<PAGE> 1
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 June 30, 1997
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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)
Texas 75-2632781
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(State of other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number
Commerce and Neches
Jacksonville, Texas 75766
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(Address of principal (Zip Code)
executive office)
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
--- ---
As of August 5, 1997, the latest practicable date, 2,674,668 shares of the
registrant's common stock, $.01 par value, were issued and 2,466,068 shares
were outstanding.
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JACKSONVILLE BANCORP, INC. AND SUBSIDIARIES
INDEX
<TABLE>
<CAPTION>
PART I. Financial Information Page
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<S> <C> <C>
Item 1. Financial Statements
Consolidated Statements of Financial Condition
as of June 30, 1997 (Unaudited) and September 30,
1996 (Audited) 3
Consolidated Statements of Earnings for the
Nine and Three Months Ended June 30, 1997
and 1996 (Unaudited) 4
Consolidated Statements of Earnings for the
Nine Months Ended June 30, 1997 and 1996
(Unaudited) 5
Consolidated Statements of Stockholders' Equity
for the Nine Months Ended June 30, 1997
(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 Nine and Three Months ended June 30, 1997
</TABLE>
<TABLE>
<CAPTION>
PART II. Other Information Page
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<S> <C> <C>
Item 1. Legal Proceedings 15
Item 2. Changes in Securities 15
Item 3. Defaults upon Senior Securities 15
Item 4. Submission of Matters to a Vote of Security Holders 15
Item 5. Other Information 15
Item 6. Exhibits and Reports on Form 8-K 15
Signatures
</TABLE>
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JACKSONVILLE BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
June 30, September 30,
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1997 1996
------------ -------------
(Unaudited) (Audited)
<S> <C> <C>
ASSETS
Cash on hand and in banks $ 1,576 $ 2,778
Interest-bearing deposits 2,709 2,415
Investment securities:
Held-to-maturity, approximate fair market
value of $21,954 and $26,378, respectively 21,966 26,447
Available-for-sale 6,420 7,359
Mortgage-backed certificates:
Held-to-maturity, approximate fair market
value of $10,990 and $12,107, respectively 10,944 12,107
Available-for-sale 5,156 -
Loans receivable, net 169,262 158,034
Accrued interest receivable 1,956 1,633
Foreclosed real estate, net 462 1,051
Premises and equipment, net 3,371 3,256
Stock in Federal Home Loan Bank of Dallas, at cost 1,817 1,740
Mortgage servicing rights 348 232
Federal income taxes receivable - 585
Prepaid expenses and other assets 195 219
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Total assets $ 226,182 $ 217,856
============= =============
LIABILITIES
Deposits $ 185,605 $ 174,328
FHLB Advances 2,000 2,000
Advances from borrowers for taxes and insurance 2,964 3,518
SAIF special assessment payable - 1,070
Federal income tax payable 360 -
Accrued expenses and other liabilities 1,272 1,150
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Total liabilities 192,201 182,066
DEFERRED INCOME
Gain on sale of real estate owned 236 359
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Common stock, $.01 par value, 25,000,000 shares
authorized; 2,674,668 and 2,664,265 shares
issued at 1997 and 1996, respectively 27 27
Additional paid-in capital 22,440 22,297
Retained earnings, substantially restricted 16,157 14,747
Less:
Treasury shares, at cost (184,600 shares) (2,674) -
Shares acquired by Employee Stock Ownership Plan (1,416) (1,528)
Shares acquired by Management Recognition Plan (725) (24)
Net of unrealized loss on decline in market value
of securities available for sale (64) (88)
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Total stockholders' equity 33,745 35,431
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Total liabilities and stockholders' equity $ 226,182 $ 217,856
============= =============
</TABLE>
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JACKSONVILLE BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(DOLLARS IN THOUSANDS)
UNAUDITED
<TABLE>
<CAPTION>
Nine Months Ended Three Months Ended
June 30, June 30,
--------------------- ----------------------
1997 1996 1997 1996
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
INTEREST INCOME
Loans receivable $ 10,516 $ 8,917 $ 3,817 $ 3,080
Mortgage-backed securities 791 454 278 200
Investment securities 1,305 1,682 442 584
Other 217 283 65 99
--------- --------- --------- ---------
Total interest income 12,829 11,336 4,602 3,963
INTEREST EXPENSE
Other 129 17 40 7
Deposits 6,429 6,310 2,193 2,079
--------- --------- --------- ---------
Total interest expense 6,558 6,327 2,233 2,086
--------- --------- --------- ---------
Net interest income 6,271 5,009 2,369 1,877
PROVISION FOR LOSSES ON LOANS 110 - 105 -
--------- --------- --------- ---------
Net interest income after
