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FORM 10-Q/A
(Amendment No. 1)
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1997
Commission File Number: No. 0-22423
HCB Bancshares, Inc.
(Exact name of registrant as specified in its charter)
Oklahoma 62-1670792
- ------------------------------- ------------------
(State of other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
237 Jackson Street, Camden, Arkansas 71701
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:
(870)836-6841
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Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 of 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
Indicate the number of shares outstanding of each of the
issuer's classes of common stock as of the latest practicable
date: 2,645,000 shares.
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PART I. FINANCIAL INFORMATION
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Item 1. Financial Statements
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HCB BANCSHARES, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Financial Condition
September 30, 1997 (Unaudited) and June 30, 1997
<TABLE>
<CAPTION>
September 30, June 30,
ASSETS 1997 1997
------------ -----------
<S> <C> <C>
Cash on hand $ 1,287,715 1,057,943
Interest-bearing deposits 14,675,405 18,273,882
Investment securities available for sale 18,339,853 17,260,383
Mortgage-backed securities
Available for sale 15,512,247 18,361,987
Held to maturity (estimated market value of 37,471,436 36,493,086
$39,028,601 and $36,194,353, respectively)
Stock in Federal Home Loan Bank 1,250,700 1,246,500
Loans receivable (net of allowance of $1,497,696 102,252,265 98,642,635
and $1,492,473, respectively)
Accrued interest receivable 1,287,911 1,305,952
Foreclosed assets 36,192 36,179
Premises and equipment 3,694,877 4,621,444
Goodwill 1,384,039 1,415,223
Prepaid expenses and other assets 2,645,607 1,783,302
------------ -------------
$199,838,247 200,498,516
============ =============
</TABLE>
See accompanying notes to condensed consolidated financial
statements.
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HCB BANCSHARES, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Financial Condition
September 30, 1997 (Unaudited) and June 30, 1997
<TABLE>
<CAPTION>
September 30, June 30,
1997 1997
LIABILITIES AND STOCKHOLDERS' EQUITY ------------ -----------
<S> <C> <C>
Liabilities
Deposits $148,454,721 151,192,591
Advances from borrowers for
Taxes, insurance and other 276,444 209,140
Accrued interest payable 358,923 410,477
Borrowings from Federal Home Loan Bank 10,000,000 10,000,000
Accrued expenses and other liabilities 2,547,744 755,456
------------ ------------
Total liabilities 161,637,832 162,567,664
------------ ------------
Stockholders' equity
Common stock, $.01 par value; authorized
10,000,000 share; issued and
outstanding 2,645,000 shares 26,450 26,450
Additional paid-in capital 25,727,576 25,775,523
Note receivable from ESOP (1,937,420) (1,990,320)
Retained earnings 14,241,299 14,152,552
Unrealized gain(loss) on securities
available for sale, net 142,510 (33,353)
------------ ------------
Total stockholders' equity 38,200,415 37,930,852
------------ ------------
$199,838,247 200,498,516
============ ============
</TABLE>
See accompanying notes to condensed consolidated financial
statements.
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HCB BANCSHARES, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
For the Three Months Ended September 30, 1997 and 1996
(Unaudited)
<TABLE>
<CAPTION>
1997 1996
------------ ------------
<S> <C> <C>
Interest income
Loans $2,113,234 1,836,067
Investment securities 335,963 114,854
Mortgage-backed securities 888,394 942,439
Other interest income 287,458 196,583
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Total interest income 3,625,049 3,089,943
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Interest expense
Deposits 1,868,470 1,895,464
Borrowings from Federal Home Loan Bank 156,362 155,935
Other interest 7,000 1,973
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Total interest expense 2,031,832 2,053,372
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Net interest income 1,593,217 1,036,571
Provision for loan losses 19,549 127,397
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Net interest income after
provision for loan losses 1,573,668 909,174
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Noninterest income
Service fees on deposits 55,352 29,544
Other service fees and commissions 10,159 1,800
Gains on sales of assets available for
sale or held for sale 15,107 --
Gain(loss) on foreclosed 1,351 (2,356)
Insurance fees and commissions, net 4,702 4,944
Loan fees earned 50,652 25,358
Other income, net 16,549 13,371
---------- ----------
Total noninterest income 153,872 72,661
---------- ----------
</TABLE>
See accompanying notes to consolidated financial statements.
