1
FORM 10-Q
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2000
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: 000-30973
MBT FINANCIAL CORP.
(Exact name of registrant as specified in its charter)
Michigan 38-3516922
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
102 E. Front Street
Monroe, Michigan 48161
(Address of principal executive offices)
(Zip code)
(734) 241-3431
(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.
Yes X No
---------- -----------
As of September 30, 2000, 20,000,000 shares of the Corporation's Common Stock,
No Par Value, were outstanding.
2
PART I - FINANCIAL INFORMATION
ITEM I. FINANCIAL STATEMENTS.
MBT FINANCIAL CORP.
CONSOLIDATED STATEMENTS OF CONDITION
(UNAUDITED)
September 30, December 31,
2000 1999
---- ----
ASSETS
Cash and due from banks $ 39,524,439 $ 27,129,665
Federal funds sold 4,500,000 10,700,000
Investment securities-
Held to maturity-
Obligations of U.S. Government agencies 145,790,035 150,399,055
Obligations of states and
political subdivisions 128,300,018 152,790,883
Other securities 4,961,785 8,955,703
Available for sale-
Obligations of U.S. Government agencies 13,819,960 33,482,440
Obligations of states and
political subdivisions -- 7,156,929
Other securities 106,591,395 96,794,073
Loans(1) 784,492,528 693,481,905
Bank premises and equipment 13,941,075 11,761,277
Other real estate owned 1,883,113 2,513,491
Interest receivable and other assets 37,636,690 21,311,162
--------------- ---------------
Total assets $ 1,281,441,038 $ 1,216,476,583
=============== ===============
LIABILITIES
Demand deposits $ 120,889,607 $ 128,816,650
Interest bearing demand deposits 64,488,500 65,226,636
Savings deposits 288,252,676 319,966,245
Other time deposits 475,604,503 430,066,684
--------------- ---------------
Total deposits $ 949,235,286 $ 944,076,215
Federal Home Loan Bank advances 175,000,000 125,000,000
Interest payable and other liabilities 8,169,186 7,752,876
--------------- ---------------
Total liabilities $ 1,132,404,472 $ 1,076,829,091
STOCKHOLDERS' EQUITY
Cumulative preferred stock ($100
par value; 4 1/2% non-voting;
authorized and outstanding-
2,000 shares as of December 31, 1999) $ -- $ 200,000
Common stock (no par value; 30,000,000 shares
authorized, 20,000,000 shares outstanding) -- --
Surplus 62,500,000 62,500,000
Undivided profits 88,746,803 78,315,956
Other comprehensive loss (2,210,237) (1,368,464)
--------------- ---------------
Total stockholders' equity $ 149,036,566 $ 139,647,492
--------------- ---------------
Total liabilities and stockholders'
equity $ 1,281,441,038 $ 1,216,476,583
=============== ===============
(1) Net of loans less allowance for loan losses of $11,285,846 as of September
30, 2000 and $9,900,000 as of December 31, 1999.
See accompanying notes to the consolidated financial statements.
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MBT FINANCIAL CORP.
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
Three Months Ended September 30,
2000 1999
---- ----
INTEREST INCOME
Interest and fees on loans $18,202,192 $15,494,118
Interest on investment securities-
Obligations of U.S. Government agencies 3,099,456 2,401,214
Obligations of states and
political subdivisions 1,693,016 2,043,436
Other securities 2,296,603 855,099
Interest on Federal funds sold 50,799 41,300
----------- -----------
Total interest income $25,342,066 $20,835,167
----------- -----------
INTEREST EXPENSE
Interest on deposits $10,243,056 $ 9,461,805
Interest on other borrowed funds 2,615,347 43,870
----------- -----------
Total interest expense $12,858,403 $ 9,505,675
----------- -----------
NET INTEREST INCOME $12,483,663 $11,329,492
PROVISION FOR LOAN LOSSES 1,500,000 1,050,000
----------- -----------
NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES $10,983,663 $10,279,492
----------- -----------
OTHER INCOME
Income from trust services $ 840,000 $ 780,000
Service charges on deposit accounts 526,994 482,940
Security gains 32,949 953
Other 564,983 468,063
----------- -----------
Total other income $ 1,964,926 $ 1,731,956
----------- -----------
OTHER EXPENSES
Salaries and employee benefits $ 3,056,612 $ 2,739,890
Occupancy expense 528,545 475,361
Other 2,308,720 2,293,696
----------- -----------
Total other expenses $ 5,893,877 $ 5,508,947
----------- -----------
INCOME BEFORE PROVISION FOR
INCOME TAXES $ 7,054,712 $ 6,502,501
PROVISION FOR INCOME TAXES 1,977,246 1,653,650
----------- -----------
NET INCOME $ 5,077,466 $ 4,848,851
=========== ===========
BASIC EARNINGS PER SHARE* (after deducting
preferred stock dividends) $ 0.25 $ 0.24
=========== ===========
DILUTED EARNINGS PER SHARE $ 0.25 $ 0.24
=========== ===========
COMMON DIVIDENDS DECLARED PER SHARE* $ 0.11 $ 0.07
=========== ===========
*This is based upon 20,000,000 common shares outstanding.
