction is structured to be
tax-free to Company shareholders except to the extent they receive cash.
Completion of the Transaction is subject to certain conditions, including
(i) approval by the shareholders of the Company, (ii) approval by the Federal
Reserve Board, the office of the Comptroller of Currency, the Office of Thrift
Supervision and other requisite regulatory authorities, (iii) receipt of
opinions of counsel for the Company and for TCF that the Transaction will be
treated, for federal income tax purposes, as a tax-free reorganization, and (iv)
other conditions to closing customary in transactions of this type.
If the Reorganization Agreement is terminated under certain circumstances,
the Company would be required to pay TCF a cash termination fee of $15 million.
8
COMPARISON OF OPERATING RESULTS FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND
MARCH 31, 1996
GENERAL
Net income for the quarter ended March 31, 1997, decreased 16.3% to $4.1
million compared to $4.9 million for the quarter ended March 31, 1996. Earnings
per share for the 1997 quarter was $0.26 compared to $0.31 in the first quarter
of 1996. The weighted average number of common shares and equivalents
outstanding for the first quarters of 1997 and 1996 were 15,558,809 and
16,027,852 shares, respectively. Net interest income before provision for loan
losses increased $0.7 million or 4.4% to $16.7 million in 1997 compared to $16.0
million in 1996. The provision for loan losses decreased $0.3 million to $0.5
million in 1997 from $0.8 million in 1996. The Company's results of operations
depend primarily on its level of net interest income, which is the difference
between interest earned on interest-earning assets, and the interest paid on
interest-bearing liabilities. The Company's earnings also are affected by the
level of its other income, including loan servicing, commitment and origination
fees, gains and losses on sale of loans and investments, as well as its level of
non-interest expenses, including employee compensation and benefits, occupancy
and equipment costs, federal deposit insurance premiums and other general and
administrative expenses. The Company's results of operations are also
significantly affected by general economic and competitive conditions,
particularly changes in market interest rates, government policies and actions
of regulatory authorities. Non-interest income decreased by $1.9 million or
63.3% to $1.1 million in 1997 from $3.0 million in 1996. Non-interest expense
increased by $0.7 million or 6.7% to $11.1 million in 1997 from $10.4 million in
1996.
INTEREST INCOME
Total interest income increased $5.5 million or 14.7% to $42.9 million for
1997 from $37.4 million for 1996. The increase in interest income was the result
of average earning assets increasing to $2.366 billion in 1997 from $2.059
billion in 1996. Interest income on loans increased $7.6 million or 37.4% to
$27.9 million in 1997 from $20.3 million in 1996. The increase was the result of
growth in average loans outstanding of $417.7 million or 38.7% from $1.078
billion in 1996 to $1.496 billion in 1997. The yield on the loan portfolio
declined from 7.53% in 1996 to 7.41% in 1997. Interest income on mortgage-backed
and related securities decreased $2.1 million or 15.3% to $11.6 million in 1997
from $13.7 million in 1996. This decrease was the result of a decrease in
average volume of mortgage-backed and related securities from $793.2 million in
1996 to $653.4 million in 1997. Offsetting this was an increase in the portfolio
yield from 6.89% in 1996 to 7.09% in 1997. Interest on investment securities
decreased by $0.1 million or 3.6% to $2.7 million in 1997 from $2.8 million in
1996. This decrease was the result of a decline in the portfolio yield from
7.73% in 1996 to 6.37% in 1997. This was virtually offset by an increase in the
average volume of investment securities from $144.7 million in 1996 to $169.0
million in 1997. Short-term investment interest income remained flat at $0.4
million in 1997 and 1996.
INTEREST EXPENSE
Total interest expense increased by $4.8 million or 22.4% to $26.2 million
in 1997 from $21.4 million in 1996. The increase in interest expense was the
result of an increase in the average amount of certificates of deposit to $1.202
billion in 1997 from $1.004 billion in 1996, and growth in borrowings from
$258.6 million in 1996 to $402.5 million in 1997. While the actual cost of funds
on the various products were lower in 1997 than in 1996, the growth in average
volume of these higher costing funds increased the cost of funds from 4.73% in
1996 to 4.92% in 1997.
