<PAGE> 1
AMENDED AND RESTATED
FORM 10-QSB/A
AMENDMENT NO. 1
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One)
[ X ] Quarterly Report Under Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the quarterly period ended June 30, 1996
[ ] Transition report under Section 13 or 15(d) of the Exchange Act
For the transition period from to
---------------- -----------------
Commission File No. 0-13668
CORPUS CHRISTI BANCSHARES, INC.
-------------------------------------------------------
(Exact name of Registrant as specified in its charter.)
Texas 74-2351663
- --------------------------------------------------------------------------------
(State or other jurisdiction of (IRS Employer Identification No.)
Incorporation or Organization)
2402 Leopard Street, Corpus Christi, Texas 78408
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(512) 887-3000
----------------------------------------------------
(Registrant's telephone number, including area code)
Check whether the issuer: (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act of 1934 during the past twelve 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 [ ]
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at August 13, 1996
- --------------------------------------------------------------------------------
COMMON STOCK, $5.00 PAR VALUE 1,600,000
Transitional Small Business Disclosure Format (check one):
Yes [ ] No [ X ]
1
<PAGE> 2
CORPUS CHRISTI BANCSHARES, INC. AND SUBSIDIARIES
INDEX
<TABLE>
<CAPTION>
PAGE
NUMBER
<S> <C>
Part I. Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets - June 30, 1996 and
December 31, 1995 3
Consolidated Statements of Income -
Three months and six months ended June 30, 1996 and June 30, 1995 5
Consolidated Statements of Changes in Shareholders'
Equity - Six months ended June 30, 1996 and June 30,1995 6
Consolidated Statements of Cash Flows -
Three months and six months ended June 30, 1996 and June 30, 1995 7
Notes to Consolidated Financial Statements 8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operation 12
Part II. Other Information
Item 4. Submission of Matters to a Vote of Security Holders 18
Item 6. Exhibits and Reports on Form 8-K 19
Signatures 20
</TABLE>
2
<PAGE> 3
Part I. Financial Information
Item 1. Financial Statements
CORPUS CHRISTI BANCSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
ASSETS: (Unaudited) (Audited)
===========================================
<S> <C> <C>
Cash and due from banks $ 11,413,504 $ 18,568,553
Interest bearing deposits with Federal Home Loan Bank 28,192 114,615
Federal funds sold 100,000 6,000,000
Securities available for sale: (Note 3)
U.S. Treasury securities 31,227,812 40,597,190
Mortgage pass-through and related securities 41,295,897 40,061,876
Other securities 753,100 610,150
------------------------------------------
Total securities available for sale 73,276,809 81,269,216
Securities held to maturity: (Note 4)
U.S. Government agencies 1,002,261 1,003,210
Obligations of states and political subdivisions 4,692,960 4,859,314
------------------------------------------
Total securities held to maturity 5,695,221 5,862,524
Loans (Note 5) 113,573,376 108,978,196
Less: Unearned discount (4,607,388) (4,444,346)
Less: Allowance for loan losses (Note 6) (2,334,942) (2,542,513)
------------------------------------------
Net loans 106,631,046 101,991,337
Bank premises and equipment, net 4,979,720 5,213,133
Accrued interest receivable 1,794,321 1,842,287
Intangible assets 1,740,059 1,781,854
Other real estate 345,567 529,560
Other assets 609,386 694,284
------------------------------------------
Total assets $ 206,613,825 $ 223,867,363
==========================================
</TABLE>
See accompanying notes to Consolidated Financial Statements.
3
<PAGE> 4
CORPUS CHRISTI BANCSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Continued)
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
(Unaudited) (Audited)
============================================
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY:
Deposits:
Demand $ 49,808,780 $ 58,790,068
Interest bearing transaction accounts 62,224,302 72,494,574
Savings 15,382,514 15,600,520
Certificates of deposit (Note 7) 52,234,418 54,012,748
--------------------------------------------
Total deposits 179,650,014 200,897,910
Federal funds purchased 5,825,000 ----
Securities sold with agreements to repurchase 3,465,000 5,459,000
Accrued interest payable 324,733 370,369
Dividends payable 120,000 100,000
Other liabilities 810,646 985,387
--------------------------------------------
Total liabilities 190,195,393 207,812,666
--------------------------------------------
SHAREHOLDERS' EQUITY:
Common stock, $5.00 par value;
4,000,000 shares authorized; 1,600,000
shares issued and outstanding 8,000,000 8,000,000
Retained earnings 9,002,150 8,032,273
Unrealized gains (losses) on securities available for sale (583,718) 22,424
--------------------------------------------
Total shareholders' equity 16,418,432 16,054,697
--------------------------------------------
Total liabilities and shareholders' equity $ 206,613,825 $ 223,867,363
============================================
</TABLE>
See accompanying notes to Consolidated Financial Statements.
