1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1996
------------------------------------------
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: 0-20331
---------------------------------------------------
Midwest Federal Financial Corp.
- --------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Wisconsin 39-1725856
- --------------------------------------------------------------------------
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)
1159 Eighth Street, Baraboo, Wisconsin 53913
- --------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(608) 356-7771
- --------------------------------------------------------------------------
(Registrant's telephone number, including area code)
N/A
- --------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report)
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. X YES NO
------------- ------------
Registrant became subject to the filing requirements of the Act on July 7,
1992.
As of July 31, 1996, there were 2,069,998 shares, $ .01 par value, of the
registrant's common stock issued and 1,626,380 shares or common shares
equivalents are outstanding.
2
Midwest Federal Financial Corp.
And Subsidiary
Table of Contents
PART I - Financial Information
- ------------------------------
Consolidated Statements of Financial Condition (unaudited) 1
Consolidated Statements of Operations (unaudited) 2
Consolidated Statements of Cash Flows (unaudited) 3
Notes to Consolidated Financial Statements (unaudited) 5
Managements discussion and Analysis of financial
Condition and Results of Operations 12
PART II - Other Information
- ------------------------------
Item 1. Legal Proceedings 14
Item 2. Changes in Securities 14
Item 3. Defaults Upon Senior Securities 14
Item 4. Submission of Matters to Vote
of Securities Holders 14
Item 5. Other Information 14
Item 6. Exhibits and Reports on Form 8-K 14
3
MIDWEST FEDERAL FINANCIAL CORP.
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Unaudited)
06/30/96 12/31/95
------------ ------------
ASSETS
Cash $ 4,676,203 $ 6,332,222
Interest bearing deposits 52,770 147,681
------------ ------------
Cash and cash equivalents 4,728,973 6,479,903
Other interest-bearing deposits 100,000 598,999
Loans held for sale 475,100 847,155
Securities available for sale:
Investment securities 20,732,338 24,600,319
Mortgage-backed securities 16,927,920 11,359,554
Securities held to Maturity:
Investment securities 1,300,000 2,095,025
Investment in Federal Home Loan Bank stock 937,500 936,100
Interest receivable on interest-bearing deposits and investment securities 500,157 611,890
Loans receivable - net 134,734,996 122,925,422
Interest receivable on loans 985,373 785,172
Office properties and equipmeNT 4,077,162 4,012,669
Deferred income taxes 392,189 38,000
Other asset 967,534 1,088,984
Deposit Base Intangible 741,296 784,901
------------ ------------
TOTAL ASSETS $187,600,538 $177,164,093
============ ============
LIABILITIES AND STOCKHOLDERS EQUITY
Liabilities:
Deposit accounts $151,228,244 $142,590,514
Borrowed funds 17,250,000 16,000,000
Advance payments by borrowers for taxes and insurance 399,211 176,921
Accrued and other liabilities:
Interest 602,757 657,696
Deferred compensation and director fees 329,109 317,465
Other 890,421 880,185
------------ ------------
Total liabilities $170,699,742 $160,622,781
============ ============
Commitments and contingencies
Stockholders' Equity:
Common stock--$.01 par value:
Authorized--3,000,000 shares
Issued--2,069,998 shares and 1,034,999 shares respectively 20,700 10,350
Additional Paid-in capital 6,502,027 6,500,960
Retained earnings-substantially restricted 14,086,134 13,162,529
Unrealized Gains (Losses) on securities available for sale, net of tax (415,600) 187,600
Loan to ESOP (404,750) (419,142)
Treasury stock at cost--435,118 shares and 218,559 shares respectively (2,887,715) (2,900,985)
------------ ------------
Total Stockholders' Equity 16,900,796 16,541,312
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $187,600,538 $177,164,093
============ ============
See accompanying notes to consolidated financial statements
Page 1
4
Midwest Federal Financial Corp.
