================================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE QUARTER ENDED JUNE 30, 1997
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
------------------------
COMMISSION FILE NUMBER: 000-22007
------------------------
SOUTHWEST BANCORPORATION OF TEXAS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
TEXAS 76-0519693
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
4400 POST OAK PARKWAY
HOUSTON, TEXAS 77027
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES, INCLUDING ZIP CODE)
(713) 235-8800
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
------------------------
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 [ ]
------------------------
There were 9,414,033 shares of the Registrant's Common Stock outstanding as
of the close of business on June 30, 1997.
================================================================================
<PAGE>
SOUTHWEST BANCORPORATION OF TEXAS, INC. AND SUBSIDIARIES
INDEX TO FORM 10-Q
PAGE
----
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Report of Independent Accountants .................................... .. 2
Consolidated Balance Sheet as of June 30, 1997 and December 31, 1996 ... 3
Consolidated Statement of Income for the quarters ended June 30,
1997 and 1996 and for the six months ended June 30, 1997 and 1996 ..... 4
Consolidated Statement of Changes in Shareholders' Equity for the
year ended December 31, 1996, and for the six months ended
June 30, 1997 ......................................................... 5
Consolidated Statement of Cash Flows for the six months ended
June 30, 1997 and 1996 ................................................ 6
Notes to Consolidated Financial Statements ............................. 7
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.......................................... 8
PART II. OTHER INFORMATION
Item 1. Legal Proceedings............................................... N/A
Item 2. Changes in Securities........................................... N/A
Item 3. Default upon Senior Securities.................................. N/A
Item 4. Submission of Matters to a Vote of Security Holders............. 18
Item 5. Other Information............................................... N/A
Item 6. Exhibits and Reports on Form 8-K................................ 18
Signatures............................................................... 19
1
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
REPORT OF INDEPENDENT ACCOUNTANTS
Board of Directors
Southwest Bancorporation of Texas, Inc.:
We have reviewed the accompanying consolidated balance sheet of Southwest
Bancorporation of Texas, Inc. and Subsidiaries (the "Company") as of June 30,
1997, the related consolidated statements of income for the three- and six-month
period ended June 30, 1997, and the consolidated statements of changes in
shareholders' equity and cash flows for the six-month periods ended June 30,
1997. These financial statements are the responsibility of the Company's
management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures to
financial data and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted in
accordance with generally accepted auditing standards, the objective of which is
the expression of an opinion regarding the financial statements taken as a
whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that
should be made to the aforementioned financial statements for them to be in
conformity with generally accepted accounting principles. We have not reviewed
the accompanying consolidated statements of income for the three- and six-month
periods ended June 30, 1996 and the consolidated statement of cash flows for the
six-month period ended June 30, 1996. Accordingly, we do not express an opinion
or any form of assurance on such financial statements.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet as of December 31, 1996, and the
related consolidated statements of income, changes in shareholders' equity, and
cash flows for the year then ended (the consolidated statements of income and
cash flows are not presented herein) and, in our report dated January 31, 1997,
we expressed an unqualified opinion on those consolidated financial statements.
In our opinion, the information set forth in the accompanying consolidated
balance sheet as of December 31, 1996 and the consolidated statement of changes
in shareholders' equity for the year then ended, are fairly stated, in all
material respects, in relation to the consolidated financial statements from
which they have been derived.
COOPERS & LYBRAND L.L.P.
Houston, Texas
August 5, 1997
2
<PAGE>
SOUTHWEST BANCORPORATION OF TEXAS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
(UNAUDITED)
JUNE 30, DECEMBER 31,
1997 1996
------------ ------------
(UNAUDITED)
ASSETS
Cash and due from banks.............. $ 85,966 $ 79,734
Federal funds sold and other......... 104,480 62,954
------------ ------------
Total cash and cash
equivalents............ 190,446 142,688
Securities -- available for sale..... 336,210 289,217
Loans receivable, net................ 700,213 595,451
Premises and equipment, net.......... 9,659 7,959
Accrued interest receivable.......... 8,494 6,803
Prepaid expenses and other assets.... 2,513 2,381
------------ ------------
Total assets............... $ 1,247,535 $1,044,499
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Noninterest-bearing............. $ 303,010 $ 308,438
Money market and savings
accounts....................... 455,190 368,486
Time, $100 and over............. 180,562 104,007
Other time...................... 56,032 52,638
------------ ------------
Total deposits............. 994,794 833,569
Securities sold under repurchase
agreements......................... 114,951 136,119
Other short-term borrowings.......... 45,413 10,027
Accrued interest payable............. 636 608
Other liabilities.................... 7,783 2,184
------------ ------------
Total liabilities.......... 1,163,577 982,507
------------ ------------
Commitments and contingencies
Bank preferred stock................. -- 7,323
------------ ------------
Shareholders' equity:
Common stock -- $1 par value,
50,000,000 shares authorized;
9,414,033 and 7,734,961 shares
issued and outstanding at
June 30, 1997 and December 31,
1996, respectively............. 9,414 7,734
Additional paid-in capital...... 38,202 18,030
Retained earnings............... 35,667 28,730
Net unrealized appreciation on
securities available for sale,
net of deferred taxes of $364
and $94 at June 30, 1997 and
December 31, 1996,
respectively................... 675 175
------------ ------------
Total shareholders'
equity................. 83,958 54,669
------------ ------------
Total liabilities and
shareholders' equity... $ 1,247,535 $1,044,499
============ ============
The accompanying notes are an integral part of the consolidated financial
statements.