PROVISION FOR LOAN LOSSES
The provision for loan losses decreased to $0.5 million in 1997 from $0.8
million in 1996, a decrease of $0.3 million or 37.5%. The allowance for loan
losses at March 31, 1997 was $7.4 million or 0.49% of gross loans outstanding,
compared to $7.0 million or 0.48% of gross loans outstanding at December 31,
1996.
9
Based on management's evaluation of the loan portfolio, past loan loss
experience and known inherent risks in the portfolio, management believes that
the allowance is adequate.
NON-INTEREST INCOME
Non-interest income decreased $1.9 million to $1.1 million in 1997 from $3.0
million in 1996. The decrease was due to losses of $0.1 million on the sale of
securities as compared to a $1.6 million gain from securities sales in 1996.
While relatively modest for the first quarter, the Company expects an increase
in loan sales in the future due to increased mortgage loan originations which
may result in greater fluctuations in non-interest income.
NON-INTEREST EXPENSE
Non-interest expense increased by $0.7 million or 6.7% to $11.1 million in
1997 from $10.4 million in 1996. Compensation and employee benefits expense
increased by $0.1 million to $5.1 million in 1997 from $5.0 million in 1996. The
Company accrued $0.7 million in expense relating to the Employee Stock Ownership
Plan (the "ESOP") in 1997 as compared to the $0.5 million expended for the ESOP
in 1996. Under generally accepted accounting principles ("GAAP"), expense under
the ESOP reflects the market value of shares released to participants. The
difference between the market value and the cost of shares released, which
equaled $0.3 million in 1997, is reflected as an increase in additional paid-in
capital.
Occupancy expense remained flat at $2.1 million.
Federal insurance premiums were $0.1 million in 1997 and $0.9 million in
1996. The decline in this expense was the result of a reduction in rates charged
by the Federal Deposit Insurance Corporation (the "FDIC").
Other general and administrative expenses increased to $3.2 million in 1997
from $1.9 million 1996. The Company incurred non-recurring legal expenses
involved with its successful litigation against LaSalle/ Kross Partners L.P. and
investment banking fees of $0.9 million.
INCOME TAX EXPENSE
Income tax expense decreased $0.7 million to $2.2 million in 1997 from $2.9
million in 1996. The effective tax rate for 1997 was 35.0% compared with 36.7%
for 1996.
COMPARISON OF CHANGES IN FINANCIAL CONDITION
At March 31, 1997, total consolidated assets of the Company were $2.5
billion, an increase of $0.1 billion or 4.2% as compared to assets of $2.4
billion at December 31, 1996.
Cash and cash equivalents increased $2.0 million or 4.6% from $43.3 million
at December 31, 1996, to $45.3 million at March 31, 1997.
Investment securities increased $43.6 million or 28.4% from $153.5 million
at December 31, 1996, to $197.1 million at March 31, 1997, as funds received
from deposit growth were deployed.
Mortgage-backed and related securities increased $11.9 million or 1.8% from
$651.4 million at December 31, 1996, to $663.3 million at March 31, 1997. Excess
funds from deposit growth were used to acquire these securities.
Loans receivable increased $26.3 million or 1.8% from $1.485 billion at
December 31, 1996, to $1.512 billion at March 31, 1997. The increase in loans
receivable was due to the expansion of the Company's consumer loan portfolio
consisting primarily of indirect auto and home equity loans. During the first
quarter of 1997, the Company originated or purchased $171.8 million in loans
compared to $200.6 million during the first quarter of 1996. The Company
purchases loans from correspondents. Correspondents are
10
mortgage bankers and brokers that originate loans for the Company using rates
and underwriting guidelines that the Company sets. The correspondents are paid a
fee for loans that are acquired. The Company underwrites all loans and only
funds those that meet its underwriting standards. As mortgage loan production
grows, the Company will increase the amount of loans sold and will retain the
loan servicing to generate additional fee income.
