-----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, QL/HWWfqgXnMylCs41uH3b8GmdmGZ3LAlH/QCU1M7lvfCD1/3z8Yqq00sp7/YDDi /PIcXtLsFc3nd+RNvmyw0Q== 0000899243-96-001463.txt : 19961118 0000899243-96-001463.hdr.sgml : 19961118 ACCESSION NUMBER: 0000899243-96-001463 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19960930 FILED AS OF DATE: 19961114 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: FORT BEND HOLDING CORP CENTRAL INDEX KEY: 0000896766 STANDARD INDUSTRIAL CLASSIFICATION: SAVINGS INSTITUTION, FEDERALLY CHARTERED [6035] IRS NUMBER: 760391720 STATE OF INCORPORATION: DE FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-21328 FILM NUMBER: 96662548 BUSINESS ADDRESS: STREET 1: 3400 AVENUE H CITY: ROSENBERG STATE: TX ZIP: 77471 BUSINESS PHONE: 7133425571 10-Q 1 FORM 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-QSB [X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 1996 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File No. 0 - 21328 FORT BEND HOLDING CORP. A Delaware Corporation I.R.S. Employer Identification No. 76-0391720 Address Telephone Number 3400 Avenue H (713) 342-5571 Rosenberg, Texas 77471 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 twelve 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 . ---- ---- There were 907,372 shares and 819,198 shares of Common Stock ($0.01 par value) issued and outstanding, respectively as of October 1, 1996. 1 of 24 PART I - FINANCIAL INFORMATION ITEM 1 - FINANCIAL STATEMENTS FORT BEND HOLDING CORP. CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL CONDITION (Unaudited)
ASSETS September 30, 1996 March 31, 1996 ------------------ -------------- Cash and due from banks $ 5,807,516 $ 3,451,880 Short-term investments 8,323,211 13,541,782 Certificates of deposit 200,000 200,000 ------------ ------------ Total cash and cash equivalents 14,330,727 17,193,662 Investment securities available for sale, at market value 2,740,491 2,684,607 Investment securities held to maturity (estimated market value of $21,899,058 and $9,064,153 at September 30, 1996 and March 31, 1996, respectively) 22,221,861 9,233,505 Mortgage-backed securities available for sale, at market value 723,355 873,502 Mortgage-backed securities held to maturity (estimated market value of $103,019,682 and $110,676,779 at September 30, 1996 and March 31, 1996, respectively) 103,809,238 110,489,617 Loans receivable, net 122,150,817 92,861,594 Loans held for sale 74,857 922,422 Accrued interest receivable 1,687,563 1,466,272 Real estate, net 871,634 155,372 Federal Home Loan Bank stock, at cost 1,878,300 1,460,200 Premises and equipment, net 4,563,745 3,635,046 Mortgage servicing rights, net 2,468,087 1,235,714 Prepaid expenses and other assets 2,420,625 1,538,171 Deferred income taxes 423,123 418,949 Goodwill, net 1,329,959 --- ------------ ------------ Total assets $281,694,382 $244,168,633 ============ ============ LIABILITIES AND STOCKHOLDERS' EQUITY Liabilities: Deposits $235,123,114 $203,913,715 Convertible Subordinated Debentures 12,100,000 12,100,000 Other borrowings 4,295,563 4,363,688 Advances from borrowers for taxes and insurance 8,992,026 4,224,796 Accounts payable, accrued expenses and other liabilities 3,787,068 1,994,063 ------------ ------------ Total liabilities 264,297,771 226,596,262 ------------ ------------ Stockholders' Equity: Serial preferred stock, $.01 par value - 500,000 shares authorized, none outstanding Common Stock $.01 par value, 2,000,000 shares authorized 907,372 shares issued and 819,198 shares outstanding at September 30, 1996 and 905,572 shares issued and 817,398 shares outstanding at March 31, 1996 9,073 9,055 Additional paid-in capital 8,580,932 8,514,562 Unearned employee stock ownership plan shares (351,000) (394,875) Deferred compensation (106,921) (98,668) Net unrealized depreciation on available for sale securities, net of tax (11,756) (21,786) Retained earnings (substantially restricted) 10,732,784 11,020,584 Treasury stock, at cost - 88,174 shares at September 30, 1996 and March 31, 1996 (1,456,501) (1,456,501) ------------ ------------ Total stockholders' equity 17,396,611 17,572,371 ------------ ------------ Total liabilities and stockholders' equity $281,694,382 $244,168,633 ============ ============
The accompanying notes are an integral part of the condensed consolidated financial statements. 2 FORT BEND HOLDING CORP. CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (Unaudited)
Three Months Ended Six Months Ended September 30, September 30, ---------------------------- ---------------------------- 1996 1995 1996 1995 ----------- ----------- ----------- ----------- Interest Income: Loans $2,389,598 $1,813,066 $4,520,287 $3,546,958 Short-term investments 231,586 88,870 418,981 166,765 Investment securities 202,532 189,560 350,528 439,858 Mortgage-backed securities 1,755,901 1,953,969 3,585,160 3,896,698 ---------- ---------- ---------- ---------- Total interest income 4,579,617 4,045,465 8,874,956 8,050,279 ---------- ---------- ---------- ---------- Interest expense: Deposits 2,467,155 2,334,249 4,787,306 4,583,685 Borrowings 335,644 115,159 665,694 252,071 ---------- ---------- ---------- ---------- Total interest expense 2,802,799 2,449,408 5,453,000 4,835,756 ---------- ---------- ---------- ---------- Net interest income before provision for loan losses 1,776,818 1,596,057 3,421,956 3,214,523 Provision for loan losses 43,000 18,000 68,000 45,053 ---------- ---------- ---------- ---------- Net interest income after provision for loan losses 1,733,818 1,578,057 3,353,956 3,169,470 ---------- ---------- ---------- ---------- Noninterest income: Gain (loss) on sale of loans 56,350 64,640 106,299 123,845 Service charges 131,092 72,607 244,510 147,239 Loan servicing income 193,524 134,453 363,155 275,252 Other income 317,032 215,670 596,170 398,326 ---------- ---------- ---------- ---------- Total noninterest income 697,998 487,370 1,310,134 944,662 ---------- ---------- ---------- ---------- Noninterest expenses: Compensation and benefits 938,549 767,365 1,770,420 1,532,137 Office occupancy and equipment 242,525 158,452 429,545 323,350 Federal insurance premiums 133,307 113,924 257,589 227,215 Savings Association Insurance Fund Assessment 1,492,686 --- 1,492,686 --- Amortization of mortgage servicing rights 82,787 48,076 147,037 108,076 Insurance and surety bond expense 37,923 28,389 71,539 54,458 Other 404,070 282,155 780,586 575,875 ---------- ---------- ---------- ---------- Total noninterest expenses 3,331,847 1,398,361 4,949,402 2,821,111 Income (loss) before income tax (900,031) 667,066 (285,312) 1,293,021 Income tax provision (benefit) (321,200) 226,112 (112,200) 449,012 ---------- ---------- ---------- ---------- Net income (loss) $ (578,831) $ 440,954 $ (173,112) $ 844,009 ========== ========== ========== ========== Primary earnings (loss) per common share $ (0.69) $ 0.50 $ (0.21) $ 0.96 ========== ========== ========== ========== Fully diluted earnings (loss) per common share $ (0.69) $ 0.50 $ (0.21) $ 0.96 ========== ========== ========== ========== Dividends per common share $ 0.07 $ 0.07 $ 0.14 $ 0.14 ========== ========== ========== ==========