And Subsidiary
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Quarter Ended Six Months Ended
------------- ----------------
06/30/96 06/30/95 06/30/96 06/30/95
-------- -------- -------- --------
Interest and dividend income:
Mortgage loans $2,197,304 $1,844,873 $4,220,597 $3,586,519
Other loans 886,327 800,378 1,788,451 1,518,572
Investment securities and interest-bearing deposits 354,625 223,425 731,269 456,485
Mortgage-backed securities 241,444 145,997 443,247 301,600
Dividends on stock in Federal Home Loan Bank 15,000 11,925 29,860 24,869
---------- ---------- ---------- ----------
TOTAL INTEREST AND DIVIDEND INCOME 3,694,700 3,026,599 7,213,424 5,888,045
Interest Expense:
Deposits 1,663,183 1,521,695 3,287,604 2,867,566
Borrowed funds 219,652 87,136 406,171 226,564
---------- ---------- ---------- ----------
TOTAL INTEREST EXPENSE 1,882,835 1,608,831 3,693,775 3,094,130
---------- ---------- ---------- ----------
Net interest income 1,811,865 1,417,768 3,519,649 2,793,915
Provision for loan losses 52,500 25,000 105,000 55,000
---------- ---------- ---------- ----------
Net interest income after provision for loan losses 1,759,365 1,392,768 3,414,649 2,738,915
---------- ---------- ---------- ----------
Non-interest income:
Loan fees and service charges 63,704 44,812 137,089 87,181
Deposit account fees and service charges - Net 205,350 149,082 383,941 280,490
Net gain on sale of investment and mortgage-backed securities 40,155 35,908 158,934 85,971
Net gain on sale of loans 71,211 26,411 139,013 77,324
Other income 132,095 104,889 258,837 222,958
---------- ---------- ---------- ----------
TOTAL NON-INTEREST INCOME 512,515 361,102 1,077,814 753,924
---------- ---------- ---------- ----------
Operating Expenses:
Compensation and other employee benefits 748,437 574,037 1,426,990 1,141,461
Occupancy 193,570 185,514 396,650 337,286
Office supplies, telephone and postage 87,839 75,205 175,337 160,596
Data processing 90,425 84,086 180,967 185,940
Federal deposit insurance premiums 67,912 65,755 137,694 131,517
Other 176,978 201,699 387,618 409,036
---------- ---------- ---------- ----------
TOTAL OPERATING EXPENSES 1,365,161 1,186,296 2,705,256 2,365,836
---------- ---------- ---------- ----------
Income before provision for income taxes 906,719 567,574 1,787,207 1,127,003
Provision for income taxes 323,700 209,750 643,200 412,300
---------- ---------- ---------- ----------
NET INCOME $ 583,019 $ 357,824 $1,144,007 $ 714,703
========== ========= ========== =========
Total earning per share $ .33 $ .20 $ .65 $ .40
========== ========= ========== =========
See accompanying notes to consolidated financial statements
* Earnings per share for prior periods has been restated to reflect a 2 for 1
stock dividend executed in May 1996.
Page 2
5
Midwest Federal Financial Corp.
And Subsidiary
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Six Months Ended
-------------------------
06/30/96 06/30/95
----------- -----------
Cash Flows from operating activities:
Net Income $ 1,144,007 $ 714,703
----------- ----------
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 189,774 158,988
Net amortization of premiums and discounts on
Investment and mortgage-backed securities (7,394) 22,780
Provision for loan losses 105,000 55,000
Gain on sale of investment and mortgage-backed securities (158,934) (85,971)
Dividends reinvested in Federal Home Loan Bank Stock 0 (11,100)
Gain on sale of loans (139,013) (77,324)
Origination of loans held for sale (14,295,866) (3,320,983)
Proceeds from sale of loans originated for sale 14,733,245 3,024,583
Provision (credit) for deferred taxes 354,189 (459,800)
Increase (decrease) in other assets (165,055) (174,311)
Increase (decrease) in other liabilities (33,059) 26,718
----------- ----------
Total adjustments 582,887 (841,420)
----------- ----------
Net cash provided by operating activities 1,726,894 (126,717)
----------- ----------
Cash flows from investing activities
Net (increase) decrease in interest-bearing deposits 498,999 (201,999)
Securities available for sale:
Purchase of investment securities (9,275,851) (2,801,853)
Proceeds from sale of investment securities 10,218,030 2,405,486
Proceeds from maturities of investment securities 2,220,000 3,500,000
Purchases of mortgage-backed securities (7,094,175) 0
Proceeds from sale of mortgage-backed securities 0 1,265,335