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HCB BANCSHARES, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
For the Three Months Ended September 30, 1997 and 1996
(Unaudited)
<TABLE>
<CAPTION>
1997 1996
------------ ------------
<S> <C> <C>
Noninterest expense
Compensation, payroll taxes and
fringe benefits 565,578 407,346
Pension and 401(K) expense 140,999 44,810
Rent and other occupancy expense 155,228 93,916
Communication, postage, printing and
office supplies 38,390 83,414
Deposit and other insurance premiums 39,810 982,796
Advertising 36,492 38,908
Expenses of officers, directors and
employees, including directors' fees 56,115 22,367
Data processing expense 81,485 60,027
Amortization of goodwill 31,184 40,018
Professional fees 56,731 139,032
Foreclosed property expense 936 2,356
Other expenses 24,045 8,798
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Total noninterest expense 1,226,993 1,923,788
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Income (loss) before income tax
expense (benefit) 500,547 (941,953)
Income tax expense(benefit) 172,418 (360,674)
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Net income(loss) $ 328,129 (581,279)
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Earnings per common share $ 0.13 N/A
---------- ----------
</TABLE>
See accompanying notes to consolidated financial statements.
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HCB BANCSHARES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended September 30,
1997 1996
OPERATING ACTIVITIES: ---------- ----------
<S> <C> <C>
Net income $328,129 $(581,279)
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 75,329 43,102
Amortization (accretion) of:
Deferred loan origination fees 15,633
Goodwill 31,184 40,018
Premiums and discounts on loans, net (1,635)
Premiums and discounts on investment
securities, net 17,268 39,419
Provision for loan loss 19,549 127,397
Net gain on sale of investment securities
available for sale (15,107)
Stock compensation expense 40,453
Gain on disposal of other assets, net (315) (3,118)
Change in accrued interest receivable 18,041 (116,050)
Change in accrued interest payable (51,554) 22,878
Change in other assets (862,305) (302,502)
Change in other liabilities 1,792,288 724,815
Net cash provided (used)
by operating activities $ 1,406,958 $ (5,320)
INVESTING ACTIVITIES:
Purchases of investment securities -
available for sale $(11,038,886) $(12,195,000)
Purchases of Federal Home Loan Bank stock (4,200)
Purchases of premises and equipment (933,929) (1,185,949)
Proceeds from sales of loans 758,286
Loan originations, net of repayments (4,367,916) (5,332,238)
Principal payments on investment securities 13,549,197 3,431,700
Proceeds from sales of foreclosed assets 12,351 3,215
Net cash used by investing activities $(2,025,097) $(15,278,272)
</TABLE>
(Continued)
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HCB BANCSHARES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended September 30,
1997 1996
FINANCING ACTIVITIES: --------------- -------------
<S> <C> <C>
Net decrease in deposits $ (2,737,870) $ 1,253,493
Net decrease in advance payments by borrowers
for taxes and insurance 67,304 42,144
Repayment of note payable (80,000)
Increase in other borrowings 400,000
Net cash provided by financing activities $(2,750,566) $1,695,637
NET DECREASE IN CASH AND
CASH EQUIVALENTS $(3,368,705) $(13,587,955)
CASH AND CASH EQUIVALENTS:
Beginning of period $19,331,825 $17,291,882
End of period $15,963,120 $ 3,703,927
</TABLE>
See accompanying notes to condensed consolidated financial
statements.
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HCB BANCSHARES, INC AND SUBSIDIARIES
Notes to Condensed Consolidated (Unaudited) Financial Statements
Note 1 - HCB Bancshares, Inc.
HCB Bancshares, Inc. (the "Company") was incorporated under the
laws of the state of Oklahoma for the purpose of becoming the
bank holding company of Heartland Community Bank and its
subsidiaries (the "Bank"), in connection with the Bank's
conversion from a federally chartered mutual savings bank to a
federally chartered stock savings bank, pursuant to its Plan of
Conversion. On April 30, 1997, the Bank completed the
conversion and became a wholly owned subsidiary of the Company.
The Company has no other operations and conducts no business of
its own other than owning the Bank, investing its portion of the
net proceeds received in the Conversion, and lending funds to
the Employee Stock Ownership Plan which was formed in connection
with the Conversion.
