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, 2002 -------------- Commission file number 0-7818 -------------- INDEPENDENT BANK CORPORATION -------------------------------------------------- (Exact name of registrant as specified in its charter) Michigan 38-2032782 ---------------------- -------------------- (State or jurisdiction of (I.R.S. Employer Identification Incorporation or Organization) Number) 230 West Main Street, P.O. Box 491, Ionia, Michigan 48846 --------------------------------------------------------- (Address of principal executive offices) (616) 527-9450 ------------------ (Registrant's telephone number, including area code) NONE -------- Former name, address and fiscal year, if changed since last report. Indicate by check mark whether the registrant (1) has filed all documents and reports required to be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES X NO______ Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Common stock, par value $1 11,701,305 - ---------------------------------- ------------------------------- Class Outstanding at May 10, 2002
INDEPENDENT BANK CORPORATION AND SUBSIDIARIES INDEX <TABLE> <CAPTION> Page Number(s) <S> <C> <C> PART I - Financial Information Item 1. Consolidated Statements of Financial Condition March 31, 2002 and December 31, 2001 2 Consolidated Statements of Operations Three-month periods ended March 31, 2002 and 2001 3 Consolidated Statements of Cash Flows Three-month periods ended March 31, 2002 and 2001 4 Consolidated Statements of Shareholders' Equity Three-month periods ended March 31, 2002 and 2001 5 Notes to Interim Consolidated Financial Statements 6-13 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 14-22 Item 3. Quantitative and Qualitative Disclosures about Market Risk 22 PART II - Other Information Item 6. Exhibits & Reports on Form 8-K 23 </TABLE>
Part I Item 1. INDEPENDENT BANK CORPORATION AND SUBSIDIARIES Consolidated Statements of Financial Condition <TABLE> <CAPTION> March 31, December 31, 2002 2001 ---------------- ---------------- (unaudited) ---------------------------------- (in thousands) <S> <C> <C> Assets Cash and due from banks $ 47,663 $ 50,525 Securities available for sale 349,156 290,303 Federal Home Loan Bank stock, at cost 21,521 21,266 Loans held for sale 27,822 77,220 Loans Commercial 491,194 482,046 Real estate mortgage 629,486 661,462 Installment 236,749 241,176 ------------- -------------- Total Loans 1,357,429 1,384,684 Allowance for loan losses (16,804) (16,167) ------------- -------------- Net Loans 1,340,625 1,368,517 Property and equipment, net 36,325 35,944 Accrued income and other assets 49,808 44,682 ------------- -------------- Total Assets $ 1,872,920 $ 1,888,457 ============= ============== Liabilities and Shareholders' Equity Deposits Non-interest bearing $ 149,974 $ 160,598 Savings and NOW 635,268 601,949 Time 680,210 624,820 ------------- -------------- Total Deposits 1,465,452 1,387,367 Federal funds purchased 19,300 35,100 Other borrowings 206,207 288,010 Guaranteed preferred beneficial interests in Company's subordinated debentures 17,250 17,250 Accrued expenses and other liabilities 31,535 28,827 ------------- -------------- Total Liabilities 1,739,744 1,756,554 ------------- -------------- Shareholders' Equity Preferred stock, no par value--200,000 shares authorized; none outstanding Common stock, $1.00 par value--30,000,000 shares authorized; issued and outstanding: 11,733,088 shares at March 31, 2002 and 11,864,876 shares at December 31, 2001 11,733 11,865 Capital surplus 77,536 82,512 Retained earnings 44,350 39,355 Accumulated other comprehensive loss (443) (1,829) ------------- -------------- Total Shareholders' Equity 133,176 131,903 ------------- -------------- Total Liabilities and Shareholders' Equity $ 1,872,920 $ 1,888,457 ============= ============== </TABLE> See notes to interim consolidated financial statements 2
INDEPENDENT BANK CORPORATION AND SUBSIDIARIES Consolidated Statements of Operations <TABLE> <CAPTION> Three Months Ended March 31, 2002 2001 ----------- ----------- (unaudited) ------------------------- (in thousands, except per share amounts) <S> <C> <C> Interest Income Interest and fees on loans $ 27,054 $ 30,164 Securities available for sale Taxable 2,711 2,272 Tax-exempt 1,643 1,403 Other investments 313 389 ----------- ----------- Total Interest Income 31,721 34,228 ----------- ----------- Interest Expense Deposits 8,626 12,931 Other borrowings 3,628 4,185 ----------- ----------- Total Interest Expense 12,254 17,116 ----------- ----------- Net Interest Income 19,467 17,112 Provision for loan losses 927 633 ----------- ----------- Net Interest Income After Provision for Loan Losses 18,540 16,479 ----------- ----------- Non-interest Income Service charges on deposit accounts 2,712 1,818 Net gains (losses) on asset sales Real estate mortgage loans 1,806 995 Securities (34) 35 Other income 2,641 2,158 ----------- ----------- Total Non-interest Income 7,125 5,006 ----------- ----------- Non-interest Expense Salaries and employee benefits 8,788 7,652 Occupancy, net 1,306 1,290 Furniture and fixtures 1,106 1,058 Other expenses 4,542 4,099 ----------- ----------- Total Non-interest Expense 15,742 14,099 ----------- ----------- Income Before Federal Income Tax 9,923 7,386 Federal income tax expense 2,814 2,093 ----------- ----------- Net Income Before Cumulative Effect of Change in Accounting Principle 7,109 5,293 Cumulative effect of change in accounting principle, net of tax (35) ----------- ----------- Net Income $ 7,109 $ 5,258 =========== =========== Net Income Per Share Before Cumulative Effect of Change in Accounting Principle Basic $ .60 $ .44 Diluted .59 .43 Net Income Per Share Basic $ .60 $ .43 Diluted .59 .43 Dividends Per Common Share Declared $ .18 $ .15 Paid .18 .14 </TABLE> See notes to interim consolidated financial statements 3
INDEPENDENT BANK CORPORATION AND SUBSIDIARIES Consolidated Statements of Cash Flows <TABLE> <CAPTION> Three months ended March 31, 2002 2001 ---------------------------- (unaudited) ---------------------------- (in thousands) <S> <C> <C> Net Income $ 7,109 $ 5,258 --------------- ----------- Adjustments to Reconcile Net Income to Net Cash from (used in) Operating Activities Proceeds from sales of loans held for sale 149,118 67,509 Disbursements for loans held for sale (97,914) (86,777) Provision for loan losses 927 633 Depreciation and amortization of premiums and accretion of discounts on securities and loans 1,298 1,700 Net gains on sales of real estate mortgage loans (1,806) (995) Net gains (losses) on sales of securities 34 (35) Decrease in deferred loan fees 418 11 Increase in accrued income and other assets (5,372) (1,404) Increase in accrued expenses and other liabilities 4,179 6,586 --------------- ----------- 50,882 (12,772) --------------- ----------- Net Cash from (used in) Operating Activities 57,991 (7,514) --------------- ----------- Cash Flow from (used in) Investing Activities Proceeds from the sale of securities available for sale 2,498 2,163 Proceeds from the maturity of securities available for sale 1,849 5,930 Principal payments received on securities available for sale 8,508 7,411 Purchases of securities available for sale (71,725) (8,503) Principal payments on portfolio loans purchased 9,204 1,441 Portfolio loans made to customers, net of principal payments 17,343 1,489 Capital expenditures (1,253) (1,058) --------------- ----------- Net Cash from (used in) Investing Activities (33,576) 8,873 --------------- ----------- Cash Flow used in Financing Activities Net increase (decrease) in total deposits 78,085 (36,108) Net increase (decrease) in short-term borrowings 23,431 (25,022) Proceeds from Federal Home Loan Bank advances 107,240 232,500 Payments of Federal Home Loan Bank advances (228,274) (176,350) Retirement of long-term debt (500) Dividends paid (2,135) (1,740) Proceeds from issuance of common stock 1,348 286 Repurchase of common stock (6,972) (3,703) --------------- ----------- Net Cash used in Financing Activities (27,277) (10,637) --------------- ----------- Net Decrease in Cash and Cash Equivalents (2,862) (9,278) Cash and Cash Equivalents at Beginning of Period 50,525 58,149 --------------- ----------- Cash and Cash Equivalents at End of Period $ 47,663 $ 48,871 =============== =========== Cash paid during the period for Interest $ 12,546 $ 17,316 Income taxes 1,000 686 Transfer of loans to other real estate 560 671 Transfer of securities held to maturity to available for sale 20,098 </TABLE> See notes to interim consolidated financial statements 4
INDEPENDENT BANK CORPORATION AND SUBSIDIARIES Consolidated Statements of Shareholders' Equity <TABLE> <CAPTION> Three months ended March 31, 2002 2001 ----------- ---------- (unaudited) ------------------------- (in thousands) <S> <C> <C> Balance at beginning of period $ 131,903 $ 128,336 Net income 7,109 5,258 Cash dividends declared (2,114) (1,839) Issuance of common stock 1,864 871 Repurchase of common stock (6,972) (3,703) Net change in accumulated other comprehensive income (loss), net of related tax effect (note 4) 1,386 (546) ------------ ------------ Balance at end of period $ 133,176 $ 128,377 ============ ============ </TABLE> See notes to interim consolidated financial statements. 5
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (unaudited) 1. In the opinion of management of the Registrant, the accompanying unaudited consolidated financial statements contain all the adjustments (consisting only of normal recurring accruals) necessary to present fairly the consolidated financial condition of the Registrant as of March 31, 2002 and December 31, 2001, and the results of operations for the three-month periods ended March 31, 2002 and 2001. Certain reclassifications have been made in the prior year financial statements to conform to the current year presentation. The Registrant's critical accounting policies include the adequacy of the allowance for loan losses, the valuation of derivative financial instruments, the valuation of originated mortgage servicing rights, and the valuation of our deferred tax assets. Refer to our 2001 Annual Report on Form 10-K for a disclosure of our accounting policies. 2. Management's assessment of the allowance for loan losses is based on an evaluation of the loan portfolio, recent loss experience, current economic conditions and other pertinent factors. Loans on non-accrual status, past due more than 90 days, or restructured amounted to $12.5 million at March 31, 2002, and $9.0 million at December 31, 2001. (See Management's Discussion and Analysis of Financial Condition and Results of Operations). 3. The provision for income taxes represents federal income tax expense calculated using annualized rates on taxable income generated during the respective periods. 4. Comprehensive income for the three-month periods ended March 31 follows: <TABLE> <CAPTION> Three months ended March 31, 2002 2001 -------- --------- (in thousands) <S> <C> <C> Net income $ 7,109 $ 5,258 Net change in unrealized gain on securities available for sale, net of related tax effect 295 2,216 Cumulative effect of change in accounting principle, net of related tax effect (731) Net change in unrealized gain (loss) on derivative instruments, net of related tax effect 1,091 (2,031) --------- ---------- Comprehensive income $ 8,495 $ 4,712 ========= ========== </TABLE> 5. The Registrant's reportable segments are based upon legal entities. The Registrant has four reportable segments: Independent Bank ("IB"), Independent Bank West Michigan ("IBWM"), Independent Bank South Michigan ("IBSM") and Independent Bank East Michigan ("IBEM"), collectively the "Banks." The Registrant evaluates performance based principally on net income of the respective reportable segments. The Registrant consolidated two segments, IB and Independent Bank MSB, during the third quarter of 2001. Prior period financial information has been restated to reflect the consolidation. 6
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (continued) (unaudited) A summary of selected financial information for the Registrant's reportable segments for the three-month periods ended March 31, follows: <TABLE> <CAPTION> Three months ended March 31, IB IBWM IBSM IBEM OTHER(1) TOTAL ------------------------------------------------------------------------------- (in thousands) <S> <C> <C> <C> <C> <C> <C> 2002 Total assets $ 873,729 $ 370,351 $ 291,905 $ 328,683 $ 8,252 $ 1,872,920 Interest income 14,948 6,606 4,904 5,256 7 31,721 Net interest income 8,949 4,679 2,990 3,306 (457) 19,467 Provision for loan losses 187 110 280 350 927 Income (loss) before income tax 5,062 3,062 1,461 1,123 (785) 9,923 Net income (loss) 3,670 2,106 1,066 946 (679) 7,109 2001 Total assets $ 904,547 $ 353,835 $ 218,301 $ 307,312 $ 4,358 $ 1,788,353 Interest income 16,727 7,378 4,290 5,827 6 34,228 Net interest income 7,840 4,211 2,348 3,292 (579) 17,112 Provision for loan losses 243 150 90 150 633 Income (loss) before income tax 3,522 2,408 1,117 1,350 (1,011) 7,386 Net income (loss) 2,519 1,564 828 1,087 (740) 5,258 </TABLE> (1) Includes items relating to the Registrant and certain insignificant operations. 7