The accompanying notes are an integral part of the condensed consolidated financial statements. 3 FORT BEND HOLDING CORP. CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited)
Six Months Ended September 30, ------------------------------- 1996 1995 ------------ ------------ Operating activities: Net income (loss) $ (173,112) $ 844,009 Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Provision for losses on loans and real estate 68,000 45,053 Depreciation 134,898 100,081 Amortization of deferred compensation 24,597 21,312 Compensation charge related to release of ESOP shares 33,538 32,461 Amortization of premiums and discounts on securities, net 6,064 71,547 Amortization of loan premium, discount, and deferred fees, net (119,248) (83,665) Deferred income tax provision (benefit) (9,172) 114,883 Gain on sale of real estate (31,087) (13,583) Amortization of unearned income (6,070) --- Amortization of mortgage servicing rights 147,037 (2,733) Amortization of debt issue costs 40,218 108,076 Amortization of goodwill 6,796 Net (gain) loss on sale of loans (92,864) (123,845) Dividends on Federal Home Loan Bank stock (48,100) (45,500) Origination of loans held for sale (6,264,911) (5,565,886) Proceeds from sale of loans 7,205,340 4,976,183 Net change in accrued interest receivable (221,291) (25,457) Net change in prepaid expenses and other assets (739,672) (723,303) Net change in accounts payable, accrued expenses and other liabilities 1,601,073 18,669 ----------- ----------- Net cash provided by (used in) operating activities 1,562,034 (251,698) ----------- -----------
Continued 4 FORT BEND HOLDING CORP. CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited)
Six Months Ended September 30, ------------------------------- 1996 1995 ------------- -------------- Investing activities: Net change in loans receivable (9,171,383) (7,072,479) Proceeds from sale of real estate 37,233 13,123 Improvements to real estate -- (1,118) Purchase of premises and equipment (373,595) (68,494) Proceeds from maturity of investment securities 10,000,000 1,000,000 Purchase or origination of mortgage servicing rights (1,379,410) (53,074) Purchase of investment securities available for sale (58,473) --- Principal collected on mortgage-backed securities held to maturity 6,670,245 6,158,258 Principal collected on mortgage-backed securities available for sale 167,974 (2,485,347) Purchase of investment securities held to maturity (22,984,496) --- Net cash acquired in acquisition 3,541,250 --- ------------ ------------- Net cash used in investing activities (13,550,655) (2,509,131) ------------ ------------- Financing activities: Net increase in deposits 4,658,394 7,729,453 Net increase (decrease) in short-term borrowings --- 160,300,000 Payment on long-term borrowings (24,250) (165,807,677) Increase in advances from borrowers for taxes and insurance 4,606,230 4,229,859 Net proceeds from issuance of common stock --- 15,500 Dividends paid (114,688) (120,390) Purchase of treasury stock --- (168,750) ------------ ------------- Net cash provided by financing activities 9,125,686 6,177,995 ------------ ------------- Net increase (decrease) in cash and cash equivalents (2,862,935) 3,417,166 Cash and cash equivalents at beginning of period 17,193,662 6,832,312 ------------ ------------- Cash and cash equivalents at end of period $ 14,330,727 $ 10,249,478 ============ ============= Supplemental disclosure of cash flow information: Cash paid for: Interest $ 2,890,723 $ 2,385,986 Income taxes 420,000 425,000 Supplemental disclosure of noncash activities: Real estate acquired in settlement of loans $ 617,408 $ 1,435 Loans originated related to sales of real estate 182,000 69,300 Stock issued to recognition and retention plan 32,850 22,500 Reduction of ESOP debt by the ESOP 43,875 43,875 Net unrealized depreciation on available for sale securities, net of tax 10,030
The accompanying notes are an integral part of the condensed consolidated financial statements. 5 Financial Statements, Continued NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 1. BASIS OF PRESENTATION The unaudited information for the three and six months ended September 30, 1996 and 1995 includes the results of operations of Fort Bend Holding Corp. (the "Holding Corp.") and its wholly-owned subsidiary Fort Bend Federal Savings and Loan Association of Rosenberg (the "Association"). In the opinion of management, the information reflects all adjustments (consisting only of normal recurring adjustments) which are necessary for a fair presentation of the results of operations for such periods but should not be considered as indicative of results for a full year. The March 31, 1996 condensed consolidated statement of financial condition data was derived from the audited financial statements, but does not include all disclosures required by generally accepted accounting principles. Accordingly, the condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements. 2. RECOGNITION AND RETENTION PLAN The Holding Corp. has a Recognition and Retention Plan ("RRP") as a method of providing key officers with a proprietary interest in the Holding Corp. in a manner designed to encourage such individuals to remain with the Holding Corp. or the Association. All outstanding awards vest at a rate of 20% per year. On April 1, 1996, an additional 1,800 shares were granted under the RRP. A total of 26,325 shares have been authorized of which 21,852 shares had been granted under the RRP as of September 30, 1996. 3. IMPAIRED LOANS Impaired loans decreased $412,000 during the three months ended September 30, 1996 and $1,405,000 during the six months ended September 30, 1996. The recent quarter decline resulted from the foreclosure of a commercial real estate loan while the prior quarter decline reflected the payoff of a multifamily loan. Each of these loans were previously recognized as impaired. The following table summarizes impaired loan information as of September 30, 1996. Impaired loans $2,458,000 Impaired loans which have a specific reserve for loan losses calculated under SFAS 114 -0- Impaired loans which do not have a specific reserve for loan losses calculated under SFAS 114 $2,458,000 6 Financial Statements, Continued NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, Continued (Unaudited) 4. OTHER BORROWINGS Borrowings at September 30, 1996 consisted of a $4.0 million advance from the Federal Home Loan Bank bearing a rate of 6.205% amortizing based on a 30 year term and maturing on June 20, 2000. The advance is collateralized by mortgage-backed securities. Borrowings also included an ESOP loan with a balance of $351,000 at September 30, 1996 with principal payments due each June 30 and December 31 and maturing June 30, 2001. The following is a schedule by fiscal year of future principal payments required under the amortizing advance agreement and the ESOP loan: FHLB Advances ESOP Loan ------------- --------- 1997 $ 25,012 $43,875 1998 52,405 87,750 1999 55,752 87,750 2000 59,312 87,750 2001 3,752,082 43,875 5. EARNINGS PER COMMON SHARE Primary earnings per common share for the three and six months ended September 30, 1996 have been computed based on net income divided by the weighted average number of common shares and common share equivalents outstanding during the period. When dilutive, stock options are included as share equivalents using the treasury stock method. Additionally, net income and shares outstanding are adjusted to assume the conversion of the Convertible Subordinated Debentures for fully diluted earnings per common share. For purposes of determining primary earnings per share the weighted average number of common shares and common share equivalents outstanding for the three and six months ended September 30, 1996 was 842,476 and for fully-diluted earnings per share, 1,402,658. 