-----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, OpEjee49/6m5mAtjXX+s7IfnVy5UOsRPRx+js/iATJS5hM0E5g232FO5sXmUG0kD jbp9k6jBSNRMPTXAELIVmw== 0000946275-98-000326.txt : 19980515 0000946275-98-000326.hdr.sgml : 19980515 ACCESSION NUMBER: 0000946275-98-000326 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980331 FILED AS OF DATE: 19980514 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: MISSISSIPPI VIEW HOLDING CO CENTRAL INDEX KEY: 0000933404 STANDARD INDUSTRIAL CLASSIFICATION: SAVINGS INSTITUTION, FEDERALLY CHARTERED [6035] IRS NUMBER: 411795363 STATE OF INCORPORATION: MN FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10QSB SEC ACT: SEC FILE NUMBER: 000-25546 FILM NUMBER: 98620079 BUSINESS ADDRESS: STREET 1: 35 E BROADWAY CITY: LITTLE FALLS STATE: MN ZIP: 56345 BUSINESS PHONE: 6126325461 MAIL ADDRESS: STREET 1: 35 EAST BROADWAY CITY: LITTLE FALLS STATE: MN ZIP: 56345-3093 10QSB 1 FORM 10QSB U.S. SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-QSB [ X] QUARTERLY REPORT UNDER SECTION 13 OF 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 1998 OR [ ] TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT For the transition period from _________ to __________ Commission File No. 0-25546 Mississippi View Holding Company ------------------------------------------------------ (Exact name of registrant as specified in its charter) Minnesota 41-1795363 - -------------------------------------------------------------------------------- (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or jurisdiction) 35 East Broadway, Little Falls, Minnesota 56345-3093 ---------------------------------------------------- (address of principal executive offices) (320) 632-5461 ---------------------------------------------------- (Registrant's telephone number, including area code) Check whether the issuer (1) filed all reports required to be filed by Sections 13 or 15(d) of the Exchange Act 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. Yes X No --- --- State the number of shares outstanding of each of the issuer's classes of common equity as of the latest practicable date. Class: Common Stock, par value $.10 per share Outstanding shares at May 8, 1998: 736,864 MISSISSIPPI VIEW HOLDING COMPANY INDEX TO FORM 10-QSB
Page PART I. FINANCIAL INFORMATION ---- --------------------- Item 1. Financial Statements Consolidated Statements of Financial Condition at March 31, 1998 (unaudited) and September 30, 1997 (audited) 2 Consolidated Statements of Income for the three and six months ended March 31, 1998 and 1997 (unaudited) 3 Consolidated Statements of Cash Flows for the six months ended March 31, 1998 and 1997 (unaudited) 4 Notes to Condensed Consolidated Financial Statements (unaudited) 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 8 Non-Performing and Problem Assets 13 Capital Compliance 14 Liquidity Resources 15 Key Operating Ratios 17 PART II. OTHER INFORMATION ----------------- Item 1. Legal Proceedings 18 Item 2. Changes in Securities 18 Item 3. Default Upon Senior Securities 18 Item 4. Submission of Matters to a Vote of Security Holders 18 Item 5. Other Information 18 Item 6. Exhibits and Reports on Form 8-K 18 SIGNATURES
MISSISSIPPI VIEW HOLDING COMPANY AND SUBSIDIARY CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
March 31, September 30, 1998 1997 ----------- ----------- ASSETS (Unaudited) (Audited) ------ ----------- ----------- Cash and cash equivalents: Cash and due from banks .................................................. $ 248,106 $ 214,934 Interest bearing deposits with banks ..................................... 7,766,597 889,660 Securities available for sale, at fair value ............................. 11,055,437 12,963,344 Securities held to maturity, at amortized cost ........................... 6,503,490 7,405,466 FHLB stock, at cost ...................................................... 650,700 650,700 Loans held for sale ...................................................... 431,950 135,550 Loans receivable, net of allowance for loan losses of $863,619 in 1998 and $861,170 in 1997 ......................................................... 41,585,812 44,474,809 Accrued interest receivable .............................................. 363,736 437,548 Premises and equipment ................................................... 764,738 806,900 Other assets ............................................................. 589,104 567,539 ---------- ---------- Total Assets ............................................................. $69,959,670 $68,546,450 ========== ========== LIABILITIES AND SHAREHOLDERS' EQUITY ------------------------------------ Liabilities: Demand deposits .......................................................... $ 4,395,303 $ 4,408,558 Savings deposits ......................................................... 14,604,370 14,525,018 Time deposits ............................................................ 36,721,684 36,250,011 ---------- ---------- Total deposits ........................................................... 55,721,357 55,183,587 Advances from borrowers for taxes and insurance .......................... 120,488 107,038 Accrued income taxes ..................................................... 38,302 66,352 Deferred tax liability ................................................... 759,219 525,353 Other liabilities ........................................................ 526,930 596,216 Total Liabilities ---------- ---------- 57,166,296 56,478,546 Shareholders' equity: Serial preferred stock, no par value; 5,000,000 shares authorized, no shares issued ................................................................... -- -- Common stock, $.10 par value, 10,000,000 shares authorized; 1,007,992 shares issued; 656,727 and 653,151 shares outstanding ........................... 100,799 100,799 Paid in capital .......................................................... 7,577,924 7,540,218 Treasury stock (271,128 and 267,749 shares), at cost (3,665,088) (3,605,111) Retained earnings, substantially restricted .............................. 8,056,256 7,737,458 Unearned ESOP shares (54,431 and 58,463 shares), at cost ................. (463,811) (498,012) Unearned MSBP shares (25,706 and 28,629 shares), at cost ................. (285,128) (317,954) Unrealized appreciation on available-for-sale securities, net of tax ..... 1,472,422 1,110,506 Total shareholders' equity ---------- ---------- 12,793,374 12,067,904 ---------- ---------- Total liabilities and shareholders' equity ............................... $69,959,670 $68,546,450 ========== ==========
