0000930661-01-501798.txt : 20011008
0000930661-01-501798.hdr.sgml : 20011008
ACCESSION NUMBER: 0000930661-01-501798
CONFORMED SUBMISSION TYPE: 8-K/A
PUBLIC DOCUMENT COUNT: 3
CONFORMED PERIOD OF REPORT: 20010717
ITEM INFORMATION: Financial statements and exhibits
FILED AS OF DATE: 20010920
FILER:
COMPANY DATA:
COMPANY CONFORMED NAME: HENDERSON CITIZENS BANCSHARES INC
CENTRAL INDEX KEY: 0000878355
STANDARD INDUSTRIAL CLASSIFICATION: NATIONAL COMMERCIAL BANKS [6021]
IRS NUMBER: 752371232
STATE OF INCORPORATION: TX
FISCAL YEAR END: 1231
FILING VALUES:
FORM TYPE: 8-K/A
SEC ACT: 1934 Act
SEC FILE NUMBER: 033-42286
FILM NUMBER: 1741136
BUSINESS ADDRESS:
STREET 1: 201 WEST MAIN ST
STREET 2: PO BOX 1009
CITY: HENDERSON
STATE: TX
ZIP: 75653
BUSINESS PHONE: 9036578521
MAIL ADDRESS:
STREET 1: 201 WEST MAIN ST
STREET 2: P O BOX 1009
CITY: HENDERSON
STATE: TX
ZIP: 75653
8-K/A
1
d8ka.txt
AMENDMENT NO. 1 TO FORM 8-K
================================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A NO. 1
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): July 17, 2001
-------------
HENDERSON CITIZENS BANCSHARES, INC.
--------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
--------------------------------------------------------------------------------
Texas 33-42286 75-2371232
--------------------------------------------------------------------------------
(State or other Jurisdiction (Commission File Number) (I.R.S. Employer
of Incorporation) Identification No.)
201 West Main Street, Henderson, Texas 75653
--------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(903) 657-8521
--------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
Not Applicable
--------------------------------------------------------------------------------
(Former name or former address, if changed since last report)
================================================================================
Item 7. Financial Statements and Exhibits.
(a) Financial Statements of Businesses to be Acquired.
Audited consolidated financial statements of Rusk County
Bancshares, Inc. as of and for the period ended December 31,
2000, and unaudited consolidated financial statements of Rusk
County Bancshares, Inc. as of and for the periods ended June
30, 2001, and 2000, are included herein.
(b) Pro Forma Financial Information.
Pro forma financial information is included herein.
(c) Exhibits
7.1 - Financial statements of Rusk County
Bancshares, Inc.
7.2 - Pro forma financial information
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 hereunto duly authorized.
HENDERSON CITIZENS BANCSHARES, INC.
(Registrant)
Date: September 18, 2001 By: /s/ Milton S. McGee, Jr.
--------------------------------
Milton S. McGee, Jr., President
EX-7.1
3
dex71.txt
FINANCIAL STATEMENTS OF RUSK COUNTY BANCHSHARES
EXHIBIT 7.1
RUSK COUNTY BANCSHARES, INC.
AND SUBSIDIARIES
Consolidated Financial Statements
December 31, 2000
(With Independent Auditor's Report Thereon)
[LETTERHEAD OF THOMAS S. GAY, CERTIFIED PUBLIC ACCOUNTANT]
Independent Auditor's Report
----------------------------
The Board of Directors
Rusk County Bancshares, Inc. and Subsidiaries
I have audited the accompanying consolidated balance sheet of Rusk County
Bancshares, Inc. and Subsidiaries (Company) as of December 31, 2000, and the
related consolidated statements of income, changes in stockholders' equity and
cash flows for the year ended December 31, 2000. These consolidated financial
statements are the responsibility of the Company's management. My responsibility
is to express an opinion on these consolidated financial statements based on my
audit.
I conducted my audit in accordance with generally accepted auditing standards.
Those standards require that I plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
I believe that my audit provides a reasonable basis for my opinion.
In my opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Rusk County
Bancshares, Inc. and Subsidiaries as of December 31, 2000, and the consolidated
results of its operations and its cash flows for the year ended December 31,
2000, in conformity with generally accepted accounting principles.
/s/ Thomas S. Gay CPA
February 28, 2001
RUSK COUNTY BANCSHARES, INC. AND SUBSIDIARIES
Consolidated Balance Sheet
December 31, 2000
(Dollars In Thousands, Except Per Share Amounts)
ASSETS
------
Cash and due from banks $ 3,799
Federal funds sold 1,875
------------
Total cash and cash equivalents 5,674
Interest bearing deposits at other banks 9,697
Securities available for sale 3,942
Securities held to maturity 1,554
Loans, net 30,599
Bank premises and equipment, net 1,220
Accrued interest receivable 545
Other assets 329
------------
$ 53,560
============
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Deposits:
Noninterest bearing $ 8,969
Interest bearing 36,185
------------
Total deposits 45,154
Other liabilities 436
Commitments and contingencies -
Stockholders' equity:
Capital stock, $2 par value; 500,000 shares authorized,
255,000 shares issued 510
Capital surplus 3,592
Retained earnings 5,738
Accumulated other comprehensive income 33
------------
9,873
Treasury stock, 87,177 shares, at cost (1,903)
------------
Total stockholders' equity 7,970
------------
$ 53,560
============
See accompanying notes to consolidated financial statements.
(1)
RUSK COUNTY BANCSHARES, INC. AND SUBSIDIARIES
Consolidated Statement of Income
For the Year Ended December 31, 2000
(Dollars In Thousands, Except Per Share Amounts)
Interest income:
Interest and fees on loans $3,207
Interest and dividends on securities:
Taxable 410
Tax exempt 19
Interest on federal funds sold 62
Interest bearing deposits at other banks 599
------
Total interest income 4,297
------
Interest expense:
Deposit accounts 1,593
Federal funds purchased 12
------
Total interest expense 1,605
------
Net interest income 2,692
Provision for possible loan losses 48
------
Net interest income after provision 2,644
------
Noninterest income:
Service charges 507
Other 85
------
Total noninterest income 592
------
Noninterest expense:
Salaries and employee benefits 1,088
Occupancy expense 387
Other 845
------
Total noninterest expense 2,320
------
Net income before income taxes 916
Income tax expense 317
------
Net income $ 599
======
Basic earnings per share $ 3.57
======
Diluted earnings per share $ 3.21
======
See accompanying notes to consolidated financial statements.
(2)
RUSK COUNTY BANCSHARES, INC. AND SUBSIDIARIES
Consolidated Statement of Changes in Stockholders' Equity
For the Year Ended December 31, 2000
(Dollars In Thousands, Except Per Share Amounts)
Accumulated
Other
Capital Capital Retained Comprehensive Treasury
Stock Surplus Earnings Income (Loss) Stock Total
----- ------- -------- ------------- ----- -----
Balance January 1, 2000 $ 510 $ 3,592 $ 5,181 $ (1) $ (1,898) $ 7,384
Comprehensive income:
Net income - - 599 - - 599
Net change in unrealized
appreciation on securities
available for sale, net of - - - 34 - 34
tax
--------
Total comprehensive income - - - - - 633
Cash dividends - - (42) - - (42)
Treasury stock purchased - - - - (5) (5)
------- ------- -------- -------- -------- --------
Balance December 31, 2000 $ 510 $ 3,592 $ 5,738 $ 33 $ (1,903) $ 7,970
======= ======= ======== ======== ======== ========
See accompanying notes to consolidated financial statements.
