-----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, WP5X+Wvtueer7RIf4MCEdIEYfaXFZ1x0qugi75UvZGKCjS6WdJf+sm/5Z/dmdXXv NZcjwP2evKxIqQiyNFil3A== 0000899243-97-001556.txt : 19970813 0000899243-97-001556.hdr.sgml : 19970813 ACCESSION NUMBER: 0000899243-97-001556 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19970630 FILED AS OF DATE: 19970812 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: 97656702 BUSINESS ADDRESS: STREET 1: 3400 AVENUE H CITY: ROSENBERG STATE: TX ZIP: 77471 BUSINESS PHONE: 7133425571 10QSB 1 FORM 10-QSB 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 JUNE 30, 1997 -------------------------------------------- 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 915,389 shares and 827,215 shares of Common Stock ($0.01 par value) issued and outstanding, respectively as of July 24, 1997. 1 of 21 PART I - FINANCIAL INFORMATION ITEM 1 - FINANCIAL STATEMENTS
FORT BEND HOLDING CORP. CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL CONDITION (UNAUDITED) ASSETS JUNE 30, 1997 MARCH 31, 1997 Cash and due from banks $ 8,462,218 $ 6,369,675 Short-term investments 18,959,712 14,220,516 Certificates of deposit 200,000 200,000 --------------- ---------------- TOTAL CASH AND CASH EQUIVALENTS 27,621,930 20,790,191 Investment securities available for sale, at market value 2,852,946 2,810,270 Investment securities held to maturity (estimated market value of $12,851,420 and $10,789,440 at June 30, 1997 and March 31, 1997, respectively) 13,230,674 11,234,763 Mortgage-backed securities available for sale, at market value 512,068 520,869 Mortgage-backed securities held to maturity (estimated market value of $93,611,639 and $96,684,430 at June 30, 1997 and March 31,1997, respectively) 93,839,235 97,084,501 Loans receivable, net 145,478,428 138,227,705 Loans held for sale 14,896,120 2,660,415 Accrued interest receivable 2,020,060 1,816,415 Real estate, net 33,721 470,996 Federal Home Loan Bank stock, at cost 1,443,100 1,933,000 Premises and equipment, net 4,878,196 4,970,011 Mortgage servicing rights, net 7,301,028 7,537,571 Prepaid expenses and other assets 2,931,684 3,369,505 Deferred income taxes 311,872 305,961 Goodwill, net 1,317,286 1,347,925 --------------- ---------------- TOTAL ASSETS $ 318,668,348 $ 295,080,098 =============== ================ LIABILITIES AND STOCKHOLDERS' EQUITY Liabilities: Deposits $ 268,578,249 $ 250,218,152 Convertible Subordinated Debentures 12,030,000 12,080,000 Other borrowings 6,122,194 4,226,676 Advances from borrowers for taxes and insurance 7,528,765 4,750,945 Accounts payable, accrued expenses and other liabilities 2,654,927 2,868,177 --------------- ---------------- TOTAL LIABILITIES 296,914,135 274,143,950 --------------- ---------------- Minority interest in consolidated subsidiary 2,538,585 2,508,214 --------------- ---------------- Stockholders' Equity: Serial preferred stock, $.01 par value - 500,000 shares authorized, none outstanding Common Stock $.01 par value, 2,000,000 shares authorized 915,389 shares issued and 827,215 shares outstanding at June 30, 1997, and 910,475 shares issued and 822,301 shares outstanding at March 31, 1997 9,154 9,105 Additional paid-in capital 8,980,347 8,704,986 Unearned employee stock ownership plan shares (215,442) (307,125) Deferred compensation (129,305) (82,324) Net unrealized depreciation on available for sale securities, net of tax (119) (6,107) Retained earnings (substantially restricted) 12,027,494 11,565,900 Treasury stock, at cost - 88,174 shares (1,456,501) (1,456,501) --------------- ---------------- TOTAL STOCKHOLDERS' EQUITY 19,215,628 18,427,934 --------------- ---------------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 318,668,348 $ 295,080,098 =============== ================ The accompanying notes are an integral part of the condensed consolidated financial statements.