6. SUBSEQUENT EVENTS On October 25, 1996, the Holding Corp. declared a cash dividend of $.07 per share payable on December 6, 1996 to shareholders of record on November 15, 1996. On August 5, 1996, the Association signed a letter of intent and on October 31, 1996, signed a definitive agreement with The Woodlands Corporation to acquire a controlling interest in a new limited liability company to be called the New Mitchell Mortgage Company ("New Mitchell"). It is being formed for the purpose of engaging in the mortgage banking business, including the origination and servicing of single family purchase loans, single family construction loans and commercial and multifamily real estate loans. The Woodlands would contribute certain mortgage loans and its mortgage 7 Financial Statements, Continued NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, Continued (Unaudited) servicing portfolio and liabilities of its wholly-owned mortgage banking subsidiary, Mitchell Mortgage Company ("Mitchell"), in exchange for a 49% ownership interest in New Mitchell and Fort Bend would contribute cash of approximately $2.6 million in exchange for a 51% ownership interest in New Mitchell. Mitchell Mortgage Company was formed in 1974 and has had a mortgage banking relationship with Fort Bend Holding Corp. for seven years. The transaction should be completed by January, 1997. New Mitchell is proposed to be operated in a manner consistent with that currently engaged in by Mitchell, and will have approximately $600 million of loan servicing. 7. SPECIAL DEPOSIT INSURANCE ASSESSMENT The deposits of savings institutions such as the Association are presently insured by the Savings Association Insurance Fund (the "SAIF"), which, along with the Bank Insurance Fund (the "BIF"), are the two insurance funds administered by the Federal Deposit Insurance Corporation (the "FDIC"). Financial institutions which are members of the BIF have experienced substantially lower deposit insurance premiums because the BIF has achieved its required level of reserves while the SAIF has not yet achieved its required reserves. A recapitalization plan for the SAIF was signed by the President on September 30, 1996 as part of the Economic Growth and Regulatory Paperwork Reduction Act and provides for a one-time special assessment of .657% of deposits imposed on all SAIF insured institutions to enable the SAIF to achieve its required level of reserves. The assessment of .657% was assessed based on deposits as of March 31, 1995 and the Association's special assessment amounted to approximately $985,000 after taxes. Accordingly, this special assessment has significantly increased non-interest expense, and adversely affected the Company's results of operations. Conversely, depending upon the Association's capital level and supervisory rating, future annual deposit insurance premiums are expected to decrease for periods beginning January 1, 1997, to approximately .064% from .23% of deposits currently paid by the Association. 8. FIRSTBANC SAVINGS ACQUISITION On May 10, 1996, the Holding Corp. entered into an agreement to acquire all the outstanding stock of FirstBanc Savings Association of Texas ("FirstBanc"). On August 16, 1996, the transaction was closed and the Holding Corp. immediately merged FirstBanc into the Association. FirstBanc was a state chartered savings and loan association with one full service office located in Missouri City, Texas. The Missouri City/Sugarland area is located in east Fort Bend County. Management believes that this will be a strategic location for the Association as east Fort Bend County has several master planned communities including the rapidly growing First Colony and a new 7,000 acre project known as Sienna Plantation. As of August 16, 1996, FirstBanc reported unaudited total assets of $30.0 million, deposits of $26.8 million and shareholders' equity of $3.0 million. Goodwill created from this transaction was approximately $1.3 million and will be amortized to expense over fifteen years. 8 Financial Statements, Continued NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, Continued (Unaudited) The FirstBanc acquisition has been recorded using the purchase method of accounting and, accordingly, the purchase price of approximately $4.2 million, was allocated to the assets based on their estimated fair values at the date of acquisition. The operating results of FirstBanc have been included in the Company's results of operations commencing August 16, 1996. The following summarized unaudited pro forma results of operations for the Holding Corp. for the six months ended September 30, 1996 and 1995 assume the FirstBanc acquisition occurred as of April 1, 1995. These pro forma results have been prepared for comparative purposes only and do not purport to be indicative of the results of operations that actually would have resulted had the acquisition occurred at the beginning of the periods presented, or that may result in the future. For the six months ended September 30, ---------------------------------- 1996 1995 ----------- ---------- Revenues $10,023,000 $9,493,000 =========== ========== Net income (loss) $ (257,000) $ 899,000 =========== ========== Primary earnings (loss) per share $ (0.31) $ 1.02 =========== ========== 9 Item 2. Management's Discussion and Analysis of Financial Condition And Results Of Operations GENERAL Fort Bend Holding Corp. (the "Holding Corp.") was incorporated under the laws of the State of Delaware to become a savings and loan holding company with Fort Bend Federal Savings and Loan Association of Rosenberg (the "Association") as its subsidiary. The Holding Corp. was incorporated at the direction of the Board of Directors of the Association, and on June 30, 1993 acquired all of the capital stock of the Association upon its conversion from mutual to stock form (the "Conversion"). Prior to the Conversion, the Holding Corp. did not engage in any material operations and at September 30, 1996, it had no significant assets other than the investment in the capital stock of the Association, investment securities, deferred charges from subordinated debenture issue and cash and cash equivalents. Unless the context otherwise requires, all references herein to the Holding Corp. include the Holding Corp. and the Association on a consolidated basis. The Association is principally engaged in the business of attracting retail savings deposits from the general public and investing those funds in first mortgage loans on owner occupied, single-family residences, mortgage-backed