See Notes to consolidated financial statements MISSISSIPPI VIEW HOLDING COMPANY AND SUBSIDIARY UNAUDITED CONSOLIDATED STATEMENTS OF INCOME
For the For the Three Months Six Months Ended March 31, Ended March 31, ----------------------- ----------------------- 1998 1997 1998 1997 ---------- ---------- ---------- ---------- Interest Income: Loans receivable ................................ $ 958,152 $ 948,205 $1,931,609 $1,890,694 Securities available for sale ................... 157,153 192,032 328,849 366,029 Securities held to maturity ..................... 161,226 144,585 287,980 321,036 --------- --------- --------- --------- Total interest income ........................... 1,276,531 1,284,822 2,548,438 2,577,759 Interest Expense: Demand deposits ................................. 8,390 9,024 17,841 18,997 Savings deposits ................................ 102,638 97,496 204,950 191,719 Time deposits ................................... 509,178 514,532 1,023,465 1,044,631 Total interest expense --------- --------- --------- --------- 620,206 621,052 1,246,256 1,255,347 --------- --------- --------- --------- Net interest income ............................. 656,325 663,770 1,302,182 1,322,412 Provision for loan losses ....................... -- -- -- -- --------- --------- --------- --------- Net interest income after provision for loan loss 656,325 663,770 1,302,182 1,322,412 Noninterest Income: Other fees and service charges .................. 39,896 14,397 57,354 28,386 Gain on sale of loans ........................... 6,818 576 9,353 2,822 Net gain on sale of real estate owned ........... 15,473 -- 15,698 -- Other ........................................... 19,064 25,542 41,035 46,824 --------- --------- --------- --------- Total noninterest income 81,251 40,515 123,440 78,032 Noninterest Expense: Compensation and employee benefits .............. 265,459 236,772 523,244 462,346 Occupancy ....................................... 25,221 26,938 47,992 48,871 Deposit insurance premium ....................... 14,505 8,038 29,182 46,223 Data processing ................................. 20,807 22,687 39,348 44,089 Advertising ..................................... 6,659 5,540 13,487 13,626 Real estate owned expense, net .................. -- 104 335 450 Other ........................................... 84,798 98,786 166,011 222,080 --------- --------- --------- --------- Total noninterest expense 417,449 398,865 819,599 837,685 --------- --------- --------- --------- Income before income taxes ...................... 320,127 305,420 606,023 562,759 Income tax expense .............................. 124,217 131,558 233,409 215,632 --------- --------- --------- --------- Net income ...................................... $ 195,910 $ 173,862 $ 372,614 $ 347,127 ========= ========= ========= ========= Basic earnings per share ........................ $ 0.30 $ 0.24 $ 0.57 $ 0.46 ========= ========= ========= ========= Diluted earnings per share ...................... $ 0.27 $ 0.23 $ 0.51 $ 0.45 ========= ========= ========= ========= Dividends declared during the period ............ $ 0.08 $ 0.08 $ 0.08 $ 0.08 ========= ========= ========= =========
See Notes to consolidated financial statements. MISSISSIPPI VIEW HOLDING COMPANY AND SUBSIDIARY UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Six Months Ended March 31, ------------------------- 1998 1997 ----------- ----------- Cash flows from operating activities: Interest received on loans and investments ....................... 2,585,367 2,567,175 Interest paid .................................................... (1,246,167) (1,255,620) Other fees, commissions, and income received ..................... 125,440 122,729 Cash paid to suppliers, employees and others ..................... (762,344) (1,113,271) Contributions to charities ....................................... (2,252) (4,114) Income taxes paid ................................................ (270,537) -- Loans originated for sale ........................................ (2,688,131) (229,841) Proceeds from sale of loans ...................................... 2,401,084 299,933 ---------- --------- Net cash provided by operating activities ........................ 142,460 386,991 ---------- --------- Cash flows from investing activities: Purchases of available-for-sale securities ....................... (3,034,054) (3,084,156) Proceeds from maturities of available-for-sale securities ........ 5,543,486 3,180,155 Purchases of held-to-maturity securities ......................... (2,076,000) (2,176,000) Proceeds from maturities of held-to-maturity securities .......... 2,977,770 4,031,374 Loan originations and principal payments on loans, net ........... 2,906,582 (896,663) Purchases of property and equipment .............................. (7,271) (18,146) Proceeds from sale of foreclosed real estate ..................... 15,698 -- Net cash provided by (used in) investing activities --------- --------- 6,326,211 1,036,564 --------- --------- Cash flows from financing activities: Net increase (decrease) in non-interest bearing demand and savings deposit accounts ................................................. 65,945 203,953 Net (decrease) increase in time deposits ......................... 471,737 (792,572) Net (decrease) increase in mortgage escrow funds ................. 13,450 (8,975) Dividend on unallocated ESOP shares .............................. 888 888 Acquisition of treasury stock .................................... (59,977) (720,141) Net increase in unearned MSBP shares ............................. (417) 996 Dividends paid ................................................... (50,188) (55,178) Net cash used by financing activities --------- --------- 441,438 (1,371,029) --------- --------- Net (decrease) increase in cash and cash equivalents ............. 6,910,109 52,526 Cash and cash equivalents at beginning of year ................... 1,104,594 2,583,654 --------- --------- Cash and cash equivalents at end of year ......................... 8,014,703 2,636,180 ========= =========
