-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, JQbfiROZ2IKrvsDPajY3aDm3GmTnDPZjvySoy3HjKdKh0jMf8UTjvrO9VNA2TDsD i0xB+Tm2yIXrOzs/axQG0Q== 0000904280-99-000220.txt : 19990719 0000904280-99-000220.hdr.sgml : 19990719 ACCESSION NUMBER: 0000904280-99-000220 CONFORMED SUBMISSION TYPE: 10-Q/A PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970930 FILED AS OF DATE: 19990716 FILER: COMPANY DATA: COMPANY CONFORMED NAME: HCB BANCSHARES INC CENTRAL INDEX KEY: 0001029740 STANDARD INDUSTRIAL CLASSIFICATION: SAVINGS INSTITUTION, FEDERALLY CHARTERED [6035] IRS NUMBER: 621670792 STATE OF INCORPORATION: OK FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-Q/A SEC ACT: SEC FILE NUMBER: 000-22423 FILM NUMBER: 99665762 BUSINESS ADDRESS: STREET 1: HEARTLAND COMMUNITY BANK STREET 2: 237 JACKSON ST CITY: CAMDEN STATE: AR ZIP: 71701 BUSINESS PHONE: 8708366841 MAIL ADDRESS: STREET 1: HEARTLAND COMMUNITY BANK STREET 2: 237 JACKSON STREET CITY: CAMDEN STATE: AR ZIP: 71701 10-Q/A 1 FORM 10-Q/A (Amendment No. 1) SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ----------------------------------- QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 1997 Commission File Number: No. 0-22423 HCB Bancshares, Inc. (Exact name of registrant as specified in its charter) Oklahoma 62-1670792 - ------------------------------- ------------------ (State of other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 237 Jackson Street, Camden, Arkansas 71701 - --------------------------------------- -------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (870)836-6841 - -------------- Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 of 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: 2,645,000 shares. PART I. FINANCIAL INFORMATION --------------------- Item 1. Financial Statements - ---------------------------- HCB BANCSHARES, INC. AND SUBSIDIARIES Condensed Consolidated Statements of Financial Condition September 30, 1997 (Unaudited) and June 30, 1997
September 30, June 30, ASSETS 1997 1997 ------------ ----------- Cash on hand $ 1,287,715 1,057,943 Interest-bearing deposits 14,675,405 18,273,882 Investment securities available for sale 18,339,853 17,260,383 Mortgage-backed securities Available for sale 15,512,247 18,361,987 Held to maturity (estimated market value of 37,471,436 36,493,086 $39,028,601 and $36,194,353, respectively) Stock in Federal Home Loan Bank 1,250,700 1,246,500 Loans receivable (net of allowance of $1,497,696 102,252,265 98,642,635 and $1,492,473, respectively) Accrued interest receivable 1,287,911 1,305,952 Foreclosed assets 36,192 36,179 Premises and equipment 3,694,877 4,621,444 Goodwill 1,384,039 1,415,223 Prepaid expenses and other assets 2,645,607 1,783,302 ------------ ------------- $199,838,247 200,498,516 ============ =============
See accompanying notes to condensed consolidated financial statements. HCB BANCSHARES, INC. AND SUBSIDIARIES Condensed Consolidated Statements of Financial Condition September 30, 1997 (Unaudited) and June 30, 1997
September 30, June 30, 1997 1997 LIABILITIES AND STOCKHOLDERS' EQUITY ------------ ----------- Liabilities Deposits $148,454,721 151,192,591 Advances from borrowers for Taxes, insurance and other 276,444 209,140 Accrued interest payable 358,923 410,477 Borrowings from Federal Home Loan Bank 10,000,000 10,000,000 Accrued expenses and other liabilities 2,547,744 755,456 ------------ ------------ Total liabilities 161,637,832 162,567,664 ------------ ------------ Stockholders' equity Common stock, $.01 par value; authorized 10,000,000 share; issued and outstanding 2,645,000 shares 26,450 26,450 Additional paid-in capital 25,727,576 25,775,523 Note receivable from ESOP (1,937,420) (1,990,320) Retained earnings 14,241,299 14,152,552 Unrealized gain(loss) on securities available for sale, net 142,510 (33,353) ------------ ------------ Total stockholders' equity 38,200,415 37,930,852 ------------ ------------ $199,838,247 200,498,516 ============ ============
See accompanying notes to condensed consolidated financial statements. HCB BANCSHARES, INC. AND SUBSIDIARIES Condensed Consolidated Statements of Operations For the Three Months Ended September 30, 1997 and 1996 (Unaudited)
1997 1996 ------------ ------------ Interest income Loans $2,113,234 1,836,067 Investment securities 335,963 114,854 Mortgage-backed securities 888,394 942,439 Other interest income 287,458 196,583 ---------- ---------- Total interest income 3,625,049 3,089,943 ---------- ---------- Interest expense Deposits 1,868,470 1,895,464 Borrowings from Federal Home Loan Bank 156,362 155,935 Other interest 7,000 1,973 ---------- ---------- Total interest expense 2,031,832 2,053,372 ---------- ---------- Net interest income 1,593,217 1,036,571 Provision for loan losses 19,549 127,397 ---------- ---------- Net interest income after provision for loan losses 1,573,668 909,174 ---------- ---------- Noninterest income Service fees on deposits 55,352 29,544 Other service fees and commissions 10,159 1,800 Gains on sales of assets available for sale or held for sale 15,107 -- Gain(loss) on foreclosed 1,351 (2,356) Insurance fees and commissions, net 4,702 4,944 Loan fees earned 50,652 25,358 Other income, net 16,549 13,371 ---------- ---------- Total noninterest income 153,872 72,661 ---------- ----------
