U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-QSB
Quarterly Report Under Section 13 or 15 (d) of the
Securities Exchange Act of 1934
For Quarter ended March 31, 1995 COMMISSION FILE NUMBER 0-10898
-------------------- --------
MERCHANTS CAPITAL CORPORATION
-------------------------------
(Exact name of registrant as specified in charter)
MISSISSIPPI 64-0655603
- ------------------ --------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
820 South Street 39180
Vicksburg, Mississippi --------------
-------------------------- (Zip Code)
(address of principal executive offices)
Registrant's telephone number, including area code (601) 636-3752
--------------
Not Applicable
- ----------------------------------------------------------------------------
Former name, former address and former fiscal year; if changed since last
report
Indicate by check mark whether the registrants (1) has filed all reports
required to be filed by Sections 13 or 15 (d) of the Securities 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
612,988 common shares were outstanding as of March 31, 1995.
1
MERCHANTS CAPITAL CORPORATION
INDEX
Page
Number
Part 1. Financial Information
Item 1. Financial Statements
Consolidated Statements of Financial Condition 3
March 31, 1995 (Unaudited) and December 31, 1994
(Unaudited)
Consolidated Statements of Income
Three Months Ended March 31, 1995 and 1994 4
(Unaudited)
Consolidated Statements of Changes in Stockholders'
Equity, Three Months Ended March 31, 1995 and 1994 5
(Unaudited)
Consolidated Statements of Cash Flows
Three Months Ended March 31, 1995 and 1994 6
(Unaudited)
Notes to Consolidated Financial Statements 7
(Unaudited)
Item 2. Management's Discussion and Analysis of Financial 8
Condition and Results of Operations
Part 2. Other Information
Item 1. Legal Proceedings 9
Item 6. Exhibits and Reports on Form 8-K 9
2
MERCHANTS CAPITAL CORPORATION
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
March 31, 1995 Dec. 31, 1994
(Unaudited) (Unaudited)
------------- -------------
ASSETS:
Cash & due from banks $9,239,872 $9,945,350
Investment securities:
Held-to-maturity 21,208,879 21,722,246
Available-for-sale 35,385,930 22,127,650
Federal funds sold 4,220,000 13,625,000
Loans - net 101,289,810 99,555,905
Bank premises & equipment - net 2,414,862 2,477,772
Other real estate 139,334 154,114
Accrued interest receivable 1,470,429 1,448,035
Other assets 968,044 1,000,757
Premuim paid on purchased assets &
deposits less amortization 237,450 243,900
------------- -------------
TOTAL ASSETS $176,574,610 $172,300,729
============= =============
LIABILITIES & STOCKHOLDERS' EQUITY
LIABILITIES:
Deposits:
Non-interest bearing deposits $20,779,842 $20,486,461
Interest bearing deposits 136,637,912 133,655,515
------------- -------------
Total deposits 157,417,754 154,141,976
Securities Sold Under Repurchase Agreement 3,891,418 3,348,103
Accrued interest payable 625,719 640,480
Accrued taxes and other liabilities 518,284 463,326
------------- -------------
TOTAL LIABILITIES 162,453,175 158,593,885
STOCKHOLDERS' EQUITY:
Common stock, $5 par value per share:
Authorized - 1,000,000 shares
Issued & outstanding 612,988 shares 3,064,940 3,064,940
Additional paid-in capital 10,784,316 10,784,316
Unrealized gain (loss) on securities AFS (327,142) (534,954)
Retained earnings 599,321 392,542
------------- -------------
TOTAL STOCKHOLDERS' EQUITY 14,121,435 13,706,844
------------- -------------
TOTAL LIABILITIES and STOCKHOLDERS' EQUITY $176,574,610 $172,300,729
============= =============
See notes to consolidated financial statements.
