1
FORM 10-Q
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarterly Period ended December 31, 1998
[ ] 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 0-24834
MILTON FEDERAL FINANCIAL CORPORATION
------------------------------------
(Exact name of registrant as specified in its charter)
Ohio 31-1412064
- ---- ----------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
25 Lowry Drive, West Milton, Ohio 45383
---------------------------------------
(Address of principal executive offices) (zip code)
(937) 698-4168
--------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act during the
past 12 months (or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing requirements for the
past 90 days.
Yes [X] No [ ]
As of February 1, 1999 the latest practicable date, 2,199,495 shares of the
registrant's common shares, no par value, were issued and outstanding.
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MILTON FEDERAL FINANCIAL CORPORATION
INDEX
Page
----
PART I - FINANCIAL INFORMATION (UNAUDITED)
Item 1. Financial Statements
Consolidated Balance Sheets .................................................. 3
Consolidated Statements of Income ............................................ 4
Consolidated Statements of Comprehensive Income............................... 5
Consolidated Statements of Changes in Shareholders' Equity.................... 6
Condensed Consolidated Statements of Cash Flows .............................. 8
Notes to Consolidated Financial Statements ................................... 9
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations.......................... 14
Item 3. Quantitative and Qualitative Disclosure About Market Risk................ 20
PART II - OTHER INFORMATION......................................................... 22
SIGNATURES ......................................................................... 23
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3
MILTON FEDERAL FINANCIAL CORPORATION
CONSOLIDATED BALANCE SHEETS
(Unaudited)
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Item 1. FINANCIAL STATEMENTS
December 31, September 30,
1998 1998
---- ----
ASSETS
Cash and amounts due from depository institutions $ 857,612 $ 1,049,982
Overnight deposits in other financial institutions 200,000 2,200,000
Interest-bearing deposits in other financial institutions 127,901 327,941
------------- -------------
Total cash and cash equivalents 1,185,513 3,577,923
Securities available for sale 41,917,512 36,912,196
Securities held to maturity (Estimated fair value of $13,971,943
at December 31, 1998 and $14,528,202 at September 30, 1998) 13,969,668 14,559,907
Federal Home Loan Bank stock available for sale 2,863,800 2,814,200
Loans, net 183,433,406 171,346,497
Premises and equipment, net 2,701,986 2,739,778
Cash surrender value of life insurance 1,610,527 1,593,383
Accrued interest receivable 1,123,745 1,225,037
Other assets 245,558 506,702
------------- -------------
Total assets $ 249,051,715 $ 235,275,623
============= =============
LIABILITIES
Deposits $ 166,974,559 $ 154,647,142
Borrowed funds 53,305,737 52,430,023
Advance payments by borrowers for taxes and insurance 657,836 258,357
Accrued interest payable 245,868 284,706
Other liabilities 1,884,684 1,372,169
------------- -------------
Total liabilities 223,068,684 208,992,397
SHAREHOLDERS' EQUITY
Preferred stock, no par value, 1,000,000 shares
authorized, none outstanding
Common stock, no par value, 9,000,000 shares authorized,
2,578,875 shares issued
Additional paid-in capital 25,193,633 25,143,563
Retained earnings 8,158,126 8,167,236
Treasury stock, at cost, 373,880 shares at December 31,
1998 and 342,039 shares at September 30, 1998 (5,559,021) (5,104,494)
Unearned employee stock ownership plan shares (1,140,359) (1,199,087)
Unearned recognition and retention plan shares (785,348) (839,194)
Accumulated other comprehensive income 116,000 115,202
------------- -------------
Total shareholders' equity 25,983,031 26,283,226
------------- -------------
Total liabilities and shareholders' equity $ 249,051,715 $ 235,275,623
============= =============
- -------------------------------------------------------------------------------
See accompanying notes to consolidated financial statements.
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MILTON FEDERAL FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
- -------------------------------------------------------------------------------
Three months ended
December 31,
------------
1998 1997
---- ----
INTEREST AND DIVIDEND INCOME
Loans, including fees $3,402,019 $2,704,720
Securities 738,159 1,174,495
Other, including dividend income 74,724 46,954
---------- ----------
4,214,902 3,926,169
INTEREST EXPENSE
Deposits 2,035,806 1,842,442
Borrowed funds 724,811 627,783
---------- ----------
2,760,617 2,470,225
---------- ----------
NET INTEREST INCOME 1,454,285 1,455,944
Provision for loan losses 30,000 24,000
---------- ----------
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 1,424,285 1,431,944
NONINTEREST INCOME
Service charges and other fees 61,701 48,583
Gain on sale of loans 52,615 --
Other income 42,541 30,100
---------- ----------
156,857 78,683
NONINTEREST EXPENSE
Salaries and employee benefits 636,093 629,814
Occupancy expense 102,766 92,732
Data processing services 58,488 47,375
State franchise taxes 87,191 88,508
Federal deposit insurance premiums 22,132 21,787
Advertising 19,870 14,862
Other expenses 181,218 169,937
---------- ----------
1,107,758 1,065,015
---------- ----------
INCOME BEFORE INCOME TAX 473,384 445,612
Income tax expense 162,000 155,000
---------- ----------
NET INCOME $ 311,384 $ 290,612
========== ==========
Earnings per common share - Basic $ .15 $ .14
========== ==========
Earnings per common share - Diluted $ .15 $ .14
========== ==========
- -------------------------------------------------------------------------------
See accompanying notes to consolidated financial statements.
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MILTON FEDERAL FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
- -------------------------------------------------------------------------------
Three months ended
December 31,
------------
1998 1997
---- ----
NET INCOME $ 311,384 $ 290,612
Other comprehensive income:
Unrealized gain (loss) on available-for-sale securities arising
during the period 1,213 (651)
Tax effect (415) 220
--------- ---------
Total other comprehensive income 798 (431)
--------- ---------
COMPREHENSIVE INCOME $ 312,182 $ 290,181
========= =========
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See accompanying notes to consolidated financial statements.