See Notes to consolidated financial statements MISSISSIPPI VIEW HOLDING COMPANY AND SUBSIDIARY UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
For the Six Months Ended March 31, ------------------------ 1998 1997 --------- ---------- RECONCILIATION OF NET INCOME TO NET CASH PROVIDED BY OPERATING ACTIVITIES Net Income ........................................................... $ 372,614 $ 347,127 Adjustments: Provision for losses on loans and real estate - - Depreciation ......................................................... 49,433 40,965 Non-cash dividends ................................................... (2,738) (2,658) ESOP fair value adjustment ........................................... 23,623 11,031 Amortization of ESOP compensation .................................... 29,685 29,040 Amortization of MSBP compensation .................................... 33,243 33,243 Tax benefit of MSBP vesting activities ............................... 14,083 3,052 Net amortization and accretion of premiums and discounts on securities 4,612 (1,889) Net (gains) on sale of real estate owned ............................. (15,698) - Net loan fees deferred and amortized ................................. (17,584) 17,699 Net mortgage loan servicing fees deferred ............................ 1,276 726 (Increase) decrease in: Loans held for sale .................................................. (296,400) 67,270 Accrued interest receivable .......................................... 73,812 12,129 Prepaid income tax ................................................... - 23,892 Deferred tax asset ................................................... - 163,903 Other assets ......................................................... (22,842) 25,002 Increase (decrease) in: Accrued interest payable ............................................. 89 (273) Accrued income taxes ................................................. (35,462) 32,140 Other liabilities .................................................... (69,286) (415,408) -------- -------- Net cash provided by operating activities ............................ $ 142,460 $ 386,991 ======== ======== SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES Noncash dividends .................................................... $ 2,738 $ 2,658
See Notes to consolidated financial statements. MISSISSIPPI VIEW HOLDING COMPANY AND SUBSIDIARY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS MARCH 31, 1998 (Unaudited) Note 1: PRINCIPLES OF CONSOLIDATION The unaudited consolidated financial statements as of and for the three and six month periods ended March 31, 1998, include the accounts of Mississippi View Holding Company (the "Company") and its wholly owned subsidiary Community Federal Savings & Loan Association of Little Falls (the "Association"). All significant intercompany accounts and transactions have been eliminated in consolidation. Note 2: BASIS OF PRESENTATION General: The accompanying unaudited interim consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and instructions per Form 10-QSB. Accordingly, they do not include all information and disclosures required by generally accepted accounting principles for complete financial statements. The accompanying consolidated financial statements do not purport to contain all the necessary financial disclosures required by generally accepted accounting principles that might otherwise be necessary in the circumstances and should be read with the fiscal 1997 consolidated financial statements and notes of Mississippi View Holding Company and Subsidiary included in their annual audit report for the year ended September 30, 1997. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for fair presentations have been included. The results of operations for the three and six month periods ended March 31, 1997 and 1998, are not necessarily indicative of the results that may be expected for the entire fiscal year or any other period. Reclassification: Certain items previously reported have been reclassified to conform with the current period's reporting format. Note 3. RECENT ACCOUNTING PRONOUNCEMENTS. SFAS No. 130, "Reporting Comprehensive Income" - issued June 1997, establishes standards for reporting and displaying comprehensive income and its components in general-purpose financial statements. Comprehensive income includes net income and several other items that current accounting standards require to be recognized outside of net income. This statement requires entities to display comprehensive income and its components in the financial statements with presentation of the accumulated balances of other comprehensive income reported in stockholder's equity separately from retained earnings and additional paid-in capital. SFAS No. 130 is effective for fiscal years beginning after December 15, 1997. Reclassification of financial statements for earlier periods that are presented for comparative purposes is required. SFAS No. 131, "Disclosures about Segments of Enterprise and Related Information" - issued June 1997, requires public business enterprises to report