4
<PAGE> 5
CORPUS CHRISTI BANCSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
Three months ended June 30, Six months ended June 30,
Interest income: 1996 1995 1996 1995
------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Interest on loans $ 2,346,261 $ 2,168,788 $ 4,731,256 $ 4,205,787
Interest on deposits with other banks 2,609 853 4,104 1,674
Interest on federal funds sold 9,698 214,103 36,137 333,385
Interest and dividends on securities
available for sale:
U.S. Treasury securities 461,453 431,017 999,150 912,394
Mortgage pass-through and related securities 659,555 62,443 1,336,039 120,179
Other securities 9,920 9,014 18,867 16,928
Interest on securities held to maturity:
U.S. Government agencies 23,401 74,900 46,801 149,801
State and Political subdivisions 77,316 80,536 155,270 161,073
------------------------------------------------------------------------
Total interest income 3,590,213 3,041,654 7,327,624 5,901,221
------------------------------------------------------------------------
Interest expense:
Interest on deposits:
Interest bearing transaction accounts 481,002 496,272 955,699 962,692
Savings 124,020 135,765 237,899 260,916
Certificates of deposit 670,400 532,193 1,364,615 983,837
Federal funds purchased 26,266 ---- 44,231 ----
Securities sold with agreements to repurchase 48,520 21,846 118,479 21,885
------------------------------------------------------------------------
Total interest expense 1,350,208 1,186,076 2,720,923 2,229,330
------------------------------------------------------------------------
Net interest income 2,240,005 1,855,578 4,606,701 3,671,891
Provision for loan losses ---- (200,000) ---- (400,000)
------------------------------------------------------------------------
Net interest income after provision
for loan losses 2,240,005 2,055,578 4,606,701 4,071,891
------------------------------------------------------------------------
Other income:
Trust department income 277,819 294,541 565,078 605,124
Service charges 283,718 255,155 556,466 497,860
Credit card fees 46,006 46,512 83,072 87,187
Brokerage fees 100,801 75,968 181,048 115,284
Other income 134,429 92,653 275,470 186,145
------------------------------------------------------------------------
Total other income 842,773 764,829 1,661,134 1,491,600
------------------------------------------------------------------------
Other expenses:
Salaries and employee benefits 1,064,275 1,000,457 2,159,693 1,974,462
Net occupancy expenses 264,714 238,562 527,741 481,761
Furniture and equipment expenses 193,360 171,456 374,548 349,900
Amortization of intangible assets 30,612 ---- 60,605 ----
Net cost to operate other real estate 17,364 37,748 38,775 52,192
Legal and professional fees 277,831 159,465 411,701 330,223
Insurance expenses 19,777 95,426 41,306 197,856
Advertising expenses 19,189 36,691 35,216 83,998
Other operating expenses 409,275 402,116 778,315 773,056
------------------------------------------------------------------------
Total other expense 2,296,397 2,141,921 4,427,900 4,243,448
------------------------------------------------------------------------
Income before income taxes 786,381 678,486 1,839,935 1,320,043
Applicable income taxes 239,625 233,223 630,058 454,676
------------------------------------------------------------------------
Net income $ 546,756 $ 445,263 $ 1,209,877 $ 865,367
========================================================================
Weighted average of common stock and common
stock equivalents outstanding 1,709,206 1,681,260 1,705,660 1,680,348
========================================================================
Net income per common share $ .32 $ .26 $ .71 $ .51
========================================================================
</TABLE>
See accompanying notes to Consolidated Financial Statements.
5
<PAGE> 6
CORPUS CHRISTI BANCSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(Unaudited)
<TABLE>
<CAPTION>
Net
Unrealized
Gains (Losses) on
Securities
Common Retained Available for
Stock Earnings Sale Total
-----------------------------------------------------------------------
<S> <C> <C> <C> <C>
Balance at January 1, 1995 $ 8,000,000 $ 6,497,204 $ (1,058,743) $ 13,438,461
Net income for six months
ended June 30, 1995 ---- 865,367 ---- 865,367
Cash dividends, declared,
$.1250 per share ---- (200,000) ---- (200,000)
Net change in unrealized gains
on securities available for sale
for the six months ended
June 30, 1995 ---- ---- 898,323 898,323
=======================================================================
Balance at June 30, 1995 $ 8,000,000 $ 7,162,571 $ (160,420) $ 15,002,151
=======================================================================
Balance at January 1, 1996 $ 8,000,000 $ 8,032,273 $ 22,424 $ 16,054,697
Net income for six months
ended June 30, 1996 ---- 1,209,877 ---- 1,209,877
Cash dividends, declared,
$.1500 per share ---- (240,000) ---- (240,000)
Net change in unrealized losses
on securities available for sale
for the six months ended
June 30, 1996 ---- ---- (606,142) (606,142)
-----------------------------------------------------------------------
Balance at June 30, 1996 $ 8,000,000 $ 9,002,150 $ (583,718) $ 16,418,432
=======================================================================
</TABLE>
See accompanying notes to Consolidated Financial Statements.