See accompanying notes to consolidated financial statements. HCB BANCSHARES, INC. AND SUBSIDIARIES Condensed Consolidated Statements of Operations For the Three Months Ended September 30, 1997 and 1996 (Unaudited)
1997 1996 ------------ ------------ Noninterest expense Compensation, payroll taxes and fringe benefits 565,578 407,346 Pension and 401(K) expense 140,999 44,810 Rent and other occupancy expense 155,228 93,916 Communication, postage, printing and office supplies 38,390 83,414 Deposit and other insurance premiums 39,810 982,796 Advertising 36,492 38,908 Expenses of officers, directors and employees, including directors' fees 56,115 22,367 Data processing expense 81,485 60,027 Amortization of goodwill 31,184 40,018 Professional fees 56,731 139,032 Foreclosed property expense 936 2,356 Other expenses 24,045 8,798 ---------- ---------- Total noninterest expense 1,226,993 1,923,788 ---------- ---------- Income (loss) before income tax expense (benefit) 500,547 (941,953) Income tax expense(benefit) 172,418 (360,674) ---------- ---------- Net income(loss) $ 328,129 (581,279) ---------- ---------- Earnings per common share $ 0.13 N/A ---------- ----------
See accompanying notes to consolidated financial statements. HCB BANCSHARES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996 (UNAUDITED)
Three Months Ended September 30, 1997 1996 OPERATING ACTIVITIES: ---------- ---------- Net income $328,129 $(581,279) Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 75,329 43,102 Amortization (accretion) of: Deferred loan origination fees 15,633 Goodwill 31,184 40,018 Premiums and discounts on loans, net (1,635) Premiums and discounts on investment securities, net 17,268 39,419 Provision for loan loss 19,549 127,397 Net gain on sale of investment securities available for sale (15,107) Stock compensation expense 40,453 Gain on disposal of other assets, net (315) (3,118) Change in accrued interest receivable 18,041 (116,050) Change in accrued interest payable (51,554) 22,878 Change in other assets (862,305) (302,502) Change in other liabilities 1,792,288 724,815 Net cash provided (used) by operating activities $ 1,406,958 $ (5,320) INVESTING ACTIVITIES: Purchases of investment securities - available for sale $(11,038,886) $(12,195,000) Purchases of Federal Home Loan Bank stock (4,200) Purchases of premises and equipment (933,929) (1,185,949) Proceeds from sales of loans 758,286 Loan originations, net of repayments (4,367,916) (5,332,238) Principal payments on investment securities 13,549,197 3,431,700 Proceeds from sales of foreclosed assets 12,351 3,215 Net cash used by investing activities $(2,025,097) $(15,278,272)
(Continued) HCB BANCSHARES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996 (UNAUDITED)
Three Months Ended September 30, 1997 1996 FINANCING ACTIVITIES: --------------- ------------- Net decrease in deposits $ (2,737,870) $ 1,253,493 Net decrease in advance payments by borrowers for taxes and insurance 67,304 42,144 Repayment of note payable (80,000) Increase in other borrowings 400,000 Net cash provided by financing activities $(2,750,566) $1,695,637 NET DECREASE IN CASH AND CASH EQUIVALENTS $(3,368,705) $(13,587,955) CASH AND CASH EQUIVALENTS: Beginning of period $19,331,825 $17,291,882 End of period $15,963,120 $ 3,703,927
See accompanying notes to condensed consolidated financial statements. HCB BANCSHARES, INC AND SUBSIDIARIES Notes to Condensed Consolidated (Unaudited) Financial Statements Note 1 - HCB Bancshares, Inc. HCB Bancshares, Inc. (the "Company") was incorporated under the laws of the state of Oklahoma for the purpose of becoming the bank holding company of Heartland Community Bank and its subsidiaries (the "Bank"), in connection with the Bank's conversion from a federally chartered mutual savings bank to a federally chartered stock savings bank, pursuant to its Plan of Conversion. On April 30, 1997, the Bank completed the conversion and became a wholly owned subsidiary of the Company. The Company has no other operations and conducts no business of its own other than owning the Bank, investing its portion of the net proceeds received in the Conversion, and lending funds to the Employee Stock Ownership Plan which was formed in connection with the Conversion. Note 2 - Basis of Consolidation The accompanying unaudited consolidated financial statements were prepared in accordance with instructions for Form 10-Q. To the extent that information and footnotes required by generally accepted accounting principles for complete financial statements are contained in the audited financial statements included in the Bank's audit report for the year ended June 30, 1997, such information and footnotes have not been duplicated herein. All material intercompany balances and transactions have been eliminated in the consolidation. The unaudited statements reflect all adjustments, consisting of normal recurring accruals, which are in the opinion of management, necessary for fair presentation of the results of operations, changes in equity and cash flows for the three months periods ended