5.
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MILTON FEDERAL FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
Three months ended December 31, 1998 and 1997
(Unaudited)
- -------------------------------------------------------------------------------
Unearned Accumulated
Additional Employee Other
Paid-In Retained Treasury Benefit Plan Comprehensive
Capital Earnings Stock Shares Income Total
------- -------- ----- ------ ------ -----
Balance at October 1, 1997 $ 25,017,419 $ 7,975,535 $ (4,050,307) $ (2,498,744) $ (56,033) $ 26,387,870
Net income for the period -- 290,612 -- -- -- 290,612
Cash dividends -
$.15 per share -- (325,738) -- -- -- (325,738)
Commitment to release 5,233
employee stock ownership
plan shares 25,111 -- -- 61,273 -- 86,384
3,739 shares earned under
recognition and retention
plan -- -- -- 53,845 -- 53,845
Purchase of treasury stock,
38,000 shares at cost -- -- (575,437) -- -- (575,437)
Change in fair value of securities
available for sale -- -- -- -- (431) (431)
------------ ------------ ------------ ------------ ------------ ------------
Balance at December 31, 1997 $ 25,042,530 $ 7,940,409 $ (4,625,744) $ (2,383,626) $ (56,464) $ 25,917,105
============ ============ ============ ============ ============ ============
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See accompanying notes to consolidated financial statements.
6.
7
MILTON FEDERAL FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (CONTINUED)
Three months ended December 31, 1998 and 1997
(Unaudited)
- -----------------------------------------------------------------------------------------------------------------------------------
Unearned Accumulated
Additional Employee Other
Paid-In Retained Treasury Benefit Plan Comprehensive
Capital Earnings Stock Shares Income Total
Balance at October 1, 1998 $ 25,143,563 $ 8,167,236 $ (5,104,494) $ (2,038,281) $ 115,202 $ 26,283,226
Net income for the period -- 311,384 -- -- -- 311,384
Cash dividends -
$.15 per share -- (320,494) -- -- -- (320,494)
Commitment to release 4,997
employee stock ownership
plan shares 20,877 -- -- 58,728 -- 79,605
3,739 shares earned under
recognition and retention
plan -- -- -- 53,846 -- 53,846
Tax benefit realized on vesting
of recognition and retention
plan shares 29,193 -- -- -- -- 29,193
Purchase of treasury stock,
31,841 shares at cost -- -- (454,527) -- -- (454,527)
Change in fair value of securities
available for sale -- -- -- -- 798 798
------------ ------------ ------------ ------------ ------------ ------------
Balance at December 31, 1998 $ 25,193,633 $ 8,158,126 $ (5,559,021) $ (1,925,707) $ 116,000 $ 25,983,031
============ ============ ============ ============ ============ ============
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See accompanying notes to consolidated financial statements.
7.
8
MILTON FEDERAL FINANCIAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
- -------------------------------------------------------------------------------
Three Months Ended
December 31,
------------
1998 1997
---- ----
NET CASH FLOWS FROM OPERATING ACTIVITIES $ 1,216,478 $ 1,095,439
CASH FLOWS FROM INVESTING ACTIVITIES
Securities available for sale
Purchases (6,941,199) --
Proceeds from principal payments 1,927,954 2,109,859
Securities held to maturity
Purchases -- (5,661,533)
Proceeds from principal payments 578,049 415,222
Increase in loans, net (14,198,028) (10,823,292)
Proceeds from sale of loans 2,215,110 --
Premises and equipment expenditures (18,363) (28,986)
Purchase Federal Home Loan Bank stock -- (337,500)
------------ ------------
Net cash from investing activities (16,436,477) (14,326,230)
CASH FLOWS FROM FINANCING ACTIVITIES
Net change in deposit accounts 12,327,417 2,085,710
Net change in advance payments by borrowers for taxes
and insurance 399,479 267,875
Net change in short-term borrowings -- 1,400,000
Long-term advances from Federal Home Loan Bank 1,000,000 6,100,000
Principal payments on Federal Home Loan Bank advances (124,286) (557,516)
Cash dividends paid (320,494) (325,738)
Purchase of treasury stock (454,527) (575,437)
------------ ------------
Net cash from financing activities 12,827,589 8,394,894
------------ ------------
Net change in cash and cash equivalents (2,392,410) (4,835,897)
Cash and cash equivalents at beginning of period 3,577,923 5,633,119
------------ ------------
Cash and cash equivalents at end of period $ 1,185,513 $ 797,222
============ ============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the period for
Interest $ 2,799,455 $ 2,432,863
Income taxes -- 252,298
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See accompanying notes to consolidated financial statements.
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MILTON FEDERAL FINANCIAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- ------------------------------------------------------------------------------
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
These interim financial statements are prepared without audit and reflect all
adjustments which, in the opinion of management, are necessary to present fairly
the financial position of Milton Federal Financial Corporation (the
"Corporation") at December 31, 1998, and its results of operations and cash
flows for the periods presented. All such adjustments are normal and recurring
in nature. The accompanying financial statements have been prepared in
accordance with the instructions of Form 10-Q and, therefore, do not purport to
contain all necessary financial disclosures required by generally accepted
accounting principles that might otherwise be necessary in the circumstances,
and should be read in conjunction with financial statements, and notes thereto,
of the Corporation for the fiscal year ended September 30, 1998, included in its
1998 annual report.. The Corporation has consistently followed the accounting
policies described in the notes to financial statements contained in the
Corporation's 1998 annual report in preparing this Form 10-Q.
The consolidated financial statements include the accounts of the Corporation
and its wholly-owned subsidiary, Milton Federal Savings Bank (the "Bank"). The
financial statements of the Bank include accounts of its wholly-owned
subsidiary, Milton Financial Service Corporation. Milton Financial Service
Corporation holds stock in Intrieve, Inc., the data processing center utilized
by the Bank. All significant intercompany accounts and transactions have been
eliminated.
