1
EXHIBIT 99(b)
OFFICE OF THRIFT SUPERVISION
WASHINGTON, D.C. 20552
____________________
FORM 10-Q
(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, 1995
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
- -----
EXCHANGE ACT OF 1934
For the transition period from to
------------- ----------
OTS Docket Number 6092
MACOMB FEDERAL SAVINGS BANK
---------------------------
(Exact name of registrant as specified in its charter)
United States 38-1524859
- ------------- ----------
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification Number)
23505 Greater Mack, St. Clair Shores, Michigan 48080
- ---------------------------------------------- -----
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code: (810) 771-2500
--------------
N/A
---------------------
Former name, former address and former fiscal year,
if changed since last report.
Indicate by check whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No
----- -----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date:
Common Stock, par value $1.00 per share 186,604
- --------------------------------------- -------
Class Outstanding at 11/3/95
2
MACOMB FEDERAL SAVINGS BANK
INDEX
Page
----
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
Statements of Financial Condition - June 30,
1995 and September 30, 1995 (unaudited) 1-2
Statements of Operations - Three month periods
ended September 30, 1994 and September 30,
1995 (unaudited) 3-4
Statements of Cash Flows - Three month periods
ended September 30, 1994 and September 30,
1995 (unaudited) 5-6
Statement of Changes in Stockholders' Equity -
Three months ended September 30, 1995 (unaudited) 7
Notes to Financial Statements 8-9
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 10-14
PART II OTHER INFORMATION
Item 1. Legal Proceedings 15
Item 2. Changes in Securities 15
Item 3. Defaults upon Senior Securities 15
Item 4. Submission of Matters to a Vote of Security Holders 15
Item 5. Other Information 15
Item 6. Exhibits and reports on Form 8-K 15
Signatures 16
Exhibit II 17
3
MACOMB FEDERAL SAVINGS BANK
STATEMENTS OF FINANCIAL CONDITION
As of June 30, 1995 and September 30, 1995
A S S E T S
June 30, September 30,
1995 1995
------------ -------------
(Unaudited)
Cash and equivalents $ 2,490,204 $ 2,777,891
Certificates of deposit 2,550,000 2,452,000
Loans receivable, net 21,270,129 21,317,268
U.S. Treasury Bills, held-to-maturity
(estimated market value of $8,852,109
on June 30, 1995 and $8,894,850 on
September 30, 1995) 8,832,902 8,887,051
Mortgage-backed securities, held-to-
maturity (estimated market value of
$4,413,680 on June 30, 1995 and
$4,294,730 on September 30, 1995) 4,480,111 4,353,322
Accrued interest receivable, net 137,432 149,922
Stock in Federal Home Loan Bank, at cost 207,800 207,800
Stock in Federal Home Loan Mortgage
Corporation available-for-sale, at
fair value 243,243 246,362
Property and equipment, net 81,828 80,808
Deferred federal income taxes 149,480 177,684
Policy cash value - Officers' and
directors' benefit plan 1,300,800 1,313,391
Other assets 132,141 83,974
------------ ------------
TOTAL ASSETS $ 41,876,070 $ 42,047,473
============ ============
See accompanying notes to financial statements.
