1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: March 31, 1996 Commission file number: 2-54663
FIRST MANISTIQUE CORPORATION
(Exact name of registrant as specified in its charter)
MICHIGAN 38-2062816
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
130 S. CEDAR STREET, MANISTIQUE, MI 49854
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (906) 341-8401
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 periods that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
--- ---
As of May 1, 1996, there were outstanding 2,120,778 shares of the registrant's
common stock, no par value.
2
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
Consolidated Balance Sheets
(In thousands of dollars)
March 31, December 31,
1996 1995
(unaudited) (audited)
----------- ------------
ASSETS
Cash and due from banks $ 8,837 $ 10,492
Federal funds sold 12,000 4,000
-------- --------
Total cash and cash equivalents 20,837 14,492
Interest-bearing deposits with banks 1,698 1,678
Securities available for sale 27,317 26,220
Securities held to maturity (fair value of $711
at 3/31/96 and $837 at 12/31/95) 710 835
Loans 255,134 221,507
Allowance for loan losses (3,475) (3,137)
-------- --------
Net loans 251,659 218,370
Bank premises and equipment 13,308 11,787
Other assets 11,985 9,409
-------- --------
TOTAL ASSETS $327,514 $282,791
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits
Noninterest-bearing $ 26,083 $ 27,674
Interest-bearing 256,986 216,733
-------- --------
283,069 244,407
Securities sold under agreement to repurchase 700 700
Other borrowings 15,351 10,088
Other liabilities 2,964 2,589
-------- --------
TOTAL LIABILITIES 302,084 257,784
Shareholders' equity
Common stock, no par value, 6,000,000 shares
authorized; outstanding: 2,120,778 3/31/96 and
2,106,897 at 12/31/95 13,443 13,195
Retained earnings 12,507 11,832
Net unrealized loss on securities available for sale,
net of tax of $266 at 3/31/96 and $9 at 12/31/95 (520) (20)
-------- --------
TOTAL SHAREHOLDERS' EQUITY 25,430 25,007
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $327,514 $282,791
======== ========
Consolidated Statements of Income (unaudited)
(In thousands of dollars)
Three Months Ended
March 31,
1996 1995
--------------------------------
Interest income
Loans, including fees $ 5,840 $ 4,430
Securities
Taxable 399 429
Exempt from federal taxation 24 52
Other 159 156
---------- ----------
Total interest income 6,422 5,067
Interest expense
Deposits 2,701 2,142
Borrowed funds 142 63
---------- ----------
Total interest expense 2,843 2,205
---------- ----------
Net interest income 3,579 2,862
Provision for loan losses 107 69
---------- ----------
Net interest income after provision for loan losses 3,472 2,793
Noninterest income
Service charges on deposit accounts 163 140
Loan service charges 29 21
Securities gains (losses) 27 3
Other 109 202
---------- ----------
Total noninterest income 328 366
Noninterest expense
Salaries and employee benefits 1,107 921
Furniture and equipment expense 198 198
Occupancy expense 236 151
Other 935 845
---------- ----------
Total noninterest expense 2,476 2,115
---------- ----------
Income before income tax 1,324 1,044
Provision for income tax (Note 6) 395 267
---------- ----------
Net income $ 929 $ 777
========== ==========
Average common shares outstanding 2,109,363 2,097,072
Earnings per common share $ 0.44 $ 0.37
Consolidated Statement of Changes in Shareholders' Equity (unaudited)
(in thousands of dollars)
Three months Three months
ended ended
March 31, 1996 March 31, 1995
-------------- --------------
Balance - beginning of period $25,007 $22,484
Net Income YTD 929 777
Cash dividends (254) (350)
Issuance of common stock 248
Net change in unrealized gain (loss)
on securities available for sale (500) 282
------- -------
$25,430 $23,193
======= =======
Consolidated Statements of Cash Flows (unaudited)
(in thousands of dollars)
March 31, March 31,
CASH FLOWS FROM OPERATING ACTIVITIES 1996 1995
----------- ------------
Net income 929 777
Adjustments to reconcile net income
to net cash from operating activities
Provision for loan losses 107 69