(3)
RUSK COUNTY BANCSHARES, INC. AND SUBSIDIARIES
Consolidated Statement of Cash Flows
For the Year Ended December 31, 2000
(Dollars In Thousands, Except Per Share Amounts)
Cash flows from operating activities:
Net income $ 599
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation 175
Net (accretion) amortization (16)
Provision for possible loan losses 48
Increase in accrued interest receivable (124)
Net decrease in other assets 25
Increase in accrued interest payable 49
Net decrease in other liabilities (25)
--------
Net cash provided by operating activities 731
--------
Cash flows from investing activities:
Increase in interest bearing deposits at other banks (1,876)
Purchases of securities available for sale (1,445)
Proceeds from sales, maturities and calls of securities available
for sale 473
Proceeds from maturities, calls and paydowns of securities
held to maturity 422
Net loans originated 1,827
Net additions to premises and equipment (54)
--------
Net cash used in investing activities (653)
--------
Cash flows from financing activities:
Net increase in demand deposits, NOW and savings accounts 1,424
Net decrease in certificates of deposit (589)
Dividends paid (42)
Purchase of treasury stock (5)
--------
Net cash provided by financing activities 788
--------
Net increase in cash and cash equivalents 866
Cash and cash equivalents at beginning of year 4,808
--------
Cash and cash equivalents at end of year $ 5,674
========
See accompanying notes to consolidated financial statements.
(4)
RUSK COUNTY BANCSHARES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2000
(Dollars In Thousands, Except Per Share Amounts)
1. Summary of Significant Accounting Policies
------------------------------------------
Basis of Presentation
---------------------
The accounting and reporting policies of Rusk County Bancshares, Inc. and
Subsidiaries conform to generally accepted accounting principles and to general
practices within the banking industry. The following are descriptions of the
more significant of those policies.
Basis of Consolidation
----------------------
The consolidated financial statements include the accounts of Rusk County
Bancshares, Inc., its wholly-owned subsidiary, Rusk Delaware Financial
Corporation, and its wholly-owned subsidiary, Peoples State Bank (Bank) (all
collectively referred to as Company). All significant intercompany transactions
have been eliminated in consolidation.
Business
--------
The Company provides a full range of banking services to individual and
corporate customers and is subject to competition from other local financial
institutions. The Company is also subject to the regulations of certain federal
agencies and undergoes periodic examinations by those regulatory authorities.
Use of Estimates
----------------
In preparing the financial statements, management is required to make estimates
and assumptions that affect the reported amounts of assets and liabilities as of
the date of the balance sheet and revenue and expenses for the period. Actual
results could differ significantly from those estimates.
Material estimates that are particularly susceptible to significant change in
the near-term relate to the determination of the allowance for possible loan
losses. Management believes that the allowance for possible loan losses is
adequate. While management uses available information to recognize losses on
loans, future provisions for losses on loans may be necessary based on changes
in local economic conditions. In addition, regulatory agencies, as an integral
part of their examination process, periodically review the Company's allowance
for possible loan losses. Such agencies may require the Company to record
additional provisions for losses based on their judgements about information
available at the time of their examination.
(5)
RUSK COUNTY BANCSHARES, INC. AND SUBSIDIARIES
A significant portion of the Company's loans are secured by real estate and
related assets located in local markets. Accordingly, the ultimate
collectibility of this portion of the Company's loan portfolio is susceptible to
changes in local market conditions.
Cash and Cash Equivalents
-------------------------
For purposes of reporting cash flows, cash and cash equivalents include cash on
hand, amounts due from banks and federal funds sold. All highly liquid
investments with an initial maturity less than ninety days are considered to be
cash equivalents.
Securities Held to Maturity
---------------------------
Investments in debt securities for which the Company has the positive intent and
ability to hold to maturity are reported at cost, adjusted for premiums and
discounts that are recognized in interest income using methods approximating the
interest method over the period to maturity.
Securities Available for Sale
-----------------------------
Investments in debt securities that are not classified as trading or held to
maturity are classified as available for sale. Securities available for sale are
carried at fair value, with unrealized gains and losses reported net of
applicable income taxes in a separate component of stockholders' equity until
realized. Gains and losses on the sale of available for sale securities are
determined using the specific identification method. Premiums and discounts are
recognized in interest income using methods approximating the interest method
over the period to maturity.
Loans and Allowance for Possible Loan Losses
--------------------------------------------
Loans receivable that management has the intent and ability to hold for the
foreseeable future or until maturity or payoff are reported at their outstanding
principal balance, net of unearned income, the allowance for possible loan
losses, and any deferred fees or costs.
Impaired loans (as defined by SFAS No. 114 and as amended by SFAS No. 118) are
accounted for at the net present value of expected future cash flows, discounted
at the loan's effective interest rate, the observable market price of the loan
or at the fair value of the collateral if the loan is collateral dependent.
The accrual of interest on impaired loans is discontinued when, in management's
opinion, the borrower may be unable to meet payments as they become due. When
interest accrual is discontinued, all unpaid accrued interest is reversed.
Interest income is subsequently recognized only to the extent cash payments are
received.
(6)
RUSK COUNTY BANCSHARES, INC. AND SUBSIDIARIES
The allowance for possible loan losses is increased by charges to income and
decreased by charge-offs (net of recoveries). Management's periodic evaluation
of the adequacy of the allowance is based on loan loss experience, known and
inherent risks in the portfolio, adverse situations that may affect the
borrower's ability to repay, the estimated value of any underlying collateral,
and current economic conditions.
Certain fees associated with originating loans are deferred and are recognized
over the life of the loan as an adjustment of yield. Costs associated with
originating loans have been recognized in the period in which such costs were
incurred. The provisions of Statement of Financial Accounting Standards (SFAS)
No. 91 generally provide that such fees or net costs be deferred and recognized
over the life of the loan as an adjustment of yield. For the year ended December
31, 2000, management believes that not deferring such costs and amortizing them
over the life of the related loan does not materially affect the financial
position or results of operations of the Company.
Bank Premises and Equipment
---------------------------
Buildings, furniture and equipment are carried at cost, less accumulated
depreciation which is computed principally by the straight-line method over the
estimated useful lives of the related property.
Other Real Estate Owned
-----------------------
Real estate properties acquired through, or in lieu of, loan foreclosure are to
be sold and are initially recorded at fair value at the date of foreclosure,
thereby establishing a new cost basis. After foreclosure, valuations are
periodically performed by management and the real estate is carried at the lower
of carrying amount or fair value less cost to sell. Revenue and expenses from
operations and changes in the valuation are included in other noninterest
expense.
Federal Income Taxes
--------------------
The Company files a consolidated income tax return with its subsidiaries.
Federal income tax expense or benefit is allocated on a separate return basis.
Deferred tax assets and liabilities are reflected at currently enacted income
tax rates applicable to the period in which the deferred tax assets and
liabilities are expected to be realized or settled. As changes in tax laws or
rates are enacted, deferred tax assets and liabilities are adjusted through the
provision for income taxes.
Financial Instruments
---------------------
In the ordinary course of business, the Company has entered into off-balance
sheet financial instruments consisting of commitments to extend credit and
standby letters of credit. Such financial instruments are recorded in the
financial statements when they are funded or related fees are incurred or
received.
(7)
RUSK COUNTY BANCSHARES, INC. AND SUBSIDIARIES
Fair Values of Financial Instruments
------------------------------------
Fair values of financial instruments are estimated using relevant market
information and other assumptions. Fair value estimates involve uncertainties
and matters of significant judgement regarding interest rates, credit risk,
prepayments, and other factors, especially in the absence of broad markets for
particular items. Changes in assumptions or in market conditions could
significantly affect the estimates. The fair value estimates of existing on- and
off-balance sheet financial instruments do not include the value of anticipated
future business or the value of assets and liabilities not considered financial
instruments.
Forward-Looking Statements
--------------------------
Certain phrases contained in these financial statements including, without
limitation, statements containing the words "believes", "anticipates",
"estimates", "expects" and words of similar meaning, constitute forward-looking
statements, as defined in securities law. Such statements are subject to certain
risks and uncertainties including changes in economic conditions in the
Company's market area, changes in policies by regulatory agencies, fluctuations
in interest rates, demand for loans in the Company's market area and
competition, that could cause actual results to differ materially from
historical earnings and those presently anticipated or projected. Factors listed
above could affect the Company's financial performance and could cause the
Company's actual results for future periods to differ materially from any
statements expressed with respect to future periods.