Principal repayment on mortgage-backed securities 1,258,886 414,024
Securities held to maturity:
Purchase of investment securities 0 (2,200,000)
Proceeds from maturities of investment securities 800,000 0
Redemption of Federal Home Loan Bank stock 136,100 0
Purchase of Federal Home Loan Bank Stock (137,500) 0
Net increase in loans (11,809,574) (7,438,966)
Capital expenditures (247,716) (581,210)
Payment received on loan to ESOP 14,392 12,412
----------- ----------
Net cash used in investing activities (13,418,409) (5,626,771)
----------- ----------
Page 3
6
MIDWEST FEDERAL FINANCIAL CORP
And Subsidiary
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Continued)
Six Months Ended
--------------------------
06/30/96 06/30/95
------------ ------------
Cash Flows from financing activities:
Net increase (decrease) in deposits 8,637,730 11,031,788
Net increase (decrease) in borrowed funds 1,250,000 (6,000,000)
Net increase (decrease) in advance payments
by borrowers for taxes and insurance 222,290 321,424
Net proceeds from sale of stock 0 0
Purchase of treasury stock 0 0
Dividends paid (183,775) (110,632)
Proceeds from the exercise of stock options 14,340 25,200
----------- -----------
Net Cash provided by financing activities 9,940,585 5,267,780
----------- -----------
Net increase (decrease) in cash and cash equivalents (1,750,930) (485,708)
Cash and cash equivalents at beginning 6,479,903 5,876,454
----------- -----------
Cash and cash equivalents at end $ 4,728,973 $ 5,390,746
=========== ===========
Supplemental cash flow information:
Cash paid during the period for:
Interest on deposit accounts 3,287,604 2,867,566
Interest on borrowings 406,171 226,564
Income taxes 643,200 412,300
See accompanying notes to consolidated financial statements.
Page 4
7
Midwest Federal Financial Corp.
And Subsidiary
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accounting policies of Midwest Federal Financial Corp. and Subsidiary (the
Company) conform to generally accepted accounting principles and prevailing
practices within the thrift industry. A summary of the more significant
accounting policies follows:
PRINCIPLES OF CONSOLIDATION
The accompanying consolidated financial statements include the accounts of
Midwest Federal Financial Corp., its wholly-owned subsidiary, Baraboo Federal
Bank, FSB (the Bank), and the Bank's wholly-owned subsidiary, BF Financial,
Inc. All significant intercompany accounts and transactions have been
eliminated in consolidation. BF Financial, Inc. offers full service brokerage
services and insurance annuity contracts to its customers.
CASH EQUIVALENTS
The Company generally considers all highly liquid debt instruments with
original maturities when purchased of three months or less to be cash
equivalents.
SECURITIES HELD TO MATURITY AND AVAILABLE FOR SALE
Management determines the appropriate classification of debt securities at the
time of purchase. Debt securities are classified as held-to-maturity when the
Company has the positive intent and ability to hold the securities to maturity.
Held to maturity securities are stated at amortized cost.
Debt securities not classified as held to maturity and marketable equity
securities are classified as available for sale. Available for sale securities
are stated at fair value, with the unrealized gains and losses, net of tax,
reported as a separate component of shareholders' equity. Prior to fiscal
1994, investment securities and mortgage-backed and related securities held for
sale were carried at the lower of cost or market value.
The cost of debt securities classified as held to maturity or available for
sale is adjusted for amortization of premiums and accretion of discounts to
maturity, or in the case of mortgage-backed and related securities, over the
estimated life of the security. Such amortization is based on a level-yield
method and is included in interest income from the respective security.
Interest and dividends are included in interest and dividend income from
investments. The cost of securities sold is based on the specific
identification method.
LOANS HELD FOR SALE
Mortgage loans held for sale generally consist of current production of certain
fixed-rate first mortgage loans. Mortgage loans held for sale are carried at
the lower of cost (less principal payments received) or market value.