Deferred taxes (170)
Depreciation taxes 201 190
Amortization 136 30
(Gains) losses on sale
Securities (27) (3)
Premises and equipment 21 (3)
Changes in assets and liabilities
Interest receiveable and other assets 688 (253)
Interest payable and other liabilities 3 629
------- -------
Net cash from operating
activities 1,888 1,436
CASH FLOWS FROM INVESTING ACTIVITIES
Net change in interest-bearing deposits
with banks (20) 419
Purchase of securities available for sale (5,000) (974)
Purchase of securities held to maturity (1,511)
Proceeds from sales of securities
available for sale 3,000 599
Proceeds from maturities, calls, or
paydowns of securities available for sale 4,809 1,928
Proceeds from maturity and calls of securities
held to maturity 125 413
Net increase in loans (5,737) (8,206)
Proceeds from sale of premises and equipment 64
Purchase of premises and equipment (221) (628)
Net cash used in acquisition of
South Range State Bank 562
------- -------
Net cash provided from investing activities (2,418) (7,960)
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in depsosits 3,981 1,485
Proceeds from notes payable 2,900 1,221
Proceeds from issuance of common stock 248
Payment of dividends (254) (350)
------ ------
Net cash from investing activities 6,875 2,356
------ ------
Net increase (decrease) in cash and cash
equivalents 6,345 (4,168)
Cash and cash equivalents at beginning of year 14,492 14,319
------ ------
Cash and cash equivalents at end of year 20,837 10,151
====== ======
Supplemental disclosures of cash flow
information
Cash paid during the period for
Interest 2,913 2,205
Income taxes 408 541
Supplemental disclosures of noncash investing
activities
Issuance of notes payable to South Range
State Bank's former shareholders' 2,363 -
Assets and liabilities acquired in acquisition
(refer to Note 3)
Premises and equipment 1,389 -
Acquisition intangibles 1,231 -
Other assets and accrued interest receivable 2,033 -
Loans, net 27,890 -
Investment securities 7,514 -
Deposits 34,681 -
Other liabilities and accrued interest payable 542 -
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - BASIS OF PRESENTATION
The unaudited condensed consolidated financial statements of First Manistique
Corporation (the "Registrant") have been prepared in accordance with generally
accepted accounting principles for interim financial information and the
instructions to Form 10-Q and Rule 10-01 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 normal recurring
accruals) considered necessary for a fair presentation have been included.
Operating results for the three month period ending March 31, 1996 are not
necessarily indicative of the results that may be expected for the year ended
December 31, 1996. For further information, refer to the consolidated
financial statements and footnotes thereto included in the Registrant's Annual
Report on Form 10-K for the year ended December 31, 1995.
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES
The FASB has issued Statement of Financial Accounting Standards No. 122,
Accounting for Mortgage Servicing Rights (SFAS No. 122). The Registrant has
adopted this Statement on January 1, 1996, as required. SFAS No. 122 eliminates
the accounting distinction between originated and purchased mortgage servicing
rights. Beginning in 1996, when a loan is originated with the intent to sell, a
separate asset will be recognized for the mortgage servicing rights, which is
consistent with the current treatment of purchased mortgage servicing rights.
SFAS No. 122 also changes the manner in which impairment of capitalized
mortgage servicing rights is recognized. Impairment will be recognized using
the fair value of individual stratum of servicing rights based on the underlying
risk characteristics of the serviced loan portfolio, compared to an aggregate
portfolio approach under existing accounting guidance. Based on the volume of
mortgage banking activity conducted during 1995, the Registrant does not expect
SFAS No. 122 to have a significant impact on its consolidated financial
condition and results of operations for 1996.