2. Recent Accounting Pronouncements
--------------------------------
In June 1998, FASB issued SFAS No. 133, "Accounting for Derivative Instruments
and Hedging Activities", which establishes accounting and reporting standards
for derivative instruments and hedging activities. It requires that an entity
recognize all derivatives as either assets or liabilities in the statement of
financial position and measure those instruments at fair value. Management does
not believe the pronouncement will have a significant effect on its operations,
as management does not currently participate in hedging or derivative
activities. Adoption of SFAS No. 133 (as later amended by SFAS No. 137) will be
required for the Company during the year ending December 31, 2001.
(8)
RUSK COUNTY BANCSHARES, INC. AND SUBSIDIARIES
In September 2000, FASB issued SFAS No. 140, "Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities". SFAS 140
replaces SFAS 125 and resolves various implementation issues while carrying
forward most of the provisions of SFAS 125 without change. SFAS 140 revises
standards for transfers of financial assets by clarifying criteria and expanding
guidance for determining whether the transferor has relinquished control and the
transfer is therefore accounted for as a sale. SFAS 140 also adopts new
accounting requirements for pledged collateral and requires new disclosures
about securitizations and pledged collateral. SFAS 140 is effective for
transfers occurring after March 31, 2001 and for disclosures relating to
securitization transactions and collateral for fiscal years ending after
December 15, 2000. Management does not expect this standard to have a material
effect on the Company's financial statements.
3. Earnings Per Share
------------------
Earnings per share is computed in accordance with SFAS No. 128, "Earnings Per
Share", which requires presentation of basic and diluted earnings per share
(EPS) for entities with complex capital structures. Basic EPS is based on net
income divided by the weighted-average number of shares outstanding during the
period. Diluted EPS includes the dilutive effect of stock options granted using
the treasury stock method. Following is a reconciliation of the numerators and
denominators of basic and diluted per-share computations at December 31, 2000
(dollars in thousands):
Income Shares Per-Share
(Numerator) (Denominator) Amount
----------- ------------- ------
Basic EPS:
Income available to common
shareholders $ 599 167,823 $ 3.57
=============
Effect of Dilutive Securities:
Stock options - 18,899
------------- -------------
Diluted EPS:
Income available to common
shareholders and assumed
conversions $ 599 186,722 $ 3.21
============= ============= =============
(9)
RUSK COUNTY BANCSHARES, INC. AND SUBSIDIARIES
4. Statement of Cash Flows
-----------------------
The Company has chosen to report, on a net basis, its cash receipts and cash
payments for time deposits accepted and repayments of those deposits, and for
loans made to customers and principal collection of loans.
The Company uses the indirect method to present cash flows from operating
activities. Other supplemental information on cash flows for the year ended
December 31, 2000 is presented below (in thousands):
Cash transactions:
Interest expense paid $ 1,554
==============
Income taxes paid $ 371
==============
5. Securities
----------
Securities have been classified in the balance sheet according to management's
intent. The carrying amount of securities and their approximate fair values by
classification at December 31, 2000 are as follows (in thousands):
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
---- ----- ------ -----
Securities Classified as Available for Sale
-------------------------------------------
Obligations of U.S. government agencies
and corporations $ 3,528 $ 40 $ - $ 3,568
Pass-through certificates issued by
FHLMC, GNMA and FNMA 365 9 - 374
--------- ---------- ---------- ---------
$ 3,893 $ 49 $ - $ 3,942
========= ========== ========== =========
Securities Classified as Held to Maturity
-----------------------------------------
Municipal securities $ 310 $ 5 $ - $ 315
Pass-through certificates issued by
FHLMC, GNMA and FNMA 1,244 - 1 1,243
--------- ---------- ---------- ---------
$ 1,554 $ 5 $ 1 $ 1,558
========= ========== ========== =========
Investment securities with amortized costs of $1,394,000 were pledged to secure
public funds at December 31, 2000.
(10)
RUSK COUNTY BANCSHARES, INC. AND SUBSIDIARIES
The amortized cost and estimated fair value of securities at December 31, 2000,
by contractual maturity, are shown below (in thousands). Expected maturities
will differ from contractual maturities because issuers may have the right to
call or prepay obligations with or without call or prepayment penalties.
Securities Available for Sale Securities Held to Maturity
----------------------------- ---------------------------
Amortized Fair Amortized Fair
Cost Value Cost Value
---- ----- ---- -----
Due from one to five years $ 3,577 $ 3,619 $ 311 $ 314
Due from five to ten years 152 156 60 62
Due after ten years 164 167 1,183 1,182
--------- ---------- ---------- ---------
$ 3,893 $ 3,942 $ 1,554 $ 1,558
========= ========== ========== =========
6. Loans and Allowance for Possible Loan Losses
--------------------------------------------
Loans at December 31, 2000 consisted of the following (in thousands):
Commercial $ 6,844
Real estate 17,853
Installment 3,997
Agricultural 1,985
Other 370
---------------
31,049
Unearned income (38)
Allowance for possible loan losses (412)
---------------
$ 30,599
===============
An analysis of the allowance for possible loan losses for the year ended
December 31, 2000 is as follows (in thousands):
Balance at the beginning of the year $ 428
Provision for possible loan losses 48
Loans charged to the allowance account (73)
Recoveries on loans previously charged-off 9
---------------
Balance at the end of the year $ 412
===============
(11)
RUSK COUNTY BANCSHARES, INC. AND SUBSIDIARIES
The Company extends commercial and consumer credit primarily to customers in
East Texas. At December 31, 2000, substantially all of the Company's loans were
collateralized with real estate, inventory, accounts receivable, equipment,
marketable securities or other assets.
Impairment of loans with a recorded investment of $278,000 at December 31, 2000
has been recognized in conformity with SFAS No. 114, as amended by SFAS No. 118.
The average recorded investment in impaired loans amounted to approximately
$298,000 for the year ended December 31, 2000. The allowance for possible loan
losses related to impaired loans was $87,000 at December 31, 2000. Interest
income recognized on impaired loans in 2000 amounted to approximately $32,000.
There were no significant loans contractually past due over ninety days which
continued to accrue interest at December 31, 2000.
The Company is not committed to lend additional funds to debtors whose loans
have been modified.
7. Bank Premises and Equipment
---------------------------
Bank premises and equipment at December 31, 2000 consisted of the following (in
thousands):
Building $ 1,574
Furniture and equipment 1,455
---------------
3,029
Less accumulated depreciation (1,809)
---------------
$ 1,220
===============
Depreciation expense was $175,000 for the year ended December 31, 2000.
(12)
RUSK COUNTY BANCSHARES, INC. AND SUBSIDIARIES
8. Deposits
--------
Deposits at December 31, 2000 consisted of the following (dollars in thousands):
Amount Percent
------ -------
Noninterest bearing demand accounts $ 8,969 19.9 %
Interest bearing demand accounts 15,091 33.4
Savings accounts 2,390 5.3
Certificates of deposit, less than $100,000 13,498 29.9
Certificates of deposit, $100,000 and greater 5,206 11.5
--------- ---------
$ 45,154 100.0 %
========= =========
At December 31, 2000, the scheduled maturities of certificates of deposit of
$100,000 or more were as follows (in thousands):
One year or less $5,103
One to five years 103
------
$5,206
======
9. Other Noninterest Expense
-------------------------
Other noninterest expense consisted of the following for the year ended December
31, 2000:
Data processing $168
Regulatory exam fees 80
Directors' fees 65
Supplies 53
Franchise taxes 49
Other 430
----
$845
====
(13)
RUSK COUNTY BANCSHARES, INC. AND SUBSIDIARIES
10. Federal Income Taxes
--------------------
Federal income tax expense for the year ended December 31, 2000 consisted of the
following (in thousands):
Current $ 278
Deferred 39
--------------
Income tax expense $ 317
==============
Deferred income taxes reflect the net tax effects of temporary differences
between the recorded amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components of
the Company's deferred tax assets and liabilities as of December 31, 2000 were
as follows (in thousands):
Deferred tax asset:
Allowance for loan losses for book in excess $
of tax 100
Investment securities basis for tax in excess
of book 11
--------------
Total deferred tax asset 111
--------------
Deferred tax liability:
Bank premises and equipment basis for book in
excess of tax 120
Other 126
--------------
Total deferred tax liability 246
--------------
Net deferred tax liability $ 135
==============
(14)
RUSK COUNTY BANCSHARES, INC. AND SUBSIDIARIES
The difference between the financial statement income tax expense and amounts
computed by applying the statutory federal income tax rate of 34.0% to income
before income taxes was as follows:
Income taxes computed by the statutory
federal tax rate on pre-tax income $ 311
Tax effects of:
Tax-exempt income (6)
Non-deductible expenses and other, net 12
--------------
$ 317
==============
Effective tax rate 34.6 %
==============
11. Stock Options
-------------
The Company has a nonqualified stock option plan covering certain of its senior
officers under which the Company granted options to purchase up to 19,500 shares
of its capital stock at an option price of $7.50 per share. Such options were
fully vested at December 31, 2000. The option plan expires at the earlier of the
date of death of the optionee or ten years from inception of the plan (1995),
and contains provisions which generally require the participants to remain
employed with the Company to exercise the options. Additionally, the option plan
contains provisions whereby all options would become fully vested and
unexercised options would be priced at an option price of $2.00 per share should
the Company become subject to a change of control.