securities and investment securities. The Association originates residential construction and commercial real estate loans. The Association also originates consumer loans, including loans for the purchase of automobiles and home improvement loans. The most significant outside factors influencing the operations of the Association and other banks and savings institutions include general economic conditions, competition in the local market place and the related monetary and fiscal policies of agencies that regulate financial institutions. More specifically, the cost of funds, primarily consisting of deposits, is influenced by interest rates offered on competing investments and general market rates of interest. Lending activities are influenced by the demand for real estate financing and other types of loans, which in turn is affected by the interest rates at which such loans may be offered and other factors affecting loan demand and funds availability. In order to continue to meet the financial services needs of the communities it serves, the Association intends to grow in a reasonable, prudent manner which may include expansion of the branch network or the acquisition of other financial institutions and related companies operating generally within a 100 mile radius of Rosenberg, Texas. As a part of this intended growth, the Association has increased the portfolio allocation of single-family construction lending, commercial real estate lending and consumer lending. The Association through its acquisition of FirstBanc, added an experienced construction lending officer and, as a result, the Association expects to increase its residential construction lending program, including the origination of speculative loans to qualified builders. Residential construction loans to owner-occupants are generally underwritten using the same criteria as for one- to four-family residential loans. Loan proceeds are disbursed in increments as construction progresses and inspections warrant. Certain improvements and expansion of facilities were completed in fiscal 1996 and two additional branch offices were added during the six months ended September 30, 1996, which management believes will assist in the expansion of the Association's core deposit base. Finally, the Association continues to look for opportunities to expand the loan servicing portfolio. 10 In furtherance of this goal, the acquisition of FirstBanc was completed on August 16, 1996. See Note 8 to the Condensed Consolidated Financial Statements. In addition, on August 5, 1996, the Association signed a letter of intent and on October 31, 1996, signed a definitive agreement with The Woodlands Corporation ("The Woodlands") and Mitchell Mortgage Company ("Mitchell Mortgage"), a wholly- owned subsidiary of The Woodlands, to acquire a controlling interest in a new limited liability company to be called Mitchell Mortgage Company, L.L.C. ("New Mitchell"). It is being formed for the purpose of engaging in the mortgage banking business, including the origination and servicing of single family purchase loans, single family construction loans and commercial and multifamily real estate loans. Mitchell Mortgage would contribute certain mortgage loans and its mortgage servicing portfolio and liabilities of Mitchell Mortgage, in exchange for a 49% ownership interest in New Mitchell and Fort Bend would contribute cash in exchange for a 51% ownership interest in New Mitchell. Mitchell Mortgage was formed in 1974 and has had a mortgage banking relationship with Fort Bend Holding Corp. for seven years. As part of the transaction the Holding Corp. agreed to provide Mitchell Mortgage, or its successor with a right to convert its ownership interest in New Mitchell into shares of the Holding Corp. under limited circumstances at an exchange rate of $24.30 per share. Loan servicing has been one of the stable income providers for the Association and will continue to be expanded, to the extent possible, through the retention of servicing for loans originated and sold into the secondary market, as well as through the purchase of mortgage servicing rights, to the extent deemed appropriate (and subject to market conditions at the time). During the six months ended September 30, 1996, the Association purchased the right to service approximately $62 million of mortgage loans. Management believes purchases of loan servicing rights may allow the Association to take advantage of some economies of scale related to servicing. Interest rates have fluctuated subsequent to the fiscal year ended March 31, 1996. The impact of these changes, may be a lower volume of permanent single family lending activity which would result in lower gains on sale of loans. While there are no assurances that the Association will be able to generate new sources of originations to neutralize the lower volume of permanent single family loans, attention is being given to increasing the level of single family construction lending, commercial real estate lending and consumer lending. It is difficult to determine the impact of changing interest rates on the net interest margin. The Association's one year interest sensitivity gap was positive 7.97% at June 30, 1996 (the latest date available). A positive gap indicates there are more interest-earning assets repricing during a stated period than interest- bearing liabilities potentially, resulting in an increase in the spread on such assets and liabilities, in a rising rate environment. A negative gap would have the opposite effect. At September 30, 1996, the Holding Corp. had unrealized gains and losses in its investment securities and mortgage-backed securities portfolio which are being held to maturity. The Holding Corp. has both the intent and ability to hold these securities until maturity. Management believes the Holding Corp. will be able to collect all amounts due according to the contractual terms of the debt securities and is not aware of any information that would indicate the inability of any issuer of such securities to make contractual payments in a timely manner. Therefore, 11 management does not believe these losses are other than temporary and will not be realized, and should not be recognized in the financial statements. Most of the mortgage-backed securities are agency securities and are either guaranteed by the full faith and credit of the United States Government (GNMA) or are insured by a Government Sponsored Enterprise (FNMA or FHLMC). Private issue mortgage-backed securities consist of the "A" piece of "A-B" structured securities where the "B" piece is subordinate to the "A" piece and which were initially rated one of the two highest categories by one or several of the rating agencies. These securities have pool insurance and/or reserve funds in addition to the subordination of the "B" piece. Collateral for these securities is whole mortgage loans. None of these securities are considered "high risk" as defined by the Office of Thrift Supervision and none have failed to pass the Federal Financial Institution Examination Council (FFIEC) mandatory test for "high risk" securities. The Association does not invest in "high risk" securities. The