<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE SECURITIES
------ EXCHANGE ACT OF 1934
For the quarterly period ended MARCH 31, 1996
--------------
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
------ EXCHANGE ACT OF 1934
For the transition period from ________ TO ________
Commission File Number 0-11033
GULF SOUTHWEST BANCORP, INC.
(Exact name of registrant as specified in its charter)
TEXAS 76-0045946
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
4200 WESTHEIMER, SUITE 210,
HOUSTON, TEXAS 77027
(Address of principal executive offices) (zip code)
(713) 622-0042
(Registrant's telephone number, including area code)
NOT APPLICABLE
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes [X] NO [_]
As of May 1, 1996, Registrant had outstanding 1,943,970 shares of its $1.00 par
value per share common stock.
1
<PAGE>
PART 1 - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
--------------------
The following financial statements are provided in response to item 1:
2
<PAGE>
PRESENTATION OF FINANCIAL INFORMATION
The consolidated balance sheet as of March 31, 1996 and the consolidated
statements of income for the three months ended March 31, 1996 and 1995 and the
consolidated statements of cash flows for the three months ended March 31, 1996
and 1995, have been prepared by the Company without audit. In the opinion of
management, all adjustments (which include only normal recurring adjustments)
necessary to present fairly the financial position, results of operations and
cash flows as of March 31, 1996, and for all periods presented have been made.
Certain information and footnote disclosure normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted. The results of operations for the period ended
March 31, 1996 are not necessarily indicative of the operating results of the
full year.
3
<PAGE>
GULF SOUTHWEST BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(Dollars in thousands)
(Unaudited)
ASSETS
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1996 1995
--------- ------------
<S> <C> <C>
Cash and due from banks $ 25,330 $ 29,848
Interest bearing deposits with bank 11,085 23,529
Time deposits in banks 1,998 898
Federal funds sold 20,375 28,175
Investment securities:
Held-to-Maturity 20,115 21,382
Available-for-Sale 132,461 130,651
Loans, net of allowance for
loan losses 242,146 235,154
Bank premises and equipment 11,319 8,692
Accrued interest receivable 3,866 3,930
Other assets 3,801 4,390
-------- --------
Total Assets $472,496 $486,649
======== ========
</TABLE>
4
<PAGE>
GULF SOUTHWEST BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET (CONTINUED)
(Dollars in thousands)
(Unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1996 1995
---------- -------------
<S> <C> <C>
Deposits:
Non-interest bearing $121,343 $120,058
Interest bearing 298,761 311,323
-------- -------
420,104 431,381
Accrued interest, taxes and
other liabilities 2,696 2,576
Borrowings 0 3,083
Minority Interest 0 287
-------- -------
Total Liabilities 422,800 437,327
-------- -------
Stockholders' Equity:
Common stock 1,978 1,978
Paid-in capital 25,767 25,767
Retained earnings 22,306 21,167
Unrealized securities
gains (losses) 79 859
-------- -------
50,130 49,771
-------- -------
Less cost of stock held in treasury:
Common Stock (434) (449)
-------- -------
Total Stockholders' Equity 49,696 49,322
-------- -------
Total Liabilities and
Stockholders' Equity $472,496 $486,649
======== ========
</TABLE>
5
<PAGE>
GULF SOUTHWEST BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
(Dollars in thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
-----------------------
1996 1995
----- -----
<S> <C> <C>
Interest Income:
Interest and fees on loans $5,639 $3,427
Investment securities:
Taxable 2,012 790
Non-taxable 231 75
Interest bearing deposits with bank 137 0
Time deposits with banks 28 24
Federal funds sold 505 317
----- -----
Total Interest Income 8,552 4,633
----- -----
Interest Expense:
Interest bearing deposits 2,820 1,276
Borrowed funds 9 0
----- -----
Total Interest Expense 2,829 1,276
----- -----
Net interest income 5,723 3,357
Provision for possible loan losses 80 0
----- -----
Net interest income after provision
for loan losses 5,643 3,357
----- -----
Non-Interest Income:
Service charges and fees 1,167 616
Other operating income 232 202
----- -----
Total Non-Interest Income 1,399 818
----- -----
</TABLE>
6
<PAGE>
GULF SOUTHWEST BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME (CONTINUED)
(Dollars in thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
--------------------------------
1996 1995
--------- ----------
<S> <C> <C>
