-----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, EZy940ByiktOhv26tseAUJtZ9f+ToqkBOir70GmLbpcsTsPQOSoLrBwNLp2J2xwY gkWRvi0iWT7CeznuedlOXQ== 0000914317-00-000370.txt : 20000515 0000914317-00-000370.hdr.sgml : 20000515 ACCESSION NUMBER: 0000914317-00-000370 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20000331 FILED AS OF DATE: 20000512 FILER: COMPANY DATA: COMPANY CONFORMED NAME: EAST TEXAS FINANCIAL SERVICES INC CENTRAL INDEX KEY: 0000929646 STANDARD INDUSTRIAL CLASSIFICATION: SAVINGS INSTITUTION, FEDERALLY CHARTERED [6035] IRS NUMBER: 752559089 STATE OF INCORPORATION: DE FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10QSB SEC ACT: SEC FILE NUMBER: 000-24848 FILM NUMBER: 627966 BUSINESS ADDRESS: STREET 1: 1200 S BECKHAM AVE CITY: TYLER STATE: TX ZIP: 75701 BUSINESS PHONE: 9035931767 MAIL ADDRESS: STREET 1: 1200 SOUTH BECKHAM AVE CITY: TYLER STATE: TX ZIP: 75701 10QSB 1 FORM 10-QSB SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 [x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the period ended March 31, 2000 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _______ to _______. Commission file number 0-24848 East Texas Financial Services, Inc. (Exact name of registrant as specified in its charter) Delaware 75-2559089 (State or other jurisdiction of (I.R.S. employer incorporation or organization identification number) 1200 South Beckham, Tyler, Texas 75701 (Address of principal executive offices) (Zip code) (903) 593-1767 (Registrant's telephone number, including area code) Check whether the issuer (1) filed all reports required to be filed by Section 13 of 15(d) of the Securities Exchange Act of 1934 during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. [ X ] Yes [ ] No The number of shares of the registrant's common stock ($.01 par value) outstanding as of March 31, 2000, was 1,162,320. EAST TEXAS FINANCIAL SERVICES, INC. AND SUBSIDIARY FORM 10-QSB March 31, 2000 INDEX Part I - Financial Information Item 1. Financial Statements Consolidated Statements of Financial Condition, March 31, 2000 (Unaudited) and September 30, 1999 Consolidated Statements of Income, (Unaudited) three months and six months ended March 31, 2000 and March 31, 1999 Consolidated Statement of Changes in Stockholders' Equity, (Unaudited) six months ended March 31, 2000 Consolidated Statements of Cash Flows, (Unaudited) six months ended March 31, 2000, and March 31, 1999 Notes to (Unaudited) Consolidated Financial Statements, March 31, 2000 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Part II - Other Information Item 1. Legal Proceedings Item 2. Changes In Securities Item 3. Defaults Upon Senior Securities Item 4. Submission of Matters To a Vote of Security Holders Item 5. Other Information Item 6. Exhibits and Reports on Form 8-K Signature Page EAST TEXAS FINANCIAL SERVICES, INC. AND SUBSIDIARY FORM 10-QSB March 31, 2000 - -------------------------------------------------------------------------------- PART I - FINANCIAL INFORMATION Item 1 - Financial Statements East Texas Financial Services, Inc. (the "Company") was formed in September of 1994 for the purpose of acquiring all of the common stock of First Federal Savings and Loan Association of Tyler (the "Association"), concurrent with its conversion from the mutual to stock form of ownership. The Company completed its initial public stock offering of 1,215,190 shares of $.01 par value common stock on January 10, 1995. The Company utilized approximately one half of the net stock sale proceeds to acquire all of the common stock issued by the Association. For additional discussion of the Company's formation and intended operations, see the Form S-1 Registration Statement (No. 33-83758) filed with the Securities and Exchange Commission and the Company's annual report on Form 10-KSB for the fiscal year ended September 30, 1999, also filed with the Commission. The financial statements presented in this Form 10-QSB reflect the consolidated financial condition and results of operations of the Company and its wholly owned subsidiary, First Federal Savings and Loan Association of Tyler. Net income for the six months ended March 31, 1999 has been restated to reflect an adjustment by the Company's independent auditors at September 30, 1999. Other non-interest income was decreased by $39,000 and income tax expense was decreased by $13,260 to reflect the restatement. The restatement was related to the recovery of a deficiency judgement against a borrower filed in a prior period. The recovery was reported as other non-interest income during the six month period ending March 31, 1999 and was restated and added to the Company's general valuation allowance at the September 30, 1999 audit.
EAST TEXAS FINANCIAL SERVICES, INC. CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION ASSETS March 31, 2000 September 30, 1999 -------------- ------------------ (Unaudited) Cash and due from banks $ 1,384,331 $ 1,019,937 Interest-bearing deposits with banks 418,408 974,627 Interest-earning time deposits with financial institutions 1,485,000 2,461,617 Federal funds sold 0 0 Investment securities available-for-sale 6,279,944 5,918,750 Mortgage-backed securities available-for-sale 36,517,765 32,893,809 Investment securities held-to-maturity (estimated market value of $27,600,405 at March 31, 2000, and $29,948,866 at September 30, 1999) 28,492,766 30,481,413 Mortgage-backed securities held-to-maturity (estimated market value of $5,257,439 at March 31, 2000 and $5,949,914 at September 30, 1999) 5,097,182 5,806,975 Loans receivable, net of allowance for credit losses of $277,899 at March 31, 2000 and $270,039 at September 30, 1999 70,668,125 67,250,334 Accrued interest receivable 1,174,723 1,167,245 Federal Home Loan Bank stock, at cost 2,932,200 2,283,000 Premises and equipment 2,575,221 2,607,213 Foreclosed real estate, net of allowance of $-0- 0 0 Mortgage servicing rights 255,152 266,010 Other assets 899,162 593,991 ------------- ------------- Total Assets $ 158,179,979 $ 153,724,921 ============= ============= LIABILITIES AND STOCKHOLDERS' EQUITY Liabilities: Noninterest deposits $ 1,992,223 $ 2,021,914 Interest-bearing deposits 81,102,901 85,517,925 ------------- ------------- Total deposits 83,095,124 87,539,839 FHLB advances 57,777,064 45,057,877 Notes payable to other banks 0 0 Advances from borrowers for taxes and insurance 348,204 823,755 Federal income taxes Current (4,356) -0- Deferred 33,036 108,184 Accrued expenses and other liabilities 507,070 1,775,938 ------------- ------------- Total liabilities 141,756,142 135,305,593 ------------- -------------
Stockholders' equity: Preferred stock, $0.01 par value, 500,000 shares authorized, none outstanding Common stock, $0.01 par value, 5,500,000 shares authorized, 1,884,492 shares issued and 1,162,320 outstanding 18,845 18,845 Additional paid-in-capital 12,397,167 12,397,167 Deferred compensation - RRP shares (38,794) (96,985) Unearned employee stock ownership plan shares (442,059) (442,059) Unrealized gain/(loss) available-for-sale securities (net) (343,156) (148,174) Retained earnings (substantially restricted) 13,699,116 13,675,391 Treasury stock, 722,172 shares at cost (8,867,282) (6,984,857) ------------- ------------- Total stockholder's equity 16,423,837 18,419,328 ------------- ------------- Total liabilities and stockholders' equity $ 158,179,979 $ 153,724,921 ============= =============
The accompanying notes are an integral part of the consolidated financial statements.
