<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTER ENDED MARCH 31, 1998
COMMISSION FILE NUMBER: 0-23469
FRANKLIN FINANCE CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
MICHIGAN 38-3372606
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
24725 WEST TWELVE MILE ROAD
SOUTHFIELD, MICHIGAN 48034
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICE) (ZIP CODE)
(248) 358-4710
(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
EQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO SUCH FILING
REQUIREMENTS FOR THE PAST 90 DAYS.
YES X NO
THE NUMBER OF SHARES OUTSTANDING OF THE REGISTRANT'S SOLE CLASS OF COMMON STOCK
IS 22,077 SHARES, $300 PAR VALUE, AS OF MARCH 31, 1998.
<PAGE> 2
FRANKLIN FINANCE CORPORATION
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS: PAGE
(A)STATEMENTS OF FINANCIAL CONDITION AT MARCH 31, 1998
AND DECEMBER 31, 1997............................................ 1
(B)STATEMENT OF OPERATIONS FOR THE THREE MONTHS ENDED
MARCH 31, 1998................................................... 2
(C)STATEMENT OF SHAREHOLDERS' EQUITY FOR THE THREE MONTHS
ENDED MARCH 31, 1998............................................. 3
(D)STATEMENT OF CASH FLOWS FOR THE THREE MONTHS ENDED
MARCH 31, 1998................................................... 4
(E)NOTES TO FINANCIAL STATEMENTS...................................... 5
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS................................ 6
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET
RISK ............................................................. 8
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS ................................................ 9
ITEM 2. CHANGES IN SECURITIES............................................. 9
ITEM 3. DEFAULTS UPON SENIOR SECURITIES................................... 9
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS ............. 9
ITEM 5. OTHER INFORMATION................................................. 9
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K ................................. 9
ii
<PAGE> 3
FRANKLIN FINANCE CORPORATION
STATEMENTS OF FINANCIAL CONDITION
<TABLE>
<CAPTION>
Assets March 31, 1998 December 31, 1997
-------------------------------------
(unaudited)
<S> <C> <C>
Cash in bank $ 4,303,037 $ 268
Loans
Residential Homes Loans 21,152,322 22,736,015
Commercial Loans 17,636,502 18,752,685
Allowance for loan losses (12,000)
----------------------------------
Net Loans 38,776,825 41,488,700
Accrued Interest - Residential 110,709 112,244
Accrued Interest - Commercial 96,846 115,989
Due from parent company 27,624
Prepaid expenses 26,514
----------------------------------
Total Assets $ 43,313,931 $ 41,744,825
==================================
Liabilities and Shareholders' Equity
Due to Franklin Bank $ 1,326,921
Dividend Payable - Preferred 49,887 $ 49,340
Dividend Payable - Common 53,207
----------------------------------
Total Current Liabilities 1,376,808 102,547
Shareholders' Equity
Common Stock par value $300.00; 60,000 shares
authorized, 22,077 shares issued and outstanding . 6,623,100 6,623,100
Preferred Stock, par value $10.00; 2,500,000 shares
authorized, 2,070,000 shares issued and outstanding 20,700,000 20,700,000
Paid in Surplus 14,319,178 14,319,178
Retained Earnings 294,845 0
----------------------------------
Total Shareholders' Equity 41,937,123 41,642,278
Total Liabilities/Shareholders' Equity $ 43,313,931 $ 41,744,825
==================================
</TABLE>
The Notes to Financial Statements are an integral part of these statements.
1
<PAGE> 4
FRANKLIN FINANCE CORPORATION
STATEMENT OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
March 31, 1998
-------------------
<S> <C>
Interest Income
Interest on residential $ 433,425
Interest on commercial 394,709
---------
Total interest on loans 828,133
Provision for loan losses (12,000)
---------
Total interest income after provision for loan losses 816,133
---------
Expenses
Director's fees 1,000
Outside services 759
Advisory fee 31,272
Insurance 7,699
Loan service fee 29,786
---------
Total expenses 70,516
---------
Net income $ 745,617
=========
Preferred stock dividend 450,772
---------
Net income available to common shareholders $ 294,845
=========
Earnings per common share - basic $ 13.36
</TABLE>
The Notes to Financial Statements are an integral part of these statements.
