UNITED STATES
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, 1994
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 : 0-13496
CHARTER BANCSHARES, INC.
(Exact name of registrant as specified in its charter)
TEXAS 74-1967164
(State or other jurisdiction of (IRS employer identification number)
incorporation or organization)
2600 CITADEL PLAZA DRIVE, SUITE 600, HOUSTON, TEXAS 77008
(Address of principal executive offices)
Registrant's telephone number, including area code: (713) 692-6121
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
("Act") 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
The number of shares outstanding of each class of the registrant's capital stock
as of March 31, 1994:
CLASS OF STOCK SHARES OUTSTANDING
COMMON STOCK, PAR VALUE $1.00 5,498,554
CLASS B SPECIAL COMMON STOCK, PAR VALUE $1.00 199,301
PREFERRED STOCK, $50.00 PAR VALUE, 8% PER ANNUM 14,201
<PAGE>
<TABLE>
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
CHARTER BANCSHARES, INC.
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
<CAPTION>
MARCH 31, December 31,
====================================================================================================
ASSETS 1994 1993
- - ----------------------------------------------------------------------------------------------------
(in thousands)
<S> <C> <C>
Cash and due from banks $ 37,070 $ 32,745
Federal funds sold and securities purchased under
agreements to resell 21,710 39,617
Interest-bearing deposits in financial institutions -- 3
Trading account assets 10,297 --
Securities held for investment (market value of $187,703,000 at March 31,
1994, and $141,101,000 at December 31, 1993, respectively) 189,850 139,797
Securities available for sale (market value of $124,766,000 at March 31,
1994, and $145,581,000 at December 31, 1993) 124,766 143,932
- - ----------------------------------------------------------------------------------------------------
Loans 252,923 290,674
Less: Allowance for credit losses (Note 2) 4,367 4,616
- - ----------------------------------------------------------------------------------------------------
Loans, Net 248,556 286,058
- - ----------------------------------------------------------------------------------------------------
Premises and equipment 12,903 13,006
Accrued interest receivable 3,704 3,687
Other real estate, net (Note 3) 2,016 2,178
Intangibles assets, net 2,200 2,220
Other assets 5,928 3,853
- - ----------------------------------------------------------------------------------------------------
TOTAL ASSETS $659,000 $667,096
====================================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
- - ----------------------------------------------------------------------------------------------------
Liabilities:
Deposits:
Non-interest-bearing demand $169,248 $173,862
Savings 36,627 35,356
Interest-bearing demand 95,613 98,982
Money market savings 111,549 107,665
Time over $100,000 58,474 60,182
Time under $100,000 106,890 112,707
- - ----------------------------------------------------------------------------------------------------
Total Deposits 578,401 588,754
- - ----------------------------------------------------------------------------------------------------
Securities sold under agreements to repurchase 14,921 12,941
Accrued interest payable 1,044 979
Other liabilities 5,352 4,843
Long-term debt (Note 10) 12,550 13,550
Mandatory convertible subordinated debentures -- 2
- - ----------------------------------------------------------------------------------------------------
Total Liabilities 612,268 621,324
- - ----------------------------------------------------------------------------------------------------
Shareholders' Equity (Notes 5 and 6):
Preferred stock (400,000 shares authorized;
issued: 1994 and 1993 - 14,204 shares) 710 710
Common stock (12,000,000 shares authorized;
issued: 1994 - 5,660,722 shares; 1993 - 5,642,682 shares) 5,661 5,643
Class B special common stock (200,000 shares authorized;
issued: 1994 - 199,301 shares; 1993 - 199,282 shares) 199 199
Series C special common stock (50,000 shares authorized;
issued: 1994 and 1993 - 44,915 shares) 45 45
Capital surplus 31,406 31,159
Retained earnings 9,874 8,749
Unrealized appreciation (depreciation) on securities available for
sale (Note 8) (425) --
Treasury stock at cost (1994 - 162,168 shares common and 3 preferred;
1993 - 161,529 shares common and 3 preferred) (738) (733)
- - ----------------------------------------------------------------------------------------------------
Total Shareholders' Equity 46,732 45,772
- - ----------------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $659,000 $667,096
====================================================================================================
The accompanying notes are an integral part of the consolidated financial statements.
</TABLE>
1
<PAGE>
CHARTER BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED)
Three Months Ended March 31,
==============================================================================
1994 1993
- - ------------------------------------------------------------------------------
Interest Income: (in thousands, except per share amounts)
Loans, including fees $ 5,044 $ 4,359
Securities:
Taxable 3,866 3,827
Non-taxable 6 2
Trading account assets 29 131
Federal funds sold 272 271
Securities purchased under agreements to resell 29 7
Interest-bearing deposits -- 5
- - ------------------------------------------------------------------------------
Total Interest Income 9,246 8,602
- - ------------------------------------------------------------------------------
Interest Expense:
Deposits:
Interest-bearing demand 422 629
Savings 227 151
Money market savings 719 668
Time over $100,000 502 565
Time under $100,000 924 955
Securities sold under agreements to repurchase 92 90
Long-term debt 274 165
- - ------------------------------------------------------------------------------
Total Interest Expense 3,160 3,223
- - ------------------------------------------------------------------------------
Net interest income 6,086 5,379
Provision for credit losses (Note 2) 67 285
- - ------------------------------------------------------------------------------
Net Interest Income After Provision
for Credit Losses 6,019 5,094
- - ------------------------------------------------------------------------------
Non-Interest Income:
Service charges on deposit accounts 1,323 1,182
Trust fees 215 89
Trading account profits 1 --
Securities gains 6 181
Other 585 419
- - ------------------------------------------------------------------------------
Total Non-Interest Income 2,130 1,871
- - ------------------------------------------------------------------------------
Non-Interest Expense:
Salaries and employee benefits 3,058 2,717
Net premises and equipment expenses 950 786
Advertising 198 143
Data processing 322 275
Legal fees 218 113
Losses and carrying costs of other real estate
(Note 3) 55 1,146
Deposit insurance premiums 319 306
Amortization of core deposit intangibles 20 112
Other 749 1,001
- - ------------------------------------------------------------------------------
Total Non-Interest Expense 5,889 6,599
- - ------------------------------------------------------------------------------
Earnings before income taxes 2,260 366
Income tax expense 757 164
- - ------------------------------------------------------------------------------
Earnings before effect of change in accounting
principle 1,503 202
Cumulative effect on prior years of a change
in accounting for income taxes (Note 4) -- 2,950
- - ------------------------------------------------------------------------------
NET EARNINGS $ 1,503 $ 3,152
==============================================================================
Earnings per common share (Note 6):
Primary earnings before change in accounting
principle $ 0.26 $ 0.02
Fully diluted earnings before change in
accounting principle 0.26 0.02
Cumulative effect of change in accounting
for income taxes -- 0.52
Primary 0.26 0.54
Fully diluted 0.26 0.54
- - ------------------------------------------------------------------------------
Weighted Average Shares Outstanding:
Primary 5,725,544 5,725,227
Fully diluted 5,742,770 5,742,647
==============================================================================
The accompanying notes are an integral part of the consolidated financial
statements.