EAST TEXAS FINANCIAL SERVICES, INC. CONSOLIDATED STATEMENTS OF INCOME Three Months Six Months Ended March 31, Ended March 31, (Unaudited) (Unaudited) 2000 1999 2000 1999 ----------- ----------- ----------- ---------- INTEREST INCOME Loans receivable: First Mortgage $ 1,171,733 $ 1,105,784 $ 2,315,129 $2,227,971 Consumer and other loans 164,101 83,109 333,491 159,118 Securities available for sale: Investment securities 43,304 37,655 282,847 52,190 Mortgage-backed securities 639,370 312,272 1,217,326 576,592 Securities held to maturity: Investment securities 556,421 417,734 936,541 885,040 Mortgage-backed securities 92,896 138,310 180,898 317,010 Deposits with banks 11,194 50,913 34,815 83,996 ----------- ----------- ----------- ---------- Total interest income 2,679,019 2,145,777 5,301,047 4,301,917 ----------- ----------- ----------- ---------- INTEREST EXPENSE Deposits 1,016,244 1,045,721 2,037,824 2,129,252 FHLB advances 835,214 305,619 1,563,556 556,837 Interest Expense to other banks 7,291 0 21,979 0 ----------- ----------- ----------- ---------- Total interest expense 1,858,749 1,351,340 3,623,359 2,686,089 ----------- ----------- ----------- ---------- Net interest income before provision for loan losses 820,270 794,437 1,677,688 1,615,828 Provision for loan losses 402 0 402 0 ----------- ----------- ----------- ---------- Net interest income after provision for loan losses 819,868 794,437 1,677,286 1,615,828 ----------- ----------- ----------- ---------- NONINTEREST INCOME Gain(loss) on sale of interest-earning assets 10,974 28,589 23,182 105,065 Loan origination and commitment fees 7,824 23,450 19,783 47,058 Loan servicing fees 16,415 18,950 31,332 29,733 Gain on foreclosed real estate (445) (2,068) (855) 302 Other 22,903 5,787 44,128 21,249 ----------- ----------- ----------- ---------- Total noninterest income 57,671 74,708 117,570 203,407 ----------- ----------- ----------- ----------
NONINTEREST EXPENSE Compensation and benefits 496,407 518,609 1,068,510 1,028,684 Occupancy and equipment 131,885 68,687 260,196 114,891 SAIF deposit insurance premium 15,611 13,480 17,702 26,464 Loss on foreclosed real estate 0 0 0 2,069 Other 145,596 171,384 211,181 314,321 ----------- ----------- ----------- ---------- Total noninterest expense 789,499 772,160 1,557,589 1,486,429 ----------- ----------- ----------- ---------- Income (loss) before provision for income taxes 88,040 96,985 237,267 332,806 Income tax expense (benefit) 35,237 39,606 90,705 125,396 ----------- ----------- ----------- ---------- NET INCOME (LOSS) $ 52,803 $ 57,379 $ 146,562 $ 207,410 =========== =========== =========== ========== Earnings per common share $ .05 $ .04 $ .13 $ .15 Earnings per common share - assuming dilution .05 .04 .12 .15
The accompanying notes are an integral part of the consolidated financial statements.
EAST TEXAS FINANCIAL SERVICES, INC. CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (UNAUDITED) SIX MONTHS ENDED March 31, 2000 Common Stock Unearned Unallocated Unrealized and Additional RRP ESOP Gain(Loss) on Retained Treasury Paid in Capital Shares Shares AFS Securities Earnings Stock --------------- ------ ------ -------------- -------- ----- Balance September 30, 1999 $ 12,416,012 $ (96,985) $ (442,059) $ (148,174) $ 13,675,391 $ (6,984,857) Comprehensive income: Net Income 146,562 Unrealized holding gains (194,982) Comprehensive income Deferred compensation amortization 58,191 Purchase of treasury stock at cost (1,882,425) Payment of cash dividends (122,837) Balance March 31, 2000 $ 12,416,012 $ (38,794) $ (442,059) $ (343,156) $ 13,699,116 $ (8,867,282) ============ ========= ========== ========== ============ ============ Total Comprehensive Stockholder's Income Equity ------ ------ Balance September 30, 1999 $ $ 18,419,328 Comprehensive income: Net Income 146,562 146,562 Unrealized holding gains --------- Comprehensive income $ 146,562 ========= Deferred compensation amortization 58,191 Purchase of treasury stock at cost (1,882,425) Payment of cash dividends (122,837) Balance March 31, 2000 16,423,837 ==========
The accompanying notes are an integral part of the consolidated financial statements.
EAST TEXAS FINANCIAL SERVICES, INC. CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED) For the Six Months Ended March 31, 2000 1999 ----------- ----------- Cash flows from operating activities: Net income $ 146,562 $ 233,150 Adjustments to reconcile net income to net cash provided by operating activities: Amortization of deferred loan origination fees (2,113) 10,715 Amortization of premiums and discounts on investment securities, mortgage-backed securities, and loans 24,220 78,783 Amortization of deferred compensation 58,191 58,191 Compensation charge related to release of ESOP shares 33,075 55,921 Depreciation 74,292 45,780 Deferred income taxes 25,298 60,838 Stock dividends on FHLB stock (80,400) (31,582) Origination of mortgage servicing rights (20,426) (86,422) Amortization of mortgage servicing rights 31,284 38,939 Net (gain) loss on sale of: Securities held to maturity 0 0 Foreclosed real estate 0 2,069 Fixed assets 0 0 Net loss on disposal of fixed assets 0 0 Other assets 0 0 Loans (2,188) (18,642) Loans held for sale 0 0 Net (gain) loss on disposal of fixed assets 228 0 Proceeds from loan sales 1,775,893 6,661,864 Originations of loans held for sale 0 0 Proceeds from sale of fixed assets 0 0 (Increase) decrease in: Accrued interest receivable (7,478) 13,308 Other assets (305,171) 828,812 Accrued loan loss 0 1,247 Increase (decrease) in: Federal income tax payable (4,356) (53,725) Accrued expenses and other liabilities (1,294,166) (861,459) Capitalized interest on time deposits 0 0 Net cash provided (used) by operating activities (452,745) 7,037,787 ----------- -----------
The accompanying notes are an integral part of the financial statements.
