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 June 30, 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
674,054 common shares were outstanding as of June 30, 1995.
1
MERCHANTS CAPITAL CORPORATION
INDEX
Page
Number
Part 1. Financial Information
Item 1. Financial Statements
Consolidated Statements of Financial Condition 3
June 30, 1995 (Unaudited) and December 31, 1994
(Unaudited)
Consolidated Statements of Income
Three Months Ended and Six Months Ended 4
June 30,1995 and 1994 (Unaudited)
Consolidated Statements of Changes in Stockholders'
Equity, Six Months Ended June 30, 1995 and 1994 5
(Unaudited)
Consolidated Statements of Cash Flows
Six Months Ended June 30, 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
June 30, 1995 Dec. 31, 1994
(Unaudited) (Unaudited)
------------- -------------
ASSETS:
Cash & due from banks $9,859,048 $9,945,350
Investment securities:
Held-to-maturity ($22,449,179 market) 22,520,346 21,722,246
Available-for-sale 33,507,316 22,127,650
Federal funds sold 345,000 13,625,000
Loans - net 118,123,950 99,555,905
Bank premises & equipment - net 2,661,216 2,477,772
Other real estate 23,819 154,114
Accrued interest receivable 2,169,669 1,448,035
Other assets 784,380 1,000,757
Premuim paid on purchased assets &
deposits less amortization 575,167 243,900
-------------- -------------
TOTAL ASSETS $190,569,911 $172,300,729
============= =============
LIABILITIES & STOCKHOLDERS' EQUITY
LIABILITIES:
Deposits:
Non-interest bearing deposits $21,655,353 $20,486,461
Interest bearing deposits 146,344,633 133,655,515
------------- -------------
Total Deposits 167,999,986 154,141,976
Securities Sold Under Repurchase Agreement 6,640,724 3,348,103
Accrued interest payable 711,643 640,480
Accrued taxes and other liabilities 479,038 463,326
------------- -------------
TOTAL LIABILITIES 175,831,391 158,593,885
STOCKHOLDERS' EQUITY:
Common stock, $5 par value per share:
Authorized - 1,000,000 shares
Issued & outstanding 674,054 shares 3,370,270 3,064,940
Additional paid-in capital 11,852,971 10,784,316
Unrealized gain (loss) on securities AFS (99,970) (534,954)
Retained earnings (384,751) 392,542
TOTAL STOCKHOLDERS' EQUITY 14,738,520 13,706,844
------------- -------------
TOTAL LIABILITIES and STOCKHOLDERS' EQUITY $190,569,911 $172,300,729
============= =============
See notes to consolidated financial statements.
3
<TABLE>
MERCHANTS CAPITAL CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1995 1994 1995 1994
<S> <C> <C> <C> <C>
Interest Income: ------------- ------------- ------------------------
Interest and fees on loans $2,718,087 $2,100,131 $5,050,219 $4,042,251
Interest on investment securities
Taxable interest income 759,101 746,156 1,527,377 1,529,895
Interest income exempt from
federal income taxes 33,537 19,880 60,622 41,128
Interest on federal funds sold 130,246 91,848 230,400 160,030
------------- ------------- ----------- ------------
TOTAL INTEREST INCOME 3,640,971 2,958,015 6,868,618 5,773,304
Interest Expense:
Interest on deposits 1,537,154 1,145,701 2,929,020 2,242,068
Interest on fed funds pur & sec sold u/repo 44,895 27,471 92,820 44,361
Interest on capital lease obligat oblig. - 279 - 659
------------- ------------- ------------------------
TOTAL INTEREST EXPENSE 1,582,049 1,173,451 3,021,840 2,287,088
------------- ------------- ------------------------
NET INTEREST INCOME 2,058,922 1,784,564 3,846,778 3,486,216
Provision for loan losses - 25,000 40,000 100,000
------------- ------------- ------------------------
NET INTEREST INCOME AFTER
PROVISON FOR LOAN LOSSES 2,058,922 1,759,564 3,806,778 3,386,216
Other Income:
Service charges on deposits 310,781 255,395 590,107 471,733
Trust service income 80,365 117,390 151,686 174,989
Insurance premium and commissions 86,358 127,284 173,642 239,278
Other 52,129 54,486 99,526 132,335
------------- ------------- ------------------------
TOTAL OTHER INCOME 529,633 554,555 1,014,961 1,018,335
Other Expenses:
Salaries 715,645 602,502 1,372,842 1,225,260
Employee benefits 170,619 179,092 333,796 342,300
Net occupancy expense 130,093 111,428 241,004 227,334
Equipment expense 154,240 137,776 306,343 303,715
Other 642,253 516,593 1,219,168 1,078,598
------------- ------------- ------------------------
TOTAL OTHER EXPENSES 1,812,850 1,547,391 3,473,153 3,177,207
------------- ------------- ------------------------
INCOME BEFORE INCOME TAXES 775,705 766,728 1,348,586 1,227,344
INCOME TAX PROVISION 212,040 250,825 424,896 402,150
------------- ------------- ------------------------
NET INCOME $563,665 $515,903 $923,690 $825,194
============= ============= ========================
Net income per common share (Note 3) $0.84 $0.77 $1.37 $1.22
Dividends per common share $0.25 $0.23 $0.48 $0.43
Average number of shares of common
stock outstanding 674,054 674,054 674,054 674,054
See notes to consolidated financial statements.