6
<PAGE> 7
CORPUS CHRISTI BANCSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Three months ended June 30, Six months ended June 30,
1996 1995 1996 1995
==================================================================
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net income $ 546,756 $ 445,263 $ 1,209,877 $ 865,367
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 165,100 164,121 334,679 323,575
Provision for loan losses ---- (200,000) ---- (400,000)
Deferred federal income tax expense (benefit) (88,563) 78,111 (12,942) 160,630
Gain on sale of property and equipment (857) ---- (14,292) ----
Gain on sale of securities available for sale ---- ---- ---- ----
Gain on sale of other real estate ---- ---- ---- (18,344)
Net amortization of investment securities available
for sale and securities held to maturity 133,456 105,876 298,422 228,068
Valuation provisions for other real estate 5,000 30,000 20,000 60,000
Decrease (increase) in accrued interest receivable (12,112) (104,749) 47,966 95,546
Decrease (increase) in other assets (1,634) 229,389 126,693 (261,798)
Increase (decrease) in accrued interest payable (22,293) 13,131 (45,636) 28,565
Increase (decrease) in other liabilities (509,714) 119,316 150,338 530,274
------------------------------------------------------------------
Net cash provided by (used)
by operating activities 215,139 880,458 2,115,105 1,611,883
------------------------------------------------------------------
Cash flows from investing activities:
Net decrease (increase) in federal funds sold ---- (5,125,000) 5,900,000 (9,550,000)
Proceeds from sales of securities available for sale ---- ---- ---- ----
Proceeds from maturities of securities available for sale 7,064,082 5,848,933 12,583,738 12,765,828
Proceeds from maturities of securities held to maturity 100,000 ---- 130,000 ----
Purchase of securities available for sale (10,150) (56,000) (5,770,729) (1,994,750)
Purchase of securities held to maturity ---- ---- ---- ----
Net increase in loans (3,267,037) (2,898,991) (4,989,723) (6,578,317)
Recoveries of charged-off loans 172,994 350,417 350,014 505,844
Purchase of bank premises and equipment (43,135) (96,789) (110,164) (230,190)
Proceeds from sale of bank premises and equipment 23,190 ---- 23,190 ----
Proceeds from sale of other real estate 89,333 4,300 163,993 93,989
------------------------------------------------------------------
Net cash provided (used) by investing activities 4,129,277 (1,973,130) 8,280,319 (4,987,596)
------------------------------------------------------------------
Cash flows from financing activities:
Net decrease in demand, interest bearing
transaction and savings accounts (4,685,281) (1,509,290) (19,469,566) (3,148,601)
Net increase (decrease) in certificates of deposit (1,303,703) 2,561,502 (1,778,330) 3,742,354
Net increase in federal funds purchased 4,925,000 ---- 5,825,000 ----
Net increase (decrease) in securities sold with
agreements to repurchase (2,681,611) 2,068,929 (1,994,000) 2,471,929
Dividends paid (100,000) (100,000) (220,000) (200,000)
------------------------------------------------------------------
Net cash provided (used) by financing
activities (3,845,595) 3,021,141 (17,636,896) 2,865,682
------------------------------------------------------------------
Net increase(decrease) in cash and cash
equivalents 498,821 1,928,469 (7,241,472) (510,031)
Cash and cash equivalents at beginning of
period 10,942,875 12,722,517 18,683,168 15,161,017
------------------------------------------------------------------
Cash and cash equivalents at end of period $ 11,441,696 $ 14,650,986 $ 11,441,696 $ 14,650,986
==================================================================
Supplementary information:
Interest paid $ 1,372,501 $ 1,172,945 $ 2,766,559 $ 2,200,765
==================================================================
Income taxes paid $ 790,000 $ 260,000 $ 879,007 $ 260,000
==================================================================
</TABLE>
See accompanying notes to Consolidated Financial Statements.
7
<PAGE> 8
CORPUS CHRISTI BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of Presentation
The Consolidated Financial Statements herein have been prepared by Corpus
Christi Bancshares, Inc. (the "Company"), without audit, pursuant to the
rules and regulations of the Securities and Exchange Commission. The
consolidated financial statements include all adjustments (including normal
recurring accruals) which, in the opinion of management, are necessary for
the fair presentation of the results of the periods presented. Certain
information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been omitted pursuant to such rules and regulations,
although the Company believes that the disclosures are adequate to make the
information presented not misleading. It is suggested that these financial
statements be read in conjunction with the consolidated financial
statements and the notes thereto in the Company's latest Annual Report on
Form 10-KSB.
2. Principles of Consolidation
The consolidated financial statements for the Company include the accounts
of Corpus Christi Bancshares, Inc. and its wholly owned subsidiaries,
C.S.B.C.C., Inc. and Citizens State Bank ("Bank"), consolidated in
accordance with generally accepted accounting principles. All major items
of income and expense are recorded on the accrual basis of accounting, and
all significant intercompany accounts and transactions have been
eliminated. In the opinion of management, the consolidated financial
statements present fairly the results of the periods presented. These
statements have not been examined by independent public accountants and are
subject to year-end audit and adjustments.
Statements of Cash Flows
For purposes of the consolidated statements of cash flows, the Company
considers cash, due from bank accounts and interest bearing deposits with
the Federal Home Loan Bank to be cash equivalent accounts.
Net Income Per Common Share
Primary net income per common share is computed on the weighted average
number of shares of common stock outstanding, including common stock
assumed outstanding to reflect the potential dilutive effect of common
stock options. Fully diluted net income per common share is computed on the
weighted average number of shares of common stock outstanding, including
the common stock assumed outstanding to reflect the maximum dilutive effect
of common stock options. Fully diluted net income per common share was not
applicable for the periods presented because the effect is not significant.
3. Securities Available for Sale
Management determines the appropriate classification of securities at the
time of purchase. Securities to be held for sale for indefinite periods of
time and not intended to be held to maturity or on a long-term basis are
classified as securities available for sale and are carried at market
value.
The securities available for sale portfolio provides the Company with an
additional measure of liquidity and added flexibility in managing the
Company's asset liability management strategy and such securities may be
sold in
8
<PAGE> 9
response to changes in interest rates, resultant prepayment risk and other
factors related to interest rate and resultant risk changes.
Included in securities classified as securities available for sale are
mortgage pass-through and related securities which represent participating
interest in pools of long-term first mortgage loans originated and serviced
by the issuers of the securities. Mortgage pass-through and related
securities are carried at fair value. Market interest rate fluctuations can
affect both the timing of prepayments of principal and the yield on the
securities. Other securities include investments in the Federal Home Loan
Bank of $690,100, Texas Independent Bank of $62,750 and the Corpus Christi
Development Corporation of $250 at June 30, 1996. Premiums and discounts
are amortized using the straight-line method over the remaining period to
contractual maturity. The net unrealized gains or losses on securities
available for sale are recorded as a separate component of shareholders'
equity.