EAST TEXAS FINANCIAL SERVICES, INC. CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED) For the Six Months End March 31, 2000 1999 ------------- ------------- Cash flows from investing activities Purchases of interest earning time deposits 0 (600,000) Net decrease (increase) in fed funds sold 0 129,187 Proceeds from maturity of time deposits 976,617 0 Proceeds from maturities of obligations - U.S. Govt and agencies held to maturity 2,000,000 (4,997,656) Purchases of FHLB stock (568,800) (597,500) Purchases of investment securities available-for-sale (485,930) (3,073,051) Purchases of mortgage-backed securities available-for-sale (5,208,739) (12,513,589) Principal payments on mortgage-backed securities available for sale 1,385,298 3,101,656 Principal payments on mortgage-backed securities held to maturity 703,015 3,186,390 Net originations and principal collections on loans (5,200,501) (7,413,269) Capitalized acquisition cost related to foreclosed real estate (4,221) 0 Proceeds from sale of foreclosed real estate 6,325 32,432 Expenditures for premises and equipment (42,528) (427,202) ------------- ------------- Net cash provided (used) by investing activities (6,439,464) (15,447,602) ------------- ------------- Cash flows from financing activities: Net increase (decrease) in: Non-interest bearing deposits, savings, NOW accounts (29,691) 1,186,065 Time deposits (4,415,024) (753,203) FHLB Advances 268,146,206 145,510,909 Repayment of FHLB Advances (255,427,019) (133,549,323) Other borrowed money 1,500,000 0 Repayment of other borrowed money (1,500,000) 0 Advances from borrowers for taxes and insurance (475,551) (520,554) Dividends paid to stockholders (121,602) (140,375) Purchase of treasury stock (1,882,425) (729,831) Proceeds from sale of common stock 0 0 ------------- ------------- Net cash provided (used) by financing activities 5,794,894 11,003,688 ------------- ------------- Net increase (decrease) in cash and cash equivalents (191,825) 2,593,873 Cash and cash equivalents at beginning of the period 1,994,564 1,697,058 ------------- ------------- Cash and cash equivalents at end of the period $ 1,802,739 $ 4,290,931 ============= =============
Supplemental disclosure: Cash paid for: Interest on deposits $ 696,247 $ 2,129,252 Interest on FHLB advances and other borrowed funds $ 1,585,535 $ 0 Income taxes $ 59,764 $ 145,257 Transfers from loans to real estate acquired through foreclosures $ 2,966 $ 0 Loans charged off to loan loss reserves $ 2,231 $ 0 Recoveries credited to loan loss reserves $ 10,091 $ 0
The accompanying notes are an integral part of the consolidated financial statements EAST TEXAS FINANCIAL SERVICES, INC. AND SUBSIDIARY NOTES TO (UNAUDITED) CONSOLIDATED FINANCIAL STATEMENTS March 31, 2000 NOTE 1 - BASIS OF PRESENTATION The financial statements presented in this report have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission for interim reporting and include all adjustments which are, in the opinion of management, necessary for fair presentation. These financial statements have not been audited by an independent accountant. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations for interim reporting. The Company believes that the disclosures are adequate to make the information not misleading. However, these financial statements should be read in conjunction with the financial statement and notes thereto included in the Company's Annual Report on Form 10-KSB for the year ended September 30, 1999. The financial data and results of operations for interim periods presented may not necessarily reflect the results to be anticipated for the complete year. NOTE 2 - EARNINGS PER SHARE Earnings per common share for the three months and six months ended March 31, 2000 and 1999, has been computed based on net income divided by the weighted average number of common shares outstanding during the period. For the three months ended March 31, 2000 and 1999, the weighted average number of shares outstanding totaled 1,096,007 and 1,335,051, shares respectively. For the six months ended March 31, 2000 and 1999, the weighted average number of shares outstanding totaled 1,152,678 and 1,362,176 shares respectively. Earnings per common share - assuming dilution, for the three months and six months ended March 31, 2000 and 1999, has been computed based on net income divided by the weighted average number of common shares outstanding. In addition, it includes the effects of all dilutive potential common shares that were outstanding during the period. For the three months ended March 31, 2000 and 1999, the weighted average number of shares outstanding for earnings per share - assuming dilution totaled 1,096,007 and 1,348,110, shares respectively. For the six months ended March 31, 2000 and 1999, the weighted average number of shares outstanding for earnings per share - assuming dilution totaled 1,175,462 and 1,374,721 shares respectively. For both earnings per share and earnings per common share - assuming dilution and as prescribed by the American Institute of Certified Public Accountants Statement of Position 93-6 ("SOP 93-6") Employer's Accounting for Employees Stock Ownership Plans, the weighted average number of shares outstanding does not include unallocated Employee Stock Ownership Plan ("ESOP") shares. See Part II, Item 6 - Exhibits for a detailed presentation of the earnings per share calculation for the three month and six month period ended March 31, 2000 and 1999. NOTE 3 - SECURITIES The carrying values and estimated market values of investment securities available-for-sale as of March 31, 2000, by type of security are as follows:
Principal Unamortized Unearned Unrealized Carrying Balance Premiums Discounts Gain/(Loss) Value ------- -------- --------- ----------- ----- Fixed Rate $6,500,000 $65,249 $ 47,321 $ (237,984) $6,279,944 Adjustable Rate 0 0 0 0 0 ---------- ------- --------- ----------- ---------- $6,500,000 $65,249 $ 47,321 $ (237,984) $6,279,944 ---------- ------- --------- ----------- ----------
The weighted average yield on the investment security available-for-sale portfolio was approximately 6.43% at March 31, 2000. The amortized cost and estimated market values of investment securities held-to-maturity as of March 31, 2000, are as follows:
Gross Gross Estimated Amortized Unrealized Unrealized Market Cost Gains Losses Value ----------- -------- ----------- ----------- Debt securities: U. S. government agency 28,492,766 0 892,361 27,600,405 ----------- -------- ----------- ----------- Total debt securities $28,492,766 $ 0 $ 892,361 $27,600,405 ----------- -------- ----------- -----------
The amortized cost and estimated market values of investment securities held-to-maturity as of March 31, 2000, by contractual maturity are shown below:
Estimated Amortized Market Cost Value ------------ ------------ Due in one year or less $ 3,998,835 $ 3,994,840 Due after one year through two years 1,000,000 972,810 Due after two years through three years 8,496,565 8,246,945 Due after three years through six years 14,997,366 14,385,810 ------------ ------------ Total debt securities $ 28,492,766 $ 27,600,405 ------------ ------------
As of March 31, 2000, approximately $24,500,000 of the securities had call options exercisable at the discretion of the issuer. Approximately $8.5 million of the securities were immediately callable. The remainder had call dates that varied between April 2000 and June 2001. As of March 31, 2000, the weighted average yield on the Company's investment security held-to-maturity portfolio was approximately 6.08% while the Company's overall investment portfolio, including securities held-to-maturity, investment securities available-for-sale, overnight deposits and interest earning time deposits with other financial institutions was approximately 6.12%. The carrying values and estimated market values of mortgage-backed and related securities available-for-sale as of March 31, 2000, by type of security are as follows:
Principal Unamortized Unearned Unrealized Carrying Balance Premiums Discounts Gain/(Loss) Value ----------- -------- --------- ------------ ----------- Fixed Rate $ 5,984,187 $ 0 $ 51,928 $ (138,917) $ 5,793,342 Adjustable Rate 30,653,583 215,020 1,148 (143,032) 30,724,423 ----------- -------- --------- ------------ ----------- $36,637,770 $215,020 $ 53,076 $ (281,949) $36,517,765 ----------- -------- --------- ------------ -----------
The carrying values and estimated market values of mortgage-backed and related securities held-to-maturity as of March 31, 2000, by type of security are as follows:
Estimated Principal Unamortized Unearned Carrying Market Balance Premiums Discounts Value Value ---------- ------- ---------- ---------- ---------- Fixed Rate $ 49,365 $ 0 $ 0 $ 49,365 $ 49,071 Adjustable Rate 5,012,051 40,700 4,934 5,047,817 5,208,368 ---------- ------- ---------- ---------- ---------- $5,061,416 $40,700 $ 4,934 $5,097,182 $5,257,439 ---------- ------- ---------- ---------- ----------
The overall yield on the Company's mortgage-backed securities portfolios as of March 31, 2000, was approximately 6.77%. NOTE 4 - CURRENT ACCOUNTING ISSUES SFAS No. 133 In June of 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards (SFAS) No. 133, Accounting for Derivative Instruments and Hedging Activities. SFAS No. 133 establishes accounting and reporting standards for derivative instruments and requires recognition of all derivatives in the statement of financial position at fair value. The Company currently does not invest in any derivative instruments or hedging activities as defined in this Statement. The Statement is effective for fiscal years beginning after June 15, 1999. The Company adopted the Statement as required. NOTE 5 - STOCK OPTION AND INCENTIVE PLAN The 1995 Stock Option and Incentive Plan (the "Stock Option Plan") provides for awards in the form of stock options, stock appreciation rights, limited stock appreciation rights, and restricted stock. Options to purchase shares of common stock of the Company may be granted to selected directors, officers and key employees. The number of shares of common stock reserved for issuance under the stock option plan was equal to 121,519 or 10% of the total number of common shares issued pursuant to the conversion. The option exercise price cannot be less than the fair market value of the underlying common stock as of the date of the option grant, and the maximum option term cannot exceed ten years. Awards generally vest at a rate of 20% per year beginning at the date of the grant. The Company uses treasury stock for the exercise of options. The following is a summary of changes in options outstanding: Options outstanding Balance, September 30, 1995 103,411 Granted -0- Exercised at $14.125 per share (2,090) Forfeited and expired -0- -------- Balance, September 30, 1996 101,321 Granted -0- Exercised at $14.125 per share (1,056) Forfeited and expired -0- -------- Balance, September 30, 1997 100,276 ======== On March 25, 1998, the Company completed a 3 for 2 stock split in the form of a 50% dividend. As a result of the split, the number of outstanding options, option price, options exercisable at year end, and shares available for future grants were adjusted as follows: Options outstanding Balance, September 30, 1997 150,411 Granted -0- Exercised at $9.42 per share (1,568) Forfeited and expired -0- -------- Balance, September 30, 1998 148,843 Granted -0- Exercised at $9.42 per share (1,567) Forfeited and expired -0- -------- Balance, September 30, 1999 147,276 ======== Options exercisable at March 31, 2000 under stock option plan 116,258 ======== Shares available for future grants 27,162 ======== During the six months ended March 31, 2000, no options were exercised, issued, or forfeited. NOTE 6 - ADVANCES FROM FEDERAL HOME LOAN BANK The outstanding advances from the FHLB consisted of the following at March 31, 2000: Maturity Balance Rate 04/04/2000 $ 4,500,000 5.91% 04/04/2000 $ 500,000 5.91% 04/04/2000 $ 500,000 6.00% 04/10/2000 $ 500,000 6.11% 04/11/2000 $ 3,545,000 5.86% 04/11/2000 $ 36,944,000 5.86% 12/31/2004 $ 249,384 6.09% 01/03/2005 $ 102,778 6.03% 01/01/2013 $ 452,709 6.09% 01/01/2013 $ 430,208 6.13% 02/01/2013 $ 426,786 5.91% 03/03/2014 $ 931,971 5.45% 04/01/2014 $ 898,411 5.97% 05/01/2014 $ 1,223,721 5.66% 06/01/2014 $ 932,031 5.90% 07/01/2014 $ 861,369 6.38% 08/01/2014 $ 625,453 6.37% 09/01/2014 $ 789,265 6.59% 10/01/2014 $ 691,880 6.86% 11/03/2014 $ 1,707,030 6.77% 12/01/2014 $ 583,477 6.57% 01/01/2015 $ 381,590 6.73% Pursuant to collateral agreements with the Federal Home Loan Bank (FHLB), advances are secured by all stock and deposit accounts in the FHLB, mortgage collateral, securities collateral, and other collateral. EAST TEXAS FINANCIAL SERVICES, INC. AND SUBSIDIARY FORM 10-QSB March 31, 2000 Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations GENERAL The principle business of the Company is that of a community-oriented financial institution attracting deposits from the general public and using such deposits to originate one- to four-family residential loans, commercial real estate, one- to four-family construction, multi-family, commercial and consumer loans. These funds have also been used to purchase mortgage-backed securities, U. S. government and agency obligations and other permissible investments. The Company also borrows funds from the Federal Home Loan Bank of Dallas ("FHLB") to fund loans and to purchase securities. The ability of the Company to attract deposits is influenced by a number of factors, including interest rates paid on competing investments, account maturities and levels of personal income and savings. The Company's cost of funds is influenced by interest rates on competing investments and general market rates of interest. Lending activities are influenced by the demand for real estate loans and other types of loans, which is in turn affected by the interest rates at which such loans are made, general economic conditions affecting loan demand, the availability of funds for lending activities, economic conditions and changes in real estate values. The Company's results of operations are dependent primarily on net interest income, which is the difference between the income earned on its loan and investment portfolios and the interest paid on deposits and borrowings. Results of operations are also affected by the Company's provision for loan losses and the net gain (loss) on sales of interest earning assets and loan fees. The Company's results of operations are also significantly affected by general economic and competitive conditions, particularly changes in interest rates, government policies and actions of regulatory authorities. The Company has expanded its product lines to include commercial and consumer loans, debit and credit cards, an ATM machine and cards, safe deposit boxes, and a full range of business and personal checking and deposit accounts. With the introduction of new products and services, the Company opened an additional full-service office located in South Tyler in 1999. The start-up costs associated with the new product lines and the expansion are significant and the Company does not anticipate the new branch office to be profitable immediately. However, management believes that the long-term future of the Company is dependent upon the success of this change. FINANCIAL CONDITION Total assets were $158.2 million at March 31, 2000, a $4.5 million increase from the $153.7 million reported at September 30, 1999, the Company's most recent fiscal year end. The increase in total assets was the result of a $3.6 million increase in mortgage-backed securities available-for-sale, a $3.4 million increase in loans receivable and a $361,000 increase in investment securities available-for-sale and. The increases were partially offset by a $710,000 decline in mortgage-backed securities held to maturity, a 1.7 million decrease in investment securities held to maturity and a $556,000 decline in interest-earning deposits with banks. At March 31, 2000, loans receivable totaled $70.7 million, compared to $67.3 million at September 30, 1999. The Company's commercial and consumer loan portfolio