-----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, J+GtzIYjaXT1ocIBcJ1s+QXr8biTZ9l3vPnwDRXfSm9A/T7ef5Cmc2k65yrDmdbT 3teWvlIZMHHMbjDxnrrcBQ== 0000928385-96-000560.txt : 19960627 0000928385-96-000560.hdr.sgml : 19960627 ACCESSION NUMBER: 0000928385-96-000560 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960331 FILED AS OF DATE: 19960515 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: TRI COUNTY FINANCIAL CORP /MD/ CENTRAL INDEX KEY: 0000855874 STANDARD INDUSTRIAL CLASSIFICATION: 6022 IRS NUMBER: 520692188 STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-18279 FILM NUMBER: 96565859 BUSINESS ADDRESS: STREET 1: 3035 LEONARDTOEN RD STREET 2: P O BOX 38 CITY: WALDORF STATE: MD ZIP: 20601 BUSINESS PHONE: 3016455604 10-Q 1 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION ---------------------------------- WASHINGTON, D.C. 20549 ----------------------- FORM 10-Q --------- Quarterly Report Under Section 13 or 15(d) of the Securities Exchange Act of 1934 For the Quarter Ended: March 31, 1996 Commission File Number 0-18279 ----------- Tri-County Financial Corporation (Exact Name of Registrant as Specified in Charter) Maryland 52-0692188 - - ------------------------------- -------------------------------------- (State or Other Jurisdiction of (I.R.S. Employer Identification Number) Incorporation or Organization) 3035 Leonardtown Road Waldorf, Maryland 20601 (Address of Principal Executive Offices) Registrant's Telephone Number: (301) 645-5601 Securities Registered Pursuant to Section 12(g) of Act: Capital Stock Par Value $.01 per Share -------------------------------------- (Title of Class) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ----- ------ Number of Shares of Capital Stock Outstanding as of May 1, 1996 740,804 TRI-COUNTY FINANCIAL CORPORATION TABLE OF CONTENTS - - ------------------------------------------------------------------------------ Index -----
PAGE PART I - FINANCIAL INFORMATION: Item 1 - Financial Statements Consolidated Statements of Financial Condition at March 31, 1996, and December 31, 1995 3 Consolidated Statements of Income for the Three-Month Periods Ended March 31, 1996 and 1995 4-5 Consolidated Statements of Cash Flows for the Three-Month Periods Ended March 31, 1996 and 1995 6-7 Notes to Consolidated Financial Statements 8-9 Item 2 - Management's Discussion and Analysis of Operations 10 PART II - OTHER INFORMATION 11 SIGNATURES 12
TRI-COUNTY FINANCIAL CORPORATION CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION MARCH 31, 1996, AND DECEMBER 31, 1995 - - --------------------------------------------------------------------------------
March 31, December 31, 1996 1995 ------------ ------------- ASSETS CASH AND CASH EQUIVALENTS: Noninterest-bearing $ 1,260,329 $ 786,113 Interest-bearing 4,795,491 3,264,106 ------------ ------------- Total cash and cash equivalents 6,055,820 4,050,219 Investment securities available for sale at fair value 14,373,544 14,903,798 Investment securities held to maturity at amortized cost 881,600 881,600 Mortgage-backed securities available for sale Mortgage-backed securities available for sale at fair value 32,045,713 30,793,682 Mortgage-backed securities held to maturity Mortgage-backed securities held to maturity at amortized cost 1,094,394 1,160,672 Loans receivable-net 106,565,296 107,340,325 Loans held for sale 640,905 476,750 Accrued interest receivable 1,228,649 1,093,113 Other assets 498,455 383,678 Net Premises and equipment 3,276,969 3,178,806 ------------ ------------ TOTAL ASSETS $166,661,345 $164,262,643 ------------ ------------ LIABILITIES AND STOCKHOLDER'S EQUITY Deposits $131,947,067 $129,348,276 Advances from Federal Home Loan Bank 12,000,000 13,250,000 Notes payable and other borrowings 4,431,049 4,302,845 Advance payments by borrowers for taxes and insurance 1,158,229 685,767 Accounts payable, accrued expenses, and other liabilities 543,185 614,952 Current and deferred income taxes 284,846 89,655 ------------ ------------ Total liabilities 150,364,376 148,291,495 ------------ ------------ STOCKHOLDERS' EQUITY: Common stock 7,057 6,851 Capital in excess of par 5,124,706 5,021,350 Stock dividend distributable 529,311 - Net unrealized gain on investment securities and mortgage-backed securities available for sale 7,269 232,123 Retained earnings 10,628,626 10,710,824 ------------ ------------ Total stockholders' equity 16,296,969 15,971,148 ------------ ------------ TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $166,661,345 $164,262,643 ------------ ------------
See notes to consolidated financial statements. - 3 - TRI-COUNTY FINANCIAL CORPORATION CONSOLIDATED STATMENTS OF INCOME THREE-MONTH PERIODS ENDED MARCH 31, 1996 AND 1995 - - ------------------------------------------------------------------------------