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (continued) (unaudited) 6. A reconciliation of basic and diluted earnings per share for the three-month periods ended March 31 follows: <TABLE> <CAPTION> Three months ended March 31, 2002 2001 ------------ ----------- (in thousands, except per share amounts) <S> <C> <C> Net income before cumulative effect of change in accounting principle $ 7,109 $ 5,293 ============ =========== Net income $ 7,109 $ 5,258 ============ =========== Average shares outstanding (Basic) (1) 11,799 12,126 Effect of dilutive securities -- stock options 222 144 ------------ ----------- Average shares outstanding (Diluted) 12,021 12,270 ============ =========== Net income per share before cumulative effect of change in accounting principle Basic $ .60 $ .44 Diluted .59 .43 Net income per share Basic $ .60 $ .43 Diluted .59 .43 </TABLE> (1) Shares outstanding have been adjusted for a 5% stock dividend in 2001. 7. The Registrant adopted Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities," ("SFAS #133") on January 1, 2001. SFAS #133, which was subsequently amended by SFAS #138, requires companies to record derivatives on the balance sheet as assets and liabilities measured at their fair value. The accounting for increases and decreases in the value of derivatives depends upon the use of derivatives and whether the derivatives qualify for hedge accounting. The Registrant's derivative financial instruments according to the type of hedge in which they are designated under SFAS #133 follows: <TABLE> <CAPTION> March 31, 2002 Average Notional Maturity Fair Amount (years) Value -------------------------------------- (dollars in thousands) <S> <C> <C> <C> Fair Value Hedge - pay variable interest-rate swap agreements $39,000 6.9 $(1,283) ======================================== Cash Flow Hedge Pay fixed interest-rate swap agreements $173,000 1.8 $(4,465) Interest-rate collar agreements 10,000 1.6 (412) ---------------------------------------- Total $183,000 1.8 $(4,877) ======================================== No hedge designation Pay fixed interest-rate swap agreements $26,000 0.6 $(574) Pay variable interest-rate swap agreements 15,000 0.4 (13) Interest-rate cap agreements 47,000 0.2 0 Interest-rate floor agreements 10,000 0.6 0 Rate-lock real estate mortgage loan commitments 26,000 0.1 (344) Mandatory commitments to sell real estate mortgage loans 50,000 0.1 448 ---------------------------------------- Total $174,000 0.3 $(483) ======================================== </TABLE> 8
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (continued) (unaudited) The Banks have established management objectives and strategies which include interest-rate risk parameters for maximum fluctuations in net interest income and market value of portfolio equity. Management monitors the Banks' interest rate risk position via simulation modeling reports (See "Asset/liability management"). The goal of the Banks' asset/liability management efforts is to maintain profitable financial leverage within established risk parameters. The Banks use variable rate and short-term fixed-rate (less than 12 months) debt obligations to fund a portion of their balance sheets, which expose the Banks to variability in interest rates. To meet their objectives, the Banks may periodically enter into derivative financial instruments to mitigate exposure to fluctuations in cash flows resulting from changes in interest rates ("Cash Flow Hedges"). Cash Flow Hedges currently include certain pay-fixed interest-rate swaps and interest-rate collars. Pay-fixed interest-rate swaps convert the variable-rate cash flows on debt obligations to fixed-rates. Under interest-rate collars, the Banks will receive cash if interest rates rise above a predetermined level while the Banks will make cash payments if interest rates fall below a predetermined level. The Banks effectively have variable rate debt with an established maximum and minimum rate. Upon adoption of SFAS #133, the Banks recorded the fair value of Cash Flow Hedges in accrued expenses and other liabilities. On an ongoing basis, the Banks adjust their balance sheets to reflect the then current fair value of Cash Flow Hedges. The related gains or losses are reported in other comprehensive income and are subsequently reclassified into earnings, as a yield adjustment in the same period in which the related interest on the hedged items (primarily variable-rate debt obligations) affect earnings. It is anticipated that approximately $3.1 million, net of tax, of unrealized losses on Cash Flow Hedges at March 31, 2002 will be reclassified to earnings over the next twelve months. To the extent that the Cash Flow Hedges are not effective, the ineffective portion of the Cash Flow Hedges are immediately recognized as interest expense. The maximum term of any Cash Flow Hedge at March 31, 2002 is 5.6 years. The Banks also use long-term, fixed-rate brokered CDs to fund a portion of their balance sheets. These instruments expose the Banks to variability in fair value due to changes in interest rates. To meet their objectives, the Banks may enter into derivative financial instruments to mitigate exposure to fluctuations in fair values of such fixed-rate debt instruments ("Fair Value Hedges"). Fair Value Hedges currently include pay-variable interest rate swaps. Also, upon adoption of SFAS #133, the Banks recorded Fair Value Hedges at fair value in accrued expenses and other liabilities. The hedged items (primarily fixed-rate debt obligations) were also recorded at fair value through the statement of operations, which offsets the adjustment to Fair Value Hedges. On an ongoing basis, the Banks will adjust their respective balance sheets to reflect the then current fair value of both the Fair Value Hedges and the respective hedged items. To the extent that the change in value of the Fair Value Hedges do not offset the change in the value of the hedged items, the ineffective portion is immediately recognized as interest expense. 9
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (continued) (unaudited) Certain derivative financial instruments, discussed in the following paragraphs, are not designated as hedges. The fair value of these derivative financial instruments have been recorded on the Banks' balance sheets and are adjusted on an ongoing basis to reflect their then current fair value. The changes in the fair value of derivative financial instruments not designated as hedges, are recognized currently as interest expense. Interest rate caps are used to help manage fluctuations in cash flows resulting from interest rate risk on certain short-term debt obligations. Under these agreements, the Banks will receive cash if interest rates rise above a predetermined level. Pay-fixed interest-rate swaps are also used to manage fluctuations in cash flows resulting from changes in interest rates on certain short-term debt obligations. In the ordinary course of business, the Banks enter into rate-lock real estate mortgage loan commitments with customers ("Rate Lock Commitments"). These commitments expose the Banks to interest rate risk. The Banks also enter into mandatory commitments to sell real estate mortgage loans ("Mandatory Commitments") to hedge price fluctuations of mortgage loans held for sale and Rate Lock Commitments. Mandatory Commitments help protect the Banks' loan sale profit margin from fluctuations in interest rates. The changes in the fair value of Rate Lock Commitments and Mandatory Commitments are recognized currently as part