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FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 1996
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or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission File Number 0-28070
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Jacksonville Bancorp, Inc.
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(Exact name of registrant as specified in its charter)
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<S> <C>
Texas 75-2632781
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(State of other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
Commerce at Neches
Jacksonville, Texas 75766
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(Address of principal (Zip Code)
executive office)
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Registrant's telephone number, including area code: (903) 586-9861
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13, or 15(d) of the Securities Exchange Act of
1934 during the preceding 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
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As of February 5, 1997, the latest practicable date, 2,670,265 shares of the
registrant's common stock, $.01 par value, were issued and 2,577,265 shares
were outstanding.
1
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JACKSONVILLE BANCORP, INC. AND SUBSIDIARIES
INDEX
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<S> <C> <C>
PART I. Financial Information Page
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Item 1. Financial Statements
Consolidated Statements of Financial Condition
as of September 30, 1996 (Audited) and December 31,
1996 (Unaudited) 3
Consolidated Statements of Earnings for the
Three Months Ended December 31, 1996
and 1995 (Unaudited) 4
Consolidated Statements of Cash Flows for
the Three Months Ended December 31, 1996 and
1995 (Unaudited) 5
Consolidated Statements of Changes in
Stockholders' Equity for the Three Months Ended
December 31, 1996 (Unaudited) 6
Notes to Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of 9
Financial Condition and Results of Operations
for the Three Months Ended December 31, 1996
PART II. Other Information Page
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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
Signatures
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2
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JACKSONVILLE BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
December 31, September 30,
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1996 1996
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(Unaudited) (Audited)
<S> <C> <C>
ASSETS
Cash on hand and in banks $ 2,335 $ 2,778
Interest-bearing deposits 4,451 2,415
Investment securities:
Held-to-maturity 21,952 26,447
Available-for-sale 6,430 7,359
Mortgage-backed certificates:
Held-to-maturity 11,468 12,107
Available-for-sale 4,980 0
Loans receivable, net 158,331 158,034
Accrued interest receivable 1,555 1,633
Foreclosed real estate, net 1,106 1,051
Premises and equipment, net 3,360 3,256
Stock in Federal Home Loan Bank of Dallas, at cost 1,766 1,740
Mortgage servicing rights 277 232
Federal income taxes receivable 187 585
Prepaid expenses and other assets 79 219
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Total assets $ 218,277 $ 217,856
============= =============
LIABILITIES
Deposits $ 176,357 $ 174,328
FHLB Advances 5,000 2,000
Advances from borrowers for taxes and insurance 968 3,518
SAIF special assessment payable 0 1,070
Accrued expenses and other liabilities 929 1,150
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Total liabilities 183,254 182,066
DEFERRED INCOME
Gain on sale of real estate owned 306 359
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Common stock, $.01 par value, 25,000,000
shares authorized; 2,664,265 and 2,651,025
shares issued at 1996 and 1995, respectively 27 27
Additional paid-in capital 22,318 22,297
Retained earnings, substantially restricted 15,089 14,747
Less:
Treasury shares, at cost (26,000 shares) (375) 0
Shares acquired by Employee Stock Ownership Plan (1,491) (1,528)
Shares acquired by Management Recognition Plan (808) (24)
Net of unrealized loss on decline in market value
of securities available for sale (43) (88)
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Total stockholders' equity 34,717 35,431
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Total liabilities and stockholders' equity $ 218,277 $ 217,856
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3
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JACKSONVILLE BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(DOLLARS IN THOUSANDS)
Unaudited
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<CAPTION>
THREE MONTHS ENDED
DECEMBER 31,
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1996 1995
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INTEREST INCOME
Loans receivable $ 3,305 $ 2,857
Mortgage-backed securities 236 113
Investment securities 460 574
Other 91 94
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Total interest income 4,092 3,638
INTEREST EXPENSE
Other 31 10
Deposits 2,125 2,111
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Total interest expense 2,156 2,121
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Net interest income 1,936 1,517
PROVISION FOR LOSSES ON LOANS 5 0
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Net interest income after