September 31, 1997 and 1996. The statements of operations for the three-month periods ended September 30, 1997, are not necessarily indicative of the results which may be expected for the entire year. Note 3 - Stockholders' Equity and Stock Conversion The Bank converted from a federally chartered mutual savings bank to a federally chartered stock savings bank pursuant to its Plan of Conversion, which was approved by the Bank's members on April 25, 1997. The conversion was effective on April 30, 1997 and resulted in the issuance of 2,645,000 shares of common stock (par value $.01) at $10.00 per share for the gross sale price of $26,450,000. Costs related to the conversion (primarily to underwriters' commissions, printing and professional fees) approximated $750,000 and were deducted from the net proceeds to arrive at net proceeds of $25,700,000. The Company also established an Employee Stock Ownership Plan and Trust which purchased 211,600 shares of common stock of the Company at the issuance price of $10 per share with funds borrowed from the Company. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations GENERAL The Bank's principal business consists of attracting deposits from the general public and investing those funds in (i) loans secured by first mortgages on existing owner-occupied single-family residences in the Bank's primary market area and, (ii) to a lesser but growing extent, commercial and multi-family real estate loans and consumer and commercial business loans. The Bank also maintains a substantial investment portfolio of mortgage-related securities and U.S. government and agency securities. The Bank's net income is dependent primarily on its net interest income, which is the difference between interest income earned on its loans, mortgage-backed securities and securities portfolio and interest paid on customers' deposits. The Bank's net income is also affected by the level of noninterest income, such as service charges on customers' deposit accounts, net gains or losses on the sale of securities and other fees. In addition, net income is affected by the level of noninterest expense, which primarily consists of employee compensation expenses, deposit insurance premiums and other expenses. The financial condition and results of operations of the Bank and the thrift and banking industries as a whole are significantly affected by prevailing economic conditions, competition and the monetary and fiscal policies of governmental agencies. Lending activities are influenced by demand for and supply of credit, competition among lenders and the level of interest rates in the Bank's market area. The Bank's deposit flows and costs of funds are influenced by prevailing market rates of interest, primarily on competing investments, as well as account maturities and the levels of personal income and savings in the Bank's market area. COMPARISON OF FINANCIAL CONDITION AT SEPTEMBER 30, 1997 AND JUNE 30, 1997 The Bank had total assets of $199.8 million and $200.5 million at September 30, 1997 and June 30, 1997, respectively. During the three month period ended September 30, 1997 the Bank experienced an increase in its loan portfolio from $98.6 million at June 30, 1997, to $102.3 million. This increase is due to the positive results realized from the implementation of the Bank's long term business plan for growth in its targeted markets of commercial, consumer and multi-family lending along with natural growth. During this same period, investment and mortgage-backed securities and other short-term interest-earning assets fluctuated between $90.4 million at June 30, 1997 and $86.0 million at September 30, 1997. Investment securities and other short-term interest-earning deposits tend to vary in conjunction with variations in savings activity. Additionally, the Bank expended approximately $965,000 to purchase computer and network equipment, furnishings and make improvements to existing facilities during the three month period ended September 30, 1997, to consummate management's planned growth projections. Deposits decreased from $151.2 million at June 30, 1997 to $148.5 million at September 30, 1997. This decrease in deposits of $2.7 million resulted from increased competition in the Bank's main market area of Camden, Arkansas. The Bank's level of deposits has been sufficient to fund its loan demand and provide for adequate liquidity. During the year ended June 30, 1997, the Bank utilized a credit line with the FHLB of Dallas to obtain advances. The outstanding balances of FHLB advances at June 30, 1997 and September 30, 1997 were $10.0 million, respectively. These advances were utilized to reduce interest rate risk by more closely matching rates and maturities of existing interest-earning assets and interest-bearing liabilities. Equity amounted to $38.2 million at September 30, 1997, and to $37.9 million at June 30, 1997, respectively. The changes in equity were due solely to the Bank's net income earned for such periods and a $176,000 increased in the market value of investment securities and mortgage-backed securities available for sale. At June 30, 1997, the Bank's regulatory capital substantially exceeded all