of gains on the sale of real estate mortgage loans. Interest expense and net gains on the sale of real estate mortgage loans, as well as net income may be more volatile as a result of derivative instruments, which are not designated as hedges. The impact of SFAS #133 on net income and other comprehensive income for the three-months ended March 31, 2002 and 2001 is as follows: <TABLE> <CAPTION> Income (Expense) Other Comprehensive Net Income Income Total ------------------ ------------------- ------------------- (in thousands) <S> <C> <C> <C> Change in fair value during the three- month period ended March 31, 2002 Interest rate swap agreements not designated as hedges $ 261 $ 261 Rate Lock Commitments 1,281 1,281 Mandatory Commitments (2,105) (2,105) Fair value hedges 1 1 Ineffectiveness of cash flow hedges 24 24 Cash flow hedges 11 $ 63 74 Reclassification adjustment 1,615 1,615 ------------------ ------------------- ------------------- Total (527) 1,678 1,151 Federal income tax (184) 587 403 ------------------ ------------------- ------------------- Net $ (343) $ 1,091 $ 748 ================== =================== =================== </TABLE> 10
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (continued) (unaudited) <TABLE> <CAPTION> Income (Expense) Other Comprehensive Net Income Income Total ------------------ ------------------- ------------------- (in thousands) <S> <C> <C> <C> Change in fair value during the three- month period ended March 31, 2001 Option contracts not designated as hedges $ (27) $ (27) Interest rate swap agreements not designated as hedges (329) (329) Rate Lock Commitments (112) (112) Mandatory Commitments 60 60 Fair value hedges (4) (4) Ineffectiveness of cash flow hedges 4 4 Cash flow hedges 33 $ (3,034) (3,001) Reclassification adjustment (43) (43) ------------------ -------------------- ------------------- Total (375) (3,077) (3,452) Federal income tax (131) (1,046) (1,177) ------------------ ------------------- ------------------- Net $ (244) $ (2,031) $ (2,275) ================== =================== =================== Cumulative effect of change in accounting principle at January 1, 2001 Fair value adjustments of Option contracts not designated as hedges $ (215) $ (215) Interest rate swap agreements not designated as hedges 310 310 Fair value hedges (39) (39) Cash flow hedges (110) $ (1,107) (1,217) ------------------ ------------------- ------------------- Total (54) (1,107) (1,161) Federal income tax (19) (376) (395) ------------------ ------------------- ------------------- Net $ (35) $ (731) $ (766) ================== =================== =================== </TABLE> 11
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (continued) (unaudited) 8. On July 20, 2001, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 141, "Business Combinations," ("SFAS #141") and Statement of Financial Accounting Standards No. 142, "Goodwill and Other Intangible Assets," ("SFAS #142"). These two Statements have a profound effect on how organizations account for business combinations and for the purchased goodwill and intangible assets that arise from those combinations or are acquired otherwise. SFAS #141 was effective for all business combinations initiated after June 30, 2001, and for all purchase method business combinations completed after June 30, 2001, and requires that such combinations be accounted for using the purchase method of accounting. SFAS #142 was effective for fiscal years beginning after December 15, 2001 and requires that the amortization of goodwill cease and that goodwill instead only be reviewed for impairment. Prior to 2002, the Registrant had been amortizing approximately $0.7 million, net of tax, of goodwill annually. This amortization ceased upon adoption of SFAS #142 on January 1, 2002. Based on Management's review of goodwill recorded on the Registrant's Statement of Condition, no impairment existed as of January 1, 2002. Intangible assets, net of amortization, were comprised of the following at March 31, 2002 and December 31, 2001: <TABLE> <CAPTION> March 31, 2002 December 31, 2001 -------------------------------- -------------------------------- Gross Gross Carrying Accumulated Carrying Accumulated Amount Amortization Amount Amortization --------------- --------------- --------------- --------------- (dollars in thousands) <S> <C> <C> <C> <C> Amortized intangible assets - Core deposit intangibles $ 12,686 $ 6,198 $ 12,666 $ 5,952 =============== =============== =============== =============== Unamortized intangible assets - Goodwill $ 7,299 $ 6,859 =============== =============== </TABLE> Amortization of intangibles, primarily amortization of core deposit intangibles, has been estimated through 2007 in the following table, and does not take into consideration any potential future acquisitions or branch purchases. <TABLE> <CAPTION> (dollars in thousands) Year ending December 31: <S> <C> 2002 $ 982 2003 982 2004 982 2005 982 2006 982 2007 and thereafter 1,578 ----------- Total $ 6,488 =========== </TABLE> 12
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (continued) (unaudited) Changes in the carrying amount of goodwill by reporting segment for the three months ended March 31, 2002 were as follows: <TABLE> <CAPTION> ------------------------------------------------------------------------------ IB IBWM IBSM IBEM OTHER(1) TOTAL ------------------------------------------------------------------------------ (dollars in thousands) <S> <C> <C> <C> <C> <C> <C> Balance, January 1, 2002 $ 6,314 $ 32 $ $ 180 $ 333 $ 6,859 Goodwill acquired during period 440 440 ----------- ----------- ----------- ----------- ----------- ------------ Balance, March 31, 2002 $ 6,754 $ 32 $ $ 180 $ 333 $ 7,299 =========== =========== =========== =========== =========== ============ </TABLE> (1) Includes items relating to the Registrant and certain insignificant operations. The following is a reconciliation of reported net income to net income adjusted to reflect the adoption of SFAS No. 142: <TABLE> <CAPTION> Three months ended March 31, -------------------------------- 2002 2001 --------------- --------------- (dollars in thousands) <S> <C> <C> Net income: Reported net income $ 7,109 $ 5,258 Add back -- goodwill amortization 168 --------------- --------------- Adjusted net income $ 7,109 $ 5,426 =============== =============== Basic earnings per share: Reported net income $ .60 .43 Add back -- goodwill amortization .02 --------------- --------------- Adjusted net income $ .60 $ .45 =============== =============== Diluted earnings per share: Reported net income $ .59 $ .43 Add back -- goodwill amortization .01 --------------- --------------- Adjusted net income $ .59 $ .44 =============== =============== </TABLE> On October 3, 2001, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets," ("SFAS #144") which addresses financial accounting and reporting for the impairment or disposal of long-lived assets. SFAS #144 was effective for fiscal years beginning after December 15, 2001. The adoption of SFAS #144 did not have a material impact on the Registrant's financial condition or results of operations. 9. The results of operations for the three-month period ended March 31, 2002, are not necessarily indicative of the results to be expected for the full year. 13