Deposits increased by $58.5 million or 3.4% from $1.719 billion at December
31, 1996 to $1.778 billion at March 31, 1997. This increase is the result of
growth in the certificates of deposit portfolio. The Company continues to
utilize various marketing strategies to promote specific deposit products and to
acquire or expand targeted customer deposits.
Borrowings increased 6.5% to $410.0 million at March 31, 1997, from $385.0
million at December 31, 1996. The Company's increased borrowings from the
Federal Home Loan Bank (the "FHLB") were utilized to fund the growth of loans.
INTEREST RATE SENSITIVITY
The Company manages its exposure to interest rate risk by emphasizing the
origination or purchase of adjustable rate mortgages ("ARM") loans and
mortgage-backed securities and the purchase of investments with a short term to
maturity for its portfolio. The Company also seeks to match the maturities of
assets with deposits and FHLB. Management believes that investing in ARM loans
and mortgage-backed securities, although possibly sacrificing short-term profits
compared to the yields obtainable through fixed rate investments, reduces the
Company's exposure to the risk of interest rate fluctuations and thereby
enhances long-term profitability. The Company's portfolio of mortgage-backed and
related securities has net unamortized premiums of $4.9 million. If prepayments
accelerate, the amortization of the premium will increase and lower the net
yield of the securities over its remaining life. The majority of the
collateralized mortgage obligation ("CMO") portfolio was purchased at a discount
and therefore does not have the risk of acceleration of premium amortization.
At March 31, 1997, total interest-bearing liabilities maturing or repricing
within one year exceeded total interest-earning assets maturing or repricing in
the same time period by $281.0 million. This represented a negative cumulative
one year gap ratio of 11.29%. Thus, during periods of falling interest rates, it
is expected that the cost of interest-bearing liabilities would fall more
quickly than the yield on interest-earning assets, which would positively affect
net interest income. In periods of rising interest rates, the opposite affect on
net interest income is expected. The Company's one-year gap ratio at December
31, 1996, was a negative 7.86%.
Certain shortcomings are inherent in the method of analysis presented in the
foregoing table. For example, although certain assets and liabilities may have
similar maturities or periods to repricing, they may react in different degrees
to changes in market interest rates. The interest rates on certain types of
assets and liabilities may fluctuate in advance of changes in market interest
rates, while interest rates on other types may lag behind changes in market
rates. Additionally, certain assets, such as ARM loans and mortgage-backed and
related securities, have features which restrict changes in interest rates on a
short-term basis and over the life of the asset. In addition, the proportion of
ARM loans and mortgage-backed and related securities in the Company's portfolio
could decrease in future periods if market interest rates remain at or decrease
below current levels due to refinance activity. Further, in the event of a
change in interest rates, prepayment and early withdrawal levels would likely
deviate significantly from those assumed in the table. Finally, the ability of
many borrowers to service their debt may decrease in the event of an interest
rate increase.