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FORT BEND HOLDING CORP. CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS THREE MONTHS ENDED JUNE 30 (UNAUDITED) 1997 1996 INTEREST INCOME: Loans $ 3,364,104 $ 2,130,689 Short-term investments 159,007 187,395 Investment securities 241,290 147,996 Mortgage-backed securities 1,575,463 1,829,259 ----------- ----------- TOTAL INTEREST INCOME 5,339,864 4,295,339 ----------- ----------- INTEREST EXPENSE: Deposits 2,668,028 2,320,151 Borrowings 337,047 330,050 ----------- ----------- TOTAL INTEREST EXPENSE 3,005,075 2,650,201 ----------- ----------- NET INTEREST INCOME BEFORE PROVISION FOR LOAN LOSSES 2,334,789 1,645,138 PROVISION FOR LOAN LOSSES 62,980 25,000 ----------- ----------- NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 2,271,809 1,620,138 ----------- ----------- NONINTEREST INCOME: Gain on sale of loans 97,340 49,949 Loan fees & charges 727,540 113,418 Loan servicing income - net 297,451 105,381 Service charges on deposit account 209,877 154,492 Other income 188,742 124,646 ----------- ----------- TOTAL NONINTEREST INCOME 1,520,950 547,886 ----------- ----------- NONINTEREST EXPENSES: Compensation and benefits 1,749,328 831,871 Office occupancy and equipment 446,580 187,020 Federal insurance premiums 39,912 124,282 Data processing fees 125,775 46,067 Insurance and surety bond expense 36,867 33,616 Other 517,245 330,449 ----------- ----------- TOTAL NONINTEREST EXPENSES 2,915,707 1,553,305 INCOME BEFORE INCOME TAX AND MINORITY INTEREST 877,052 614,719 INCOME TAX PROVISION 278,343 209,000 ----------- ----------- NET INCOME BEFORE MINORITY INTEREST 598,709 405,719 MINORITY INTEREST 79,371 --- ----------- ----------- NET INCOME $ 519,338 $ 405,719 =========== =========== PRIMARY EARNINGS PER SHARE $ 0.60 $ 0.48 =========== =========== FULLY DILUTED EARNINGS PER COMMON SHARE $ 0.49 $ 0.40 =========== =========== DIVIDENDS PER COMMON SHARE $ 0.07 $ 0.07 =========== =========== The accompanying notes are an integral part of the condensed consolidated financial statements.
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FORT BEND HOLDING CORP. CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED) THREE MONTHS ENDED JUNE 30, 1997 1996 OPERATING ACTIVITIES: Net income $ 519,338 $ 405,719 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Provision for losses on loans and real estate 62,980 25,000 Depreciation 145,207 51,877 Compensation charge related to release of ESOP shares 165,916 33,538 Amortization of loan premium, discount, and deferred fees, net (66,133) (61,115) Amortization of goodwill 22,944 --- Deferred income tax provision (benefit) (9,840) 32,474 Minority interest in income of consolidated subsidiary 79,371 --- Amortization of mortgage servicing rights 406,717 64,250 Net gain on sale of loans (97,340) (49,949) Origination of loans held for sale (25,431,217) (4,113,994) Proceeds from sale of loans 13,292,852 4,223,200 Other, net 46,709 (42,954) --------------- ------------- NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES (10,862,496) 568,046 --------------- ------------- INVESTING ACTIVITIES: Net change in loans receivable $ (7,016,540) $ (7,747,962) Proceeds from sale of real estate 200,000 8,500 Improvements to real estate (14,102) --- Purchase of premises and equipment (53,392) (267,216) Proceeds from redemption of FHLB stock 511,700 --- Purchase or origination of mortgage servicing rights (170,174) (743,901) Purchase of investment securities available for sale (32,739) (27,979) Principal collected on mortgage-backed securities 3,243,061 3,486,595 Purchase of investment securities held to maturity (1,991,953) (10,983,561) --------------- ------------- NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES (5,324,139) (16,275,524) --------------- ------------- FINANCING ACTIVITIES: Net increase in deposits 18,360,097 960,866 Net increase in short-term borrowings 2,000,000 6,000,000 Payment on long-term borrowings (12,799) (12,031) Increase in advances from borrowers for taxes and insurance 2,777,820 3,219,986 Dividends paid to minority stockholder (49,000) --- Dividends paid (57,744) (57,344) ------------ ------------- NET CASH PROVIDED BY FINANCING ACTIVITIES 23,018,374 10,111,477 ------------ ------------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 6,831,739 (5,596,001) CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 20,790,191 17,193,662 ------------ ------------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 27,621,930 $ 11,597,661 ============ ============= The accompanying notes are an integral part of the condensed consolidated financial statements.