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Management's discussion and analysis of financial condition and results of operations may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include expressions such as "expects," "intends," "believes," and "should" which are necessarily statements of belief as to the expected outcomes of future events. Actual results could differ materially from those contained in, or implied by such forward-looking statements. Independent Bank Corporation undertakes no obligation to release revisions to these forward-looking statements or reflect events or circumstances after the date of this report. The following section presents additional information that may be necessary to assess our financial condition and results of operations. This section should be read in conjunction with our consolidated financial statements contained elsewhere in this report as well as our 2001 Annual Report on Form 10-K. FINANCIAL CONDITION SUMMARY Our total assets declined slightly during the first three months of 2002. Loans, excluding loans held for sale ("Portfolio Loans"), totaled $1.357 billion at March 31, 2002, down $27.3 million from December 31, 2001 primarily due to a decline in real estate mortgage loans. (See "Portfolio loans and asset quality.") Loans held for sale declined by $49.4 million, as the volume of loan sales in the first quarter of 2002 exceeded new originations of such loans. The declines in these asset categories were partially offset by an increase in securities available for sale. Deposits totaled $1.465 billion at March 31, 2002, compared to $1.387 billion at December 31, 2001. The $78.1 million increase in total deposits during the period principally reflects an increase in savings and NOW accounts and an increase in brokered certificates of deposit ("Brokered CDs"). Other borrowings totaled $206.2 million at March 31, 2002, a decline of $81.8 million from December 31, 2001, attributable to the payoff of short-term and maturing borrowings as a result of funds generated from the growth in deposits. SECURITIES We maintain diversified securities portfolios, which include obligations of the U.S. Treasury and government-sponsored agencies as well as securities issued by states and political subdivisions, corporate securities, mortgage-backed securities and other asset-backed securities. We continually measure and evaluate our asset/liability management needs and attempt to maintain a portfolio structure that provides sufficient liquidity and cash flow. (See "Asset/liability management.") SECURITIES <TABLE> <CAPTION> Unrealized ------------------------------ Amortized Fair Cost Gains Losses Value -------------- -------------- ------------- ------------- (in thousands) <S> <C> <C> <C> <C> Securities available for sale March 31, 2002 $344,970 $ 6,133 $1,947 $349,156 December 31, 2001 286,571 5,789 2,057 290,303 </TABLE> 14
The purchase or sale of securities is dependent upon our assessment of investment and funding opportunities as well as our asset/liability management needs. Securities available for sale increased to $349.2 million at March 31, 2002 from $290.3 million at December 31, 2001. This increase was the result of purchases of securities during the first quarter of 2002 primarily to offset declines in other interest earning assets such as Portfolio Loans and loans held for sale. Sales of securities available for sale were as follows: SALES OF SECURITIES AVAILABLE FOR SALE <TABLE> <CAPTION> Three months ended March 31, 2002 2001 -------------- -------------- (in thousands) <S> <C> <C> Proceeds $2,498 $2,163 ============== ============= Gross gains $ 45 $35 Gross losses (79) -------------- ------------- Net Gains $(34) $35 ============== ============= </TABLE> PORTFOLIO LOANS AND ASSET QUALITY We believe that our decentralized structure provides important advantages in serving the credit needs of our principal lending markets. In addition to the communities served by our branch networks, principal lending markets include nearby communities and metropolitan areas. Subject to established underwriting criteria, we also participate in commercial lending transactions with certain non-affiliated banks and may also purchase real estate mortgage loans from third-party originators. Although each of our Banks' management and Boards of Directors retain authority and responsibility for credit decisions, we have adopted uniform underwriting standards. Further, our corporate loan committee as well as the centralization of commercial loan credit services and loan review functions promotes compliance with such established underwriting standards. The centralization of retail loan services also provides for consistent service quality and facilitates compliance with consumer protection laws and regulations. We generally retain loans that may be profitably funded within established risk parameters. (See "Liquidity and capital resources.") As a result, we often retain adjustable-rate and balloon real estate mortgage loans, while 15- and 30-year, fixed-rate obligations are sold to mitigate exposure to changes in interest rates. (See "Asset/liability management.") Although total real estate mortgage loan origination volume increased substantially in the first quarter of 2002 compared to the first quarter of 2001, our balance of real estate mortgage loans declined. This decline reflects an increase in prepayments in the portfolio (caused primarily by refinancing activity resulting from lower interest rates) as well as new origination volume being primarily 15- and 30-year fixed rate obligations, which are generally sold as explained above. If borrowers continue to prefer longer-term fixed rate mortgage loans, we believe it may be difficult to grow our real estate mortgage loan portfolio in the foreseeable future. The $9.1 million increase in commercial loans during the three months ended March 31, 2002, principally reflects our emphasis on lending opportunities within this category of loans, particularly in the Lansing and Grand Rapids markets. Loans secured by real estate comprise the majority of new commercial loans. Weaker economic conditions and intense competition slowed our growth of commercial loans. Future growth of overall Portfolio Loans is dependent upon a number of competitive and economic factors. Declines in Portfolio Loans or competition leading to lower relative pricing on new Portfolio Loans could adversely impact our future operating results. Management views loan growth consistent with prevailing quality standards as its major near term challenge. 15