Non-Interest Expense:
Salaries and employee benefits $ 2,798 $ 1,233
Furniture, equipment and
occupancy expense 724 383
Other operating expenses 1,390 980
--------- ----------
Total Non-Interest Expense 4,912 2,596
--------- ----------
Income before income taxes 2,130 1,579
Income taxes 660 485
--------- ----------
Net Income $ 1,470 $ 1,094
========= ==========
Per Share:
Net Income $ .76 $ .87
========= ==========
Dividends - Common Stock $ .17 $ .08
========= ==========
Average Number of Shares Outstanding 1,943,137 1,258,636
========= ==========
</TABLE>
7
<PAGE>
GULF SOUTHWEST BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
-------------------
1996 1995
-------- -------
<S> <C> <C>
Increase (Decrease) in Cash and
Cash Equivalents:
Operating Activities:
Net Income $ 1,470 $1,094
Adjustments to Reconcile Net
Income to Net Cash Provided by
Operating Activities:
Provision for loan losses 80 0
Depreciation and amortization 246 107
Discount (accretion) amortized
to income 171 114
Origination of mortgage loans for sale (3,110) 0
Proceeds of mortgage loans sold 2,981 0
Provision for losses on real
estate and other assets 122 49
(Increase) decrease in interest
receivable 64 28
(Decrease) increase in accrued
interest and other liabilities 120 120
Other - net 324 (28)
------- ------
Net Cash Flows From Operating Activities 2,468 1,484
------- ------
</TABLE>
8
<PAGE>
GULF SOUTHWEST BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS (CONTINUED)
(Dollars in thousands)
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
------------------
1996 1995
------- ------
<S> <C> <C>
Investing Activities:
Net increase in time deposits
in banks (1,100) 250
Proceeds from the maturities of held-to-
maturity investment securities 1,510 3,500
Proceeds from the maturities of available-
for-sale investment securities 11,033 2,500
Purchase of held-to-maturity
investment securities (253) (6,710)
Purchase of available-for-sale
investment securities (14,197) (500)
Net decrease (increase) in loans (6,367) (3,851)
Purchase of bank premise and equipment (2,863) (33)
Proceeds from sale of real estate
and other loan related assets 151 68
Other (181) 0
------- ------
Net Cash From Investing Activities (12,267) (4,776)
------- ------
</TABLE>
9
<PAGE>
GULF SOUTHWEST BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS (CONTINUED)
(Dollars in thousands)
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
------------------
1996 1995
-------- --------
<S> <C> <C>
Financing Activities:
Net increase (decrease) in deposits (11,277) (7,747)
Dividends paid (331) (101)
Sale of Treasury stock 15 0
Repayment of borrowings (3,083) 0
Purchase minority interest (287) 0
-------- --------
Net Cash Flows from Financing Activities (14,963) (7,848)
-------- --------
Net Increase (decrease) in Cash
and Cash Equivalents (24,762) (11,140)
Cash and Cash Equivalents at
Beginning of Period 81,552 41,912
-------- --------
Net cash received in acquisition of banks
Cash and Cash Equivalents at
End of Period $ 56,790 $ 30,772
======== ========
For the nine months ended September 30:
Interest paid $ 2,959 $ 1,253
======== ========
Income taxes paid $ 0 $ 88
======== ========
</TABLE>
10
<PAGE>
GULF SOUTHWEST BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS (CONTINUED)
(Dollars in thousands)
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
------------------
1996 1995
------- --------
<S> <C> <C>
Non-Cash Transactions:
Foreclosed properties transferred
to other real estate and loan
related assets 124,000 280,000
Bank loans for other real estate
and loan related assets sold 700,000 665,000
</TABLE>
11
<PAGE>
ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
ANALYSIS OF STATEMENT OF INCOME
-------------------------------
The following analysis discusses material changes in the results of operations
for the first quarter of 1996 as compared to the first quarter of 1995. Gulf
Southwest Bancorp, Inc. recorded earnings of $1,470,000 in the first quarter of
1996. This level of earnings represented an increase of $376,000 from the
$1,094,000 earned in the first quarter of 1995.
NET INTEREST INCOME
- -------------------
Net interest income increased 70.5% in the first quarter of 1996 when compared
to the same of 1995. The increase of $2,366,000 resulted from a $3,919,000
(84.6%) increase in interest income on earning assets, partially offset by an
increase of $1,553,000 (121.7%) in interest expense. Higher volumes of interest
earning assets and interest bearing liabilities attributable to the acquisition
of Texas Gulf Coast Bancorp, Inc. were the primary reasons for the increases.