3
<PAGE>
SOUTHWEST BANCORPORATION OF TEXAS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
-------------------- --------------------
1997 1996 1997 1996
--------- --------- --------- ---------
Interest income:
Loans.......................... $ 15,493 $ 10,455 29,083 20,640
Securities..................... 5,177 4,561 9,595 9,190
Federal funds sold and other... 585 147 937 322
--------- --------- --------- ---------
Total interest income..... 21,255 15,163 39,615 30,152
Interest expense on deposits and
other borrowings.................. 8,959 6,550 16,820 12,989
--------- --------- --------- ---------
Net interest income....... 12,296 8,613 22,795 17,163
Provision for loan losses........... 900 280 1,338 560
--------- --------- --------- ---------
Net interest income after
provision for loan
losses................. 11,396 8,333 21,457 16,603
--------- --------- --------- ---------
Other income:
Service charges................ 1,013 707 1,940 1,368
Other operating income......... 863 531 1,628 935
Gain on sale of securities,
net.......................... 378 22 515 22
--------- --------- --------- ---------
Total other income........ 2,254 1,260 4,083 2,325
--------- --------- --------- ---------
Other expenses:
Salaries and employee
benefits..................... 4,460 3,303 8,664 6,504
Occupancy expense.............. 1,256 852 2,475 1,656
Other operating expenses....... 2,004 1,482 3,671 2,872
--------- --------- --------- ---------
Total other expenses...... 7,720 5,637 14,810 11,032
--------- --------- --------- ---------
Income before income
taxes.................. 5,930 3,956 10,730 7,896
Provision for income taxes.......... (2,076) (1,385) (3,757) (2,764)
--------- --------- --------- ---------
Net income before bank
preferred stock
dividend............... 3,854 2,571 6,973 5,132
Bank preferred stock dividend....... -- 111 36 226
--------- --------- --------- ---------
Net income available for
common shareholders.... $ 3,854 $ 2,460 $ 6,937 $ 4,906
========= ========= ========= =========
Earnings per common
share.................. $ 0.39 $ 0.29 $ 0.71 $ 0.58
========= ========= ========= =========
The accompanying notes are an integral part of the consolidated financial
statements.
4
<PAGE>
SOUTHWEST BANCORPORATION OF TEXAS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
NET UNREALIZED
APPRECIATION
(DEPRECIATION)
COMMON STOCK ADDITIONAL ON SECURITIES TOTAL
------------------------- PAID-IN RETAINED AVAILABLE SHAREHOLDERS'
SHARES DOLLARS CAPITAL EARNINGS FOR SALE EQUITY
---------- ---------- ---------- ---------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1995 ................ 7,717,580 $ 7,717 $ 17,745 $ 19,142 $ 222 $ 44,826
Issuance of common stock to
benefit plan ....................... 17,435 17 151 168
Liquidation of partial shares ........ (54) -- (1) -- -- (1)
Deferred compensation
amortization ....................... -- -- 135 -- -- 135
Net change in unrealized
appreciation on securities
available for sale, net of
deferred taxes of $25 .............. -- -- -- -- (47) (47)
Cash dividends on preferred
stock ($.61 per share) ............. -- -- -- (457) -- (457)
Net income for the year ended
December 31, 1996 .................. -- -- -- 10,045 -- 10,045
---------- ---------- ---------- ---------- ---------- ----------
BALANCE, DECEMBER 31, 1996 ................ 7,734,961 7,734 18,030 28,730 175 54,669
Issuance of common stock to
benefit plan ....................... 2,520 3 33 -- -- 36
Exercise of stock options ............ 354,052 354 1,776 -- -- 2,130
Proceeds of public offering .......... 1,322,500 1,323 18,487 -- -- 19,810
Redemption of Bank preferred
stock .............................. -- -- (177) -- -- (177)
Deferred compensation
amortization ....................... -- -- 53 -- -- 53
Net change in unrealized
appreciation on securities
available for sale, net of
deferred taxes of $269 ............. -- -- -- -- 500 500
Cash dividends on preferred
stock ($.05 per share) ............. -- -- -- (36) -- (36)
Net income for the six months
ended June 30, 1997 ................ -- -- -- 6,973 -- 6,973
---------- ---------- ---------- ---------- ---------- ----------
BALANCE, JUNE 30, 1997 .................... 9,414,033 $ 9,414 $ 38,202 $ 35,667 $ 675 $ 83,958
========== ========== ========== ========== ========== ==========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
5
<PAGE>
SOUTHWEST BANCORPORATION OF TEXAS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
SIX MONTHS ENDED JUNE 30,
-------------------------
1997 1996
------------ -----------
Cash flows from operating activities:
Net income...................... $ 6,973 $ 5,132
Adjustments to reconcile net
income to net cash provided by
operating activities:
Provision for loan
losses.................. 1,338 560
Depreciation............... 1,417 982
Compensation expense....... 36 79
Deferred compensation
amortization............ 53 67
Realized gains on
securities available for
sale.................... (515) (22)
Net amortization of
premiums and
discounts............... 635 552
Dividends on Federal Home
Loan Bank stock......... (1,146) (1,116)
Increase in accrued
interest receivable,
prepaid expenses and
other assets............ (2,091) (606)
Decrease (increase) in
accrued interest payable
and other liabilities... 7,507 (59)
------------ ----------
Net cash provided by
operating
activities......... 14,207 5,569
------------ ----------
Cash flows from investing activities:
Proceeds from maturity of
securities available for
sale........................... 12,000 23,438
Principal paydowns of
mortgage-backed securities
available for sale............. 18,597 28,512
Proceeds from sale of securities
available for sale............. 60,828 20,792
Purchase of securities available
for sale....................... (136,622) (78,944)
Proceeds from sale of other real
estate and other loan related
assets......................... 27 10
Net increase in loans
receivable..................... (106,101) (52,336)
Purchase of premises and
equipment...................... (3,117) (1,081)
------------ ----------
Net cash used in
investing
activities......... (154,388) (59,609)
------------ ----------
Cash flows from financing activities:
Net (decrease) increase in
noninterest-bearing deposits... (5,428) 1,247
Net increase in time deposits... 79,949 9,042
Net increase (decrease) in other
interest-bearing deposits...... 86,704 (11,832)
Net decrease in securities sold
under repurchase agreements.... (21,168) (20,827)
Net increase in other short-term
borrowings..................... 35,386 53,039
Net proceeds from initial public
offering of common stock....... 19,810 --
Net proceeds from exercise of
stock options.................. 338 --
Retirement of Bank preferred
stock.......................... (7,500) --
Payment of dividends on Bank
preferred stock................ (152) (226)
------------ ----------
Net cash provided by
financing
activities......... 187,939 30,443
------------ ----------
Net increase (decrease) in cash and
cash equivalents................... 47,758 (23,597)
Cash and cash equivalents at
beginning of period................ 142,688 81,195
------------ ----------
Cash and cash equivalents at end of
period............................. $ 190,446 $ 57,598
============ ==========
The accompanying notes are an integral part of the consolidated financial
statements.