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L I A B I L I T I E S A N D S T O C K H O L D E R S ' E Q U I T Y
June 30, September 30,
1995 1995
------------ -------------
(Unaudited)
CURRENT LIABILITIES
Deposits $ 34,256,150 $ 34,534,490
Advances from borrowers for taxes and insurance 528,766 310,744
E.S.O.P. loan payable - Comerica Bank - Current portion 36,000 36,000
Employees' and directors' pension fund payable 854,934 881,698
Other liabilities 65,020 84,876
------------ ------------
Total Current Liabilities $ 35,740,870 $ 35,847,808
LONG-TERM LIABILITIES
E.S.O.P. loan payable - Comerica Bank 45,000 36,000
------------ ------------
TOTAL LIABILITIES $ 35,785,870 $ 35,883,808
------------ ------------
STOCKHOLDERS' EQUITY
Capital Stock
Authorized 3,000,000 shares common, issued and
outstanding 186,604 shares at $1 par value $ 186,604 $ 186,604
Additional Paid-in Capital 1,429,939 1,429,939
Retained Earnings (Substantially restricted) 4,403,330 4,465,736
Net unrealized appreciation on available-for-sale
securities, net of tax of $77,957 as of June 30,
1995 and $79,017 as of September 30, 1995 151,327 153,386
------------ ------------
Totals $ 6,171,200 $ 6,235,665
Less: Unearned E.S.O.P. shares 81,000 72,000
------------ ------------
TOTAL STOCKHOLDERS' EQUITY $ 6,090,200 $ 6,163,665
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 41,876,070 $ 42,047,473
============ ============
See accompanying notes to financial statements.
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MACOMB FEDERAL SAVINGS BANK
STATEMENTS OF OPERATIONS
Three Month Periods Ended September 30, 1994 and 1995
Period Ended Period Ended
September 30, 1994 September 30, 1995
------------------ ------------------
(Unaudited) (Unaudited)
INTEREST INCOME
Interest and fees on loans $ 410,989 $ 437,606
Interest on investments 3,711 6,340
Interest on mortgage-backed securities 69,704 63,744
Other 145,745 210,981
--------- ---------
TOTAL INTEREST INCOME $ 630,149 $ 718,671
--------- ---------
INTEREST EXPENSES
Interest on deposits $ 337,684 $ 441,040
Interest on borrowings 2,124 1,370
--------- ---------
TOTAL INTEREST EXPENSE $ 339,808 $ 442,410
--------- ---------
NET INTEREST INCOME $ 290,341 $ 276,261
PROVISION FOR LOSSES ON LOANS - -
--------- ---------
NET INTEREST INCOME AFTER
PROVISION FOR LOSSES ON LOANS $ 290,341 $ 276,261
--------- ---------
OTHER INCOME
Charges and other fees $ 5,671 $ 5,183
Net gain on sale of real estate owned 428 1,295
Other 2 -
--------- ---------
TOTAL OTHER INCOME $ 6,101 $ 6,478
--------- ---------
OTHER EXPENSES
Salaries and benefits $ 118,600 $ 119,379
Occupancy 6,347 6,341
Insurance 23,148 23,205
Legal, audit and examination fees 24,020 23,648
Office supplies and postage 2,916 3,215
State intangibles and single business tax 1,640 12,734
Dues and assessments 5,632 3,638
Other 3,573 2,976
--------- ---------
TOTAL OTHER EXPENSES $ 185,876 $ 195,136
--------- ---------
See accompanying notes to financial statements.
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MACOMB FEDERAL SAVINGS BANK
STATEMENTS OF OPERATIONS (CONTINUED)
Three Month Periods Ended September 30, 1994 and 1995
Period Ended Period Ended
September 30, 1994 September 30, 1995
------------------ ------------------
(Unaudited) (Unaudited)
NET INCOME BEFORE INCOME TAXES $ 110,566 $ 87,603
--------- ---------
FEDERAL INCOME TAX
Current $ 32,695 $ 54,461
Deferred 2,261 (29,264)
--------- ---------
TOTAL FEDERAL INCOME TAX $ 34,956 $ 25,197
--------- ---------
NET INCOME $ 75,610 $ 62,406
========= =========
AVERAGE SHARES OUTSTANDING 175,504 179,104
========= =========
EARNINGS PER SHARE $ .43 $ .35
========= =========
See accompanying notes to financial statements.