applicable regulatory capital requirements. Regulatory capital levels at September 30, 1997 were not substantially different from those at June 30, 1997. COMPARISON OF RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996 Net Income (Loss). Net income for the three months ended September 30, 1997 was $328,129 compared to a loss of $581,279 for the three months ended September 30, 1996. The changes were attributable to a non-recurring one time, special deposit insurance assessment of $889,000 and professional fees of $139,000, incurred in the quarter ended September 30, 1996, an increase in net interest income of $556,646 and an increase in noninterest income of $81,211 for the three months ended September 30, 1997, as compared to the three months ended September 30, 1996. Income tax expense for the three months ended September 30, 1997 compared to 1996 was a tax expense of $172,418 compared to a tax benefit of $360,674. Net Interest Income. Net interest income for the three months ended September 30, 1997 was $1.6 million, an increase of 53.7% when compared to net interest income of $1.0 million for the three months ended September 30, 1996. This increase was attributable to an increase in total interest income of $535,106 and a net decrease in total interest expense of $21,540. The net interest margin for the three months ended September 30, 1997 was 3.20% compared to 2.45% for the three months ended September 30, 1996. This increase in net interest income and net interest margin is due to an increase in the average volume of interest-earning assets, combined with a decrease in the average rate paid on interest-bearing liabilities. One cause for the increase in average interest-earning assets when comparing the three months ended September 30, 1997 to the three months ended September 30, 1996 was the formation of the holding company, the conversion of the Bank and sale of stock. The average volume of interest-earning assets increased from $166.0 million for the three months ended September 30, 1996 to $192.7 million for the three months ended September 30, 1997 which had the effect of increasing total interest income by $500,000. The average rate paid on interest-bearing liabilities decreased during the three months ended September 30, 1997 to 5.06% from 5.29% for the three months ended September 30, 1996. The decrease in the average rate on interest-bearing liabilities had the effect of decreasing total interest expense between the three months ended September 30, 1996 and the three months ended September 30, 1997 by approximately $90,000. The average yield on interest-earning assets remained relatively unchanged between the two periods, which is indicative of the fact that the Bank's interest-earning assets are not highly sensitive to the increases in market interest rates which occurred between the two periods. For the three months ended September 30, 1997, the average yield on interest-earning assets was 7.45%, compared to 7.51% for the three months ended September 30, 1996, which had the effect of increasing total interest income by $10,000. In addition, the average volume of interest-bearing liabilities increased by 2.8% reflecting an increase in deposits since the opening of two new branches in the current year. Provision for Loan Losses. During the year ended June 30, 1997, the Bank's management initiated an extensive internal loan review of all loan files both of the parent and subsidiary. The review resulted in the adoption of more conservative loan loss allowance standards than had been used in the past. This new policy on allowance for loan losses was deemed prudent in establishing credit underwriting standards for future expected lending areas, such as commercial real estate, business and consumer loans, which inherently have more risk. Management made a provision for loan losses in the three months ended September 30, 1997 of $19,549, compared to a provision for loan loss of $127,397 in the three months ended September 30, 1996. The allowance for loan losses, after this provision, of $1.5 million, represented 1.44 % of outstanding loans at September 30, 1997. Nonperforming loans as of September 30, 1997 and 1996, as a percent of total loans, remained below 1.0%. Management evaluates the carrying value of the loan portfolio periodically and the allowance is adjusted accordingly. While management uses the best information available to make evaluations, future adjustments to the allowance may be necessary if conditions differ substantially from the assumptions used in making the evaluations. In particular, management recognizes that recent and planned changes in the amounts and types of lending by the Bank will result in further growth of the Bank's loan loss allowance and may justify further changes in the Bank's loan loss allowance policy in the future. In addition, various regulatory agencies, as an integral part of their examination process, periodically review the Bank's allowance for loan losses. Such agencies may require the Bank to recognize changes to the allowance based upon their judgments and the information available to them at the time of their examination. Noninterest Income. Noninterest