A resolution for a 3-for-1 stock split, for shareholder's of record on April
29, 1996, was approved by the Board of Directors on April 23, 1996. All share
and per share amounts in this filing have been adjusted to reflect the 3-for-1
stock split.
NOTE 3 - ACQUISITION OF SOUTH RANGE STATE BANK
The Registrant acquired 100% of the outstanding stock of South Range State Bank
(with assets of $38,969,000, liabilities of $35,223,000, total deposits of
$34,681,000, and total loans of $27,890,000) on January 31, 1996. The total
purchase price was $4,310,000 with $1,947,000 being paid in cash and the
remaining $2,363,000 being financed through the issuance of notes payable.
NOTE 4 - SECURITIES
The amortized cost and fair value of securities at March 31, 1996 are shown
below:
(in thousands of dollars)
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Loss Value
--------------------------------------------------------------------
Securities Available for Sale
- -----------------------------
U.S. Treasury and federal agency $23,158 $4 $754 $22,408
State and political subdivisions 1,507 1 17 1,491
Other 3,438 1 21 3,418
------------------------------------------------------------
Total $28,103 $6 $792 $27,317
============================================================
Securities Held To Maturity
- ---------------------------
State and political subdivisions $ 710 $1 $ 711
============================================================
The amortized cost and fair value of securities by contractural maturity at
March 31, 1996, are shown below, in thousands of dollars
Available for Sale Held to Maturity
--------------------------- -------------------------
Amortized Fair Amortized Fair
Cost Value Cost Value
--------------------------- -------------------------
Due in one year or less $10,399 $10,082 $710 $711
Due after one year through five years 5,395 5,384
Due after five years through ten years 9,138 8,889
Due after ten years 3,171 2,962
--------------------------- --------------------
$28,103 $27,317 $710 $711
=========================== ====================
NOTE 5 - LOANS
Loans presented in the consolidated balance sheet are comprised of the
following classifications at March 31, 1996 and December 31, 1995: (in
thousands of dollars)
March 31, December 31,
1996 1995
---------- -------------
Loans:
Commercial, financial and agricultural $142,813 $130,921
1-4 family residential real estate 72,795 58,433
Consumer 36,389 29,954
Construction 3,162 2,235
-------- --------
Total 255,159 221,543
Less: unearned income (25) (36)
-------- --------
$255,134 $221,507
======== ========
Included in the loan portfolio are loans made to certain executive officers,
directors, principal shareholders and companies in which they have an interest.
The following is a summary of such loans, in thousands of dollars:
Balance - January 1, 1996 $6,603
New Loans 142
Repayments (530)
------
Balance - March 31, 1996 $6,215
======
NOTE 6 - ALLOWANCE FOR LOAN LOSSES
Activity in the allowance for loan losses for the three months ended March 31,
1996 and 1995, and the twelve months ended December 31, 1995, are summarized as
follows: (in thousands of dollars)
March 31, December 31, March 31,
1996 1995 1995
---------- ------------- ----------
Balance at beginning of period $3,137 $2,350 $2,350
Charge offs (74) (440) (105)
Recoveries 20 456 41
Adjustment from loans resold to Newberry
State Bank (6)
Allowance transferred from purchase of
South Range State Bank 285
Provision 107 771 69
------ ------ ------
Balance at end of period $3,475 $3,137 $2,349
====== ====== ======
Nonaccrual loans $569 $0 $102
Loans 90 or more days past due 1,737 1,440 194
Renegotiated loans 0 563 0
The majority of the increase in nonaccrual loans from December 31, 1995 to March
31, 1996 consisted of credit extended to one used car dealer. The loan loss
reserve allocated to this loan is adequate to meet any exposure
to loss.