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MACOMB FEDERAL SAVINGS BANK
STATEMENTS OF CASH FLOWS
Three Month Periods Ended September 30, 1994 and 1995
Period Ended Period Ended
September 30, 1994 September 30, 1995
------------------ ------------------
(Unaudited) (Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 75,610 $ 62,406
----------- -----------
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation $ 532 $ 1,565
Interest on mortgage-backed securities (1,540) (1,537)
Interest on U.S. Treasury bills - (135,065)
E.S.O.P. compensation expense 9,000 9,000
Provision for deferred income taxes 2,261 (29,264)
Interest paid in advance (1,043) 41
(Increase) Decrease in:
Accrued interest receivable (48,799) (12,490)
Prepaid expenses (21,994) 2,164
Accounts receivable (499) (19)
Increase (Decrease) in:
Accrued interest on deposits 41,736 69,382
Pension fund payable 40,413 26,764
Accrued expenses and accounts payable (2,492) 11,376
Federal income tax payable 32,695 54,461
----------- -----------
Total Adjustments $ 50,270 $ (3,622)
----------- -----------
Net Cash Provided by Operating Activities $ 125,880 $ 58,784
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Net change in certificates of deposit $ (293,000) $ 98,000
Purchased loans (862,000) (929,050)
Originated loans - (9,000)
Principal collections on loans 930,634 890,911
Purchase of U.S. Treasury bills (2,900,540) (4,919,084)
Proceeds from repayment on mortgage-backed securities 165,751 128,326
Proceeds from repayment on U.S. Treasury Bills - 5,000,000
Capital expenditures (4,629) (545)
Net increase in policy cash value -
Officers' and directors' benefit plan (9,782) (12,591)
----------- -----------
Net Cash Used by Investing Activities $(2,973,566) $ 246,967
----------- -----------
See accompanying notes to financial statements.
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MACOMB FEDERAL SAVINGS BANK
STATEMENTS OF CASH FLOWS (CONTINUED)
Three Month Periods Ended September 30, 1994 and 1995
Period Ended Period Ended
September 30, 1994 September 30, 1995
------------------ ------------------
(Unaudited) (Unaudited)
CASH FLOWS FROM FINANCING ACTIVITIES:
Advances by borrowers $ (184,725) $ (218,022)
Payments to E.S.O.P. (9,000) (9,000)
Net increase (decrease) in customer savings 925,743 208,958
----------- -----------
Net Cash Provided (Used) by
Financing Activities $ 732,018 $ (18,064)
----------- -----------
NET INCREASE (DECREASE)
IN CASH AND EQUIVALENTS $(2,115,668) $ 287,687
CASH AND EQUIVALENTS, BEGINNING OF PERIODS 8,703,457 2,490,204
----------- -----------
CASH AND EQUIVALENTS, END OF PERIODS $ 6,587,789 $ 2,777,891
=========== ===========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the periods for:
Income taxes $ - $ -
Interest 298,098 374,051
See accompanying notes to financial statements.
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MACOMB FEDERAL SAVINGS BANK
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
Three Month Period Ended September 30, 1995
Retained Net Unrealized
Additional Earnings, Appreciation on Unearned
Common Paid-in Substantially Available-For-Sale ESOP
Stock Capital Restricted Stock in FHLMC Total Shares Total
--------- ----------- -------------- ------------------ ----------- ---------- -----------
BALANCE,
JULY 1, 1995 $ 186,604 $ 1,429,939 $ 4,403,330 $ 151,327 $ 6,171,200 $ (81,000) $ 6,090,200
Net income for
the period - - 62,406 - 62,406 - 62,406
Net change in unrealized
appreciation on available-
for-sale stock, net of
$1,060 tax - - - 2,059 2,059 - 2,059
Value of E.S.O.P. shares
released - - - - - 9,000 9,000
--------- ----------- ----------- --------- ----------- --------- -----------
BALANCE,
SEPTEMBER 30, 1995 $ 186,604 $ 1,429,939 $ 4,465,736 $ 153,386 $ 6,235,665 $ (72,000) $ 6,163,665
========= =========== =========== ========= =========== ========= ===========
See accompanying notes to financial statements.