provision for losses on loans 1,931 1,517
NONINTEREST INCOME
Fees and deposit service charges 286 233
Real estate operations, net 49 8
Other 18 15
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Total noninterest income 353 256
NONINTEREST EXPENSE
Compensation and benefits 775 690
Occupancy and equipment 129 105
Insurance expense 120 110
Other 296 262
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Total noninterest expense 1,320 1,167
INCOME BEFORE TAXES ON INCOME 964 606
TAXES ON INCOME 312 200
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Net earnings $ 652 $ 406
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Earnings per share $ .26 $ .17
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4
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JACKSONVILLE BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
FOR THE THREE MONTHS ENDED DECEMBER 31, 1996 AND 1995
(DOLLARS IN THOUSANDS)
Unaudited
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<CAPTION>
1996 1995
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CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 652 $ 406
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 53 38
Amortization/Accretion of securities 9 28
Provision for losses on loans and real estate 5 0
Loans originated for sale (4,346) (6,003)
Loans sold 4,346 6,003
(Gain) Loss on sale of other real estate (63) 26
Accrual of MRP awards 52 25
Release of ESOP shares 59 0
Change in assets and liabilities:
Decrease (Increase) in accrued interest receivable 78 (154)
Decrease (Increase) in prepaid expenses and
other assets 140 68
Increase in mortgage servicing rights (45) 0
Decrease in FIT receivable 398 81
Decrease in accrued expenses and other liabilities (1,291) (270)
Decrease in deferred income (53) (4)
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Net cash (used in) provided by operating
activities (6) 244
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds on maturity of investment securities 5,477 6,893
Net principal payments (origination) on loans (634) (4,290)
Proceeds from sale of foreclosed real estate 9 95
Purchase of mortgage-backed securities (4,983) (4,000)
Principal paydowns on mortgage-back securities 642 278
Capital expenditures 157 (11)
Purchase of stock in FHLB (26) 27
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Net cash provided by (used in) investing
activities 642 (1,008)
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in deposits 2,029 1,240
Net decrease in advances for taxes and insurance (2,551) (2,521)
Purchase of treasury stock (375) 0
Dividends paid (310) (105)
Advances from FHLB 3,000 0
Purchase of MRP shares (836) 0
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Net cash provided by (used in) financing activities 957 (1,386)
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Net increase (decrease) in cash and cash
equivalents 1,593 (2,150)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 5,193 8,051
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CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 6,786 $ 5,901
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JACKSONVILLE BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE THREE MONTHS ENDED DECEMBER 31, 1996
(UNAUDITED)
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<CAPTION>
Total
Stockholders'
Equity
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Balance at September 30, 1996 $ 35,431
Net change in unrealized loss on securities 45
Accrual of MRP awards 52
Accrual of ESOP compensation 58
Cash dividends (310)
Net earnings 652
MRP awards (836)
Purchase of 26,000 treasury shares (375)
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Balance at December 31, 1996 $ 34,717
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JACKSONVILLE BANCORP, INC.
NOTES TO UNAUDITED FINANCIAL STATEMENTS
NOTE 1 - BASIS OF PRESENTATION
The unaudited financial statements were prepared in accordance with
instructions for Form 10-Q and, therefore, do not include information or
footnotes necessary for a complete presentation of financial position, results
of operations, and cash flows in conformity with generally accepted accounting
principles. However, all adjustments (consisting only of normal recurring
adjustments) which, in the opinion of management, are necessary for a fair
presentation of the financial statements have been included. The results of
operations for the three and six month periods ended March 31, 1996 and 1995
are not necessarily indicative of the results which may be expected for an
entire fiscal year.
NOTE 2 - CONVERSIONS
On March 31, 1994, Jacksonville Savings and Loan Association (Jacksonville
completed its reorganization into the mutual holding company form of
organization whereby Jacksonville (i) formed Jacksonville Savings and Loan
Association (the Association), a Texas-chartered stock savings and loan
association, (ii) transferred substantially all of its assets and liabilities
to the Stock Association in exchange for common stock, $.01 par value per
share (Common Stock), of the Stock Association, and (iii) reorganized from a
state-chartered mutual savings and loan association to a federally-chartered
mutual holding company known as "Jacksonville Federal Mutual Holding Company"
(the Holding Company) (collectively the Reorganization). As part of the
Reorganization, the Association issued 731,250 shares of Common Stock to
members of the public and 1,137,500 shares of its Common Stock to the Holding
Company.