The amortized cost and market value of securities available for sale at
June 30, 1996 and December 31, 1995 were as follows:
<TABLE>
<CAPTION>
June 30, 1996
======================================================================
Gross Gross
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
======================================================================
<S> <C> <C> <C> <C>
U.S. Treasury securities $ 31,208,412 $ 81,270 $ (61,870) $ 31,227,812
Mortgage pass-through and
related securities 41,954,325 12,525 (670,953) 41,295,897
Other securities 753,100 ---- ---- 753,100
----------------------------------------------------------------------
$ 73,915,837 $ 93,795 $ (732,823) $ 73,276,809
======================================================================
</TABLE>
<TABLE>
<CAPTION>
December 31, 1995
======================================================================
Gross Gross
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
======================================================================
<S> <C> <C> <C> <C>
U.S. Treasury securities $ 40,429,105 $ 210,918 $ (42,833) $ 40,597,190
Mortgage pass-through and
related securities 39,950,710 187,002 (75,836) 40,061,876
Other securities 610,150 ---- ---- 610,150
----------------------------------------------------------------------
$ 80,989,965 $ 397,920 $ (118,669) $ 81,269,216
======================================================================
</TABLE>
Securities available for sale with market values of $58,514,229 at June
30, 1996 and $6,599,170 at December 31, 1995 were pledged to secure
public deposits and for other purposes required or permitted by law.
9
<PAGE> 10
4. Securities Held to Maturity
Securities held to maturity are stated at cost adjusted for amortization of
premium and accretion of discounts which are recognized as adjustments to
interest income. Management determines the appropriate classification of
securities at the time of purchase. Securities held to maturity are
acquired for long term investment purposes. Management is of the opinion
that the Company has the intention and ability to hold securities
classified as securities held to maturity until maturity.
The amortized cost and approximate market value of securities classified as
held to maturity at June 30, 1996 and December 31, 1995 are as follows:
<TABLE>
<CAPTION>
June 30, 1996
======================================================================
Gross Gross
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
======================================================================
<S> <C> <C> <C> <C>
U.S. Government agencies $ 1,002,261 $ 38,364 $ ---- $ 1,040,625
Obligations of states and
political subdivisions 4,692,960 97,268 (10,295) 4,779,933
----------------------------------------------------------------------
$ 5,695,221 $ 135,632 $ (10,295) $ 5,820,558
======================================================================
</TABLE>
<TABLE>
<CAPTION>
December 31, 1995
======================================================================
Gross Gross
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
======================================================================
<S> <C> <C> <C> <C>
U.S. Government agencies $ 1,003,210 $ 61,790 $ ---- $ 1,065,000
Obligations of states and
political subdivisions 4,859,314 177,768 (6,387) 5,030,695
----------------------------------------------------------------------
$ 5,862,524 $ 239,558 $ (6,387) $ 6,095,695
======================================================================
</TABLE>
Securities held to maturity with amortized costs of $1,165,678 at June 30,
1996 and $2,355,126 at December 31, 1995 were pledged to secure public and
trust-fund deposits and for other purposes required or permitted by law.
5. Loans
Major classifications of loans as of June 30, 1996 and December 31, 1995
are as follows:
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
=======================================
<S> <C> <C>
Commercial and industrial $ 28,465,740 $ 28,481,910
Energy 1,773,164 1,691,571
Installment 40,288,418 36,670,868
Real estate construction 2,345,159 1,172,986
Real estate mortgage 36,075,406 37,835,935
Agricultural 4,563,910 3,102,465
Other 61,579 22,461
---------------------------------------
113,573,376 108,978,196
Unearned discount (4,607,388) (4,444,346)
---------------------------------------
108,965,988 104,533,850
Allowance for loan losses (2,334,942) (2,542,513)
---------------------------------------
$ 106,631,046 $ 101,991,337
=======================================
</TABLE>
10
<PAGE> 11
6. Allowance for Loan Losses
Transactions in the allowance for loan losses for the six months ending
June 30, 1996, and for the year ended December 31, 1995 are summarized as
follows:
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
=========================================
<S> <C> <C>
Balance at beginning of period $ 2,542,513 $ 1,990,638
Loans charged-off (557,585) (475,134)
Recoveries on loans 350,014 1,369,464
-----------------------------------------
Net loans recovered (charged-off) (207,571) 894,330
Provisions charged to operating expenses ---- (600,000)
Allowance acquired in purchase transaction ---- 257,545
-----------------------------------------
Balance at end of period $ 2,334,942 $ 2,542,513
=========================================
</TABLE>
7. Certificates of Deposit
Included in certificates of deposits are certificates of deposits in
denominations of $100,000 or more aggregating $14,848,238 and $15,156,682
at June 30, 1996 and December 31, 1995, respectively. Interest expense on
certificates of deposits in denominations of $100,000 or more amounted to
$401,434 and $261,338 for the six months ended June 30, 1996 and June 30,
1995, respectively.
8. Nonqualified Stock Option Plan
On October 20, 1993, the Board of Directors authorized 160,000 shares of
Company common stock for issuance under a nonqualified stock option plan
for directors and key officers who the Board of Directors believe have a
significant impact on the profitability of the Company. The options were
granted in 1993 at an option price of $5 per common share, the estimated
market value per common share on the date of the grant. On May 14, 1996,
options for 200 shares of the Company's common stock were exercised. At
June 30, 1996, those shares had not been issued pending delivery of
required payment of taxes and certain documents required by the Company.