4
</TABLE>
<TABLE>
MERCHANTS CAPITAL CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
SIX MONTHS ENDED JUNE 30, 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 825,194 825,194
Cash dividends declared
(.43 per share) (292,612) (292,612)
Stock dividend (10%) 277,620 1,110,480 (1,388,100) -
Fractional shares
purchased (222.4 shares
@$25 per share) (5,560) (5,560)
Unrealized gain (loss)
on securities AFS (355,569) (355,569)
------------ ------------- ------------- ----------- ------------
BALANCE, June 30, 1994 $3,064,940 $10,784,316 ($355,569) $123,206 $13,616,893
============ ============= ============= =========== ============
BALANCE, January 1, 1995 $3,064,940 $10,784,316 (534,954) $392,542 $13,706,844
Net income 923,690 923,690
Cash dividends declared
(.48 per share) (321,760) (321,760)
Stock dividend (10%) 305,330 1,068,655 (1,373,985) -
Fractional shares
purchased (232.8 shares
@$22.50 per share) (5,238) (5,238)
Unrealized gain (loss)
on securities AFS 434,984 434,984
------------ ------------- ------------- ----------- ------------
BALANCE, June 30, 1995 $3,370,270 $11,852,971 ($99,970) ($384,751) $14,738,520
============ ============= ============= =========== ============
See notes to consolidated financial statements.
5
</TABLE>
<TABLE>
MERCHANTS CAPITAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Six Months Ended
<CAPTION>
----------------------------
1995 1994
<S> <C> <C>
OPERATING ACTIVITIES: ------------- -------------
Net income $923,690 $825,194
Adjustments to reconcile net income to net
cash provided by operating activities:
Provision for loan losses 40,000 100,000
Provision for depreciation and amortization 269,348 237,030
Gain on sale of securities - (6,421)
Increase in accrued interest receivable (721,634) (69,979)
Increase in other assets (281,432) (55,267)
Increase (decrease) in accrued interest payable 71,163 (64,873)
Increase (decrease) in taxes and other liabilities 446 (136,963)
------------- -------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 301,581 828,721
------------- -------------
INVESTING ACTIVITIES:
Decrease in federal funds sold 13,280,000 7,200,000
Purchase of investment securities-HTM (1,940,892) (1,991,250)
Proceeds from sales of investment securities-AFS - 7,686,462
Proceeds from maturities of investment securities-AFS 17,281,630 28,058,674
Purchase of investment securities-AFS (27,998,582) (30,706,810)
Prepayments on Mortgage Backed securities 1,193,166 2,596,316
Net increase in loans (18,608,045) (7,484,449)
Purchases of premises and equipment (434,059) (151,451)
------------- -------------
NET CASH (USED) PROVIDED BY INVESTING ACTIVITIES (17,226,782) 5,207,492
------------- -------------
FINANCING ACTIVITIES:
Net increase (decrease) in deposits 13,858,010 (6,277,584)
Cash dividends paid (306,494) (557,464)
Payment of fractional shares from 10% stock dividend (5,238) (5,560)
Net increase in Sec. sold under repurchase agreement 3,292,621 3,504,326
------------- -------------
NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES 16,838,899 (3,336,282)
------------- -------------
(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (86,302) 2,699,931
CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE YEAR 9,945,350 8,761,044
------------- -------------
CASH AND CASH EQUIVALENTS AT END OF YEAR $9,859,048 $11,460,975
============= =============
SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
Dividends declared but not paid $168,513 $153,247
Total (decrease) increase in unrealized loss on
securities available for sale net of deferred taxes ($434,984) 355,569
Stock dividends declared $1,373,985 1,388,100
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 June 30, 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 June 30, 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 $99,970.02, net of