4 FINANCIAL STATEMENTS, CONTINUED -------------------------------- NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) ---------------- 1. BASIS OF PRESENTATION The unaudited information for the three months ended June 30, 1997 and 1996 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"). The Association's financial statements includes its 51% owned subsidiary Mitchell Mortgage Company, L.L.C. ("Mitchell"). 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, 1997 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, 1997, an additional 2,600 shares were granted under the RRP. A total of 26,325 shares have been authorized of which 24,452 shares had been granted under the RRP as of June 30, 1997. 3. NON-PERFORMING ASSETS Impaired loans decreased $1,000 during the three months ended June 30, 1997. The decline resulted from the loan amortization from scheduled payments made on two of the loans, partially offset by an increase in a third loan attributed to loan modification and partial capitalization of interest due. Each of these loans was previously recognized as impaired. Foreclosed assets decreased $310,000 for the quarter ended June 30, 1997, which primarily reflects the sale of a single family house and a commercial property. 5 FINANCIAL STATEMENTS, CONTINUED ------------------------------- NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED (UNAUDITED) ----------------- The following table summarizes impaired loan information as of June 30, 1997. Impaired loans $806,038 Impaired loans which have a specific reserve of $111,300 for loan losses calculated under SFAS 114 275,300 Impaired loans which do not have a specific reserve for loan losses calculated under SFAS 114 $530,738
4. CONVERTIBLE SUBORDINATED DEBENTURES AND OTHER BORROWINGS Borrowings at June 30, 1997 included 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 and has a balance of $3,906,752 at June 30, 1997. In addition, the Association had a $2.0 million short-term advance which was repaid July 2, 1997. Borrowings also included an ESOP loan with a balance of $215,442 at June 30, 1997 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 ---------------- ------------- 1998 $ 39,607 $43,875 1999 55,752 87,750 2000 59,312 83,817 2001 3,752,081
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 which would result in the acquisition of 559,255 shares. 6 FINANCIAL STATEMENTS, CONTINUED ------------------------------- NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED (UNAUDITED) ----------------- 5. EARNINGS PER COMMON SHARE Primary earnings per common share for the three months ended June 30, 1997 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 months ended June 30, 1997 was 866,177 shares. For fully-diluted earnings per share the weighted average number of common shares and common share equivalents outstanding was 1,423,118 for the three months ended June 30, 1997. 6. SUBSEQUENT EVENTS On July 23, 1997, the Holding Corp. declared a cash dividend of $.10 per share payable on September 3, 1997 to shareholders of record on August 13, 1997. 7 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. In January, 1997 the Association acquired, and has consolidated in its financial statements, a 51% interest in Mitchell Mortgage Company, L.L.C. ("Mitchell"). 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 June 30, 1997, 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. Mitchell engages in similar lending activities with emphasis on construction and multifamily lending. 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, 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. Two additional branch offices were added during fiscal 1997 which management believes will assist in the expansion of the Association's core deposit base. 8 ITEM 2. ------- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF -------------------------------------------------------------------------- OPERATIONS ---------- CONTINUED --------- 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). At June 30, 1997, the Association had loans serviced for others of approximately $286 million and Mitchell Mortgage Company, L.L.C. ("Mitchell") had approximately $598 million for a total of $884 million for the Holding Corp. Management believes purchases of loan servicing rights may allow the Holding Corp. to take advantage of some economies of scale related to servicing. Interest rates have moderated slightly subsequent to the fiscal year ended March 31, 1997. The impact of these changes, may be a higher volume of permanent single family lending activity. 