2
<PAGE>
CHARTER BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
THREE MONTHS ENDED Year Ended
==============================================================================
MARCH 31, December 31,
1994 1993
- - ------------------------------------------------------------------------------
(in thousands)
- - ------------------------------------------------------------------------------
Preferred stock, ($50.00 par value)
Balance at beginning of year $ 710 $ 710
- - ------------------------------------------------------------------------------
Balance at end of period (14,204 shares issued
and 14,201 shares outstanding) 710 710
- - ------------------------------------------------------------------------------
Common stock ($1.00 par value)
Balance at beginning of year 5,643 5,374
Stock dividend (268,472 shares in 1993) -- 269
Conversion of debentures (18,040 shares in 1994 and
123 shares in 1993) 18 --
- - ------------------------------------------------------------------------------
Balance at end of period (5,660,722 shares
issued and 5,498,554 shares outstanding) 5,661 5,643
- - ------------------------------------------------------------------------------
Class B special common stock ($1.00 par value)
Balance at beginning of year 199 190
Conversion of debentures (19 shares in 1994) -- --
Stock dividend (9,484 in 1993) -- 9
- - ------------------------------------------------------------------------------
Balance at end of period (199,301 shares
issued and outstanding) 199 199
- - ------------------------------------------------------------------------------
Series C special common stock ($1.00 par value)
Balance at beginning of year 45 43
Stock dividend - common stock (2,138 shares in 1993) -- 2
- - ------------------------------------------------------------------------------
Balance at end of period (44,915 shares
issued and outstanding) 45 45
- - ------------------------------------------------------------------------------
Capital surplus
Balance at beginning of year 31,159 27,726
Conversion of debentures 247 2
Stock dividend - common stock -- 3,431
- - ------------------------------------------------------------------------------
Balance at end of period 31,406 31,159
- - ------------------------------------------------------------------------------
Retained earnings
Balance at beginning of year 8,749 5,326
Cash dividends - preferred stock (28) (57)
Cash dividend - common stock (350) (1,015)
Stock dividend - common stock -- (3,711)
Net earnings 1,503 8,206
- - ------------------------------------------------------------------------------
Balance at end of period 9,874 8,749
- - ------------------------------------------------------------------------------
Unrealized appreciation (depreciation) on
securities available for sale (425) --
- - ------------------------------------------------------------------------------
Treasury stock
Balance at beginning of period (733) (733)
Treasury stock acquired through conversion
of debentures (639 shares in 1994) (5) --
- - ------------------------------------------------------------------------------
Balance at end of period (162,168 shares common
and 3 shares preferred) (738) (733)
- - ------------------------------------------------------------------------------
Total Shareholders' Equity (Notes 5 and 6) $ 46,732 $ 45,772
==============================================================================
The accompanying notes are an integral part of the consolidated financial
statements.
3
<PAGE>
<TABLE>
CHARTER BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
<CAPTION>
Three Months Ended March 31,
=============================================================================================
1994 1993
- - ---------------------------------------------------------------------------------------------
(in thousands)
<S> <C> <C>
Cash flows from operating activities:
Net earnings $ 1,503 $ 3,152
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation and amortization 449 304
Amortization of core deposit intangibles 20 112
Net amortization of premiums and
discounts on securities 951 858
Provision for credit losses 67 285
Provision for other real estate losses -- 1,061
Net gain on sales of securities (6) (211)
Writedown of securities -- 30
Net trading account activity (10,297) --
Net gain on sales of fixed assets, other real
estate and collateral acquired (6) (7)
Net increase in other assets and interest receivable (587) (498)
Net decrease in other liabilities and interest payable (1,549) (113)
Net (increase) decrease in deferred tax asset 749 (3,144)
- - ---------------------------------------------------------------------------------------------
Increase (decrease) in outstanding expense and interest checks 134 (16)
Total Adjustments (10,075) (1,339)
- - ---------------------------------------------------------------------------------------------
Net Cash Provided by (Used in) Operating Activities (8,572) 1,813
- - ---------------------------------------------------------------------------------------------
Cash flows from investing activities:
Net decrease in interest-bearing deposits 3 490
Proceeds from sales of securities 6,043 3,249
Proceeds from maturities and prepayments of securities 32,120 34,530
Purchase of securities (70,659) (37,882)
Net decrease in loans 37,514 20,191
Capital expenditures (361) (188)
Proceeds from sales of other real estate 215 77
- - ---------------------------------------------------------------------------------------------
Net Cash Provided by (Used in) Investing Activities 4,875 20,467
- - ---------------------------------------------------------------------------------------------
Cash flows from financing activities:
Net decrease in non-interest-bearing, demand,
savings, interest-bearing demand and money market accounts (2,962) (21,928)
Net decrease in certificate of deposits (7,525) (14,197)
Net increase (decrease) in securities sold under agreements
to repurchase 1,980 (7,319)
Payment of long term debt (1,000) --
Payment of common dividends (350) (167)
- - ---------------------------------------------------------------------------------------------
Payment of preferred dividends (28) (28)
Net Cash Provided by (Used in) Financing Activities (9,885) (43,639)
Net Increase (Decrease) in Cash and Cash Equivalents (13,582) (21,359)
- - ---------------------------------------------------------------------------------------------
Cash and Cash Equivalents at Beginning of Period 72,362 81,603
- - ---------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 58,780 $ 60,244
=============================================================================================
SUPPLEMENTAL DISCLOSURE:
Interest paid $ 3,095 $ 3,408
Taxes paid 20 90
=============================================================================================
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
Other real estate and collateral acquired $ 205 $ 381
Loans made to finance sales of other real estate -- 10
=============================================================================================
The accompanying notes are an integral part of the consolidated financial
statements.