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MACOMB FEDERAL SAVINGS BANK
NOTES TO FINANCIAL STATEMENTS
Basis of Presentation:
In the opinion of management, the accompanying unaudited financial statements
contain all adjustments (consisting of normal recurring accruals) necessary
for a fair presentation. The results of operations for the three months
ended September 30, 1995, are not necessarily indicative of the results that
may be expected for the entire year. The interim financial information
should be read in conjunction with the financial statements and notes in the
1995 annual report of Macomb Federal Savings Bank (The "Bank").
Earnings per Share:
Earnings per share are calculated based on adjusting the weighted average
number of shares outstanding during the period to reflect the unreleased
shares held by the E.S.O.P. As principal payments are made, compensation
expense is recorded and shares become outstanding for earnings per share
(EPS) computations. The weighted average shares outstanding during the
three month period ended September 30, 1994 was 175,504 and for the three
month period ended September 30, 1995 was 179,104.
Provision for Probable Losses:
A provision for probable losses on loans and real estate is charged to
operations based upon management's evaluation of the potential losses in its
loan and real estate portfolios. The major factors considered in evaluating
potential losses are recent loss experience, current economic conditions,
and the overall balance and composition of the loan and real estate
portfolios.
The following table sets forth certain information concerning the Bank's non-
performing assets:
June 30, September 30,
1995 1995
-------- -------------
Accruing loans past due more than
90 days $ 0 $ 24,082
Nonaccrual loans 0 53,248
Real estate held for redemption 0 0
------- --------
Total non-performing assets $ 0 $ 77,330
======= ========
Income Taxes:
The Bank's provision for federal income taxes, for all the periods presented,
varies from the statutory rates due principally from the recognition of
income and expenses on the cash basis of accounting for income tax purposes.
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MACOMB FEDERAL SAVINGS BANK
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
MORTGAGE-BACKED SECURITIES AND U.S. TREASURY BILLS:
The carrying value and estimated market value of mortgage-backed securities
and U.S. Treasury Bills are summarized as follows:
June 30, 1995
------------------------------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
----------- ---------- ---------- -----------
Held-to-Maturity
Federal Home Loan
Corporation $ 1,649,891 $ - $ 26,010 $ 1,623,881
GNMA Certificates 856,953 - 30,654 826,299
FNMA Certificates 1,973,267 - 9,767 1,963,500
----------- --------- --------- -----------
Totals $ 4,480,111 $ - $ 66,431 $ 4,413,680
=========== ========= ========= ===========
Held-to-Maturity
U.S. Treasury Bills $ 8,832,902 $ 19,207 $ - $ 8,852,109
=========== ========= ========= ===========
All maturities are within twelve months.
September 30, 1995
------------------------------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
----------- ---------- ---------- -----------
Held-to-Maturity
Federal Home Loan
Corporation $ 1,587,901 $ - $ 29,256 $ 1,558,645
GNMA certificates 793,342 - 28,427 764,915
FNMA certificates 1,972,079 - 909 1,971,170
----------- --------- --------- -----------
Totals $ 4,353,322 $ - $ 58,592 $ 4,294,730
=========== ========= ========= ===========
Held-to-Maturity
U.S. Treasury Bills $ 8,887,051 $ 7,799 $ - $ 8,894,850
=========== ========= ========= ===========
All maturities are within twelve months.
* * * * *
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MACOMB FEDERAL SAVINGS BANK
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
PART I. Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
General
The Bank's results of operations are dependent primarily on net interest
income, which is the difference between the interest earned on its loan and
investment portfolios and its cost of funds, consisting of the interest paid on
its deposits. Operating results are also affected to a lesser extent by the
type of lending, fixed rate versus adjustable or short-term, each of which has
a different rate and fee structure. The Bank's operating expenses principally
consist of employee compensation, occupancy expenses, federal insurance
premiums and other general and administrative expenses. The Bank'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.
Management Strategy
The Bank has historically focused its lending activities on traditional
single family residential loans. Because of this focus, and as a result of its
relatively conservative underwriting standards, the Bank experienced minimal
losses on its loans. This lack of diversification in its asset structure does,
however, increase the Bank's portfolio concentration risk by making the value
of the portfolio more susceptible when declines in real estate values occur in
its market area.