management of the investment portfolio is not designed to be the primary source of funds for the Association's operations. Rather, it is viewed as a use of funds generated by the Association to be invested in interest-earning assets to be held to maturity. Cash flow mismatches between sources and uses of funds should not require any of the securities to be liquidated. While cash flows from the securities varies depending on the prepayment speeds associated with each particular security, the variance in the prepayment speeds does not impact the over-all cash flow requirements of the Association since the Association has the ability to borrow funds from the Federal Home Loan Bank of Dallas. Currently, the Association has the ability to borrow up to an additional $112 million if cash flow requirements cannot be met by attracting deposits from its customer base (its primary source of funds), or from repayment of loans and other sources. The following schedule provides detail of the investment securities and the mortgage-backed securities portfolio, which are held to maturity, along with the related unrealized gains and losses. 12 SCHEDULE OF INVESTMENT AND MORTGAGE-BACKED SECURITIES HELD TO MATURITY
SEPTEMBER 30, 1996 ------------------------------------------------------------------- UNREALIZED BOOK MARKET ------------------------------- TYPE OF SECURITY VALUE VALUE GAINS LOSSES ------------ ------------ ------------ ------------ INVESTMENT SECURITIES: U.S. Treasury Notes $ 998,032 $ 998,120 $ 88 $ World Bank Bonds & FHLB Debentures 18,231,640 18,030,359 45,700 246,981 FNMA & FHLMC Debentures 2,992,189 2,870,579 121,610 ------------ ------------ ------------ ------------ TOTAL HELD TO MATURITY $ 22,221,861 $ 21,899,058 $ 45,788 $ 368,591 ============ ============ ============ ============ MORTGAGE-BACKED SECURITIES: FNMA Fixed $ 10,479,715 $ 10,624,452 $ 242,815 $ 98,078 Adjustable 14,967,953 14,825,970 62,669 204,652 FHLMC Fixed 6,798,667 6,774,951 59,479 83,195 Adjustable 16,307,829 16,117,648 72,820 263,001 GNMA Fixed 2,516,844 2,570,704 54,891 1,031 Adjustable 7,238,079 7,220,088 17,596 35,587 Private Issue Fixed Adjustable 4,788,009 4,770,823 10,444 27,630 CMO Fixed FNMA 12,134,494 11,887,272 19,233 266,455 FHLMC 11,884,001 11,730,230 28,426 182,197 Private 3,952,428 3,959,014 17,626 11,040 Adjustable FNMA 2,934,514 2,890,548 32,377 76,343 FHLMC 6,948,774 6,848,064 31,456 132,166 Private 2,857,931 2,799,918 58,013 ------------ ------------ ------------ ------------ TOTAL HELD TO MATURITY $103,809,238 $103,019,682 $ 649,832 $ 1,439,388 ============ ============ ============ ============
MARCH 31, 1996 ------------------------------------------------------------------- UNREALIZED BOOK MARKET ------------------------------- TYPE OF SECURITY VALUE VALUE GAINS LOSSES ------------ ------------ ------------ ------------ INVESTMENT SECURITIES: U.S. Treasury Notes $ 996,839 $ 998,120 $ 1,281 $ World Bank Bonds & FHLB Debentures 5,247,145 5,186,785 40,039 100,399 FNMA & FHLMC Debentures 2,989,521 2,879,248 110,273 ------------ ------------ ------------ ------------ TOTAL HELD TO MATURITY $ 9,233,505 $ 9,064,153 $ 41,320 $ 210,672 ============ ============ ============ ============ MORTGAGE-BACKED SECURITIES: FNMA Fixed $ 11,631,375 $ 11,969,697 $ 393,627 $ 55,305 Adjustable 15,816,532 15,817,278 154,630 153,884 FHLMC Fixed 7,457,968 7,540,961 119,060 36,067 Adjustable 17,801,264 17,808,211 100,262 93,315 GNMA Fixed 2,622,503 2,725,387 102,884 Adjustable 8,018,104 8,041,718 44,574 20,960 Private Issue Fixed Adjustable 5,306,546 5,288,821 12,647 30,372 CMO Fixed FNMA 12,453,781 12,310,233 38,170 181,718 FHLMC 12,371,623 12,282,834 50,686 139,475 Private 3,969,574 4,022,320 57,736 4,990 Adjustable FNMA 2,934,307 2,890,294 0 44,013 FHLMC 7,023,394 6,888,173 35,654 170,875 Private 3,082,646 3,090,852 8,206 0 ------------ ------------ ------------ ------------ TOTAL HELD TO MATURITY $110,489,617 $110,676,779 $ 1,118,136 $ 930,974 ============ ============ ============ ============
13 FORWARD-LOOKING STATEMENTS When used in this Form 10-QSB, the words or phrases "will likely result", "are expected to", "will continue", "is anticipated", "estimate", "project" or similar expressions are intended to identify "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements are subject to certain risks and uncertainties - including, changes in economic conditions in the Holding Corp.'s market area, changes in policies by regulatory agencies, fluctuations in interest rates, demand for loans in the Holding Corp.'s market area and competition, that could cause actual results to differ materially from historical earnings and those presently anticipated or projected. The Holding Corp. wishes to caution readers not to place undue reliance on any such forward-looking statements, which speak only as of the date made. The Holding Corp. wishes to advise readers that the factors listed above could affect the Holding Corp.'s financial performance and could cause the Holding Corp.'s actual results for future periods to differ materially from any opinions or statements expressed with respect to future periods in any current statements. The Holding Corp. does not undertake - and specifically disclaims any obligation - to publicly release the results of any revisions which may be made to any forward-looking statements to reflect events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events. RESULTS OF OPERATIONS Comparison of Three Months ended September 30, 1996 and 1995 The Holding Corp. had a net loss of $579,000 or ($.69) primary and fully diluted loss per share for the three months ended September 30, 1996 compared to net income of $441,000 or $.50 per share for the same period in fiscal 1996. As more fully discussed below, this change was primarily the result of the one-time SAIF assessment. During the quarter, the Holding Corp. acquired FirstBanc Savings Association ("FirstBanc") a $30 million savings and loan association located in Missouri City, a southwest Houston suburb. The acquisition included approximately $21 million of loans receivable and a $27 million in deposits. The facility is leased and is staffed with a branch manager, nine full-time and two part-time employees. Goodwill of $1.3 million was created from this transaction and will be amortized over fifteen years. Net interest income, before provision for loan losses, increased $181,000 to $1.8 million during the three months ended September 30, 1996. Interest income increased $534,000 to $4.6 million and primarily reflected a $17.0 million increase in the average balance of interest-earning assets, and an increase of .23% in the average yield on interest-earning assets to 7.41% for the three months September 30, 1996 compared to 7.18% for the three months ended September 30, 1995. 