increased to $6.4 March 31, 2000 from $2.6 million at September 30, 1999. The increase was a direct result of the company's new South Broadway location and it's focus on this type of lending. The increase in the mortgage-backed securities available-for-sale portfolio was primarily the result of the Company's decision to continue its program of borrowing funds from the FHLB and investing the proceeds into mortgage-backed and similar securities in an effort to achieve a positive margin on the transaction. At March 31, 2000, the portfolio totaled $36.5 million, compared to $32.9 million at September 30, 1999. At March 31, 2000, the average yield on the securities in the program was approximately 6.71% while the cost of the FHLB advance was approximately 5.86%, resulting in a pre-tax interest rate margin of 85 basis points. The purpose of the program is to leverage a portion of the Company's excess capital and to achieve a rate of return on the difference in the rate earned on the securities and the cost of the advances. The success of the program is dependent upon several factors, including the Company's ability to purchase adjustable rate securities that will maintain a positive margin above the FHLB advance rates. The Company borrows funds from the FHLB with terms of approximately thirty days and invests in mortgage-backed securities with interest rate adjustment frequencies that vary between one month and one year. The Company intends to maintain the size of the plan at it current level. Alternatively, the Company may decrease the size of the program, depending upon its ability to increase its loans receivable portfolio. The investment security available-for-sale portfolio consists of corporate debt securities. The corporate debt securities have a fixed rate and term. The Company invests only in investment grade corporate debt with varying maturities and ratings. All corporate debt securities have maturities of less than or equal to six years. The yield on the investment security available-for-sale portfolio was 6.43% at March 31, 2000. At March 31, 2000, the investment securities held-to-maturity portfolio totaled $28.5 million, compared to $30.5 million at September 30, 1999. At March 31, 2000, the overall yield on the portfolio was approximately 6.08%, compared to 6.07% at September 30, 1999. At March 31, 2000, the portfolio contained $4.0 million in securities with remaining terms until maturity of less than one year, $1.0 million with remaining maturities of one through two years, 8.5 million with remaining maturities of two through three years and $15.0 million with remaining maturities of three through six years. Approximately $24.5 million of the investment securities are callable at the discretion of the issuer. The Company's mortgage-backed securities held-to-maturity portfolio totaled $5.1 million at March 31, 2000, compared to $5.8 million at September 30, 1999. The decrease in mortgage-backed securities held-to-maturity was primarily due to principal payments received on the portfolio during the period and the Company's decision to increase its loan receivable and mortgage-backed securities available-for-sale portfolio. The weighted average yield on the portfolio was approximately 7.168% at March 31, 2000. Total deposits were $83.1 million at March 31, 2000, a $4.4 million decrease from the $87.5 million reported at September 30, 1999. The Company's cost of deposits was approximately 5.05% at March 31, 2000. The Company reported $57.8 million in borrowed funds at March 31, 2000, an increase of $12.7 million from the $45.1 million reported at September 30, 1999. Approximately $36.9 million of the borrowed funds were used to invest in mortgage-backed securities available-for-sale. The advances had a remaining term of less than 30 days and had an interest rate of 5.86%. Approximately $9.6 million was used to fund 15 year loans at an average rate of 6.26%, with the remaining $1.4 million in advances used to fund a portion of the Company's commercial real estate loan portfolio at a weighted average cost of approximately 6.04%. Stockholders' equity totaled $16.4 million at March 31, 2000, a decrease of $2.0 million from the $18.4 million reported at September 30, 1999. The decrease was primarily attributable to a $1.9 million increase in treasury stock, the payment of cash dividends in the amount of $123,000. The decrease was partially offset by net income of $146,562 reported for the six months ended March 31, 2000, and a $58,000 decrease in deferred compensation. At March 31, 2000, the Company reported a book value per share of $14.13 based on 1,162,320 net outstanding shares. During the six months ended March 31, 2000, the Company repurchased 132,100 shares of treasury stock at an average price of $14.25 per share. The result was an increase in the number of shares held as treasury stock to 722,172 at an average cost of $12.28 per share. RESULTS OF OPERATIONS The Company's net income is dependent primarily upon net interest income, the difference or spread between the average yield earned on loans and investments and the average rate paid on deposits, as well as the relative amounts of such assets and liabilities. The Company, like other financial intermediaries, is subject to interest rate risk to the degree that its interest-bearing liabilities mature or reprice at different times, or on a different basis, than its interest earning assets. COMPARISON OF THE THREE MONTHS ENDED March 31, 2000 AND March 31, 1999 General. Net income for the three months ended March 31, 2000 was $52,805 or $.05 per share, a decrease of $4,574 from the $57,379 or $.04 per share reported for the three months ended March 31, 1999. The decrease in net income was attributable to a $17,000 decline in noninterest income and a $17,000 increase in total non-interest expense. The decline in noninterest income and the increase in noninterest expense was partially offset by a $26,000 increase in net interest income and a $4,000 decrease in income tax expense. Net Interest Income. For the quarter ended March 31, 2000, net interest income before provision for loan losses totaled $820,000, an increase of $26,000 from the $794,000 reported for the quarter ended March 31, 1999. On an annualized basis, the $820,000 in net interest income was approximately 2.15% of average interest earning assets and 2.06% of average total assets. For the quarter ended March 31, 1999, the $794,000 in net interest income was approximately 2.48% of average interest earning assets and 2.37% of average total assets. Average interest earning assets were approximately $152.7 million for the quarter ended March 31, 2000, compared to $128.2 million for the quarter ended March 31, 1999. The increase in net interest income was primarily due to an increase in interest earning assets from $129.0 million at March 31, 1999 to 151.9 million at March 31, 2000. Also, the yield on the Company's average interest-earning assets increased from 6.68% for the quarter ended March 31, 1999 to 7.02% for the quarter ended March 31, 2000. The increase was partially due to the Company's decision to begin offering consumer and commercial loans and the increase in volume of such loans. In addition, the overall rise in interest rates has helped increase the yield on interest earnings assets. Total interest income was $2.7 million for the quarter ended March 31, 2000, an increase of $500,000 from the $2.2 million reported for the same quarter in 1999. Interest income on loans-receivable totaled $1.3 million or 7.68% of average loans receivable balances outstanding for the quarter ended March 31, 2000. For the three months ended March 31, 1999, interest income on loans-receivable was approximately 7.74% of average loans receivable balances. The increase in the Company's consumer and commercial loan portfolio helped increase the overall yield of the portfolio. At March 31, 2000, the $6.4 million in the portfolio was approximately 9.04%. For the quarter ended March 31, 2000, the $1.0 million in interest expense on deposits was, on an annualized