The Corporation is a thrift holding company engaged in the business of
commercial and retail banking services with operations conducted through its
main office in West Milton, Ohio, and from its full-service branch offices
located in Englewood, Brookville and Tipp City, Ohio. Miami, Montgomery and
Darke Counties provide the source for substantially all the Corporation's
deposit and lending activities. The majority of the Corporation's income is
derived from residential, nonresidential and consumer lending activities, and
investments.
To prepare financial statements in conformity with generally accepted accounting
principals, management makes estimates and assumptions based on available
information. These estimates and assumptions affect the amounts reported in the
financial statements and the disclosures provided, and future results could
differ. The allowance for loan losses, fair values of financial instruments and
status of contingencies are particularly subject to change.
Income tax expense is the sum of the current-year income tax due or refundable
and the change in deferred tax assets and liabilities. Deferred tax assets and
liabilities are the expected future tax consequences of temporary differences
between the carrying amounts and tax bases of assets and liabilities, computed
using enacted tax rates. A valuation allowance, if needed, reduces deferred tax
assets to the amount expected to be realized. Income tax expense is based on the
effective tax rate expected to be applicable for the entire year.
Basic earnings per share ("EPS") are based on net income divided by the weighted
average number of shares outstanding during the period. Diluted EPS includes the
dilutive effect of stock options granted and unearned recognition and retention
plan ("RRP") shares using the treasury stock method. Unreleased ESOP shares are
not considered to be outstanding shares for the purpose of determining the
weighted average number of shares used in the earnings per common share
calculations.
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(Continued)
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MILTON FEDERAL FINANCIAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- ------------------------------------------------------------------------------
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
The weighted average number of common shares outstanding for basic and diluted
earnings per share computations were as follows:
Three months ended
DECEMBER 31
-----------
1998 1997
---- ----
Weighted-average shares outstanding - Basic 2,067,046 2,091,391
Effect of stock options 2,109 21,047
Effect of unearned RRP shares 209 6,104
-------------- --------------
Weighted-average shares outstanding - Diluted 2,069,364 2,118,542
============== ==============
The Corporation adopted on October 1, 1998, the Statement of Financial
Accounting Standards ("SFAS") No. 130, "Reporting Comprehensive Income."
Comprehensive income consists of net income and other comprehensive income.
Other comprehensive income includes unrealized gains and losses on securities
available for sale which is also recognized as a separate component of equity.
The accounting standard that requires reporting comprehensive income first
applies for fiscal years beginning after December 15, 1997, with prior
information restated to be comparable.
NOTE 2 - SECURITIES
The amortized cost and fair values of securities are as follows:
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
---- ----- ------ -----
December 31, 1998
- -----------------
Available for sale
Equity $ 15,000 $ - $ - $ 15,000
Mortgage-backed 41,726,753 351,873 (176,134) 41,902,512
----------------- ------------ ------------ -----------------
Total $ 41,741,753 $ 351,873 $ (176,134) $ 41,917,512
================= ============ ============ =================
Held to maturity
Mortgage-backed $ 13,969,668 $ 119,345 $ (117,070) $ 13,971,943
================= ============ ============ =================
September 30, 1998
- ------------------
Available for sale
Equity $ 15,000 $ - $ - $ 15,000
Mortgage-backed 36,722,650 304,109 (129,563) 36,897,196
----------------- ------------ ------------ -----------------
Total $ 36,737,650 $ 304,109 $ (129,563) $ 36,912,196
================= ============ ============ =================
Held to maturity
Mortgage-backed $ 14,559,907 $ 85,137 $ (116,842) $ 14,528,202
================= ============ ============ =================
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(Continued)
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MILTON FEDERAL FINANCIAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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NOTE 2 - SECURITIES (Continued)
The Corporation maintains a significant portfolio of mortgage-backed securities
in the form of Federal Home Loan Mortgage Corporation ("FHLMC"), Federal
National Mortgage Association ("FNMA") and Government National Mortgage
Association ("GNMA") participation certificates. Mortgage-backed securities
generally entitle the Corporation to receive a portion of the cash flows from an
identified pool of mortgages, and FHLMC, FNMA and GNMA securities are each
guaranteed by their respective agencies as to principal and interest. The
Corporation has also invested significant amounts in collateralized mortgage
obligations ("CMOs") and real estate mortgage investment conduits ("REMICs")
which are included in mortgage-backed securities. Substantially all CMOs and
REMICs are backed by pools of mortgages insured or guaranteed by the FNMA and
FHLMC.
There were no sales of securities during the three-month periods ended December
31, 1998 and 1997.
NOTE 3 - LOANS
Loans consisted of the following:
December 31, September 30,
1998 1998
---- ----
Residential real estate loans
1-4 family (first mortgage) $ 150,000,762 $ 138,514,548
Home equity (1-4 family second mortgage) 3,914,814 4,244,313
Multi-family 2,566,376 2,670,477
Nonresidential real estate loans 12,321,209 8,804,909
Construction loans 11,755,871 16,412,903
---------------- -----------------
Total real estate loans 180,559,032 170,647,151
Consumer loans
Automobile 3,295,448 3,480,341
Loans on deposits 311,862 290,640
Other consumer loans 345,332 344,244
---------------- -----------------
Total consumer loans 3,952,642 4,115,225
Commercial loans 2,885,510 2,753,493
---------------- -----------------
Total loans 187,397,184 177,515,869
Less:
Net deferred loan fees (628,071) (605,224)
Loans in process (2,629,292) (4,887,733)
Allowance for loan losses (706,415) (676,415)
---------------- -----------------
Net loans $ 183,433,406 $ 171,346,497
================ =================
The Corporation, through the Bank, has sold various loans to other financial
intermediaries while retaining the servicing rights. Gains and losses on loan
sales are recorded at the time of the sale. Loans sold for which the Corporation
has retained servicing totaled $15,694,473 at December 31, 1998 and $15,615,077
at September 30, 1998. Capitalized mortgage-servicing rights totaled $189,000 at
December 31, 1998 and September 30, 1998. At December 31, 1998 and September 30,
1998, no loans were held for sale. Proceeds from the sale of loans during the
three months ended December 31, 1998 were $2,215,110 with net realized gains of
$52,615 included in earnings. No loans were sold during the three months ended
December 31, 1997.