The Registrant is a secured creditor in the Bennett Funding Group, Inc. (BFG)
case. BFG filed
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Chapter 11 Bankruptcy Protection and has ceased payments to hundreds of
investors throughout the country, including approximately 250 banks. The
Registrant holds actual commercial leases which consist of equipment contracts
for various office equipment including fax machines, copiers, and phone
systems. Upon learning of BFG's filing of Chapter 11, the Registrant's major
focus has been to determine that it was in first lien position on all leases
held. The Registrant ordered a search of all recorded UCC filings and upon
their review feels confident that it is in first lien position on all the
leases held. The outstanding balances on these leases was $2,792,651 at
December 31, 1995 and $2,528,188 at March 31, 1996. The Registrant has not
received a payment on any of it's leases from BFG since their filing for
Chapter 11 on March 29, 1996. However, based on procedures performed and
continued monitoring of this situation, management believes that lease
payments will be resumed within 90 days. None of the leases has been
identifited as impaired and all leases have remained on accrual status.
NOTE 7 - DEPOSITS
The following is an analysis of interest-bearing deposits as of March 31, 1996
and December 31, 1995.
(in thousands of dollars)
March 31, December 31,
1996 1995
--------- ------------
Savings and interest-bearing checking $145,172 $118,957
Time: In denominations under $100,000 95,265 82,752
In denominations of $100,000 or more 16,549 15,024
-------- --------
$256,986 $216,733
======== ========
NOTE 8 - OTHER BORROWINGS
Other Borrowings consists of the following at March 31, 1996 and December 31,
1995: (in thousands of dollars)
March 31, December 31,
1996 1995
------------- ---------------
Federal Home Loan Bank advances (7), at
various rates with various maturities. $ 8,088 $ 8,088
Farmer's Home Administration, $2,000,000
fixed rate line agreement maturing August 24, 2024:
interest payable at 1%. 2,000 2,000
Associated Bank Green Bay, $4,000,000 variable
rate line agreement maturing February 1, 1999:
interest payable at Associated's prime rate - 8.50%
at March 31, 1996. 2,900
Notes Payable to South Range State Bank's former
stockholders, $2,362,852 maturing in three equal
annual installments beginning February 1, 1997:
interest payable at 5.20%. 2,363
------- -------
$15,351 $10,088
======= =======
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
The following discussion and analysis of financial condition and results of
operations provides additional information to assess the consolidated financial
statements of the Registrant and its wholly-owned subsidiaries. The discussion
should be read in conjunction with those statements.
The Registrant is not aware of any market or institutional trends, events, or
circumstances that will have or are reasonably likely to have a material effect
on liquidity, capital resources, or results of operations except as discussed
herein. Also, the Registrant is not aware of any current recommendations by
regulatory authorities which will have such effect if implemented.
HIGHLIGHTS
The Registrant acquired 100% of the outstanding stock of South Range State Bank
(with assets of $38,969,000, liabilities of $35,223,000, total deposits
$34,681,000, and total loans of
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$27,890,000) on January 31, 1996. The total purchase price was $4,310,000 with
$1,947,000 being paid in cash and the remaining $2,363,000 being financed
through the issuance of notes payable.
Year to date consolidated net income was $929,000 for the period ending March
31, 1996 compared to $777,000 for the same period in 1995. Improved interest
income, combined with acquisitions and careful control of operating expenses
have contributed to this improvement. Net income for the year is 20% above the
same period last year. Return on consolidated average assets for the quarter
was 1.13% compared to 1.22% for the first quarter period in 1995. Earnings per
share increased from $0.37 for the period ending March 31, 1995, to $0.44 for
the same period in 1996. The increase is due to increased earnings and no
significant change in outstanding shares.
FINANCIAL CONDITION
LOANS
During the first quarter of 1996, loan balances increased by $33.6 million. The
acquisition of South Range State Bank accounted for $26.8 million of this
increase and the remainder was due to loan growth. The loan to deposit ratio
has decreased from 90.6% at December 31, 1995, to 90.1% at March 31, 1996.
Management believes loans provide the most attractive earning asset yield
available to the corporation and that trained personnel and controls are in
place to successfully manage a growing portfolio. Accordingly, management
intends to continue to maintain loans at the highest level which is consistent
with maintaining adequate liquidity.