income is comprised primarily of insurance commissions from sales of credit life insurance, banking service charges, loan origination and commitment fees earned and gains on sales of investment and mortgage-backed securities. Noninterest income for the three months ended September 30, 1997, was $153,872, compared to $72,661 for the three months ended September 30, 1996. This represents an increase of $81,211. This increase is due primarily to increases in loan fees earned as a result of increased lending activities and new fee earning banking services offered by the Bank to its deposit customers. In light of the increasingly competitive markets for deposits and loans, management has recently shifted the Bank's deposit taking and loan origination activities to reflect, among other things, the importance of offering valued customer services that generate additional fee income, and it is expected that management will continue this trend for the foreseeable future. Noninterest Expense. The major components of noninterest expense are compensation and benefits paid to the Bank's employees and directors, occupancy expense for ownership and maintenance of the Bank's building and furniture and equipment, communications, costs and office supplies and postage. Total noninterest expense for the three months ended September 30, 1997 was $1.2 million, compared to $1.9 million for the three months ended September 30, 1996. The decrease was largely due to a one-time, special assessment by the FDIC to replenish the Savings Association Insurance Fund ("SAIF") depleted by prior years' losses in the thrift industry. During the years in which thrifts as an industry suffered many publicized and non-publicized "bailouts" by the SAIF, and its predecessor, the Federal Savings and Loan Insurance Corporation, the deposit insurance fund for the thrift industry was severely depleted. After several years of debate Congress with the assistance of the FDIC, which administers the SAIF, consummated a plan of action to replenish the SAIF to a level of coverage required by statute (the designated reserve ratio of 1.25% of insured deposits) for the remaining covered deposits. The plan of remedy included a one time assessment to each thrift institution based on capital levels and deposits, among other factors. This one-time special assessment was recognized by the Bank in the three months ended September 30, 1996, in the amount of $889,000 and was expensed in the same period. This assessment was paid November 27, 1996. The effective deposit insurance rate prior to the assessment was .23% compared to a rate of .065% after the assessment. The second largest component of noninterest expense for the three months ended September 30, 1997 was compensation expense, including director and officer retirement plans and other benefits, which totaled $706,577, compared to $452,000 for the three months ended September 30, 1996. This increase was attributable to increases in salary expense associated with the addition of staff for future growth, the acquisition of the subsidiary savings bank and increased directors fees due to additional time incurred by the Board in evaluating and working on various strategic plans for the Bank. During the three months ended September 30, 1996, amounts were incurred to facilitate the name change of the Bank to HEARTLAND Community Bank. In addition, fees were incurred for personnel placement services to attract key personnel for hire, a computer consul- tant was engaged to evaluate operating systems and further growth needs, and marketing consultants were approached for market strategies and implementation. These expense categories decreased approximately $50,000 during the three months ended September 30, 1997 compared with the same period in 1996. Overall, noninterest expense increased for the three month period ended September 30, 1997, compared to the three month-period ended September 30, 1996, by approximately $192,000, exclusive of the FDIC one time, special assessment. Included in noninterest expenses for the three months ended September 30, 1997 was a charge for the amortization of goodwill of $31,184, which resulted from the acquisition of the subsidiary bank during the year ended June 30, 1996. The amortization will be $162,200 per year over a ten year period, subsequent to June 30, 1997, and is not expected to have a material effect on the future earnings of the Bank. In light of the substantial costs associated with the recent, pending and planned expansions of the Bank's activities, facilities and staff, including the additional costs associated with adding staff, building or renovating branches, introducing new deposit and loan products and services and implementing the planned stock benefit plans after the Conversion, it is expected that the Bank's noninterest expense levels may remain somewhat high relative to the historical levels for the Bank, as well as the prevailing levels for institutions that are not undertaking such expansions, for an indefinite period of time, as management implements the Bank's business strategy. Among the activities planned are increased loan originations in the areas of multi-family