-----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, GeHNV0MDM6XPs1c1dKHlUKkJK5aD9xuzOs//dtU4qhZf2Nwmn7mCi3W8yhWPMSzP rET/fEkjpAphgL0ZCO6qyA== 0000899243-97-000182.txt : 19970221 0000899243-97-000182.hdr.sgml : 19970221 ACCESSION NUMBER: 0000899243-97-000182 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19961231 FILED AS OF DATE: 19970211 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: 10QSB SEC ACT: 1934 Act SEC FILE NUMBER: 000-21328 FILM NUMBER: 97524550 BUSINESS ADDRESS: STREET 1: 3400 AVENUE H CITY: ROSENBERG STATE: TX ZIP: 77471 BUSINESS PHONE: 7133425571 10QSB 1 FORM 10QSB 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 December 31, 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 908,550 shares and 820,376 shares of Common Stock ($0.01 par value) issued and outstanding, respectively as of February 1, 1997. 1 of 23 PART I - FINANCIAL INFORMATION ITEM 1 - FINANCIAL STATEMENTS FORT BEND HOLDING CORP. CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL CONDITION (Unaudited) ASSETS December 31, 1996 March 31, 1996 Cash and due from banks $ 6,981,332 $ 3,451,880 Short-term investments 14,472,756 13,541,782 Certificates of deposit 200,000 200,000 ------------ ------------ Total cash and cash equivalents 21,654,088 17,193,662 Investment securities available for sale, at market value 2,779,442 2,684,607 Investment securities held to maturity (estimated market value of $10,943,103 and $9,064,153 at December 31, 1996 and March 31, 1996, respectively) 11,231,671 9,233,505 Mortgage-backed securities available for sale, at market value 630,583 873,502 Mortgage-backed securities held to maturity (estimated market value of $101,181,513 and $110,676,779 at December 31, 1996 and March 31, 1996, respectively) 101,175,340 110,489,617 Loans receivable, net 122,889,848 92,861,594 Loans held for sale 296,706 922,422 Accrued interest receivable 1,697,381 1,466,272 Real estate, net 2,425,325 155,372 Federal Home Loan Bank stock, at cost 1,905,900 1,460,200 Premises and equipment, net 4,490,676 3,635,046 Mortgage servicing rights, net 2,574,015 1,235,714 Prepaid expenses and other assets 3,019,404 1,538,171 Deferred income taxes 420,277 418,949 Goodwill, net 1,341,432 -- ------------ ------------ Total assets $278,532,088 $244,168,633 ============ ============ LIABILITIES AND STOCKHOLDERS' EQUITY Liabilities: Deposits $238,497,915 $203,913,715 Convertible Subordinated Debentures 12,100,000 12,100,000 Other borrowings 4,239,279 4,363,688 Advances from borrowers for taxes and insurance 3,585,017 4,224,796 Accounts payable, accrued expenses and other liabilities 2,203,471 1,994,063 ------------ ------------ Total liabilities 260,625,682 226,596,262 ============ ============ Stockholders' Equity: Serial preferred stock, $.01 par value - 500,000 shares authorized, none outstanding Common Stock $.01 par value, 2,000,000 shares authorized 908,550 shares issued and 820,376 shares outstanding at December 31, 1996 and 905,572 shares issued and 817,398 shares outstanding at March 31, 1996 9,085 9,055 Additional paid-in capital 8,669,193 8,514,562 Unearned employee stock ownership plan shares (307,125) (394,875) Deferred compensation (94,622) (98,668) Net unrealized depreciation on available for sale securities, net of tax (6,233) (21,786) Retained earnings (substantially restricted) 11,092,609 11,020,584 Treasury stock, at cost - 88,174 shares at December 31, 1996 and March 31, 1996 (1,456,501) (1,456,501) ------------ ------------ Total stockholders' equity 17,906,406 17,572,371 ------------ ------------ Total liabilities and stockholders' equity $278,532,088 $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 Nine Months Ended December 31, December 31, 1996 1995 1996 1995 Interest Income: Loans $2,673,173 $1,860,596 $ 7,193,460 $ 5,407,554 Short-term investments 256,338 155,188 675,319 321,953 Investment securities 214,074 213,492 564,602 653,350 Mortgage-backed securities 1,701,684 1,929,554 5,286,844 5,826,252 ---------- ---------- ----------- ----------- Total interest income 4,845,269 4,158,830 13,720,225 12,209,109 ---------- ---------- ----------- ----------- Interest expense: Deposits 2,643,474 2,377,799 7,430,780 6,961,484 Borrowings 329,035 141,878 994,729 393,949 ---------- ---------- ----------- ----------- Total interest expense 2,972,509 2,519,677 8,425,509 7,355,433 ---------- ---------- ----------- ----------- Net interest income before provision for loan losses 1,872,760 1,639,153 5,294,716 4,853,676 Provision for loan losses 60,000 60,000 128,000 105,053 ---------- ---------- ----------- ----------- Net interest income after provision for loan losses 1,812,760 1,579,153 5,166,716 4,748,623 ---------- ---------- ----------- ----------- Noninterest income: Gain on sale of loans 91,237 