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 17.59% at June 30, 1997. 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 June 30, 1997, 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, 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 9 ITEM 2. ------- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF -------------------------------------------------------------------------- OPERATIONS ---------- CONTINUED --------- 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 June 30, 1997, the Association had the ability to borrow up to an additional $150 million from the Federal Home Loan Bank of Dallas 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. 10
SCHEDULE OF INVESTMENT AND MORTGAGE-BACKED SECURITIES HELD TO MATURITY JUNE 30, 1997 ------------------------------------------------------ UNREALIZED BOOK MARKET ----------------------- TYPE OF SECURITY VALUE VALUE GAINS LOSSES ------------ ------------ --------- ----------- INVESTMENT SECURITIES: U.S. Treasury Notes $ 1,997,213 $ 2,004,216 $ 7,003 $ World Bank Bond & FHLB Debentures 7,241,944 6,943,783 17,464 315,625 FNMA & FHLMC Debentures 3,991,517 3,903,421 6,372 94,468 ------------ ------------ --------- ----------- TOTAL HELD TO MATURITY $ 13,230,674 $ 12,851,420 $ 30,839 $ 410,093 ============ ============ ========= =========== MORTGAGE-BACKED SECURITIES: FNMA Fixed $ 9,386,105 $ 9,729,555 $ 359,007 $ 15,557 Adjustable 13,485,002 13,347,301 69,076 206,777 FHLMC Fixed 5,277,629 5,360,472 95,899 13,056 Adjustable 14,832,823 14,683,436 107,257 256,644 GNMA Fixed 2,293,620 2,394,161 100,541 Adjustable 6,385,032 6,511,289 126,257 Private Issue Fixed Adjustable 3,626,423 3,611,534 9,316 24,205 CMO Fixed FNMA 11,800,696 11,689,802 12,672 123,566 FHLMC 10,842,845 10,780,771 19,716 81,790 Private 3,579,710 3,609,816 33,721 3,615 Adjustable FNMA 2,934,820 2,816,653 26,718 144,885 FHLMC 6,759,323 6,511,103 19,286 267,506 Private 2,635,207 2,565,746 69,461 ------------ ------------ --------- ----------- TOTAL HELD TO MATURITY $ 93,839,235 $ 93,611,639 $ 979,466 $ 1,207,062 ============ ============ ========= ===========
MARCH 31, 1997 ------------------------------------------------------------- UNREALIZED BOOK MARKET ----------------------- TYPE OF SECURITY VALUE VALUE GAINS LOSSES ------------ ------------ --------- ----------- INVESTMENT SECURITIES: U.S. Treasury Notes $ 999,218 $ 999,766 $ 548 $ World Bank Bond & FHLB Debentures 7,240,703 6,917,342 4,920 328,281 FNMA & FHLMC Debentures 2,994,842 2,872,332 122,510 ------------ ------------ --------- ----------- TOTAL HELD TO MATURITY $ 11,234,763 $ 10,789,440 $ 5,468 $ 450,791 ============ ============ ========= =========== MORTGAGE-BACKED SECURITIES: FNMA Fixed $ 9,646,216 $ 9,933,315 $ 322,154 $ 35,055 Adjustable 14,146,181 14,002,041 77,136 221,276 FHLMC Fixed 5,564,950 5,624,926 81,704 21,728 Adjustable 15,339,418 15,171,045 107,024 275,397 GNMA Fixed 2,378,421 2,462,218 83,797 Adjustable 6,709,957 6,795,714 90,650 4,893 Private Issue Fixed Adjustable 3,858,558 3,842,010 9,025 25,573 CMO Fixed FNMA 11,898,545 11,768,345 10,269 140,469 FHLMC 11,258,437 11,147,713 23,595 134,319 Private 3,796,851 3,819,229 26,276 3,898 Adjustable FNMA 2,934,718 2,828,209 1,391 107,900 FHLMC 6,826,509 6,604,949 20,569 242,129 Private 2,725,740 2,684,716 41,024 ------------ ------------ --------- ----------- TOTAL HELD TO MATURITY $ 97,084,501 $ 96,684,430 $ 853,590 $ 1,253,661 ============ ============ ========= ===========
11 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 JUNE 30, 1997 AND 1996 The Holding Corp. had net income of $519,000 or $.60 primary earnings per share and $.49 fully diluted earnings per share for the three months ended June 30, 1997 compared to net income of $406,000 or $.48 primary earnings per share and $.40 fully diluted earnings per share for the same period in fiscal 1997. Net interest income, before provision for loan losses, increased $690,000 to $2.3 million during the three months ended June 30, 1997. Interest income increased $1.0 million to $5.3 million and primarily reflected a $41.8 million increase in the average balance of interest-earning assets, and an increase of .40% in the average yield on interest-earning assets to 7.77% for