11
STANDARD FINANCIAL, INC. AND SUBSIDIARIES
INTEREST EARNING ASSETS AND INTEREST BEARING LIABILITIES RATE SENSITIVITY
MARCH 31, 1997
MORE THAN MORE THAN
WITHIN FOUR TO ONE YEAR THREE YEARS
THREE TWELVE TO THREE TO FIVE OVER FIVE
MONTHS MONTHS YEARS YEARS YEARS TOTAL
---------- ----------- ----------- ----------- ---------- ----------
(DOLLARS IN THOUSANDS)
Interest-earning assets (1):
Mortgage loans (2):
Fixed.................................. $ 6,044 $ 18,112 $ 48,974 $ 51,975 $ 64,502 $ 189,607
Variable............................... 45,802 141,559 450,879 596,228 34,539 1,269,007
Consumer loans (2)....................... 415 1,299 7,155 39,912 12,252 61,033
Mortgage-backed and related securities:
Fixed.................................. 657 1,971 5,276 5,315 7,076 20,295
Variable............................... 287,913 258,256 73,024 23,809 0 643,002
Investment securities and other assets
(3).................................... 157,794 5,544 21,125 59,981 539 244,983
---------- ----------- ----------- ----------- ---------- ----------
Total.............................. 498,625 426,741 606,433 777,220 118,908 2,427,927
Interest-bearing liabilities:
Deposits (4):
Now accounts........................... 4,261 12,783 34,088 34,088 16,840 102,060
Passbook savings accounts.............. 14,718 44,153 117,742 117,742 58,166 352,521
Money market deposit accounts.......... 74,270 0 0 0 0 74,270
Certificates of deposit................ 268,998 787,144 154,879 19,556 287 1,230,864
Borrowings (5)........................... 0 0 225,000 160,000 25,000 410,000
---------- ----------- ----------- ----------- ---------- ----------
Total.............................. 362,247 844,080 531,709 331,386 100,293 2,169,715
---------- ----------- ----------- ----------- ---------- ----------
Excess(deficiency) of interest-earning
assets over interest-bearing
liabilities............................ $ 136,378 $ (417,339) $ 74,724 $ 445,834 $ 18,615 $ 258,212
---------- ----------- ----------- ----------- ---------- ----------
---------- ----------- ----------- ----------- ---------- ----------
Cumulative excess(deficiency) of
interest-earning assets over
interest-bearing liabilities........... $ 136,378 $ (280,961) $ (206,237) $ 239,597 $ 258,212
---------- ----------- ----------- ----------- ----------
---------- ----------- ----------- ----------- ----------
Cumulative excess(deficiency) of
interest-earning assets over
interest-bearing liabilities as a % of
total assets........................... 5.48% -11.29% -8.29% 9.63% 10.37%
- ------------------------
(1) Adjustable and floating rate assets are included in the earlier of the
period in which interest rates are next scheduled to adjust or the period in
which they are due, and fixed rate assets are included in the periods in
which they are scheduled to be repaid based on scheduled amortization. For
fixed rate mortgage loans and mortgage-backed and related securities, an
annual prepayment rate of 13% was used, which management believes accurately
reflects the Company's historical experiences.
(2) Balances have been increased for unamortized premiums and reduced for
unearned discounts.
12
(3) Amounts shown reflect the repricing of inverse floating rate securities
during the indicated period. Such securities have rates which reset in the
opposite direction of interest rates and thus are reflected as a reduction
in total assets repricing in that period. When inverse floating rate
securities mature, the amount shown for such period reflects the principal
amount of such security plus the negative effect of repricing in prior
periods. Balances have been reduced for discounts.
(4) Although the Company's NOW accounts and passbook savings accounts generally
are subject to immediate withdrawal, management considers a certain amount
of such accounts to be core deposits having significantly longer effective
maturities based on the Company's retention of such deposits in changing
interest rate environments. NOW accounts and passbook savings accounts are
assumed to be withdrawn at annual rates of 16.7%, which management believes
accurately reflects the Company's expected historical experience. If all of
the Company's NOW accounts and passbook savings accounts had been assumed to
be subject to repricing within one year, the one-year cumulative deficiency
of interest-earning assets to interest-bearing liabilities would have been
$659.6 million or 26.50% of total assets.
13
ASSET QUALITY
The Company regularly reviews its assets to determine that the allowance for
loan losses is adequate. The review consists of a comparison of the allowance
for loan losses to historical loss experience while incorporating the impact of
any classified loan. Management also reviews its allowance adequacy in light of
the outlook for the general economy and regulatory environment.
The following table sets forth information regarding non-performing loans,
investments and real estate owned at the dates indicated.