2
<PAGE> 5
FRANKLIN FINANCE CORPORATION
STATEMENT OF SHAREHOLDERS' EQUITY
(UNAUDITED)
For the Three Months Ended March 31, 1998
<TABLE>
<CAPTION>
Preferred Common Paid in Retained
Stock Stock Surplus Earnings Totals
---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1997 $ 20,700,000 $ 6,623,100 $ 14,319,178 $ 41,642,278
Net Income $ 745,617 745,617
Capital Contribution from
Common Shareholder 67,552 67,552
Additional Expenses for Preferred
Stock Offering (67,552) (67,552)
Dividends on 8.70% Noncumulative
Series A Preferred Shares (450,772) (450,772)
---------------------------------------------------------------------------------------
Balance, March 31, 1998 $ 20,700,000 $ 6,623,100 $ 14,319,178 $ 294,845 $ 41,937,123
=======================================================================================
</TABLE>
The Notes to Financial Statements are an integral part of this statement.
3
<PAGE> 6
FRANKLIN FINANCE CORPORATION
STATEMENT OF CASH FLOWS
(UNAUDITED)
For the Three Months Ended March 31, 1998
<TABLE>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 745,617
Adjustments to reconcile net income to cash provided by operating activities:
Provision for loan losses 12,000
(Increase)/decrease in accrued interest receivable 20,678
(Increase)/decease prepaid expenses and other assets 1,110
Increase/(decrease) accrued interest payable, deferred taxes and other
liabilities 1,274,261
-----------
Total adjustments 1,308,049
-----------
NET CASH PROVIDED BY OPERATING ACTIVITIES 2,053,666
-----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of commercial loans (981,840)
Net (increase)/decrease in loans 3,681,715
-----------
NET CASH PROVIDED BY INVESTING ACTIVITIES 2,699,875
-----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Dividend on preferred stock (450,772)
NET CASH USED IN FINANCING ACTIVITIES (450,772)
-----------
NET INCREASE IN CASH AND CASH EQUIVALENTS 4,302,769
-----------
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 268
-----------
CASH AND CASH EQUIVALENTS AT MARCH 31, 1998 $ 4,303,037
===========
</TABLE>
The Notes to Financial Statements are an integral part of this statement.
4
<PAGE> 7
FRANKLIN FINANCE CORPORATION
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 - ORGANIZATION AND BASIS OF PRESENTATION:
Franklin Finance Corporation (the "Company") is a Michigan corporation which was
incorporated on September 25, 1997 and created for the purpose of acquiring and
holding real estate mortgage assets. The Company is a wholly-owned subsidiary of
Franklin Bank, N.A. (the "Bank"), a nationally chartered commercial bank.
On September 25, 1997, the Company was initially capitalized with the issuance
to the Bank of 1,000 shares of the Company's common stock (the "Common Stock"),
$1.00 par value. On December 22, 1997, the Company commenced its operations upon
consummation of an initial public offering of 2,070,000 shares of the Company's
8.70% Noncumulative Preferred Stock, Series A (the "Series A Preferred Shares"),
$10.00 liquidation preference. These offerings, together with a separate capital
contribution of $20.9 million made by the Bank on December 22, 1997, raised net
capital of approximately $41.6 million.
The Company used the proceeds raised from the initial public offering of the
Series A Preferred Shares, the sale of Common Stock to the Bank and the
additional capital contribution to the Company by the Bank to pay the expenses
related to the offering and the formation of the Company and to purchase from
the Bank the Company's initial portfolio of residential and commercial mortgage
loans at their estimated fair value of approximately $41.5 million. Such loans
were recorded in the accompanying balance sheet at their estimated fair values.