</TABLE>
4
<PAGE>
CHARTER BANCSHARES, INC.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 1 - BASIS OF PRESENTATION
The accounting and reporting policies of Charter Bancshares, Inc. ("Charter"
or "the Company") conform to generally accepted accounting principles and to
general practices within the banking industry. The accompanying consolidated
financial statements include the accounts of Charter and its subsidiaries. All
significant intercompany balances and transactions have been eliminated upon
consolidation. Certain amounts have been reclassified in the accompanying
consolidated financial statements from those previously reported for the
quarter ended March 31, 1993 to conform to current year financial statement
classifications.
The accompanying consolidated financial statements were not audited by
independent certified public accountants, but in the opinion of management
reflect all adjustments (consisting only of normal recurring accruals) necessary
for a fair presentation of same.
NOTE 2 - ALLOWANCE FOR CREDIT LOSSES
The following table is an analysis of the activity in the allowance for
credit losses for the three months ended March 31, 1994 and 1993:
1994 1993
==========================================================================
(in thousands)
Balance at beginning of period $ 4,616 $ 3,792
Provision charged to operating expenses 67 285
Loans charged off (501) (287)
Less recoveries on loans previously charged off 185 47
- - --------------------------------------------------------------------------
Net loan charge-offs (316) (240)
- - --------------------------------------------------------------------------
Balance at end of period $ 4,367 $ 3,837
==========================================================================
NOTE 3 - ALLOWANCE FOR OTHER REAL ESTATE LOSSES
Other real estate ("ORE") is reflected on the consolidated balance sheets net
of an allowance for anticipated losses on other real estate. The following
table is an analysis of activity in the allowance for anticipated losses on
other real estate for the three months ended March 31, 1994 and 1993:
1994 1993
==========================================================================
(in thousands)
Balance at beginning of period $ 2,418 $ 3,569
Provision charged to operating expenses -- 1,061
Reductions (32) --
- - --------------------------------------------------------------------------
Balance at end of period $ 2,386 $ 4,630
==========================================================================
NOTE 4 - INCOME TAXES
The Statement of Financial Accounting Standards ("SFAS") No. 109, "Accounting
for Income Taxes," was adopted by Charter effective January 1, 1993. This new
standard provides for a deferred tax asset to be recognized for the estimated
future tax effects attributable to temporary differences and carryforwards. The
adoption of SFAS No. 109 has been reported as the effect of a change in
accounting principle. Management determined that a net deferred tax asset of
approximately $2,950,000 should be recognized as of January 1, 1993.
5
<PAGE>
NOTE 5 - DIVIDENDS
Charter's board of directors declared cash dividends totalling $378,000 and
$195,000 that were respectively paid March 31, 1994 and 1993 to shareholders of
common and preferred stock. $28,000 was paid to holders of the initial series
preferred stock and the remainder was paid on the common stock.
NOTE 6 - EARNINGS PER COMMON SHARE
Earnings per common share are computed as follows:
Three Months Ended March 31,
==========================================================================
1994 1993
- - --------------------------------------------------------------------------
(in thousands, except per share amounts)
Earnings before cumulative effect of a change in $ 1,503 $ 202
accounting principle
Cumulative effect on prior years of a change in
accounting for income taxes -- 2,950
- - --------------------------------------------------------------------------
Net earnings 1,503 3,152
- - --------------------------------------------------------------------------
Less preferred dividend requirements 28 28
- - --------------------------------------------------------------------------
Primary earnings applicable to common
shareholders 1,475 3,124
Interest expense on debentures 5 5
- - --------------------------------------------------------------------------
Fully diluted earnings applicable to common
shareholders $ 1,480 $ 3,129
==========================================================================
Primary earnings per common share:
Earnings before cumulative effect of a change in
accounting principle $ 0.26 $ 0.02
Cumulative effect of a change in accounting for
income taxes -- 0.52
- - --------------------------------------------------------------------------
Net earnings $ 0.26 $ 0.54
==========================================================================
Fully diluted earnings per common share:
Earnings before cumulative effect of a change in
accounting principle $ 0.26 $ 0.02
Cumulative effect of a change in accounting for
income taxes -- 0.52
- - --------------------------------------------------------------------------
Net earnings $ 0.26 $ 0.54
==========================================================================
Weighted average common shares outstanding:
Primary 5,725,544 5,725,227
Fully diluted 5,742,770 5,742,647
==========================================================================
Primary earnings per share amounts are computed by dividing net earnings less
current period preferred dividends by the weighted average number of common
shares outstanding during the period. Fully diluted earnings per share amounts
are similarly computed but include the pro forma effect from conversion of
Charter's other potentially dilutive securities.
6
<PAGE>
NOTE 7 - DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
Fair values were estimated by management as of March 31, 1994 which required
the exercise of considerable judgment. Accordingly, the estimates presented
herein are not necessarily indicative of the amounts Charter could realize in a
current market exchange. The use of different market assumptions and/or
estimation methodologies may have a material effect on the estimated values
presented.
The estimated fair values of Charter's financial instruments were as follows:
MARCH 31, December 31,
================================================================================
1994 1993
- - --------------------------------------------------------------------------------
CARRYING FAIR Carrying Fair
AMOUNT VALUE Amount Value
Financial Assets:
Cash and short-term investments $ 58,780 $ 58,780 $ 72,365 $ 72,365
Securities 314,616 312,469 283,729 286,682
Loans 252,923 254,516 290,674 292,602
Less: allowance for credit losses (4,367) (4,367) (4,616) (4,616)
- - --------------------------------------------------------------------------------
Loans, net $248,556 $250,149 $286,058 $287,986
- - --------------------------------------------------------------------------------
Financial Liabilities:
Deposits $578,401 $579,404 $588,754 $589,794
Securities sold under agreements
to repurchase 14,921 14,921 12,941 12,941
Long-term debt and debentures 12,550 10,955 13,550 12,133
Unrecognized financial instruments:
Commitments to extend credit $ 40,562 $ 40,562 $ 41,371 $ 41,371
Standby letters of credit 8,313 8,313 4,165 4,165
===============================================================================
NOTE 8 - SECURITIES
SFAS No. 115, "Accounting for Certain Investments in Debt and Equity
Securities," was adopted by Charter effective January 1, 1994. Under the new
rules, debt securities that the Company has both the positive intent and ability
to hold to maturity are carried at amortized cost. Debt securities that the
Company does not have the positive intent and ability to hold to maturity and
all marketable equity securities are classified as available-for-sale or trading
and carried at fair value. Unrealized holding gains and losses on securities
classified as available-for-sale are carried as a separate component of
shareholders' equity. Unrealized holding gains and losses on securities
classified as trading are reported in earnings.