3
MERCHANTS CAPITAL CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
Three Months Ended
March 31,
1995 1994
Interest Income: ------------- -------------
Interest and fees on loans $2,332,132 $1,942,120
Interest on investment securities
Taxable interest income 768,276 783,739
Interest income exempt from
federal income taxes 27,085 21,249
Interest on federal funds sold 100,154 68,182
------------- -------------
TOTAL INTEREST INCOME 3,227,647 2,815,290
Interest Expense:
Interest on deposits 1,391,867 1,096,367
Interest on fed funds pur & sec sold u/repo 47,925 16,890
Interest on capital lease obligat oblig. - 380
------------- -------------
TOTAL INTEREST EXPENSE 1,439,792 1,113,637
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NET INTEREST INCOME 1,787,855 1,701,653
Provision for loan losses 40,000 75,000
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NET INTEREST INCOME AFTER
PROVISON FOR LOAN LOSSES 1,747,855 1,626,653
Other Income:
Service charges on deposits 279,326 216,337
Trust service income 71,321 57,600
Insurance premium and commissions 87,285 111,994
Other 50,320 77,849
------------- -------------
TOTAL OTHER INCOME 488,252 463,780
Other Expenses:
Salaries 657,197 622,758
Employee benefits 163,177 163,208
Net occupancy expense 110,911 115,906
Equipment expense 152,103 165,939
Other 579,837 562,005
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TOTAL OTHER EXPENSES 1,663,225 1,629,816
------------- -------------
INCOME BEFORE INCOME TAXES 572,882 460,617
INCOME TAX PROVISION 212,856 151,325
------------- -------------
NET INCOME $360,026 $309,292
============= =============
Net income per common share (Note 3) $0.59 $0.50
Dividends per common share $0.25 $0.23
Average number of shares of common
stock outstanding 612,988 612,988
See notes to consolidated financial statements.
4
<TABLE>
MERCHANTS CAPITAL CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
THREE MONTHS ENDED MARCH 31, 1995 AND 1994
(Unadited)
<CAPTION>
Additional Unrealized
Common Paid-In Gain (Loss) Retained
Stock Capital on Sec. AFS Earnings Total
------------ ------------- ------------- ----------- ------------
<S> <C> <C> <C> <C> <C>
BALANCE, January 1, 1994 $2,787,320 $9,673,836 - $984,284 $13,445,440
Net income 309,292 309,292
Cash dividends declared
(.23 per share) (139,366) (139,366)
Unrealized gain (loss)
on securities AFS (151,610) (151,610)
------------ ------------- ------------- ----------- ------------
BALANCE, March 31, 1994 $2,787,320 $9,673,836 ($151,610) $1,154,210 $13,463,756
============ ============= ============= =========== ============
BALANCE, January 1, 1995 $3,064,940 $10,784,316 (534,954) $392,542 $13,706,844
Net income 360,026 360,026
Cash dividends declared
(.25 per share) (153,247) (153,247)
Unrealized gain (loss)
on securities AFS 207,812 207,812
------------ ------------- ------------- ----------- ------------
BALANCE March 31 1995 $3,064,940 $10,784,316 ($327,142) $599,321 $14,121,435
============ ============= ============= =========== ============
See notes to consolidated financial statements.