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(Continued)
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MILTON FEDERAL FINANCIAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- ------------------------------------------------------------------------------
NOTE 3 - LOANS (Continued)
Activity in the allowance for losses on loans was as follows:
Three months ended
December 31
-----------
1998 1997
---- ----
Beginning balance $ 676,415 $ 562,202
Provision for loan losses 30,000 24,000
Charge-offs - (100,771)
------------ ------------
Ending balance $ 706,415 $ 485,431
============ ============
Loans considered impaired within the scope of SFAS No. 114 were not significant
during three months ended December 31, 1998 and 1997.
NOTE 4 - BORROWED FUNDS
At December 31, 1998, the Bank had a cash-management line-of-credit enabling it
to borrow up to $10,800,000 from the Federal Home Loan Bank ("FHLB") of
Cincinnati. The line of credit must be renewed on an annual basis. The next
renewal date is April 16, 1999. There were no borrowings outstanding on this
line of credit at December 31, 1998 or September 30, 1998.
Additionally, as a member of the FHLB system, the Bank has the ability to obtain
additional borrowings up to a total of 50% of Bank assets subject to the level
of qualified, pledgable 1- to 4-family residential real estate loans. The Bank
had variable-rate borrowings totaling $5,000,000, with interest rates ranging
from 5.57% to 5.62%, at December 31, 1998 and $4,000,000, with an interest rate
of 5.54%, at September 30, 1998. The Bank had fixed-rate borrowings totaling
$12,305,737 at December 31, 1998 and $12,430,023 at September 30, 1998. The
interest rates on these borrowings ranged from 5.80% to 6.42%. The Bank also had
$36,000,000 in convertible advances at December 31, 1998 and September 30, 1998
whereby the interest rates are fixed for a specified period of time and then
change to variable for the remaining term of the advance. The interest rates on
these advances ranged from 4.66% to 5.65%.
Advances under the borrowing agreements are collateralized by a blanket pledge
of the Bank's residential mortgage loan portfolio and FHLB stock.
At December 31, 1998, required annual principal payments are as follows:
Period ending December 31:
1998 $ 1,146,533
1999 7,415,527
2000 2,910,996
2001 2,227,740
2002 1,258,632
Thereafter 38,346,309
---------------
$ 53,305,737
===============
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(Continued)
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MILTON FEDERAL FINANCIAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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NOTE 5 - COMMITMENTS, OFF-BALANCE -SHEET RISK AND CONTINGENCIES
Various contingent liabilities are not reflected in the financial statements,
including claims and legal actions arising in the ordinary course of business.
In the opinion of management, after consultation with legal counsel, the
ultimate disposition of these matters is not expected to have a material effect
on financial condition or results of operations of the Corporation.
Some financial instruments are used in the normal course of business to meet
financing needs of customers. These financial instruments include commitments to
extend credit, standby letters of credit and financial guarantees. These
involve, to varying degrees, credit risk more than the amount reported in the
financial statements.
Exposure to credit loss if the other party does not perform is represented by
the contractual amount for commitments to extend credit, standby letters of
credit and financial guarantees written. The same credit policies are used for
commitments and conditional obligations as are used for loans. The amount of
collateral obtained, if deemed necessary, on extension of credit is based on
management's credit evaluation and generally consists of residential or
commercial real estate. Lines of credit are primarily home equity lines
collateralized by second mortgages on 1- to 4-family residential real estate and
commercial lines of credit collateralized by business assets.
Commitments to extend credit are agreements to lend to a customer as long as
there is no violation of any condition established in the commitment.
Commitments generally have fixed expiration dates or other termination clauses
and may require payment of a fee. Since many of the commitments are expected to
expire without being used, the total commitments do not necessarily represent
future cash requirements.
As of December 31, 1998 and September 30, 1998, the Corporation had commitments
to make fixed-rate, 1- to 4-family residential real estate loans at current
market rates totaling $2,496,000 and $1,516,000. Loan commitments are generally
for 30 days. The interest rate on commitments ranged from 6.25% to 9.50% at
December 31, 1998 and 6.38% to 8.50% at September 30, 1998. The Corporation had
commitments to make variable-rate, 1-to 4-family residential loans totaling
$306,000 at December 31, 1998, at interest rates ranging from 5.75% to 8.00%,
while there were no such commitments at September 30, 1998. As of December 31,
1998 and September 30, 1998, the Corporation had $4,894,000 and $4,711,000 in
unused variable-rate home equity lines of credit and $1,335,000 and $820,000
unused commercial lines of credit.
Standby letters of credit are conditional commitments to guarantee a customer's
performance to a third party. At December 31, 1998 and September 30, 1998, the
Corporation had standby letter-of-credit commitments totaling $141,000 and
$150,000.
At December 31, 1998 and September 30, 1998, compensating balances of $697,000
and $518,000 were required as deposits with the FHLB. The balances do not earn
interest.
The Corporation and the Bank have entered employment agreements with certain
officers of the Corporation and the Bank. Each of the agreements provide for a
term of three years and a salary and performance review by the Board of
Directors not less than annually, as well as inclusion of the employee in any
formally-established employee benefit, bonus, pension and profit-sharing plans
for which management personnel are eligible.
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13.
14
MILTON FEDERAL FINANCIAL CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following discusses the financial condition of the Corporation as of
December 31, 1998, as compared to September 30, 1998, and the results of
operations for the three-month period ended December 31, 1998, compared with the
same period in 1997. This discussion should be read in conjunction with the
interim financial statements and footnotes included herein.