LOANS RECEIVABLE
Loans receivable are stated as unpaid principal balances, less the allowance
for loan losses and net deferred loan origination fees. Interest income is
recognized using methods which approximate a level yield on principal amounts
outstanding. Accrual of interest is discontinued either when reasonable doubt
exists as to the full, timely collection of interest or principal or when a
loan becomes contractually past due by 90 days or more with respect to interest
or principal. At that time, any accrued but uncollected interest is reversed,
and additional income is recorded only to the extent that payments are received
and the collection of principal is reasonably assured.
LOAN FEES AND RELATED COSTS
Certain loan origination fees, commitment fees and direct loan origination
costs are being deferred and the net amounts amortized as an adjustment of the
related loan's yield. The Bank is amortizing these amounts into interest
income, using the level yield method, over the contractual life of the related
loan.
Other origination and commitment fees not required to be recognized as a yield
adjustment are included in loan fees and service charges.
Page 5
8
MIDWEST FEDERAL FINANCIAL CORP.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
FORECLOSED PROPERTIES
Real estate acquired by foreclosure or deed in lieu of foreclosure, is adjusted
to its fair market value upon acquisition and is subsequently carried at the
lower of cost or net realizable value. Costs related to the development and
improvement of property are capitalized; holding costs are charged to expense.
ALLOWANCE FOR LOSSES ON LOANS AND FORECLOSED PROPERTIES
Management periodically reviews loans and foreclosed properties to determine
whether the estimated realizable value of the related asset is less than the
carrying amount. In making such determinations, consideration is given to
estimated sales price, refurbishing costs, and direct holding and selling
costs. When a loss is anticipated, an allowance for the estimated loss is
provided. In addition, general loss allowances are established in excess of
identifiable losses. This allowance is based on the Bank's own loss
experience, that of the financial services industry, and management's ongoing
assessment of the credit risk inherent in the portfolio.
OFFICE PROPERTIES AND EQUIPMENT
Office properties and equipment are recorded at cost. Maintenance and repair
costs are charged to expense as incurred. When property is retired or
otherwise disposed of, the related cost and accumulated depreciation are
removed from the respective accounts and the resulting gain or loss is recorded
in income. The cost of office properties and equipment is being depreciated
principally by accelerated and straight-line methods over the estimated useful
lives of the assets for both financial reporting and tax reporting purposes.
INCOME TAXES
Deferred income taxes have been provided under the liability method. Deferred
tax assets and liabilities are determined based upon the difference between the
financial statement and tax bases of assets and liabilities, as measured by the
enacted tax rates which will be in effect when these differences are expected
to reverse. Deferred tax expense is the result of changes in the deferred tax
asset and liability.
EARNINGS PER SHARE
Earnings per share of common stock for the periods ending June 30, 1996 and
1995 were computed based on consolidated net income and weighted average
outstanding shares. The weighted average outstanding shares for the quarter
ending June 30, 1996 and 1995 were 1,756,367 and 1,792,262 respectively. Prior
periods have been restated to reflect a 2 for 1 stock dividend executed in May
1996.
Page 6
9
MIDWEST FEDERAL FINANCIAL CORP.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
ACCOUNTING CHANGES
In December 1991, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 107, "Disclosures about
Fair Value of Financial Instruments." This statement requires disclosure of
the fair value of financial instruments, both assets and liabilities, whether
or not such instruments are recognized in the balance sheet. Financial
instruments involve either a right or an obligation to receive or deliver cash
or an equivalent to another entity. Such disclosure could be on the face of
the financial statements or in footnotes thereto to the extent that such fair
value is reasonably attainable, and would not necessarily result in any
adjustment to the carrying amounts of such instruments on the Company's
statement of financial condition. As it relates to the Company, financial
instruments include primarily cash equivalents, investment securities,
mortgage-backed securities, loans receivable and deposits. SFAS No. 107 has
been adopted by the Company for the fiscal year ending December 31, 1995.
In May 1993, the FASB issued SFAS No. 114, "Accounting by Creditors for
Impairment of a Loan," which was subsequently amended by SFAS No. 118. This
statement addresses the accounting by creditors for certain impaired loans and
requires that applicable impaired loans be measured based on future cash flows
or fair value of the underlying collateral. The statements have been adopted
by the Company effective January 1, 1995. The adoption of SFAS No. 114 and
SFAS No. 118 has had a minimal effect on the Company's financial position.