110,453 197,536 234,298 Service charges 160,387 79,337 404,897 226,576 Loan servicing income 213,615 135,733 576,770 410,985 Other income 355,764 301,646 951,934 699,972 ---------- ---------- ----------- ----------- Total noninterest income 821,003 627,169 2,131,137 1,571,831 ---------- ---------- ----------- ----------- Noninterest expenses: Compensation and benefits 1,030,093 770,830 2,800,513 2,302,967 Office occupancy and equipment 290,975 163,550 720,520 486,900 Federal insurance premiums 110,092 118,179 367,681 345,394 Savings Association Insurance Fund Assessment --- --- 1,492,686 --- Amortization of mortgage servicing rights 100,828 49,315 247,865 157,391 Insurance and surety bond expense 34,571 37,726 106,110 92,184 Other 474,327 315,344 1,254,913 891,219 ---------- ---------- ---------- ----------- Total noninterest expenses 2,040,886 1,454,944 6,990,288 4,276,055 Income before income tax 592,877 751,378 307,565 2,044,399 Income tax provision 175,709 275,100 63,509 724,112 ---------- ---------- ---------- ----------- Net income $ 417,168 $ 476,278 $ 244,056 $ 1,320,287 ========== ========== ========== =========== Primary earnings per common share $ 0.49 $ 0.55 $ 0.29 $ 1.50 ========== ========== ========== =========== Fully diluted earnings per common share $ 0.42 $ 0.51 $ 0.29 $ 1.47 ========== ========== ========== =========== Dividends per common share $ 0.07 $ 0.07 $ 0.21 $ 0.21 ========== ========== ========== =========== 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)
Nine Months Ended December 31, 1996 1995 Operating activities: Net income (loss) $ 244,056 $ 1,320,287 Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Provision for losses on loans and real estate 128,000 105,053 Depreciation 236,600 149,023 Amortization of deferred compensation 36,896 31,968 Compensation charge related to release of ESOP shares 101,785 70,020 Amortization of premiums and discounts on securities, net 1,364 76,453 Amortization of loan premium, discount, and deferred fees, net (582,090) (128,609) Deferred income tax provision (benefit) (9,342) 103,110 Gain on sale of real estate (31,087) (74,212) Amortization of unearned income (7,721) (3,826) Amortization of mortgage servicing rights 247,865 157,391 Amortization of debt issue costs 60,327 5,683 Amortization of goodwill 28,996 --- Net gain on sale of loans (197,536) (234,298) Dividends on Federal Home Loan Bank stock (75,700) (68,500) Origination of loans held for sale (10,347,663) (9,432,300) Proceeds from sale of loans 11,170,915 9,630,608 Net change in accrued interest receivable (231,109) (27,440) Net change in prepaid expenses and other assets (1,358,560) (271,486) Net change in accounts payable, accrued expenses and other liabilities 19,127 80,846 ----------- --------- Net cash provided by (used in) operating activities (564,877) 1,489,771 ----------- --------- Continued
4 FORT BEND HOLDING CORP. CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited)
Nine Months Ended December 31, 1996 1995 Investing activities: Net change in loans receivable $(11,094,936) $(11,007,330) Proceeds from sale of real estate 37,233 48,123 Improvements to real estate --- (1,118) Purchase of premises and equipment (402,228) (117,369) Proceeds from maturity of investment securities 21,000,000 5,000,000 Purchase or origination of mortgage servicing rights (1,586,166) (102,627) Purchase of investment securities available for sale (89,035) --- Principal collected on mortgage-backed securities held to maturity 9,296,119 10,096,092 Principal collected on mortgage-backed securities available for sale 260,746 --- Purchase of investment securities held to maturity (22,981,432) --- Purchase of mortgage-backed securities held to maturity --- (2,485,347) Net cash acquired in acquisition 3,541,250 --- ------------ ------------ Net cash provided by (used in) investing activities (2,018,449) 1,430,424 ------------ ------------ Financing activities: Net increase in deposits 8,033,195 8,510,821 Net increase (decrease) in short-term borrowings --- (7,519,341) Payment on long-term borrowings (36,659) --- Net proceeds from issuance of convertible subordinated debentures --- 11,302,202 Decrease in advances from borrowers for taxes and insurance (800,779) (1,880,075) Net proceeds from issuance of common stock 20,026 15,500 Dividends paid (172,031) (179,988) Purchase of treasury stock --- (475,264) ------------ ------------ Net cash provided by financing activities 7,043,752 9,773,855 ------------ ------------ Net increase in cash and cash equivalents 4,460,426 12,694,050 Cash and cash equivalents at beginning of period 17,193,662 6,832,312 ------------ ------------ Cash and cash equivalents at end of period $ 21,654,088 $ 19,526,362 ============ ============ Supplemental disclosure of cash flow information: Cash paid for: Interest $ 8,655,053 $ 6,864,750 Income taxes 420,000 495,000 Supplemental disclosure of noncash activities: Real estate acquired in settlement of loans $ 2,171,099 $ 37,784 Loans originated related to sales of real estate 182,000 200,358 Stock issued to recognition and retention plan 32,850 22,500 Reduction of ESOP debt by the ESOP 87,750 87,750 Transfer of investment in mortgage back securities from held to maturity to available for sale --- 1,498,953 Net unrealized depreciation on available for sale securities, net of tax 15,553 10,830