STANDARD FINANCIAL, INC. AND SUBSIDIARIES
NON-PERFORMING ASSETS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
MARCH 31, DECEMBER 31, SEPTEMBER 30, JUNE 30, MARCH 31,
1997 1996 1996 1996 1996
----------- ------------ ------------- --------- -----------
Non-accrual mortgage loans....................... $ 5,258 $ 4,362 $ 3,649 $ 2,556 $ 2,417
Non-accrual consumer loans....................... 24 0 0 358 367
----------- ------------ ------------- --------- -----------
Total non-performing loans....................... 5,282 4,362 3,649 2,914 2,784
Net real estate held for sale.................... 160 70 70 0 170
Non-accrual mortgage-backed and related
securities..................................... 10,386 11,138 12,123 7,373 7,877
----------- ------------ ------------- --------- -----------
Total non-performing assets...................... $ 15,828 $ 15,570 $ 15,842 $ 10,287 $ 10,831
----------- ------------ ------------- --------- -----------
----------- ------------ ------------- --------- -----------
Allowance for loan losses........................ $ 7,401 $ 6,988 $ 6,559 $ 6,218 $ 5,589
Total non-performing assets to total assets...... 0.64% 0.65% 0.68% 0.45% 0.50%
Total non-performing loans to gross loans........ 0.35% 0.30% 0.26% 0.22% 0.24%
Allowance for loan losses to total non-performing
loans.......................................... 140.12% 160.20% 179.75% 213.38% 200.75%
Total non-performing mortgage-backed and related
securities to gross mortgage-backed and related
securities..................................... 1.57% 1.71% 1.76% 1.01% 0.99%
AVERAGE BALANCE SHEET
The following table sets forth certain information relating to the Company's
consolidated average statements of condition and the consolidated statements of
income for the periods indicated and reflects the average yield on assets and
average cost of liabilities for those periods. Such yields and costs are derived
by dividing income or expense by the average balance of assets or liabilities,
respectively, for the periods shown. Average balances are derived principally
from average daily balances and include non-accruing loans. The yields and costs
include fees which are considered adjustments to yields. Interest income on
non-accruing loans is reflected in the period it is collected and not in the
period it is earned. In the opinion of management, such amounts are not material
to net interest income or net change in net interest income in any period.
Non-accrual loans are included in the average balances and do not have a
material effect on the average yield.
14
STANDARD FINANCIAL, INC. AND SUBSIDIARIES
NET INTEREST MARGIN
THREE MONTHS ENDED MARCH 31, 1997 AND 1996
1997 1996
---------------------------------------------- --------------------------------------
AVERAGE AVERAGE AVERAGE AVERAGE
(DOLLARS IN THOUSANDS) BALANCE INTEREST YIELD/COST BALANCE INTEREST YIELD/COST
- ----------------------------------------- ------------ ----------------- ------------- ------------ --------- -------------
ASSETS:
Interest-earning assets:
Short term investments................. $ 27,200 $ 374 5.50% $ 29,470 $ 402 5.46%
Investment securities.................. 169,042 2,692 6.37% 144,749 2,799 7.73%
Mortgage-backed and related
securities............................. 653,370 11,586 7.09% 793,237 13,660 6.89%
Loans receivable....................... 1,504,549 27,885 7.41% 1,078,118 20,303 7.53%
Investment in Federal Home Loan Bank
stock.................................. 20,500 342 6.67% 13,278 224 6.75%
------------ ------- --- ------------ --------- ---
Total interest-earning assets...... 2,374,661 42,879 7.22% 2,058,852 37,388 7.26%
Non-interest-earning assets.............. 58,145 59,959
------------ ------------
Total assets....................... $ 2,432,806 $ 2,118,811
------------ ------------
------------ ------------
LIABILITIES AND STOCKHOLDERS' EQUITY:
Interest-bearing liabilities:
NOW accounts........................... $ 101,433 $ 514 2.03% $ 98,495 $ 499 2.03%
Money market deposit accounts.......... 73,270 577 3.15% 80,775 631 3.12%
Passbook savings accounts.............. 347,826 2,200 2.53% 367,523 2,300 2.50%
Certificates of deposit................ 1,201,827 16,712 5.56% 1,003,641 13,993 5.58%