Note 2 - Basis of Consolidation
The accompanying unaudited consolidated financial statements
were prepared in accordance with instructions for Form 10-Q.
To the extent that information and footnotes required by
generally accepted accounting principles for complete financial
statements are contained in the audited financial statements
included in the Bank's audit report for the year ended June 30,
1997, such information and footnotes have not been duplicated
herein. All material intercompany balances and transactions
have been eliminated in the consolidation. The unaudited
statements reflect all adjustments, consisting of normal
recurring accruals, which are in the opinion of management,
necessary for fair presentation of the results of operations,
changes in equity and cash flows for the three months periods
ended September 31, 1997 and 1996. The statements of operations
for the three-month periods ended September 30, 1997, are not
necessarily indicative of the results which may be expected for
the entire year.
Note 3 - Stockholders' Equity and Stock Conversion
The Bank converted from a federally chartered mutual savings
bank to a federally chartered stock savings bank pursuant to its
Plan of Conversion, which was approved by the Bank's members on
April 25, 1997. The conversion was effective on April 30, 1997
and resulted in the issuance of 2,645,000 shares of common stock
(par value $.01) at $10.00 per share for the gross sale price of
$26,450,000. Costs related to the conversion (primarily to
underwriters' commissions, printing and professional fees)
approximated $750,000 and were deducted from the net proceeds to
arrive at net proceeds of $25,700,000. The Company also
established an Employee Stock Ownership Plan and Trust which
purchased 211,600 shares of common stock of the Company at the
issuance price of $10 per share with funds borrowed from the
Company.
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Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
GENERAL
The Bank's principal business consists of attracting
deposits from the general public and investing those funds in
(i) loans secured by first mortgages on existing owner-occupied
single-family residences in the Bank's primary market area and,
(ii) to a lesser but growing extent, commercial and multi-family
real estate loans and consumer and commercial business loans.
The Bank also maintains a substantial investment portfolio of
mortgage-related securities and U.S. government and agency
securities.
The Bank's net income is dependent primarily on its net
interest income, which is the difference between interest income
earned on its loans, mortgage-backed securities and securities
portfolio and interest paid on customers' deposits. The Bank's
net income is also affected by the level of noninterest income,
such as service charges on customers' deposit accounts, net
gains or losses on the sale of securities and other fees. In
addition, net income is affected by the level of noninterest
expense, which primarily consists of employee compensation
expenses, deposit insurance premiums and other expenses.
The financial condition and results of operations of the
Bank and the thrift and banking industries as a whole are
significantly affected by prevailing economic conditions,
competition and the monetary and fiscal policies of governmental
agencies. Lending activities are influenced by demand for and
supply of credit, competition among lenders and the level of
interest rates in the Bank's market area. The Bank's deposit
flows and costs of funds are influenced by prevailing market
rates of interest, primarily on competing investments, as well
as account maturities and the levels of personal income and
savings in the Bank's market area.
COMPARISON OF FINANCIAL CONDITION AT SEPTEMBER 30, 1997 AND JUNE
30, 1997
The Bank had total assets of $199.8 million and $200.5
million at September 30, 1997 and June 30, 1997, respectively.
During the three month period ended September 30, 1997 the Bank
experienced an increase in its loan portfolio from $98.6 million
at June 30, 1997, to $102.3 million. This increase is due to
the positive results realized from the implementation of the
Bank's long term business plan for growth in its targeted
markets of commercial, consumer and multi-family lending along
with natural growth. During this same period, investment and
mortgage-backed securities and other short-term interest-earning
assets fluctuated between $90.4 million at June 30, 1997 and
$86.0 million at September 30, 1997. Investment securities and
other short-term interest-earning deposits tend to vary in
conjunction with variations in savings activity. Additionally,
the Bank expended approximately $965,000 to purchase computer
and network equipment, furnishings and make improvements to
existing facilities during the three month period ended
September 30, 1997, to consummate management's planned growth
projections.
Deposits decreased from $151.2 million at June 30, 1997 to
$148.5 million at September 30, 1997. This decrease in deposits
of $2.7 million resulted from increased competition in the
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Bank's main market area of Camden, Arkansas. The Bank's level
of deposits has been sufficient to fund its loan demand and
provide for adequate liquidity. During the year ended June 30,
1997, the Bank utilized a credit line with the FHLB of Dallas to
obtain advances. The outstanding balances of FHLB advances at
June 30, 1997 and September 30, 1997 were $10.0 million,
respectively. These advances were utilized to reduce interest
rate risk by more closely matching rates and maturities of
existing interest-earning assets and interest-bearing
liabilities.