information about their operating segments in a complete set of financial statements to shareholders. This statement also requires entities to report enterprise-wide information about their products and services, their activities in different geographic areas, and their reliance on major customers. Certain segment information is also to be reported in interim financial statements. The basis for determining an enterprise's operating segments is the manner in which management operates the business. Specifically, financial information is required to be reported on the basis that is used internally by the enterprise's chief operating decision maker in making decisions related to resource allocation and segment performance. SFAS No. 131 is effective for financial statements for years beginning after December 31, 1997. Management believes adoption of the above-described Statements will not have a material effect on financial position and the results of operations, nor will adoption require additional capital resources. Note 4. EARNINGS PER SHARE. In 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards (SFAS) No. 128, Earnings per Share. Statement 128 replaced the previously reported primary and fully diluted earnings per share with basic and diluted earnings per share. Unlike primary earnings per share, basic earnings per share excludes any dilutive effects of options, warrants, and convertible securities. Diluted earnings per share is very similar to the previously reported fully diluted earnings per share. All earnings per share amounts for all periods have been presented, and where necessary restated, to conform to the Statement 128 requirements. The following tables set forth the computation of basic and diluted earnings per share:
For the Three For the Six Months Ended Months Ended March 31, March 31, -------------------- ------------------- 1998 1997 1998 1997 -------------------- ------------------- Numerator: Net income - Numerator for basic earnings per share and diluted earnings per share -- income available to common shareholders ... $195,910 $173,862 $372,614 $347,127 ======= ======= ======= ======= Denominator: Denominator for basic earnings per shares - weighted-average shares ... 658,106 725,639 656,506 748,944 Effect of dilutive securities: stock options and employee stock-based compensation ........... 71,333 27,630 69,804 17,511 ------- ------- ------- ------- Denominator for diluted earnings per share - adjusted weighted-average shares and assumed conversions ..... 729,439 753,269 726,310 766,455 ======= ======= ======= ======= Basic earnings per share ........... $ 0.30 $ 0.24 $ 0.57 $ 0.46 Diluted earnings per share ......... $ 0.27 $ 0.23 $ 0.51 $ 0.45
Management's Discussion and Analysis of Financial Condition for September 30, 1997 and March 31, 1998 General. Total assets of Mississippi View Holding Company, (the "Company") increased by $1,413,220, or 2.06%, from September 30, 1997, to March 31, 1998. The increased assets were primarily the result of increased deposits of $537,770, increased unrealized gain of mark-to-market investments of $361,916, and net income of $372,614. Cash and Cash Equivalents. Cash and cash equivalents consisting of interest-bearing and noninterest bearing deposits, increased $6,910,109. Liquidity increased primarily due to cash receipts from investment securities, the principal reduction in the lending portfolio, and by deposit growth. Securities Available for Sale. Securities available for sale decreased $1,907,907, or 14.72%, from $12,963,344 at September 30, 1997 to $11,055,437 at March 31, 1998. Security maturities and principal payments exceeded purchases by $2,509,432. The cash received from this activity was reinvested in short term liquid investments and is reported as cash and cash equivalents in the statement of condition. The reduced investment balance was offset by an increase in the market value of available for sale securities of $603,193. Any future increase or decrease in the market value of such securities will have a corresponding positive or negative effect on stockholders' equity. Securities Held to Maturity. Debt and mortgage-backed securities held to maturity decreased $901,976, or 12.18%, from $7,405,466 on September 30, 1997, to $6,503,490 on March 31, 1998. Maturing debt securities of $2,490,476 and principal amortization of mortgage-backed securities of $487,294 were offset by purchases of certificates of deposit of $2,076,000. Liquidity not reinvested in certificates of deposit was reinvested in short term liquid investments and is reported as cash and cash equivalents in the statement of condition. Loans Held for Sale. Loans held for sale increased $296,400 from $135,550 (2 loans) on September 30, 1997, to $431,950 (10 loans) held for sale on March 31, 1998. This increase was the result of seasonal activity. Management's strategy is to sell in the secondary market lower-yielding fixed rate mortgage loans rather than maintaining them for portfolio. These loans are presold in the secondary market prior to origination. The balance is the amount sold, yet unfunded as of the period end. Loans Receivable, Net. Loans receivable decreased $2,888,997, or 6.50%, from $44,474,809 on September 30, 1997, to $41,585,812 on March 31, 1998. This decrease was due to principal amortizations and loan payoffs exceeding new loan originations held in the portfolio coupled with an increase in originations of loans sold in the secondary market. Other Assets. Other assets increased $21,565, or 3.80%, from $567,539 as of September 30, 1997, to $589,104 as of March 31, 1998. This increase was primarily the net result of increased prepaid insurance premiums of $23,741. Deposits. Deposits, after interest credited, increased by $537,770, or 0.97%, to $55,721,357 at March 31, 1998, from $55,183,587 at September 30, 1997. The increase was due, in part, to management's deposit pricing strategy. Advances from