6
<PAGE>
SOUTHWEST BANCORPORATION OF TEXAS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. BASIS OF PRESENTATION
The consolidated financial statements include the accounts of Southwest
Bancorporation of Texas, Inc. (the "Company") and its wholly-owned subsidiary
Southwest Bank of Texas National Association (the "Bank"). All material
intercompany accounts and transactions have been eliminated. In the opinion of
management, the unaudited consolidated financial statements reflect all
adjustments, consisting only of normal and recurring adjustments, necessary to
present fairly the Company's consolidated financial position at June 30, 1997,
the consolidated results of operations for the three-month and six-month periods
ended June 30, 1997 and 1996, and the consolidated cash flows for the six-month
periods ended June 30, 1997 and 1996. Interim period results are not necessarily
indicative of results of operations or cash flows for a full-year period.
These financial statements and the notes thereto should be read in
conjunction with the Company's annual report on Form 10-K for the year ended
December 31, 1996. The 1996 year-end consolidated balance sheet and statement of
changes in shareholders' equity data were derived from audited financial
statements, but do not include all disclosures required by generally accepted
accounting principles.
2. SHAREHOLDERS' EQUITY
In January 1997, the Company completed an initial public offering ("IPO")
of its common stock. A total of 1,322,500 shares of common stock were sold by
the Company at $16.50 per share yielding net proceeds of $19.8 million, after
deducting underwriting discount and other expenses. Substantially all of the net
proceeds from the IPO were contributed to the Bank. Approximately $7.5 million
was used to redeem the 750,000 outstanding shares of the Bank's preferred stock,
and the balance was used for general corporate purposes.
3. EARNINGS PER COMMON SHARE:
Earnings per common share is computed as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
-------------------------- --------------------------
1997 1996 1997 1996
------------ ------------ ------------ ------------
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
Net income available for common
shareholders....................... $ 3,854 $ 2,460 $ 6,937 $ 4,906
============ ============ ============ ============
Divided by average common shares
and common share equivalents:
Average common shares........... 9,406,276 7,723,646 9,115,273 7,721,028
Average common share
equivalents................... 574,574 786,908 610,216 778,123
------------ ------------ ------------ ------------
Total average common shares and
common share equivalents........... 9,980,850 8,510,554 9,725,489 8,499,151
============ ============ ============ ============
Earnings per common share............ $ 0.39 $ 0.29 $ 0.71 $ 0.58
============ ============ ============ ============
</TABLE>
4. SUPPLEMENTAL NONCASH FINANCING ACTIVITIES:
During the six months ended June 30, 1997, the Company reduced its federal
income tax liability by approximately $2.0 million and recorded a corresponding
increase to additional paid-in capital representing the tax benefit related to
the exercise of certain stock options.
7
<PAGE>
5. SUBSEQUENT EVENT:
Effective August 1, 1997, the Company and the Bank consummated their merger
with Pinemont Bank, whereby Pinemont Bank was merged into the Bank. In
accordance with the Agreement and Plan of Merger, the Company exchanged 0.625 of
a share of the Company's common shares for each share of Pinemont Bank stock,
resulting in the issuance of 1,668,750 shares of the Company's common shares. At
June 30, 1997, Pinemont Bank had total assets of approximately $240 million and
total deposits of $219 million. Net interest income and net income of Pinemont
Bank were $5.9 million and $1.3 million respectively, for the six months ended
June 30, 1997. The transaction was accounted for as a pooling of interests.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
OVERVIEW
Total assets at June 30, 1997 and December 31, 1996 were $1.25 billion, and
$1.04 billion, respectively. Loans were $707.0 million at June 30, 1997, an
increase of $105.6 million or 17.6% from $601.4 million at December 31, 1996.
This growth was a result of a strong local economy, and the Company's style of
relationship banking. Deposits experienced similar growth, increasing to $994.8
million at June 30, 1997 from $833.6 million at December 31, 1996. Shareholders'
equity was $84.0 million and $54.7 million at June 30, 1997 and December 31,
1996, respectively. This increase was primarily due to the Company's recently
completed initial public offering ("IPO") of its common stock. A total of
1,322,500 shares of common stock were sold by the Company at $16.50 per share,
yielding net proceeds of $19.8 million after deducting underwriting discount and
other expenses. Substantially all of the net proceeds from the IPO were
contributed to the Bank. Approximately $7.5 million was used to redeem the
750,000 outstanding shares of the Bank's preferred stock and the balance was
used for general corporate purposes.
The Company reported net income of $3.9 million for the three months ended
June 30, 1997, a 56.0% increase over the $2.5 million earned in the second
quarter of 1996.
For the six months ended June 30, 1997, net income was $6.9 million, or
$0.71 cents per fully diluted common share, an increase of 40.8% and 22.4%,
respectively, over the $4.9 million or $0.58 cents per fully diluted common
share earned in the first six months of 1996. Return on common average equity
was 19.24% and return on average assets was 1.37% for the first six months of
1997, compared with 20.67% and 1.18% for the same period a year ago.
RESULTS OF OPERATIONS
NET INTEREST INCOME
Net interest income was $12.3 million for the three months ended June 30,
1997, compared with $8.6 million for the three months ended June 30, 1996, an
increase of 43.0%. For the six months ended June 30, 1997, net interest income
increased 32.6% from the same period in 1996 to $22.8 million. The increase in
net interest income over the three- and six-months ended June 30, 1996 was
primarily due to growth in average interest-earning assets, principally loans.
The net interest margin was 4.66% for the three months ended June 30, 1997,
compared with 4.44% in the second quarter of 1996. The net interest margin was
4.62% for the six months ended June 30, 1997, up from 4.48% for the first six
months of 1996.
8
<PAGE>
The following tables present for the periods indicated the total dollar
amount of interest income from average interest-earning assets and the resultant
yields, as well as the interest expense on average interest-bearing liabilities,
expressed both in dollars and rates. No tax equivalent adjustments were made and
all average balances are daily average balances. Nonaccruing loans have been
included in the tables as loans carrying a zero yield.