FORWARD-LOOKING STATEMENTS
When used in this document, the words or phrases "will likely result," "are
expected to," "will continue," "is anticipated," "estimated," "projected" or
similar expressions are intended to identify "forward looking statements" within
the meaning of the Private Securities Litigation Reform Act of 1995. Such
statements are subject to certain risks and uncertainties including changes in
economic conditions in the Bank's market area, changes in policies by regulatory
agencies, fluctuations in interest rates, demand for loans in the Bank's market
area and competition, that could cause actual results to differ materially from
historical earnings and those presently anticipated or projected. Factors listed
above could affect the Corporation's financial performance and could cause the
Corporation's actual results for future periods to differ materially from any
statements expressed with respect to future periods.
The Corporation does not undertake, and specifically disclaims any obligation,
to publicly revise any forward-looking statements to reflect events or
circumstances after the date of such statements or to reflect the occurrence of
anticipated or unanticipated events.
ANALYSIS OF FINANCIAL CONDITION
The Corporation's assets totaled $249.1 million at December 31, 1998, an
increase of $13.8 million, or 5.9%, from $235.3 million at September 30, 1998.
The growth in assets was primarily in securities and loans. Such growth was
funded by the use of overnight deposits in other financial institutions and
increased deposits and borrowed funds.
Total securities increased $4.4 million from $51.5 million at September 30, 1998
to $55.9 million at December 31, 1998. The increase was due to $6.9 million in
purchases of mortgage-backed securities partly offset by maturities and
principal repayments of $2.5 million. The purchases were funded by growth in
deposits and borrowings.
Net loans increased from $171.3 million at September 30, 1998 to $183.4 million
at December 31, 1998. The growth in loans was primarily in 1- to 4-family
first-mortgage loans and nonresidential real estate loans, which increased $11.5
million and $3.5 million. As interest rates have decreased slightly since
September 30, 1998, much of the growth in 1- to 4-family first mortgages is the
result of customers refinancing their higher-rate loans from the Corporation's
competitors. Despite the high volume of originations, overall growth was partly
constrained by the sale of a pool of 1- to 4-family first mortgage loans with a
carrying value of $2.2 million. The loans were sold as a means to manage
interest rate risk by reducing the Corporation's investment in various
lower-yielding or longer-term, fixed-rate loans. The Corporation retained the
right to service the loans for a fixed spread to provide an additional source of
fee income. In addition to growth spurred by refinancings, the continued growth
in total real estate loans is also related to growth in the Corporation's market
area, as the Corporation has not changed its
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(Continued)
14.
15
MILTON FEDERAL FINANCIAL CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
- -------------------------------------------------------------------------------
philosophy regarding pricing or underwriting standards during the period.
Construction loans decreased $4.6 million as loans were converted to more
permanent financing upon completion of construction. Changes in other types of
real estate loans were not significant.
Total deposits increased $12.4 million, or 8.0%, from $154.6 million at
September 30, 1998 to $167.0 million at December 31, 1998. The Corporation
experienced increases of $2.2 million and $3.5 million in negotiable order of
withdrawal ("NOW") and money market accounts while certificates of deposit
increased $7.0 million, or 6.0%, and had the largest increase of all types of
deposits. Overall deposit growth has been due to normal operating procedures as
the Corporation has not used special promotions to attract increased volume.
Borrowed funds totaled $52.4 million at September 30, 1998 and $53.3 million at
December 31, 1998. The majority of borrowed funds are invested in
mortgage-backed and related securities to leverage the Bank's excess capital and
to provide liquidity for future loan growth.
COMPARISON OF RESULTS OF OPERATIONS
Operating results of the Corporation are affected by general economic
conditions, monetary and fiscal policies of federal agencies and policies of
agencies regulating financial institutions. The Corporation's cost of funds is
influenced by interest rates on competing investments and general market rates
of interest. Lending activities are influenced by demand for real estate loans
and other types of loans which, in turn, is affected by the interest rates at
which such loans are made, general economic conditions and availability of funds
for lending activities.
The Corporation's net income is primarily dependent on its net interest income
(the difference between interest income generated on interest-earning assets and
interest expense incurred on interest-bearing liabilities). Net income is also
affected by provisions for loan losses, service charges, gains on sale of assets
and other income, noninterest expense and income taxes.
The Corporation's net income of $311,000 for the three months ended December 31,
1998 represented a $20,000 increase from $291,000 in net income for the three
months ended December 31, 1997. Similarly, both basic and diluted earnings per
common share increased by $.01 for the three months ended December 31, 1998 as
compared to the same period in 1997. The increase in net income was primarily
the result of gains realized on the sale of loans during the three months ended
December 31, 1998.
Net interest income is the largest component of the Corporation's income and is
affected by the interest-rate environment and volume and composition of
interest-earning assets and interest-bearing liabilities. Net interest income
totaled $1,454,000 for the three months ended December 31, 1998 and $1,456,000
for the same period in 1997. The Corporation remains liability sensitive,
whereby its interest-bearing liabilities will generally reprice more quickly
than its interest-earning assets. Therefore, the Corporation's net interest
margin will generally increase in periods of falling interest rates in the
market and will decrease in periods of increasing interest rates. Accordingly,
in a rising rate environment, the Corporation may need to increase rates to
attract and retain deposits. Due to the negative gap position, the rise in
interest rates may not have such an immediate affect on interest-earning assets.
This lag could negatively affect net interest income. During the first quarter
of fiscal 1999, the Board of Governors of the Federal Reserve System decreased
the discount rate by 50 basis points, which has lead to a general decrease in
deposit and loan rates offered by many financial institutions.
- -------------------------------------------------------------------------------
(Continued)
15.
16
MILTON FEDERAL FINANCIAL CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
- -------------------------------------------------------------------------------
Interest and fees on loans totaled $3,402,000 for the three months ended
December 31, 1998, compared to $2,705,000 for the three months ended December
31, 1997. Such increase in interest income was due to higher average loan
balances related to the origination of new 1- to 4-family first mortgages and
nonresidential real estate loans.