Management is aware of the risk associated with an increase in average balances
of loans but feels that the current level in the allowance for loan losses is
adequate. At March 31, 1996 the allowance for loan losses was equal to 1.36%
of total loans outstanding compared to 1.42% at December 31, 1995.
Commercial loans as a percentage of total loans has declined from 59.09% at
December 31, 1995 to 55.96% at March 31, 1996 while 1-4 family residential
loans has increased from 26.38% to 28.53% of total loans during that same
period. The percentage makeup of the remaining loan portfolio has not changed
significantly from December 31, 1995 to March 31, 1996. The loan portfolio
contains no concentrations by industry or customer. The table below shows
total portfolio loans outstanding, in thousands of dollars, at March 31, 1996,
and December 31, 1995, and their percentage of the total loan portfolio.
March 31, December 31,
1996 % of total 1995 % of total
--------------------------- ------------------------------
Loans:
Commercial, financial and agricultural $142,788 55.96% $130,885 59.09%
1-4 family residential real estate 72,795 28.53% 58,433 26.38%
Consumer 36,389 14.27% 29,954 13.52%
Construction 3,162 1.24% 2,235 1.01%
-------- ----- -------- -----
Total $255,134 $221,507
======== ========
CREDIT QUALITY
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Management analyzes the allowance for loan losses in detail on a monthly basis
to ensure that the losses inherent in the portfolio are properly recognized.
The Registrant's success in maintaing excellent credit quality is demonstrated
in the table presented in Note 6 above. Charge offs for the period ending
March 31, 1996 have decreased from the same period in 1995 as a result of the
continued excellence in extending credit quality. The provision for loan loss
has increased from the period ending March 31, 1995 to the same period in 1996
as a result of the Registrant's increased loan portfolio. See Note 6 of the
accompanying condensed consolidated financial statements for a discussion of
nonaccrual loans and certain lease receivables.
Management is aware of the risk associated with an increase in average balances
of loans and feel that the current level in our allowance for loan losses is
adequate. At March 31, 1996 the allowance for loan losses was equal to 1.36%
of total loans outstanding compared to 1.42% at December 31, 1995.
INVESTMENTS
Available for sale securities increased during the first quarter of 1996 while
hold to maturity securities decreased. The increase in available for sale
securities is due primarily to the acquisition of South Range State Bank. The
mix of the portfolio remained relatively unchanged from December 31, 1995. The
primary use of the portfolio is to provide a source of liquidity. Most of the
portfolio is invested in U.S. Treasury and agency securities which have little
credit risk and are highly liquid. The only securities now classified as hold
to maturity are state and local political subdivision issues from small issuers
which have liquidity.
DEPOSITS
Total deposits increased this quarter by $38.6 million. A substantial portion,
$33.4 million, of the increase came from the acquisition of South Range State
Bank. Interest bearing deposit balances increased during the first quarter of
1996, continuing a trend from last fiscal year. The bulk of the increase in
interest bearing deposits came from savings and interest-bearing checking with
time deposits less than $100,000 making up the remainder of the increase
(refer to the table presented in Note 7 above). The time deposits of $100,000
or more consist of stable, government balances and balances from retail
customers. Management anticipates that deposit growth will be steady during
the remainder of 1996.
BORROWINGS
The Registrant's branching network is a relatively high cost network in
comparison to peers. Accordingly, the Registrant has begun to use alternative
funding sources to provide funds for lending activities. Other borrowings
increased by $5.3 million during the first quarter (refer to
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the table presented in Note 8 above for the composition of the increase), the
majority of which was used in the acquisition of South Range State Bank. At
March 31, 1996, $8.1 of the total borrowings were from the Federal Home Loan
Bank of Indianapolis. Alternative sources of funding can be obtained at
interest rates which are competitive with, or lower than, retail deposit rates
and with inconsequential administrative costs.