Presently, the Company classifies $124,766,000 of its debt securities as
available for sale and carries them at fair value. Application of the new rules
resulted in an estimated decrease of approximately $425,000 in shareholders'
equity as of March 31, 1994, representing the recognition in shareholders'
equity of unrealized appreciation, net of taxes, for the Company's investment in
debt and equity securities determined to be available-for-sale.
7
<PAGE>
NOTE 9 - ACQUISITIONS
On April 8, 1994, Charter consummated the acquisition of certain assets and
liabilities that comprise an aggregate of four branches which are located in
Fiesta Mart supermarkets in the Houston, Harris County area. These Fiesta Mart
branches had total deposits in excess of $20 million at April 8, 1994. The
purchase price for the Fiesta Mart branches was equal to the net book value of
the acquired assets less the assumed liabilities, plus a premium of $775,000.
On April 27, 1994, Charter consummated the acquisition of certain assets and
liabilities of Capital Standard Mortgage, Inc. ("Capital Standard"). Capital
Standard has become a 90-percent owned subsidiary of Charter National Bank -
Houston. The remaining 10-percent of Capital Standard's stock is owned by
principals of Capital Standard. Capital Standard presently operates mortgage
production offices in Houston, Austin, Dallas, Plano and Arlington. The
servicing portfolio totals approximately $126 million and loans in the pipeline
total approximately $80 million; both the servicing portfolio and the pipeline
are comprised of relatively low rate mortgages with a weighted average coupon of
approximately 7.5%, which should be resistant to accelerated prepayments.
Each of these acquisitions do not have an immediate material impact on the
consolidated financial position of Charter. However, these acquisitions provide
Charter with an access to new markets, an increase in potential revenues and,
with the addition of the mortgage company, an ability to offer a wider range of
mortgage-related products and services.
NOTE 10 - LONG TERM DEBT
At March 31, 1994, Charter Venture Group, Inc. elected to prepay its
$1,000,000 subordinated debenture guaranteed by the Small Business
Administration because management did not anticipate an alternative use of such
funds prior to the scheduled maturity of December 1, 1994.
Charter issued a $2,500,000 subordinated debenture in April, 1994 in
connection with the purchase of the Fiesta Mart branches. The subordinated
debenture matures April 8, 2006 and bears interest at a fixed rate of 8.11% per
annum, payable semi-annually.
8
<PAGE>
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
(A) ANALYSIS OF RESULTS OF OPERATIONS
CONDENSED STATEMENTS OF OPERATIONS
The following is a comparison of Charter's condensed statements of operations
for the three-month periods ended March 31, 1994 and 1993:
Three Months Ended
March 31, Increase
1994 1993 (Decrease)
=======================================================================
(in thousands)
Interest income $ 9,246 $ 8,602 $ 644
Interest expense 3,160 3,223 (63)
- - -----------------------------------------------------------------------
Net interest income 6,086 5,379 707
Provision for credit losses 67 285 (218)
Non-interest income 2,130 1,871 259
Non-interest expense 5,889 6,599 (710)
- - -----------------------------------------------------------------------
Earnings before income taxes 2,260 366 1,894
Income tax expense 757 164 593
- - -----------------------------------------------------------------------
Earnings before effect of change in
accounting principle 1,503 202 1,301
Cumulative effect on prior years of
a change in accounting for income
taxes -- 2,950 (2,950)
- - -----------------------------------------------------------------------
NET EARNINGS $ 1,503 $ 3,152 $ (1,649)
=======================================================================
Earnings before income taxes increased $1.9 million for the first quarter
1994 as compared to the first quarter of 1993 primarily due to a $1.1 million
decrease in losses and carrying costs of other real estate. Net earnings
decreased for the first three months of 1994 to $1,503,000 as compared to
$3,152,000 for the first three months of 1993 primarily due to the adoption of
SFAS No. 109 in 1993. In the following sections, the major factors affecting
the components of income and expense are examined. Information concerning
assets and liabilities are subsequently provided so that an evaluation can be
made of capitalization and liquidity as they may affect Charter's future
outlook.
NET INTEREST INCOME
The data used in the analysis of the changes in net interest income is
derived from the daily average levels of earning assets and interest-bearing
liabilities as well as from the rates earned and paid on such amounts. The
schedule below gives a comparative analysis of Charter's daily average
interest-earning accounts (including non-accruing loans) and interest-bearing
accounts for the three-month periods ended March 31, 1994 and 1993. The rates
earned and paid on each major type of asset and liability account are then shown
beside the average balance in the account for the period. The average yields on
all interest-earning assets (including non-accruing loans) and the average cost
of all interest-bearing liabilities also are summarized.