The Company's subsidiary bank (the "Subsidiary Bank") attempts to adjust the
rates paid or earned on interest bearing liabilities and interest earning assets
to maintain a consistent net interest margin to the extent possible.
PROVISION FOR POSSIBLE LOAN LOSSES
- ----------------------------------
The provision for possible loan losses increased by $80,000 for the first
quarter of 1996 compared to the first quarter of 1995. The ratio of the
allowance for possible loan loses to outstanding loans decreased to 1.00% at
March 31, 1996 from 1.38% at March 31, 1995.
The Company's Subsidiary Bank's policy is to maintain a level in the allowance
for possible loan losses that is adequate to cover the loan losses sustained
plus provide for any future possible losses on problem loans. The adequacy of
the allowance is continually monitored and management considers the current
level to be appropriate based on an evaluation of the Subsidiary Bank's loan
portfolio. The transactions in the allowance for possible loan losses were as
follows:
12
<PAGE>
PROVISION FOR POSSIBLE LOAN LOSSES (CONTINUED)
- ----------------------------------------------
<TABLE>
<CAPTION>
FOR THE QUARTER
ENDED MARCH 31,
------------------------------
1996 1995
------------- ------------
<S> <C> <C>
Loans outstanding at period end $244,599,000 $148,157,000
============ ============
Allowance at beginning of period $ 2,411,000 $ 2,063,000
------------ ------------
Provision charged to expense 80,000 0
------------ ------------
Loans charged off:
Commercial and industrial $ (14,000) $ (18,000)
Real estate (15,000) (0)
Installment (83,000) (25,000)
------------ ------------
Total (112,000) (43,000)
------------ ------------
Loans recovered:
Commercial and industrial 48,000 14,000
Real estate 2,000 6,000
Installment 24,000 3,000
------------ ------------
Total 74,000 23,000
------------ ------------
Net Loans recovered (charged off) (38,000) (20,000)
------------ ------------
Allowance at end of period $ 2,453,000 $ 2,043,000
============ ============
Ratios:
Allowance as a percent of
loans outstanding 1.00% 1.38%
============ ============
Allowance as a percent of
nonperforming loans 58.6% 149.0%
============ ============
</TABLE>
NON-PERFORMING ASSETS
- ---------------------
All loans which cause management to have doubt as to the borrower's ability to
substantially comply with present loan repayment terms are included in the
schedule of non-performing loans.
Non-performing loans consist of loans on which interest is not being accrued and
loans which are 90 days or more past due as to principal and/or interest payment
and not yet in a non-accruing status. The policy of the Subsidiary Bank is to
continue to accrue interest on loans which are 90 days or more past due if
periodic payments are being made on the loans. If a loan is classified as past
due and payments then resume on the loan, it continues to be classified as past
due until all past due amounts are paid.
13
<PAGE>
NON-PERFORMING ASSETS (CONTINUED)
- ---------------------------------
The following table discloses information regarding non-performing assets for
the indicated periods:
<TABLE>
<CAPTION>
MARCH 31,
---------------------------------
1996 1995
---------- ----------
<S> <C> <C>
Non-accrual loans $2,856,000 $ 991,000
Past due 90 days or more 1,332,000 380,000
---------- ----------
Total 4,188,000 1,371,000
Other real estate owned 1,087,000 1,515,000
---------- ----------
Total non-performing assets $5,275,000 $2,886,000
========== ==========
</TABLE>
NON-INTEREST INCOME
-------------------
The components included in non-interest income for the indicated periods
are as follows:
<TABLE>
<CAPTION>
FOR THE QUARTER
ENDED MARCH 31,
---------------------------------
1996 1995
---------- ----------
<S> <C> <C>
Service charges and fees $1,167,000 $ 616,000
Other operating income 232,000 202,000
Securities transactions 0 0
---------- ----------
Total non-interest income $1,399,000 $ 818,000
========== ==========
</TABLE>
Non-interest income increased $581,000 or 71.0% for the first quarter of 1996
over the first quarter of 1995. This increase is primarily due to the
acquisition of Texas Gulf Coast Bancorp, Inc.