LIQUIDITY AND FUNDS MANAGEMENT
LIQUIDITY
The Registrant's sources of liquidity include principal payments on loans and
investments, sales of securities available for sale, deposits from customers,
borrowings from the Federal Home Loan Bank, other bank borrowings, and the
issuance of common stock. The Registrant has ready access to significant
sources of liquidity on an almost immediate basis. Management anticipates no
difficulty in maintaining liquidity at the levels necessary to conduct the
Registrant's day-to-day business activities.
FUNDS MANAGEMENT
Management actively manages the Registrant's interest rate risk. In relatively
low interest rate environments which have been in place the last few years,
borrowers have generally tried to extend the maturities and repricing periods
on their loans and place deposits in demand or very short term accounts.
Management has taken various actions to offset the imbalance which those
tendencies would otherwise create. Management writes commercial and real
estate loans at variable rates or, if necessary, fixed rate loans for
relatively short terms. Management has also offered products that give
customers an incentive to accept longer term deposits. Management can also
manage interest rate risk with the maturity periods of securities purchased,
selling securities available for sale, and borrowing funds with targeted
maturity periods. The Registrant has experienced a slight shift in the
cumulative net asset (liability) funding gap for 1 - 365 since December 31,
1995, days to being liability sensitive. The shift was mainly due to an
increase in CD's less than $100,000 maturing within one year and an increase
in IMM accounts which are placed entirely in the 1 - 90 days maturity category.
CAPITAL RESOURCES
It is the policy of the Registrant to maintain capital at a level consistent
with both safe and sound operations and proper leverage to generate an
appropriate return on shareholders' equity. The capital ratios of the
Registrant exceed the regulatory guidelines for well capitalized institutions.
The table below shows the Registrant s capital ratios, in thousands of dollars,
and ratio calculations at March 31, 1996 and 1995.
8
Capital Resources
Regulatory Guidelines
------------------------ March 31, March 31,
Adequate Well 1996 1995
------------------------ -----------------------------
Tier 1 leverage ratio 4% 5% 7.59% 7.51%
Tier 1 risk adjusted capital ratio 4% 6% 10.49% 10.64%
Total risk adjusted capital ratio 8% 10% 11.70% 11.70%
Total Shareholders' equity $29,840 $23,193
Intangible assets (4,091) (3,548)
Unrealized (gain) loss on securities available for sale 520 286
--------------------------
Tier 1 capital $25,229 $19,359
Tier 2 capital $ 2,128 $ 1,928
RESULTS OF OPERATIONS
NET INTEREST INCOME
Net interest income increased by 25% compared to March 31, 1995. The net
interest margin at March 31, 1996 was 4.82%, compared to 4.92% for all of 1995.
The net yield on interest earning assets remained relatively constant. At year
ended December 31, 1995, the net yield on earning assets was 9.13% and at March
31, 1996 it was 9.06%. Interest income from loans represented 90.9% of total
interest income for the first quarter of 1996 compared to 90.4% for all of 1995
and 87.4% for the first quarter of 1995. In all cases, the total amount of
interest income and the yield on total earning assets is strongly influenced by
lending activities.
The increase in income from sales and servicing of loans reflects the growing
demand for residential real estate mortgages, following the unprecedented
origination volume throughout the country in 1993 and 1992. Management expects
continued growth in interest income due to continued expansion of the
Corporation.
NONINTEREST INCOME
There were no significant changes in total or in the aggregate in noninterest
income amounts.
PROVISION FOR LOAN LOSSES
The Registrant maintains the allowance for loan losses at a level adequate to
cover losses inherent in the portfolio. The Registrant records a provision for
loan losses necessary to maintain the allowance at that level after considering
factors such as loan charge-offs and recoveries, changes in the mix of loans in
the portfolio, loan growth, and other economic factors. The increase in the
provision for loan losses from $69,000 from March 31, 1995 to $107,000 for
quarter ended March 31, 1996 is due to loan growth particularly in the
commercial real estate portfolio.