<TABLE>
<CAPTION>
THREE MONTHS ENDED THREE MONTHS ENDED
JUNE 30, 1997 JUNE 30, 1996
--------------------------------- ---------------------------------
AVERAGE INTEREST AVERAGE AVERAGE INTEREST AVERAGE
OUTSTANDING EARNED/ YIELD/ OUTSTANDING EARNED/ YIELD/
BALANCE PAID RATE BALANCE PAID RATE
----------- ------- ------- ----------- ------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Interest-earning assets:
Loans.............................. $ 686,823 $15,493 9.05% $ 459,921 $10,455 9.14%
Securities......................... 328,267 5,177 6.33 309,775 4,561 5.92
Federal funds sold and other....... 44,230 585 5.31 10,496 147 5.63
----------- ------- ------- ----------- ------- -------
Total interest-earning
assets..................... 1,059,320 21,255 8.05% 780,192 15,163 7.82%
------- ------- ------- -------
Less allowance for loan losses.......... (6,665) (5,338)
----------- -----------
Total earning assets, net of
allowance............................. 1,052,655 774,854
Nonearning assets....................... 74,530 60,801
----------- -----------
Total assets.................. $ 1,127,185 $ 835,655
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest-bearing liabilities:
Money market and savings
deposits......................... $ 462,070 4,912 4.26% $ 336,680 3,407 4.07%
Certificates of deposits........... 165,944 2,231 5.39 138,935 1,838 5.32
Repurchase agreements and borrowed
funds............................ 142,312 1,816 5.12 106,998 1,305 4.91
----------- ------- ------- ----------- ------- -------
Total interest-bearing
liabilities................ 770,326 8,959 4.66% 582,613 6,550 4.52%
------- ------- ------- -------
Noninterest-bearing liabilities:
Noninterest-bearing deposits....... 271,655 193,695
Other liabilities.................. 5,031 4,292
----------- -----------
Total liabilities............. 1,047,012 780,600
Bank preferred stock.................... -- 7,323
Shareholders' equity.................... 80,173 47,732
----------- -----------
Total liabilities and
shareholders' equity....... $ 1,127,185 $ 835,655
=========== ===========
Net interest income..................... $12,296 $ 8,613
======= =======
Net interest spread..................... 3.39% 3.30%
======= =======
Net interest margin..................... 4.66% 4.44%
======= =======
</TABLE>
9
<PAGE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED SIX MONTHS ENDED
JUNE 30, 1997 JUNE 30, 1996
--------------------------------- ---------------------------------
AVERAGE INTEREST AVERAGE AVERAGE INTEREST AVERAGE
OUTSTANDING EARNED/ YIELD/ OUTSTANDING EARNED/ YIELD/
BALANCE PAID RATE BALANCE PAID RATE
----------- ------- ------- ----------- ------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Interest-earning assets:
Loans.............................. $ 650,623 $29,083 9.01% $ 449,705 $20,640 9.23%
Securities......................... 309,504 9,595 6.25 308,493 9,190 5.99
Federal funds sold & other......... 35,099 937 5.38 11,500 322 5.63
----------- ------- ------- ----------- ------- -------
Total interest-earning
assets..................... 995,226 39,615 8.03% 769,698 30,152 7.88%
------- ------- ------- -------
Less allowance for loan losses.......... (6,456) (5,201)
----------- -----------
Total earning assets, net of
allowance............................. 988,770 764,497
Nonearning assets....................... 83,463 60,108
----------- -----------
Total assets.................. $ 1,072,233 $ 824,605
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest-bearing liabilities:
Money market and savings
deposits......................... $ 428,827 9,005 4.23% $ 336,170 6,813 4.07%
Certificates of deposits........... 160,182 4,287 5.40 135,879 3,608 5.34
Repurchase agreements and borrowed
funds............................ 142,759 3,528 4.98 104,488 2,568 4.94
----------- ------- ------- ----------- ------- -------
Total interest-bearing
liabilities................ 731,768 16,820 4.63% 576,537 12,989 4.53%
------- ------- ------- -------
Noninterest-bearing liabilities:
Noninterest-bearing deposits....... 259,596 189,278
Other liabilities.................. 4,281 4,462
----------- -----------
Total liabilities............. 995,645 770,277
Bank preferred stock.................... 1,214 7,500
Shareholders' equity.................... 75,374 46,828
----------- -----------
Total liabilities and
shareholders' equity....... $ 1,072,233 $ 824,605
=========== ===========
Net interest income..................... $22,795 $17,163
======= =======
Net interest spread..................... 3.40% 3.35%
======= =======
Net interest margin..................... 4.62% 4.48%
======= =======
</TABLE>
10
<PAGE>
The following table presents the dollar amount of changes in interest
income and interest expense for the major components of interest-earning assets
and interest-bearing liabilities and distinguishes between the increase
(decrease) related to outstanding balances and the volatility of interest rates.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
THREE MONTHS ENDED JUNE 30, JUNE 30,
------------------------------- ------------------------------------------
1997 VS. 1996 1997 VS. 1996
------------------------------- ------------------------------------------
INCREASE (DECREASE) INCREASE (DECREASE)
DUE TO DUE TO
------------------------------- ------------------------------------------
VOLUME RATE TOTAL VOLUME RATE DAYS TOTAL
--------- --------- --------- --------- --------- --------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
INTEREST-EARNING ASSETS:
Loans................................... $ 5,201 $ (163) $ 5,038 $ 9,252 $ (696) $ (113) $ 8,443
Securities.............................. 286 330 616 (1,292) 1,747 (50) 405
Federal funds sold and other............ 474 (36) 438 1,558 (941) (2) 615
--------- --------- --------- --------- --------- --------- ---------
Total increase (decrease) in
interest income.................. 5,961 131 6,092 9,518 110 (165) 9,463
--------- --------- --------- --------- --------- --------- ---------
INTEREST-BEARING LIABILITIES:
Money market and savings deposits....... 1,282 223 1,505 1,890 339 (37) 2,192
Certificates of deposits................ 363 30 393 654 45 (20) 679
Repurchase agreements and borrowed
funds................................. 435 76 511 945 29 (14) 960
--------- --------- --------- --------- --------- --------- ---------
Total increase (decrease) in
interest expense................. 2,080 329 2,409 3,489 413 (71) 3,831
--------- --------- --------- --------- --------- --------- ---------
Increase (decrease) in net interest
income................................ $ 3,881 $ (198) $ 3,683 $ 6,029 $ (303) $ (94) $ 5,632
========= ========= ========= ========= ========= ========= =========
</TABLE>
PROVISION FOR LOAN LOSSES
The provision for loan losses was $900,000 for the three months ended June
30, 1997 as compared to $280,000 for the three months ended June 30, 1996. The
provision for loan losses was $1.3 million for the six months ended June 30,
1997 as compared to $560,000 for the six months ended June 30, 1996, an increase
of 138.9%. This increase in the provision is directly related to loan growth.