See accompanying notes to the consolidated financial statements.
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MBT FINANCIAL CORP.
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
Nine Months Ended September 30,
2000 1999
---- ----
INTEREST INCOME
Interest and fees on loans $51,562,475 $45,653,785
Interest on investment securities-
Obligations of U.S. Government agencies 9,364,603 6,277,321
Obligations of states and
political subdivisions 5,551,727 6,167,154
Other securities 6,807,349 2,547,913
Interest on Federal funds sold 132,377 158,690
----------- -----------
Total interest income $73,418,531 $60,804,863
----------- -----------
INTEREST EXPENSE
Interest on deposits $29,128,536 $27,812,409
Interest on other borrowed funds 6,991,595 64,269
----------- -----------
Total interest expense $36,120,131 $27,876,678
----------- -----------
NET INTEREST INCOME $37,298,400 $32,928,185
PROVISION FOR LOAN LOSSES 4,500,000 3,150,000
----------- -----------
NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES $32,798,400 $29,778,185
----------- -----------
OTHER INCOME
Income from trust services $ 2,520,000 $ 2,340,000
Service charges on deposit accounts 1,575,566 1,274,915
Security gains 26,602 8,171
Other 1,881,635 1,340,174
----------- -----------
Total other income $ 6,003,803 $ 4,963,260
----------- -----------
OTHER EXPENSES
Salaries and employee benefits $ 9,238,644 $ 8,082,978
Occupancy expense 1,566,839 1,348,007
Other 6,452,163 5,812,762
----------- -----------
Total other expenses $17,257,646 $15,243,747
----------- -----------
INCOME BEFORE PROVISION FOR
INCOME TAXES $21,544,557 $19,497,698
PROVISION FOR INCOME TAXES 5,908,510 4,941,137
----------- -----------
NET INCOME $15,636,047 $14,556,561
=========== ===========
BASIC EARNINGS PER SHARE* (after deducting
preferred stock dividends) $ 0.78 $ 0.73
=========== ===========
DILUTED EARNINGS PER SHARE $ 0.78 $ 0.73
=========== ===========
COMMON DIVIDENDS DECLARED PER SHARE* $ 0.26 $ 0.21
=========== ===========
*This is based upon 20,000,000 common shares outstanding.
See accompanying notes to the consolidated financial statements.
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MBT FINANCIAL CORP.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(UNAUDITED)
Other
Preferred Common Undivided Comprehensive
Stock Stock Surplus Profits Income (Loss)
------------ ------------ ------------ ------------ -------------
BALANCE
JANUARY 1, 1999 $ 200,000 $ 0 $ 62,500,000 $ 68,455,624 $ 61,627
------------ ------------ ------------ ------------ -------------
ADD (DEDUCT)
Net income for the year 17,069,332
Dividends declared-
Preferred ($4.50 per share) (9,000)
Common ($.36 per share*) (7,200,000)
Change in net unrealized gains (losses)
on securities available for sale, net of tax (1,430,091)
------------ ------------ ------------ ------------ -------------
BALANCE
DECEMBER 31, 1999 $ 200,000 $ 0 $ 62,500,000 $ 78,315,956 ($ 1,368,464)
ADD (DEDUCT)
Net income for the nine months 15,636,047
Dividends declared-
Preferred ($2.25 per share regular dividend (5,200)
plus $0.35 per share to redeem the stock)
Common ($.26 per share*) (5,200,000)
Redemption of Preferred Stock (200,000)
Change in net unrealized gains (losses)
on securities available for sale, net of tax (841,773)
------------ ------------ ------------ ------------ -------------
BALANCE
SEPTEMBER 30, 2000 $ 0 $ 0 $ 62,500,000 $ 88,746,803 ($ 2,210,237)
============ ============ ============ ============ =============
*This is based upon 20,000,000 common shares outstanding.