Borrowings............................. 402,488 6,148 6.11% 258,626 3,970 6.14%
------------ ------- --- ------------ --------- ---
Total interest-bearing
liabilities...................... 2,126,844 26,151 4.92% 1,809,060 21,393 4.73%
Non-interest-bearing liabilities......... 36,569 35,564
------------ ------------
Total liabilities.................. 2,163,413 1,844,624
Stockholders' equity..................... 269,393 274,187
------------ ------------
Total liabilities and stockholders'
equity........................... $ 2,432,806 $ 2,118,811
------------ ------------
------------ ------------
Net interest income before provision for
loan losses............................ $ 16,728 2.30% $ 15,995 2.53%
------- --- --------- ---
------- --- --------- ---
Net yield on earning assets.............. 2.82% 3.11%
Ratio of interest-earning assets to
interest-bearing liabilities........... 1.12x 1.14x
15
STANDARD FINANCIAL, INC. AND SUBSIDIARIES
NET INTEREST MARGIN
AT MARCH 31, 1997
(DOLLARS IN THOUSANDS) BALANCE YIELD/COST
- ---------------------------------------------------------------------------------------- ------------ -------------
ASSETS:
Interest-earning assets:
Short term investments.............................................................. $ 27,375 5.50%
Investment securities............................................................... 197,108 6.24%
Mortgage-backed and related securities.............................................. 663,297 7.10%
Loans receivable.................................................................... 1,519,647 7.46%
Investment in Federal Home Loan Bank stock.......................................... 20,500 6.75%
------------ ---
Total interest-earning assets..................................................... 2,427,927 7.23%
Non-interest-earning assets............................................................. 60,927
------------
Total assets...................................................................... $ 2,488,854
------------
------------
LIABILITIES AND STOCKHOLDERS' EQUITY:
Interest-bearing liabilities:
NOW accounts........................................................................ $ 102,060 2.10%
Money market deposit accounts....................................................... 74,270 3.15%
Passbook savings accounts........................................................... 352,521 2.53%
Certificates of deposit............................................................. 1,230,864 5.56%
Borrowings.......................................................................... 410,000 6.11%
------------ ---
Total interest-bearing liabilities................................................ 2,169,715 4.93%
Non-interest-bearing liabilities........................................................ 47,882
------------
Total liabilities................................................................. 2,217,597
Stockholders' equity.................................................................... 271,257
------------
Total liabilities and stockholders' equity........................................ $ 2,488,854
------------
------------
Net interest income before provision for loan losses.................................... 2.30%
---
---
CAPITAL COMPLIANCE
Office of Thrift Supervision (the "OTS") regulations require the Bank to
comply with the following minimum capital standards: a leverage (or core
capital) requirement consisting of a minimum ratio of core capital (which, as
defined by the OTS, is comprised primarily of stockholders' equity) to total
assets of 3.00%; a tangible capital requirement consisting of a minimum ratio of
tangible capital (defined as core capital minus all intangible assets other than
a specified amount of purchased mortgage servicing rights) to total assets of
1.50%; and a risk-based capital requirement, consisting of a minimum ratio of
total capital to total risk-weighted assets of 8.00%, with at least 50% of total
capital consisting of core capital.
At March 31, 1997, the Bank exceeded all regulatory minimum capital
requirements. The following table sets forth information relating to the Bank's
regulatory capital compliance at that date.