On September 20, 1995, the Boards of Directors of the Association and the
Mutual Holding Company adopted a Plan of Conversion and Agreement and Plan of
Reorganization (Plan) which was consummated March 29, 1996. Pursuant to the
Plan, (1) the Mutual Holding Company converted to an interim federal stock
savings association and simultaneously merged into the Association, the Mutual
Holding Company ceased to exist and the 1,137,500 shares or 60.8% of the
outstanding shares of the Association's common stock held by the Mutual
Holding Company were cancelled, and (2) the Association then merged into an
interim institution (Interim) formed as a wholly-owned subsidiary of
Jacksonville Bancorp, Inc. (the Company), a newly formed Texas corporation
formed in connection with the reorganization, with the Association being the
surviving entity; and, (3) the outstanding shares of the Association's common
stock (other than those held by the Mutual Holding Company, which were
cancelled) were converted into shares of common stock of the Company pursuant
to a ratio which resulted in the holders of such shares owning in the
aggregate approximately that same percentage of the Company as they owned of
the Association. The Company offered for sale pursuant to the Plan additional
shares equal to 60.8% of the common shares of the Company. Consummation of the
Plan was approved by (i) the members of the Mutual Holding Company, (ii) the
stockholders of the Association, and (iii) various regulatory agencies.
7
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JACKSONVILLE BANCORP, INC.
NOTES TO UNAUDITED FINANCIAL STATEMENTS
CONTINUED
NOTE 2 - CONVERSIONS - CONTINUED
In connection with this Plan, the Company issued 1,618,409 new shares of stock
to the public. The shares of the Association stock owned by the public were
exchanged for 1,045,856 shares of Company stock. Immediately after
conversion, 2,664,265 shares were outstanding including shares held by the
Employee Stock Ownership Plan and shares held by the Management Recognition
Plan.
NOTE 3 - EARNINGS PER SHARE
Earnings per share for the three month periods ended December 31, 1996 and
1995 have been computed by dividing net earnings by the weighted average
number of shares outstanding. Shares controlled by the ESOP are accounted for
in accordance with Statement of Position 93-6 under which unallocated shares
are not considered in the weighted average number of shares of common stock
outstanding. Earnings per share for all periods prior to the Reorganization
completed March 29, 1996 have been adjusted using the exchange ratio of
1.41785 and adjusted for additional shares acquired by the ESOP.
NOTE 4 - RECLASSIFICATION OF PREVIOUS STATEMENTS
Certain items previously reported have been reclassified to conform with the
current period's reporting format.
NOTE 5 - NEW ACCOUNTING PRONOUNCEMENTS
In October 1995, the Financial Accounting Standards Board issued Statement No.
123 "Accounting for Stock-Based Compensation." This statement requires
either; (a) recognition o compensation cost in earnings for stock-based
compensation plans based the fair value of stock options; or (b) pro forma
disclosures of what earnings and per share amounts would have been had the
fair value method been used for expense recognition. Management is continuing
to evaluate the impact of this statement and plans to present pro forma
disclosures in its full set of financial statements for the year ending
September 30, 1997.
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The Jacksonville Bancorp, Inc.
Management Discussion and Analysis
of Financial Condition and Results of Operation
Discussion of Changes in Financial Condition from September 30, 1996 to
December 31, 1996
At December 31, 1996 assets of Jacksonville totaled $218.3 million
compared to $217.9 million at September 30, 1996. The increase in assets was
funded through growth in the deposit portfolio of $2.0 million and an increase
in advances from the Federal Home Loan Bank ("FHLB") of $3.0 million.