The increase in the provision for loan losses was due to the increased loan
balances which averaged $687 million for the three months ended June 30, 1997
compared to $460 million for the comparable period in 1996, and management's
increase of the allowance to attain a loan loss allowance of 1%. Although no
assurance can be given, management believes that the present allowance for loan
losses is adequate considering loss experience, delinquency trends and current
economic conditions. Management will continue to review its loan loss provision
as the Company's loan portfolio grows and diversifies.
11
<PAGE>
NONINTEREST INCOME
Noninterest income for the three months ended June 30, 1997 was $2.3
million, an increase of $994,000 or 78.9% over the same period in 1996.
Noninterest income for the six months ended June 30, 1997 was $4.1 million, an
increase of 78.3%, from $2.3 million during the comparable period in 1996. The
following table presents for the periods indicated the major changes in
noninterest income.
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
-------------------- --------------------
1997 1996 1997 1996
--------- --------- --------- ---------
(DOLLARS IN THOUSANDS)
Service charges on deposit
accounts.......................... $ 1,013 $ 707 $ 1,940 $ 1,368
Retail services income.............. 29 18 51 40
Corporate services income........... 12 5 23 10
Loan operations..................... 190 134 345 229
Investment services................. 524 348 1,033 616
Other noninterest income............ 108 26 176 40
Gain on sale of securities, net..... 378 22 515 22
--------- --------- --------- ---------
Total noninterest income....... $ 2,254 $ 1,260 $ 4,083 $ 2,325
========= ========= ========= =========
All categories of noninterest income for the six months ended June 30, 1997
reflect increased income compared to the six months ended June 30, 1996. The
increase in noninterest income for the three and six months ended June 30, 1997,
compared to the three and six months ended June 30, 1996, respectively, is
primarily attributable to the increased number of deposit accounts, the new
business relationship acquired with Harris County and the investment services
department.
Service charges were $1.0 million for the three months ended June 30, 1997,
compared to $707,000 for the three months ended June 30, 1996, an increase of
$306,000 or 43.3%. Services charges were $1.9 million for the six months ended
June 30, 1997, compared to $1.4 million for the same period in 1996. This was an
increase of $572,000, or 41.8%. During this period the number of accounts
serviced increased to 20,055 at June 30, 1997 from 16,104 at June 30, 1996.
Other significant increases in noninterest income were recognized in the
categories of loan operations and investment services. Fee income from
investment services has increased significantly in the past year. For the three
months ended June 30, 1997, investment services income grew to $524,000, an
increase of $176,000 or 50.6% over the 1996 level. For the six month period
ending June 30, 1997, investment services income grew to $1.0 million or 67.7%
from the $616,000 level during the same period in 1996. This increase in the
investment services income was attributable to a strategic focus by the Company
to increase its competitive position in providing investment services.
NONINTEREST EXPENSES
For the three months ended June 30, 1997, noninterest expenses totaled $7.7
million, an increase of $2.1 million, or 37.5%, from $5.6 million during 1996.
For the six months ended June 30, 1997, noninterest expenses totaled $14.8
million, an increase of $3.8 million, or 34.5% from $11.0 million for the same
period in 1996. The increase in noninterest expenses during these periods was
due primarily to salaries and employee benefits. The efficiency ratio decreased
to 54.47% for the three months ended June 30, 1997, from 57.22% for the
comparable period in 1996. For the six months ended June 30, the efficiency
ratio decreased to 56.18% for 1997 from 56.67% for 1996. This improvement
resulted from an increase in the net interest margin to 4.66 from 4.44, or 22
basis points, in the quarter ended June 30, 1997 and June 30, 1996,
respectively.
Salary and benefit expense for the three months ended June 30, 1997 was
$4.5 million, an increase of $1.2 million or 36.4% from $3.3 million for the
three months ended June 30, 1996. Salary and benefit expense for the six months
ended June 30, 1997 was $8.7 million, an increase of $2.2 million or 33.8% from
$6.5 million for the same period in 1996. This increase was due primarily to
hiring of additional personnel required to accommodate the Company's growth,
including staffing for two new branches, a
12
<PAGE>
second downtown branch at 909 Fannin, and a branch west of downtown in the
Memorial area. Total full-time equivalent employees for the three months ended
June 30, 1997 and June 30, 1996 were 367 and 291, respectively.
Occupancy expense increased $400,000 or 44.4% to $1.3 million for the
quarter ended June 30, 1997. For the six months ended June 30, 1997, occupancy
expense increased $800,000 or 47.1% over the same period a year ago to total
$2.5 million. Major categories included within occupancy expense are building
lease expense, depreciation expense, and maintenance contract expense. Building
lease expense increased to $406,000 for the three months ended June 30, 1997
from $232,000 for the same period in 1996. For the six months ended June 30,
1997, building lease expense increased 75.8% to $821,000 from $467,000 for the
six months ended June 30, 1996. This increase was the result of opening two new
branches during the past year and additionally, by increasing the rentable
square feet of the Galleria location by moving to a larger facility.