5
</TABLE>
<TABLE>
MERCHANTS CAPITAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<CAPTION>
Three Months Ended
March 31,
----------------------------
1995 1994
<S> <C> <C>
OPERATING ACTIVITIES: ------------- -------------
Net income $360,026 $309,292
Adjustments to reconcile net income to net
cash provided by operating activities:
Provision for loan losses 40,000 75,000
Provision for depreciation and amortization 129,885 119,335
(Increase) decrease in accrued interest receivable (22,394) 57,662
Increase in other assets (85,371) (208,358)
Decrease in accrued interest payable (14,761) (113,211)
Increase (decrease) in taxes and other liabilities 54,958 (83,539)
------------- -------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 462,343 156,181
------------- -------------
INVESTING ACTIVITIES:
Decrease (increase) in federal funds sold 9,405,000 (5,210,000)
Proceeds from sales of investment securities-HTM - -
Proceeds from maturities of investment securities-HTM - -
Purchase of investment securities-HTM - -
Proceeds from sales of investment securities-AFS - 2,685,810
Proceeds from maturities of investment securities-AFS 6,010,062 14,909,410
Purchase of investment securities-AFS (18,830,582) (8,977,522)
Prepayments on Mortgage Backed securities 416,283 1,421,067
Net increase in loans (1,773,905) (2,884,907)
Purchases of premises and equipment (60,525) (53,977)
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NET CASH (USED) PROVIDED USED BY INVESTING ACTIVITIES (4,833,667) 1,889,881
------------- -------------
FINANCING ACTIVITIES:
Net decrease in deposits 3,275,778 624,618
Cash dividends paid (153,247) (418,098)
Net increase in Sec. sold under repurchase agreement 543,315 329,083
------------- -------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 3,665,846 535,603
------------- -------------
DECREASE IN CASH AND CASH EQUIVALENTS (705,478) 2,581,665
CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE YEAR 9,945,350 8,761,044
------------- -------------
CASH AND CASH EQUIVALENTS AT END OF YEAR $9,239,872 $11,342,709
============= =============
SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
Dividends declared but not paid $153,247 $139,366
Total (decrease) increase in unrealized loss on
securities available for sale net of deferred taxes ($207,812) 151,610
See notes to consolidated financial statements.
6
</TABLE>
MERCHANTS CAPITAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Basis of Consolidated Financial Statements
The consolidated fianacial statement include Merchants Capital
Corporation and its wholly owned subsidiary, Merchants Bank and its
wholly owned subsidiary Merchants Credit Company. All intercompany
profits, transactions and balances have been eliminated.
The consolidated financial statements have been prepared by the Company
without an audit. In the opinion of management, all adjustments (which
include only normal recurring adjustments) necessary to present fairly
the financial position, results of their operations and their cash flows
as of March 31, 1995, and for all periods presented have been made.
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted. The results of
operations for the periods ended March 31, 1995, are not necessarily
indicative of operating results for the full year. It is suggested these
financial statements be read in conjunction with the Company's Annual
Report and proxy statements filed with its Form 10-k for the year ended
December 31, 1994.
2. Change in Accounting Principle
Due to FASB #115, which became effective January 1,1994, the Company
reclassified the securities held in the investment portfolio into two
categories: Available for Sale and Held to Maturity. The Available for
Sale securities are recorded at market value while the Held to Maturity
securities are recorded at book value. An unrealized loss on the
Available for Sale securities was recognized for $327,142.00, net of
deferred taxes, reducing the Company's equity as of March 31, 1995.
3. Net Income Per Share of Common Stock
Net income (loss) per share of common stock is based on the weighted
average number of share outstanding during each period, after giving
retroactive effect to stock dividends.
4. Acquisitions
On April 1, 1995, Merchants Bank purchased certain assets and assumed
certain liabilities of the Bank of Edwards, Edwards, Mississippi, for a
premium of $350,000 which will be amortize over a fifteen year period.
7
ITEM 2. Management's Discussion and Analysis of Financial Condition and
Results of Operation
Changes In Financial Position and Liquidity
- -------------------------------------------
In the three months ended March 31, 1995, assets increased by $4,273,881
or 2.48%. This resulted from increases of $12,744,913 in investments,
$1,733,905 in net increase in loans, and $22,394 in accrued interest
receivable. These increases were offset by decreases of $705,478 in cash and
due from banks, $9,405,000 in federal funds sold, $62,910 in bank premises
and equipment, $14,780 in other real estate, $32,713 in other assets, and
$6,450 in premium paid on purchased assets and deposits. The net increase in
liabilities and equity was a result of increases of $3,275,778 in deposits,
$543,315 in securities sold under repurchased agreements, $54,958 in accrued
taxes and other liabilities, and $206,779 in retained earnings which was
offset by a decrease of $14,761 in accrued interest payable. Also, assets
stockholders equity were increased by a decrease of $207,812 in net
unrealized loss on securities available for sale.