Management's strategy has been to maintain profitability and a strong
capital position by growing at a rate that does not exceed its ability to
generate earnings. Although capital does not eliminate the exposure of the
Bank's net interest income to fluctuation in interest rates, it does allow the
Bank greater protection and flexibility when net interest income decreases as a
result of increases in the cost of funds. This strategy has been accomplished
by (i) maintaining a high asset quality, (ii) maintaining a higher level of
interest-earning assets than interest-bearing liabilities, (iii) purchasing
single family residential mortgage loans at competitive rates, either fixed or
adjustable in order to maintain controlled growth, (iv) managing deposit rates
and maintaining a strong deposit base by providing convenient and quality
service, and (v) controlling operating expenses. Since 1984, the Bank has also
sought to reduce its vulnerability to interest rate risk by purchasing ARM
loans and maintaining investments with maturities generally less than five
years. Management intends to continue its conservative lending policies while
strengthening the Bank's position within its community.
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13
Consistent with management's strategy discussed above, the Bank
concentrates its lending activities on purchasing, rather than originating
mortgage loans. The size of the Bank, the small number of employees (five
full-time and two part-time employees) and the cost of establishing an
origination department have created a situation in which the purchase of
mortgage loans is more economically advantageous to the Bank than the
origination of such loans. Because of the lower cost to the Bank of purchasing
rather than originating loans, the Bank is better able to generate earnings
from its lending activities.
In recent years, the Bank did not have sufficient high quality mortgage
loans available for purchase to justify extensive investment in the mortgage
market. As a result, 21.1% of the Bank's assets were invested in United States
Treasury obligations and 10.4% of the Bank's assets were invested in
mortgage-backed securities at September 30, 1995.
Interest Rate Sensitivity
The matching of assets and liabilities may be analyzed by examining the
extent to which such assets and liabilities are "interest rate sensitive" and
by monitoring an institution's interest rate sensitivity "gap". An asset or
liability is said to be interest rate sensitive within a specific time period
if it will mature or reprice within that time period. The interest rate
sensitivity gap is defined as the difference between the amount of
interest-earning assets anticipated, based upon certain assumptions, to mature
or reprice within a specific time period and the amount of interest-bearing
liabilities anticipated, based upon certain assumptions, to mature or reprice
within that time period. A gap is considered positive when the amount of
interest rate sensitive assets exceeds the amount of interest rate sensitive
liabilities. A gap is considered negative when the amount of interest rate
sensitive liabilities exceeds the amount of interest rate sensitive assets.
During a period of rising interest rates, a negative gap would tend to
adversely affect net increase income while a positive gap would tend to result
in an increase in net interest income. During a period of falling interest
rates, a negative gap would tend to result in an increase in net interest
income while a positive gap would tend to adversely affect net interest income.
The Bank has taken steps to reduce or control its gap by maintaining
investments with short terms to maturity and by emphasizing loans that mature
or reprice more rapidly while preserving higher yields, such as shorter term
mortgage loans. In addition, management of the Bank believes that, given the
high level of capital of the Bank and the excess of interest-earning assets
over interest-bearing liabilities, the increased net income resulting from a
mismatch in the maturity of its asset and liability portfolios provides
sufficient returns during periods of declining or stable interest rates to
justify the increased vulnerability to sudden and unexpected increases in
interest rates. Nonetheless, the Bank closely monitors its interest rate risk
as such risk relates to management's strategy.
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Changes in Financial Condition Over the Three-Month Period Ended September 30,
1995
Total assets increased $.1 million to $42.0 million at September 30, 1995
from $41.9 million at June 30,1995. Total liabilities increased $.1 million to
$35.9 million at September 30, 1995 from $35.8 million at June 30, 1995. This
increase was primarily due to a $.3 million increase in deposits from $34.2
million at June 30, 1995 to $34.5 million at September 30, 1995. Stockholders'
equity increased $.1 million to $6.2 million or 14.6% of total assets at
September 30, 1995.