9
<PAGE>
<TABLE>
Comparative Net Interest Margin
<CAPTION>
Three Months Ended March 31,
1994 1993
Average Yield Average Yield
Balance Interest or Rate Balance Interest or Rate
(in thousands)
<S> <C> <C> <C> <C> <C> <C>
Assets:
Loans $257,724 $ 5,044 7.94% $ 215,344 $ 4,359 8.21%
Interest-earning deposits -- -- -- 613 5 3.31
Trading account assets 2,419 29 4.79 17,520 131 2.97
Securities:
Taxable 299,994 3,866 5.15 247,885 3,827 6.26
Non-taxable 487 6 4.79 110 2 8.56
- - -----------------------------------------------------------------------------------------------------------------------------
Total Securities 300,481 3,872 5.15 247,995 3,829 6.18
- - -----------------------------------------------------------------------------------------------------------------------------
Federal funds sold and securities
purchased under agreements to
resell 32,799 301 3.72 36,785 278 3.06
- - -----------------------------------------------------------------------------------------------------------------------------
Total Earning Assets/Yield 593,423 $9,246 6.31% 518,257 $ 8,602 6.73%
- - -----------------------------------------------------------------------------------------------------------------------------
Cash and due from banks 33,565 30,835
Other assets 26,637 26,134
Allowance for credit losses (4,633) (3,899)
- - -----------------------------------------------------------------------------------------------------------------------------
Total Assets $648,992 $ 571,327
=============================================================================================================================
Liabilities and Shareholders' Equity:
Interest-bearing demand deposits $ 98,437 $ 422 1.74% $ 90,148 $ 629 2.83%
Savings deposits 35,999 227 2.56 22,476 151 2.72
Money market savings 110,153 719 2.64 89,954 668 3.01
Other time deposits 166,949 1,426 3.41 164,058 1,520 3.71
Securities sold under agreements
to repurchase 13,307 92 2.81 15,519 90 2.35
Long-term debt 13,782 274 8.07 7,770 165 8.61
- - -----------------------------------------------------------------------------------------------------------------------------
Total Interest-Bearing
Liabilities/Rate 438,627 $ 3,160 2.92% 389,925 $ 3,223 3.35%
- - -----------------------------------------------------------------------------------------------------------------------------
Demand deposits 157,342 134,985
Other liabilities 6,441 5,303
- - -----------------------------------------------------------------------------------------------------------------------------
Total Liabilities 602,410 530,213
Shareholders' Equity 46,582 41,114
- - -----------------------------------------------------------------------------------------------------------------------------
Total Liabilities and
Shareholders' Equity $ 648,992 $ 571,327
=============================================================================================================================
Interest Rate Spread 3.39% 3.38%
=============================================================================================================================
Net Interest Margin 4.16% 4.21%
=============================================================================================================================
</TABLE>
The 13% increase in net interest income in the first quarter of
1994 is due to an increase in earning assets. The interest rate spread
of 3.39% and the net interest margin of 4.16% were relatively unchanged
from their levels in the same quarter for the prior year. A further
understanding of the factors responsible for the year-to-year increase
in net interest income can be obtained by examining the changes in:
(1) the volume of earning assets and (2) the net interest income
produced after the related cost of funding these earning assets.
10
<PAGE>
The following table allocates total interest income earned at
the "interest spread" between assets funded with: (1) interest-bearing
liabilities and (2) non-interest-bearing liabilities (primarily
non-interest-bearing demand deposits) and equity capital. The interest
spread on earning assets funded by interest-bearing liabilities is
defined as the difference between the average rate earned on total
earning assets and the average rate paid on interest-bearing liabilities.
The interest spread on assets funded with non-interest-bearing sources
of funds is simply the rate earned on total earning assets.
<TABLE>
ANALYSIS OF NET INTEREST INCOME
<CAPTION>
Three Months Ended March 31,
==========================================================================================================================
- - --------------------------------------------------------------------------------------------------------------------------
Average Net Average Net
Earning Interest Interest Earning Interest Interest
Assets Spread Income Assets Spread Income
(in thousands)
Source of Funding
<S> <C> <C> <C> <C> <C> <C>
Interest-bearing liabilities $438,627 3.39% $ 3,717 $389,925 3.38% $ 3,295
Non-interest-bearing
liabilities and
equity capital 154,796 6.31 2,369 128,332 6.73 2,084
- - --------------------------------------------------------------------------------------------------------------------------
Total $593,423 $ 6,086 $518,257 $ 5,379
==========================================================================================================================
</TABLE>
The $707,000 increase in total net interest income between the
first quarter of 1994 and the first quarter of 1993 can be attributed
entirely to a higher level of earning assets ($593,423,000 in 1994 versus
$518,257,000 in 1993). This factor more than offset the impact of a
substantially lower interest spread (6.31% in 1994 versus 6.73% in 1993) on
a higher level of earning assets funded with non-interest-bearing funds.
Increases in non-interest-bearing sources of funds reflect the
increases in non-interest-bearing deposits, which were approximately 29%
of total deposits at March 31, 1994. The high level of this type of
deposit favorably impacts net interest income. However, the impact is
more favorable in periods of relatively higher interest rates than in the
current period of low interest rates. Accordingly, the net interest
income on earning assets funded with these non-interest-bearing funds
would benefit from a rise in interest rates due to the resulting increase
in the interest spread.
11
<PAGE>
PROVISION FOR CREDIT LOSSES
The allowance for credit losses at March 31, 1994 of $4,367,000 represented
1.73% of outstanding loans. A year earlier, this ratio was 1.77% and at
December 31, 1993, it was 1.59%. Annualized net loans charged off as a percent
of average loans outstanding increased to 0.50% during the first quarter of 1994
as compared to 0.45% during the first quarter of 1993. The provision for credit
losses charged against earnings was $67,000 for the three months ended March 31,
1994, as compared to $285,000 for the corresponding period in 1993.