the three months June 30, 1997 compared to 7.37% for the three months ended June 30, 1996. The increase in average yield reflected the reinvestment of principal repayments on mortgage-backed securities with an average rate of 6.61% into portfolio loans with an average rate of 8.91%. An increase of $51.5 million in the average balance of loans receivable and $4.0 million in investments, partially offset by a decrease of $13.7 million in mortgage-backed securities contributed to the increase in interest-earning assets. The increase in the average loan balance reflected approximately $24 million from the Mitchell loan portfolio. The remaining increase reflected the increase in the Association's portfolio including loans acquired through the August, 1996 acquisition of Firstbanc which initially added approximatelly $20 million. 12 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF -------------------------------------------------------------------------- OPERATIONS ---------- CONTINUED --------- Interest expense increased $355,000 and primarily reflected an increase of $31.8 million in the average interest-bearing liabilities. Average deposits increased $33.4 million reflecting the acquisition of FirstBanc, and average borrowings decreased $1.6 million primarily reflecting a decrease in Federal Home Loan Bank advances and subordinated debt of $1.4 million and $70,000, respectively. The average rate paid on interest- bearing liabilities decreased to 4.79% for the three months ended June 30, 1997 compared to 4.83% for the three months ended June 30, 1996. Non-interest income increased $973,000 to $1.5 million for the three months ended June 30, 1997 compared to $548,000 for the same period in fiscal 1997. The increase was primarily due to an increase in loan fees and charges of $614,000 to $728,000 which reflected $567,000 of fees included from Mitchell and an increase of $37,000 in construction loan fees of the Association for the three months ended June 30, 1997. Loan servicing income increased $192,000 to $297,000 for the three months ended June 30, 1997 compared to $105,000 for the same period in fiscal 1997. This increase primarily reflects an increase of $642 million in loans serviced for others of which $598 million was serviced by Mitchell. Other income increased $64,000 and primarily reflected other income from Mitchell. Non-interest expense increased $1.4 million to $2.9 million for the three months ended June 30, 1997 compared to $1.6 million for the same period in fiscal 1997. Compensation and benefits increased $917,000 and primarily reflected additional personnel retained from the acquisition of FirstBanc, Mitchell personnel, ESOP appreciation in shares released and normal salary increases within the Association. Office occupancy increased $260,000 to $447,000 for the three months ended June 30, 1997 compared to $187,000 for the same period in fiscal year 1997 and primarily reflects the Association's increase of $68,000 in depreciation, $30,000 in rent and utilities and $13,000 in telephone expense. In addition, Mitchell had occupancy expense of $142,000. Most of the Association's increase in occupancy cost is associated with the addition of the new branch in Katy, Texas and the acquisition of FirstBanc. Income tax provision increased $69,000 to $278,000 for the three months ended June 30, 1997 compared to $209,000 for the same period in fiscal 1997. The increase primarily reflected the increase 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, 1997, was a 13 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF -------------------------------------------------------------------------- OPERATIONS ---------- CONTINUED --------- positive 17.59%. As interest rates, prepayments and early withdrawal levels change, however, the resulting interest sensitivity gap is expected to be affected. 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 $63,000 provision for loan losses during the three months ended June 30, 1997. Net charge- offs for the three months ended June 30, 1997, totaled $88,000, attributed primarily to one commercial real estate loan, of which $62,000 was charged off and the remainder paid off. The Holding Corp.'s allowance for loan losses decreased to $1,676,000 or 1.14% of total loans at June 30, 1997, compared to $1,701,000 or 1.22% of total loans at March 31, 1997. 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.