provision for losses on loans 6,161 5,009 2,264 1,877
NONINTEREST INCOME
Fees and deposit service charges 822 841 297 321
Real estate operations, net 139 78 43 56
Other 75 58 28 13
--------- --------- --------- ---------
Total noninterest income 1,036 977 368 390
NONINTEREST EXPENSE
Compensation and benefits 2,370 2,244 786 775
Occupancy and equipment 387 321 129 106
Insurance expense 179 336 42 113
Provisions for real estate
losses (89) - (89) -
Other 867 751 298 243
--------- --------- --------- ---------
Total noninterest expense 3,714 3,652 1,166 1,237
INCOME BEFORE TAXES ON INCOME 3,483 2,334 1,466 1,030
TAXES ON INCOME 1,171 825 492 373
--------- --------- --------- ---------
Net earnings $ 2,312 $ 1,509 $ 974 $ 657
========= ========= ========= =========
Earnings per share $ .95 $ .71 $ .41 $ .25
========= ========= ========= =========
</TABLE>
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JACKSONVILLE BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
FOR THE NINE MONTHS ENDED JUNE 30, 1997 AND 1996
(DOLLARS IN THOUSANDS)
UNAUDITED
<TABLE>
<CAPTION>
1997 1996
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 2,312 $ 1,509
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 167 171
Amortization/Accretion of securities 19 78
Provision for losses on loans and real estate 21 -
Loans originated for sale (14,290) (10,565)
Loans sold 14,290 10,565
Gain on sale of other real estate (117) (81)
Gain on loans sold (116) -
Accrual of MRP awards 136 73
Release of ESOP shares 182 106
Change in assets and liabilities:
Increase in accrued interest receivable (323) (304)
Decrease in prepaid expenses and other assets 25 36
Increase in federal income taxes receivable 945 162
Decrease in accrued expenses and other liabilities (949) (116)
Decrease in deferred income (123) (70)
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Net cash provided by operating activities 2,179 1,564
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds on maturity of investment securities 8,428 16,968
Purchase of investment securities (3,004) (12,477)
Net principal payments (origination) on loans (10,717) (18,243)
Proceeds from sale of foreclosed real estate 174 466
Purchase of mortgage-backed securities (4,983) (11,000)
Principal paydowns on mortgage-back securities 990 1,887
Capital expenditures (282) (372)
Purchase of stock in FHLB Dallas (77) (79)
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Net cash used in investing activities (9,471) (22,850)
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in deposits 11,278 560
Net decrease in advances for taxes and insurance (554) (823)
Proceeds from sale of common stock - 14,074
Dividends paid (903) (544)
Return of capital from MHC - 100
Advances from FHLB 5,000 4,000
Payment of FHLB Advances (5,000) -
Proceeds from exercise of stock options 73 -
Purchase of treasury stock (2,674) -
Purchase of MRP shares (836) -
Payment of ESOP loan - (358)
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Net cash provided by financing activities 6,384 17,009
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Net increase in cash and cash equivalents (908) (4,277)
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CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 5,193 8,051
---------- ----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 4,285 $ 3,741
========== ==========
</TABLE>
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JACKSONVILLE BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE NINE MONTHS ENDED JUNE 30, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
Total
Stockholders'
Equity
-------------
<S> <C>
Balance at September 30, 1996 $ 35,431
Net change in unrealized loss on securities 24
Accrual of MRP awards 136
Accrual of ESOP compensation 182
Cash dividends (903)
Net earnings 2,312
MRP awards (836)
Exercise of 10,403 option shares 73
Purchase of 184,600 treasury shares (2,674)
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Balance at June 30, 1997 $ 33,745
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</TABLE>
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JACKSONVILLE BANCORP, INC. AND SUBSIDIARIES
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 nine
and three month periods ended June 30, 1997 and 1996 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 (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" (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. (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.
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 1,045,996 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.
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JACKSONVILLE BANCORP, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED FINANCIAL STATEMENTS
CONTINUED
NOTE 3 - EARNINGS PER SHARE
Earnings per share for the nine and three month periods ended June 30,
1997 and 1996 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 the nine month period ended June 30, 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 of 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.