No compensation expense was recorded in 2000 as a result of the stock options.
The Company applies APB 25 in accounting for its stock option plan. Had
compensation cost been determined on the basis of fair value pursuant to SFAS
No. 123, management believes that net income for 2000 would not be materially
different.
12. Employee Benefits
-----------------
The Company has a profit sharing plan for employees of its subsidiary bank. The
plan is available to all full-time employees with required tenure, and employees
may make voluntary contributions to the plan. The plan is managed by the trust
department of a correspondent bank, and participants may make elections as to
the composition of their investment. Pension costs are funded as accrued; the
Bank expended $37,751 in 2000 for contributions to the plan. As of the end of
2000, the net value of plan assets was approximately $816,000 which approximated
vested pension benefits. The Bank provides no other post-employment benefits.
(15)
RUSK COUNTY BANCSHARES, INC. AND SUBSIDIARIES
In January 2000, the Board of Directors of the Company approved employee
retention agreements with certain officers. These agreements basically provide
that, in exchange for the employees' contractual agreement to remain in
management of the Company for a specified period, the employees will be paid
lump-sum compensation in the event the Company undergoes a change of control as
defined in the agreement. The agreements are for five year terms, are renewable
thereafter, and contain certain other provisions. Payment of compensation under
the agreement is contingent upon potential future occurrences; accordingly, no
compensation expense has been recorded by the Company.
13. Financial Instruments With Off-Balance Sheet Risk
-------------------------------------------------
The Company is a party to financial instruments with off-balance sheet risk in
the normal course of business to meet the financing needs of its customers.
These financial instruments include commitments to extend credit and standby
letters of credit. Those instruments involve, to varying degrees, elements of
credit and interest rate risk in excess of the amount recognized in the balance
sheet.
The Company's exposure to credit loss in the event of nonperformance by the
other party to the financial instrument for commitments to extend credit and
standby letters of credit is represented by the contractual amount of these
instruments. The Company uses the same credit policies in making commitments and
conditional obligations as it does for on-balance sheet instruments. At December
31, 2000, the approximate amounts of these financial instruments were as follows
(in thousands):
Commitments to extend credit $ 4,877
Standby letters of credit 81
Credit card lines available 1,179
------------
$ 6,137
============
Although the maximum exposure to loss is the amount of such commitments, at
December 31, 2000, management anticipated no material losses from such
activities.
Commitments to extend credit are agreements to lend to a customer as long as
there is no violation of any condition established in the contract. Commitments
generally have fixed expiration dates or other termination clauses and may
require payment of a fee. Since many of the commitments are expected to expire
without being drawn upon, the total commitment amounts do not necessarily
represent future cash requirements. The Company evaluates each customer's
creditworthiness on a case-by-case basis. The amount of collateral obtained, if
deemed necessary by the Company upon extension of credit, is based on
management's credit evaluation of the borrower. Collateral held varies but may
include real estate, accounts receivable, inventory, equipment and
income-producing commercial properties.
(16)
RUSK COUNTY BANCSHARES, INC. AND SUBSIDIARIES
Standby letters of credit are conditional commitments issued by the Company to
guarantee the performance of a customer to a third party. The credit risk
involved in issuing letters of credit is essentially the same as that involved
in extending loan facilities to customers.
The Company was not required to perform on any financial guarantees during 2000.
The Company has not incurred any significant losses on such commitments.
14. Related Party Transactions
--------------------------
In the ordinary course of business, the Company conducts transactions with its
employees, officers, directors, and other related parties. Generally, in the
opinion of management, loan and deposit transactions have terms, including
interest rates and collateral, similar to transactions with the Company's
general public customers. At December 31, 2000, aggregate loans to related
parties were $1,913,000. During 2000, $536,000 of new loans were originated and
repayments totaled $703,000.
15. Significant Group Concentrations of Credit Risk
-----------------------------------------------
The majority of the Company's loan and business activity is with customers
located within Texas. Such customers are normally also depositors of the
Company. The concentrations of credit by type of loan are set forth in note 6.
The distribution of commitments to extend credit generally approximates the
distribution of loans outstanding.
At December 31, 2000, the Company had due from bank deposits of $1,157,000 in
excess of federally insured limits with one correspondent bank. Additionally,
the Company had a total of $1,875,000 in federal funds sold to its correspondent
banks at December 31, 2000.
16. Fair Value Disclosures of Financial Instruments
-----------------------------------------------
The following methods and assumptions were used by the Company in estimating
fair values of financial instruments disclosed herein:
Cash and short-term investments
The carrying amounts of cash and short-term instruments approximate their fair
value
(17)
RUSK COUNTY BANCSHARES, INC. AND SUBSIDIARIES
Available for sale and held to maturity securities
Fair values for securities, excluding restricted equity securities, are based on
quoted market prices. The carrying values of restricted equity securities
approximate their fair values.
Loans
For variable-rate loans that reprice frequently and have no significant change
in credit risk, fair values are based on carrying values. Fair values for
commercial real estate loans and other commercial loans are estimated using
discounted cash flow analyses, using interest rates currently being offered for
loans with similar terms to borrowers of similar credit quality. Fair values for
impaired loans are estimated using discounted cash flow analyses or underlying
collateral values, where applicable.
Deposits
The fair values disclosed for demand deposits are, by definition, equal to the
amount payable on demand at the reporting date (that is, their carrying
amounts). The carrying amounts of variable-rate, fixed-term money-market
accounts and certificates of deposit (CDs) approximate their fair values at the
reporting date. Fair values for fixed-rate CDs are estimated using a discounted
cash flow calculation that applies interest rates currently being offered on
certificates to a schedule of aggregated expected monthly maturities on time
deposits.
Accrued interest
The carrying amounts of accrued interest approximate their fair values.
Off-balance sheet instruments
Commitments to extend credit and standby letters of credit have short maturities
and therefore, have no significant fair value.
(18)
RUSK COUNTY BANCSHARES, INC. AND SUBSIDIARIES
The carrying amounts and estimated fair values of the Company's financial
instruments at December 31, 2000 were as follows (in thousands):
Carrying Fair
Amount Value
------ -----
Financial assets:
Cash and cash equivalents $ 5,674 $ 5,674
Interest bearing deposits at other banks 9,697 9,697
Investment securities 5,496 5,500
Loans 30,599 30,410
Accrued interest receivable 545 545
Financial liabilities:
Deposits $45,154 $45,170
Accrued interest payable 237 237
Off-balance sheet instruments:
Commitments to extend credit $ -- $ --
Standby letters of credit -- --
17. Restrictions on Retained Earnings
---------------------------------
Under banking law, there are legal restrictions limiting the amount of dividends
the Company can declare. Approval of the regulatory authorities is required if
the effect of dividends declared would cause the regulatory capital of the
Company to fall below specified minimum levels.