Borrowers for Taxes and Insurance. Advances from borrowers for taxes and insurance increased $13,450 from $107,038 on September 30, 1997, to $120,488 on March 31, 1998, due to the cyclical nature of these payments. Deferred Tax Liability. Deferred tax liability increased $233,866, or 44.52%, from $525,353 at September 30, 1997, to $759,219 on March 31, 1998, due primarily to the increase in net unrealized gains on available for sale securities. Other Liabilities. Other liabilities decreased by $69,286, or 11.62%, from $596,216 on September 30, 1997, to $526,930 on March 31, 1998. Decreased liabilities primarily resulted from reduced accrued compensation and bonus expenses of $41,853 and accrued audit expense of $23,583. Stockholders' Equity. Stockholders' equity increased by $725,470, or 6.01%, from $12,067,904 on September 30, 1997, to $12,793,374 on March 31, 1998. This increase is the net effect of the following changes in equity: a paid in capital increase of $37,706 resulting from the fair market value adjustment to earned and committed to be released Employee Stock Ownership Plan ("ESOP") shares, net of taxes, and the permanent tax/book benefit resulting from the vesting of Management Stock Bonus Plan (MSBP) shares; an increase of $34,201 as a result of accounting for earned ESOP shares; an increase of $32,826 as a result of accounting for earned MSBP shares; an increase of $361,916 resulting from an increase in net unrealized gains on available for sale securities; and an increase of $372,614 from net operational income for the six month period just ended; a decrease to retained earnings due to a dividend declared and paid of $53,816, and a decrease of $59,977 resulting from open market purchases of common stock of the Company. Comparison of Operating Results for the Three Months Ended March 31, 1998 and 1997 Net Income. Net income increased by $22,048, from $173,862 at March 31, 1997 to $195,910 at March 31, 1998. Net interest income decreased by $7,445 due to interest income decreasing more than interest expense. Noninterest income increased $40,736 and was offset by an increase in noninterest expense of $18,584. Net income also increased due to the decreased income tax expense of $7,341. Total Interest Income. Interest income decreased $8,291, or 0.65%, from $1,284,822 for the three month period ended March 31, 1997, to $1,276,531 for the three month period ended March 31, 1998. Interest income from loans receivable increased $9,947 due to the increase in the average loan balances offset by lower rates paid on such balances over the period. Available for sale security investment income decreased $34,879 due to lower rates paid on a lower average balance of such securities. Held to maturity investment security income increased $16,641 due to a increase in the average balance of such securities. Total Interest Expense. Interest expense decreased $846, or 0.14%, for the comparative three month periods ending March 31, 1997 and 1998. This decrease was due to lower average deposit balances. Net Interest Income. Net interest income decreased $7,445, or 1.12%, from $663,770 for the three months ended March 31, 1997, to $656,325 for the three month period ended March 31, 1998. This was primarily due to the reduced interest income from the lower rate of return earned on available for sale investment securities. Provision for Loan Losses. The Association currently maintains an allowance for loan losses based upon management's periodic evaluation of known and inherent risks in the loan portfolio, the Association's past loss experience, adverse situations that may affect the borrowers' ability to repay loans, estimated value of the underlying collateral, and current and expected market conditions. Loans are considered impaired if full principal and interest payments are not anticipated to be made in accordance with the contractual terms. Impaired loans are carried at the present value of expected future cash flows discounted at the loan's effective interest rate or at the fair value of the collateral if the loan is collateral dependent. A portion of the allowance for loan losses is allocated to impaired loans if the value of such loans is deemed to be less than the unpaid balance. If these allocations cause the allowance for loan losses to require an increase, such an increase is reported as a component of the provision for loan losses. Management's assessment of the loan portfolio and market conditions determined that no provisions needed to be recorded for the three months ended March 31, 1998 and 1997. While management maintains its allowance for losses at a level which it considers to be adequate to provide for potential losses, there can be no assurances that further additions will not be made to the loss allowances and that such losses will not exceed the estimated amounts. Due to the size of the institution and the minimal amount of nonperforming loans the percentage of nonperforming loans to allowance for loan losses will seem high. Movement of even one loan into or out of nonperforming status per reporting period may result in a large percentage change due to the size of the portfolio. Noninterest Income. Noninterest income increased by $40,736, or 100.55%, during the three month period ended March 31, 1998, as compared to the same period ended March 31, 1997. This increase was due to increased fee and service charge fee income of $25,499, an increase in gain of sale of loans of $6,242, an increase in the gain on the sale of real estate owned of $15,473, and a decrease in other noninterest income of $6,478. Noninterest Expense. Noninterest expense increased $18,584, or 4.66%, from $398,865 to $417,449 during the comparative three month periods ending March 31, 1997 and 1998, respectively. The increased noninterest expense was the result of the increased compensation and employee benefit plans of $28,687 due in part to the fair market value adjustment