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 nine months ended December 31, 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 December 31, 1996. 3. NON-PERFORMING ASSETS Impaired loans decreased $2,049,000 during the three months ended December 31, 1996 and $3,454,000 during the nine months ended December 31, 1996. The recent quarter decline resulted primarily from the foreclosure of a $1.9 million multifamily loan while the prior two quarter decline reflected the payoff of a multifamily loan and the foreclosure of a commercial real estate loan. Each of these loans were previously recognized as impaired. Foreclosed assets increased $1.5 million for the quarter ended December 31, 1996, which primarily reflects the $1.9 million multifamily loan after a $456,000 charge-off. 6 Financial Statements, Continued NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, Continued (Unaudited) The following table summarizes impaired loan information as of December 31, 1996. Impaired loans $ 409,170 Impaired loans which have a specific reserve for loan losses calculated under SFAS 114 --- Impaired loans which do not have a specific reserve for loan losses calculated under SFAS 114 $ 409,170 4. CONVERTIBLE SUBORDINATED DEBENTURES AND OTHER BORROWINGS Borrowings at December 31, 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 $307,125 at December 31, 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 $ 12,603 $ --- 1998 52,405 87,750 1999 55,752 87,750 2000 59,312 87,750 2001 3,752,082 43,875 In December 1995, the Holding Corp. issued $12.1 million of 8% Convertible Subordinated Debentures due December 1, 2005. Interest is payable June 1 and December 1 of each year through maturity. The debentures are convertible at any time prior to maturity at the rate of 46.296 shares of common stock for each $1,000 of principal or $21.60 per share. The debentures may be redeemed at the option of the Holding Corp., in whole or in part, at any time on or after December 1, 1998. 5. EARNINGS PER COMMON SHARE Primary earnings per common share for the three and nine months ended December 31, 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. 7 Financial Statements, Continued NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, Continued (Unaudited) 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 nine months ended December 31, 1996 was 853,843 shares and 853,324 shares, respectively. For fully-diluted earnings per share the weighted average number of common shares and common share equivalents outstanding was 1,414,025 and 1,413,506 for the three and nine months ended December 31, 1996. 6. SUBSEQUENT EVENTS On January 16, 1997, the Holding Corp. declared a cash dividend of $.07 per share payable on February 27, 1997 to shareholders of record on February 6, 1997. On January 2, 1997 the Holding Corp. executed its 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"). This follows the signing of a letter of intent and a definitive agreement on August 5, 1996 and October 31, 1996, respectively. 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 contributed certain mortgage loans and its mortgage 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 contributed 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. New Mitchell is proposed to be operated in a manner consistent with that currently engaged in by Mitchell, and is expected to 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 8 Financial Statements, Continued NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, Continued (Unaudited) 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 is 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. 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 nine months ended December 31, 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 nine months ended December 31, 1996 1995 Revenue $ 14,868,000 $ 14,374,000 ============== ============ Net income $ 160,000 $ 1,402,000 ============== ============ Primary earnings per share $ 0.19 $ 1.60 ============== ============ 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 December 31, 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 nine months ended December 31, 1996, which management believes will assist in the expansion of the Association's core deposit base. 10 Item 2. Management's Discussion and Analysis of Financial Condition And Results Of Operations CONTINUED The Association continues to look for opportunities to expand the loan servicing portfolio. 