NOTE 6 - ALLOWANCE FOR LOAN LOSSES AND NON-PERFORMING ASSETS
Activity in the allowance for loan losses for the nine month periods
ended June 30, is summarized as follows:
<TABLE>
<CAPTION>
(Dollars in Thousands)
1997 1996
-------- --------
<S> <C> <C>
Balance at beginning of the period $ 1,100 $ 1,000
Provision charged to income 110 -
Charge-offs (17) -
Recoveries - -
-------- --------
Balance at end of period $ 1,193 $ 1,000
======== ========
</TABLE>
The following table sets forth the amounts and categories of
Jacksonville's non-performing assets at the dates indicated:
<TABLE>
<CAPTION>
(Dollars in Thousands)
June 30, September 30,
1997 1996
-------- --------
<S> <C> <C>
Non-accruing loans:
Single-family residential $ 390 $ 465
Multi-family residential - -
Commercial - -
Construction - -
Land 521 321
Commercial business - -
Consumer 6 29
-------- --------
Total non-accruing loans 917 815
Accruing loans 90 days or more
delinquent - -
-------- --------
Total non-performing loans 917 815
Real estate owned 462 1,051
-------- --------
Total non-performing assets $ 1,379 $ 1,866
======== ========
Total debt restructurings $ 385 $ 38
======== ========
</TABLE>
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JACKSONVILLE BANCORP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATION
Discussion of Changes in Financial Condition from September 30, 1996 to June
30, 1997.
At June 30, 1997, the assets of Jacksonville Bancorp, Inc., (the "Company")
totaled $226.2 million, which represents an increase of $ 8.3 million from the
$217.9 million held on September 30,1996.
Investments in interest-bearing deposits increased by $294,000 to $2.7
million at June 30, 1997 due primarily to the decision by management to use the
Federal Home Loan Bank as its depository institution for its branch operations
rather than to use local banks at each location.
Investment securities, held-to-maturity and available-for-sale, decreased
by $4.5 million and $939,000, to $22.0 million and $6.4 million, respectively,
at June 30, 1997. These decreases were primarily due to maturities of
investment securities with the proceeds used for funding of loans, meeting
withdrawal demands, and purchasing of adjustable rate mortgage-backed
securities.
Mortgage-backed securities, held-to-maturity, decreased by $1.2 million
from September 30, 1996 to June 30, 1997 due to principal reduction of the
securities. Mortgage-backed securities, available-for-sale, increased by $5.2
million during the same period primarily from management's decision to purchase
adjustable rate mortgage-backed products rather than investing in lower
yielding Treasury and Agency securities.
Loans receivable, net increased during the period by $11.2 million to
$169.3 million at June 30, 1997. This increase was primarily due to the
decision to continue to hold most of its 15 year fixed rate loans in lieu of
selling them on the secondary market.
Accrued interest receivable increased from $1.63 million at September 30,
1996 to $1.96 million at June 30, 1997. This increase was primarily due to an
increased loan portfolio. Additionally, Jacksonville Savings and Loan
Association (the "Association") recorded at June 30, 1997, a one-time
adjustment to increase accrued interest receivable by $285,000 and to increase
interest income by a like amount in order to comply with Federal Home Loan
Mortgage Corporation (FHLMC) servicing requirements for accrual/payment of
interest on serviced loans.
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Foreclosed real estate, net declined from $1.1 million at September 30,
1996, to $462,000 at June 30, 1997. This decline was primarily due to the
Company's continued effort to dispose of real estate owned, and the
reclassification of a commercial loan, previously carried as in-substance
foreclosure at September 30, 1996.
Premises and equipment, net increased by $115,000 from $3.26 million at
September 30, 1996 to $3.37 million at June 30, 1997. This increase was
primarily due to the completion and furnishing of the Palestine Branch Annex.
Mortgage servicing rights increased from $232,000 at September 30, 1996 to
$348,000 at June 30, 1997. This is a result of management's decision to
continue to sell its 30-year product to the FHLMC and retain servicing on these
loans.
Deposits for the six month period increased by $11.3 million from the total
at September 30, 1996 of $174.3 million to a total of $185.6 million at June
30, 1997. These numbers reflect an increase in new deposits as well as
compounded interest on existing accounts.
Federal Home Loan Bank advances remained at $2 million on June 30, 1997,
the same amount that was due to the Bank on September 30, 1996. During the
nine month period the Company borrowed an additional $5 million on a short-term
basis. This amount was paid off before June 30, 1997.
Advances from borrowers for taxes and insurance decreased from $3.5 million
at September 30, 1996 to $3.0 million at June 30, 1997. This decrease was
primarily due to the payment of real estate taxes which typically takes place
in the last quarter of each calendar year.
The SAIF special assessment payable, reported at September 30, 1996 in the
amount of $1.07 million, was paid during the first quarter of the fiscal year.