Three Months Ended March 31, ----------------------- 1996 1995 INTEREST INCOME: Interest on loans $2,530,610 $2,426,293 Interest on mortgage-back securities 560,374 502,296 Interest and dividends on investment securities 255,997 273,853 ---------- ---------- Total interest revenues 3,346,981 3,202,442 ---------- ---------- INTEREST EXPENSES: Deposits 1,352,739 1,194,294 Federal Home Loan Bank advances 181,713 116,441 Notes payable and other borrowings 82,605 127,551 ---------- ---------- Total interest expenses 1,617,057 1,438,286 ---------- ---------- NET INTEREST INCOME 1,729,924 1,764,156 LOAN LOSS PROVISION 60,000 36,000 ---------- ---------- Net interest income after loan loss provision 1,669,924 1,728,156 ---------- ---------- OTHER INCOME: Loan service charges 67,756 59,310 Gain on sale of investments and mortgage-back securities available for sale - 18,544 Gain on sale of loans held for sale 41,220 - Service charges 73,874 76,383 Other 18,004 (16,597) ---------- ---------- Total other income 200,854 137,640 ---------- ----------
(Continued) See notes to consolidated financial statements. - 4 - TRI-COUNTY FINANCIAL CORPORATION CONSOLIDATED STATEMENTS OF INCOME THREE-MONTH PERIODS ENDED MARCH 31, 1996 AND 1995 - - -------------------------------------------------------------------------------
Three Months Ended March 31, ----------------------- 1996 1995 OPERATIONS EXPENSES: Employee compensation and benefits $ 536,576 $ 514,900 Occupancy expense 92,692 73,857 Federal insurance premium and surety bond premiums 87,054 85,076 Data processing expense 59,302 44,447 Other 291,533 227,066 ---------- ---------- Total operating expenses 1,067,157 945,346 ---------- ---------- INCOME BEFORE INCOME TAXES 803,621 920,450 INCOME TAXES 285,934 331,622 ---------- ---------- NET INCOME $ 517,687 $ 588,828 ========== ========== EARNINGS PER SHARE: Primary $ 0.67 $ 0.80/(1)/ On a fully diluted basis 0.67 0.79
(Concluded) /(1)/ Restated to reflect 1996 stock dividends. See notes to consolidated financial statements. - 5 - TRI-COUNTY FINANCIAL CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS THREE-MONTH PERIODS ENDED MARCH 31, 1996 AND 1995 - - -------------------------------------------------------------------------------
Three Months Ended March 31 -------------------------------- 1996 1995 INCREASE IN CASH AND CASH EQUIVALENTS CASH FLOWS FROM FINANCING ACTIVITIES: Net income $ 517,687 $ 588,828 Adjustments to reconcile net income to net cash provided by operating activities: Provision for loan losses 60,000 36,000 Net loan charge-offs and recoveries (1,138) (20,763) Provision for depreciation and amortization 64,413 69,796 Amortization of premium/discount on mortgage-backed securities and investments (24,967) (15,143) Capitalization of interest expense on notes payable - 19,074 Provision for deferred income tax (benefit) (10,863) 22,736 Increase in interest receivable (135,536) (86,363) Decrease in deferred loan fees (58,173) (43,398) Increase (decrease) in accounts payable, accrued expenses, and other liabilities 177,130 (81,327) (Increase) decrease in other assets (114,777) 179,195 Loss on sale of premises and equipment - 33,595 Originations of loans available for sale (2,700,155) (1,190,000) Gain on sale of mortgage-backed and investment securities available for sale - (18,544) Proceeds from sales of loans available for sale 2,536,000 1,032,000 Proceeds from disposition of foreclosed real estate - 53,833 Federal home loan bank stock dividends - (10,200) ------------ ----------- Net cash provided by operating activities 309,621 569,319 ------------ ----------- CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of investment securities available for sale (2,174,968) (1,168,640) Principal collected on loans 12,812,471 10,075,975 Principal collected on mortgage-backed securities 66,278 307,060 Loans originated or acquired (12,038,131) (13,752,977) Purchase of mortgage-backed securities available for sale (1,995,000) - Proceeds from sale or redemption of mortgaged-backed securities available for sale 359,734 1,807,375 Proceeds from sale of investment securities available for sale 2,775,152 801,297 Purchase of mortgage-backed securities held to maturity - (1,000,000) Purchase of premises and equipment (149,983) (28,926) ------------ ----------- Net cash used in invested activities (344,447) (2,958,836) ------------ -----------
- 6 - TRI-COUNTY FINANCIAL CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS THREE-MONTH PERIODS ENDED MARCH 31, 1996 AND 1995 - - -------------------------------------------------------------------------------
Three Months Ended March 31 -------------------------- 1996 1995 CASH FLOWS FROM FINANCING ACTIVITIES: Net increase (decrease) in deposits 2,598,791 (251,975) Proceeds from FHLB advances 20,500,000 2,000,000 Payments of maturing FHLB advances (21,750,000) - Net increase in other short-term borrowings 254,732 501,695 Net increase in advance payments by borrowers for taxes and insurance 472,462 374,549 Exercise of stock options 103,563 30,000 Payments on notes payable (139,121) (114,058) ------------ ----------- Net cash flows provided by financing activities 2,040,427 2,540,211 ------------ ----------- INCREASE IN CASH AND CASH EQUIVALENTS 2,005,601 150,694 CASH AND CASH EQUIVALENTS-JANUARY 1, 4,050,219 3,471,953 ------------ ----------- CASH AND CASH EQUIVALENTS-MARCH 31, $ 6,055,820 $ 3,622,647 SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Accounting Policies: Cash equivalents include short-term amounts due from banks Noncash transactions: Cash paid during the three months for: Interest $ 1,641,829 $ 1,416,824 Income taxes - -