Depreciation expense for the second quarter increased $164,000 or 43.7% in 1997
from the comparable period in 1996. For the six months ended June 30, 1997,
depreciation expense was $1.4 million. This represents an increase of $435,000
or 44.3% over the same period in 1996. This increase was due primarily to
depreciation on equipment provided to new employees and expense related to
technology upgrades throughout the Company. Maintenance contract expense for the
three months ended June 30, 1997 was $122,000, an increase of $29,000 or 31.2%
compared to $93,000 in 1996. For the six months ended June 30, 1997, maintenance
contract expense was $236,000, an increase of 33.3% or $59,000 over the same
period in 1996. The Company has purchased maintenance contracts for major
operating systems throughout the organization.
INCOME TAXES
Income tax expense includes the regular federal income tax at the statutory
rate, plus the income tax component of the Texas franchise tax. The amount of
federal income tax expense is influenced by the amount of taxable income, the
amount of tax-exempt income, the amount of nondeductible interest expense, and
the amount of other nondeductible expenses. Taxable income for the income tax
component of the Texas franchise tax is the federal pre-tax income, plus certain
officers salaries, less interest income from federal securities. For the three
months ended June 30, 1997, income tax expense was $2.1 million, an increase of
$691,000 or 49.9% from the $1.4 million of income tax expense for the same
period in 1996. For the six month period ending June 30, 1997, income tax
expense was $3.8 million compared to $2.8 million during the same period in
1996, an increase of 35.9%.
FINANCIAL CONDITION
LOAN PORTFOLIO
Total loans were $707.0 million at June 30, 1997, an increase of $105.6
million or 17.6% from $601.4 million at December 31, 1996. Consistent with the
Company's historically high rate of growth, this increase is believed to be the
result of the Company's style of relationship banking featuring professional,
attentive and responsive service to customers' needs, and focusing on commercial
lending to middle market companies and private banking for individuals.
13
<PAGE>
The following table summarizes the loan portfolio of the Company by type of
loans as of June 30, 1997 and December 31, 1996:
JUNE 30, 1997 DECEMBER 31, 1996
-------------------- --------------------
AMOUNT PERCENT AMOUNT PERCENT
---------- ------- ---------- -------
(DOLLARS IN THOUSANDS)
Commercial and Industrial.......... $ 351,142 49.7% $ 295,003 49.0%
Real estate........................
Construction and Land
Development................. 80,847 11.4 71,808 12.0
1-4 Family.................... 129,452 18.3 113,801 18.9
Commercial Owner Occupied..... 67,282 9.5 52,138 8.7
Ranchland..................... 8,142 1.2 8,845 1.5
Other.............................. 5,443 0.8 3,159 0.5
Consumer........................... 64,665 9.1 56,721 9.4
---------- ------- ---------- -------
Total Loans........................ $ 706,973 100.00% $ 601,475 100.00%
========== ======= ========== =======
NONPERFORMING ASSETS
The Company's conservative lending approach has resulted in strong asset
quality. Nonperforming assets were $1.3 million at June 30, 1997 compared with
$1.3 million at December 31, 1996. This resulted in a ratio of nonperforming
assets to loans plus other real estate of 0.19% and 0.21% at June 30, 1997 and
December 31, 1996, respectively.
The following table presents information regarding nonperforming assets as
of the dates indicated:
JUNE 30, DECEMBER 31,
1997 1996
-------- ------------
(DOLLARS IN THOUSANDS)
Nonaccrual loans..................... $1,048 $ 955
Accruing loans 90 or more days past
due.................................. 17 22
Restructured loans................... -- --
ORE and OLRA......................... 254 281
-------- ------------
Total non-performing assets..... $1,319 $1,258
======== ============
Nonperforming assets to total loans
and other real estate.............. 0.19% 0.21%
ALLOWANCE FOR LOAN LOSSES
The allowance for loan losses is a reserve established through charges to
earnings in the form of a provision for loan losses. Based on an evaluation of
the loan portfolio, management presents a quarterly review of the allowance for
loan losses to the Board of Directors, indicating any changes in the allowance
since the last review and any recommendations as to adjustments in the
allowance. In making its evaluation, management considers the diversification by
industry of the Company's commercial loan portfolio, the effect of changes in
the local real estate market on collateral values, the results of recent
regulatory examinations, the effects on the loan portfolio of current economic
indicators and their probable impact on borrowers, the amount of charge-offs for
the period, the amount of nonperforming loans and related collateral security,
the evaluation of its loan portfolio by the loan review function and the annual
examination of the Company's financial statements by its independent auditors.
Charge-offs occur when loans are deemed to be uncollectible.
In order to determine the adequacy of the allowance for loan losses,
management considers the risk classification or delinquency status of loans and
other factors, such as collateral value, portfolio composition, trends in
economic conditions and the financial strength of borrowers. Management
establishes specific allowances for loans which management believes require
reserves greater than those allocated according to their classification or
delinquent status. An unallocated allowance is also established based on
14
<PAGE>
the Company's historical charge-off experience. The Company then charges to
operations a provision for loan losses determined on an annualized basis to
maintain the allowance for loan losses at an adequate level determined according
to the foregoing methodology.
Management believes that the allowance for loan losses at June 30, 1997 is
adequate to cover losses inherent in the portfolio as of such date. There can be
no assurance, however, that the Company will not sustain losses in future
periods, which could be greater than the size of the allowance at June 30, 1997.