The Company maintains a policy of constantly monitoring and evaluating service
charges and fees to ensure that the fees charged reflect the cost of service
provided and remain competitive with other financial institutions located in the
Subsidiary Bank's market area.
NON-INTEREST EXPENSE
- --------------------
Non-interest expense increased by 89.2% for the first quarter of 1996 over the
first quarter of 1995. The totals were as follows:
<TABLE>
<CAPTION>
FOR THE QUARTER
ENDED MARCH 31,
----------------------
1996 1995
---------- ----------
<S> <C> <C>
Salaries and employee benefits $2,798,000 $1,233,000
Furniture, equipment and occupancy
expense 724,000 383,000
Other operating expenses 1,390,000 980,000
---------- ----------
Total non-interest expenses $4,912,000 $2,596,000
========== ==========
</TABLE>
14
<PAGE>
Salaries and employee benefits are the most significant operating expenses of
the Company. These expenses increased by $1,565,000 or 126.9% for the first
quarter of 1996 as compared to the first quarter of 1995.
Furniture, equipment and occupancy expense increased by 89.0% for the first
quarter of 1996 over the first quarter of 1995. Other operating expenses
increased by 41.8% for the first quarter of 1996 over the comparable period of
1995. The increases in non-interest expenses are attributable to the
acquisition of Texas Gulf Coast Bancorp, Inc.
The major components of other operating expenses are legal and accounting fees,
data processing, supplies and advertising expenses. Also included are expenses
related to real estate held for sale and other loan-related assets acquired
through foreclosure.
ANALYSIS OF BALANCE SHEET
-------------------------
EARNING ASSETS
- --------------
When comparing the total of earning assets at March 31, 1996, to the total at
December 31, 1995, earning assets decreased 2.5%. The decrease of $11,609,000
was due to the decreases of $12,444,000 in interest bearing deposits in banks
and $7,800,000 in federal funds sold. The decreases were partially offset by
increases of $1,100,000, $543,000 and $6,992,000 in time deposits in banks,
securities and loans, respectively.
Included in the total of earning assets at March 31, 1996 are loans totaling
$2,856,000 which are on a non-accrual status. This compares to non-accrual
loans totaling $991,000 and $3,125,000 at March 31, 1995 and December 31, 1995,
respectively.
DEPOSITS
- --------
The most important funding source for earning asset growth is deposits. Total
deposits decreased by 2.6% from December 31,1995 to March 31, 1996, compared to
a decrease of 3.4% from December 31, 1994, to March 31, 1995. Non-interest
bearing deposits increased 1.1% from December 31, 1995 to March 31, 1996, while
interest bearing deposits decreased 4.0% for the same period.
CAPITAL
- -------
Shareholders' equity increased $374,000, or .8%, for the three months ended
March 31, 1996, as compared to an increase of 4.1% for the three months ended
March 31, 1995. The ratio of stockholders' equity to total assets was 10.5% on
March 31, 1996, as compared to 10.1% on December 31,1995.
Bank holding companies and their bank subsidiaries are required to maintain
certain capital ratios. The Federal Reserve Board's guidelines classify capital
into two tiers, referred to as Tier 1 and Tier 2. Tier 1 capital consists of
common and qualifying preferred shareholders' equity less goodwill. Tier 2
capital consists of mandatory convertible debt, preferred stock not qualifying
as Tier 1, qualifying subordinated debt and the allowance for loan losses up to
1.25% of risk-weighted assets. The minimum ratio for the sum of Tier 1 and Tier
2 to risk weighted
15
<PAGE>
CAPITAL (CONTINUED)
- -------------------
assets is 8.0%, at least one-half of which should be in the form of Tier 1
capital. At March 31, 1996, core capital (Tier 1) and total capital (Tier 1 and
Tier 2) as a percentage of risk-weighted assets was 18.83% and 19.78%,
respectively. The Company's Subsidiary Bank at March 31, 1996 had core capital
of 17.11% and total capital of 18.07% as a percentage of risk weighted assets.
In addition to the foregoing ratios, bank holding companies are required to
maintain a minimum ratio of core capital to total assets (hereinafter referred
to as the "Leverage Ratio") of at least 3.0%. At March 31, 1996, the Company's
Leverage Ratio was 10.24%. A similar leverage ratio applicable to the Company's
Subsidiary Bank has been adopted by the FDIC. At March 31, 1996, the Company's
Subsidiary Bank's ratio was 9.34%.