Tri-County Financial Corporation declared a 5% stock dividend payable April 15, 1996, and April 17, 1995, respectively, to shareholders of record on March 4, 1996, and March 3, 1995, respectively. The Corporation also declared a $.10 per share cash dividend to shareholders of record on March 4, 1996, payable on April 15, 1996; and March 3, 1995, payable on April 17, 1995. Retained earnings in the amount of $599,886 in 1996 and $777,018 in 1995 was transferred to stock dividend distributable and accounts payable to reflect these dividends. See notes to consolidated financial statements. (Concluded) - 7 - TRI-COUNTY FINANCIAL CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS MARCH 31, 1996 - - -------------------------------------------------------------------------------- 1. BASIS OF PRESENTATION General - The consolidated financial statements of Tri-County Financial Corporation (the Company) and its wholly owned subsidiary, Tri-County Federal Savings Bank (the Bank) included herein are unaudited; however, they reflect all adjustments consisting only of normal recurring accruals that, in the opinion of Management, are necessary to present fairly the results for the periods presented. Certain information and note disclosures normally included in financial statements prepared in accordance with Generally Accepted Accounting Principles have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission and the Office of Thrift Supervision. The Company believes that the disclosures are adequate to make the information presented not misleading. The results of operations for the three months ended March 31, 1996, are not necessarily indicative of the results of operations to be expected for the remainder of the year. It is suggested that these consolidated financial statements be read in conjunction with the consolidated financial statements and notes thereto included in the Company's Annual Report for the year ended December 31, 1995. 2. EARNINGS PER SHARE Primary and fully diluted earnings per share, giving effect to the stock dividend, have been computed based on weighted-average common and common equivalent shares outstanding as follows:
Three Months Ended March 31, ----------------------- 1996 1995 Primary 769,958 733,354 Fully diluted 769,958 742,202
3. NEW ACCOUNTING PRONOUNCEMENTS Effective January 1, 1996, the Company adopted SFAS No. 122, "Accounting for Mortgage Servicing Rights," which amended certain provisions of SFAS No. 65 to eliminate the accounting distinction between rights to service mortgage loans for others that are acquired through loan origination activities and those acquired through purchase transactions. When the Company purchases or originates mortgage loans, the cost of acquiring those loans includes the cost of the related mortgage servicing rights (MSRs). If the Company sells or securitizes the loans and retains the MSRs, the Company allocates the total cost of the mortgage loans between the MSRs and the loans (without MSRs) based on their relative fair values, if practicable. Any cost allocated to the MSRs is recognized as a separate asset. MSRs are amortized in proportion to and over the period of estimated net servicing income and are evaluated for impairment based on their fair value. During 1996 and 1995, the Company did not sell or securitize loans and retain the MSRs. - 8 - Effective January 1, 1996, the Company adopted SFAS 123, "Accounting for Stock-Based Compensation." This Statement gives the Company the option of either (1) continuing to account for stock options and other forms of stock compensation under the accounting rules defined in APB No. 25, "Accounting for Stock Issued to Employees," while providing the disclosures required under SFAS 123 or (2) adopting SFAS 123 accounting for all stock compensation arrangements. The Company continues to account for stock options under the accounting rules stated in APB No. 25, and will provide the additional disclosures required under SFAS 123. Regulatory Issues - The Federal Deposit Insurance Corporation administers two separate deposit insurance funds, the BIF and SAIF. Congress is considering legislation that would recapitalize the SAIF fund through a special assessment on FDIC-insured institutions with SAIF deposits. While the specifics of the legislation have not been finalized, the impact of this deposit assessment could result in a future after-tax expense to the Company in an amount in excess of $700,000. This amount would be recorded as an expense if and when the legislation is enacted. * * * * * * - 9 - MANAGEMENT DISCUSSION AND ANALYSIS Results of operations: Net income for the three