basis, approximately 4.80% of average interest costing deposits, compared to 4.78% for the same quarter in 1999. On an annualized basis, the $1.9 million in total interest expense, reported for the quarter ended March 31, 2000, was approximately 5.36% of average interest costing liabilities outstanding for the quarter. For the quarter ended March 31, 1999, the $1.4 million in total interest expense was approximately 4.84% of average interest costing liabilities. The Company's dependence upon wholesale sources to fund loans and securities has had the effect of increasing total interest expense. Interest income from mortgage-backed securities available-for sale totaled $639,000 for the three months ended March 31, 2000, compared to $312,000 for the three months ended March 31, 1999. The increase in interest income is a direct result of the increase in the average balance outstanding during the comparable quarters from $20.8 to $36.9 million. Interest income from this portfolio is part of the Company's plan to borrow funds from the FHLB and invest in mortgage-related securities in an effort to achieve a margin on the difference in the investment yield and the cost of the borrowings from the FHLB. The yield on the portfolio was approximately 6.71% at March 31, 2000. [See "Financial Condition"] Interest income from investment securities available-for-sale totaled $43,000 for the three months ended March 31, 2000, compared to $38,000 for the three months ended March 31, 1999. Interest income from the investment securities held-to-maturity portfolio totaled $556,000 for the three months ended March 31, 2000, compared to $418,000 for the same quarter in 1999. The increase was primarily the result of an increase in the average balance outstanding in the portfolio from $25.6 million for the three months ended March 31, 1999 to $29.5 million for the three months ended March 31, 2000. Interest income from the mortgage-backed securities held-to-maturity portfolio totaled $93,000 for the three months ended March 31, 2000, compared to $138,000 for the same period in 1999. Continued cash flow from prepayments on the adjustable rate securities in the portfolio was redirected into the Company's lending operations and its investment securities held-to-maturity portfolio to replace matured or called investment securities. The result was a decline in interest income from the portfolio. Interest paid to depositors totaled $1.0 million for the three months ended March 31, 2000, down $30,000 from the $1.0 million for the three months ended March 31, 1999. Average deposit balances declined $4.5 million from $89.5 million for the quarter ended March 31, 1999 to $85.0 million for the quarter ended March 31, 2000. Interest on FHLB advances was $835,000 for the three months ended March 31, 2000, compared to $306,000 for the same period in 1999. The increase was a direct result of the continued increase in total FHLB advances in the Company's program to match fund 15 year loans and securities with advances. Provision For Loan Losses. The Company made provision for loan losses of $402 during the quarter ended March 31, 2000 and none for the quarter ended March 31, 1999. [See - "Asset Quality"] Noninterest Income. Noninterest income totaled $58,000 for the three months ended March 31, 2000, compared to $75,000 for the same period in 1999, a $17,000 decrease. The decrease in noninterest income was the result of a decline in gains on sales of interest earning assets of $18,000 as fewer loans were sold into the secondary market. Noninterest Expenses. Noninterest expenses totaled $789.000 for the three months ended March 31, 2000, compared to $772,000 for the three months ended March 31, 1999. The increase in noninterest expense was the result of a $63,000 increase in occupancy and equipment expense from $69,000 for the three months ended March 31, 1999 to $132,000 for the three months ended March 31, 2000. The increase in occupancy and equipment expense was the result of the new full-service office opened for business in April 1999. At March 31, 2000 the new location had approximately $6.4 million in loans outstanding and $3.7 million in deposits. Provision For Income Taxes. The Company incurred federal income tax expense of $35,000 or 40.0% of pre-tax income for the three months ended March 31, 2000, compared to $40,000 or 40.8% of pre-tax income for the three months ended March 31, 1999. COMPARISON OF THE SIX MONTHS ENDED MARCH 31, 2000 AND MARCH 31, 1999 General. For the six months ended March 31, 2000, the Company reported net income of $147,000 or $.13 per common share and $.12 per common share - assuming dilution, compared to $207,000 or $.15 per common share and $.15 per common share - assuming dilution for the six months ended March 31, 1999. The decrease in net income was attributable to an $86,000 decrease in noninterest income and a $71,000 increase in noninterest operating expenses, which were partially offset by a $61,000 increase in net interest income after provisions for loan losses and a $35,000 decrease in income tax expense. Net Interest Income. For the six months ended March 31, 2000, net interest income after provisions for loan losses totaled $1.7 million, an increase of $61,000 from the $1.6 million reported for the six months ended March 31, 1999. On an annualized basis, the $1.7 million in net interest income after provisions for loan losses for the current period was approximately 2.24% of average interest earning assets and 2.15% of average total assets. For the six months ended March 31, 1999, the $1.6 million in net interest income after provisions for loan losses was approximately 2.59% of average interest earning assets and 2.50% of average total assets. Average interest earning assets were approximately $150.0 million for the six months ended March 31, 2000, compared to $123.8 million for the six months ended March 31, 1999. Total interest income was $5.3 million or 7.07% of average interest earning assets for the six months ended March 31, 2000, compared to $4.3 million or 6.91% of average interest earning assets for the six months ended March 31, 1999. The increase in total interest income was primarily attributable to the increase in average outstanding balances of interest earning assets. The increase in average yield on interest earning assets was a result of rising interest rates and the increase in commercial and consumer loans at higher yields. Interest income on loans receivable totaled $2.6 million for the six months ended March 31, 2000 an increase from the $2.4 million reported for the six months ended March 31, 1999. Average loans receivable balance increased to $69.0 million for the six months ended March 31, 2000 from $61.4 million for the six months ended March 31, 1999. For the six months ended March 31, 2000, the $2.6 million in interest income on loans receivable was approximately 7.68%, compared to 7.77% for the six months ended March 31, 1999. Interest income from mortgage-backed securities available-for sale totaled $1.2 million for the six months ended March 31, 2000, compared to $577,000 for the six months ended March 31, 1999. Interest income from this portfolio is part of the Company's program to borrow funds from the FHLB and invest in mortgage-related securities in an effort to achieve a positive margin on the difference in the investment yield and the cost of the borrowings. At March 31, 2000, the Company had approximately $36.3 million invested in the program. [See "Financial Condition"] Interest income on investment securities held-to-maturity totaled $937,000 for the six months ended March 31, 2000, compared to $885,000 for the six months ended March 31, 1999. The increase in interest income on the portfolio was primarily the result of a $946,000 increase in the average balance outstanding. For the six months ended March 31, 2000, the $937,000 in interest income was approximately 6.38% of the average balance outstanding, compared to 6.23% for the $885,000 reported for the six months ended March 31, 1999. Interest income on mortgage-backed securities