14 The increase in average yield reflected the reinvestment of principal repayments on mortgage-backed securities with an average rate of 6.65% into portfolio loans with average rates of 8.51%. An increase of $24.3 million in the average balance of loans receivable and $6.6 million in investments, partially offset by a decrease of $14.2 million in mortgage-backed securities contributed to the increase in interest-earning assets. Interest expense increased $353,000 for the three months ended September 30, 1996 compared to the same period in fiscal 1996. The increase primarily reflected a .09% increase in the average rate paid on average interest-bearing liabilities to 4.85% for the three months ended September 30, 1996 compared to 4.76% for the three months ended September 30, 1995 and a $22.1 million increase in the average balance of interest-bearing liabilities, reflecting increases of $13.7 million in deposits and $8.4 million in borrowings. Non-interest income increased $211,000 to $698,000 for the three months ended September 30, 1996 compared to $487,000 for the same period in fiscal 1996. The increase was primarily due to an increase in service charges of $58,000 to $131,000 which reflected increases in appraisal fees of $24,000, construction loan fees of $15,000 and late fees of $11,000 for the three months ended September 30, 1996. Loan servicing income increased $59,000 to $194,000 for the three months ended September 30, 1996 compared to $134,000 for the same period in fiscal 1996. This increase primarily reflects an increase of $69 million in loans serviced for others of which $62 million was a result of purchased servicing contracts. Other income increased $101,000 and primarily reflected a $62,000 increase in financial services income, which is income derived from offering Discount Brokerage Services and from certain insurance related activities. Non-interest expense increased $1.9 million to $3.3 million for the three months ended September 30, 1996 compared to $1.4 million for the same period in fiscal 1996. A one-time assessment of approximately $1.5 million by the Savings Association Insurance Fund, which is administered by the Federal Deposit Insurance Corporation, was responsible for a substantial part of the increase in noninterest expense. Approximately $191,000 related to the FirstBanc deposits. The assessment was based on deposits as of March 31, 1995, and was assessed at a rate of .657%. In addition, compensation and benefits increased $171,000 and primarily reflected additional personnel retained from the acquisition of FirstBanc and the addition of a new branch and normal salary increases. Office occupancy increased $84,000 to $243,000 for the three months ended September 30, 1996 compared to $158,000 for the same period in fiscal year 1996 and primarily reflects an increase of $32,000 in depreciation and $32,000 in rent and utilities. Most of the increase in occupancy cost is associated with the addition of a new branch in Katy, Texas and the acquisition of FirstBanc. Income tax provision (benefit) decreased $547,000 to ($321,000) for the three months ended September 30, 1996 compared to $226,000 for the same period in fiscal 1996. The decrease primarily reflected the net loss for the quarter. 15 Comparison of Six Months Ended September 30, 1996 and 1995 The Holding Corp. had a net loss of 173,000 or $0.21 per share for the six months ended September 30, 1996 compared to net income of $844,000 or $0.96 per share for the same period in fiscal 1996. As more fully discussed below, this change was primarily the result of the one-time SAIF assessment. Net interest income, before provision for loan losses, increased $207,000 to $3,422,000 during the six months ended September 30, 1996, compared to $3,215,000 for the same period in fiscal 1996. Interest income increased $825,000 and primarily reflected an increase of $13.8 million in the average balance of interest-earning assets. An increase of $21.5 million in the average balance of loans receivable reflecting the acquisition of FirstBanc Savings and the Association's originations and additions to the portfolio and $5.4 million in investments, partially offset by a decrease of $13.0 million in mortgage- backed securities contributed to the increase in interest-earning assets. Interest expense increased approximately $617,000 and primarily reflected an increase of $18.6 million in the average balance of interest-bearing liabilities. An increase of approximately $9.4 million in average deposits reflecting the acquisition of FirstBanc Savings and $9.1 million in average borrowings contributed to the increase in interest-bearing liabilities. Convertible subordinated debentures of $12.1 million, issued in December 1995, were primarily responsible for the increase in average borrowings. Net yield on average interest-earning assets for the six months ended September 30, 1996 and 1995 was 2.84% and 2.88%, respectively. Management periodically reviews the level of the allowance for loan losses, which covers specific loans as well as estimated losses inherent in the loan portfolio. The level of the allowance is based on such factors as the amount of non-performing assets, historical loss experience, regulatory policies, general economic conditions, the estimated fair value of the underlying collateral and other factors related to the collectibility of the loans. The provision for loan losses for the six months ended September 30, 1996 increased $23,000 as compared to the same period in the last fiscal year, and was provided for estimated losses believed by management to be inherent in the loan portfolio and the increase in size of the loan portfolio. Noninterest income for the six months ended September 30, 1996 was $1.3 million compared to $945,000 for the same period in fiscal 1996. Service charges increased approximately $97,000 which included an increase of $31,000 in late charges due partially to a $17,000 late charge collected on a $928,000 loan paid off during the six month period. Loan servicing income increased approximately $88,000 and reflected the purchase of approximately $62 million of servicing rights during the six month period. The average servicing fee at September 30, 1996 was .32%. Other income increased approximately $198,000 and primarily reflected a $129,000 increase in financial services income, which is income derived from offering discount brokerage services and from certain insurance related activities. These increases were partially offset by gain on sale of loans was $106,000 for the six months ended September 30, 1996 compared to a gain of $124,000 for the same period in 1995. The volume of loans sold was $7.3 million and $5.0 million for the six months ended September 30, 1996 and September 30, 1995, respectively. 