Results of Operations
- ---------------------
In the first quarter ended March 31, 1995, net income increased by
$50,734 or 16.40% over the first quarter income of 1994. Net interest income
increased by $86,202 or 5.07% as a result of an increase of $412,357 or
14.65% in interest income and an increase of $326,155 or 29.29% in interest
expense. The provision for loan losses decreased by $35,000 or 46.67%. Other
income increased by $24,472 or 5.28% and so did other expenses by $33,409
or 2.05%. The income tax provision increased by $61,531 or 40.66%.
Capital Adequacy
- ----------------
The Company and the Bank must maintain certain levels of capitalization
as prescribed by the various regulators. The Company and the Bank must
maintain minimum amounts of capital to total "risk weighted" assets, as
outlined under the regulators' 1992 risk-based capital guidelines. The
Company and the Bank are required to have minimum Tier I and total capital
ratios of 4% and 8%, respectively. The actual ratios at March 31, 1995,
were 13.14% and 14.36% (Company) and 12.54% and 13.76% (Bank), respectively.
The Company and the Bank's leverage ratios at March 31, 1995, were 8.05%
and 7.68%, respectively. The minimum required leverage ratio is 3%-5% with
an internal target ratio set at 6% by management.
The main source of capital expansion for the Company and the Bank
continues to be the retention of earnings. However, if the need arises
again, the Company can use its borrowing ability to inject needed capital
into the Bank. The net change in stockholders' equity of $414,591 in the
first three months was the result of the retention of earnings and a
decrease of the unrealized loss on securities available for sale. At the
present, there are no planned capital expenditures which would materially
restrict capital growth.
8
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
There are no legal proceedings that need to be disclosed as required
by Item 103 of Regulation S-B as of March 31, 1995.
Item 6. Exhibits and Reports on Form 8-K.
None.
9
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
MERCHANTS CAPITAL CORPORATION
--------------------------------
Date: May 12, 1995 Joel H. Horton
_____________________ _______________________________
Joel H. Horton
President and Chief Operating
Officer
Date: May 12, 1995 James R. Wilkerson, Jr.
________________ _________________________________
James R. Wilkerson, Jr.
Secretary
10
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> MAR-31-1995
<CASH> 9,152,352
<INT-BEARING-DEPOSITS> 81,776
<FED-FUNDS-SOLD> 4,220,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 35,385,930
<INVESTMENTS-CARRYING> 21,208,879
<INVESTMENTS-MARKET> 20,778,543
<LOANS> 101,289,810
<ALLOWANCE> 1,318,585
<TOTAL-ASSETS> 176,574,610
<DEPOSITS> 157,417,754
<SHORT-TERM> 3,891,418
<LIABILITIES-OTHER> 1,144,003
<LONG-TERM> 0
<COMMON> 3,064,940
0
0
<OTHER-SE> 11,056,495
<TOTAL-LIABILITIES-AND-EQUITY> 176,574,610
<INTEREST-LOAN> 2,332,132
<INTEREST-INVEST> 795,361
<INTEREST-OTHER> 100,154
<INTEREST-TOTAL> 3,227,647
<INTEREST-DEPOSIT> 1,391,867
<INTEREST-EXPENSE> 1,439,792
<INTEREST-INCOME-NET> 1,787,855
<LOAN-LOSSES> 40,000
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 1,663,225
<INCOME-PRETAX> 572,882
<INCOME-PRE-EXTRAORDINARY> 360,026
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 360,026
<EPS-PRIMARY> .59
<EPS-DILUTED> .59
<YIELD-ACTUAL> 8.03
<LOANS-NON> 571,889
<LOANS-PAST> 273,320
<LOANS-TROUBLED> 377,893
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 1,273,160
<CHARGE-OFFS> 48,514
<RECOVERIES> 53,939
<ALLOWANCE-CLOSE> 1,318,585
<ALLOWANCE-DOMESTIC> 1,318,585
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