NON-PERFORMING ASSETS <TABLE> <CAPTION> March 31, December 31, 2002 2001 ----------------- ----------------- (dollars in thousands) <S> <C> <C> Non-accrual loans $8,715 $5,990 Loans 90 days or more past due and still accruing interest 3,462 2,771 Restructured loans 284 285 ----------------- ----------------- Total non-performing loans 12,461 9,046 Other real estate 1,818 1,610 ----------------- ----------------- Total non-performing assets $14,279 $10,656 ================= ================= As a percent of Portfolio Loans Non-performing loans 0.92% 0.65% Non-performing assets 1.05 0.77 Allowance for loan losses 1.24 1.17 Allowance for loan losses as a percent of non-performing loans 135 179 </TABLE> Non-performing loans increased by $3.4 million during the first quarter of 2002 and totaled $12.5 million, or 0.92% of total Portfolio Loans at March 31, 2002. The increase in total non-performing loans by loan category during the first quarter of 2002 was: commercial: $2.3 million, real estate mortgage: $0.8 million and installment: $0.3 million. The increase in commercial non-performing loans is primarily due to the addition of a $2.1 million loan on a hotel property in Bad Axe, Michigan. As of March 31, 2002 a specific reserve of approximately $0.6 million had been established on this loan. We are vigorously pursuing collection of this credit, but it is likely that the loan will remain non-performing throughout 2002 as we proceed with the collection process. The increase in non-performing real estate mortgage loans and installment loans is believed to primarily reflect economic conditions in some of our markets that have led to higher unemployment as well as other factors affecting consumer credit such as increased debt levels. Impaired loans totaled approximately $7.1 million and $4.1 million at March 31, 2002 and 2001, respectively. At those same dates, certain impaired loans with balances of approximately $4.4 million and $0.5 million, respectively had specific allocations of the allowance for loan losses, which totaled approximately $1.5 million and $0.2 million, respectively. Our average investment in impaired loans was approximately $6.1 million for the three-month period ended March 31, 2002. Cash receipts on impaired loans on non-accrual status are generally applied to the principal balance. Interest recognized on impaired loans during the first quarter of 2002 was approximately $0.1 million. 16
ALLOWANCE FOR LOAN LOSSES <TABLE> <CAPTION> Three months ended March 31, 2002 2001 ------------- ----------- (in thousands) <S> <C> <C> Balance at beginning of period $16,167 $13,982 Additions (deduction) Provision charged to operating expense 927 633 Recoveries credited to allowance 203 156 Loans charged against the allowance (493) (449) ------------- ------------ Balance at end of period $16,804 $14,322 ============= ============ Net loans charged against the allowance to average Portfolio Loans (annualized) 0.08% 0.08% </TABLE> In determining the allowance and the related provision for loan losses, we consider four principal elements: (i) specific allocations based upon probable losses identified during our review of the loan portfolio, (ii) allocations established for other adversely rated loans, (iii) allocations based principally on historical loan loss experience and (iv) additional allowances based on subjective factors, including local and general economic business factors and trends, portfolio concentrations and changes in the size and/or the general terms of the loan portfolios. ALLOCATION OF THE ALLOWANCE FOR LOAN LOSSES <TABLE> <CAPTION> March 31, December 31, 2002 2001 ---------------------------------------- (in thousands) <S> <C> <C> Specific allocations $ 1,500 $ 500 Other adversely rated loans 6,487 7,284 Historical loss allocations 2,513 2,837 Additional allocations based on subjective factors 6,304 5,546 ---------------------------------------- $16,804 $16,167 ======================================== </TABLE> DEPOSITS AND BORROWINGS Our competitive position within many of the markets served by our branch networks limits the ability to materially increase deposits without adversely impacting the weighted-average cost of core deposits. Accordingly, we compete principally on the basis of convenience and personal service, while employing pricing tactics that are intended to enhance the value of core deposits. We have implemented funding strategies that incorporate other borrowings and Brokered CDs to finance a portion of the Portfolio Loans. The use of such alternate sources of funds supplements our core deposits and is also an integral part of our asset/liability management efforts. 17
<TABLE> <CAPTION> March 31, 2002 December 31, 2001 ------------------------------- ----------------------------- Average Average Amount Maturity Rate Amount Maturity Rate ------------------------------- ----------------------------- (dollars in thousands) <S> <C> <C> <C> <C> <C> <C> Brokered CDs(1) $218,556 2.1 years 3.44% $163,315 1.7 years 3.83% Fixed rate FHLB advances(1) 81,049 6.7 years 5.01 129,084 4.1 years 4.08 Variable rate FHLB advances(1) 20,000 0.4 years 1.95 93,000 0.4 years 1.83 Securities sold under agreements to Repurchase(1) 88,882 0.1 years 1.83 54,963 0.2 years 1.94 Federal funds purchased 19,300 1 day 1.91 35,100 1 day 1.86 -------- ---------- ---- ---------- --------- --------- Total $427,787 2.4 years 3.27% $475,462 1.8 years 3.15% ======== ========== ==== ========== ========= ========= </TABLE> (1) Certain of these items have had their average maturity and rate altered through the use of derivative instruments, including pay-fixed and pay-variable interest rate swaps. Derivative financial instruments are employed to manage our exposure to changes in interest rates. (See "Asset/liability management".) At March 31, 2002, we employed interest-rate caps, floors and collars with an aggregate notional amount of $67.0 million. We also employed interest-rate swaps with an aggregate notional amount of $253.0 million. (See note #7 to interim consolidated financial statements.) LIQUIDITY AND CAPITAL RESOURCES Effective management of capital resources is critical to our mission to create value for our shareholders. The cost of capital is an important factor in creating shareholder value and, accordingly, our capital structure includes unsecured debt and Preferred Securities. We believe that diversified portfolios of quality commercial and consumer loans will provide superior risk-adjusted returns. Accordingly, we have implemented balance sheet management strategies that combine efforts to originate Portfolio Loans with disciplined funding strategies. Acquisitions have also been an integral component of our capital management strategies. To supplement our balance sheet and capital management activities, we regularly repurchase our common stock. We purchased 239,000 shares at an