See accompanying notes to the consolidated financial statements.
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MBT FINANCIAL CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Nine Months Ended September 30,
2000 1999
----- ----
CASH FLOWS PROVIDED BY (USED FOR)
OPERATING ACTIVITIES:
Interest and fees received $ 74,540,012 $ 59,288,681
Other income received 5,977,201 4,955,089
Miscellaneous payments (3,430,780) (395,757)
Interest paid (35,832,558) (27,780,175)
Cash paid to employees and others (28,660,749) (31,822,883)
Income taxes paid (5,118,000) (338,785)
------------- -------------
Net cash provided by operating activities $ 7,475,126 $ 3,906,170
------------- -------------
CASH FLOWS PROVIDED BY (USED FOR)
INVESTING ACTIVITIES:
Proceeds from maturities of investment securities
held to maturity $ 86,420,688 $ 447,290,482
Proceeds from maturities of investment securities
available for sale 14,500,000 4,606,611
Proceeds from sale of investment securities
available for sale 22,698,308 --
Net (increase) decrease in loans (96,564,868) 4,932,039
Proceeds from sales of other real estate owned 1,339,737 1,091,336
Proceeds from sales of other assets 11,000 --
Purchase of investment securities held to maturity (53,731,357) (488,017,503)
Purchase of investment securities available for sale (21,415,260) (28,220,535)
Capital expenditures (3,492,471) (3,097,054)
------------- -------------
Net cash used for investing activities $ (50,234,223) $ (61,414,624)
------------- -------------
CASH FLOWS PROVIDED BY (USED FOR)
FINANCING ACTIVITIES:
Net decrease in demand, interest bearing
demand, and savings deposits $ (40,378,748) $ (3,139,075)
Net increase in certificates of deposit 45,537,819 44,603,243
Net increase in borrowed funds 50,000,000 24,300,000
Redemption of preferred stock (200,000) --
Dividends paid (6,005,200) (5,109,000)
------------- -------------
Net cash provided by financing activities $ 48,953,871 $ 60,655,168
------------- -------------
NET INCREASE IN CASH AND CASH EQUIVALENTS $ 6,194,774 $ 3,146,714
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 37,829,665 31,096,097
------------- -------------
CASH AND CASH EQUIVALENTS AT END OF NINE MONTHS $ 44,024,439 $ 34,242,811
============= =============
RECONCILIATION OF NET INCOME TO NET CASH
PROVIDED BY (USED FOR) OPERATING ACTIVITIES:
Net income $ 15,636,047 $ 14,556,561
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation 1,312,673 922,223
Provision for loan losses 4,500,000 3,150,000
(Increase) decrease in net deferred Federal income tax asset (1,140,053) 5,848,779
Amortization of investment premium and discount 375,077 233,763
Net increase (decrease) in interest payable and other liabilities 416,310 (18,735,807)
Net increase in interest receivable and other assets (15,185,475) (3,014,365)
Net increase (decrease) in deferred loan fees 335,886 (19,072)
Other 1,224,661 964,088
------------- -------------
Net cash provided by operating activities $ 7,475,126 $ 3,906,170
============= =============
SUPPLEMENTAL SCHEDULE OF
NONCASH INVESTING ACTIVITIES:
Transfer of loans to other assets $ 9,000 $ --
============= =============
Transfer of loans to other real estate owned $ 709,359 $ 479,214
============= =============
See accompanying notes to the consolidated financial statements.
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MBT FINANCIAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1. BASIS OF PRESENTATION AND ACCOUNTING POLICIES
The unaudited consolidated financial statements include the accounts of MBT
Financial Corp. (the "Company") and its subsidiary, Monroe Bank & Trust (the
"Bank"). The Bank operates twenty-one offices in Monroe County, Michigan and one
office in Wayne County, Michigan. The Bank's primary source of revenue is from
providing loans to customers, who are predominantly small and middle-market
business and middle-income individuals.