18. Regulatory Matters
------------------
The Company and the Bank are subject to various regulatory capital requirements
administered by federal banking authorities. Failure to meet minimum capital
requirements can initiate certain mandatory and possibly additional
discretionary actions by regulators that, if undertaken, could have a direct
material effect on the Company's financial statements. Under capital adequacy
guidelines and the regulatory framework for prompt corrective action, the
Company and the Bank must meet specific capital guidelines that involve
quantitative measures of the their assets, liabilities, and certain off-balance
sheet items as calculated under regulatory accounting practices. The capital
amounts and classification are also subject to qualitative judgments by the
regulators about components, risk weightings, and other factors. Prompt
corrective action provisions are not applicable to bank holding companies.
(19)
RUSK COUNTY BANCSHARES, INC. AND SUBSIDIARIES
Quantitative measures established by regulation to ensure capital adequacy
require the Company and the Bank to maintain minimum amounts and ratios (set
forth in the table below) of total and Tier I capital (as defined in the
regulations) to risk weighted assets (as defined), and of Tier I capital (as
defined) to average assets (as defined). Management believes, as of December 31,
2000, that the Company and the Bank meet all capital adequacy requirements to
which they are subject.
As of December 31, 2000, the most recent notification from regulatory
authorities categorized the Company as "well capitalized" under the regulatory
framework for prompt corrective action. To be categorized as "well capitalized",
the Company must maintain minimum total risk based, Tier I risk based and Tier I
leverage ratios as set forth in the table. There are no conditions or events
since that notification that management believes would change the institution's
category.
The Bank's actual capital amounts and ratios at December 31, 2000 are presented
in the following table (dollars in thousands).
To Be Well
Capitalized Under
For Capital Prompt Corrective
Actual Adequacy Purposes Action Provisions
------ ----------------- -----------------
Amount Ratio Amount Ratio Amount Ratio
------ ----- ------ ----- ------ -----
Total capital to risk weighted $ 8,326 26.6 % * $ 2,501 8.0 % * $ 3,126 10.0 %
assets
Tier I capital to risk weighted 7,935 25.4 * 1,251 4.0 * 1,876 6.0
assets
Tier I capital to average assets 7,935 15.3 * 2,078 4.0 * 2,598 5.0
* denotes more than and equal to.
(20)
RUSK COUNTY BANCSHARES, INC. AND SUBSIDIARIES
19. Parent Company Only Condensed Financial Information
---------------------------------------------------
The condensed balance sheet, statement of income and statement of cash flows as
of and for the year ended December 31, 2000 of Rusk County Bancshares, Inc.
(Parent Company only) are presented below (in thousands).
Balance Sheet
December 31, 2000
ASSETS
------
Cash and cash equivalents $ -
Investment in subsidiary 7,970
--------------
$ 7,970
===============
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Other liabilities $ -
Stockholders' equity:
Common stock 510
Paid-in capital 3,592
Retained earnings 5,738
Accumulated other comprehensive income 33
--------------
9,873
Treasury stock, at cost (1,903)
--------------
Total stockholders' equity 7,970
--------------
$ 7,970
==============
(21)
RUSK COUNTY BANCSHARES, INC. AND SUBSIDIARIES
19. Parent Company Only Condensed Financial Information (Continued)
---------------------------------------------------------------
Statement of Income
For the Year Ended December 31, 2000
Interest income:
Dividends from subsidiary $ 98
Noninterest expense:
Other 59
-------
Income before undistributed earnings of subsidiary 39
Equity in undistributed earnings of subsidiary 560
-------
Net income $ 599
=======
(22)
RUSK COUNTY BANCSHARES, INC. AND SUBSIDIARIES
19. Parent Company Only Condensed Financial Information (Continued)
---------------------------------------------------------------
Statement of Cash Flows
For the Year Ended December 31, 2000
Cash flows from operating activities:
Net income $ 599
Adjustments to reconcile net income to net cash
provided by operating activities:
Equity in undistributed income of subsidiary (560)
-------
Net cash provided by operating activities 39
-------
Cash flows from financing activities:
Purchase of treasury stock (5)
Dividends paid on common stock (42)
-------
Net cash used in financing activities (47)
-------
Net decrease in cash and cash equivalents (8)
Cash and cash equivalents at beginning of year 8
-------
Cash and cash equivalents at end of year $ -
=======
20. Subsequent Event
----------------
On February 6, 2001, the Company's Board of Directors entered into an Agreement
and Plan of Reorganization (subject to certain conditions and contingencies,
including stockholder and regulatory approvals) to sell 100% of the outstanding
shares of voting stock of the Company to an unaffiliated commercial bank. The
acquisition, subject to the conditions described above, is expected to be
completed and the Company merged into the unaffiliated commercial bank during
the third quarter of 2001.
(23)
RUSK COUNTY BANCSHARES, INC.
AND SUBSIDIARIES
Interim Consolidated Financial Statements
June 30, 2001 and 2000
RUSK COUNTY BANCSHARES, INC. AND SUBSIDIARIES
Interim Consolidated Balance Sheet
June 30, 2001 and 2000
(Dollars in Thousands, Except Per Share Amounts)
(Unaudited)
2001 2000
---- ----
ASSETS
------
Cash and due from banks $ 3,101 $ 2,917
Federal funds sold 3,635 605
---------- ---------
Total cash and cash equivalents 6,736 3,522
Interest bearing deposits at other banks 12,817 8,311
Securities available for sale 3,318 4,587
Securities held to maturity 1,327 1,737
Loans, net 30,180 33,785
Bank premises and equipment, net 1,150 1,302
Accrued interest receivable 643 646
Other assets 861 75
---------- ---------
$ 57,032 $ 53,965
========== =========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Deposits:
Noninterest bearing $ 9,469 $ 8,776
Interest bearing 39,218 37,259
---------- ---------
Total deposits 48,687 46,035
Other liabilities 1,910 321
Commitments and contingencies - -
Stockholders' equity:
Capital stock, $2 par value; 500,000 shares authorized, 255,000
shares issued 510 510
Capital surplus 3,500 3,592
Retained earnings 4,275 5,424
Accumulated other comprehensive income (loss) 53 (14)
---------- ---------
8,338 9,512
Treasury stock, 87,177 shares, at cost (1,903) (1,903)
---------- ---------
Total stockholders' equity 6,435 7,609
---------- ---------
$ 57,032 $ 53,965
========== =========
See accompanying notes to consolidated financial statements.
(1)
RUSK COUNTY BANCSHARES, INC. AND SUBSIDIARIES
Interim Consolidated Statement of Income
For the Six Months Ended June 30, 2001 and 2000
(Dollars in Thousands, Except Per Share Amounts)
(Unaudited)
2001 2000
---- ----
Interest income:
Interest and fees on loans $ 1,488 $ 1,610
Interest and dividends on securities:
Taxable 164 194
Tax exempt 6 9
Interest on federal funds sold 40 21
Interest bearing deposits at other banks 368 257
--------- --------
Total interest income 2,066 2,091
--------- --------
Interest expense:
Deposit accounts 814 740
Other borrowings 1 6
--------- --------
Total interest expense 815 746
--------- --------
Net interest income 1,251 1,345
Provision for possible loan losses 124 24
--------- --------
Net interest income after provision 1,127 1,321
--------- --------
Noninterest income:
Service charges 260 250
Other 32 54
--------- --------
Total noninterest income 292 304
--------- --------
Noninterest expense:
Salaries and employee benefits 2,411 552
Occupancy of bank premises 164 203
Other 737 445
--------- --------
Total noninterest expense 3,312 1,200
--------- --------
(Loss) income before income taxes (1,893) 425
Income tax (benefit) expense (472) 140
--------- --------
Net (loss) income $ (1,421) $ 285
========= ========
Basic (loss) earnings per share $ (8.47) $ 1.70
========= ========
Diluted (loss) earnings per share $ (7.61) $ 1.53
========= ========
See accompanying notes to consolidated financial statements.