Interest on securities totaled $738,000 for the three months ended December 31,
1998, compared to $1,174,000 for the three months ended December 31, 1997. The
decrease was primarily due to a decrease in volume of securities since the prior
period as the majority of proceeds from sales and principal repayments have been
reinvested in higher-yielding loans.
Interest on deposits totaled $2,036,000 for the three months ended December 31,
1998, and $1,842,000 for the three months ended December 31, 1997. The increase
resulted from higher average deposit balances partly offset by a decrease in the
average cost of funds from the prior period.
Interest on borrowed funds increased $97,000 over the comparable periods. The
increase was the result of higher average balances of borrowed funds during the
three months ended December 31, 1998. Beginning in the fourth quarter of fiscal
1995, the Corporation borrowed funds and invested a portion of these funds in
mortgage-backed securities to leverage excess capital, as discussed previously.
From time to time, the Corporation has borrowed additional adjustable-rate funds
for similar purposes as well as to provide funding for loan growth The
Corporation has also borrowed fixed-rate funds to provide for long-term
liquidity needs. As opportunities arise, the Corporation may make additional
borrowings to fund loan demand and mortgage-backed and related security
purchases.
The Corporation maintains an allowance for loan losses in an amount, which, in
management's judgment, is adequate to absorb probable losses in the loan
portfolio. While management utilizes its best judgment and information
available, ultimate adequacy of the allowance is dependent on a variety of
factors, including performance of the Corporation's loan portfolio, the economy,
changes in real estate values and interest rates and the view of the regulatory
authorities toward loan classifications. The provision for loan losses is
determined by management as the amount to be added to the allowance for loan
losses after net charge-offs have been deducted to bring the allowance to a
level considered adequate to absorb probable losses in the loan portfolio. The
amount of the provision is based on management's regular review of the loan
portfolio and consideration of such factors as historical loss experience,
general prevailing economic conditions, changes in size and composition of the
loan portfolio and specific borrower considerations, including ability of the
borrower to repay the loan and the estimated value of the underlying collateral.
Other than $115,000 in charge-offs during fiscal 1998, the Corporation has not
experienced any significant charge-offs for the past several years. The majority
of these charge-offs occurred during the three months ended December 31, 1997
and were related to a single loan relationship for which the Corporation
maintained a specific valuation allowance. The Corporation's low historical
charge-off history is the product of a variety of factors, including the
Corporation's underwriting guidelines, which generally require a down payment of
20% of the lower of sales price or appraised value of 1- to 4-family residential
real estate loans, established income information and defined ratios of debt to
income. Loans secured by real estate make up 96.4% of the Corporation's loan
portfolio, and loans secured by first mortgages on 1- to 4-family residential
real estate constituted 80.0% of total loans at December 31, 1998.
Notwithstanding the historically low level of charge-offs, management believes
it is prudent to continue increasing the allowance for loan losses as total
loans increase. Accordingly, management anticipates it will continue its
provisions to the allowance for loan losses at current levels for the near
future, providing volume of nonperforming loans remains insignificant. The
provision for loan losses totaled $30,000 and $24,000 during the three months
ended December 31, 1998 and 1997.
- -------------------------------------------------------------------------------
(Continued)
16.
17
MILTON FEDERAL FINANCIAL CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
- -------------------------------------------------------------------------------
Noninterest income totaled $157,000 for the three months ended December 31, 1998
and $79,000 for the three months ended December 31, 1997. The increase was
primarily the result of gains realized on sales of loans during the three months
ended December 31, 1998. The loan sales were primarily made for interest-rate
risk-strategy purposes. Other changes in noninterest income for the three-month
periods were not significant.
Noninterest expense totaled $1,108,000 for the three months ended December 31,
1998, compared to $1,065,000 for the three months ended December 31, 1997. The
Corporation experienced increases in most of the components of noninterest
expense, however, no single component made up a significant portion of the
increase.
The volatility of income tax expense is primarily attributable to the change in
net income before income taxes. Income tax expense totaled $162,000, or an
effective rate of 34.2%, for the three months ended December 31, 1998, compared
to $155,000, or an effective rate of 34.8%, for the three months ended December
31, 1997.
LIQUIDITY AND CAPITAL RESOURCES
The Corporation's liquidity, primarily represented by cash equivalents, is a
result of operating, investing and financing activities. These activities are
summarized below for the three months ended December 31, 1998 and 1997.
Three months ended
December 31,
------------
1998 1997
---- ----
(In thousands)
Net income $ 311 $ 291
Adjustments to reconcile net income to net cash from
operating activities 905 804
---------- -----------
Net cash from operating activities 1,216 1,095
Net cash from investing activities (16,436) (14,326)
Net cash from financing activities 12,828 8,395
---------- -----------
Net change in cash and cash equivalents (2,392) (4,836)
Cash and cash equivalents at beginning of period 3,578 5,633
---------- -----------
Cash and cash equivalents at end of period $ 1,186 $ 797
========== ===========
The Corporation's principal sources of funds are deposits, loan and security
repayments, securities available for sale and other funds provided by
operations. The Corporation also has the ability to borrow from the FHLB of
Cincinnati. While scheduled loan repayments and maturing securities are
relatively predictable, deposit flows and early loan and mortgage-backed
security repayments are more influenced by interest rates, general economic
conditions and competition. The Corporation maintains investments in liquid
assets based on management's assessments of (1) the need for funds, (2) expected
deposit flows, (3) the yields available on short-term liquid assets and (4) the
objectives of the asset/liability management program.
Office of Thrift Supervision ("OTS") regulations presently require the
Corporation to maintain an average daily balance of investments in U.S.
Treasury, federal agency obligations and other investments having maturities of
five years or less in an amount equal to 4% of the sum of the Corporation's
average daily balance of net withdrawable deposit accounts and borrowings
payable in one year or less. The liquidity requirement, which may be changed
from time to time by the OTS to reflect changing economic
- -------------------------------------------------------------------------------
(Continued)
17
18
MILTON FEDERAL FINANCIAL CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
- -------------------------------------------------------------------------------
conditions, is intended to provide a source of relatively liquid funds on which
the Corporation may rely, if necessary, to fund deposit withdrawals or other
short-term funding needs. At December 31, 1998, the Corporation's regulatory
liquidity was 34.5%. At such date, the Corporation had commitments to originate
fixed-rate loans totaling $2,496,000 and variable-rate loans totaling $306,000.