At the April 6, 2000 Annual Meeting of Shareholders of Monroe Bank & Trust,
shareholders approved a proposal that resulted in the Bank reorganizing into a
one-bank holding company. The holding company formation involved merging Monroe
Bank & Trust with Monroe Interim Bank, a state chartered bank organized solely
for the purpose of this transaction. The merger of Monroe Bank & Trust and
Monroe Interim Bank was treated as a pooling of interests. The financial
information for all prior periods was restated in the unaudited consolidated
financial statements for MBT Financial Corp. to present the statements as if the
merger had been in effect for all periods presented.
The reorganization resulted in an exchange of the Monroe Bank & Trust common
stock for MBT Financial Corp. common stock. The exchange rate was two shares of
MBT Financial Corp. for each share of Monroe Bank & Trust. Monroe Bank & Trust
previously had 10,000,000 common shares authorized and outstanding, with a par
value of $3.125 per share. MBT Financial Corp. has 30,000,000 common shares
authorized, of which 20,000,000 are outstanding. The MBT Financial Corp. common
stock has no par value. Monroe Bank & Trust is now a wholly owned subsidiary of
MBT Financial Corp., a registered bank holding company.
The accompanying unaudited consolidated financial statements of the Company have
been prepared in accordance with the instructions to Form 10-Q. Accordingly,
they do not include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. However, such
information reflects all adjustments (consisting of normal recurring
adjustments), which are, in the opinion of Management, necessary for fair
statement of results for the interim periods.
Other Comprehensive Income (Loss) consists of the change in net unrealized gains
(losses) on securities available for sale, net of tax.
2. EARNINGS PER SHARE
The numerators and denominators used in basic and diluted earnings per share
(EPS) for the periods indicated are as follows:
For Three Months Ended For Nine Months Ended
September 30 September 30
----------------------------- -----------------------------
Earnings available for common Stockholders $ 5,077,466 $ 4,848,851 $15,636,047 $14,556,561
Weighted average common shares outstanding:
Basic 20,000,000 20,000,000 20,000,000 20,000,000
Effect of dilutive securities - stock options 1,279 -- 1,211 --
----------------------------- -----------------------------
Diluted 20,001,279 20,000,000 20,001,211 20,000,000
Earnings per share:
Basic $ 0.25 $ 0.24 $ 0.78 $ 0.73
Effect of dilutive securities - stock options -- -- -- --
----------------------------- -----------------------------
Diluted $ 0.25 $ 0.24 $ 0.78 $ 0.73
============================= =============================
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MBT FINANCIAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(CONTINUED)
On July 1, 2000, the Company issued options for 126,600 shares of its common
stock to certain key executives of the Bank in accordance with the Long-Term
Incentive Compensation Plan that was approved by shareholders at the Annual
Meeting of Shareholders on April 6, 2000. The options were granted at the price
of $18.125, which was the fair market value of the Company's common stock on the
date the options were granted. The plan provides for the award of stock options,
stock, and restricted stock to directors, selected employees, and consultants.
The Board of Directors of the Company has full discretion to make awards under
the plan, up to 1,000,000 shares, or 5% of the outstanding common shares.
3. LOANS
The Bank grants commercial, consumer, and mortgage loans primarily to customers
in Monroe County, Michigan and surrounding areas. Although the Bank has a
diversified loan portfolio, a substantial portion of its debtors' ability to
honor their contracts is dependent on the automotive, manufacturing, and real
estate development economic sectors.
The Bank is a party to financial instruments with off-balance-sheet risk in the
normal course of business to meet the financing needs of its customers. These
financial instruments include commitments to extend credit and standby letters
of credit. Those instruments involve, to varying degrees, elements of credit and
interest rate risk in excess of the amount recognized in the statements of
condition.
The Bank's exposure to credit loss in the event of nonperformance by the other
party to the financial instrument for commitments to extend credit and standby
letters of credit is represented by the contractual amount of those instruments.
The Bank uses the same credit policies in making commitments and conditional
obligations as it does for on-balance-sheet instruments.
Financial instruments whose contract amounts represent off-balance-sheet credit
were as follows:
Contract amount
(000's omitted)
9/30/00 12/31/99
---------------------------
Commitments to extend credit:
Unused portion of commercial lines of credit $ 89,404 $ 74,230
Unused portion of credit card lines of credit 30,522 29,115
Unused portion of home equity lines of credit 12,024 11,985
Standby letters of credit and financial guarantees written 18,960 11,834
Commitments to extend credit are agreements to lend to a customer as long as
there is no violation of any condition established in the contract. Most
commercial lines of credit are secured by real estate mortgages or other
collateral, generally have fixed expiration dates or other termination clauses,
and require payment of a fee. Since the lines of credit may expire without being
drawn upon, the total committed amounts do not necessarily represent future cash
requirements. Credit card lines of credit have no established maturity dates,
but are payable on demand. Home equity lines of credit are secured by real
estate mortgages, have no established maturity dates, but are payable on demand.