NONINTEREST EXPENSES
Noninterest expense showed an increase of 17% over the first quarter of 1995.
The increase is consistent with the Registrant's asset growth. The majority of
the increase is due to an increase
9
in salary and occupancy expense. Salary expense increased mainly due to an
increase in full-time equivalent employees at March 31, 1996 vs. March 31,
1995, due to the Registrant's purchase of the Rudyard branch and South Range
State Bank and the opening of additional branches. Occupancy expense increased
due the the purchases of the Rudyard branch and South Range State Bank, as well
as the opening of additional branches. While the growth was expected, a
primary objective of management is to hold the rate of increase in this
category below future asset growth. Management believes that significant
efficiencies can be obtained and is increasing the level of management emphasis
in this area.
FEDERAL INCOME TAX
The provision for income taxes was 29.8% of income before income tax at March
31, 1996 compared to 25.6% at March 31, 1995. The difference between these
rates and the federal corporate income tax rate of 34% is primarily due to
tax-exempt interest earned on loans and investments. The effective tax rate
has decreased as tax-exempt income has become a larger portion of total
interest income.
10
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
At the date hereof, there were no material pending legal proceedings, other
than routine litigation incidental to the business of banking, to which the
Registrant or any of its subsidiaries is a party of or which any of its
properties is the subject.
ITEM 2. CHANGES IN SECURITIES.
The Registrant's Articles of Incorporation have been amended to increase its
authorized common stock to 6,000,000 shares without par value and to increase
its authorized series preferred stock to 500,000 shares. In addition, the
Articles have been amended to provide (a) for a classified board of directors,
(b) for filling vacancies or new positions on the Board of Directors, (c)
special vote requirements for removal of directors, (d) procedures shareholders
must follow to nominate directors, (e) notice requirements shareholders must
satisfy to present a proposal for consideration at annual meeting of
shareholders, (f) for required evaluations by the directors of certain
transactions, and (g) increased voting requirements to amend or repeal these
provisions or adopt inconsistent provisions. Any or all of these provisions
may be interpreted as having anti-takeover implications.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
There have been no defaults upon senior securities relevant to the requirements
of this section.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matters were submitted during the first quarter of fiscal 1996 to a vote of
the Registrant's stockholders.
ITEM 5. OTHER INFORMATION.
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) The following exhibits are filed as part of this report:
Number Exhibit
- ------ -------
3(a) Amendments to Articles III, VII, VIII, IX, and X of the Registrant's
Articles of Incorporation. Previously filed as Appendices to
the Registrant's definitive proxy statement for its annual meeting held
April 23, 1996. Here incorporated by reference.
10(a) Deferred compensation, deferred stock and current stock purchase plan
for non-employee directors. Previously filed as an exhibit to
the Registrant's definitive proxy statement for its annual meeting held
April 23, 1996. Here incorporated by reference.
27 Financial Data Schedule. Filed herewith.
11
The following documents are filed as part of Part I, Item 1 of this report:
Consolidated Balance Sheets - March 31, 1996 (Unaudited) and December
31, 1995 (Audited)
Consolidated Statements of Income - Three months ended March 31, 1996
and 1995 (Unaudited)
Consolidated Statement of Changes in Shareholders' Equity - March 31,
1996 (Unaudited)
Consolidated Statement of Cash Flows - Three months ended March 31, 1996
and 1995 (Unaudited)
Notes to consolidated financial statements - March 31, 1996
(b) Report on Form 8-K. Previously filed on February 14, 1996 (Commission File
Number 2-54663), and amended on April 8, 1996 . Here incorporated by
reference
12
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.
FIRST MANISTIQUE CORPORATION
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(Registrant)
May 13, 1996 /s/ RONALD G. FORD
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Date RONALD G. FORD, President & CEO
May 13, 1996 /s/ RICHARD B.DEMERS
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Date RICHARD B.DEMERS, Chief
Accounting Officer
13
Exhibit Index
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Exhibit No. Description
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27 Financial Data Schedule