average price of $29.22 in the first quarter of 2002 compared to 182,000 shares at an average price of $20.35 per share during the first quarter of 2001. As of March 31, 2002 we had 558,000 shares remaining to be purchased under share repurchase plans previously authorized by our Board of Directors. CAPITALIZATION <TABLE> <CAPTION> March 31, December 31, 2002 2001 ----------------- -------------- (in thousands) <S> <C> <C> Unsecured debt $ 10,500 $ 10,500 -------- -------- Preferred Securities 17,250 17,250 -------- -------- Shareholders' Equity Preferred stock, no par value Common Stock, par value $1.00 per share 11,733 11,865 Capital surplus 77,536 82,512 Retained earnings 44,350 39,355 Accumulated other comprehensive income (loss) (443) (1,829) -------- -------- Total shareholders' equity 133,176 131,903 -------- -------- Total capitalization $160,926 $159,653 ======== ======== </TABLE> Total shareholders' equity at March 31, 2002 was up slightly from December 31, 2001, as the retention of earnings, the issuance of common stock pursuant to certain compensation plans and a decline in accumulated other comprehensive loss was partially offset by purchases of our common stock. Shareholders' equity totaled $133.2 million, equal to 7.11% of total assets at 18
March 31, 2002. At December 31, 2001, shareholders' equity totaled $131.9 million, which was equal to 6.98% of assets. CAPITAL RATIOS <TABLE> <CAPTION> March 31, 2002 December 31, 2001 --------------------- ---------------------- <S> <C> <C> Equity capital 7.11% 6.98% Tier 1 leverage (tangible equity capital) 7.44 7.28 Tier 1 risk-based capital 9.99 9.82 Total risk-based capital 11.22 10.98 </TABLE> (1) Based on year to date average balances for the respective periods ASSET/LIABILITY MANAGEMENT Interest-rate risk is created by differences in the pricing characteristics of our assets and liabilities. Options embedded in certain financial instruments, including caps on adjustable-rate loans as well as borrowers' rights to prepay fixed-rate loans also create interest-rate risk. Our asset/liability management efforts are intended to identify sources of interest-rate risk and to evaluate opportunities to structure our balance sheet in a manner that is consistent with our mission to maintain profitable financial leverage. The marginal cost of funds is a principal consideration in the implementation of our balance sheet management strategies, but such evaluations further consider interest-rate and liquidity risk as well as other pertinent factors. We employ simulation analyses to monitor our interest-rate risk profiles and evaluate potential changes in our net interest income and market value of portfolio equity that result from changes in interest rates. RESULTS OF OPERATIONS SUMMARY Net income totaled $7.1 million during the three months ended March 31, 2002, compared to $5.3 million during the comparable period in 2001. The increase in net income reflects increases in net interest income and non-interest income, which were partially offset by increases in non-interest expense, the provision for loan losses and federal income taxes. The amortization of intangible assets declined by $0.2 million during the three month period ended March 31, 2002, compared to the comparable quarter in 2001, as the result of adoption of SFAS #142. (See note #8 to interim consolidated financial statements.) KEY PERFORMANCE RATIOS <TABLE> <CAPTION> Three months ended March 31, 2002 2001 -------------------------- <S> <C> <C> Net income to Average assets 1.55% 1.21% Average equity 21.34 16.45 Earnings per common share Basic $0.60 $0.43 Diluted 0.59 0.43 </TABLE> NET INTEREST INCOME Tax equivalent net interest income totaled $20.5 million during the three months ended March 31, 2002. The increase from $18.0 million during the comparable period of 2001 reflects a 35 basis point increase in our tax equivalent net interest income as a percentage of average earning assets ("Net Yield") as well as a $94.2 million increase in average earning assets. As a result of SFAS #133, tax equivalent net interest income increased by $0.3 million in the first 19
quarter of 2002, compared to a decrease in tax equivalent net interest income of approximately $0.3 million in the first quarter of 2001. (See note #7 to interim consolidated financial statements.) Average earning assets totaled $1.754 billion during the first quarter of 2002 up from $1.659 billion during the comparable period in 2001. This growth primarily reflects an increase in securities available for sale. The average balance of Portfolio Loans grew only slightly in the first three months of 2002 compared to the first three months of 2001, and declined from the fourth quarter of 2001. (See "Portfolio Loans and asset quality.") Net Yield was equal to 4.70% during the three months ended March 31, 2002, compared to 4.35% during the corresponding period of 2001. The increase in Net Yield was primarily due to a decline in interest expense as a percent of average earning assets resulting from a lower interest rate environment. The Federal Reserve Bank cut the target federal funds rate eleven times in 2001, leading to generally lower rates on our deposits and borrowings. Partially offsetting the decline in interest expense was a decline in tax equivalent interest income as a percent of average earning assets ("Asset Yield"). The decline in Asset Yield was also generally due to a lower interest rate environment that resulted in the prepayment of higher yielding loans as well as the origination of new loans and the purchase of securities available for sale at lower relative interest rates. NET INTEREST INCOME AND SELECTED RATIOS <TABLE> <CAPTION> Three months ended March 31, 2002 2001 --------------- ------------ <S> <C> <C> Average earning assets (in thousands) $1,753,560 $1,659,363 Tax equivalent net interest income 20,498 18,016 As a percent of average earning assets Tax equivalent interest income 7.53% 8.53% Interest expense 2.83 4.18 Tax equivalent net interest income 4.70 4.35 Average earning assets as a percent of average assets 94.44% 94.05% Free-funds ratio 11.48% 10.52% </TABLE> PROVISION FOR LOAN LOSSES The provision for loan losses was $0.9 million during the three months ended March 31, 2002, compared to $0.6 million during the three-month period in 2001. The increase in the provision reflects our assessment of the allowance for loan losses taking into consideration factors including an increase in non-performing and impaired loans. (See "Portfolio loans and asset quality.") NON-INTEREST INCOME Non-interest income, including net gains on the sale of real estate mortgage loans, grew to $7.1 million during the three months ended March 31, 2002. The $2.1 million increase from $5.0 million during the comparable period of 2001 principally reflects a $0.9 million increase in service charges on deposit accounts and a $0.8 million increase in net gains on the sale of real estate mortgage loans. 20