Interest bearing deposits increased by $2.1 million from $2.4 million
at September 30, 1996 to $4.5 million at December 31, 1996. The investment
securities portfolio declined during the quarter from a total of $33.8 million
at September 30, 1996 to $28.4 million at December 31, 1996. The $5.4 million
decrease was the result of the maturity of investment securities in the
portfolio, the proceeds from which were used primarily to fund the purchase of
$5.0 million of adjustable-rate mortgage-backed certificates. The entire
balance of these certificates were added to the "available for sale" category
of mortgage-backed securities during the quarter ended December 31, 1996.
There were no certificates in this category at September 30, 1996. Loans
receivable, net increased $300,000 from $158.0 million at September 30, 1996 to
$158.3 million at December 31, 1996. Federal income taxes receivable decreased
by $398,000 from September 30, 1996 to December 31, 1996 as a result of
accruals made during the quarter. Prepaid expenses and other assets decreased
from $219,000 at September 30, 1996 to $79,000 at December 31, 1996. This
decrease was primarily the result of decreases in prepaid Savings Association
Insurance Fund ("SAIF") premiums, state franchise taxes and Office of Thrift
Supervision assessments.
At December 31, 1996 the liabilities of Jacksonville totaled $183.3
million as compared to $182.1 million at September 30, 1996. Deposits grew
$2.1 million for the quarter from $174.3 million to $176.4 million principally
as a result of interest credited to accounts during the quarter. FHLB advances
increased from $2.0 million at September 30, 1996 to $5.0 million at December
31, 1996. These advances were used to fund loan originations, to pay customers
real estate taxes, and to fund the SAIF special assessment. Advances from
borrowers for taxes and insurance decreased by $2.5 million from $3.5 million
at September 30, 1996 to $1.0 million at December 31, 1996 as a result of the
payment from customer escrow accounts of all amounts due to taxing agencies
during the quarter. The one-time SAIF special assessment of $1.1 million was
paid during the quarter ended December 31, 1996 eliminating the payable account
of record at September 30, 1996.
At December 31, 1996 stockholders' equity totaled $34.7 million
compared to $35.4 million at September 30, 1996. This $714,000 decrease was
the result of the repurchase of 26,000 shares of Company stock at a cost of
$375,000 and the purchase of 64,736 shares by the Management Recognition Plan
Trust during the period at a cost of $836,000. These decreases were partially
offset by an increase of $342,000 in retained earnings as a result of the net
income for the quarter after dividends.
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At December 31, 1996, Jacksonville's core, tangible and risk based
capital were all substantially in excess of required minimums.
Comparison of Operating Results for the three month period ended December 31,
1996 to the three month period ended December 31, 1995.
Jacksonville reported net income of $652,000 for the three months ended
December 31, 1996 compared to $406,000 for the three months ended December 31,
1995. The increase in net income of $246,000 was due to an increase in net
income of $419,000; an increase of $97,000 in non-interest income, partially
offset by an increase in non-interest expenses of $153,000.
Net Interest Income
Total interest income increased by $454,000 during the three months
ended December 31, 1996 compared to the same period in the prior year.
Interest income from loans receivable increased $448,000 due primarily to an
increase in the average balance of loans and the mortgage-backed certificates
portfolio in the two comparative periods. Interest on investment securities
decreased $114,000 from $574,000 for the quarter ended December 31, 1995 to
$460,000 at December 31, 1996 as the average balance of the portfolio during
the comparable quarters decreased as Jacksonville shifted funds from investment
securities to mortgage-backed certificates.
Total interest expense increased by $35,000 during the three months
ended December 31, 1996 compared to the same period in 1995. Interest paid and
deposit volume were relatively flat for the respective quarters.
Provision for Losses on Loans
Jacksonville recorded a $5,000 provision for the quarter ended December
31, 1996 as compared to no such provision during the same period in the prior
year. The provision is consistent with management's estimate which takes into
account the adequacy of the allowance for loan losses for the loan portfolio by
loan types.
Noninterest Income
Total noninterest income increased from $256,000 during the three
months ended December 31, 1995 to $353,000 for the same period in 1996. The
$97,000 increase was the result of a $53,000 increase in fees and deposit
service charges as well as $41,000 of income from real estate operations, net.