Comparison of Operating Results for the Three Months Ended September 30, 1995
and September 30, 1994
General.
Net income for the three months ended September 30, 1995 was $62,406 as
compared to $75,610 for the three months ended September 30, 1994. A decrease
in net-interest income accounted for the decrease and is more fully explained
below.
Interest Income.
Interest income increased $88,522 to $718,671 for the three months ended
September 30, 1995 from $630,149 for the three months ended September 30, 1994.
The increase resulted primarily from an increase in loans receivable and an
increase in the average yields on United States Treasury obligations. Interest
income from loans increased $26,617 or 6.4% for the three-month period ended
September 30, 1995 from the same period in 1994, which was due to an increase
in average loan yields. Interest income from other investments including United
States Treasury obligations increased $65,236, but was more than offset by an
increase in interest expense in the three months ended September 30, 1995 from
the same period in 1994.
Interest Expense.
Interest expense for the three months ended September 30, 1995 increased
$102,602 to $442,410. This increase is primarily attributable to an increase in
average balance of passbook and certificate accounts to $34.5 million during
the three months ended September 30, 1995 from $34.2 million during the same
period in 1994, and an increase in the average cost of funds. The average cost
of passbook and certificate accounts increased to 5.29% in the three-month
period ended September 30, 1995 from 4.26% in the same period in 1994 as a
result of general market conditions.
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Net Interest Income Before Provision for Loan Losses.
Net interest income before provision for loan losses decreased $14,080 to
$276,261 for the three months ended September 30, 1995 from $290,341 for the
three months ended September 30, 1994. The decrease resulted primarily from an
increase in the average cost of funds during the same period in 1994.
Provision for Loan Losses.
No increase in the provision for loan losses was recorded for the
three-month period ended September 30, 1995 and September 30, 1994. Management
determined that the loss reserves were adequate as of September 30, 1995 and
September 30, 1994.
Non-Interest Income.
The Bank's non-interest income in the three months ended September 30, 1995
remained virtually identical over the same period in 1994.
Non-Interest Expense.
Non-interest expense was $195,136 in the three months ended September 30,
1995 as compared to $185,876 for the same period in 1994. The increase is
attributable to an increase in the Michigan Single business tax at September
30, 1995 as compared to the period in 1994.
Income Tax Expense.
Income tax expense for the three months ended September 30, 1995 decreased
by $9,759 as a result of a decrease in net income for the three months ended
September 30, 1995 over the same period in 1994.
Liquidity and Capital Resources
The Bank's primary sources of funds are deposits and investments, and
proceeds from principal and interest payments on loans. While maturities and
scheduled amortization of loans and investments are a predictable source of
funds, deposit flows and mortgage prepayments are greatly influenced by general
interest rates, economic conditions, competition and most recently the
restructuring of the thrift industry.
The primary investing activity of the Bank is the purchase of mortgage
loans. During the three-month period ended September 30, 1995, the Bank
purchased mortgage loans in the amount of $929,000. Other investing activities
include investing in mortgage-backed securities and United States Treasury
obligations. During the three-month period ended September 30, 1995, this
activity was funded primarily by principal repayments on loans totalling
$884,000.
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The Bank has other sources of liquidity if a need for additional funds
arises. Additional sources of funds include FHLB of Indianapolis advances
although no such advances were outstanding at September 30, 1995. Other sources
of liquidity can be found in the Bank's balance sheet, such as investments in
certificates of deposit maturing within one year.
The Bank is required to maintain minimum levels of liquid assets as defined
by OTS regulations. This requirement, which may be varied 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 required minimum ratio
is currently 5.0%. The Bank's liquidity ratio was 40.02% at September 30, 1995.
The Bank's most liquid assets are cash and cash equivalents, which
include investments in highly liquid short-term investments. The level of
these assets are dependent on the Bank's operating, financing and investing
activities during any given period. At September 30, 1995, cash and cash
equivalents totalled $2,777,891.