The Bank evaluates each customer's creditworthiness on a case-by-case basis. The
amount of the collateral obtained, if deemed necessary by the Bank upon
extension of credit, is based on Management's credit evaluation of the
counterparty.
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MBT FINANCIAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(CONTINUED)
Standby letters of credit written are conditional commitments issued by the Bank
to guarantee the performance of a customer to a third party. Those guarantees
are primarily issued to support public and private borrowing arrangements and
other business transactions.
Loans consist of the following (000's omitted):
9/30/00 12/31/99
----------------------------------
Real estate loans $516,057 $437,867
Loans to finance agricultural production and
other loans to farmers 3,075 2,087
Commercial and industrial loans 156,490 157,382
Loans to individuals for household, family,
and other personal expenditures 121,774 107,412
All other loans (including overdrafts) 179 118
----------------------------------
Total loans, gross 797,575 704,866
Less: Deferred loan fees 1,797 1,484
----------------------------------
Total loans, net of deferred loan fees 795,778 703,382
Less: Allowance for loan losses 11,286 9,900
----------------------------------
$784,492 $693,482
==================================
Loans are placed in a nonaccrual status when, in the opinion of Management, the
collection of additional interest is doubtful. In the opinion of Management, all
impaired loans are in nonaccrual status. Allowances for these loans are included
in the allowance for loan losses. All cash received on nonaccrual loans is
applied to the principal balance. Nonperforming assets consists of nonaccrual
loans, loans 90 days or more past due, restructured loans, and real estate that
has been acquired in full or partial satisfaction of loan obligations or upon
foreclosure. The following table summarizes nonperforming assets (000's
omitted):
9/30/00 12/31/99
----------------------------------
Nonaccrual loans $19,712 $16,791
Loans 90 days past due 268 107
Restructured loans 1,074 1,281
----------------------------------
Total Non Performing Loans 21,054 18,179
Other real estate owned 1,883 2,513
----------------------------------
Total Non Performing Assets 22,937 20,692
==================================
Non Performing Assets to Total Loans 2.88% 2.94%
Non Performing Assets to Total Assets 1.79% 1.70%
Allowance for Loan and Lease Losses to
Non Performing Assets 49.20% 47.84%
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MBT FINANCIAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(CONTINUED)
4. ALLOWANCE FOR LOAN LOSSES
Transactions in the allowance for loan losses were as follows (000's omitted):
9/30/00 12/31/99
----------------------------
Balance beginning of period $9,900 $11,100
Provision for loan losses 4,500 9,388
Loans charged off (5,167) (11,556)
Recoveries 2,053 968
----------------------------
Balance end of period $11,286 $9,900
============================
Each period the provision for loan losses in the income statement results from
the combination of an estimate by Management of loan losses that occurred during
the current period and the ongoing adjustment of prior estimates of losses
occurring in prior periods.
To serve as a basis for making this provision, the Bank maintains an extensive
credit risk monitoring process that considers several factors including: current
economic conditions affecting the Bank's customers, the payment performance of
individual large loans and pools of homogeneous small loans, portfolio
seasoning, changes in collateral values, and detailed reviews of specific large
loan relationships. For large loans deemed to be impaired due to an expectation
that all contractual payments will probably not be received, impairment is
measured by comparing the Bank's recorded investment in the loan to the present
value of expected cash flows discounted at the loan's effective interest rate,
the fair value of the collateral, or the loan's observable market price.
The provision for loan losses increases the allowance for loan losses, a
valuation account which is netted against loans on the statements of condition.
As the specific customer and amount of a loan loss is confirmed by gathering
additional information, taking collateral in full or partial settlement of the
loan, bankruptcy of the borrower, etc., the loan is charged off, reducing the
allowance for loan losses. If, subsequent to a charge off, the Bank is able to
collect additional amounts from the customer or obtain control of collateral
worth more than earlier estimated, a recovery is recorded.