of stock benefits, increased federal deposit insurance of $6,467, increased advertising expense of $1,119, reduced data processing charges of $1,880, reduced occupancy expense of $1,717 and reduced other expenses primarily legal expense, consulting fees, audit expense and charitable contributions of $13,988. Income Tax. Income tax expense decreased $7,341, or 5.58%, from $131,558 for the three month period ended March 31, 1997, to $124,217 for the three month period ended March 31, 1998. Comparison of Operating Results for the Six Months Ended March 31, 1998 and 1997 Net Income. Net income increased by $25,487, from $347,127 at March 31, 1997 to $372,614 at March 31, 1998. Net interest income decreased by $20,230 due to interest income decreasing more than interest expense. The noninterest income increase of $45,408 and noninterest expense decrease of $18,086 were offset by an increase in income tax expense of $17,777. Total Interest Income. Interest income decreased $29,321, or 1.14%, from $2,577,759 for the six month period ended March 31, 1997, to $2,548,438 for the six month period ended March 31, 1998. Interest income from loans receivable increased $40,915 due to the increase in the average loan balances offset by lower rates paid on such balances over the period. Available for sale security investment income decreased $37,180 due to lower rates paid on a lower average balance of such securities. Held to maturity investment security income decreased $33,056 due to a decrease in the average balance of such securities as maturities were not reinvested in such investments. Total Interest Expense. Interest expense decreased $9,091, or 0.72%, for the comparative six month periods ending March 31, 1997 and 1998. This decrease was due to lower average deposit balances. Net Interest Income. Net interest income decreased $20,230, or 1.53%, from $1,322,412 for the six months ended March 31, 1997, to $1,302,182 for the six month period ended March 31, 1998. This was due to the reduced interest expense on deposits, the reduced interest income from the lower rate of return earned on available for sale investment securities, the reduced interest income from the lower rate on lower average balance of securities held to maturity, offset by interest received on loans due to the higher average loan balances. Provision for Loan Losses. The Association currently maintains an allowance for loan losses based upon management's periodic evaluation of known and inherent risks in the loan portfolio, the Association's past loss experience, adverse situations that may affect the borrowers' ability to repay loans, estimated value of the underlying collateral, and current and expected market conditions. Loans are considered impaired if full principal and interest payments are not anticipated to be made in accordance with the contractual terms. Impaired loans are carried at the present value of expected future cash flows discounted at the loan's effective interest rate or at the fair value of the collateral if the loan is collateral dependent. A portion of the allowance for loan losses is allocated to impaired loans if the value of such loans is deemed to be less than the unpaid balance. If these allocations cause the allowance for loan losses to require an increase, such an increase is reported as a component of the provision for loan losses. Management's assessment of the loan portfolio and market conditions determined that no provisions needed to be recorded for the six months ended March 31, 1998 and 1997. While management maintains its allowance for losses at a level which it considers to be adequate to provide for potential losses, there can be no assurances that further additions will not be made to the loss allowances and that such losses will not exceed the estimated amounts. Due to the size of the institution and the minimal amount of nonperforming loans the percentage of nonperforming loans to allowance for loan losses will seem high. Movement of even one loan into or out of nonperforming status per reporting period may result in a large percentage change due to the size of the portfolio. Noninterest Income. Noninterest income increased by $45,408, or 58.19%, during the six month period ended March 31, 1998, as compared to the same period ended March 31, 1997. This increase was due to increased fee and service charge fee income of $28,968 from fees generated from the sale of loans in the secondary market, an increase in gain of sale of loans of $6,531 due to increased activity, an increase in the gain on the sale of real estate owned of $15,698, and a decrease in other noninterest income of $5,789. Noninterest Expense. Noninterest expense decreased $18,086, or 2.16%, from $837,685 to $819,599 during the comparative six month periods ending March 31, 1997 and 1998, respectively. The decreased noninterest expense was the result of the reduced federal deposit insurance of $17,041, reduced data processing charges of $4,741, reduced occupancy expense of $879, and reduced other expenses primarily legal expense, consulting fees, audit expense and charitable contributions of $56,069, offset by increased compensation and employee benefit plans of $60,898 due in part to the fair market value adjustment of stock benefits. Income Tax. Income tax expense increased $17,777, or 8.24%, from $215,632 for the six month period ended March 31, 1997, to $233,409 for the six month period ended March 31, 1998, primarily due to increased earnings. Non-performing and Problem Assets. The following table sets forth information regarding non-accrual loans, real estate owned, and other repossessed assets, and loans 90 days or more delinquent but on which the Association was accruing interest at the date indicated. As of the date indicated, the Association had no loans categorized as trouble debt restructuring within the meaning of Statement of Financial Accounting Standards ("SFAS") No. 15.