16 Noninterest expenses increased $2.1 million to $4.9 million for the six months ended September 30, 1996. This was primarily the result of a one-time assessment of $1.5 million by the Savings Association Insurance Fund (SAIF), which is administered by the Federal Deposit Insurance Corporation, was responsible for a substantial part of the increase in noninterest expense. Approximately $191,000 related to the FirstBanc deposits. The assessment was based on deposits as of March 31, 1995, and was assessed at a rate of .657%. See Note 7 to the Condensed Consolidated Financial Statements. In addition to the SAIF assessment, compensation and benefits increased $238,000 for the six months ended September 30, 1996 and primarily reflected additional personnel retained from the acquisition of FirstBanc, normal salary increases and additions to staff, partially offset by a decrease in contributions to the retirement plan. Office occupancy increased $106,000 and primarily reflected increases of $35,000 in depreciation and $44,000 in utilities and rent expense. Most of the increase relates to the construction and remodeling work on the branches and the main office and the acquisition of FirstBanc. Income tax provision (benefit) decreased $561,000 to ($112,000) for the six months ended September 30, 1996 compared to $449,000 for the same period in fiscal 1996. The decrease primarily reflected the decrease in income before tax. ASSET/LIABILITY MANAGEMENT The Holding Corp. attempts to maximize net interest income by achieving a positive interest rate spread that can be sustained during fluctuations in prevailing interest rates. The Holding Corp.'s policies are designed to reduce the impact of changes in interest rates on its net interest income by maintaining a favorable match between the maturities or repricing dates of its interest-earning assets and interest-bearing liabilities (interest sensitivity gap). The Holding Corp. has implemented these policies by generally selling long term fixed rate mortgage loan originations, retaining its adjustable rate mortgage loans, originating and retaining short-term consumer loans and purchasing adjustable rate or short term maturity loans, mortgage-backed securities, collateralized mortgage obligations and investment securities. As a result of these policies, the Holding Corp.'s cumulative one year interest sensitivity gap at June 30, 1996 (the latest date available), was a positive 7.97%. Management does not believe that its cumulative one year interest sensitivity gap at September 30, 1996, was substantially different from that at June 30, 1996. As interest rates, prepayments and early withdrawal levels change, however, the resulting interest sensitivity gap is expected to be affected. 17 ASSET QUALITY The allowance for loan losses is established through a provision for loan losses based on management's quarterly asset classification review and evaluation of the risk inherent in its loan portfolio and changes in the nature and volume of its loan activity. As a result of this review process, management recorded a $43,000 provision for loan losses during the three months ended September 30, 1996, and a $68,000 provision for the six months ended September 30, 1996. The allowance for loan losses was further increased by the addition of $385,000 in allowance for loan loss held by FirstBanc at the time of acquisition. Net charge-offs for the six months ended September 30, 1996, totaled $209,000, attributed primarily to one commercial real estate loan, which was a nonaccrual loan. The Holding Corp.'s allowance for loan losses increased to $1,600,000 or 1.29% of total loans at September 30, 1996, as compared to $1,350,000 or 1.43% of total loans at March 31, 1996. The percent to total loans decreased due to the acquisition of loans from the FirstBanc merger. While management believes it uses the best information available to make determinations regarding the adequacy of the allowance, there is no assurance that the subsequent evaluations of the loan portfolio may not require additional provisions for loan losses. The non-performing assets to total assets ratio is one indicator of the exposure to credit risk. Non-performing assets of the Holding Corp. consist of non- accruing loans, troubled debt restructurings, and real estate which was acquired as a result of foreclosure. The following table summarizes the various categories of the Holding Corp.'s non-performing assets. September 30, 1996 March 31, 1996 ------------------ -------------- Non-accruing loans $ 220,574 $ 729,274 Troubled debt restructurings 2,618,672 2,307,947 Foreclosed assets 846,757 123,215 ---------- ---------- Total non-performing assets $3,686,003 $3,160,436 ========== ========== Total non-performing assets as a percentage of total assets 1.31% 1.29% Total non-performing assets increased $526,000 for the six months ended September 30, 1996. The increase was primarily a result of the addition of two foreclosed properties held by FirstBanc at the time of acquisition and the subsequent foreclosure of two other properties which had been nonaccrual loans of FirstBanc. The increase in troubled debt restructurings reflected two loans totaling $439,000 acquired in the merger with FirstBanc. The largest is a $412,000 loan secured by a multi-tenant retail/restaurant and is paying as agreed. 18 At September 30, 1996, foreclosed assets consisted of two commercial properties and three single family houses. Both commercial properties and one of the single family houses are being marketed. The other two houses are being prepared for listing. Subsequent to the quarter ended September 30, 1996, a $1.9 million, multi-family loan matured on November 1, 1996. Management has discussed a possible loan workout agreement with the borrower and is also moving towards foreclosure. At the present time, the potential for loss cannot be determined. LIQUIDITY AND CAPITAL RESOURCES: The Holding Corp.'s primary sources of funds are deposits, sales of mortgage loans, principal and interest payments on loans and mortgage-backed securities, borrowings and funds provided by operations. While scheduled loan and mortgage- backed securities principal repayments are a relatively predictable source of funds, deposit flows, prepayments of loan and mortgage-backed securities principal, and sales of mortgage loans are greatly influenced by general interest rates, economic conditions, and competition. Current Office of Thrift Supervision ("OTS") regulations require the Association to maintain cash and eligible investments in an amount equal to at least 5% of customer accounts and short-term borrowings to assure its ability to meet demands for withdrawals and repayment of short-term borrowings. As of September 30, 1996, the Association's liquidity ratio was 12.61%, which was in excess of the minimum regulatory requirements. During the six months ended September 30, 1996, total deposits increased approximately $31.2 million. The increase primarily reflects the acquisition of FirstBanc which had approximately $27 million in deposits, the Association's marketing effort to attract funds into an 18 month certificate, and the opening of a new branch in Katy, Texas. The Holding Corp. uses its capital resources principally to meet its ongoing commitments to fund maturing certificates of deposit and loan commitments, maintain its liquidity and meet operating expenses. At September 30, 1996, the Holding Corp. had commitments to originate loans totaling $7.8 million. The Holding Corp. considers its liquidity and capital resources to be adequate to meet its foreseeable short and long-term needs. The Holding Corp. expects to be able to fund or refinance, on a timely basis, its material commitments and long- term liabilities. During the six months ended September 30, 1996, the borrowings from the Federal Home Loan Bank of Dallas decreased $24,000 and ESOP debt decreased $44,000. It is anticipated that the amount of outstanding borrowings will fluctuate during the 1997 fiscal year depending upon cash flows from the various sources of funds. On July 24, 1996, the Holding Corp. declared a cash dividend of $0.07 per share payable on September 4, 1996 to the shareholders of record on August 14, 1996. 