LIQUIDITY AND CAPITAL COMMITMENTS
- ---------------------------------
Liquidity is the ability of the Company and its Subsidiary Bank to meet their
short-term needs for cash arising from demands such as operating expenses,
withdrawal of deposits and demand for loans. The liquidity of the Company is
primarily provided by dividends from the Subsidiary Bank and interest on time
deposits in financial institutions.
The Subsidiary Bank's liquidity is primarily provided by maturing loans,
deposits, cash, short-term investments, time deposits in other banks, federal
funds sold and profits. With bank regulators critically reviewing liquidity,
the Company has adopted a policy of maintaining a minimum liquidity level of 20%
as measured by the FDIC formula, at the Subsidiary Bank. As of March 31, 1996,
the liquidity level of the Subsidiary Bank was 44.6%.
The Company believes that both it and the Subsidiary Bank have sufficient
capital and financial resources to meet its current and anticipated capital
commitments.
16
<PAGE>
PART 2 - OTHER INFORMATION
Item 1. Legal proceedings.
------------------
Not applicable
Item 2. Changes in securities.
----------------------
Not applicable
Item 3. Defaults upon senior securities.
--------------------------------
Not applicable
Item 4. Submission of matters to a vote of security holders.
----------------------------------------------------
Not applicable
Item 5. Other information.
------------------
Not applicable
Item 6. Exhibits and reports on Form 8-K.
---------------------------------
No reports on Form 8-K were filed with the Securities and Exchange
Commission during the fiscal quarter ended March 31, 1996.
17
<PAGE>
EXHIBIT INDEX
Exhibit number and description
- ------------------------------
(2) Plan of acquisition, reorganization, arrangement, liquidation or
succession. *)
(4) Instruments defining the rights of security holders, including
indentures. *)
(10) Material contracts. *)
(11) Statement re computation of per share earnings. *)
(15) Letter re unaudited interim financial information. *)
(18) Letter re change in accounting principles. *)
(19) Report furnished to security holders. *)
(22) Published report regarding matters submitted to vote of security
holder. *)
(23) Consent of experts and counsel. *)
(24) Power of attorney. *)
(27) Financial data schedule.
. Exhibit 27.1. Financial Data Schedule
(99) Additional exhibits. *)
*) Not applicable.
18
<PAGE>
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.
GULF SOUTHWEST BANCORP, INC.
Date: May 7, 1996 BY: /s/ J. W. LANDER, JR., CHAIRMAN
_______________________________
J. W. Lander, Jr., Chairman
Date: May 7, 1996 BY: /s/ J. W. LANDER, III, PRESIDENT
________________________________
J. W. Lander, III, President
(principal financial and chief
accounting officer)
19
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 25,330,000
<INT-BEARING-DEPOSITS> 13,083,000
<FED-FUNDS-SOLD> 20,375,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 132,461,000
<INVESTMENTS-CARRYING> 152,576,000
<INVESTMENTS-MARKET> 152,844,000
<LOANS> 244,599,000
<ALLOWANCE> 2,453,000
<TOTAL-ASSETS> 472,496,000
<DEPOSITS> 420,104,000
<SHORT-TERM> 0
<LIABILITIES-OTHER> 2,696,000
<LONG-TERM> 0
0
0
<COMMON> 1,978,000
<OTHER-SE> 47,718,000
<TOTAL-LIABILITIES-AND-EQUITY> 472,496,000
<INTEREST-LOAN> 5,639,000
<INTEREST-INVEST> 2,243,000
<INTEREST-OTHER> 670,000
<INTEREST-TOTAL> 8,552,000
<INTEREST-DEPOSIT> 2,820,000
<INTEREST-EXPENSE> 9,000
<INTEREST-INCOME-NET> 5,723,000
<LOAN-LOSSES> 80,000
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 4,912,000
<INCOME-PRETAX> 2,130,000
<INCOME-PRE-EXTRAORDINARY> 2,130,000
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,470,000
<EPS-PRIMARY> .76
<EPS-DILUTED> .76
<YIELD-ACTUAL> 5.26
<LOANS-NON> 2,856,000
<LOANS-PAST> 1,332,000
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 2,411,000
<CHARGE-OFFS> 112,000
<RECOVERIES> 74,000
<ALLOWANCE-CLOSE> 2,453,000
<ALLOWANCE-DOMESTIC> 2,453,000
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