deferred taxes, reducing the Company's equity as of June 30, 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 amortized 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 six months ended June 30, 1995, assets increased by $18,269,182
or 10.6%. This resulted from increases of $12,177,766 in investments,
$18,568,045 in net increase in loans, $183,444 in bank premises and
equipment, $721,634 in accrued interest receivable, and $331,267 in premium
paid in purchased assets. These increases were offset by decreases of
$86,302 in cash and due from banks, $13,280,000 in federal funds sold,
$130,295 in other real estate, and $216,377 in other assets. The increase in
assets was a result of net increases of $13,858,010 in deposits, $3,292,621
in securities sold under repurchase agreement, $71,163 in accrued interest,
$15,712 in accrued taxes and other liabilities, and $1,373,985 in common
stock and surplus. These increases were offset by a decrease of $777,293
in retained earnings resulting from year-to-date net income of $923,690
less cash dividends declared of $321,760 less 10% stock dividend of
$1,379,223. Also, assets and shareholders equity were increased by $434,984
due to a decrease in net unrealized loss on securities available for sale.
Results of Operations
---------------------
In the second quarter ended June 30, 1995, net income increased by
$47,762 or 9.26% over the second quarter income of 1994. Net interest income
increased by $274,358 or 15.37% as a result of an increase of $682,956 or
23.09% in interest income and an increase of $408,598 or 34.82% in interest
expense. The provision for loan losses decreased by $25,000 or 100.0%. Other
income decreased by $24,922 or 4.49% while other expenses increased by
$265,459 or 17.16%. The income tax provision decreased by $38,785 or 15.46%.
The six months ended June 30, 1995, resulted in an increased of $98,496
or 11.94% in net income in comparison with the first six months of 1994.
Net interest income increased by $360,562 or 10.34% as a result of an
increase of $1,095,314 or 18.97 % in interest income and $734,752 or 32.13%
in interest expense. The provision for loan losses decreased by $60,000 or
60%. Other income decreased by $3,374 or .33% while other expenses increased
by $295,946 or 9.31%. The income tax provision increased by $22,746 or
5.66%.
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 June 30, 1995,
were 11.38% and 12.63% (Company) and 11.86% and 12.11% (Bank), respectively.
The Company and the Bank's leverage ratios at June 30, 1995, were 7.48%
and 7.14, 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 $1,031,676 in the
first six 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 June 30, 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 ______________________ _______________________________
(Signature)
Joel H. Horton
President and Chief Operating
Officer
Date ______________________ _______________________________
(Signature)
James R. Wilkerson
Secretary
10
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> JUN-30-1995
<CASH> 9767800
<INT-BEARING-DEPOSITS> 91248
<FED-FUNDS-SOLD> 345000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 33507316
<INVESTMENTS-CARRYING> 22520346
<INVESTMENTS-MARKET> 22449179
<LOANS> 118123950
<ALLOWANCE> 2160538
<TOTAL-ASSETS> 190569911
<DEPOSITS> 167999986
<SHORT-TERM> 6640724
<LIABILITIES-OTHER> 1190681
<LONG-TERM> 0
<COMMON> 3370270
0
0
<OTHER-SE> 11368250
<TOTAL-LIABILITIES-AND-EQUITY> 190569911
<INTEREST-LOAN> 5050219
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<INTEREST-EXPENSE> 3021840
<INTEREST-INCOME-NET> 3846778
<LOAN-LOSSES> 40000
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 3473153
<INCOME-PRETAX> 1348586
<INCOME-PRE-EXTRAORDINARY> 923690
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