19 The Association is required to maintain specific amounts of regulatory capital pursuant to regulations of the OTS. As of January 29, 1996, the Association was notified by the OTS that based on its reported capital position, the Association is considered to be "well capitalized" in accordance with the Prompt Corrective Action provision of Section 38 of the Federal Deposit Insurance Act. The table below presents the Association's capital position at September 30, 1996 relative to the existing regulatory capital requirements. Such requirements may increase if proposed capital regulations are implemented. Management believes the Association will meet the requirements of the proposed capital regulations. Amount Percent of (000's) Assets (1) ------- ---------- Tangible capital $15,891 5.8% Tangible capital requirement 4,082 1.5 ------- ---- Excess $11,809 4.3% ======= ==== Core capital $15,891 5.8% Capital requirement 8,164 3.0 ------- ---- Excess $ 7,727 2.8% ======= ==== Total capital (i.e., core & supplemental capital) $17,326 14.4% Risk-based capital requirement 9,604 8.0 ------- ---- Excess $ 7,722 6.4% ======= ==== (1) Based upon adjusted assets for purposes of the tangible capital and core capital requirements, and risk-weighted assets for purposes of the risk-based capital requirement. 20 IMPACT OF NEW ACCOUNTING STANDARDS In March, 1995, the Financial Accounting Standards Board issued SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of" ("SFAS 121"). The Company adopted SFAS No. 121 on April 1, 1996. The adoption of SFAS No. 121 did not have any impact on the Company's financial position or result of operations. In October 1995, the FASB issued SFAS No. 123 "Accounting for Stock-Based Compensation" which establishes accounting and reporting standards for stock- based employee compensation plans. Companies are encouraged to utilize the fair- value method to measure stock based compensation but may continue to utilize the methods prescribed by APB Opinion No. 25 and disclose the pro-forma affects of the SFAS No. 123 method. Based on a preliminary review, the Company has elected to adopt only the reporting disclosures of SFAS No. 123. In June 1996, the FASB issued SFAS No. 125 "Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities" which uses a "financial components" approach that focuses on content and provides consistent standards for distinguishing transfers of financial assets that are sales from transfers that are secured borrowings. The pronouncement is effective for transactions occurring after December 31, 1996. 21 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. FORT BEND HOLDING CORP. Registrant /s/ Lane Ward Date: November 13, 1996 ------------------------------------ Lane Ward Vice Chairman, President and Chief Executive Officer /s/ David D. Rinehart Date: November 13, 1996 ------------------------------------- David D. Rinehart Executive Vice President and Chief Financial Officer 22 PART II - OTHER INFORMATION Item 1. - LEGAL PROCEEDINGS There are no material legal proceedings to which the Holding Corp. or the Association is a party or of which any of their property is subject. From time-to-time, the Association is a party to various legal proceedings incident to its business. Item 2. - CHANGES IN SECURITIES None Item 3. - DEFAULTS UPON SENIOR SECURITIES None Item 4. - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None Item 5. - OTHER INFORMATION None Item 6. - EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits Exhibit 11 - Computation of earnings per share (attached) Exhibit 27 - Financial Data Schedule (attached) (b) Reports on Form 8-K Fort Bend Holding Corp. filed the following Forms 8-K during the six months ended September 30, 1996. July 30, 1996 - The registrant issued a press release announcing the results of operations for the quarter and fiscal year ended June 30, 1996 and the declaration of a cash dividend for the quarter ended June 30, 1996. August 16, 1996 - The registrant issued a press release announcing the completion of the acquisition of FirstBanc Savings Association. August 30, 1996 - The registrant issued a press release announcing the purchase of controlling interest in Mortgage Banking Business. September 20, 1996 - The registrant issued a press release announcing the stock repurchase program. 23 EX-11 2 COMPUTATION OF EARNINGS PER SHARE EXHIBIT 11 COMPUTATION OF EARNINGS PER SHARE For the three and six months ended September 30, 1996 and 1995 (Unaudited)
Three Months Ended Six Months Ended September 30 September 30, --------------------------- ---------------------------- Primary Earnings per Share 1996 1995 1996 1995 - -------------------------- ------------ -------- ----------- ---------- Net income (loss) applicable to common stock $ (578,831) $440,954 $ (173,112) $ 844,009 ========== ======== ========== ========= Weighted average number of common shares outstanding 819,198 856,658 819,198 858,113 Common shares issuable under employee stock option plan 58,817 51,139 58,817 51,139 Less shares assumed repurchased with proceeds (34,822) (27,861) (34,822) (27,861) ---------- -------- ---------- --------- Weighted average common shares and common share equivalents outstanding 843,193 879,936 843,193 881,391 ========== ======== ========== ========= Primary earnings (loss) per common share $ (0.69) $ 0.50 $ (0.21) $ 0.96 ========== ======== ========== ========= Fully Diluted Earnings Per Share Net income (loss) applicable to common stock $ (578,831) $440,954 $ (173,112) $ 844,009 Interest on convertible subordinated debentures, net of tax 172,991 --- 345,981 --- ---------- -------- ---------- --------- Net income (loss), adjusted $ (405,840) $440,954 $ 172,869 $ 844,009 ========== ======== ========== ========= Weighted average common share and common share equivalents outstanding 843,193 879,936 843,193 881,391 Weighted average common shares issuable with the conversion of debentures to common stock 560,182 --- 560,182 --- ---------- -------- ---------- --------- Weighted average common shares and common share equivalents 1,403,375 879,936 1,403,375 881,391 ========== ======== ========== ========= Fully diluted earnings (loss) per common share $ (0.29) $ 0.50 0.12 0.96 ========== ======== ========== =========
Fully diluted earnings per share are not disclosed on the statement of operations as they are anti-dilutive. EX-27 3 FINANCIAL DATA SCHEDULE
9 6-MOS MAR-31-1997 APR-01-1996 SEP-30-1996 5,807,516 8,523,211 0 0 3,463,846 126,031,099 124,918,740 123,826,000 1,600,326 281,694,382 235,123,114 0 12,779,094 16,395,563 0 0 9,073 19,313,716 281,694,382 4,520,287 4,354,669 0 8,874,956 4,787,306 5,453,000 3,421,956 68,000 0 780,586 (285,312) (285,312) 0 0 (173,112) (.21) (.21) 2.84 220,574 0 2,618,672 0 1,350,222 203,180 0 1,600,326 166,185 0 1,434,141
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