NOTE 2 - RESIDENTIAL AND C0MMERICAL MORTGAGE LOANS:
Of the residential mortgage loans included in the portfolio, 58.9% bear interest
at fixed rates. At March 31, 1998, the interest rates of the fixed rate
residential mortgage loans included in the portfolio range from 6.00% per annum
to 10.25% per annum. The weighted average interest rate of the fixed rate
residential mortgage loans included in the portfolio at March 31, 1998 was
approximately 8.29% per annum.
Of the residential mortgage loans included in the portfolio, approximately 49.3%
bear interest at adjustable rates. The interest rates on the "adjustable rate
mortgages" or "ARMs" contained in the portfolio are all tied to the one-year
Treasury Index ("One-Year ARM"), and adjust periodically. The interest rates of
the residential mortgage loans included in the portfolio that are ARMs ranged
from 7.00% per annum to 8.75% per annum as of March 31, 1998. As of March 31,
1998, the weighted average current interest rate of the residential mortgage
loans included in the portfolio that are ARMs was approximately 8.01% per annum.
The commercial mortgage loans included in the portfolio generally consist of
retail strip centers, multi-family residential rental properties, warehouse,
industrial and office center properties located in Michigan. The outstanding
principal balances of the commercial mortgage loans included in the portfolio
ranged from $116,659 to $1.9 million as of March 31, 1998.
Of the commercial mortgage loans included in the portfolio at March 31, 1998,
62.5% bear interest at fixed rates. The interest rates of the fixed rate
commercial mortgage loans included in the portfolio ranged from 7.75% per annum
to 12.00% per annum at March 31, 1998.
Of the commercial mortgage loans included in the portfolio at March 31, 1998,
37.5% bear interest at variable rates which are typically tied to an index (such
as the Bank's Prime Rate or the U.S. Treasury Index adjusted for a constant
maturity of either one year or three years) and are adjustable periodically. The
interest rates borne by the variable rate commercial mortgage loans included in
the portfolio ranged from 8.00% per annum to 10.00% per annum as of March 31,
1998.
5
<PAGE> 8
NOTE 3 - PREFERRED STOCK
On December 22, 1997, the Company sold $20.7 million of Series A Preferred
Shares, $10.00 par value and received net cash proceeds of $19.8 million. Cash
dividends on the Series A Preferred Shares are payable quarterly in arrears at
an annual rate of 8.70%. The liquidation value of each Series A Preferred Share
is $.87 plus accrued and unpaid dividends for the most recent quarter thereon,
if any, to the date of liquidation. The Series A Preferred Shares are not
redeemable until December 22, 2002, and are redeemable thereafter at the option
of the Company. Except under certain circumstances, the holders of the Series A
Preferred Shares have no voting rights. The Series A Preferred Shares are
automatically exchangeable for a new series of preferred stock of the Bank upon
the occurrence of certain events.
NOTE 4 - DIVIDENDS:
During the three months ended March 31, 1998, the Company's Board of Directors
declared $500,112 of preferred stock dividends. Dividends of $450,225 were paid
on March 31, 1998. The remaining dividend of $49,887, representing dividends due
for the period December 22 through December 31, 1997, were paid on April 13,
1998.
PART I
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
FINANCIAL CONDITION
Organization
Franklin Finance Corporation (the "Company") is a newly formed Michigan
corporation incorporated on September 25, 1997, and created for the purpose of
acquiring and holding real estate mortgage assets ("Mortgage Assets"). The
Company elected to be treated as a real estate investment trust (a "REIT") under
the Internal Revenue Code of 1986, as amended (the "Code"), and generally will
not be subject to Federal income tax to the extent that it distributes its
earnings to its stockholders and maintains its qualification as a REIT. All of
the shares of the Company's common stock, par value $300.00 per share (the
"Common Stock"), are owned by Franklin Bank, N.A., a nationally chartered and
federally insured national bank (the "Bank"). The Company was formed by the Bank
to provide the Bank with a cost- effective means of raising capital.