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, 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. New 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. The transaction to acquire New Mitchell closed January 2, 1997. 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 nine months ended December 31, 1996, the Association purchased the right to service approximately $127 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 11.93% at December 31, 1996. 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 December 31, 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 11 Item 2. Management's Discussion and Analysis of Financial Condition And Results Of Operations CONTINUED 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, 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. As of December 31, 1996 the Association had the ability to borrow up to an additional $134 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 DECEMBER 31, 1996 MARCH 31, 1996 ---------------------------------------------------- --------------------------------------------------- UNREALIZED UNREALIZED BOOK MARKET -------------------- BOOK MARKET ----------------------- TYPE OF SECURITY VALUE VALUE GAINS LOSSES VALUE VALUE GAINS LOSSES ------------ ---------- ---------- ------- ---------- ----------- ---------- --------- INVESTMENT SECURITIES: U.S. Treasury Notes $ 998,631 $ 1,000,470 $ 1,839 $ $ 996,839 $ 998,120 $ 1,281 $ World Bank Bonds & FHLB Debentures 7,239,510 7,048,874 56,262 246,898 5,247,145 5,186,785 40,039 100,399 FNMA & FHLMC Debentures 2,993,530 2,893,759 99,771 2,989,521 2,879,248 110,273 ----------- ------------ -------- --------- ---------- ----------- --------- -------- TOTAL HELD TO MATURITY $ 11,231,671 $ 10,943,103 $ 58,101 $ 346,669 $ 9,233,505 $ 9,064,153 $ 41,320 $ 210,672 =========== ============ ======== ========= ========== =========== ========= ======== MORTGAGE-BACKED SECURITIES: FNMA Fixed $ 10,140,991 $ 10,398,002 $ 289,390 $ 32,379 $ 11,631,375 $ 11,969,697 $ 393,627 $ 55,305 Adjustable 14,562,597 14,536,864 108,853 134,586 15,816,532 15,817,278 154,630 153,884 FHLMC Fixed 6,496,435 6,597,573 122,238 21,100 7,457,968 7,540,961 119,060 36,067 Adjustable 15,789,665 15,724,723 103,171 168,113 17,801,264 17,808,211 100,262 93,315 GNMA Fixed 2,459,139 2,571,037 111,898 2,622,503 2,725,387 102,884 Adjustable 6,974,897 7,041,792 74,238 7,343 8,018,104 8,041,718 44,574 20,960 Private Issue Fixed Adjustable 4,592,378 4,577,570 11,714 26,522 5,306,546 5,288,821 12,647 30,372 CMO Fixed FNMA 12,038,851 11,989,849 31,761 80,763 12,453,781 12,310,233 38,170 181,718 FHLMC 11,633,639 11,621,367 52,371 64,643 12,371,623 12,282,834 50,686 139,475 Private 3,859,944 3,906,575 48,039 1,408 3,969,574 4,022,320 57,736 4,990 Adjustable FNMA 2,934,616 2,798,688 1,724 137,652 2,934,307 2,890,294 0 44,013 FHLMC 6,881,066 6,651,290 16,319 246,095 7,023,394 6,888,173 35,654 170,875 Private 2,811,122 2,766,183 44,939 3,082,646 3,090,852 8,206 0 ----------- ------------ -------- --------- ---------- ----------- --------- -------- TOTAL HELD TO MATURITY $101,175,340 $101,181,513 $ 971,716 $ 965,543 $110,489,617 $110,676,779 $1,118,136 $ 930,974 =========== ============ ======== ========= ========== =========== ========= ========
13 Management's Discussion and Analysis of Financial Condition And Results Of Operations Continued 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 December 31, 1996 and 1995 The Holding Corp. had net income of $417,000 or $.49 primary earnings per share and $.42 fully diluted earnings per share for the three months ended December 31, 1996 compared to net income of $476,000 or $.55 primary earnings per share and $.51 fully diluted earnings per share for the same period in fiscal 1996. Net interest income, before provision for loan losses, increased $234,000 to $1.9 million during the three months ended December 31, 1996. Interest income increased $686,000 to $4.8 million and primarily reflected a $29.7 million increase in the average balance of interest-earning assets, and an increase of .23% in the average yield on interest-earning assets to 7.52% for the three months December 31, 1996 compared to 7.29% for the three months ended December 31, 1995. The increase in average yield reflected the reinvestment of principal repayments on mortgage-backed securities with an average rate of 6.63% into portfolio loans with average rates of 8.60%. An increase of $36.8 million in the average balance of loans receivable and $5.8 million in investments, partially offset by a decrease of $13.5 million in mortgage-backed securities contributed to the increase in interest-earning assets. 