At March 31, ---------------------- 1998 1997 ---------- --------- (In Thousands) ---------------------- Loans accounted for on a non-accrual basis: Mortgage loans: Permanent loans secured by 1-4 dwelling units .................. $ 197 $ 100 All other mortgages ............................................ -- -- Non-mortgage loans.............................................. 15 12 -------- ------- Total .......................................................... 212 112 Accruing loans which are contractually past due 90 days or more: Mortgage loans: Construction loans ............................................. -- -- Permanent loans secured by 1-4 dwelling units .................. 30 31 All other mortgage loans ....................................... -- -- Non-mortgage loans ............................................. 67 -- -------- ------- Total .......................................................... 97 31 -------- ------- Total non-accrual and accrual loans ............................ 309 143 -------- ------- Real estate owned .............................................. -- 34 Other non-performing assets .................................... -- -- -------- -------- Total non-performing assets .................................... $ 309 $ 177 ======== ======== Total non-accrual and accrual loans to net loans ............... 0.74% 0.33% Total non-accrual and accrual loans to total assets ............ 0.44% 0.21% Total non-performing assets to total assets .................... 0.44% 0.25% Total allowance for loan losses to non-performing loans ........ 278.80% 604.05%
Interest income that would have been recorded on loans accounted for on a nonaccrual basis under the original terms of such loans was $12,495 and $3,909 for the six months ended March 31, 1998 and 1997, respectively. No interest income on non-accrual loans was included in income for the six months ended March 31, 1998 and 1997. Capital Compliance. The following table sets forth the Association's capital position at March 31, 1998, as compared to the minimum regulatory capital requirements imposed on the Association by the Office of Thrift Supervision ("OTS") at that date. At March 31, 1998 ---------------------------- Percentage of Amount Adjusted Assets ----------- --------------- GAAP Capital .......... $12,600,811 18.01% =========== =============== Tangible Capital: (1) Regulatory requirement $ 1,350,117 2.00% Actual capital ........ 11,127,566 16.48% ----------- --------------- Excess ................ $ 9,777,449 14.48% =========== =============== Core Capital: (1) Regulatory requirement $ 2,700,235 4.00% Actual capital ........ 11,127,566 16.48% ----------- --------------- Excess ................ $ 8,427,331 12.48% =========== =============== Risk-Based Capital: (2) Regulatory requirement $ 2,717,875 8.00% Actual capital ........ 11,557,654 34.02% ----------- --------------- Excess ................ $ 8,839,779 26.02% =========== =============== (1) Regulatory capital reflects modifications from GAAP capital due to valuation adjustments for available for sale securities and unallowable mortgage servicing rights. (2) Based on risk weighted assets of $33,973,442 Liquidity Resources The OTS issued a final rule (12 CFR Part 566) that updates, simplifies, and streamlines it liquidity regulation effective November 24, 1997. The final rule has lowered the liquidity requirements for savings associations from 5 to 4 percent of the institution's liquidity base, the lowest level permitted by current law. The rule also eliminates a separate requirement that thrifts hold assets equal to 1 percent of a thrifts liquidity base in cash or short term liquid assets. Additionally, OTS streamlined the calculations used to measure compliance with liquidity requirements, expanded the types of investments considered to be liquid assets to conform with provisions of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989, and reduced the liquidity base by modifying the definition of net withdrawable account to exclude accounts with maturities exceeding one year. The final rule requires the calculation once each quarter rather than monthly. Another change removes the requirement that certain obligations must mature in five years or less in order to qualify as a liquid asset. The OTS minimum required liquidity ratio is 4%. At March 31, 1998, the Association's total liquidity was 24.39%. The Association liquidity level was well in excess of regulation requirements. The Association adjusts its liquidity levels in order to meet funding needs for deposit outflows, payment of real estate taxes from escrow accounts on mortgage loans, loan funding commitments, and repayment of borrowings, when applicable. The Association adjusts its liquidity level as appropriate to meet its asset/liability objectives. The primary sources of funds are deposits, amortization and prepayments of loans and mortgage-backed securities, maturity of investments, and funds provided from operations. As an alternative to supplement liquidity needs, the Association has the ability to borrow from the Federal Home Loan Bank of Des Moines. Scheduled loan amortization and maturing investment securities are a relatively predictable source of funds, however, deposit flow and loan prepayments are greatly influenced by, among other things, market interest rates, economic conditions and competition. The Association's liquidity, represented by cash, cash equivalents, securities (held to maturity and available for sale), is a product of its operating, investing, and financing activities. At March 31, 1998, the Association had total outstanding commitments to fund loan originations or mortgage-backed and investment security purchases of $505,000. Impact of Inflation and Changing Prices The unaudited consolidated financial statements of the Company and notes thereto, presented elsewhere herein, have been prepared in accordance with GAAP, which requires the measurement of financial position and operating results in terms of historical dollars without considering the change in the relative purchasing power of money over time due to inflation. The impact of inflation is reflected in the increased cost of the Company's operations. Unlike most industrial companies, nearly all the assets and liabilities of the Company are financial. As a result, interest rates have a greater impact on the Company's performance than do the general levels of inflation. Interest rates do not necessarily move in the same direction or to the same extent as the prices of goods and services. Year 2000 The Company has presented its Year 2000 Action Plan to the Board of Directors. The Plan includes the following phases: awareness, assessment, upgrading, implementation, and testing. The Company has completed the awareness and assessment phases. Upgrading and implementation of hardware and software is currently being addressed with testing scheduled to begin after July 1, 1998. The Company believes its exposure is primarily with the automated data processing applications. The data processing vendor provides quarterly Year 2000 updates and has scheduled extensive testing during the last three quarters of 1998. Based upon current findings the Company has budgeted $94,000 in direct expense, (which includes hardware and software upgrades, seminars and training) and $37,000 in indirect expenses to be incurred prior to January 1, 2000. In addition, due to residential mortgage lending emphasis, the Company does not believe that its exposure to default by borrowers as a result of this problem to be significant. Despite the best efforts of management to address this issue, the vast number of external entities that have direct and indirect business relationships with the Company, such as customers, vendors, payment system providers and other financial institutions, makes it impossible to assure that a failure to achieve compliance by one or more of these entities would not have a material adverse impact on the operations of the Company. Key Operating Ratios The table below sets forth certain performance ratios of the Company for the periods indicated.