On December 22, 1997, the Company commenced its operations upon the closing of
the initial public offering (the "Offering") of 2,070,000 shares of the
Company's 8.70% Noncumulative Exchangeable Preferred Stock, Series A, par value
$10.00 per share (the "Series A Preferred Shares"). The net proceeds to the
Company from the sale of the Series A Preferred Shares were $19.8 million.
Simultaneous with the consummation of the Offering, the Bank made capital
contributions to the Company with respect to its Common Stock in the amount of
$20.7 million, plus an additional $1.1 million representing the underwriting
discount and the expenses of the Offering.
The Company used the net proceeds of $42.9 million raised from the Offering and
the capital contributions by the Bank to purchase from the Bank the Company's
initial portfolio of Mortgage Assets, comprised of residential and commercial
mortgage loans ("Mortgage Loans"), at their estimated fair value of
approximately $41.5 million. Such loans were recorded in the accompanying
financial statements at the Bank's historical cost basis of $41.2 million and
the premium paid with the purchase of the loans of $0.3 million.
The Bank administers the day-to-day activities of the Company in its role as
advisor under an Advisory Agreement. The Bank also services the Company's
Mortgage Assets pursuant to servicing agreements between the Company and the
Bank.
6
<PAGE> 9
Residential and Commercial Mortgage Loans
At March 31, 1998, the Company had $21.2 million invested in loans secured by
first mortgages or deeds of trust on single-family residential real estate
properties ("Residential Mortgage Loans"). The $1.6 million decrease from the
balance at December 31, 1997, resulted from Residential Mortgage Loan principal
collections and individual loan payoffs. Management intends to continue to
reinvest proceeds received from repayments of loans in additional Residential
Mortgage Loans to be purchased from either the Bank or its affiliates. See
"Results of Operations."
At March 31, 1998, the Company had $17.6 million invested in mortgage loans
secured by income-producing properties ("Commerical Mortgage Loans") that
consist of retail strip centers, multi-family residential rental properties,
warehouse, industrial and office center properties located in Michigan. The $1.1
million decrease from the balance at December 31, 1997, resulted from Commercial
Mortgage Loan principal collections and individual loan payoffs of $2.1 and the
purchase of loans for the portfolio of $1.0 million. Management intends to
continue to reinvest proceeds received from repayments of loans in additional
Commerical Mortgage Loans to be purchased from either the Bank or its
affiliates. See "Results of Operations."
At March 31, 1998, the Company had no non-accrual loans (loans contractually
past due 90 days or more or with respect to which other factors indicate that
full payment of principal and interest is unlikely).
Allowance for Loan Losses
The allowance for loan losses is maintained at a level believed adequate by
management to absorb potential losses in the loan portfolio. Management's
determination of the adequacy of the allowance is based on an evaluation of the
portfolio, past loan loss experience, current economic conditions, volume,
amount and composition of the loan portfolio, and other factors. The allowance
is increased by provisions for loan losses charged to income and reduced by net
charge-offs. The activity in the allowance for loan losses for the three months
ended March 31, 1998 is as follows:
<TABLE>
<CAPTION>
Three Months Ended
March 31, 1998
------------------
<S> <C>
Balance at beginning of period $ --
Provision for loan losses 12,000
Charge-offs 0
Recoveries 0
-------
Balance at end of period $12,000
=======
</TABLE>
Interest Rate Risk
The Company's income consists primarily of interest payments on mortgage loans.
If there is a decline in interest rates (as measured by the indices upon which
the interest rates of the adjustable rate mortgage loans are based), then the
Company will experience a decrease in income available to be distributed to its
shareholders. There can be no assurance that an interest rate environment in
which there is a significant decline in interest rates, over an extended period
of time, would not adversely affect the Company's ability to pay dividends on
the Series A Preferred Shares. Currently, the Company does not use any
derivative products to manage its interest rate risk.
Significant Concentration of Credit Risk
Concentration of credit risk arises when a number of customers engage in similar
business activities, or activities in the same geographical region, or have
similar economic features that would cause their ability to meet contractual
obligations to be similarly affected by changes in economic conditions.
Concentration of credit risk indicates the relative sensitivity of the Company's
performance to both positive and negative developments affecting a particular
industry.