14 Management's Discussion and Analysis of Financial Condition And Results Of Operations Continued Interest expense increased $453,000 and primarily reflected an increase of $38.7 million in the average interest-bearing liabilities. Average deposits increased $30.8 million reflecting the acquisition of FirstBanc, and average borrowings increased $7.9 million reflecting the full effect of issuance in December, 1995 of $12.1 million convertible subordinated debenture. The average rate paid on interest-bearing liabilities decreased to 4.79% for the three months ended December 31, 1996 compared to 4.81% for the three months ended December 31, 1995. Non-interest income increased $194,000 to $821,000 for the three months ended December 31, 1996 compared to $627,000 for the same period in fiscal 1996. The increase was primarily due to an increase in service charges of $81,000 to $160,000 which reflected increases in appraisal fees of $40,000, construction loan fees of $31,000 and late fees of $10,000 for the three months ended December 31, 1996. Loan servicing income increased $78,000 to $214,000 for the three months ended December 31, 1996 compared to $136,000 for the same period in fiscal 1996. This increase primarily reflects an increase of $129 million in loans serviced for others of which $127 million was a result of purchased servicing contracts. Other income increased $54,000 and primarily reflected an increase in financial services income, which is income derived from offering Discount Brokerage Services and from certain insurance related activities. Non-interest expense increased $586,000 to $2.0 million for the three months ended December 31, 1996 compared to $1.5 million for the same period in fiscal 1996. Compensation and benefits increased $259,000 and primarily reflected additional personnel retained from the acquisition of FirstBanc, the addition of a new branch office in Katy, Texas and normal salary increases. Office occupancy increased $127,000 to $291,000 for the three months ended December 31, 1996 compared to $164,000 for the same period in fiscal year 1996 and primarily reflects an increase of $53,000 in depreciation, $39,000 in rent and utilities and $16,000 in telephone expense. Most of the increase in occupancy cost is associated with the addition of the new branch in Katy, Texas and the acquisition of FirstBanc. Income tax provision decreased $99,000 to $176,000 for the three months ended December 30, 1996 compared to $275,000 for the same period in fiscal 1996. The decrease primarily reflected the decrease in income before tax and an adjustment to the tax accrual. Comparison of Nine Months Ended December 31, 1996 and 1995 The Holding Corp. had net income of $244,000 or $0.29 per share for the nine months ended December 31, 1996 compared to net income of $1,320,000 or $1.50 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. Net interest income, before provision for loan losses, increased $441,000 to $5,294,000 during the nine months ended December 31, 1996, compared to $4,854,000 for the same period in fiscal 1996. Interest income increased $1,511,000 and primarily reflected an increase of $18.9 million in the average balance of interest-earning assets. An increase of $26.6 million in the average balance of loans receivable reflecting the acquisition of FirstBanc Savings and the Association's 15 Management's Discussion and Analysis of Financial Condition And Results Of Operations Continued originations and additions to the portfolio and $5.2 million in investments, partially offset by a decrease of $13.1 million in mortgage-backed securities contributed to the increase in interest-earning assets. Interest expense increased approximately $1,070,000 and primarily reflected an increase of $25.3 million in the average balance of interest-bearing liabilities. An increase of approximately $16.6 million in average deposits reflecting the acquisition of FirstBanc Savings and $8.7 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 nine months ended December 31, 1996 and 1995 was 2.90% 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 nine months ended December 31, 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 nine months ended December 31, 1996 was $2.1 million compared to $1.6 million for the same period in fiscal 1996. Service charges increased approximately $178,000 which included an increase of $41,000 in late charges due partially to a $17,000 late charge collected on a $928,000 loan paid off during the nine month period. An increase of $104,000 in appraisal fees and $39,000 in construction loan fees also contributed to the increase