EXCESS OF
REGULATORY ACTUAL BANK BANK ACTUAL
REQUIREMENTS CAPITAL CAPITAL OVER
---------------------- ----------------------- REGULATORY
AMOUNT PERCENT AMOUNT PERCENT REQUIREMENTS
--------- ----------- ---------- ----------- -------------
Risk-based............................................... $ 82,591 8.00% $ 210,890 20.43% $ 128,299
Leverage (core).......................................... 72,992 3.00 203,489 8.36 130,497
Tangible................................................. 36,490 1.50 203,102 8.35 166,612
16
The capital requirements described above are minimum requirements. Higher
capital requirements will be required by the OTS if warranted by the particular
circumstances or risk profile of an individual institution. For example, OTS
regulations provide that additional capital may be required to take adequate
account of the risks posed by concentrations of credit, nontraditional
activities and the institution's ability to manage such risks. Further, the OTS
may require an institution to maintain additional capital to account for its
interest rate risk ("IRR") exposure. Under OTS regulations, the OTS quantifies
each institution's level of IRR exposure based on data reported by the
institution to the OTS, using a model designed to measure the change in the net
present value of the institution's assets, liabilities and off-balance sheet
positions resulting from a hypothetical 200 basis point increase or decrease in
interest rates. IRR exposure, as measured by the OTS, is used as the basis for
determining whether the institution must hold additional risk-based capital to
account for IRR. The Bank has not been required by OTS to maintain capital in
excess of the minimum regulatory requirements set forth above.
LIQUIDITY
The Company's primary sources of funds are deposits, principal and interest
payments on loans, mortgage-backed and related securities and investment
securities, and advances from the FHLB and other borrowed funds. While scheduled
maturities of investments and amortization of loans are predictable sources of
funds, deposit flows and mortgage prepayments are greatly influenced by general
interest rates, economic conditions and competition.
The Bank is required to maintain an average daily balance of liquid assets
and short-term liquid assets as a percentage of net withdrawable deposits plus
short-term borrowings as defined by the OTS regulations. This requirement which
may vary at the direction of the OTS depending upon economic conditions and
deposit flows, is based upon a percentage of deposits and short-term borrowings.
The minimum required liquidity and short-term liquidity ratios are currently 5%
and 1%, respectively. The Bank's liquidity ratios were 10.30% at March 31, 1997
and 7.46% at December 31, 1996. The Bank's short-term liquidity ratios were
6.66% at March 31, 1997 and 4.50% at December 31, 1996. Excess funds are
generally invested in high quality, short-term marketable investments and
federal funds. In the event that the Bank should require funds beyond its
ability to generate them internally, additional sources of funds are available
through the use of advances from the Company, the FHLB, and other commercial
banking sources.
The Company's cash flows are comprised of three primary classifications:
cash flows from operating activities, investing activities and financing
activities. Net cash provided (used) by operating activities, consisting of the
results of operations of the Company, adjusted primarily for non-cash
amortization of expenses and changes in assets and liabilities were ($6.8)
million and $5.8 million for the first three months of 1997 and 1996,
respectively. Net cash used in investing activities, consisting of purchases and
maturities of investments, changes in the level of mortgage loans, and payment
for property and equipment, were $74.2 million and $116.3 million for the first
three months of 1997 and 1996, respectively. Net cash provided by financing
activities, consisting primarily of changes in deposit and escrow accounts and
changes in borrowed funds, were $83.1 million and $103.6 million for the first
three months of 1997 and 1996, respectively.
At March 31, 1997, the Company had outstanding loan commitments of $63.3
million and anticipates that it will have sufficient funds available to meet
these commitments. Certificates of deposit which are scheduled to mature in one
year or less from March 31, 1997, totaled $1.056 billion. Management believes
that a significant portion of such deposits will remain with the Company based
upon prior experience with such deposits.