At June 30, 1996, options for 159,800 shares were outstanding, all of which
are exercisable through that date. Expiration dates are ten (10) years from
the date of the grant.
11
<PAGE> 12
Item 2.
CORPUS CHRISTI BANCSHARES, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion highlights the major changes affecting the operations
and condition of the Company for the quarter and six months ended June 30,
1996 as compared to the same periods of 1995.
Overall Performance:
The Company had second quarter 1996 net income of $546,756, or $.32 net income
per share, up $101,493, compared to $445,263, or $.26 net income per share for
the same quarter of 1995.
The Company's net income for the six months ended June 30, 1996 was $1,209,877,
or $.71 net income per share, up $344,510, compared to $865,367, or $.51 net
income per share, for the same period of 1995. The increase in net income for
the six months period ended June 30,1996 compared to the same period of 1995 is
attributable in large part to the increase in net interest income totaling
$934,810 and to an increase in noninterest income totaling $169,534.
Provision for Loan Losses
The Company had no provisions for loan losses during the second quarter of 1996
nor the six months ended June 30, 1996. This compares to "negative" provisions
made by the Company during the second quarter of 1995 and the six months ended
June 30, 1995 of $200,000 and $400,000, respectively. The "negative" provisions
made by the Company during 1995 were the result of increased recoveries on
prior loans charged-off. The Company had net charge-offs totaling $207,571 for
the six months ended June 30, 1996 compared to net recoveries totaling $362,799
for the same period in 1995.
The allowance for loan losses is established through charges to operations in
the form of provisions for loan losses. Loan losses (or recoveries) are
charged (or credited) directly to the allowance for loan losses. The provision
for loan losses is determined by management, based upon considerations of
several factors including: (1) a continuing review by management of the
portfolio with particular emphasis on problem loans; (2) regular examination of
the loan portfolio; (3) loss experience on various types of loans in relation
to outstanding loans; and (4) an ongoing assessment of current and anticipated
economic conditions in the market place served by the subsidiary bank.
The Company's Credit Review Committee ("CRC"), independent consultants, and
Federal and State regulators, conduct periodic examinations of the Company's
subsidiary bank to make evaluations of the subsidiary bank's loan portfolio. In
addition, appropriate regulatory authorities and independent consultants make
evaluations of the effectiveness of the Company's loan review and
administrative functions and make periodic reports to the Company's Board of
Directors.
As the Company's CRC examines the loan portfolio, loans are assigned a risk
grading which is used to determine the reserve requirements for each loan. In
addition to these specific allocations of reserves, an appropriate amount is
set aside to recognize the likelihood that there are unidentified additional
risks in the portfolio.
While there is no precise method of predicting loan losses, it is the judgment
of the Company's management that the allowance for loan losses at June 30,
1996, was adequate to absorb possible losses from the loans in the portfolio at
that date.
12
<PAGE> 13
Nonperforming assets and past-due accounts were as follows:
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
===================================================
<S> <C> <C>
Nonperforming assets:
Nonaccrual loans $ 1,530,725 $ 1,185,565
Other real estate 345,567 529,560
---------------------------------------------------
$ 1,876,292 $ 1,715,125
===================================================
Accruing loans past due 90 days or more $ 280,920 $ 134,350
===================================================
</TABLE>
Generally, the accrual of income is discontinued when the full collection of
principal and interest is in doubt, or when the payment of principal or
interest has become contractually 90 days past due unless the obligation is
well secured and in the process of collection. Loans are not restored to full
earnings status until the borrower's ability to make payments of principal and
interest at original or prevailing market terms has been demonstrated through
substantial performance on the loan over an extended period of time. At June
30, 1996, nonaccrual loans totaled $1,530,725 compared to $1,185,565 and
$101,819 at December 31, 1995 and June 30, 1995, respectively. Further
information regarding the balance of nonaccrual loans at June 30, 1996, and
related interest payment information, is as follows:
<TABLE>
<CAPTION>
Book Contractual
Balance Balance
=====================================================
<S> <C> <C>
Nonaccrual loans at December 31, 1995 $ 1,185,565 $ 1,289,548
Additions 506,619 507,906
Reductions-principal payments (71,775) (72,426)
Reductions-interest payments (42,713) ----
Charge-offs (46,971) (47,490)
Transferred to other real estate ---- ----
-----------------------------------------------------
Nonaccrual loans at June 30, 1996 $ 1,530,725 $ 1,677,538
=====================================================
</TABLE>
The Company considers a nonaccrual loan to have substantial performance if
eighty percent (80%) of principal payment and interest is collected.
<TABLE>
<CAPTION>
Cash interest payments in 1996
applied as:
Book Balance Contractual ----------------------------------------------------
at Balance at Recoveries of
June 30, June 30, Interest Prior Partial Reduction of
1996 1996 Income Charge-offs Principal
=======================================================================================
<S> <C> <C> <C> <C> <C>
Contractually past due with:
substantial performance $ 50,852 $ 87,288 $ ---- $ ---- $ 5,055
limited performance 43,417 43,417 ---- ---- ----
no performance ---- ---- ---- ---- ----
Contractually current, however:
payment in full of principal
or interest in doubt 1,436,456 1,546,833 ---- ---- 37,658
---------------------------------------------------------------------------------------
$ 1,530,725 $ 1,677,538 $ ---- $ ---- $ 42,713
=======================================================================================
</TABLE>
13
<PAGE> 14
Total nonperforming assets increased to $1,876,292 at June 30, 1996, up
$161,167, compared to $1,715,125 at December 31, 1995. Nonperforming assets at
June 30, 1995 totaled $730,930.