RECLASSIFICATIONS
Certain amounts in these financial statements for prior years have been
reclassified to conform to the June 30, 1996 presentation.
Page 7
10
MIDWEST FEDERAL FINANCIAL CORP.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2 - SECURITIES AVAILABLE FOR SALE
The amortized cost and estimated market values of investment securities
available for sale.
Gross Gross Estimated
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
----------- ---------- ----------- -----------
June 30, 1996
--------------
U.S. government and agencies securities $14,531,135 $ 12,950 $385,610 $14,158,475
Obligations of state and political subdivisions 4,381,454 39,977 57,977 4,363,454
Other 857,126 35,821 892,947
Equity securities - Common stock 1,318,062 23,750 24,350 1,317,462
----------- -------- -------- -----------
TOTALS $21,087,777 $112,498 $467,937 $20,732,338
=========== ======== ======== ===========
December 31, 1995
-----------------
U.S. government and agencies securities $20,486,905 $242,154 $ 11 $20,729,048
Obligations of state and political subdivisions 2,875,769 63,957 11,356 2,928,370
Other 24,000 24,000
Equity securities - Common stock 885,901 33,000 918,901
----------- -------- -------- -----------
TOTALS $24,248,575 $363,111 $ 11,367 $24,600,319
=========== ======== ======== ===========
The amortized cost and estimated market values of mortgage-backed securities
available for sale.
Gross Gross Estimated
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
------------ ---------- ---------- ------------
June 30, 1996
-------------
Participation certificates:
FHLMC $ 5,890,914 $ $ 93,415 $ 5,797,499
FNMA 2,020,672 1,262 40,236 1,981,698
GNMA 4,770,497 6,363 35,102 4,741,758
SBA 284,830 6,216 278,614
Other 312,170 1,546 313,716
Real estate mortgage investment Conduits
("REMICS") 1,871,445 52,012 1,819,433
Adjustable rate mortgage mutual fund 346,960 2,776 344,184
Collateralized mortgage obligations (CMO's) 1,726,593 75,575 1,651,018
----------- ------- -------- ----------
TOTALS $17,224,081 $ 9,171 $305,332 $16,927,920
============ ======== ========= ===========
December 31, 1995
-----------------
Participation certificates:
FHLMC $ 2,004,515 $ $ 39,527 $ 1,964,988
FNMA 1,572,252 8,165 8,359 1,572,058
GNMA 4,744,533 11,750 17,208 4,739,075
SBA 288,088 7,117 295,205
Collateralized mortgage Conduits (REMICS") 1,582,318 10,147 1,592,465
Collateralized mortgage obligations (CMOs) 867,032 124 17,312 849,844
Adjustable rate mortgage mutual fund 346,960 1,041 345,919
----------- ------- -------- -----------
TOTALS $11,405,698 $37,303 $ 83,447 $11,359,554
=========== ======= ======== ===========
Page 8
11
MIDWEST FEDERAL FINANCIAL CORP.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2 - INVESTMENT SECURITIES HELD TO MATURITY
The amortized cost and estimated market values of investment securities held to
maturity.
Gross Gross Estimated
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
---------- ----------- ---------- ----------
June 30, 1996
-------------
U.S. Treasury
obligations and
obligations of U.S.