(2)
RUSK COUNTY BANCSHARES, INC. AND SUBSIDIARIES
Interim Consolidated Statement of Changes in Stockholders' Equity
For the Six Months Ended June 30, 2001 and 2000
(Dollars in Thousands, Except Per Share Amounts)
(Unaudited)
Accumulated
Other
Capital Capital Retained Comprehensive Treasury
Stock Surplus Earnings Income (Loss) Stock Total
----- ------- -------- ------------- ----- -----
Balance January 1, 2000 $ 510 $ 3,592 $ 5,181 $ (1) $ (1,898) $ 7,384
Comprehensive income:
Net income - - 285 - - 285
Net change in unrealized
depreciation on securities
available for sale, net of
tax - - - (13) - (13)
--------
Total comprehensive income - - - - - 272
Cash dividends - - (42) - - (42)
Purchase of treasury stock - - - - (5) (5)
------- ------- -------- -------- -------- --------
Balance June 30, 2000 $ 510 $ 3,592 $ 5,424 $ (14) $ (1,903) $ 7,609
======= ======= ======== ======== ======== ========
Balance January 1, 2001 $ 510 $ 3,592 $ 5,738 $ 33 $ (1,903) $ 7,970
Comprehensive income:
Net loss - - (1,421) - - (1,421)
Net change in unrealized
appreciation on securities
available for sale, net of
tax - - - 20 - 20
--------
Total comprehensive loss - - - - - (1,401)
Cash dividends - - (42) - - (42)
Settlement of stock options - (92) - - - (92)
------- ------- -------- -------- -------- --------
Balance June 30, 2001 $ 510 $ 3,500 $ 4,275 $ 53 $ (1,903) $ 6,435
======= ======= ======== ======== ======== ========
See accompanying notes to consolidated financial statements.
(3)
RUSK COUNTY BANCSHARES, INC. AND SUBSIDIARIES
Interim Consolidated Statement of Cash Flows
For the Six Months Ended June 30, 2001 and 2000
(Dollars in Thousands, Except Per Share Amounts)
(Unaudited)
2001 2000
---- ----
Cash flows from operating activities:
Net (loss) income $ (1,421) $ 285
Adjustments to reconcile net (loss) income to net cash provided
by operating activities:
Depreciation 72 92
Accretion net of amortization - (4)
Provision for possible loan losses 124 24
Increase in net accrued interest, prepaid expenses
and other assets (722) (118)
Increase (decrease) in other liabilities 1,464 (84)
----------------- -----------
Net cash (used in) provided by operating activities (483) 195
----------------- -----------
Cash flows from investing activities:
Increase in interest bearing deposits at other banks (3,120) (490)
Purchase of securities available for sale - (1,479)
Proceeds from maturities, sales, and calls of securities available of sale 654 -
Proceeds from maturities and calls of securities held to maturity 227 206
Net loans repaid (originated) 295 (1,335)
Net additions to premises and equipment (2) (52)
----------------- -----------
Net cash used in investing activities (1,946) (3,150)
----------------- -----------
Cash flows from financing activities:
Net increase in demand deposits, NOW and savings accounts 3,001 1,602
Net additions of certificates of deposit 532 114
Dividends paid (42) (42)
Purchase of treasury stock - (5)
----------------- -----------
Net cash provided by financing activities 3,491 1,669
----------------- -----------
Net increase (decrease) in cash and cash equivalents 1,062 (1,286)
Cash and cash equivalents at beginning of period 5,674 4,808
----------------- -----------
Cash and cash equivalents at end of period $ 6,736 $ 3,522
================= ===========
See accompanying notes to consolidated financial statements.
(4)
RUSK COUNTY BANCSHARES, INC. AND SUBSIDIARIES
Notes to Interim Consolidated Financial Statements
June 30, 2001 and 2000
(Dollars in Thousands, Except Per Share Amounts)
(Unaudited)
1. Summary of Significant Accounting Policies
------------------------------------------
These interim consolidated financial statements are prepared without audit and
reflect all adjustments that, in the opinion of management, are necessary to
present fairly the consolidated financial position of Rusk County Bancshares,
Inc. and Subsidiaries (Company) at June 30, 2001 and 2000, and their
consolidated results of operations and cash flows for the six month periods then
ended. All such adjustments are normal and recurring in nature. The accompanying
financial statements have been prepared in accordance with the instructions
established by the Securities and Exchange Commission (SEC). Accordingly, these
financial statements do not purport to contain all necessary financial
disclosures required by generally accepted accounting principles that might
otherwise be necessary in the circumstances, and should be read in conjunction
with the financial statements, and notes thereto, of the Company for the year
ended December 31, 2000, included herein. The accounting policies of the Company
conform to generally accepted accounting principles and practices generally
followed within the banking industry. Refer to the accounting policies of the
Company described in the notes to financial statements contained in the 2000
consolidated financial statements. The Company has consistently followed these
policies in preparing these interim consolidated financial statements.
The Company provides a full range of banking services to individual and
corporate customers and is subject to competition from other financial
institutions. The Company is subject to the regulations of certain federal
agencies and periodic examinations by those regulatory authorities.
To prepare financial statements in conformity with generally accepted accounting
principles, management makes estimates and assumptions based on available
information. These estimates and assumptions affect the amounts reported in the
financial statements and the disclosures provided, and actual future results
could differ. The allowance for loan losses, fair values of financial
instruments, and status of contingencies are particularly subject to change.
(5)
RUSK COUNTY BANCSHARES, INC. AND SUBSIDIARIES
2. Recent Accounting Pronouncements
--------------------------------
In June 1998, the Financial Accounting Standards Board (FASB) issued SFAS No.
133, "Accounting for Derivative Instruments and Hedging Activities", which
establishes accounting and reporting standards for derivative instruments and
hedging activities. It requires that an entity recognize all derivatives as
either assets or liabilities in the statement of financial position and measure
those instruments at fair value. The Company, should it acquire such derivative
instruments or should it engage in such hedging activities, will adopt SFAS 133
(as later amended by SFAS 137) as required for its year ended December 31, 2001.
In September 2000, FASB issued SFAS No. 140, "Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities". SFAS 140
replaces SFAS 125 and resolves various implementation issues while carrying
forward most of the provisions of SFAS 125 without change. SFAS 140 revises
standards for transfers of financial assets by clarifying criteria and expanding
guidance for determining whether the transferor has relinquished control and the
transfer is therefore accounted for as a sale. SFAS 140 also adopts new
accounting requirements for pledged collateral and requires new disclosures
about securitizations and pledged collateral. SFAS 140 is effective for
transfers occurring after March 31, 2001 and for disclosures relating to
securitization transactions and collateral for fiscal years ending after
December 15, 2000. Management does not expect this standard to have a material
effect on the Company's financial statements.
In June 2001, FASB issued SFAS No. 141, "Business Combinations" and SFAS No.
142, "Goodwill and Other Intangible Assets". SFAS 141 addresses financial
accounting and reporting for business combinations and requires use of the
purchase method of accounting for business combinations. SFAS 142 addresses
financial accounting and reporting for acquired goodwill and other intangible
assets, both pre-existing and newly created goodwill and other intangibles.
Pre-existing goodwill and other intangible assets which do not arise from
contractual or other legal rights and which are not separable, either
individually or in combination with a related contract, asset or liability, are
to be periodically (but at least annually) reviewed for impairment only and are
not subject to future amortization. Newly created goodwill and other intangible
assets are to be segregated between those that are recognizable and have a
finite life and those that are either not recognizable or determined to have an
indefinite life. Recognizable intangible assets shall be amortized over their
estimated useful lives under a method that best reflects the patterns in which
the economic benefits are consumed, while unrecognizable intangible assets or
intangible assets which are deemed to have an indefinite life shall not be
amortized but periodically (as least annually) reviewed for impairment. SFAS 141
is effective for all business combinations initiated after June 30, 2001, while
SFAS 142 is effective for fiscal years beginning after December 15, 2001.