The following table is an analysis of the activity in the allowance for
credit losses for the three-month periods ended March 31, 1994 and 1993:
Three Months Ended
=============================================================================
March 31,
- - -----------------------------------------------------------------------------
1994 1993
- - -----------------------------------------------------------------------------
(in thousands)
Average loans outstanding $258,449 $ 216,594
Loans outstanding at end of period 252,923 216,455
=============================================================================
Transactions in the allowance for credit losses:
Balance at beginning of period 4,616 3,792
Provision charged to operating expenses 67 285
Loans charged off:
Real estate 229 49
Commercial 170 74
Individuals 102 164
- - -----------------------------------------------------------------------------
Total loans charged off 501 287
- - -----------------------------------------------------------------------------
Recoveries of loans previously charged off:
Real estate 107 18
Commercial 22 5
Individuals 56 24
- - -----------------------------------------------------------------------------
Total recoveries 185 47
- - -----------------------------------------------------------------------------
Net loans charged off (316) (240)
- - -----------------------------------------------------------------------------
Balance at end of period $ 4,367 $ 3,837
=============================================================================
Ratios:
Allowance as a percent of loans outstanding
at end of period 1.73% 1.77%
Allowance as a percent of average loans 1.69 1.77
Net loans charged off as a percent of
average loans outstanding (annualized) 0.50 0.45
=============================================================================
12
NON-INTEREST INCOME
Non-interest income increased 13.8% during the first three months
of 1994 as compared to the same period in 1993. Excluding the effect
of securities transactions for the three months ended March 31 of each
year, non-interest income increased 25.6% in 1994 following a 3.8%
increase in 1993. Service charges on deposits, the largest component
of non-interest income, increased by 11.9% to $1,323,000 for the
three months ended March 31, 1994, as compared to $1,182,000 for the
same period in 1993. The increase in service charge income was
primarily due to an increase in the average volume of transaction
deposit accounts, particularly non-interest-bearing demand accounts,
which generate the majority of this fee income. Average non-interest-
bearing demand accounts increased by approximately $22 million, or
16.6% for the first quarter 1994 as compared to the same period in
1993. The acquisition of University Bank-Galveston in April 1993
contributed to the growth in deposit accounts. At March 31, 1994,
non-interest-bearing demand accounts and total deposits at University
Bank-Galveston were $13,012,000 and $84,906,000, respectively.
Service charges from University Bank-Galveston's deposits included in
Charter's consolidated financial statements for the first quarter 1994
were approximately $151,000.
Investment securities gains decreased by $175,000 for the first
quarter 1994 as compared to the same period in 1993. Trust fees
represent revenues earned by services provided to customers of
Charter's Asset Management and Trust Services Department. First
quarter 1994 trust fees increased $126,000 to $215,000 compared to the
first quarter of 1993, due to an increase in the assets under
administration which grew to approximately $175 million at the end of
March 1994, compared to $143 million at the end of March 1993.
The components of the "other" category of non-interest income
consist of rental income on other real estate owned, fees generated
from customers engaged in international trade such as foreign exchange
fees and letter of credit fees, plus miscellaneous fees such as
collection fees, credit card fees, safe deposit rentals, research
fees, check printing fees, discount brokerage commissions and wire
transfer fees. These fees correlate to the level of transactions in
each of the referenced categories. Other non-interest income
increased $166,000, or 39.6% in the first quarter of 1994 compared to
the first quarter of 1993. Fees from components within the "other"
category which improved in 1994 include a $50,000 increase in fees
generated from customers engaged in international trade. Furthermore,
the acquisition of University Bank-Galveston added approximately
$59,000 this "other" category of fee income.
The following table sets forth by category the non-interest
income and the percentage change from the prior period:
<TABLE>
Three Months Ended March 31,
1994 1993
Percent Percent
Amount Change Amount Change
(in thousands)
<S> <C> <C> <C> <C>
Service charges on deposits $ 1,323 11.9% $ 1,182 4.5%
Investment securities gains 6 (96.7) 181 (65.7)
Trading account profits (losses) 1 NM -- (100.0)
Trust fees 215 141.6 89 64.8
Other 585 39.6 419 (5.4)
- - ---------------------------------------------------------------------------------------------------
Total $ 2,130 13.8% $ 1,871 (10.0)%
===================================================================================================
"NM" denotes a comparison that is not meaningful.
</TABLE>
13
NON-INTEREST EXPENSE
Non-interest expense decreased 10.8% during the first three
months of 1994 as compared to the same period in 1993. The most
significant decrease in expenses was in the category of "other" and
ORE losses and carrying costs. Charter has established an allowance
for other real estate in order to recognize possible declines in fair
values of foreclosed properties. This allowance is increased by
provisions charged to earnings and reduced by writedowns upon the sale
of ORE at a loss. ORE losses and carrying costs decreased by
approximately $1.1 million primarily due to a declining balance in
ORE. Total ORE, net of the allowance for other real estate, declined
by approximately $3.0 million from a total of $5.0 million at December
31, 1992 to $2.0 million at March 31, 1994. The reduction in ORE has
resulted in a substantial reduction in associated carrying costs.
Management further anticipates that its efforts to dispose of some or
all of the remaining ORE properties will be accompanied by additional
reductions in associated carrying costs. The decrease in the "other"
category of non-interest expense is primarily due to one-time expenses
incurred in the first quarter 1993 related to the acquisition of
University Bank-Galveston.
The largest single line item for non-interest expense continues to be
salaries and benefits which increased by $341,000, or 12.6% for the
first quarter 1994. Approximately $292,000 of the increase in
salaries and benefits was generated by University Bank-Galveston.
Excluding the impact of the acquisition of University Bank-Galveston,
total salaries and benefits increased by $49,000, or 1.8% for 1994 as
compared to 1993.
The acquisition of University Bank-Galveston was the primary source of
increases in several categories of non-interest expense including net
premises and equipment expense, advertising, electronic data
processing and deposit insurance premiums. Expense incurred by
University Bank-Galveston and reflected on the consolidated financial
statements of Charter for 1994 in each of the preceding categories
approximated $121,000, $28,000, $47,000, and $48,000, respectively.
The following table sets forth by category the operating expenses and
the percentage change from the prior period:
<TABLE>
<CAPTION>
Three Months Ended March 31,
1994 1993
Percent Percent
Amount Change Amount Change
(in thousands)
<S> <C> <C> <C> <C>
Salaries and benefits $ 3,058 12.6% $ 2,717 4.3%
Occupancy expense 950 20.9 786 (2.8)
Advertising 198 38.5 143 38.8
Electronic data processing 322 17.1 275 26.7
Legal fees 218 92.9 113 (13.7)
ORE losses and carrying costs 55 (95.2) 1,146 25.9
Deposit insurance premiums 319 4.2 306 11.3
Amortization of core deposit intangibles 20 (82.1) 112 --
Other 749 (25.2) 1,001 12.9
Total $ 5,889 (10.8)% $ 6,599 9.1%
</TABLE>
14
(b) Analysis of Financial Condition
Total assets at March 31, 1994, were $659,000,000, as compared to Charter's
total assets of $667,096,000 at December 31, 1993. Total securities increased
$41 million as compared to December 31, 1993. Loans and federal funds sold
decreased by approximately $38 million and $18 million, respectively, from year-
end 1993. Normal recurring fluctuations increased cash and due from banks by
$4.3 million since year-end. The most significant changes in sources of funds
were in deposits which decreased in the aggregate by approximately $10.3
million, from year-end 1993.