Geographically, the Company's Mortgage Loans generally will be concentrated in
the State of Michigan. Geographic concentration of loans may present risks in
addition to those present with respect to mortgage loans
7
<PAGE> 10
generally. All of the properties underlying the Company's Residential and
Commercial Mortgage Loans included in the current portfolio are located in
Michigan. Mortgage Loans secured by properties located in Michigan may be
subject to a greater risk of default than other comparable mortgage loans in the
event of adverse economic, political or business developments or natural hazards
that may affect Michigan and the ability of borrowers in Michigan to make
payments of principal and interest on such loans.
Liquidity and Capital Resources
The objective of liquidity management is to ensure the availability of
sufficient cash flows to meet all of the Company's financial commitments. In
managing liquidity, the Company takes into account various legal limitations
placed on a REIT as discussed below in "Tax Status of the Company."
The Company's principal liquidity needs are to maintain the current portfolio
size through the acquisition of additional mortgage loans as Mortgage Loans
currently in the portfolio mature or prepay, and to pay dividends on the Series
A Preferred Shares. The acquisition of additional mortgage loans is intended to
be funded with the proceeds obtained from repayment of principal balances by the
individual mortgagees. The Company does not have and does not anticipate having
any material capital expenditures.
To the extent that the Board of Directors determines that additional funding is
required, the Company may raise such funds through additional equity offerings,
debt financing or retention of cash flows (after consideration of provisions of
the Code requiring the distribution by a REIT of at least 95% of its "REIT
taxable income" and taking into account taxes that would be imposed on
undistributed income), or a combination of these methods, subject to certain
approvals as described in the Company's organizational documents.
Tax Status of the Company
The Company has elected to be taxed as a REIT under Sections 856 through 860 of
the Code, commencing with its taxable year ended December 31, 1997. As a REIT,
the Company generally will not be subject to Federal income tax on its net
income (excluding capital gains) provided that it distributes annually 95
percent of its REIT taxable income to its stockholders, and meets certain
organizational, stock ownership and operational requirements. If in any taxable
year the Company fails to qualify as a REIT, the Company would not be allowed a
deduction for distributions to stockholders in computing its taxable income and
would be subject to Federal and state income tax (including any applicable
alternative minimum tax) on its taxable income at regular corporate rates. In
addition, the Company would also be disqualified from treatment as a REIT for
the four taxable years following the year during which qualification was lost.
As of March 31, 1998, the Company believed that it was in compliance with the
REIT tax rules and that it will continue to qualify as a REIT under the
provisions of the Code.
RESULTS OF OPERATIONS
During the three months ended March 31, 1998, the Company reported net income of
$745,617. Interest income on Residential Mortgage Loans totaled $433,425, which
represents an average yield on such loans of 8.01%. Interest income on
Commercial Mortgage Loans totaled $394,709, which represents an average yield on
such loans of 8.80%. The average loan balance of the Residential and Commercial
Mortgage Loan portfolio for the period was $21.9 million and $18.2 million,
respectively.
Provision for loan losses of $12,000 was recorded on the Company's loan
portfolio during the three-month period.
Operating expenses totaling $70,516 for the three-month period was comprised of
loan servicing fees and advisory fees paid to the Bank, directors fees, and
general and administrative expenses. Loan servicing fees paid to the Bank of
$29,786 for the three-month period was based on a servicing fee rate of .375% of
the outstanding principal balances of the Residential and Commerical Mortgage
Loans, pursuant to the servicing agreements between the Company and the Bank.
Advisory fees paid to the Bank for the three-month period totaled $31,272.
Directors fees totaled $1,000, and represents compensation to the 2 independent
members of the Board of Directors. General and administrative expenses consist
primarily of insurance and outside service costs.
On February 26, 1998, the Company declared, out of the retained earnings of the
Company, a cash dividend of $.87 per share on the outstanding shares of Series A
Preferred Stock for the period of December 22, 1997 through March 31, 1998.