Equity amounted to $38.2 million at September 30, 1997, and
to $37.9 million at June 30, 1997, respectively. The changes in
equity were due solely to the Bank's net income earned for such
periods and a $176,000 increased in the market value of
investment securities and mortgage-backed securities available
for sale. At June 30, 1997, the Bank's regulatory capital
substantially exceeded all applicable regulatory capital
requirements. Regulatory capital levels at September 30, 1997
were not substantially different from those at June 30, 1997.
COMPARISON OF RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED
SEPTEMBER 30, 1997 AND 1996
Net Income (Loss). Net income for the three months ended
September 30, 1997 was $328,129 compared to a loss of $581,279
for the three months ended September 30, 1996. The changes were
attributable to a non-recurring one time, special deposit
insurance assessment of $889,000 and professional fees of
$139,000, incurred in the quarter ended September 30, 1996, an
increase in net interest income of $556,646 and an increase in
noninterest income of $81,211 for the three months ended
September 30, 1997, as compared to the three months ended
September 30, 1996. Income tax expense for the three months
ended September 30, 1997 compared to 1996 was a tax expense of
$172,418 compared to a tax benefit of $360,674.
Net Interest Income. Net interest income for the three
months ended September 30, 1997 was $1.6 million, an increase of
53.7% when compared to net interest income of $1.0 million for
the three months ended September 30, 1996. This increase was
attributable to an increase in total interest income of $535,106
and a net decrease in total interest expense of $21,540. The
net interest margin for the three months ended September 30,
1997 was 3.20% compared to 2.45% for the three months ended
September 30, 1996. This increase in net interest income and
net interest margin is due to an increase in the average volume
of interest-earning assets, combined with a decrease in the
average rate paid on interest-bearing liabilities. One cause
for the increase in average interest-earning assets when
comparing the three months ended September 30, 1997 to the three
months ended September 30, 1996 was the formation of the holding
company, the conversion of the Bank and sale of stock. The
average volume of interest-earning assets increased from $166.0
million for the three months ended September 30, 1996 to $192.7
million for the three months ended September 30, 1997 which had
the effect of increasing total interest income by $500,000. The
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average rate paid on interest-bearing liabilities decreased
during the three months ended September 30, 1997 to 5.06% from
5.29% for the three months ended September 30, 1996. The
decrease in the average rate on interest-bearing liabilities had
the effect of decreasing total interest expense between the
three months ended September 30, 1996 and the three months ended
September 30, 1997 by approximately $90,000.
The average yield on interest-earning assets remained
relatively unchanged between the two periods, which is
indicative of the fact that the Bank's interest-earning assets
are not highly sensitive to the increases in market interest
rates which occurred between the two periods. For the three
months ended September 30, 1997, the average yield on
interest-earning assets was 7.45%, compared to 7.51% for the
three months ended September 30, 1996, which had the effect of
increasing total interest income by $10,000. In addition, the
average volume of interest-bearing liabilities increased by 2.8%
reflecting an increase in deposits since the opening of two new
branches in the current year.
Provision for Loan Losses. During the year ended June 30,
1997, the Bank's management initiated an extensive internal loan
review of all loan files both of the parent and subsidiary. The
review resulted in the adoption of more conservative loan loss
allowance standards than had been used in the past. This new
policy on allowance for loan losses was deemed prudent in
establishing credit underwriting standards for future expected
lending areas, such as commercial real estate, business and
consumer loans, which inherently have more risk. Management
made a provision for loan losses in the three months ended
September 30, 1997 of $19,549, compared to a provision for loan
loss of $127,397 in the three months ended September 30, 1996.
The allowance for loan losses, after this provision, of $1.5
million, represented 1.44 % of outstanding loans at
September 30, 1997. Nonperforming loans as of
September 30, 1997 and 1996, as a percent of total loans,
remained below 1.0%.