residential, commercial real estate, commercial business and consumer loans. Customer products to be introduced include ATM and debit cards and an expanded deposit account mix. In addition to two new branch facilities that were constructed and completed in the quarter ended September 30, 1997, other existing facilities will be renovated to attract and serve an increased customer base. Income Taxes. The effective income tax rate for the Bank for the three months ended September 30, 1997 and 1996 was 38.3% which includes federal and Arkansas tax components. A tax benefit of $360,674 for 1996 and an expense of $172,418 for 1997 was recognized, resulting in an increase in taxes of $533,092. SOURCES OF CAPITAL AND LIQUIDITY The Bank is required to maintain minimum levels of liquid assets as defined by the OTS regulations. This requirement which may be varied at the discretion of the OTS depending on economic conditions and deposit outflows, is based upon a percentage of deposits and short term borrowings. Current OTS regulations require that a savings association maintain liquid assets of not less than 5% of its average daily balance of net withdrawable deposit accounts and borrowings payable in one year or less, of which short-term liquid assets must consist of not less than 1%. At September 30, 1997, the Bank's liquidity, as measured for regulatory purposes, was 20.1%, or $25.4 million in excess of the minimum OTS liquidity requirement of 5%, and 10.0% or $13.3 million in excess of the OTS short term liquidity requirement of 1%. Management of the Bank seeks to maintain a relatively high level of liquidity in order to retain flexi- bility in terms of investment opportunities and deposit pricing and in order to meet funding needs of loan commitments. Historically, the Bank has been able to meet its liquidity demands through internal sources of funding supplemented from time to time by advances from the FHLB of Dallas. The Bank's primary sources of funds are deposits, proceeds from principal and interest payments on loans and mortgage-backed securities, interest payments and maturities of investment securities, and earnings. While scheduled principal repayments on loans and mortgage-backed securities and interest payments on investment securities are a relatively predictable source of funds, deposit flows and loan and mortgage-backed prepayments are greatly influenced by general interest rates, economic conditions, competition and other factors. The Bank does not solicit deposits outside of its market area through brokers or other financial institutions. The Bank has also designated certain securities as available for sale in order to meet liquidity demands. At September 30, 1997, the Bank had designated securities with a fair value of approximately $33.9 million as available for sale. In addition to internal sources of funding, the Bank as a member of the FHLB has substantial borrowing authority with the FHLB. The Bank's use of a particular source of funds is based on need, comparative total costs and availability. Another source of liquidity is the net proceeds of the Conversion. Following the completion of the Conversion, effective April 30, 1997, the Bank received over half of the net proceeds of the Conversion. These funds are expected to be used by the Bank for its business activities, including investment in interest-earning assets. For additional information about cash flows from the Bank's operating, investing and financing activities see the consolidated financial statements presented elsewhere herein. At September 30, 1997, the Bank had outstanding $4.5 million in commitments to originate loans (including unfunded portions of construction loans) and $563,000 in unused lines of credit. At the same date, the total amount of certificates of deposit which were scheduled to mature in one year or less was $59.2 million. Management anticipates that the Bank will have adequate resources to meet its current commitments through internal funding sources described above. Historically, the Bank has been able to retain a significant amount of its deposits as they mature. Management is not aware of any current recommendations by its regulatory authorities, legislation, competition, trends in interest rate sensitivity, new accounting guidance or other material events and uncertainties that would have a material effect on the Bank's ability to meet its liquidity demands. SIGNATURES In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned thereunto duly authorized. HCB BANCSHARES, INC. Registrant Date: July 16, 1999 By: /s/ Vida H. Lampkin ---------------------------------- Vida H. Lampkin Chairman, President and Chief Executive Officer EX-27 2 - ARTICLE 9 FIN. DATA SCHEDULE FOR 1ST QTR 10-Q
9 3-MOS JUN-30-1998 SEP-30-1997 1,287,715 14,675,405 0 0 33,852,100 37,471,436 39,028,601 103,749,961 1,492,473 199,838,247 148,454,721 0 2,547,744 10,000,000 26,450 0 0 38,173,965 199,838,247 2,113,234 1,224,357 287,458 3,625,049 1,868,470 2,031,832 1,593,217 19,549 15,107 1,226,993 500,547 500,547 0 0 328,129 .13 .13 7.45 166,000 852,000 0 2,570,000 1,492,473 14,326 0 1,497,696 1,497,696 0 0
-----END PRIVACY-ENHANCED MESSAGE-----