The recorded investments in loans for which an impairment has been recognized
and the related allowance for loan losses at June 30, 1996 were $2,048,559 and
$520,628, respectively. The average recorded investment in impaired loans
during the six months ended June 30, 1996 was $2,126,005. Interest recognized
on impaired loans during the six months ended June 30, 1996 was $40,291.
As part of the CRC process, loans are graded according to risk. Loans having a
greater degree of risk, but not necessarily a greater potential for loss, are
placed on a watchlist. Such loans are performing and are either considered to
be collateralized or higher reserves are allocated for unsecured exposures. The
total amount of such loans at June 30, 1996 and December 31, 1995 not
classified as nonaccrual, restructured, or past due 90 days and still accruing
in the above table totaled $3,817,342 and $3,062,924, respectively. Such loans
totaled $4,221,688 at June 30, 1995.
In addition, a substantial amount of the Company's nonperforming assets are
attributable to other real estate located in the Corpus Christi, Texas area.
Other real estate at June 30, 1996 was $345,567, down $183,993, compared to
$529,560 at December 31, 1995. Other real estate totaled $629,111 at June 30,
1995. Other real estate has been adjusted to estimated fair value less
estimated selling costs, if lower than cost, and includes some income producing
property.
With respect to other real estate, management of the Company believes it has
made appropriate valuations, using independent appraisers, of these properties
based on strict appraisal guidelines. The carrying value of other real estate
is reviewed at least annually and the valuation allowance is revised through
subsequent valuation provisions charged to other operating expenses. During the
second quarter ended June 30, 1996, the Company made valuation provisions for
other real estate totaling $5,000 compared to $30,000 for the same quarter of
1995. For the six months ended June 30, 1996, the Company made valuation
provisions for other real estate totaling $20,000 compared to $60,000 for the
same period of 1995. In the opinion of management, this appraisal process
results in values which represent current market conditions at June 30, 1996
and 1995.
Net Interest Income
Net interest income (the difference between interest income and interest
expense) for the quarter ended June 30, 1996 was $2,240,005, up $384,427,
compared to $1,855,578 for the same quarter of 1995. Net interest income for
the six months ended June 30, 1996 was $4,606,701, up $934,810, compared to
$3,671,891 for the same period of 1995. The increase for the second quarter and
the six months ended June 30, 1996 was largely attributable to the increase in
the volume of earning assets as a result of the acquisition of The First
National Bank of Taft, Texas ("Taft Acquisition") on October 31, 1995.
Earning assets at June 30, 1996 were $186.5 million, up $30.0 million, compared
to $156.5 million at June 30, 1995. The yield on earning assets at June 30,
1996 was 7.5% compared to 8.1% for the same period last year. Interest-bearing
liabilities at June 30, 1996 were $139.1 million, up $23.0 million, compared to
$116.1 million at June 30, 1995. The yields on interest-bearing liabilities was
3.9% at June 30, 1996 compared to 4.2% at June 30, 1995. Net interest income as
a percentage of average earning assets ("net interest margin") was 4.6% at June
30, 1996 compared to 5.0% at June 30, 1995. The net interest margin averaged
4.7% in 1995.
Noninterest Income
Noninterest income for the six months ended June 30, 1996 was 1,661,134, up
$169,534, compared to $1,491,600 for the same period of 1995. Trust fees for
the six months ended June 30, 1996 were $565,078, down $40,046,
14
<PAGE> 15
compared to $605,124 for the same period in 1995. The decrease was largely
attributable to non-recurring estate and stock transfer fees collected during
1995 totaling approximately $50,000. Service charges on deposit accounts were
$556,466 for the six months ended June 30, 1996, up $58,606, compared to
$497,860 for the same period in 1995. The increase was largely attributable to
an increase in nonsufficient fund charges totaling $40,442. Credit card fees
were $83,072 for the six months ended June 30, 1996, down $4,115 compared to
$87,187 for the same period last year. Brokerage fees were $181,048 for the six
months ended June 30, 1996, up $65,764, compared to $115,284 for the same
period in 1995. Other income totaled $275,470 for the six months ended June
30, 1996, up $89,325, compared to $186,145 for the same period in 1995. The
increase in other income for the first six months of 1996 was largely
attributable to increases in automated teller machine interchange fees totaling
$79,856. The increase in automated teller machine interchange fees was due in
part to the addition of two automated teller machines in 1995 acquired in the
Taft Acquisition.
Noninterest income for the second quarter ended June 30, 1996 was $842,773, up
$77,944, compared to $764,829 for the same quarter of 1995.
The following table details the changes in noninterest income for the six
months ended June 30, 1996 as compared with the same period of 1995.
<TABLE>
<CAPTION>
Change for the
Six Months Ended
June 30, June 30, June 30, 1996
1996 1995 Amount Percentage
=========================================================================
<S> <C> <C> <C> <C>
Trust department income $ 565,078 $ 605,124 $ (40,046) (6.6)%
Service charges 556,466 497,860 58,606 11.8%
Credit card fees 83,072 87,187 (4,115) (4.7)%
Brokerage fees 181,048 115,284 65,764 57.0%
Other income 275,470 186,145 89,325 48.0%
-------------------------------------------------------------------------
Total noninterest income $ 1,661,134 $ 1,491,600 $ 169,534 11.4%
=========================================================================
</TABLE>
Noninterest expenses
The Company's noninterest expenses were $4,427,900 for the six months ended
June 30, 1996, up $184,452, compared to $4,243,448 for the same period of 1995.
Salaries and employee benefits for the six months ended June 30, 1996 were
$2,159,693, up $185,231, compared to $1,974,462 for the same period of 1995.