Federal income taxes payable at June 30, 1997 was $360,000 compared to a
receivable of $585,000 at September 30, 1996. This change of $945,000 was due
primarily to timing of tax payments and an approximate tax savings of $360,000
associated with the Savings Association Insurance Fund (SAIF) special
assessment recorded at September 30, 1996. The Internal Revenue Service
recently completed an audit of the Association's federal income tax returns for
years 1993, 1994, and 1995 with no substantial changes.
Accrued expenses and other liabilities increased from $1.15 million at
September 30,1996 to $1.27 million at June 30, 1997. This $150,000 increase
was primarily due
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to the establishment of a $231,000 accounts payable for the payment of accrued
interest on loans sold to FHLMC, and the increase in deferred compensation
expense of $68,000. These were partially offset by a $53,000 reduction in the
reserve for employee bonuses which were paid in the last calendar quarter; a
$56,000 reduction in employee pension trust; a $19,000 reduction in dividend
payable; and a $17,000 reduction in audit and exam fees payable.
Deferred Income, gain on sale of real estate owned, declined from $359,000
at September 30, 1996 to $236,000 at June 30, 1997. This decrease was
primarily the result of the recognition of deferred profits from the sale of
real estate owned as payments were received on the related loans.
Stockholder's equity decreased during the period by $1.7 million from $35.4
million at September 30, 1996 to $33.7 million at June 30, 1997. Paid-in
capital increased by $143,000 during the period as the result of the exercise
of 10,403 option shares at an exercised price of $73,000, and the recognition
of the difference in the current market price and cost of the Employee Stock
Ownership Plan shares released during the period amounting to $70,000.
Retained earnings increased by $1.4 million as a result of net income for the
period after dividends. Treasury shares increased by $2.7 million during the
period as a result of the repurchase of 184,600 shares during the period.
Shares acquired by the Employee Stock Ownership Plan deceased by $112,000 due
to the principal payments made on the Employee Stock Ownership Plan Trust loans
during the period. Shares acquired by the Management Recognition Plan
increased by $701,000 during the period due to the purchase of 64,736 shares by
the 1996 management Recognition Plan Trust at a cost of $836,000 and the
accrual of $135,000 in Management Recognition Plan awards. Net unrealized
losses on securities available-for-sale reduced by $24,000 during the period
based on market values at June 30, 1997.
Comparison of Operating Results for the three and nine months ended June 30,
1997 and 1996.
Net Income for the three months ended June 30, 1997, totaled $974,000 as
compared to $657,000 for the three months ended June 30, 1996. The increase of
$317,000 was the result of the combined affect of an increase in total
interest income of $639,000; an increase of $147,000 in total interest expense;
a decrease in non-interest income of $22,000; a decrease of $71,000 in
non-interest expense; and an increase of $119,000 in federal income taxes. Net
income for the nine months ended June 30, 1997 was $2.31 million compared to
$1.5 million for the same period in 1996. The increase of $803,000 was
primarily due to an increase in net interest income after provisions for loan
losses of $1.15 million, and an increase of $59,000 in total non-interest
income, offset by an increase of $62,000 in total non-interest expense, and an
increase in federal income taxes of $346,000.
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Net Interest Income
The Company's net interest income before provisions for loan losses was
$2.37 million for the three months ended June 30, 1997. This amount represents
an increase of $492,000 from the $1.88 million of net interest income before
provisions for loan losses for the three month period ended June 30, 1996.
For the nine months ended June 30, 1997, net interest income before
provision for loan losses increased by $1.26 million to $6.3 million from the
comparable period ended June 30, 1996. The increases for the three months and
nine months ended June 30, 1997 were primarily due to an increase in interest
income and as previously mentioned, accrued interest receivable includes
$285,000 in interest income related to a one-time adjustment in net accrued
interest on loans serviced for FHLMC. During the same periods, interest
expense increased by $147,000 and $231,000, respectively.
Provisions for Losses on Loans
The provisions for losses on loans are the result of management's decision
to have adequate reserves based on historical experience, industry standards,
the amount of non-performing assets, general economic conditions in the
Company's market area, and the collectablility of the loan portfolio. Based on
these factors, the loan loss provision was $110,000 for the nine months ended
June 30, 1997. For the three month period the provision was $105,000. No
provisions had been made during the comparable prior periods.
Non Interest Income
Non interest income consists primarily of fees collected on mortgage loans,
service charges on deposit accounts and income from real estate operations.
This income decreased by $22,000 for the three month period ended June 30,
1997, as compared to the three month period ended June 30, 1996, amounting to
$368,000 and $390,000 for the respective periods. This decrease was due
primarily to a reduction in fees and deposit service charges of $24,000, and a
$13,000 decrease in income from real estate operations, net. The decrease was
partially offset by an increase of $15,000 in other non interest income.