CAPITAL RESOURCES
Under the guidelines published by the Board of Governors of the Federal
Reserve System ("Federal Reserve Board"), Charter's aggregate risk-weighted
assets and off-balance sheet exposures at March 31, 1994 and December 31, 1993
were approximately $305,144,000 and $310,489,000, respectively, calculated as
follows:
RISK-WEIGHTED Assets MARCH 31, December 31,
================================================================================
1994 1993
- - --------------------------------------------------------------------------------
AGGREGATE RISK-WEIGHTED Aggregate Risk-Weighted
AMOUNT AMOUNT Amount Amount
- - --------------------------------------------------------------------------------
(in thousands)
Securities $324,913 $ 43,891 $283,730 $ 37,982
Loans 252,923 210,168 290,674 224,687
Other earning assets 21,710 4,342 39,619 7,924
Cash and due from banks 37,070 3,875 32,745 3,772
All other assets 26,752 26,752 24,944 24,943
- - --------------------------------------------------------------------------------
Total Adjusted Assets (1) $663,368 289,028 $671,712 299,308
- - --------------------------------------------------------------------------------
Total credit-equivalent amount
of off-balance sheet items 16,116 11,181
- - --------------------------------------------------------------------------------
Total Risk-Weighted Assets $305,144 $310,489
================================================================================
(1) Total adjusted assets are total assets plus the allowance for credit
losses.
The following table indicates Charter's risk-based capital as calculated in
accordance with the Federal Reserve Board's guidelines:
RISK-WEIGHTED CAPITAL MARCH 31, December 31,
================================================================================
1994 1993
- - --------------------------------------------------------------------------------
(in thousands)
Core Capital (Tier 1):
Common equity $ 46,447 $ 45,062
Preferred equity 710 710
- - --------------------------------------------------------------------------------
Total Core Capital 47,157 45,772
- - --------------------------------------------------------------------------------
Supplementary Capital (Tier 2):
Allowance for credit losses 3,814 3,881
Mandatory convertible debt -- 257
Subordinated debt 1,650 1,650
- - --------------------------------------------------------------------------------
Total Supplementary Capital 5,464 5,788
- - --------------------------------------------------------------------------------
Total Capital $ 52,621 $51,560
================================================================================
Core capital (Tier 1) as a percentage of
risk-weighted assets 15.48% 14.78%
Total capital (Tier 1 and Tier 2) as a percentage of
risk-weighted assets 17.28% 16.65%
Core capital as a percentage of quarterly
average assets (leverage ratio) 7.22% 6.90%
Tangible core capital as a percentage of
quarterly average assets (tangible leverage ratio)6.95% 6.64%
================================================================================
15
<PAGE>
RATE-SENSITIVE ASSETS AND LIABILITIES
Interest rate sensitivity is a measure of the volatility of the net
interest margin as a consequence of changes in market rates. The following
table summarizes the rate sensitivity of earning assets and interest-bearing
liabilities of Charter at March 31, 1994. Charter monitors the rate sensitivity
gap (rate-sensitive, earning assets less rate-sensitive, interest-bearing
liabilities) at least monthly in the normal process of asset and liability
management. Money market saving accounts are included in the 31-90 days
category. Passbook savings accounts and regular interest-bearing demand
accounts with balances at March 31, 1994, of approximately $37 million and $96
million, respectively, are included in the 91-180 days category. Although
repricing on such accounts is possible at any time, the historical stability of
the rates paid on such accounts supports this classification.
At March 31, 1994, the table shows a positive (asset-sensitive) rate
sensitivity gap of $170 million in the 1-30 day repricing category. The gap
beyond thirty days becomes more liability-sensitive as interest-bearing
liabilities that reprice within 90 days, 180 days and one year become greater in
volume than rate-sensitive assets that are subject to repricing in the same
respective time periods.
<TABLE>
<CAPTION>
Rate Sensitive Within
===============================================================================================================================
1-30 31-90 91-180 181 Days- 1-5 Over
Days Days Days 1 Year Years 5 Years Total
- - -------------------------------------------------------------------------------------------------------------------------------
(in thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Earning Assets:
Loans $ 164,953 $ 8,506 $ 11,385 $ 17,900 $ 29,980 $ 20,199 $ 252,923
Securities 26,002 28,944 36,557 74,062 79,936 69,115 314,616
Other earning assets 32,007 -- -- -- -- -- 32,007
- - -------------------------------------------------------------------------------------------------------------------------------
Total Earning Assets 222,962 37,450 47,942 91,962 109,916 89,314 599,546
Interest-Bearing Liabilities:
Interest-bearing deposits 50,668 144,562 173,036 28,363 27,443 -- 424,072
Borrowed funds 2,750 -- -- 200 2,100 7,500 12,550
- - -------------------------------------------------------------------------------------------------------------------------------
Total Interest-Bearing
Liabilities 53,418 144,562 173,036 28,563 29,543 7,500 436,622
- - -------------------------------------------------------------------------------------------------------------------------------
Interest-Bearing Assets Less
Interest-Bearing Liabilities $ 169,544 $(107,112) $(125,094) $ 63,399 $ 80,373 $ 81,814 $ 162,924
===============================================================================================================================
Cumulative Gap $ 169,544 $ 62,432 $(62,662) $ 737 $ 81,110 $ 162,924 --
Cumulative Amounts as a
Percentage of Total
Interest-Earning Assets 76.04% 23.97% (20.32)% 0.18% 15.90% 27.17% --
Cumulative Ratio 4.17X 1.32X 0.83X 1.00X 1.19X 1.37X 1.37X
===============================================================================================================================
</TABLE>
The foregoing table shows the interval of time in which given volumes of
earning assets and interest-bearing liabilities would be responsive to changes
in market interest rates based on their contractual maturities or terms for
repricing. It is, however, only a static, single-day depiction of Charter's
rate sensitivity structure, which can be adjusted in response to changes in
forecasted interest rates. Various off-balance sheet instruments may be used
in managing Charter's interest rate sensitivity. Instruments which may be used
include interest rate swaps, futures and forward rate agreements which serve to
hedge interest rate risk by matching the maturity rate of securities and loans
with funding sources. Charter evaluates the creditworthiness of the
counterparties to these agreements under its credit policy guidelines.