Management evaluates the carrying value of the loan
portfolio periodically and the allowance is adjusted
accordingly. While management uses the best information
available to make evaluations, future adjustments to the
allowance may be necessary if conditions differ substantially
from the assumptions used in making the evaluations. In
particular, management recognizes that recent and planned
changes in the amounts and types of lending by the Bank will
result in further growth of the Bank's loan loss allowance and
may justify further changes in the Bank's loan loss allowance
policy in the future. In addition, various regulatory agencies,
as an integral part of their examination process, periodically
review the Bank's allowance for loan losses. Such agencies may
require the Bank to recognize changes to the allowance based
upon their judgments and the information available to them at
the time of their examination.
Noninterest Income. Noninterest income is comprised
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primarily of insurance commissions from sales of credit life
insurance, banking service charges, loan origination and
commitment fees earned and gains on sales of investment and
mortgage-backed securities. Noninterest income for the three
months ended September 30, 1997, was $153,872, compared to
$72,661 for the three months ended September 30, 1996. This
represents an increase of $81,211. This increase is due
primarily to increases in loan fees earned as a result of
increased lending activities and new fee earning banking
services offered by the Bank to its deposit customers. In light
of the increasingly competitive markets for deposits and loans,
management has recently shifted the Bank's deposit taking and
loan origination activities to reflect, among other things, the
importance of offering valued customer services that generate
additional fee income, and it is expected that management will
continue this trend for the foreseeable future.
Noninterest Expense. The major components of noninterest
expense are compensation and benefits paid to the Bank's
employees and directors, occupancy expense for ownership and
maintenance of the Bank's building and furniture and equipment,
communications, costs and office supplies and postage. Total
noninterest expense for the three months ended September 30,
1997 was $1.2 million, compared to $1.9 million for the three
months ended September 30, 1996. The decrease was largely due
to a one-time, special assessment by the FDIC to replenish the
Savings Association Insurance Fund ("SAIF") depleted by prior
years' losses in the thrift industry. During the years in which
thrifts as an industry suffered many publicized and
non-publicized "bailouts" by the SAIF, and its predecessor, the
Federal Savings and Loan Insurance Corporation, the deposit
insurance fund for the thrift industry was severely depleted.
After several years of debate Congress with the assistance of
the FDIC, which administers the SAIF, consummated a plan of
action to replenish the SAIF to a level of coverage required by
statute (the designated reserve ratio of 1.25% of insured
deposits) for the remaining covered deposits. The plan of
remedy included a one time assessment to each thrift institution
based on capital levels and deposits, among other factors. This
one-time special assessment was recognized by the Bank in the
three months ended September 30, 1996, in the amount of $889,000
and was expensed in the same period. This assessment was paid
November 27, 1996. The effective deposit insurance rate prior
to the assessment was .23% compared to a rate of .065% after the
assessment. The second largest component of noninterest expense
for the three months ended September 30, 1997 was compensation
expense, including director and officer retirement plans and
other benefits, which totaled $706,577, compared to $452,000 for
the three months ended September 30, 1996. This increase was
attributable to increases in salary expense associated with the
addition of staff for future growth, the acquisition of the
subsidiary savings bank and increased directors fees due to
additional time incurred by the Board in evaluating and working
on various strategic plans for the Bank. During the three
months ended September 30, 1996, amounts were incurred to
facilitate the name change of the Bank to HEARTLAND Community
Bank. In addition, fees were incurred for personnel placement
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services to attract key personnel for hire, a computer consul-
tant was engaged to evaluate operating systems and further
growth needs, and marketing consultants were approached for
market strategies and implementation. These expense categories
decreased approximately $50,000 during the three months ended
September 30, 1997 compared with the same period in 1996.
Overall, noninterest expense increased for the three month
period ended September 30, 1997, compared to the three
month-period ended September 30, 1996, by approximately
$192,000, exclusive of the FDIC one time, special assessment.
Included in noninterest expenses for the three months ended
September 30, 1997 was a charge for the amortization of goodwill
of $31,184, which resulted from the acquisition of the
subsidiary bank during the year ended June 30, 1996. The
amortization will be $162,200 per year over a ten year period,
subsequent to June 30, 1997, and is not expected to have a
material effect on the future earnings of the Bank.