NON-INTEREST INCOME <TABLE> <CAPTION> Three months ended March 31, 2002 2001 ------------ ------------ (in thousands) <S> <C> <C> Service charges on deposit accounts $2,712 $1,818 Net gains (losses) on asset sales Real estate mortgage loans 1,806 995 Securities (34) 35 Manufactured home loan origination fees and commissions 444 353 Title insurance fees 623 286 Real estate mortgage loan servicing fees 295 391 Mutual fund and annuity commissions 229 172 Other 1,050 956 ------------ ------------ Total non-interest income $7,125 $5,006 ============ ============ </TABLE> The increase in net gains on the sale of real estate mortgage loans reflects an increase in the volume of loans sold partially offset by a decline in net gains as a percentage of real estate mortgage loans sold (the "Loan Sales Margin"). The volume of loans sold during the first quarter of 2002 may not be indicative of real estate mortgage loan sales in future quarters as a result of the decline in loans held for sale. The Loan Sales Margin declined in the first quarter of 2002 compared to 2001, primarily because 2001 activity included a much higher percentage of sales of loans with servicing rights released. During 2001 we were selling a higher percentage of loans with servicing rights released because of the price being paid for such servicing by outside third parties. The price being paid for mortgage loan servicing declined in the latter part of 2001 as mortgage loan refinancing activity increased. As a result, in late 2001 we made a decision to retain the servicing on the majority of the real estate mortgage loans that we were selling. Depending on relative prices being paid for mortgage loan servicing in the future, we may again begin to sell a higher percentage of real estate mortgage loans on a service-released basis. <TABLE> <CAPTION> Three months ended March 31, 2002 2001 ------------- ------------- (in thousands) <S> <C> <C> Real estate mortgage loans originated $140,720 $115,971 Real estate mortgage loans sold 147,312 66,514 Real estate mortgage loans sold with servicing rights released 12,337 57,919 Net gains on the sale of real estate mortgage loans 1,806 995 Net gains as a percent of real estate mortgage loans sold 1.23% 1.50% </TABLE> The volume of loans sold is dependent upon our ability to originate real estate mortgage loans as well as the demand for fixed-rate obligations and other loans that we cannot profitably fund within established interest-rate risk parameters. (See "Portfolio loans and asset quality.") Net gains on real estate mortgage loans are also dependent upon economic and competitive factors as well as our ability to effectively manage exposure to changes in interest rates. Service charges on deposit accounts increased by 49.2% to $2.7 million during the three months ended March 31, 2002, from $1.8 million during the comparable period in 2001. The increase in service charges principally relate to growth in checking accounts as a result of deposit account promotions, which include direct mail solicitations, and increases in certain fees on both retail and commercial checking accounts that we implemented in the second quarter of 2001. 21
Title insurance fees increased substantially during the first quarter of 2002 compared to the first quarter of 2001 as a result of growth in mortgage lending volume primarily associated with increased refinancing activity. Real estate mortgage loan servicing fees declined in the first quarter of 2002 compared to the year earlier period due primarily to a lower average balance of real estate mortgage loans serviced for others (the "Mortgage Servicing Portfolio"). The average balance of the Mortgage Servicing Portfolio was lower in 2002 compared to 2001 because we sold a majority of our real estate mortgage loans on a service-released basis during the first ten months of 2001 (as described above) and due to increased prepayments in the Mortgage Servicing Portfolio resulting from higher refinancing activity. We capitalized approximately $1.1 million and $0.1 million of related servicing rights during the three-month periods ended March 31, 2002 and 2001, respectively. Amortization of capitalized servicing rights for both periods was $0.3 million. The book value of capitalized mortgage servicing rights was $5.1 million at March 31, 2002. The fair value of capitalized servicing rights, which relate to approximately $671 million of loans sold and serviced, approximated $8 million at that same date. NON-INTEREST EXPENSE Non-interest expense totaled $15.7 million during the three months ended March 31, 2002 an increase of $1.6 million or 11.7% from the corresponding period in 2001. The majority of the increase in total non-interest expense resulted from increases in salaries and benefits (including performance based compensation) due primarily to merit pay increases that were effective January 1, 2002, staffing level increases associated with the expansion and growth of our organization and a rise in health care costs. Intangible asset amortization declined to $0.2 million during the three months ended March 31, 2002, from $0.4 million from the same period in 2001 as the result of the adoption of SFAS #142. (See note #8 to interim consolidated financial statements.) NON-INTEREST EXPENSE <TABLE> <CAPTION> Three months ended March 31, 2002 2001 ------------ ----------- (in thousands) <S> <C> <C> Salaries $ 5,818 $ 5,486 Performance-based compensation and benefits 1,190 809 Other benefits 1,780 1,357 ------------ ----------- Salaries and benefits 8,788 7,652 Occupancy, net 1,306 1,290 Furniture and fixtures 1,106 1,058 Data processing 713 554 Communications 646 588 Advertising 612 501 Loan and collection 505 465 Supplies 333 369 Amortization of intangible assets 246 427 Other 1,487 1,195 ------------ ----------- Total non-interest expense $15,742 $14,099 ============ =========== </TABLE> Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. No material changes in the market risk faced by the Registrant have occurred since December 31, 2001. 22
Part II Item 6. Exhibits & Reports on Form 8-K (a) Exhibit Number & Description 11. Computation of Earnings Per Share (b) Reports on Form 8-K A report on Form 8-K was filed on April 16, 2002, under item 9. The report included supplemental data to the Registrant's press release dated April 16, 2002, regarding its earnings during the quarter ended March 31, 2002. 23
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. Date May 10, 2002 By /s/Robert N. Shuster -------------------- --------------------------------------------------- Robert N. Shuster, Principal Financial Officer Date May 10, 2002 By /s/James J. Twarozynski -------------------- --------------------------------------------------- James J. Twarozynski, Principal Accounting Officer 24
Exhibit Index Exhibit No. Exhibit Description 11 Computation of Earnings Per Share