agencies $1,300,000 $4,130 $1,295,870
==========
Gross Gross Estimated
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
---------- ----------- ---------- ----------
December 31, 1995
-----------------
U.S. Treasury
obligations and
obligations of U.S. $2,095,025 $16,997 $2,112,022
agencies ========== ======= ==========
NOTE 3 - LOANS RECEIVABLE
Details of loans receivable
06/30/96 12/31/95
------------ ------------
First Mortgage Loans:
One-to-four family residential $ 59,152,965 $ 59,178,880
Multi-family residential 6,984,918 7,328,630
Commercial 27,698,554 18,082,781
Construction 5,261,584 4,661,327
------------ ------------
Total first mortgage loans 99,098,021 89,251,618
------------ ------------
Consumer and other loans:
Home Equity 12,769,718 12,171,585
Consumer 13,897,575 12,692,942
Commercial 9,735,926 9,032,325
Education loans 767,313 711,066
Savings account 253,010 244,217
Agricultural 1,461,659 1,763,872
------------ ------------
Total consumer and other loans 38,885,201 36,616,007
------------ ------------
Subtotals 137,983,222 125,867,625
Less:
Undisbursed Loan Proceeds 1,790,787 1,620,226
Allowance for Estimated Losses 1,407,071 1,320,734
Deferred Loan Fees - Net 50,368 1,243
------------ ------------
Totals $134,734,996 $122,925,422
============ ============
Page 9
12
MIDWEST FEDERAL FINANCIAL CORP.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 4 - DEPOSIT ACCOUNTS
Deposit accounts are summarized as follows:
06/30/96 12/31/95
--------------------- ---------------------
Amount Percent Amount Percent
------------ ------- ------------ -------
Demand Deposit Accounts (noninterest-bearing) $ 13,087,576 8.65% $ 13,273,632 9.31%
Negotiable Orders of Withdrawal (NOW) Accounts
(2.25% at December 31, 1995 and at June 30, 1996) 7,817,927 5.17% 6,921,389 4.85%
Super NOW Accounts
(2.40% at December 31, 1995 and and at June 30,
1996) 1,438,207 0.95% 1,663,425 1.17%
Savings Accounts
(2.25% at December 31, 1995 and at June 30, 1996) 11,887,072 7.86% 11,609,058 8.14%
Cash Management Accounts
(3.50% to 5.25% at December 31, 1995 and 3.30% to
5.00% at June 30, 1996) 28,418,791 18.79% 23,457,210 16.45%
Money Market Accounts
(2.40% to 3.25% December 31, 1995 and at June 30,
1996) 2,716,457 1.80% 3,238,356 2.27%
Certificate Accounts:
Less than 3.00% 11,238 0.01% 11,204 0.01%
3.00% - 3.99% 1,170,600 0.77% 1,264,327 0.89%
4.00% - 4.99% 5,896,635 3.90% 9,652,733 6.77%
5.00% - 5.99% 42,764,668 28.28% 31,222,733 21.90%
6.00 - 6.99% 33,123,354 21.90% 37,185,191 26.07%
7.00 - over 2,895,719 1.92% 3,091,256 2.17%
------------ ------ ------------ ------
Totals $151,228,244 100.00% $125,623,523 100.00%
============ ====== ============ ======
Weighted Average Savings Interest Rate 5.12% 5.24%
===== =====
Page 10
13
MIDWEST FEDERAL FINANCIAL CORP.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 5 - RETAINED EARNINGS - SUBSTANTIALLY RESTRICTED
Under the provisions of FIRREA, the Savings Bank is required to meet certain
tangible, core and risk-based capital requirements. Tangible capital generally
consists of stockholders' equity minus certain intangible assets. Core capital
generally consists of stockholders' equity. The risk-based capital
requirements presently address risk related to both recorded assets and
off-balance-sheet commitments and obligations.
The following table summarizes the Savings Bank's capital ratios and the ratios
required by FIRREA and subsequent regulations at June 30, 1996:
Tangible Core Risk-Based
Capital Capital Capital
----------- ----------- -----------
Savings Bank's regulatory percentage 7.39% 7.39% 13.14%
Required regulatory percentage 1.50% 3.00% 8.00%
----------- ----------- -----------
Excess regulatory percentage 5.89% 4.39% 5.14%
=========== =========== ===========
Savings Bank's regulatory capital $13,707,000 $13,707,000 $15,114,000
Required regulatory capital 2,784,000 5,567,000 9,205,000
----------- ----------- -----------
Excess regulatory capital $10,923,000 $ 8,140,000 $ 5,909,000
=========== =========== ===========
Page 11
14
MIDWEST FEDERAL FINANCIAL CORP.
AND SUBSIDIARY
MANAGEMENT'S DISCUSSIONS AND ANALYSIS
OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
FINANCIAL DATA SUMMARY
TOTAL ASSETS
Total assets have increased by $10.4 million from December 31, 1995 to June 30,
1996. This is an increase of 5.9%. Deposit growth and to a lessor extent,
borrowings, have funded increases in earning assets.