in service charges. An increase of approximately $15.0 million in loan volume, reflecting favorable interest rates, contributed to the increase in appraisal fees and construction loan fees. Loan servicing income increased approximately $166,000 and reflected the purchase of approximately $127 million of servicing rights during the nine month period. The average servicing fee at December 31, 1996 was .32%. Other income increased approximately $252,000 and primarily reflected a $187,000 increase in financial services income, which is income derived from offering discount brokerage services and from certain insurance related activities and approximately $86,000 increase in fees earned on transaction accounts. These increases were partially offset by a decrease of $37,000 on gain on sale of loans reflecting less favorable pricing on loans sold. Noninterest expenses increased $2.7 million to $7.0 million for the nine months ended December 31, 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. Approximately $191,000 of this assessment 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 Unaudited Condensed Consolidated Financial Statements. In addition to the SAIF assessment, compensation and benefits increased $498,000 for the nine months ended December 31, 1996 and primarily reflected additional personnel retained from the acquisition of 16 Management's Discussion and Analysis of Financial Condition And Results Of Operations Continued FirstBanc, staffing for the new branch office opened in Katy, Texas, normal salary increases and other additions to staff, partially offset by a decrease in contributions to the retirement plan. Office occupancy increased $234,000 and primarily reflected increases of $88,000 in depreciation and $83,000 in utilities and rent expense. Most of the increase relates to the remodeling work on the Katy branch, upgrading computer and telephone systems and the acquisition of FirstBanc. Income tax provision decreased $661,000 to $64,000 for the nine months ended December 31, 1996 compared to $724,000 for the same period in fiscal 1996. The decrease primarily reflected the decrease in income before tax reflecting the one-time SAIF assessment and adjustment to the tax accrual. 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 December 31, 1996 was a positive 11.93%. As interest rates, prepayments and early withdrawal levels change, however, the resulting interest sensitivity gap is expected to be affected. 17 Management's Discussion and Analysis of Financial Condition And Results Of Operations Continued 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 $60,000 provision for loan losses during the three months ended December 31, 1996, and a $128,000 provision for the nine months ended December 31, 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 nine months ended December 31, 1996, totaled $698,000, attributed primarily to one commercial real estate loan, which was a nonaccrual loan and one multifamily loan which matured November 1, 1996. The Holding Corp.'s allowance for loan losses decreased to $1,166,000 or .95% of total loans at December 31, 1996, as compared to $1,350,000 or 1.43% of total loans at March 31, 1996. 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. December 31, 1996 March 31, 1996 Non-accruing loans $ 214,086 $ 729,274 Troubled debt restructurings 676,865 2,307,947 Foreclosed assets 2,400,448 123,215 ---------- ---------- Total non-performing assets $3,291,399 $3,160,436 ========== ========== Total non-performing assets as a percentage of total assets 1.18% 1.29% Total non-performing assets increased $131,000 for the nine months ended December 31, 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 three other properties which had been loans of FirstBanc, two of which were nonaccrual loans. The addition of these assets to the non-performing total was partially offset by the foreclosure and partial charge-off of two loans, one of which was previously classified as trouble debt restructuring and the other a non-accruing loan. 18 Management's Discussion and Analysis of Financial Condition And Results Of Operations Continued At December 31, 1996, foreclosed assets consisted of two commercial properties, one multifamily property and five single family houses. Subsequent to the quarter ended December 31, 1996, one of the single family houses was sold at a gain of $6,000. Both commercial properties, the multi-family property and three of the remaining single family houses are being marketed. The other house is being prepared for listing. 