The Bank anticipates that it will have sufficient funds available to meet
its current commitments. At September 30, 1995, the Bank had commitments to
purchase residential mortgages of $194,000. Customer deposits which are
scheduled to mature in one year or less at September 30, 1995 totalled $19.2
million. Management believes that a significant portion of such deposits will
remain with the Bank.
The following table, which summarizes the Bank's regulatory capital
requirements versus actual capital, shows that the Bank exceeded all
requirements at September 30, 1995.
Regulatory Required Excess
Capital Capital (Shortage)
------- ------- ----------
Amount % Amount % Amount %
------- - ------- - --------- -
Tangible Capital $6,010,000 14.3 $ 629,000 1.5 $5,381,000 12.8
Core Leverage Capital $6,010,000 14.3 $1,257,000 3.0 $4,753,000 11.3
Risk-Based Capital $6,160,000 42.4 $1,163,000 8.0 $4,997,000 34.4
The OTS has issued a final rule adding an interest rate risk component to
the present capital rules. The rule requires the OTS to measure an
institution's interest rate risk as the percentage change in the market value
of its portfolio resulting from a hypothetical 200 basis point shift in
interest rates. The additional capital an institution would be required to
maintain would be calculated as one-half of the difference between the measured
risk and 2 percent multiplied by the market value of the institution's assets.
Institutions with less than $300 million in assets and a risk-based capital
ratio in excess of 12 percent are exempt from the OTS' regulations.
Page 14
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Part II Other Information
Item 1. Legal Proceedings
None.
Item 2. Changes in Securities
Not applicable.
Item 3. Defaults upon Senior Securities
Not applicable.
Item 4. Submission of Matters to a Vote of Security
Holders
(a) The Bank held its annual meeting of
shareholders on October 26, 1995.
(b) The following directors were elected at the meeting
to serve for a three-year term: Paul E. Andrews, Esther
Mason and Steven E. Zack. The term of office of the
following directors continued after the meeting: Mark T.
Jacobson, Stanley A. Jacobson, Jon M. Fox and James H.
Hudnut.
(c) The other matter voted upon at the meeting was the
approval of auditors. The vote on this matter was as
follows:
Affirmative votes 156,227 .
---------
Negative votes 682 .
---------
Item 5. Other Information.
On October 20, 1995, the Bank announced it had entered
into a letter of intent to be acquired by D & N Financial
Corporation, subject to definitive agreement being entered
into, shareholder and regulatory approval.
Item 6. Exhibits and reports on Form 8-K
(a) Exhibit II - Computation of per share earnings is
attached hereto
(b) Reports of Form 8-K - No reports on Form 8-K were filed
during the three months ended September 30, 1995
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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 thereunto duly authorized.
MACOMB FEDERAL SAVINGS BANK
---------------------------
Registrant
November 6, 1995 /s/ Stanley A. Jacobson
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Date Stanley A. Jacobson
President and Principal
Executive Officer
November 6, 1995 /s/ Esther Mason
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Date Esther Mason
Executive Vice President,
Principal Financial and
Accounting Officer
Page 16
19
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
- ----------- -----------
Exhibit 11 Computation of Earnings Per Share
20
Exhibit 11:
The calculation of earnings per share for the three months ended September 30,
1994 and September 30, 1995 follows:
September 30, 1994:
Net earnings for the three month period ended
September 30, 1994 applicable to common stock $ 75,610
=========
Average number of common shares outstanding 175,504
Earnings per share $ .43
=========
September 30, 1995:
Net earnings for the three month period ended
September 30, 1995 applicable to common stock $ 62,406
=========
Average number of common shares outstanding 179,104
Earnings per share $ .35
=========
Common shares outstanding are reduced for unreleased shares held by the
Employee Stock Ownership Plan (E.S.O.P.). As principal payments are made on
the guaranteed E.S.O.P. loan, shares are released and become outstanding for
earnings per share (EPS) computations. Unreleased shares amounted to 10,800
shares at September 30, 1994 and 6,586 shares at September 30, 1995.