At or for the At or for the Three Months Six Months Ended March 31, Ended March 31, ---------------------- -------------------- 1998 (1) 1997 (1) 1998 (1) 1997 (1) ---------- ---------- --------- -------- Performance Ratios: Return on average assets (net income divided by average total assets) .... 1.17% 1.02% 1.12% 1.01% Return on average equity (net income divided by average equity) .......... 6.93% 5.87% 6.65% 5.75% Average interest earning assets to average interest bearing liabilities. 122.51% 122.51% 122.42% 122.88% Net interest rate spread .............. 3.14% 3.11% 3.12% 3.07% Net yield on average interest-earning assets .............................. 3.98% 3.95% 3.97% 3.91% Net interest income after provision for loan losses to total other expenses ............................ 157.22% 166.41% 158.88% 157.87% Capital Ratios: Book value per share (2) .............. $17.36 $15.55 $17.36 $15.55 Average equity to average assets ratio (average equity divided by average total assets) ....................... 16.89% 17.37% 16.83% 17.60% Shareholders' equity to assets at period end .......................... 18.29% 18.26% 18.29% 18.26%
(1) The ratios for the three and six month periods are annualized. (2) The number of shares outstanding as of March 31, 1998 was 736,864, includes shares sold to the ESOP and purchased by the Management Stock Bonus Plan ("MSBP") and 818,743 as of March 31, 1997, includes shares sold to ESOP and purchased by the MSBP. PART II - OTHER INFORMATION Item 1. Legal Proceedings Not Applicable Item 2. Changes in Securities Not Applicable Item 3. Default Upon Senior Securities Not Applicable Item 4. Submission of Matters to a Vote of Security Holders The annual meeting of stockholders of the Corporation was held January 21, 1998, and the following items were acted upon: Election of Directors Wallace R. Mattock and Gerald Peterson for terms of three years ending in 2001. Wallace R. Mattock received 629,128 votes in favor and 2,156 votes were withheld. Gerald Peterson received 629,203 in favor and 2,081 votes were withheld. Ratification of the appointment of Bertram Cooper and Company, LLP as the Corporation's auditors for the 1998 fiscal year. Bertram Cooper and Company, LLP was ratified as the Corporation's auditors with 631,034 votes for and 250 abstentions. Item 5. Other Information On April 13, 1998, the Company announced an offer to purchase (the "Offer") up to 222,000 shares of its Common Stock at a cash purchase price not in excess of $21.50 per share or less than $19.50 per share. The Offer expires at 5:00 p.m. Eastern Time on May 11, 1998. Item 6. Exhibits, List and Reports on Form 8-K (a) Exhibits are either attached as part of this Report or incorporated herein by reference. 2.0 Schedule 13E-3 of the Registrant and Mississippi View Holding Company Stock Employee Compensation Trust declared effective by the SEC on April 13, 1998 3.1 Articles of Incorporation of Mississippi View Holding Company ** 3.2 Bylaws of Mississippi View Holding Company ** 10.1 Employment contract with Thomas J. Leiferman ** 10.2 Management Stock Bonus Plans *** 10.3 1995 Stock Option Plan ** 10.4 1997 Stock Option Plan **** 11 Statement regarding computation of earnings per share (see Note 4 to the Notes to Consolidated Financial Statements) 27 Financial Data Schedule ***** (b) Reports on Form 8-K - On March 20, 1998, the Company filed a Form 8-K announcing its termination of listing on Nasdaq SmallCap Market - ------------ * Incorporated by reference as filed with the SEC. ** Incorporated by reference to the Registrant's Registration Statement on form S-1 (File No. 33-86820) declared effective by the SEC on February 9, 1995. *** Incorporated by reference to the Registrant's proxy statement for the special meeting of stockholders held on September 27, 1995 and filed with the SEC on August 17. 1995 (File No. 0-25546). **** Incorporated by reference to the Registrant's definite proxy materials for the annual meeting of stockholders held on January 22, 1997 and filed with the SEC on December 16, 1996 ***** Only in electronic filing. MISSISSIPPI VIEW HOLDING COMPANY 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 thereunto duly authorized. Mississippi View Holding Company Date: 05/11/98 By: /s/ Thomas J. Leiferman ---------------------------- ---------------------------------------- Thomas J. Leiferman President and Chief Executive Officer (Principal Executive Officer) Date: 05/11/98 By: /s/ Larry D. Hartwig ---------------------------- ---------------------------------------- Larry D. Hartwig Vice President (Principal Accounting and Financial Officer) EX-27 2 FDS 10QSB
9 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION DERIVED FROM THE QUARTERLY REPORT ON FORM 10-QSB AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL INFORMATION. 6-MOS SEP-30-1997 MAR-31-1998 248 7,767 0 0 11,055 6,503 6,572 43,133 864 69,960 55,721 0 1,445 0 0 0 101 12,693 69,960 1,932 617 0 2,548 1,246 1,246 1,302 0 0 820 606 373 0 0 373 0.57 0.51 7.50 212 98 0 1,585 861 0 3 864 864 0 702
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