held-to-maturity was $181,000 for the six months ended March 31, 2000, compared to $317,000 for the six months ended March 31, 1999. The decline in interest income on the portfolio was primarily the result of a decline in the average balance outstanding in the portfolio from $9.3 million for the six months ended March 31, 1999 to $5.5 million for the six months ended March 31, 2000. The Company redirected cash flow from the portfolio into its lending operations, its investment securities available-for-sale portfolio, and its investment securities held-to-maturity portfolio. The adjustable rate feature of the underlying loans in the securities, the higher coupon rates on such loans, and lower rates of interest on fixed interest mortgage loans have caused borrowers on the underlying loans to seek out opportunities to refinance their mortgages. The result has been an increase in the cash flow from the portfolio, which resulted in the decline in the average balances in the portfolio. Interest expense was $3.6 million for the six months ended March 31, 2000, an increase of $937,000 from the $2.7 million reported for the six month period ended March 31, 1999. An increase in average interest costing liabilities, including advances from the FHLB, from $107.8 million for the six months ended March 31, 1999 to $134.7 million for the six months ended March 31, 2000 primarily accounted for the increase in interest expense. The $3.6 million in interest expense reported for the six month period ended March 31, 2000 was approximately 5.38% of average interest costing liabilities, compared to 4.98% for the same period in 1999. Noninterest Income. Noninterest income was $118,000 for the six months ended March 31, 2000, compared to $203,000 for the six months ended March 31, 1999. The decrease was directly attributable to fewer gains on sales of interest earning assets, and loan origination fees as mortgage lending activity decreased with rising interest rates. Losses on sales on interest earning assets totaled $23,000 for the six month period ended March 31, 2000, compared to $105,000 for the six months ended March 31, 1999. Loan origination and commitment fees were $20,000 for the six months ended March 31, 2000, compared to $47,000 for the six months ended March 31, 1999. Noninterest Expense. Noninterest expense was reported as $1.6 million for the six month period ended March 31, 2000, a $71,000 increase from the $1.5 million reported for the six months ended March 31, 1999. The increase in noninterest expense was primarily the result of a $39,000 increase in compensation and benefits expense from $1.0 million for the six months ended March 31, 1999 to $1.1 million for the six months ended March 31, 2000. The increase in compensation and benefits expense was essentially the result of additional compensation for additional staff employed at the Company's new office location. Also, additional expenses associated with the funding of the Company's defined benefit pension plan and additional expenses associated with the Company's Employee Stock Ownership Plan accounted for a portion of the increase. Occupancy and equipment expense totaled $260,000 for the six months ended March 31, 2000, compared to $115,000 for the six months ended March 31, 1999. The increase was attributable to additional expenses associated with the opening of the new full-service office. Provision For Income Taxes. The Company incurred federal income tax expense of $91,000 or 38.2% of pre-tax income for the six months ended March 31, 2000, compared to $125,000 or 37.7% of pre-tax income for the six months ended March 31, 1999. ASSET QUALITY At March 31, 2000, the Company's non-performing assets totaled $182,000 or .12% of total assets, compared to $768,000 or .50% of total assets at September 30, 1999. At March 31, 2000, non-performing assets were comprised of eight (8) loans, the largest of which was $60,000, secured by a single family dwelling. Non-performing loans at March 31, 2000 equaled $182,000 or .26% of loans receivable, compared to $768,000 or 1.14% of loans receivable at September 30, 1999. Classified assets totaled $711,000 or .49% of total assets at March 31, 2000, compared to $1.1 million or .71% of total assets at September 30, 1999. Classified assets and non-performing assets differ in that classified assets may include loans less than ninety (90) days delinquent. Also, assets guaranteed by government agencies such as the Veterans Administration and the Federal Housing Administration are not included in classified assets but are included in non-performing assets. All classified assets at March 31, 2000, were deemed to be "substandard". No assets were classified "doubtful" or "loss" as of such date. The Company's allowance for loan losses totaled $277,899 at March 31, 2000, a slight increase from the $270,039 at September 30, 1999. The allowance for loan losses as a percentage of loans receivable equaled .39% at March 31, 2000 and .40% at September 30, 1999. LIQUIDITY AND CAPITAL RESOURCES The Company's principal sources of funds are deposits from customers, advances from the FHLB, amortization and prepayment of loan principal (including mortgage-backed securities), maturities of securities, sales of loans and operations. The Association uses its liquidity and capital resources principally to meet ongoing commitments to fund maturing certificates of deposit and loan commitments, maintain liquidity and pay operating expenses. At March 31, 2000, the Association had outstanding commitments to extend credit on $4.8 million of real estate loans. Management believes that present levels of liquid assets are sufficient to meet anticipated future loan commitments as well as deposit withdrawal demands. Total stockholders' equity equaled $16.4 million at March 31, 2000, a decrease of $2.0 million from the $18.4 million reported at September 30, 1999. The decrease was the result of the $1.9 increase in treasury stock and the $122,837 cash dividend paid during the quarter. The decrease was offset by the $146,562 net income reported for the three month period ended March 31, 2000, and a $58,191 decrease in deferred compensation. As of March 31, 2000, the Company's reported book value per share, using total stockholders' equity of $16.4 million (net of the cost of unallocated ESOP and RRP shares) and 1,162,320 outstanding shares of common stock (the total issued shares including unallocated ESOP and RRP shares, less treasury shares), equaled $14.13 per share. Subsequent to the quarter ended March 31, 2000, the Company announced its intention to pay a cash dividend of $.05 per share on May 24, 2000, to stockholders of record at May 9, 2000. Under the Financial Institutions Reform, Recovery and Enforcement Act of 1989 ("FIRREA"), Congress imposed a three part capital requirement for thrift institutions. At March 31, 2000, the Association's actual and required capital amounts under each of the three requirements were as follows: - - Tangible Capital (stockholders' equity) was $15.5 million or 9.765% of total assets, exceeding the minimum requirement of 1.5% by $13.1 million. - - Core Capital (Tangible capital plus certain intangible assets) was $15.5 million or 9.765% of total assets, exceeding the minimum requirement of 4.0% by $9.1 million. - - Risk-based Capital (Core capital plus general loan and valuation allowances less an adjustment for capitalized mortgage servicing rights) equaled $15.7 million of 23.984% of risk weighted assets, exceeding the minimum requirement of 8.0% of risk weighted assets by $10.5 million. At March 31, 2000, the Association was considered a "well capitalized" institution under the prompt corrective action requirements of the Federal Deposit Insurance Corporation Improvement Act of 1991. YEAR 2000 ISSUE The Year 2000 or Century Date Change issue is a result of computer programs being written using two digits rather than four digits to define the applicable year. A computer system's inability to recognize the date "00" as the year 2000 or if the system recognized the date "00" as the year 1900, could