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MBT FINANCIAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(CONTINUED)
5. INVESTMENT SECURITIES
The following is a summary of the Bank's investment securities portfolio as of
September 30, 2000 and December 31, 1999 (000's omitted):
September 30, 2000 December 31, 1999
------------------ -----------------
Amortized Fair Amortized Fair
Cost value Cost value
----------------------- ------------------------
Held to Maturity
- ----------------
Obligations of US Government Agencies $ 145,790 $ 137,806 $ 150,399 $ 141,170
Obligations of States and Political
Subdivisions 128,300 129,533 152,791 152,505
Other Securities 4,962 4,838 8,956 8,845
----------------------- ------------------------
279,052 272,177 312,146 302,520
======================= ========================
Available for Sale
- ------------------
Obligations of US Government Agencies 14,127 13,820 34,088 33,482
Obligations of States and Political
Subdivisions - - 6,984 7,157
Other Securities 109,685 106,591 98,467 96,794
----------------------- ------------------------
$ 123,812 $ 120,411 $ 139,539 $ 137,433
======================= ========================
The Bank elected early adoption of SFAS 133, "Accounting for Derivative
Instruments and Hedging Activities", effective April 1, 1999. The provisions of
SFAS 133 require the Bank to recognize all derivative instruments as assets or
liabilities in its statement of condition and to report them at their fair
value. The provisions of SFAS 133 also allowed the Bank to reclassify securities
that were classified as Held to Maturity as Available for Sale or as Trading.
Upon adoption of SFAS 133, the Bank reclassified certain Held to Maturity
Obligations of States and Political Subdivisions as Available for Sale
Obligations of States and Political Subdivisions. The value of the securities
reclassified on April 1, 1999 was $7,990,185.
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12
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
At the April 6, 2000 Annual Meeting of Shareholders of Monroe Bank & Trust,
shareholders approved a proposal that resulted in the Bank reorganizing into a
one-bank holding company. The holding company formation involved merging Monroe
Bank & Trust with Monroe Interim Bank, a state chartered bank organized solely
for the purpose of this transaction. The merger of Monroe Bank & Trust and
Monroe Interim Bank was treated as a pooling of interests. The financial
information for all prior periods was restated in the unaudited consolidated
financial statements for MBT Financial Corp. to present the statements as if the
merger had been in effect for all periods presented.
The reorganization resulted in an exchange of the Monroe Bank & Trust common
stock for MBT Financial Corp. common stock. The exchange rate was two shares of
MBT Financial Corp. for each share of Monroe Bank & Trust. Monroe Bank & Trust
previously had 10,000,000 common shares authorized and outstanding, with a par
value of $3.125 per share. MBT Financial Corp. has 30,000,000 common shares
authorized, of which 20,000,000 are outstanding. The MBT Financial Corp. common
stock has no par value. Monroe Bank & Trust is now a wholly owned subsidiary of
MBT Financial Corp., a registered bank holding company.
The Company experienced a slight increase of $5.1 million in deposits since the
beginning of the year, representing a 0.6% increase. Demand Deposits decreased
$7.9 million and Savings Deposits decreased $31.7 million while Other Time
Deposits increased $45.5 million. Local loan demand has continued to be strong,
with Loans increasing $91.0 million, or 13.1% since the beginning of the year.
This loan growth has been funded through the use of borrowed funds, the increase
in deposits, and a decrease of $50.1 million in investments. During the first
quarter, the Company redeemed its Cumulative Preferred Stock, which had a par
value of $200,000.
A comparison of the income statements for the three months ended September 30,
2000 and 1999 shows that Net Interest Income increased $1,154,000, or 10%, while
Net Income increased $229,000, or 5%. The largest interest income dollar changes
were in Interest and Fees on Loans, increasing $2,708,000, or 18%, interest on
Other Securities, increasing $1,442,000, or 169%, and interest on Obligations of
U.S. Government Agencies, increasing $698,000, or 29%. Average loans outstanding
increased $84 million while the average yield on these loans increased from
8.44% to 8.96%. The average investment in Other Securities increased $63 million
while the average yield on these investments increased from 6.87% to 7.35%. The
average investment in Obligations of U.S. Government Agencies increased $31
million while the average yield on these investments increased from 6.54% to
6.99%. Average interest bearing deposits decreased from $860 million to $830
million, while at the same time the average cost of these deposits increased
from 4.36% to 4.91%. The result was an increase in Interest on Deposits of
$781,000, or 8.3%. Average borrowed funds increased from $4 million to $169
million while the average cost of these borrowings increased from 5.33% to
6.09%. The interest expense related to these borrowings increased $2,571,000. We
incurred an increase of $450,000, or 43% in the Provision for Loan Losses,
compared to the third quarter of last year. Trust Income increased $60,000, or
8%, Service Charges on Deposit Accounts increased $44,000, or 9%, Other Income
increased $97,000, or 21% and Security Gains increased $32,000. Salaries and
Employee Benefits increased $317,000, Occupancy Expense increased $53,000, and
Other Expenses increased $15,000, compared to the third quarter of 1999. Income
Before Provision for Income Taxes showed a small increase of $552,000, or 8%,
but the Provision for Income Taxes increased $323,000, or 20%, resulting in an
increase of $229,000 in Net Income.