June 30, 1997 March 31, 1997 Non-accruing loans $ 574,843 $ 489,251 Troubled debt restructurings 565,320 405,097 Foreclosed assets 48,345 357,880 ---------- ---------- Total non-performing assets $1,188,508 $1,252,228 ========== ========== Total non-performing assets as a percentage of total assets 0.37% 0.42%
Total non-performing assets decreased $64,000 for the three months ended June 30, 1997. The increase in nonaccrual loans is primarily the result of a $349,000 increase in residential loans over 90 days delinquent, of which $252,000 are two loans held by Mitchell Mortgage. This increase was partially offset by the transfer from nonaccrual of a $275,000 commercial real estate loan which was modified and written down to $164,000, and reclassified as a troubled debt restructuring. The decrease in foreclosed assets was primarily the result of the sale of a single family residence and a commercial real estate property, which totaled $323,000. At June 30, 1997, foreclosed assets consisted of three repossesed automobiles and a 5% participation in 18 residential lots. All of the lots and the automobiles are being marketed. 14 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF -------------------------------------------------------------------------- OPERATIONS ---------- CONTINUED --------- 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 June 30, 1997, the Association's liquidity ratio was 9.87%, which was in excess of the minimum regulatory requirements. During the three months ended June 30, 1997, total deposits increased approximately $18.4 million. The increase primarily reflects $12 million in transit for a large multifamily loan payoff serviced by Mitchell Mortgage payable to FNMA and $4 million in proceeds from the sale of a loan participation by the Holding Corp. 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 June 30, 1997, the Holding Corp. had commitments to originate loans totaling $9.3 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 three months ended June 30, 1997, the borrowings from the Federal Home Loan Bank of Dallas increased $1,987,000 and ESOP debt decreased $92,000. The increase in borrowings from Federal Home Loan was used to partially fund multifamily loans during the period. Such loans are generally sold to investors within 30 days of origination. It is anticipated that the amount of outstanding borrowings will fluctuate during the 1998 fiscal year depending upon cash flows from the various sources of funds and financing to be provided to Mitchell Mortgage Company, L.L.C. On July 23, 1997, the Holding Corp. declared a cash dividend of $0.10 per share payable on September 3, 1997 to the shareholders of record on August 13, 1997. The Association is required to maintain specific amounts of regulatory capital pursuant to regulations of the OTS. As of June 5, 1997, 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 June 30, 1997 15 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF -------------------------------------------------------------------------- OPERATIONS ---------- CONTINUED --------- 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 $20,501 6.6% Tangible capital requirement 4,669 1.5 ------- ---- Excess $15,832 5.1% ======= ==== Core capital $20,501 6.6% Capital requirement 12,479 4.0 ------- ---- Excess $ 8,022 2.6% ======= ==== Total capital (i.e., core & supplemental $21,857 13.9% capital) Risk-based capital requirement 12,598 8.0 ------- ---- Excess $ 9,259 5.9% ======= ====
(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. 16 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF -------------------------------------------------------------------------- OPERATIONS ---------- CONTINUED --------- IMPACT OF NEW ACCOUNTING STANDARDS In February 1997, the Financial Accounting Standards Board issued Statement No. 128, "Earnings per Share." Statement 128 is effective for the year ending after December 15, 1997, for both interim and annual periods, and replaces the presentation of primary and fully diluted earnings per share with a presentatin of basic and diluted earnings per share. The adoption of Statement 128 is not expected to have a material impact on earnings per share reported by the Holding Corp. In February 1997, the Financial Accounting Standards Board issued Statement No. 129, "Disclosure of Information about Capital Structure." Statement 129 is effective for financial statements for periods ending after December 15, 1997. Statement 129 consolidates the existing requirements to disclose certain information about an entity's capital structure. In June 1997, the Financial Accounting Standards Board issued SFAS No. 130, "Accounting for Comprehensive Income." Statement 130 is effective for financial statements for fiscal years beginning after December 15, 1997, with earlier application permitted. Statement 130 defines comprehensive income as the change in equity of a business enterprise during a period from transactions and other events and circumstances from nonowner sources. In June 1997, the Financial Accounting Standards Board issued SFAS No. 131, "Disclosures about Segments of an Enterprise and Related Information." Statement 131 is effective for fiscal years beginning after December 15, 1997, with earlier application encouraged. Statement 131 specifies revised guidelines for determining an entity's operating segments and the type and level of financial information to be disclosed. 