LOANS
Net loans receivable have increased by $12.2 million from December 31, 1995 to
June 30, 1996, an increase of 9.9 %. Commercial mortgage loans account for
$6.1 million of this increase. Adjustable rate mortgage loans, commercial and
consumer loans are put into the portfolio of the Bank. Fixed rate mortgage
originations continue to be sold to FHLMC.
CASH AND INVESTMENTS
Mortgage backed securities and investments have decreased by $.4 million, a
decrease of 1.1%. Proceeds from this decrease in investments were used to fund
loan growth.
DEPOSITS
Deposit growth from December 31, 1995, to June 30, 1996, was $8.6 million, an
increase of 6.1%. Deposit growth was used to fund loans.
BORROWED FUNDS
The borrowed funds of the Bank have increased by $1.3 million. The increase in
borrowed funds has helped fund loan growth.
EQUITY
Equity increased only $.4 million or 2.4% due to unrealized losses on
securities available for sale. The unrealized losses are a result of a
decrease in the market value of the investment portfolio as of June 30, 1996.
OPERATING DATA SUMMARY
NET INTEREST INCOME
Net interest income for the second quarter of 1996 is up 26.3% over the second
quarter of 1995. The increase in net interest income is due to growth in
assets of 19.0% from one year ago and a 36 basis point increase in the net
interest margin. Year to date noninterest income is up 26.0% due to similar
increases in asset growth and margin year to date.
NON-INTEREST INCOME
Non-interest income increased by 42.1% from the quarter ending June 30, 1995,
compared to the quarter ending June 30, 1996, and is up
43.0% year to date.
NON INTEREST EXPENSE
Non-interest expenses increased by 15.1% for the quarter ending June 30, 1996
when compared to the quarter ending June 30, 1995, and is up 14.3% year to
date. The primary reasons for the change are an increase in personnel costs
and occupancy costs associated with asset growth.
NET INCOME
Net income for the second quarter of 1996 is 62.9% higher than the second
quarter of 1995 and earnings per share increased from $ .20 to
$ .33 or 65%. Net income year to date is 60.0% higher than 1995 and year to
date earnings per share increased from $ .40 to $ .65, or 62.5%.
Page 12
15
MIDWEST FEDERAL FINANCIAL CORP.
AND SUBSIDIARY
KEY OPERATING RATIOS
(UNAUDITED)
ENDED SEPTEMBER 30,
Three Month Period
--------------------
1996 1995
-------- --------
Return on assets
(Net income divided by average assets) (1) 1.30% .92%
Return on average equity
(net income divided by average equity) (1) 13.84% 9.11%
Average equity to average assets 9.41% 10.06%
Interest rate spread
(difference between average yield on interest earning assets and
average cost of interest bearing liabilities) (1) 3.81% 3.42%
Net interest margin
(net interest income as a percentage of average interest
earning assets) (1) 4.30% 3.94%
Non-interest expense to average assets 3.04% 3.04%
Average interest earning assets to interest bearing deposits 110.87% 108.13%
Allowance for loan losses to total loans at end of period 1.03% 1.01%
Net charge-offs to average outstanding loans during the period .00% .00%
Ratio of non-performing assets to total assets .20% .25%
Risk-based capital (of the Bank) 13.14% 13.85%
- ---------------
(1) Annualized
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16
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
---------------------------
Not Applicable
Item 2. Changes in Securities
------------------------------
Not Applicable
Item 3. Defaults upon Senior Securities
----------------------------------------
Not Applicable
Item 4. Submission of Matters to Vote of Securities Holders
------------------------------------------------------------
Not Applicable
Item 5. Other information
--------------------------
Not Applicable
Item 6. Exhibits and Reports on Form 8-K
-----------------------------------------
During the quarter ended June 30,1996, the Registrant was
not required to file any Current Reports on Form 8-K, and no
reports on Form 8-K were filed.
Page 14
17
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.
MIDWEST FEDERAL FINANCIAL CORP.
/s/ Gary E. Wegner
--------------------------------
Gary E. Wegner, President & CEO
/s/ Dean C. Carter
---------------------------------------
Dean C. Carter, Chief Financial Officer
Date: August 8, 1996