result in a system failure or miscalculations causing disruptions of operations. The Company outsources its primary computer processing functions. The Company established a management committee to identify all of its systems potentially affected by the year 2000 and to ensure that reprogramming of affected systems is completed. The committee was responsible for testing all company computer systems and ensuring that all third party computer system vendors were Year 2000 compliant. The Company has undergone three examinations from its primary regulatory authority, the OTS. The Company received satisfactory ratings on all exams. The Company experienced no known problems or business interruptions as a result of the century date change. FORWARD-LOOKING STATEMENTS When used in this Form 10-QSB or future filings by the Company with the Securities and Exchange Commission, the Company's press releases or other public or shareholder communications or in oral statements made with the approval of an authorized executive officer, the words or phrases "will likely result", "are expected to", "will continue", "is anticipated", "estimate", "project", "believe" or similar expressions are intended to identify "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. The Company wishes to caution readers not to place undue reliance on any such forward-looking statements, which speak only as of the date made, and to advise readers that various factors, including regional and national economic conditions, changes in levels of market interest rates, credit risks of lending activities, and competitive and regulatory factors, could affect the Company's financial performance and could cause the Company's actual results for future periods to differ materially from those anticipated or projected. The Company does not undertake, and specifically disclaims any obligation, to publicly release the result of any revisions, which may be made to any forward-looking statements to reflect the occurrence of anticipated or unanticipated events or circumstances after the date of such statements. EAST TEXAS FINANCIAL SERVICES, INC. AND SUBSIDIARY FORM 10-QSB MARCH 31, 2000 PART II - OTHER INFORMATION Item 1. Legal Proceedings ----------------- There are no material legal proceedings to which the Company 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 the conduct of its business. Item 2. Changes In Securities --------------------- None Item 3. Defaults Upon Senior Securities ------------------------------- None Item 4. Submissions Of Matters To A Vote Of Security Holders ---------------------------------------------------- None Item 5. Other Information. ----------------- None Item 6. Exhibits and Reports on Form 8-K -------------------------------- The following exhibits are filed herewith: Exhibit 11.0 - Computation of Earnings Per Share Exhibit 27.0 - Financial Data Schedule (b) Reports on Form 8-K During the quarter ended March 31, 2000, the Company filed a report on Form 8-K on February 7, 2000 to report the issuance of a press release dated February 7, 2000, announcing the Company's intention to pay, on February 23, 2000, a cash dividend of $.05 per share for the quarter ended December 31, 1999, to stockholders of record on February 8, 2000. During the quarter ended March 31, 2000, the Company filed a report on Form 8-K on February 7, 2000, to report the issuance of a press release dated February 7, 2000, announcing the Company's earnings for the quarter ended December 31, 1999. SIGNATURES Pursuant to the requirement of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. East Texas Financial Services, Inc. Date: May 9, 2000 /s/ Gerald W. Free ------------------ Gerald W. Free Vice Chairman, President and CEO (Principal Executive Officer) Date: May 9, 2000 /s/ Derrell W. Chapman ----------------------- Derrell W. Chapman Vice President/COO/CFO (Principal Financial and Accounting Officer) EX-11 2 EXHIBIT 11.0 COMPUTATIONS OF EARNINGS PER SHARE Three Months Ended March 31, 2000 Less Total Shares Unallocated Shares Used For Outstanding ESOP Shares EPS Calculation ----------- ----------- --------------- December 31, 1999 1,162,320 66,313 1,096,007 January 31, 2000 1,162,320 66,313 1,096,007 February 29, 2000 1,162,320 66,313 1,096,007 March 31, 2000 1,162,320 66,313 1,096,007 Weighted average number of shares outstanding for the quarter ended March 31, 2000, for earnings per share calculation 1,096,007 --------- Stock options outstanding at March 31, 2000: 147,276 ------- Exercise price of stock options: $9.42 per share --------------- Average stock price for three month period: ended March 31, 2000 $8.909 ------ Three Months Ended ------------------ March 31, --------- Basic Earnings Per Share 2000 1999 - ------------------------ ----------- --------- Income available to common stockholders $52,804 $57,379 =========== ========= Weighted average number of common shares outstanding for basic EPS calculation 1,096,007 1,335,051 =========== ========= Basic Earnings Per Share $.05 $.04 =========== ========= Diluted Earnings Per Share - -------------------------- Income available to common stockholders $52,804 $57,379 =========== ========= Weighted average number of common shares outstanding for basic EPS calculation 1,096,007 1,335,051 Weighted average common shares issued under stock option plans 147,276 148,843 Less weighted average shares assumed repurchased with proceeds (147,276) (135,784) ----------- --------- Weighted average number of common shares outstanding for diluted EPS calculation 1,096,007 1,348,110 =========== ========= Diluted Earnings Per Share $.05 $.04 =========== ========= COMPUTATIONS OF EARNINGS PER SHARE Six Months Ended March 31, 2000 Less Total Shares Unallocated Shares Used For Outstanding ESOP Shares EPS Calculation ----------- ----------- --------------- September 30, 1999 1,294,420 66,313 1,228,107 October 31, 1999 1,294,420 66,313 1,228,107 November 30, 1999 1,294,420 66,313 1,228,107 December 31, 1999 1,162,320 66,313 1,096,107 January 31, 2000 1,162,320 66,313 1,096,107 February 29, 2000 1,162,320 66,313 1,096,107 March 31, 2000 1,162,320 66,313 1,096,107 Weighted average number of shares outstanding for the quarter ended March 31, 2000, for earnings per share calculation 1,152,678 --------- Stock options outstanding at March 31, 2000: 147,276 ------- Exercise price of stock options: $9.42 per share --------------- Average stock price for six month period: ended March 31, 2000 $11.144 ------- Six Months Ended ------------------ March 31, --------- Basic Earnings Per Share 2000 1999 - ------------------------ ----------- --------- Income available to common stockholders $146,562 $207,410 ========= ========= Weighted average number of common shares outstanding for basic EPS calculation 1,152,678 1,362,176 ========= ========= Basic Earnings Per Share $.13 $.15 ========= ========= Diluted Earnings Per Share - -------------------------- Income available to common stockholders $146,562 $207,410 ========= ========= Weighted average number of common shares outstanding for basic EPS calculation 1,152,678 1,362,176 Weighted average common shares issued under stock option plans 147,276 148,843 Less weighted average shares assumed repurchased with proceeds (124,492) (136,298) --------- --------- Weighted average number of common shares outstanding for diluted EPS calculation 1,175,462 1,374,721 ========= ========= Diluted Earnings Per Share $.12 $.15 ========= ========= EX-27 3
9 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED FINANCIAL STATEMENTS OF EAST TEXAS FINANCIAL SERVICES, INC., AT MARCH 31, 2000, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 6-MOS SEP-30-2000 MAR-31-2000 1,384,331 418,408 0 0 42,797,709 33,589,948 32,857,844 70,668,125 277,899 158,179,979 83,095,124 46,489,000 883,954 11,288,063 0 0 18,845 16,404,992 158,179,979 2,648,620 2,652,427 0 5,301,047 2,037,824 3,623,359 1,677,688 402 0 117,570 237,267 237,267 0 0 146,562 0.13 0.12 7.02 182,000 0 0 374,000 270,084 2,231 10,046 277,899 65,312 0 215,587
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