The following table presents, for the periods indicated, an analysis of the
allowance for loan losses and other related data:
SIX MONTHS YEAR ENDED
ENDED JUNE 30, DECEMBER 31,
1997 1996
-------------- -------------
(DOLLARS IN THOUSANDS)
Allowance for loan losses beginning
of period.......................... $6,024 $ 4,921
Provision for loan losses............ 1,338 1,670
Charge-offs.......................... (686) (595)
Recoveries........................... 84 28
-------------- -------------
Allowance for loan losses end of
period............................... $6,760 $ 6,024
============== =============
Allowance to period-end loans........ 0.96% 1.00%
Net charge-offs to average loans..... 0.06% 0.12%
Allowance to period-end nonperforming
loans.............................. 634.74% 616.58%
SECURITIES
The amortized cost and approximate fair value of securities classified as
available for sale is as follows:
<TABLE>
<CAPTION>
JUNE 30, 1997
----------------------------------------------
GROSS UNREALIZED
AMORTIZED ------------------ FAIR
COST GAIN LOSS VALUE
--------- ------ ------ ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
U. S. Government securities.......... $ 86,947 $ 253 $ (75) $ 87,125
Mortgage-backed securities........... 194,488 1,089 (233) 195,344
Federal Reserve Bank stock........... 1,393 -- -- 1,393
Federal Home Loan Bank stock, at
cost................................. 35,532 -- -- 35,532
Other securities..................... 16,812 4 -- 16,816
--------- ------ ------ ----------
Total securities available for
sale.......................... $ 335,172 $1,346 $ (308) $ 336,210
========= ====== ====== ==========
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, 1996
----------------------------------------------
GROSS UNREALIZED
AMORTIZED ------------------ FAIR
COST GAIN LOSS VALUE
--------- ------ ------ ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
U. S. Government securities.......... $ 83,345 $ 315 $ (68) $ 83,592
Mortgage-backed securities........... 159,106 524 (507) 159,123
Federal Reserve Bank stock........... 950 -- -- 950
Federal Home Loan Bank stock, at
cost................................. 39,386 -- -- 39,386
Other securities..................... 6,161 5 -- 6,166
--------- ------ ------ ----------
Total securities available for
sale.......................... $ 288,948 $ 844 $ (575) $ 289,217
========= ====== ====== ==========
</TABLE>
15
<PAGE>
DEPOSITS
The Company offers a variety of deposit accounts having a wide range of
interest rates and terms. The Company's deposits consist of demand, savings, NOW
accounts, money market and time accounts. The Company relies primarily on
advertising, competitive pricing policies and customer service to attract and
retain these deposits. As of June 30, 1997, the Company had less than four
percent of its deposits classified as brokered funds and does not anticipate any
significant increase. Deposits provide the primary source of funding for the
Company's lending and investment activities, and the interest paid for deposits
must be managed carefully to control the level of interest expense.
The Company's ratio of average demand deposits to average total deposits
for the periods ended June 30, 1997 and December 31, 1996, were 30.2% and 30.0%,
respectively.
The average daily balances and weighted average rates paid on deposits for
the three months ended June 30, 1997 and the year ended December 31, 1996, are
presented below:
<TABLE>
<CAPTION>
JUNE 30, 1997 DECEMBER 31, 1996
-------------------- --------------------
AVG. AVG. AVG.
BALANCE AVG. RATE BALANCE RATE
-------- --------- -------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
NOW accounts......................... $ 17,078 2.96% $ 37,325 1.40%
Regular savings...................... 3,356 2.16 2,739 2.30
Money market savings................. 441,636 3.98 299,670 4.48
CD's less than $100,000.............. 46,240 5.24 43,182 5.23
CD's $100,000 and over............... 110,750 5.19 88,390 5.42
IRA's & QRP's........................ 8,954 5.38 8,421 5.36
--------
Total interest-bearing
deposits...................... 628,014 4.27 479,727 4.48
Noninterest-bearing deposits......... 271,656 -- 205,720 --
--------
Total deposits.................. $899,670 2.98% $685,447 3.14%
======== ========= ======== =========
</TABLE>
The following table sets forth the maturity of the Company's certificates
of deposit that are $100,000 or greater as of the dates indicated:
JUNE 30, 1997 DECEMBER 31, 1996
------------- -----------------
(DOLLARS IN THOUSANDS)
3 months or less..................... $ 129,721 $ 58,700
Between 3 months and 6 months........ 23,064 20,608
Between 6 months and 1 year.......... 21,857 14,559
Over 1 year.......................... 5,920 10,140
------------- -----------------
Total CD's $100,000 and over.... $ 180,562 $ 104,007
============= =================
On March 10, 1997, the Bank restructured its personal checking accounts
into master accounts containing a checking subaccount and a savings subaccount.
The allocation of funds between such subaccounts has resulted in a $27.0 million
decrease in the amount of NOW accounts and a corresponding increase in
noninterest-bearing money market accounts at June 30, 1997. Funds in the
checking subaccount are swept into the savings subaccount on a periodic basis,
and then swept back into the checking subaccount as needed to cover checks or
other withdrawals. In order to avoid having the savings subaccount reclassified
as a "transaction account" for purposes of Regulation D, the number of transfers
from the savings account to the checking subaccount is limited to six per month,
with the sixth such transfer sweeping all funds from the savings subaccount to
the checking subaccount. The purpose of this restructuring is to reduce the
required non-interest-bearing balances held at the Federal Reserve.
16
<PAGE>
BORROWINGS
Securities sold under repurchase agreements and other short-term
borrowings, consisting of federal funds purchased and treasury, tax, and loan
deposits, generally represent borrowings with maturities ranging from one to
thirty days. Information relating to these borrowings is summarized as follows:
SIX MONTHS
ENDED JUNE 30, DECEMBER 31,
1997 1996
-------------- ------------
(DOLLARS IN THOUSANDS)
Securities sold under repurchase agreements:
Average......................... $122,212 $103,927
Period-end...................... 114,951 136,119
Maximum month-end balance during
period........................ 125,694 136,119
Interest rate:
Average......................... 4.89% 4.88%
Period-end...................... 5.08% 4.93%
Other short-term borrowings:
Average......................... $ 20,547 $ 13,137
Period-end...................... 45,413 10,027
Maximum month-end balance during
period........................ 50,645 60,044
Interest rate:
Average......................... 5.52% 5.57%
Period-end...................... 5.57% 5.16%
Securities sold under repurchase agreements are maintained in safekeeping
by correspondent banks.
LIQUIDITY AND CAPITAL RESOURCES
Liquidity involves the Company's ability to raise funds to support asset
growth or reduce assets to meet deposit withdrawals and other payment
obligations, to maintain reserve requirements and otherwise to operate the
Company on an ongoing basis. For the three months ended June 30, 1997, the
Company's liquidity needs have primarily been met by growth in core deposits and
proceeds from the Company's IPO. Although access to purchased funds from
correspondent banks is available and has been utilized on occasion to take
advantage of investment opportunities, the Company does not generally rely on
these external funding sources. The cash and federal funds sold position,
supplemented by amortizing securities and loan portfolios, have generally
created an adequate liquidity position.