The increase in salaries and employee benefits was primarily attributable to
salaries and benefits related to the Taft Acquisition totaling $113,425,
increases in medical insurance totaling $29,988, and a 3% merit increase during
1995. Full time equivalent employees at June 30, 1996 were 138 compared to 130
employees at June 30, 1995. Net occupancy expenses were $527,741 for the six
months ended June 30, 1996, up $45,980, compared to $481,761 for the same
period in 1995. Furniture and equipment cost totaled $374,548 for the six
months ended June 30, 1996, up $24,648, compared to $349,900 for the same
period in 1995. The increase in net occupancy expenses and furniture and
equipment cost for the six months ended June 30,1996 compared to the same
period of 1995 was largely attributable to depreciation expenses related to
assets acquired in the Taft Acquisition totaling $52,860 and $26,032,
respectively. Amortization of intangible assets related to the Taft Acquisition
totaled $60,605 during the six months ended June 30, 1996. Net cost to operate
other real estate was $38,775 for the six months ended June 30, 1996, down
$13,417, compared to $52,192 for the same period of 1995. The decrease in net
cost to operate other real estate was primarily attributable to a decrease in
valuation provisions on other real estate in 1996 totaling $40,000. Legal and
professional fees were $411,701 for the six months ended June 30, 1996, up
$81,478, compared to $330,223 for the same period in 1995. The increase was
largely attributable to an increase in legal fees totaling $74,905 in 1996.
Insurance expenses for the six months ended June 30, 1996 were $41,306, down
$156,550, compared to $197,856 for the same period in 1995. The decrease in
insurance expenses was the result of lower
15
<PAGE> 16
Federal Deposit Insurance Corporation (FDIC) insurance assessment fees totaling
approximately $165,527. Advertising expenses totaled $35,216 at June 30, 1996,
down $48,782, compared to $83,998 for the same period in 1995. Other operating
expenses totaled $778,315 for the six months ended June 30, 1996, up $5,259,
compared to $773,056 for the same period in 1995.
Noninterest expenses for the second quarter ended June 30, 1996 were
$2,296,397, up $154,476, compared to $2,141,921 for the same period in 1995.
The following table details the changes in noninterest expenses for the six
months ended June 30,1996 as compared to the same period of 1995.
<TABLE>
<CAPTION>
Percent of Percent of Change for the
Net Interest Net Interest Six Months Ended
and and June 30, 1996
June 30, Noninterest June 30, Noninterest ----------------------------
1996 Income 1995 Income Amount Percentage
============================================================================================
<S> <C> <C> <C> <C> <C> <C>
Salaries and employee benefits $ 2,159,693 34.5% $ 1,974,462 38.2% $ 185,231 9.4%
Net occupancy expenses 527,741 8.4% 481,761 9.3% 45,980 9.6%
Furniture and equipment expenses 374,548 6.0% 349,900 6.8% 24,648 7.0%
Amortization of intangible assets 60,605 1.0% -- -- 60,605 100.0%
Net cost to operate other real
estate 38,775 .6% 52,192 1.0% (13,417) (25.7)%
Legal and professional fees 411,701 6.6% 330,223 6.4% 81,478 24.7%
Insurance expenses 41,306 .7% 197,856 3.8% (156,550) (79.1)%
Advertising expenses 35,216 .5% 83,998 1.6% (48,782) (58.1)%
Other operating expenses 778,315 12.4% 773,056 15.0% 5,259 1.0%
-------------------------------------------------------------------------------------------
Total noninterest expenses $ 4,427,900 70.7% $ 4,243,448 82.1% $ 184,452 4.3%
============================================================================================
</TABLE>
Liquidity
Generally, the Company's largest source of funds is provided through deposits.
Total deposits at June 30, 1996 were $179.7 million, down $21.2 million,
compared to $200.9 million at December 31, 1995. The decline in deposits during
the six months ended June 30, 1996 is in part reflective of seasonal trends
experienced during the prior five years and to a decline in deposits at the
Taft branch of $9.8 million since year-end 1995. Total deposits at June 30,
1995 were $158.3 million. In addition, at June 30, 1996 and at December 31,
1995, the Company had approximately $100.0 thousand and $6.0 million,
respectively, in federal funds sold that could be readily converted to cash.
Another source of liquidity, if the need arises, could come from the
liquidation of securities available for sale totaling $73.3 million at June 30,
1996.
Funds are also generated through loan payoffs and maturities of investment
securities. Currently, management believes that it has an adequate level of
liquidity to meet its financial obligations that will arise during the normal
course of business in the coming year.
One principal ratio measurement used by regulatory authorities to measure
liquidity is the ratio of net loans to total deposits. At June 30, 1996, the
Company's ratio of net loans to total deposits was 59.4%, compared to 50.8% at
December 31, 1995. The Company's ratio of net loans to total deposits at June
30, 1995 was 62.3%. At June 30, 1996, the Company's net loans to total deposits
ratio of 59.4% compared favorably to peer banking institutions in Texas with
similar asset sizes which had net loans to total deposit ratios with a low of
41%, median of 52% and a high of 65% at December 31, 1995. The Company's
long-term planning targets a loan to deposit ratio of 65% to 70%.