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 December 31, 1996, the Association's liquidity ratio was 11.59%, which was in excess of the minimum regulatory requirements. During the nine months ended December 31, 1996, total deposits increased approximately $34.6 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 December 31, 1996, the Holding Corp. had commitments to originate loans totaling $6.9 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 nine months ended December 31, 1996, the borrowings from the Federal Home Loan Bank of Dallas decreased $37,000 and ESOP debt decreased $88,000. 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 and financing to be provided to Fort Bend's new subsidiary, Mitchell Mortgage Company, L.L.C. On October 25, 1996, the Holding Corp. declared a cash dividend of $0.07 per share payable on December 6, 1996 to the shareholders of record on November 15, 1996. 19 Management's Discussion and Analysis of Financial Condition And Results Of Operations Continued 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 December 31, 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 $16,554 6.0% Tangible capital requirement 4,125 1.5 ------- ---- Excess $12,429 4.5% ======= ==== Core capital $16,554 6.0% Capital requirement 10,999 4.0 ------- ---- Excess $ 5,555 2.0% ======= ==== Total capital (i.e., core & supplemental capital) $17,590 14.4% Risk-based capital requirement 9,804 8.0 ------- --- Excess $ 7,786 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. The acquisition of New Mitchell is expected to increase tangible, core and risk- based capital requirements to $4,505, $12,012 and $11,319, respectively and reduce excess capital to $11,799, $4,292 and $6,021, respectively. See Note 6 to Condensed Consolidated Financial Statements. 20 Management's Discussion and Analysis of Financial Condition And Results Of Operations Continued 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 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 three months ended December 31, 1996. October 30, 1996 - The registrant issued an earnings release announcing the declaration of a cash dividend and earnings for the quarter ended September 30, 1996. 22 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 Date: February 11, 1997 /s/ Lane Ward --------------------------------------- Lane Ward Vice Chairman, President and Chief Executive Officer Date: February 11, 1997 /s/ David D. Rinehart --------------------------------------- David D. Rinehart Executive Vice President and Chief Financial Officer 23 EX-11 2 COMPUTATION OF EARNINGS PER SHARE Exhibit 11 COMPUTATION OF EARNINGS PER SHARE For the three and nine months ended December 31, 1996 and 1995 (Unaudited)
Three Months Ended Nine Months Ended December 31 December 31, 1996 1995 1996 1995 Primary Earnings per Share Net income applicable to common stock $ 417,168 $ 476,278 $ 244,056 $1,320,287 Weighted average number of common shares ========== ========== ========== ========== outstanding 819,979 849,893 819,459 855,363 Common shares issuable under employee stock option plan 61,317 51,139 61,317 51,139 Less shares assumed repurchased with proceeds (27,453) (28,952) (27,453) (28,952) ---------- ---------- ---------- ---------- Weighted average common shares and common share equivalents outstanding 853,843 872,080 853,324 877,550 ========== ========== ========== ========== Primary earnings per common share $ 0.49 $ 0.55 $ 0.29 $ 1.50 ========== ========== ========== ========== Fully Diluted Earnings Per Share Net income applicable to common stock $ 417,168 $ 476,278 $ 244,056 $1,320,287 Interest on convertible subordinated debentures, net of tax 172,991 45,509 518,972 45,509 ---------- ---------- ---------- ---------- Net income adjusted $ 590,159 $ 521,787 $ 763,028 $1,365,796 ========== ========== ========== ========== Weighted average common share and common share equivalents outstanding 853,843 872,080 853,324 877,550 Weighted average common shares issuable with the conversion of debentures to common stock 560,182 152,223 560,182 50,926 ---------- ---------- ---------- ---------- Weighted average common shares and common share equivalents 1,414,025 1,024,303 1,413,506 928,476 ========== ========== ========== ========== Fully diluted earnings per common share $ 0.42 $ 0.51 $ 0.54 $ 1.47 ========== ========== ========== ==========
Fully diluted earnings per share are not disclosed on the statement of operations as they are anti-dilutive for the nine months ended December 31, 1996 EX-27 3 FINANCIAL DATA SCHEDULE
9 9-MOS MAR-31-1997 APR-01-1996 DEC-31-1996 6,981,332 14,672,756 0 0 3,410,025 112,407,011 112,124,616 124,352,183 1,165,629 278,532,088 238,497,915 0 5,788,488 16,339,279 0 0 9,085 19,761,802 278,532,088 7,193,460 6,526,765 0 13,720,225 7,430,780 8,425,509 5,294,716 128,000 0 1,254,913 307,565 307,565 0 0 244,056 .29 .29 2.90 214,086 0 676,865 0 1,350,222 789,193 91,316 1,165,629 183,674 0 981,955
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