The Corporation had no commitments to purchase or sell loans. The Corporation
considers its liquidity and capital reserves sufficient to meet its outstanding
short- and long-term needs. See Note 5 of the Notes to Consolidated Financial
Statements.
The Bank is required by regulations to meet certain minimum capital
requirements, which must be generally as stringent as standards established for
commercial banks. Failure to meet minimum capital requirements can initiate
certain mandatory actions that, if undertaken, could have a direct material
affect on the Bank's financial statements. Current capital requirements call for
tangible capital of 1.5% of adjusted total assets, core capital (which for the
Bank consists solely of tangible capital) of 3.0% of adjusted total assets and
risk-based capital (which, for the Bank, consists of core capital and general
valuation allowances) of 8.0% of risk-weighted assets (assets are weighted at
percentage levels ranging from 0% to 100% depending on their relative risk). The
following table indicates that the requirement for core capital is 4.0% because
that is the level that the OTS prompt corrective-action regulations require to
be considered adequately capitalized. At December 31, 1998, the Bank complies
with all regulatory capital requirements. Based on the Bank's computed
regulatory capital ratios, the Bank is considered well capitalized under the
applicable requirements at December 31, 1998. Management is not aware of any
matter after the latest regulatory exam that would cause the Bank's capital
category to change.
The following table summarizes the Bank's regulatory capital requirements and
actual capital at December 31, 1998.
Excess of actual
capital over current
Actual Capital Current Requirement Requirement
-------------- ------------------- ----------- Applicable
(Dollars In Thousands) Amount Percent Amount Percent Amount Percent Asset Total
- ---------------------- ------ ------- ------ ------- ------ ------- -----------
Tangible capital $ 22,168 8.9% $ 3,722 1.5% $ 18,446 7.4% $ 248,100
Core capital 22,168 8.9 9,924 4.0 12,244 4.9 248,100
Tier 1 risk-based capital 22,168 17.4 5,107 4.0 17,061 13.4 127,669
Total risk-based capital 22,839 17.9 10,214 8.0 12,625 9.9 127,669
In October 1998, the Board of Directors of the Corporation authorized the
purchase of up to 5% of the Corporation's outstanding common shares over a
twelve-month period. The shares will be purchased in the over-the-counter
market. The number of shares to be purchased and the price to be paid will
depend upon the availability of shares, the prevailing market prices and any
other considerations which may, in the opinion of the Corporation's Board of
Directors or management, affect the advisability of purchasing shares. Through
December 31, 1998, the Corporation purchased 31,841 shares related to the 5%
stock purchase.
- -------------------------------------------------------------------------------
(Continued)
18.
19
MILTON FEDERAL FINANCIAL CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
- -------------------------------------------------------------------------------
YEAR 2000 ISSUE
The Bank's lending and deposit activities are almost entirely dependent on
computer systems which process and record transactions, although the Bank can
effectively operate with manual systems for brief periods when its electronic
systems malfunction or cannot be accessed. The Bank uses the services of a
nationally-recognized data processing service bureau specializing in data
processing for financial institutions. In addition to its basic operating
activities, the Bank's facilities and infrastructure, such as security systems
and communications equipment, are dependent, to varying degrees, on computer
systems.
The Bank is aware of the potential Year 2000-related problems that may affect
the computers that control or operate Bank's operating systems, facilities and
infrastructure. In 1997, the Bank began a process of identifying any Year
2000-related problems that may be experienced by its computer-operated or
computer-dependent systems. The Bank has contacted the companies that supply or
service the Bank's computer-operated or computer-dependent systems to obtain
confirmation that each system that is material to the operations of the Bank is
either currently Year 2000 compliant or is expected to be Year 2000 compliant.
With respect to systems that cannot presently be confirmed as Year 2000
compliant, the Bank will continue to work with the appropriate supplier or
servicer to ensure all such systems will be rendered compliant in a timely
manner, with minimal expense or disruption of the Bank's operations. All of the
identified computer systems affected by the Year 2000 issue are currently in the
renovation, validation or implementation phase of the process of becoming Year
2000 compliant. The Bank has identified various companies whose services are
deemed critical to the mission of the Bank and received assurances that such
companies will be Year 2000 compliant.
As a contingency plan, the Bank has determined that, if such service providers
were to have their systems fail, the Bank would implement manual systems until
such systems could be re-established. The Bank does not anticipate that such
short-term manual systems would have a material adverse effect on the Bank's
operations. The expense of any change in suppliers or servicers is not expected
to be material to the Bank. The Bank has examined its computer hardware and
software and determined it will cost approximately $55,000 to make such systems
Year 2000 compliant. Of that amount, the Bank has already spent $20,000. At this
time, however, any additional expense that may be incurred by the Bank in
connection with Year 2000 issues cannot be determined.
In addition to the possible expense related to its own systems, the Bank could
incur losses if loan payments are delayed due to Year 2000 problems affecting
any of the Bank's significant borrowers or impairing the payroll systems of
large employers in the Bank's primary market area. Because the Bank's loan
portfolio is highly diversified with regard to individual borrowers and types of
businesses and the Bank's primary market area is not significantly dependent on
one employer or industry, the Bank does not expect any significant or prolonged
Year 2000-related difficulties will affect net earnings or cash flow.
- -------------------------------------------------------------------------------
19.