In light of the substantial costs associated with the
recent, pending and planned expansions of the Bank's activities,
facilities and staff, including the additional costs associated
with adding staff, building or renovating branches, introducing
new deposit and loan products and services and implementing the
planned stock benefit plans after the Conversion, it is expected
that the Bank's noninterest expense levels may remain somewhat
high relative to the historical levels for the Bank, as well as
the prevailing levels for institutions that are not undertaking
such expansions, for an indefinite period of time, as management
implements the Bank's business strategy. Among the activities
planned are increased loan originations in the areas of
multi-family residential, commercial real estate, commercial
business and consumer loans. Customer products to be introduced
include ATM and debit cards and an expanded deposit account mix.
In addition to two new branch facilities that were constructed
and completed in the quarter ended September 30, 1997, other
existing facilities will be renovated to attract and serve an
increased customer base.
Income Taxes. The effective income tax rate for the Bank
for the three months ended September 30, 1997 and 1996 was 38.3%
which includes federal and Arkansas tax components. A tax
benefit of $360,674 for 1996 and an expense of $172,418 for 1997
was recognized, resulting in an increase in taxes of $533,092.
SOURCES OF CAPITAL AND LIQUIDITY
The Bank is required to maintain minimum levels of liquid
assets as defined by the OTS regulations. This requirement
which may be varied at the discretion of the OTS depending on
economic conditions and deposit outflows, is based upon a
percentage of deposits and short term borrowings. Current OTS
regulations require that a savings association maintain liquid
assets of not less than 5% of its average daily balance of net
withdrawable deposit accounts and borrowings payable in one year
or less, of which short-term liquid assets must consist of not
less than 1%. At September 30, 1997, the Bank's liquidity, as
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measured for regulatory purposes, was 20.1%, or $25.4 million in
excess of the minimum OTS liquidity requirement of 5%, and 10.0%
or $13.3 million in excess of the OTS short term liquidity
requirement of 1%. Management of the Bank seeks to maintain a
relatively high level of liquidity in order to retain flexi-
bility in terms of investment opportunities and deposit pricing
and in order to meet funding needs of loan commitments.
Historically, the Bank has been able to meet its liquidity
demands through internal sources of funding supplemented from
time to time by advances from the FHLB of Dallas.
The Bank's primary sources of funds are deposits, proceeds
from principal and interest payments on loans and
mortgage-backed securities, interest payments and maturities of
investment securities, and earnings. While scheduled principal
repayments on loans and mortgage-backed securities and interest
payments on investment securities are a relatively predictable
source of funds, deposit flows and loan and mortgage-backed
prepayments are greatly influenced by general interest rates,
economic conditions, competition and other factors. The Bank
does not solicit deposits outside of its market area through
brokers or other financial institutions.
The Bank has also designated certain securities as
available for sale in order to meet liquidity demands. At
September 30, 1997, the Bank had designated securities with a
fair value of approximately $33.9 million as available for sale.
In addition to internal sources of funding, the Bank as a member
of the FHLB has substantial borrowing authority with the FHLB.
The Bank's use of a particular source of funds is based on need,
comparative total costs and availability.
Another source of liquidity is the net proceeds of the
Conversion. Following the completion of the Conversion,
effective April 30, 1997, the Bank received over half of the net
proceeds of the Conversion. These funds are expected to be used
by the Bank for its business activities, including investment in
interest-earning assets.
For additional information about cash flows from the Bank's
operating, investing and financing activities see the
consolidated financial statements presented elsewhere herein.
At September 30, 1997, the Bank had outstanding $4.5
million in commitments to originate loans (including unfunded
portions of construction loans) and $563,000 in unused lines of
credit. At the same date, the total amount of certificates of
deposit which were scheduled to mature in one year or less was
$59.2 million. Management anticipates that the Bank will have
adequate resources to meet its current commitments through
internal funding sources described above. Historically, the
Bank has been able to retain a significant amount of its
deposits as they mature.
Management is not aware of any current recommendations by
its regulatory authorities, legislation, competition, trends in
interest rate sensitivity, new accounting guidance or other
material events and uncertainties that would have a material
effect on the Bank's ability to meet its liquidity demands.
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SIGNATURES
In accordance with the requirements of the Exchange Act, the
registrant caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
HCB BANCSHARES, INC.
Registrant
Date: July 16, 1999 By: /s/ Vida H. Lampkin
----------------------------------
Vida H. Lampkin
Chairman, President and
Chief Executive Officer
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