Off-balance sheet instruments which complement discretionary balance sheet
management may be incorporated in overall interest rate risk analysis. As of
March 31, 1994, $40 million notional amount of "prime" rate caps had been sold
and were outstanding. This strategy is expected to stabilize net interest
income in the event of a decline in the prime lending rate below the national
rate of 6%. Furthermore, $40 million notional amount of "prime" rate caps had
been purchased and were outstanding. This strategy was expected to stabilize
the impact on net interest income from the interest rate caps sold in the event
of rapidly rising interest rates, which may result in an increase in the prime
lending rate above 8.5%. These interest rate agreements, along with the
availability of other mechanisms such as interest rate futures, swaps and
future rate agreements, provide Charter the flexibility to change the rate
sensitivity gap should the interest rate outlook change. At March 31, 1994,
there were no interest rate swaps in effect.
16
LIQUIDITY
Like any commercial bank, the liability structure of Charter's
subsidiary banks requires that Charter maintain an appropriate level
of liquid resources to meet normal day-to-day fluctuations in deposit
volume and to make new loans and investments as opportunities arise.
Liquidity can be provided by either assets or liabilities.
Traditional sources of liquidity include cash and due from demand
balances, money market investments, investment security maturities and
prepayments, loan maturities and repayments, and core deposit growth.
Other sources of asset liquidity readily available to Charter include
interest-bearing deposits with other financial institutions and
trading account assets. At March 31, 1994, Charter had $37,070,000 in
cash, $21,710,000 in federal funds sold and a $314,616,000 total
securities portfolio in which the market value was approximately
$2,147,000 less than the carrying value. The average loan-to-deposit
ratio for the three-month period ended March 31, 1994 was 45.4%.
A financial service company's activities consist primarily of
financing and investing activities. These activities result in large
cash flows. Charter's Consolidated Statements of Cash Flows on page 4
indicate the sources of these cash flows. In addition to the assets
which could be readily converted to cash during the first quarter of
1994, Charter received $32,120,000 in proceeds from maturities and
prepayments of securities.
Charter has substantial liability liquidity through its customer
base. In addition to normal core deposit growth, liability liquidity
is available through various sources of purchased funds. Charter
emphasizes direct issuance of liabilities in order to develop stable,
long-lasting funding relationships. At March 31, 1994, Charter had
$14,921,000 in securities sold under agreements to repurchase, all of
which were transactions effected through existing deposit customers,
rather than through the national markets. There were no federal funds
purchased or other short-term borrowings, reflecting management's
continuing effort to limit the use of more expensive purchased funds.
The liquidity of Charter also may be maintained through access to the
Federal Reserve System's "discount window," which is a liquidity
source all banks may avail themselves of if needed. Liquidity and
matched funding may also be obtained from the Federal Home Loan Bank
of Dallas, of which Charter-Houston and University Bank-Galveston are
members.
LOANS
Total loans have decreased $37,751,000, or 12.99%, from December
31, 1993 to March 31, 1994. The following is a schedule of loans
outstanding classified by type:
March 31, December 31,
1994 1993
(in thousands)
Commercial, financial and industrial $ 62,602 $ 58,421
Commercial real estate 48,457 50,467
Real estate-construction 7,517 6,477
Real estate-multi-family 17,574 16,573
Real estate-1-4 family 59,541 101,375
Loans to individuals 57,232 57,361
- - -----------------------------------------------------------------
Total Loans $252,923 $290,674
=================================================================
17
NON-PERFORMING ASSETS AND PAST DUE LOANS
The following table sets forth the components of non-performing
assets and past due loans as of March 31, 1994 and December 31, 1993:
March 31, December 31,
1994 1993
(in thousands)
Non-accrual loans:
Real estate $ 963 $ 1,172
Commercial and industrial 571 464
Individual 63 98
Other -- --
- - --------------------------------------------------------------------------
Total non-accrual loans 1,597 1,734
- - --------------------------------------------------------------------------
Restructured loans:
Real estate 213 213
Commercial and industrial -- --
Individual -- --
Other -- --
- - --------------------------------------------------------------------------
Total restructured loans 213 213
- - --------------------------------------------------------------------------
Other real estate, net and
collateral acquire 2,091 2,218
- - --------------------------------------------------------------------------
Total non-performing assets $ 3,901 $ 4,165
==========================================================================
Loans past due 90 days or more
and still accruing interest:
Real estate $ 664 $ 207
Commercial and industrial 598 19
Individual 77 342
All other loans 3 9
- - --------------------------------------------------------------------------
Total loans past due 90 days or more
and still accruing interest $ 1,342 $ 177
==========================================================================
Ratios:
Allowance for credit losses as a
percentage of loans 1.7% 1.6%
Allowance for credit losses as a
percentage of non-accrual loans 273.4 266.2
Allowance for credit losses as a
percentage of non-performing loans 138.5 182.9
Non-performing loans as a percentage
of total loans 1.2 0.9
Total non-performing assets as a
percentage of total assets 0.6 0.6
==========================================================================
Total non-performing assets decreased $264,000 since year-end to
$3,901,000 at March 31, 1994. Total non-performing assets as a
percentage of total assets was 0.6% at both March 31, 1994, and
December 31, 1993.
Charter has $91,000 in loans outstanding to foreign corporations or
governments. At March 31, 1994 and December 31, 1993, Charter had
$47,000 of properties subject to a sales contract and accounted for
under the "deposit method" as defined in Statement of Financial
Accounting Standards No. 66.
18
<PAGE>
PART II
OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(b) Reports on Form 8-K
Charter has not filed any reports on Form 8-K during the
period for which this report is filed.
All other items prescribed by Part II of Form 10-Q are
inapplicable and accordingly have been omitted.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused the report to be signed on
its behalf by the undersigned thereunto duly authorized.
Charter Bancshares, Inc.
(Registrant)
By:
William S. Shropshire, Jr.
Chief Financial Officer
and Treasurer
(Principal financial and
accounting officer)
Date: May 11, 1994
19