20
MILTON FEDERAL FINANCIAL CORPORATION
QUANTITATIVE AND QUALITATIVE DISCLOSURE
ABOUT MARKET RISK
- -------------------------------------------------------------------------------
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
ASSET AND LIABILITY MANAGEMENT AND MARKET RISK
The principal market risk affecting the Corporation is interest-rate risk. The
Bank does not maintain a trading account for any class of financial instrument
and the Corporation is not affected by foreign currency exchange rate risk or
commodity price risk. Because the Corporation does not hold any equity
securities other than stock in the FHLB of Cincinnati and an insignificant
investment in its data processing servicer, Intrieve, Inc., the Corporation is
not subject to equity price risk.
The Corporation, like other financial institutions, is subject to interest rate
risk to the extent that its interest-earning assets reprice differently than its
interest-bearing liabilities. One of the Corporation's principal financial
objectives is to achieve long-term profitability while reducing its exposure to
fluctuations in interest rates. The Corporation has sought to reduce exposure of
its earnings to changes in market interest rates by managing asset and liability
maturities and interest rates primarily through structuring the securities
portfolio so that substantially all of the mortgage-backed securities reprice on
at least an annual basis. The variable-rate feature of these securities helps
mitigate the Corporation's exposure to upward interest rate movement due to its
primarily fixed-rate loan portfolio. Some mortgage-backed securities have been
purchased with funds provided by similar maturity, long-term borrowings from the
FHLB to capitalize on the yield differential. The majority of the Corporation's
securities are classified as available for sale to allow management the
flexibility to move these funds into higher-yielding loans as demand warrants.
The mortgage-backed and related securities also provide the Corporation with a
constant cash flow stream from principal repayments.
As the Corporation's loan portfolio is primarily made up of fixed-rate loans,
the Corporation is particularly sensitive to periods of rising interest rates.
In such periods, the Corporation's net interest spread is negatively affected
because the interest rate paid on deposits increases faster than the rates
earned on loans. Management is continuing to originate variable-rate mortgage
loans as the primary means to manage this risk. Variable-rate loans increased
from $26.2 million at September 30, 1998 to $31.4 million at December 31, 1998.
In addition, the Corporation also originates consumer and commercial loans,
however, such loans make up only a small percentage of the overall loan
portfolio. Consumer loans typically have a significantly shorter
weighted-average maturity and offer less exposure to interest rate risks while
commercial loans generally carry variable interest rates. From time to time, the
Corporation has also sold pools of fixed-rate mortgage loans and invested the
funds in shorter-term fixed-rate loans, adjustable-rate loans and
adjustable-rate mortgage-backed securities. Such investments have less exposure
to interest rate risk. The Corporation may sell additional pools of fixed-rate
loans in the future should the need exist.
Lastly, as part of its effort to monitor and manage interest rate risk, the Bank
uses the "net portfolio value" ("NPV") methodology adopted by the OTS as part of
its capital regulations. Presented in the Corporation's 1998 annual report, as
of September 30, 1998, is an analysis of the Bank's interest rate risk as
measured by changes in NPV for instantaneous and sustained parallel shifts of
100 basis points in market interest rates. Also presented are policy limits set
by the Board of Directors of the Bank as to the maximum change in NPV that the
Board of Directors deems advisable in case of various changes in interest rates.
Such limits are established with consideration of the dollar impact of various
rate changes and the Bank's strong capital position. Management believes that no
events have occurred since September 30, 1998 that would significantly change
the Bank's NPV at December 31, 1998 under each of the assumed shifts of 100
basis points in market interest rates.
- -------------------------------------------------------------------------------
(Continued)
20.
21
MILTON FEDERAL FINANCIAL CORPORATION
QUANTITATIVE AND QUALITATIVE DISCLOSURE
ABOUT MARKET RISK
- -------------------------------------------------------------------------------
The Bank's NPV is more sensitive to rising rates than declining rates. Such
difference in sensitivity occurs principally because, as rates rise, borrowers
do not prepay fixed-rate loans as quickly as they do when interest rates are
declining. Thus, in a rising interest rate environment, because the Bank has
predominantly fixed-rate loans in its loan portfolio, the amount of interest the
Bank would receive on its loans would increase relatively slowly as loans are
slowly prepaid and new loans at higher rates are made. Moreover, the interest
the Bank would pay on its deposits would increase rapidly because the Bank's
deposits generally have shorter periods to repricing.
As with any method of measuring interest rate risk, certain shortcomings are
inherent in the NPV approach. For example, although certain assets and
liabilities may have similar maturities or periods of repricing, they may react
in different degrees to changes in market interest rates. Also, the interest
rates on certain types of assets and liabilities may fluctuate in advance of
changes in market interest rates, while interest rates on other types may lag
behind changes in market rates. Further, in the event of a change in interest
rates, expected rates of prepayment on loans and mortgage-backed securities and
early withdrawal levels from certificates of deposit, would likely deviate
significantly from those assumed in making risk calculations.
- -------------------------------------------------------------------------------
21.
22
MILTON FEDERAL FINANCIAL CORPORATION
PART II - OTHER INFORMATION
- ------------------------------------------------------------------------------
Item 1. LEGAL PROCEEDINGS
None
Item 2. CHANGES IN SECURITIES
None
Item 3. DEFAULTS UPON SENIOR SECURITIES
None
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
Item 5. OTHER INFORMATION
None
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibit No. 27: Financial Data Schedule.
(b) No current reports on Form 8-K were filed by the Registrant
during the quarter ended December 31, 1998.
- -------------------------------------------------------------------------------
22.
23
MILTON FEDERAL FINANCIAL CORPORATION
SIGNATURES
- -------------------------------------------------------------------------------
Pursuant to the requirement 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.
Date: February 8, 1999 /S/ Glenn E. Aidt
------------------------------------- ------------------
Glenn E. Aidt
President
Date: February 8, 1999 /S/ Thomas P. Eyer
------------------------------------- -------------------
Thomas P. Eyer
Treasurer (Chief Financial Officer)
- -------------------------------------------------------------------------------
23.
24
INDEX TO EXHIBITS
EXHIBIT
NUMBER DESCRIPTION PAGE NUMBER
- ------ ----------- -----------
27 Financial Data Schedule 25
- -------------------------------------------------------------------------------
24.