Noninterest Expense
Total noninterest expense increased by $153,000 during the three months
ended December 31, 1996 compared to the three months ended December 31, 1995.
Compared to the comparable
10
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1995 quarter, compensation and benefits increased by $85,000 and occupancy and
equipment increased by $24,000. These increases were principally the result of
the addition of personnel to staff Jacksonville's new loan annex at its
Palestine, Texas branch and its Longview branch office. The cost of accruing
the new management recognition plan awards and employee stock ownership plan
allocations also contributed to the increase in the compensation and benefits
expense during the quarter. Insurance expense and other noninterest expense
increased by $10,000 and $34,000 for the quarter ended December 31, 1996 as
compared to the comparable 1995 quarter.
Income Tax Expense
For the three months ended December 31, 1995 and December 31, 1996, the
provisions for income tax amounted to $200,000 and $312,000, respectively. The
higher provisions for income tax during the quarter ended December 31, 1996 was
due to the higher taxes resulting from increased earnings during the quarter.
11
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JACKSONVILLE BANCORP, INC.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Jacksonville Bancorp, Inc., is involved only in routine legal
proceedings occurring in the ordinary course of business which in
the aggregate are believed by management to be immaterial to the
financial condition of the Association.
ITEM 2. CHANGES IN SECURITIES
Not Applicable
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not Applicable
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company held a special meeting of shareholders on October 22,
1996 to consider the 1996 Stock Option Plan ("Option Plan") and the
1996 Management Recognition Plan and Trust ("MRP"). both plans
were approved by the shareholders by required margins. The vote on
the Option Plan was 1,763,429 for, 109,440 against and 19,628
abstaining; the vote on the MRP was 1,854,093 for, 139,440 against
and 18,784 abstaining.
ITEM 5. OTHER INFORMATION
Not Applicable
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
On October 18, 1996 filed 8-K announcing special SAIF assessement.
On October 23, 1996 filed 8-K announcing initiation of open-market
stock purchases to fund management recognition plan.
On November 14, 1996 filed 8-K announcing the intent to repurchase
up to 5% of outstanding shares.
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On December 16, 1996 filed 8-K announcing dividends for quarter
ending September 30, 1996.
On December 20, 1996 filed 8-K announcing earnings for quarter
ending September 30, 1996.
8-K dated February 5, 1997.
13
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JACKSONVILLE BANCORP, INC.
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.
Jacksonville Bancorp, Inc.
Date: February 5, 1997 By: Jerry Chancellor
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Jerry Chancellor, President
Date: February 5, 1997 By: Bill W. Taylor
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Bill W. Taylor, Exec. Vice
President
Chief Financial Officer
14
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-START> OCT-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 2,335
<INT-BEARING-DEPOSITS> 4,451
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 11,410
<INVESTMENTS-CARRYING> 33,420
<INVESTMENTS-MARKET> 33,420
<LOANS> 159,431
<ALLOWANCE> 1,100
<TOTAL-ASSETS> 218,277
<DEPOSITS> 176,357
<SHORT-TERM> 5,000
<LIABILITIES-OTHER> 2,203
<LONG-TERM> 0
0
0
<COMMON> 27
<OTHER-SE> 34,690
<TOTAL-LIABILITIES-AND-EQUITY> 218,277
<INTEREST-LOAN> 3,305
<INTEREST-INVEST> 696
<INTEREST-OTHER> 91
<INTEREST-TOTAL> 4,092
<INTEREST-DEPOSIT> 2,125
<INTEREST-EXPENSE> 2,156
<INTEREST-INCOME-NET> 1,936
<LOAN-LOSSES> 5
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 1,320
<INCOME-PRETAX> 964
<INCOME-PRE-EXTRAORDINARY> 964
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 652
<EPS-PRIMARY> .26
<EPS-DILUTED> .26
<YIELD-ACTUAL> 7.9
<LOANS-NON> 736
<LOANS-PAST> 0
<LOANS-TROUBLED> 387
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 1,100
<CHARGE-OFFS> 4
<RECOVERIES> 0
<ALLOWANCE-CLOSE> 1,100
<ALLOWANCE-DOMESTIC> 1
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