Management has yet to determine the effects of adoption of SFAS 141 and SFAS
142.
(6)
RUSK COUNTY BANCSHARES, INC. AND SUBSIDIARIES
3. Earnings Per Share
------------------
Earnings per share is computed in accordance with SFAS No. 128, "Earnings Per
Share", which requires presentation of basic and diluted earnings per share
(EPS) for entities with complex capital structures. Basic EPS is based on net
income divided by the weighted-average number of shares outstanding during the
period. Diluted EPS includes the dilutive effect of stock options granted using
the treasury stock method. Following is a reconciliation of the numerators and
denominators of basic and diluted per-share computations for the six months
ended June 30, 2001 and 2000 (dollars in thousands):
Income Shares Per-Share
(Numerator) (Denominator) Amount
----------- ------------- ------
June 30, 2001:
Basic EPS:
Loss allocable to common
shareholders $ (1,421) 167,823 $ (8.47)
=============
Effect of Dilutive Securities:
Stock options - 18,860
------------- -------------
Diluted EPS:
Loss allocable to common
shareholders and assumed
conversions $ (1,421) 186,683 $ (7.61)
============= ============= =============
June 30, 2000:
Basic EPS:
Income available to common
shareholders $ 285 167,823 $ 1.70
=============
Effect of Dilutive Securities:
Stock options - 18,885
------------- -------------
Diluted EPS:
Income available to common
shareholders and assumed
conversions $ 285 186,708 $ 1.53
============= ============= =============
(7)
RUSK COUNTY BANCSHARES, INC. AND SUBSIDIARIES
4. Statement of Cash Flows
-----------------------
The Company has chosen to report on a net basis its cash receipts and cash
payments for time deposits accepted and repayments of those deposits, loans made
to customers and principal collections on those loans and purchases and
redemptions of interest bearing deposits in other banks.
The Company has chosen to report its cash flows by the indirect method.
Supplemental information on cash flows for the six months ended June 30, 2001
and 2000 is as follows (in thousands):
2001 2000
---- ----
Cash transactions:
Interest expense paid $ 872 $ 785
================= =================
5. Securities
----------
Securities have been classified in the balance sheet according to management's
intent. The carrying amount of securities and their approximate fair values by
classification at June 30, 2001 and 2000 are as follows (in thousands):
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
---- ----- ------ -----
Securities Classified as Available for
--------------------------------------
Sale
----
June 30, 2001:
Obligations of U.S. government
agencies and corporations $ 2,932 $ 68 $ - $ 3,000
Pass-through certificates issued by
FHLMC, GNMA and FNMA 305 13 - 318
--------- ---------- ---------- ---------
$ 3,237 $ 81 $ - $ 3,318
========= ========== ========== =========
June 30, 2000:
Obligations of U.S. government
agencies and corporations $ 4,024 $ - $ 30 $ 3,994
Pass-through certificates issued by
FHLMC, GNMA and FNMA 404 10 1 413
Other 108 - - 180
--------- ---------- ---------- ---------
$ 4,608 $ 10 $ 31 $ 4,587
========= ========== ========== =========
(8)
RUSK COUNTY BANCSHARES, INC. AND SUBSIDIARIES
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
---- ----- ------ -----
Securities Classified as Held to Maturity
-----------------------------------------
June 30, 2001:
Municipal securities $ 310 $ 6 $ - $ 316
Pass-through certificates issued by
FHLMC, GNMA and FNMA 1,017 8 - 1,025
--------- ---------- --------- --------
$ 1,327 $ 14 $ - $ 1,341
========= ========== ========= ========
June 30, 2000:
Municipal securities $ 310 $ 4 $ - $ 314
Pass-through certificates issued by
FHLMC, GNMA and FNMA 1,427 4 25 1,406
--------- ---------- --------- --------
$ 1,737 $ 8 $ 25 $ 1,720
========= ========== ========= ========
The amortized cost and estimated fair value of securities at June 30, 2001, by
contractual maturity, are shown below (in thousands). Expected maturities will
differ from contractual maturities because issuers may have the right to call or
prepay obligations with or without call or prepayment penalties.
Securities Available for Sale Securities Held to Maturity
----------------------------- ---------------------------
Amortized Fair Amortized Fair
Cost Value Cost Value
---- ----- ---- -----
Due from one to five years $ 2,932 $ 3,000 $ 285 $ 291
Due from five to ten years - - 25 25
-------- --------- --------- --------
2,932 3,000 310 316
Pass-through certificates issued by
FHLMC, GNMA and FNMA 305 318 1,017 1,025
-------- --------- --------- --------
$ 3,237 $ 3,318 $ 1,327 $ 1,341
======== ========= ========= ========
(9)
RUSK COUNTY BANCSHARES, INC. AND SUBSIDIARIES
6. Loans and Allowance for Possible Loan Losses
--------------------------------------------
Loans at June 30, 2001 and 2000 consisted of the following (in thousands):
2001 2000
---- ----
Real estate $ 16,686 $ 17,515
Commercial 5,596 7,736
Consumer 6,426 6,796
Agricultural 1,979 2,136
Other 21 45
---------------- ----------------
30,708 34,228
Allowance for possible loan losses ( 528 ) ( 443 )
---------------- ----------------
$ 30,180 $ 33,785
================ ================
The Company extends commercial and consumer credit primarily to customers in the
State of Texas. At June 30, 2001 and 2000, substantially all of the Company's
loans were collateralized with real estate, inventory, accounts receivable,
equipment and/or other assets. Although the Company has a diversified loan
portfolio, its debtors' ability to honor their contracts is substantially
dependent upon the general economic conditions of the region.
The Company is not committed to lend additional funds to debtors whose loans
have been modified.
An analysis of the allowance for possible loan losses for the six months ended
June 30, 2001 and 2000 is as follows (in thousands):
2001 2000
---- ----
Balance at beginning of period $ 412 $ 428
Provision charged to earnings 124 24
Loans charged to the allowance account ( 27 ) ( 17 )
Recoveries on loans previously charged-off 19 8
---------------- ----------------
Balance at end of period $ 528 $ 443
================ ================
(10)
RUSK COUNTY BANCSHARES, INC. AND SUBSIDIARIES
7. Deposits
--------
Deposits at June 30, 2001 and 2000 consisted of the following (in thousands):
June 30, 2001 June 30, 2000
------------- -------------
Amount Percent Amount Percent
------ ------- ------ -------
Noninterest bearing demand accounts $ 9,469 19.4 % $ 8,776 19.1 %
Interest bearing demand accounts 17,441 35.8 15,583 33.9
Savings accounts 2,541 5.2 2,382 5.2
Certificates of deposit, less than 13,644 28.0 14,705 31.9
$100,000
Certificates of deposit, $100,000
and greater 5,592 11.6 4,589 9.9
------------ ------------- ------------ ------------
$ 48,687 100.0 % $ 46,035 100.0 %
============ ============= ============ ============
8. Financial Instruments
---------------------
The Company is a party to financial instruments with off-balance sheet risk in
the normal course of business to meet the financing needs of its customers.
These financial instruments include commitments to extend credit and standby
letters of credit. Those instruments involve, to varying degrees, elements of
credit and interest rate risk in excess of the amount recognized in the balance
sheet.
The Company's exposure to credit loss in the event of nonperformance by the
other party to the financial instrument for commitments to extend credit and
standby letters of credit is represented by the contractual amount of these
instruments. The Company uses the same credit policies in making commitments and
conditional obligations as it does for on-balance sheet instruments. At June 30,
2001 and 2000, the approximate amounts of these financial instruments were as
follows (in thousands):
2001 2000
---- ----
Financial instruments whose contract amounts
Represent credit risk:
Commitments to extend credit $ 4,316 $ 3,237
Standby letters of credit 10 60
---------------- ----------------
$ 4,326 $ 3,297
================ ================
(11)
RUSK COUNTY BANCSHARES, INC. AND SUBSIDIARIES
Commitments to extend credit are agreements to lend to a customer as long as
there is no violation of any condition established in the contract. Commitments
generally have fixed expiration dates or other termination clauses and may
require payment of a fee. Since many of the commitments are expected to expire
without being drawn upon, the total commitment amounts do not necessarily
represent future cash requirements. The Company evaluates each customer's
creditworthiness on a case-by-case basis. The amount of collateral obtained, if
it is deemed necessary by the Company upon extension of credit, is based on
management's credit evaluation of the counterparty. Collateral held varies but
may include accounts receivable, inventory, property, plant and equipment and
income-producing commercial properties.