The Company's risk-based capital ratios remain above the levels designated
as "well capitalized" on June 30, 1997 with Leverage Capital, Tier 1 Risk-Based
Capital and Risk-Based Capital Ratios of 6.50%, 9.58% and 10.37%, respectively.
OTHER MATTERS
Effective August 1, 1997, the Company and the Bank consummated their merger
with Pinemont Bank, whereby Pinemont Bank was merged into the Bank. In
accordance with the Agreement and Plan of Merger, the Company exchanged 0.625 of
a share of the Company's common shares for each share of Pinemont Bank stock,
resulting in the issuance of 1,668,750 shares of the Company's common shares. At
June 30, 1997, Pinemont Bank had total assets of approximately $240 million and
total deposits of $219 million. Net interest income and net income of Pinemont
Bank were $5.9 million and $1.3 million, respectively, for the six months ended
June 30, 1997. The transaction was accounted for as a pooling of interests.
In the first quarter of 1997, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards No. 128, EARNINGS PER SHARE
("SFAS 128") and Statement of Financial Accounting Standards No. 129 DISCLOSURE
OF INFORMATION ABOUT CAPITAL STRUCTURE ("SFAS 129"). These statements will be
adopted by the Company effective December 31, 1997. SFAS 128 simplifies the
computation of earnings per common share by replacing primary and fully diluted
presentations with the new basic and diluted
17
<PAGE>
disclosures. SFAS 129 establishes standards for disclosing information about an
entity's capital structure. Under the provisions of SFAS 128, basic and diluted
earnings per share would be computed as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
-------------------------- --------------------------
1997 1996 1997 1996
------------ ------------ ------------ ------------
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
Net income available for common
shareholders....................... $ 3,854 $ 2,460 $ 6,937 $ 4,906
============ ============ ============ ============
Divided by average common shares and common share equivalents:
Average common shares........... 9,406,276 7,723,646 9,115,273 7,721,028
Average common share
equivalents................... 499,995 474,814 518,294 470,355
------------ ------------ ------------ ------------
Total average common shares and
common share equivalents........... 9,906,271 8,198,460 9,633,567 8,191,383
============ ============ ============ ============
Basic earnings per common share...... $ 0.41 $ 0.32 $ 0.76 $ 0.64
============ ============ ============ ============
Diluted earnings per common share.... $ 0.39 $ 0.30 $ 0.72 $ 0.60
============ ============ ============ ============
</TABLE>
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 130, REPORTING COMPREHENSIVE INCOME ("SFAS
130"), which establishes standards for reporting and display of comprehensive
income and its components in a full set of general-purpose financial statements.
SFAS 130 requires that all items that are required to be recognized under
accounting standards as components of comprehensive income be reported in a
financial statement that is displayed with the same prominence as other
financial statements. This statement is effective for financial statements
issued for periods after December 31, 1997 and will have no impact on the
Company's financial position, results of operations or cash flows.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a) The Company's Annual Meeting of Shareholders (the "Annual Meeting") was
held on May 20, 1997.
(b) The following Class I Directors were elected for a three year term at
the Annual Meeting: John B. Brock III, J. David Heaney and Andres Palandjoglou.
The following Class II and III Directors also continued in office after the
Annual Meeting: Ernest H. Cockrell, John W. Johnson, Walter E. Johnson,
Wilhelmina R. Morian, Paul B. Murphy, Jr. and Michael T. Willis.
(c) A total of 6,158,045 votes were cast in favor of the Class I Directors
and 400 votes abstained from voting on each Director. No votes were cast against
any of the Class I Directors. At the Annual Meeting, the Company's shareholders
also ratified the selection of Coopers & Lybrand L.L.P. as the Company's
independent auditors for the year ending December 31, 1997. A total of 6,157,545
votes were cast in favor of such proposal with 700 votes being cast against the
proposal and 200 votes abstaining from voting on the proposal.
(d) Not applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits:
Exhibit 27. Financial Data Schedule
The required Financial Data Schedule has been included as Exhibit 27 of
the Form 10-Q filed electronically with the Securities and Exchange
Commission.
b) Reports on Form 8-K
None.
18
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED, THIS REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF
THE REGISTRANT AND IN THE CAPACITIES AND ON THE DATES INDICATED.
SIGNATURE TITLE DATE
- ---------------------- --------------------------------------- --------------
WALTER E. JOHNSON Chairman of the Board and Chief August 11, 1997
WALTER E. JOHNSON Executive Officer (Principal Executive
Officer)
DAVID C. FARRIES Executive Vice President, August 11, 1997
DAVID C. FARRIES Treasurer and Secretary (Principal
Financial Officer)
R. JOHN McWHORTER Vice President and Controller August 11, 1997
R. JOHN MCWHORTER (Principal Accounting Officer)
19
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 85,966
<INT-BEARING-DEPOSITS> 73
<FED-FUNDS-SOLD> 104,407
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 336,210
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 706,973
<ALLOWANCE> 6,760
<TOTAL-ASSETS> 1,247,535
<DEPOSITS> 994,794
<SHORT-TERM> 160,364
<LIABILITIES-OTHER> 8,419
<LONG-TERM> 0
0
0
<COMMON> 9,414
<OTHER-SE> 74,544
<TOTAL-LIABILITIES-AND-EQUITY> 1,247,535
<INTEREST-LOAN> 15,493
<INTEREST-INVEST> 5,177
<INTEREST-OTHER> 585
<INTEREST-TOTAL> 21,255
<INTEREST-DEPOSIT> 7,143
<INTEREST-EXPENSE> 8,959
<INTEREST-INCOME-NET> 12,296
<LOAN-LOSSES> 900
<SECURITIES-GAINS> 378
<EXPENSE-OTHER> 5,844
<INCOME-PRETAX> 5,930
<INCOME-PRE-EXTRAORDINARY> 3,854
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,854
<EPS-PRIMARY> 0.41
<EPS-DILUTED> 0.39
<YIELD-ACTUAL> 4.66
<LOANS-NON> 1,048
<LOANS-PAST> 17
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 6,286
<CHARGE-OFFS> 495
<RECOVERIES> 69
<ALLOWANCE-CLOSE> 6,760
<ALLOWANCE-DOMESTIC> 6,760
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