RECENT REGULATORY DEVELOPMENTS
Legislation has been introduced in the Congress that would eliminate the
federal thrift charter by requiring each federal thrift to convert to a national
bank or to a state bank or state thrift. One of the pending bills would require
the conversion to occur by January 1, 1998 while the other would require
17
conversion by June 30, 1998. Under the proposed legislation, state thrift
institutions would be regulated for purposes of federal law as state banks. The
bills would allow a converting federal thrift to retain nonconforming
investments and activities for a period of two years following conversion
subject to extension by the converted bank's primary federal regulator for up to
two additional one year periods). The pending legislation would allow savings
and loan holding companies that become bank holding companies as a result of a
charter conversion pursuant to the legislation to continue to engage in any
activity in which they are currently allowed to engage, provided that they
remain "qualified bank holding companies." In order to be deemed a qualified
bank holding company, each depository institution subsidiary of the holding
company that was previously a thrift institution must continue to satisfy the
qualified thrift lender test and comply with all other investment limitations to
which the institution was subject as a thrift institution. Further, the proposed
legislation imposes certain restrictions on the ability of a qualified bank
holding company to acquire other depository institutions or to be acquired. If a
savings and loan holding company failed to remain a qualified bank holding
company, the company would become subject to all of the nonbanking activities
restrictions generally applicable to bank holding companies.
The Congress is also considering legislation that would allow bank holding
companies to engage in a wider range of nonbanking activities, including greater
authority to engage in securities and insurance activities. While the scope of
permissible nonbanking activities and the conditions under which the new powers
could be exercised varies among bills, the expanded powers generally would be
available to a bank holding company only if the bank holding company and its
bank subsidiaries remain well-capitalized and well-managed. The bills also
impose various restrictions on transactions between the depository institution
subsidiaries of bank holding companies and their nonbank affiliates. These
restrictions are intended to protect the depository institutions from the risks
of the new nonbanking activities permitted to such affiliates.
At this time, the Company is unable to predict whether any of the pending
bills will be enacted and, therefore, is unable to predict the impact such
legislation may have on the operations of the Company and the Bank.
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
This report may contain certain 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. The Company intends such
forward-looking statements to be covered by the safe harbor provisions for
forward-looking statements contained in the Private Securities Reform Act of
1995, and is including this statement for purposes of these safe harbor
provisions. Forward-looking statements, which are based on certain assumptions
and describe future plans, strategies and expectations of the Company, are
generally identifiable by use of the words "believe," "expect," "intend,"
"anticipate," "estimate," "project" or similar expressions. The Company's
ability to predict results or the actual effect of future plans or strategies is
inherently uncertain. Factors which could have a material adverse affect on the
operations and future prospects of the Company and its subsidiaries include, but
are not limited to, changes in: interest rates, general economic conditions,
legislative/regulatory changes, monetary and fiscal polices of the U.S.
Government, including policies of the U.S. Treasury and the Federal Reserve
Board, the quality or composition of the loan or investment portfolios, demand
for loan products, deposit flows, competition, demand for loan products, deposit
flows, competition, demand for financial services in the Company's market area
and accounting principles, polices and guidelines. These risks and uncertainties
should be considered in evaluating forward-looking statements and undue reliance
should not be placed on such statements. Further information concerning the
Company and its business, including additional factors that could materially
affect the Company's financial results, is included in the Company's filings
with the Securities and Exchange Commission.
18
STANDARD FINANCIAL, INC. AND SUBSIDIARIES
PART II--OTHER INFORMATION
ITEM 1 LEGAL PROCEEDINGS
There are no material pending legal proceedings to which the Company or its
Subsidiaries are a party other than ordinary routine litigation incidental to
their respective businesses.
ITEM 2 CHANGES IN SECURITIES
None
ITEM 3 DEFAULT UPON SENIOR SECURITIES
None
ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5 OTHER INFORMATION
None
19
ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
11.1 Statement Re Computation of Per Share Earnings
27.1 Financial Data Schedule
(b) Reports on Form 8-K
On January 28, 1997, the Company filed a Form 8-K to report under item 5 of
the Form 8-K certain information regarding the Company's 1997 annual meeting of
stockholders.
On March 16, 1997, the Company filed a Form 8-K to report under Item 5 of
the Form 8-K that the Company has entered into an Agreement and Plan of
Reorganization with TCF Financial Corp (the "Agreement"). Under Item 7 of the
Form 8-K, Exhibit 2.1 set forth a copy of the Agreement, and Exhibit 99.1 set
forth a copy of a press release, dated March 17, 1997, announcing the execution
of the Agreement.
20