months ended March 31, 1996, decreased $71,141, or 12%, over the comparable period in 1995. This decrease in net income is a direct result of the prolonged flat yield curve wherein the cost of funds remained high while the yield on longer term loan products declined. The effect of the curve reduced the marginal spread available to cover the cost of operations. Correspondingly, some of the assets in the investment portfolio began to experience early payoff as the issuer obtained better rates by calling the investment prior to its maturity and reissuing it at the more attractive long- term rates currently available. During the quarter, $1 million of such investments were called by issuers, contributing to the decline in investment income of 6.5% or $17,856 in the current quarter as compared to the comparable quarter in the previous year. The Bank has received notification that several of its other investments will be called in the second quarter of 1996. The proceeds of the redeemed investments will be used to curtail short-term debt until other appropriate investment opportunities become available. At the conclusion of the quarter, the yield at the long end of the yield curve began to increase. Long-term rates increased by over 50 basis points and, as a result, the higher rate environment discouraged many consumers from initiating the purchase of their first or a larger home, as well as refinancing existing loans for a lower rate. Our volume of originations was 12% less than the comparable period in 1995. Total interest revenues increased by 4.5% or $144,539 over the comparable quarter in 1995. Total interest expense increased 12.4% or $178,771 during that same quarter, reflecting a continued squeeze of margins in the quarter. The resulting net interest income decreased by 1.9% compared to the first quarter of 1995. As the Bank makes more consumer lending products available, management feels it is prudent to establish slightly higher loss reserves to match the increased risk. The loan loss provision for the first quarter of 1996 was, therefore, increased to $60,000 from the $36,000 level provided in 1995. Nonperforming loans continue to be well managed, with a balance of $819,000, or 0.77% of the net loan portfolio at March 31, 1996. Other income in 1996 was $18,004, composed primarily of rental income from excess office space in the building housing the main office. This compares to a loss of $16,597 in 1995 generated by the disposal of certain obsolete fixed assets that offset the rental income. While continued cost containment measures are being taken, operating expenses during the quarter increased by 12.9%. Facility renovations were considered prudent to improve security at various branches. Substantial training has occurred and systems were obtained or upgraded to allow staff to service the increasingly complex array of services offered by the Bank. Advertising costs have increased in response to competition in our market. Assets increased only 1.5% since December 31, 1995, with virtually no significant change in the composition of the balance sheet. Changes in the stockholders' equity section of the balance sheet were caused by a $224,854 reduction in the market valuation allowance from the December 31, 1995 level. Since the adoption of SFAS 115, the portfolio of investments has been "marked to market" with any changes in current market value flowing through stockholders' equity. During the quarter, the increased slope of the yield curve has caused intermediate-term and long-term investments held by the Bank to decline in market value. This fluctuation in valuation will persist until the market detects some stability or visible change in direction in the interest rate scenario. - 10 - TRI-COUNTY FINANCIAL CORPORATION PART II - OTHER INFORMATION - - -------------------------------------------------------------------------------- Item 1 - LEGAL PROCEEDINGS Not Applicable. Item 2 - CHANGES IN SECURITIES Not Applicable. Item 3 - DEFAULTS UPON SENIOR SECURITIES Not applicable. Item 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS Not Applicable. Item 5 - OTHER INFORMATION None. Item 6 - EXHIBITS AND REPORTS ON FORM 8-K None. - 11 - 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. Tri-County Financial Corporation Date: May 14, 1996 By: /s/ Michael L. Middleton ------------------ -------------------------------- Michael L. Middleton, President and Chairman of the Board Date: May 14, 1996 By: /s/ Henry A. Shorter, Jr. ------------------ -------------------------------- Henry A. Shorter, Jr., Secretary - 12 - EX-27 2 FINANCIAL DATA SCHEDULE
9 3-MOS DEC-31-1996 JAN-01-1996 MAR-31-1996 6,055,820 4,795,491 0 0 46,419,257 1,975,994 2,015,024 107,206,201 792,434 166,661,345 131,947,067 15,772,104 1,986,260 658,945 0 0 7,057 16,289,912 166,661,345 2,530,610 255,997 560,374 3,346,981 1,352,739 1,617,057 1,729,924 60,000 0 1,067,157 803,621 803,621 0 0 517,687 .67 .67 4.3 16,000 0 0 0 733,573 2,139 0 792,434 792,434 0 0
-----END PRIVACY-ENHANCED MESSAGE-----