16
<PAGE> 17
Capital Resources
The Company and the Bank are required by federal regulations to meet certain
minimum regulatory capital guidelines utilizing a risk-based capital framework
that became effective on December 31, 1992. The Company and the Bank must have
a minimum ratio of Tier 1 capital to total risk-adjusted assets of not less
than 4%, a ratio of combined Tier 1 and Tier 2 capital to total risk-adjusted
assets of not less than 8% and a leverage ratio of not less than 4%. For the
purposes of these ratios, shareholders' equity does not include unrealized
gains or losses on securities available for sale or intangible assets in
accordance with regulatory guidelines. At June 30, 1996, the Company and the
Bank each had a Tier 1 capital ratio of 12.5%, combined Tier 1 and Tier 2
capital ratio of 13.9% and leverage ratio of 7.4%. At December 31, 1995, the
Company and the Bank each had a Tier 1 capital ratio of 12.0%, combined Tier 1
and Tier 2 capital ratio of 13.3% and leverage ratio of 6.4%.
The Company's equity to assets ratio is one indicator that management uses to
monitor capital adequacy. At June 30, 1996, the Company's equity to assets
ratio was 7.4% compared to 6.4% at December 31, 1995. The Company's equity to
asset ratio at June 30, 1995 was 8.6%. The decrease in the Company's equity to
assets ratio of 7.4% at June 30, 1996 compared to 8.6% at June 30, 1995 was a
direct result of the Taft Acquisition.
At June 30, 1996, the Company's subsidiary bank had an equity ratio of 7.4%,
which exceeds the minimum requirement guideline of 6.0% by the Texas Department
of Banking.
17
<PAGE> 18
PART II
OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders.
(a) The 1996 Annual Meeting of the Shareholders of Corpus Christi Bancshares,
Inc. was held on May 29, 1996 at 3:00 P.M. (Central Daylight Savings Time)
at Citizens State Bank of Corpus Christi, 2402 Leopard Street, Corpus
Christi, Texas.
(b) Class B Directors elected at the 1996 Annual Meeting of Shareholders:
Marvin L. Berry
Joe R. DeLeon, Jr.
Stephen R. Karp
Roscoe M. Smith
Class A Directors whose terms continue after the 1996 Annual Meeting of
Shareholders:
John C. Brooke
Roy M. Grassedonio
Jack Powers
John T. Wright, III
Class C Directors whose terms continue after the 1996 Annual Meeting of
Shareholders:
J.B. Clark
R. Jay Phillips
L.L. Woodman, Jr.
John T. Wright, Jr.
(c) A brief description of matters voted upon at the Annual Meeting including
the number of votes cast for, against or abstained from voting are as
follows:
Election of Directors
<TABLE>
<S> <C> <C> <C> <C>
Marvin L. Berry For: 1,128,730 Withheld: 148,596
Joe R. DeLeon, Jr. For: 1,128,730 Withheld: 148,596
Stephen R. Karp For: 1,128,730 Withheld: 148,596
Roscoe M. Smith For: 1,128,730 Withheld: 148,596
</TABLE>
To ratify the selection of KPMG Peat Marwick LLP as the independent auditors
of the Company for the current fiscal year.
<TABLE>
<S> <C> <C>
For: 1,270,340 Against: 1,200 Abstained: 5,786
</TABLE>
(d) Not applicable.
18
<PAGE> 19
Item 6. Exhibits and reports on Form-8-K.
(a) Exhibits: See Index to Exhibits, Page 22.
(b) The Company was not required to file any report on Form 8-K
during the six-month period ending June 30, 1996.
19
<PAGE> 20
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.
CORPUS CHRISTI BANCSHARES, INC.
-------------------------------
REGISTRANT
Date: December 19, 1996 /s/ John T. Wright, III
-----------------------------------------
John T. Wright, III
Chairman of the Board
20
<PAGE> 21
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
___________________
EXHIBITS
TO
FORM 10-QSB
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
___________________
For the Quarter Ended June 30, 1996
Commission File Number 0-13668
___________________
CORPUS CHRISTI BANCSHARES, INC.
21
<PAGE> 22
CORPUS CHRISTI BANCSHARES, INC.
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Sequentially
Numbered
Pages
------------
<S> <C> <C>
27 Financial Data Schedule ----
</TABLE>
22
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 11,413,504
<INT-BEARING-DEPOSITS> 28,194
<FED-FUNDS-SOLD> 100,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 73,276,809
<INVESTMENTS-CARRYING> 5,695,221
<INVESTMENTS-MARKET> 5,820,558
<LOANS> 108,965,988
<ALLOWANCE> 2,334,942
<TOTAL-ASSETS> 206,613,825
<DEPOSITS> 179,650,014
<SHORT-TERM> 9,290,000
<LIABILITIES-OTHER> 1,255,379
<LONG-TERM> 0
<COMMON> 8,000,000
0
0
<OTHER-SE> 8,418,432
<TOTAL-LIABILITIES-AND-EQUITY> 206,613,825
<INTEREST-LOAN> 4,731,256
<INTEREST-INVEST> 2,596,368
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 7,327,624
<INTEREST-DEPOSIT> 2,558,213
<INTEREST-EXPENSE> 2,720,923
<INTEREST-INCOME-NET> 4,606,701
<LOAN-LOSSES> 0
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 4,427,900
<INCOME-PRETAX> 1,839,935
<INCOME-PRE-EXTRAORDINARY> 1,839,935
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,209,877
<EPS-PRIMARY> .71
<EPS-DILUTED> .71
<YIELD-ACTUAL> 4.6
<LOANS-NON> 1,530,725
<LOANS-PAST> 280,920
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 3,817,342
<ALLOWANCE-OPEN> 2,542,513
<CHARGE-OFFS> 557,585
<RECOVERIES> 350,014
<ALLOWANCE-CLOSE> 2,334,942
<ALLOWANCE-DOMESTIC> 2,334,942
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