Comparing the income statements for the nine months ended September 30, 2000 and
1999 shows that the largest interest income dollar changes were in Interest and
Fees on Loans, increasing
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$5,909,000, interest on Other Securities, increasing $4,259,000, and interest on
Obligations of U.S. Government Agencies, increasing $3,087,000. Average loans
outstanding increased from $700 million to $750 million, while at the same time,
the average yield on these loans increased from 8.38% to 8.84%. Average interest
bearing deposits decreased from $854 million to $831 million, while at the same
time, the average cost of these deposits increased from 4.35% to 4.68%. The
result was a $1,316,000 increase in Interest on Deposits. While the average
deposits decreased, the Company funded its asset growth with borrowed funds.
Average borrowed funds increased from $2 million to $154 million while the
average cost of borrowed funds increased from 5.17% to 5.99%. The interest
expense related to these borrowings increased $6,927,000. The Company incurred
an increase of $1,350,000, or 43% in the Provision for Loan Losses, compared to
the same period last year. Comparing the first nine months of 2000 to the same
period in 1999, shows the largest dollar changes within Other Income and Other
Expenses were in Salaries and Employee Benefits, increasing $1,156,000, Other
Expenses, increasing $639,000, and Other Income, increasing $541,000. Income
Before Provision for Income Taxes showed a modest increase of $2,047,000, or
10%, while the Provision for Income Taxes showed a significant increase of
$967,000, or 20%. The result was a 7% increase in Net Income of $1,079,000.
The Company has maintained sufficient liquidity to fund its loan growth and
allow for fluctuations in deposit levels. Internal sources of liquidity are
provided by the maturities of loans and securities as well as holdings of
securities Available for Sale. External sources of liquidity include the unused
portion of our line of credit with the Federal Home Loan Bank of Indianapolis,
and the Federal funds lines that we have established with our correspondent
banks.
Total stockholders equity of the Company was $149,037,000 at September 30, 2000
and $139,647,000 at December 31, 1999. The ratio of equity to assets was 11.6%
and 11.5% at each period end, respectively. Federal bank regulatory agencies
have set capital adequacy standards for Total Risk Based Capital, Tier 1 Risk
Based Capital, and Capital Leverage. These standards require banks to maintain
Leverage and Tier 1 ratios of at least 4% and a Total Capital ratio of at least
8% to be adequately capitalized. The regulatory agencies consider a bank to be
well capitalized if its Total Risk Based Capital is at least 10% of Risk
Weighted Assets, Tier 1 Capital is at least 6% of Risk Weighted Assets, and
Leverage Capital Ratio is at least 5%. The following table summarizes the
capital ratios of the Bank:
September 30, 2000 December 31, 1999
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Leverage Capital 11.86% 12.00%
Tier 1 Risk Based Capital 15.95% 16.45%
Total Risk Based Capital 17.14% 17.63%
At September 30, 2000 and December 31, 1999, the Bank was in compliance with the
capital guidelines and is considered "well-capitalized" under regulatory
standards.
Market risk for the Bank, as is typical for most banks, consists mainly of
interest rate risk and market price risk. The Bank's earnings and the economic
value of its equity are exposed to interest rate risk and market price risk, and
monitoring this risk is the responsibility of the Asset/Liability Management
Committee (ALCO) of the Bank. The market risk is monitored monthly and has not
changed significantly since year-end 1999.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
MBT FINANCIAL CORP.
-----------------------------------
(Registrant)
Date November 13, 2000 /s/ Ronald D. LaBeau
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Ronald D. LaBeau
President
Date November 13, 2000 /s/ Eugene D. Greutman
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Eugene D. Greutman
Treasurer
(principal financial officer)
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Exhibit Index
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Exhibit No. Description
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27 Financial Data Schedule