Dividends of $450,225 and $49,887 were subsequently paid on March 31, 1998 for
the period
8
<PAGE> 11
January 1 through March 31, 1998, and April 13, 1998, for payment for the period
December 22 through December 31, 1997, respectively.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is not the subject of any material litigation. None of the Company,
the Bank or any affiliate of the Bank is currently involved in nor, to the
Company's knowledge, is currently threatened with any material litigation with
respect to the Residential Mortgage Loans or Commercial Mortgage Loans included
in the Company's portfolio which litigation would have a material effect on the
business or operations of the Company.
ITEM 2. CHANGES IN SECURITIES
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits required by item 601 of Regulation S-K are set forth below.
NO. EXHIBIT
11 Computation of Net Income Per Common Share
12 Computation of ratio of income to fixed charges and Preferred Stock
dividend requirements.
27 Financial Data Schedule
(b) No reports on Form 8-K were issued during the three months ended March 31,
1998
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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, in Southfield, Michigan on
May 13, 1998.
9
<PAGE> 12
FRANKLIN FINANCE CORPORATION
(Registrant)
By:
-----------------------------------------
Read P. Dunn
President and Chief Executive Officer
(Duly authorized representative)
By:
--------------------------------------
David L. Shelp
Director, Treasurer and Chief Financial Officer
(Principal financial and accounting officer)
10
<PAGE> 13
INDEX TO EXHIBITS
EXHIBIT NO. DESCRIPTION
- ------- --- -----------
11 Computation of Net Income Per Common Share
12 Computation of ratio of income to fixed charges
and Preferred Stock dividend requirements
27 Financial Data Schedule
<PAGE> 1
EXHIBIT 11
FRANKLIN FINANCE CORPORATION
COMPUTATION OF NET INCOME PER SHARE
Net income for basic income per share are computed by subtracting from the
applicable income the dividend requirements on preferred stock to arrive at
income applicable to common stock and dividing this amount by the weighted
average number of shares of common stock outstanding during the period.
<TABLE>
<CAPTION>
Three Months Ended
March 31, 1998
-------------------
<S> <C>
INCOME
Net income $745,617
Less: preferred stock dividend requirements 450,772
--------
Net income applicable to common stock 294,845
SHARES
Weighted average number of common shares outstanding 22,077
NET INCOME PER SHARE $ 13.36
</TABLE>
<PAGE> 1
EXHIBIT 12
COMPUTATION OF RATIO OF INCOME TO FIXED CHARGES AND PREFERRED STOCK DIVIDEND
REQUIREMENTS
For Three Months
Ended
March 31, 1998
--------------------
Net income 745,617
Fixed charges:
Income before fixed charges 745,617
Fixed charges, as above 0
Preferred stock dividend requirements 450,225
Fixed charges including preferred
stock dividends 450,225
Ratio of income to fixed charges and
preferred stock dividend requirements 1.66
11
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 4,303,037
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 0
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 38,788,825
<ALLOWANCE> 12,000
<TOTAL-ASSETS> 43,313,931
<DEPOSITS> 0
<SHORT-TERM> 0
<LIABILITIES-OTHER> 1,376,808
<LONG-TERM> 0
0
20,700,000
<COMMON> 6,623,100
<OTHER-SE> 14,614,023
<TOTAL-LIABILITIES-AND-EQUITY> 43,313,931
<INTEREST-LOAN> 828,133
<INTEREST-INVEST> 0
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 828,133
<INTEREST-DEPOSIT> 0
<INTEREST-EXPENSE> 0
<INTEREST-INCOME-NET> 1,656,266
<LOAN-LOSSES> 12,000
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 70,516
<INCOME-PRETAX> 745,617
<INCOME-PRE-EXTRAORDINARY> 745,617
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 745,617
<EPS-PRIMARY> 13.36
<EPS-DILUTED> 13.36
<YIELD-ACTUAL> 9.00
<LOANS-NON> 0
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 0
<CHARGE-OFFS> 0
<RECOVERIES> 0
<ALLOWANCE-CLOSE> 0
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