17 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 ------------------------------------------------------------- On July 29, 1997 the Holding Corp. held its annual meeting at which two directors, Robert W. Lindsey and Lane Ward were nominated and re-elected to a three year term. For Withheld ----- ---------- Robert W. Lindsey 720,412 4,300 Lane Ward 721,876 2,836 Directors who will continue serving until their term expires are: J. Patrick Gubbels, Wayne O. Poldrack, Doyle G. Callender, Ron L. Workman, George C. Brady and William A. Little. Other matters voted upon at the meeting were as follows: Amendment of the Holding Corp.'s Certificate of Incorporation to increase the number of authorized shares of common stock from 2,000,000 to 4,000,000 For Against Abstain Non-votes ----------- -------------- -------------- ---------------- 571,227 151,716 969 800 Amendment of the Holding Corp.'s Certification of Incorporation to increase the number of authorized shares of preferred stock from 500,000 to 1,000,000 For Against Abstain Non-votes ------------- -------------- -------------- --------------- 452,858 167,716 1,969 102,169 Amendment of the Holding Corp.'s 1993 Stock Option and Incentive Plan to increase the number of shares of common stock reserved thereunder from 87,750 to 128,865 For Against Abstain Non-votes -------------- ------------- -------------- ---------------- 555,859 86,991 78,769 3,093 Ratification of the appointment of Coopers & Lybrand L.L.P. as independent accountants for the Company for the fiscal year ending March 31, 1998 For Against Abstain ------------- ------------------ ----------------- 720,651 1,450 2,611 18 PART II - OTHER INFORMATION --------------------------- CONTINUED --------- 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 June 30, 1997. May 1, 1997 - The registrant issued an earnings release announcing the declaration of a cash dividend and earnings for the quarter ended March 31, 1997. 19 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: August 12, 1997 /s/ Lane Ward ------------------------------- Lane Ward Vice Chairman, President and Chief Executive Officer /s/ David D. Rinehart --------------------------------- Date: August 12, 1997 David D. Rinehart Executive Vice President and Chief Financial Officer 20 EX-11 2 COMPUTATION OF EARNINGS PER SHARE
EXHIBIT 11 COMPUTATION OF EARNINGS PER SHARE FOR THE THREE MONTHS ENDED JUNE 30, 1997 AND 1996 (UNAUDITED) 1997 1996 Primary Earnings per Share - -------------------------- Net income applicable to common stock $ 519,338 $ 405,719 ========== ========== Weighted average number of common shares outstanding 826,808 819,198 Common shares issuable under employee stock option plan 74,639 51,139 Less shares assumed repurchased with proceeds 35,270 30,283 ---------- ---------- Weighted average common shares and common share equivalents outstanding 866,177 840,054 ========== ========== Primary earnings per common share $ 0.60 $ 0.48 ========== ========== Fully Diluted Earnings Per Share - -------------------------------- Net income applicable to common stock $ 519,338 $ 405,719 Interest on convertible subordinated debentures, net of tax 173,205 159,719 ---------- ---------- Net income, adjusted $ 692,543 $ 565,438 ========== ========== Weighted average common share and common share equivalents outstanding 866,177 840,054 Weighted average common shares issuable with the conversion of debentures to common stock 556,941 560,182 ---------- ---------- Weighted average common shares and common share equivalents 1,423,118 1,400,236 ========== ========== Fully diluted earnings per common share $ 0.49 $ 0.40 ========== ==========
EX-27 3 FINANCIAL DATA SCHEDULE
9 3-MOS MAR-31-1998 APR-01-1997 JUN-30-1997 8,462,218 19,159,712 0 0 3,365,014 107,069,909 106,463,059 162,050,732 1,676,184 318,668,348 268,578,249 2,000,000 10,183,692 16,152,194 0 0 9,154 21,007,841 318,668,348 3,364,104 1,975,760 0 5,339,864 2,668,028 3,005,075 2,334,789 62,980 0 517,245 797,681 797,681 0 0 519,338 .60 .49 3.40 574,843 0 565,320 0 1,701,008 87,804 0 1,676,184 270,457 0 1,405,727
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