Standby letters of credit are conditional commitments issued by the Company to
guarantee the performance of a customer to a third party. Those guarantees are
primarily issued to support public and private borrowing arrangements, including
commercial paper, bond financing, and similar transactions. The credit risk
involved in issuing letters of credit is essentially the same as that involved
in extending loan facilities to customers. The Company's policy for obtaining
collateral and the nature of such collateral is essentially the same as that
involved in making commitments to extend credit.
Although the maximum exposure to loss is the amount of such commitments,
management currently anticipates no losses from such activities.
9. Subsequent Event
----------------
On February 6, 2001, the Company's Board of Directors entered into an Agreement
and Plan of Reorganization (subject to certain conditions and contingencies,
including stockholder and regulatory approvals) to sell 100% of the outstanding
shares of voting stock and 100% of the outstanding and unexercised stock options
of the Company to an unaffiliated commercial bank. The acquisition, subject to
the conditions described above, is expected to be completed and the Company
merged into the unaffiliated commercial bank during the third quarter of 2001.
(12)
EX-7.2
4
dex72.txt
PRO FORMA FINANCIAL INFORMATION
EXHIBIT 7.2
SUMMARY UNAUDITED PROFORMA COMBINED CONDENSED FINANCIAL DATA
The accompanying summary unaudited proforma combined condensed balance
sheet and income statement combines the historical consolidated financial
statements of Henderson Citizens Bancshares, Inc. and Subsidiaries with the
historical consolidated financial statements of Rusk County Bancshares, Inc. and
Subsidiaries and are intended to give a better picture of what the companies
might have looked like as a combined entity. The summary unaudited proforma
condensed combined balance sheet data assumes that the Rusk County Bancshares,
Inc. and Subsidiaries merger was consummated on June 30, 2001. The summary
unaudited proforma condensed combined statements of income data assumes that the
Rusk County Bancshares, Inc. and Subsidiaries merger was consummated as of
January 1, 2001. The companies may have performed differently if they had been
combined.
The merger of Rusk County Bancshares, Inc. and Subsidiaries will be
accounted for under the "purchase method" of accounting in accordance with
generally accepted accounting principles. We anticipate that approximately $4.6
million in goodwill will be created as a result of the Rusk County Bancshares,
Inc. and Subsidiaries acquisition. The accompanying unaudited proforma combined
condensed financial statements should be read in conjunction with the historical
consolidated financial statements and notes thereto of Henderson Citizens
Bancshares, Inc. and Subsidiaries and the historical consolidated financial
statements and notes thereto of Rusk County Bancshares, Inc. and Subsidiaries.
The following unaudited proforma combined condensed financial
statements are presented for information purposes only and are not necessarily
indicative of the results of future operations of the combined entity or the
actual results that would have been achieved had the merger been consummated on
the dates presented. No adjustments for possible cost synergies are reflected in
the table below.
HENDERSON CITIZENS BANCSHARES, INC. AND SUBSIDIARIES
Proforma Combined Condensed Balance Sheet
June 30, 2001
(Dollars in Thousands)
(Unaudited)
Henderson Citizens Rusk County
Bancshares, Inc. Bancshares, Inc.
Consolidated Consolidated Proforma Proforma
(Historical) (Historical) Adjustments Combined
------------ ------------ ----------- --------
ASSETS
------
Cash and cash equivalents $ 51,543 $ 6,736 $ (11,279)(3) $ 47,000
Interest bearing deposits at other banks - 12,817 - 12,817
Securities available for sale 157,541 3,318 - 160,859
Securities held to maturity 49,759 1,327 - 51,086
Loans, net 175,362 30,180 - 205,542
Premises and equipment, net 8,953 1,150 400 (1) 10,503
Accrued interest receivable 4,010 643 - 4,653
Goodwill and other intangible assets 3,907 - 4,580 (2) 8,487
Other assets 4,038 861 - 4,899
---------- ---------- --------- ---------
$ 455,113 $ 57,032 $ (6,299) $ 505,846
========== ========== ========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Liabilities:
Noninterest bearing deposits $ 59,013 $ 9,469 $ - $ 68,482
Interest bearing deposits 350,361 39,218 - 389,579
---------- ---------- --------- ---------
Total deposits 409,374 48,687 - 458,061
Other liabilities 3,936 1,910 136 (1) 5,982
Stockholders' equity:
Preferred stock - - - -
Common stock 10,800 510 (510)(4) 10,800
Additional paid-in capital 5,400 3,500 (3,500)(4) 5,400
Retained earnings 27,583 4,275 (4,275)(4) 27,583
Accumulated other comprehensive income 417 53 (53)(4) 417
Treasury stock (2,397) (1,903) 1,903 (4) (2,397)
---------- ---------- --------- ---------
Total stockholders' equity 41,803 6,435 (6,435) 41,803
---------- ---------- --------- ---------
$ 455,113 $ 57,032 $ (6,299) $ 505,846
========== ========== ========= =========
HENDERSON CITIZENS BANCSHARES, INC. AND SUBSIDIARIES
Proforma Combined Condensed Statement of Income
For the Six Months Ended June 30, 2001
(Dollars in Thousands)
(Unaudited)
Henderson Citizens Rusk County
Bancshares, Inc. Bancshares, Inc.
Consolidated Consolidated Proforma Proforma
(Historical) (Historical) Adjustments Combined
------------ ------------ ----------- --------
Interest income:
Loans $ 7,201 $ 1,488 $ - $ 8,689
Securities 5,881 170 - 6,051
Federal funds sold 485 40 - 525
Interest bearing deposits atother
banks 381 368 - 749
---------- ---------- --------- ----------
Total interest income 13,948 2,066 - 16,014
---------- ---------- --------- ----------
Interest expense 7,774 815 - 8,589
---------- ---------- --------- ----------
Net interest income 6,174 1,251 - 7,425
Provision for loan losses 230 124 - 354
---------- ---------- --------- ----------
Net interest income after
provision for loan losses 5,944 1,127 - 7,071
---------- ---------- --------- ----------
Noninterest income 3,287 292 - 3,579
Noninterest expense 6,833 3,312 - 10,145
---------- ---------- --------- ----------
Income (loss) before income taxes 2,398 (1,893) - 505
Income tax expense (benefit) 370 (472) - (102)
---------- ---------- --------- ----------
Net income (loss) $ 2,028 $ (1,421) $ - $ 607
========== ========== ========= ==========
HENDERSON CITIZENS BANCSHARES, INC. AND SUBSIDIARIES
(1) Represents adjustment of Rusk County Bancshares, Inc. and Subsidiaries
net assets to estimated fair value.
(2) Represents excess of purchase price over estimated fair value of net
assets of Rusk County Bancshares, Inc. and Subsidiaries.
(3) Represents agreed-upon purchase price of all outstanding stock of Rusk
County Bancshares, Inc. and Subsidiaries.
(4) Represents reallocation of equity section due to purchase and
subsequent merger of Rusk County Bancshares, Inc. and Subsidiaries with
and into Henderson Citizens Bancshares, Inc. and Subsidiaries.
(5) No adjustment for amortization of goodwill and other intangibles
created in conjunction with acquisition of Rusk County Bancshares, Inc.
and Subsidiaries has been taken into consideration, pending
implementation of Statements of Financial Accounting Standards Number
141, "Business Combinations" and Number 142 "Goodwill and Other
Intangible Assets".