For the nine months ended June 30, 1997, non interest income increased by
$59,000 from $977,000 to $1.04 million, primarily due to a $61,000 increase in
income from real estate operations, net.
Non-Interest Expenses
For the three months ended June 30, 1997, non-interest expense decreased by
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$71,000 when compared with the comparable period ended June 30, 1996. The
decrease consisted primarily of a reduction in insurance expense of $71,000,
representing the lowered rates on insurance of accounts after the special
assessment paid to the Federal Deposit Insurance Corporation, and a credit to
the provision for losses on real estate of $89,000. These decreases were
offset by an aggregate increase of $89,000 in compensation and benefits,
occupancy and equipment, and other non-interest expenses.
Non interest expense increased by $62,000 for the nine month period ended
June 30, 1997, to $3.7 million. This $126,000 increase was primarily due to an
increase in compensation and benefits due to the funding of the 1996
Management Recognition Plan and Employee Stock Ownership Plan benefits, as
well as an increase in the accrual for deferred compensation for benefits
awarded to three officers. Also contributing to the increase were a $66,000
increase in occupancy and equipment, an a $116,000 increase in other non
interest expense. These increases were partially offset by a reduction in
insurance expense of $157,000 and a credit to the provision for losses on real
estate of $89,000.
Taxes
The provision for income tax amounted to $492,000 and $1.17 million for the
three and nine months ended June 30, 1997, respectively, compared to $373,000
and $825,000 during the three and nine months ended June 30, 1996,
respectively. The higher provisions for income tax were due to the increase in
earnings for the periods.
Liquidity
The OTS regulations require the Association to maintain an average daily
balance of liquid assets (cash, certain time deposits, banker's acceptances and
specified United States Government, state or federal obligations) equal to a
monthly average of not less than 5% of its net withdrawable deposits plus
short-term borrowings. For the month ended June 30, 1997, the Association's
average liquidity position was $27.3 million or 14.6% compared to $36.7 million
or 20.1% at September 30, 1996.
Regulatory Capital Requirements
The Association is required to maintain specific amounts of capital
pursuant to OTS regulations. Under these standards, savings associations must
maintain "tangible" capital equal to at least 1.5% of adjusted total assets;
"core" capital equal to at least 3% of adjusted total assets; and "total"
capital (a combination of "core" and "supplementary" capital) equal to at least
8% of "risk-weighted" assets. At June 30, 1997, the Association's tangible,
core, and total capital were 13.77%, 13.77%, and 27.90%, respectively. All
three capital figures exceeded the applicable
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requirements.
Recent Developments
On April 24, 1997 O.T.S. approved the Company's request for permission to
repurchase an additional 5% of its stock amounting to 127,073 shares. These
shares are being purchased at the prevailing market price from time-to-time
over a six month period depending on market conditions. At June 30, 1997 a
total of 51,400 shares had been purchased of the second repurchase approval.
Due to the success of adding a consumer loan department to the Palestine
facility, it is the intention of management to open a consumer loan department
in the Tyler branch in the near future.
On July 2, 1997 the Association consummated its conversion to a
state-chartered savings bank, Jacksonville Savings Bank, ("SSB"). The main
purpose of the conversion was to reduce the duplication associated with meeting
the regulatory requirements of three regulators. With the conversion to a
state savings bank, SSB will be regulated by the Texas Savings and Loan
Department and its primary federal regulator and the insurer of its deposits
will be the FDIC. Prior to the conversion the Association's primary federal
regulator had been the Office of Thrift Supervision.
In a related matter, the Company entered an agreement with Jacksonville
IHC, Inc. ("IHC"), a subsidiary of the Company, a Delaware corporation, whereby
the Company will transfer its entire interest in SSB to IHC. As a result of
the transfer, SSB will become a direct subsidiary of IHC and will thereby
enjoy greater operating flexibility in a Delaware holding Company structure
than presently enjoyed through the Company. It is further expected that the
transfer will reduce future corporate taxes paid by the Company.
14
<PAGE> 15
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
Not Applicable
ITEM 5. OTHER INFORMATION
Not Applicable
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
8K dated April 25, 1997 - OTS Approval to Repurchase Shares
8K dated May 5, 1997 - Declaration of Quarterly Earnings
8K dated June 10, 1997- Declaration of Dividends
8K dated July 2, 1997- Charter Conversion to State Savings Bank
15
<PAGE> 16
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: 8-5-97 By: Jerry Chancellor
---------------------------- --------------------------------
Jerry Chancellor
President
DATE: 8-5-97 By: Bill W. Taylor
---------------------------- --------------------------------
Bill W. Taylor
Exec. Vice President and
Chief Financial Officer
16
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