<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 March 31, 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, Texas78408
- --------------------------------------------------------------------------------
(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 May 10, 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
<TABLE>
<CAPTION>
INDEX PAGE
NUMBER
<S> <C>
Part I. Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets - March 31, 1996 and
December 31, 1995 3
Consolidated Statements of Income -
Three months ended March 31, 1996 and 1995 5
Consolidated Statements of Changes in Stockholders'
Equity - Three months ended March 31, 1996 and March 31,1995 6
Consolidated Statements of Cash Flows -
Three months ended March 31, 1996 and March 31, 1995 7
Notes to Consolidated Financial Statements 8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 12
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K 18
Signatures 18
</TABLE>
2
<PAGE> 3
Part I. Financial Information
Item 1. Financial Statements
CORPUS CHRISTI BANCSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, December 31,
1996 1995
ASSETS: (Unaudited) (Audited)
----------------------------------------------
<S> <C> <C>
Cash and due from banks $ 10,933,994 $ 18,568,553
Interest bearing deposits with Federal Home Loan Bank 8,881 114,615
Federal funds sold 100,000 6,000,000
Securities available for sale: (Note 3)
U.S. Treasury securities 36,382,344 40,597,190
Mortgage pass-through and related securities 43,998,092 40,061,876
Other securities 742,950 610,150
----------------------------------------------
Total securities available for sale 81,123,386 81,269,216
Securities held to maturity: (Note 4)
U.S. Government agencies 1,002,736 1,003,210
Obligations of states and political subdivisions 4,810,793 4,859,314
----------------------------------------------
Total securities held to maturity 5,813,529 5,862,524
Loans (Note 5) 110,644,997 108,978,196
Less: Unearned discount (4,617,942) (4,444,346)
Less: Allowance for loan losses (Note 6) (2,490,052) (2,542,513)
----------------------------------------------
Net loans 103,537,003 101,991,337
Bank premises and equipment, net 5,124,018 5,213,133
Accrued interest receivable 1,782,209 1,842,287
Intangible assets 1,767,714 1.781,854
Other real estate 439,900 529,560
Other assets 580,097 694,284
----------------------------------------------
Total assets $ 211,210,731 $ 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>
March 31, December 31,
1996 1995
LIABILITIES AND SHAREHOLDERS' EQUITY: (Unaudited) (Audited)
----------------------------------------------
<S> <C> <C>
Deposits:
Demand $ 50,476,486 $ 58,790,068
Interest bearing transaction accounts 66,032,695 72,494,574
Savings 15,591,696 15,600,520
Certificates of deposit (Note 7) 53,538,121 54,012,748
----------------------------------------------
Total deposits 185,638,998 200,897,910
Federal funds purchased 900,000 ----
Securities sold with agreements to repurchase 6,146,611 5,459,000
Accrued interest payable 347,026 370,369
Dividends payable 120,000 100,000
Other liabilities 1,619,272 985,387
----------------------------------------------
Total liabilities 194,771,907 207,812,666
----------------------------------------------
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 8,575,394 8,032,273
Unrealized gains (losses) on securities available for sale (136,570) 22,424
----------------------------------------------
Total SHAREHOLDERS' equity 16,438,824 16,054,697
----------------------------------------------
Total liabilities and SHAREHOLDERS' equity $ 211,210,731 $ 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 March 31,
Interest income: 1996 1995
------------------------------------------------
<S> <C> <C>
Interest on loans $ 2,384,995 $ 2,036,999
Interest on deposits with Federal Home Loan Bank 1,495 821
Interest on federal funds sold 26,439 119,282
Interest and dividends on securities available for sale:
U.S. Treasury securities 537,697 481,377
Mortgage pass-through and related securities 676,484 57,736
Other securities 8,947 7,914
Interest on securities held to maturity:
U.S. Government agencies 23,400 74,901
State and Political subdivisions 77,954 80,537
------------------------------------------------
Total interest income 3,737,411 2,859,567
------------------------------------------------
Interest expense:
Interest on deposits:
Interest bearing transaction accounts 474,697 466,420
Savings 113,879 125,151
Certificates of deposit 694,215 451,644
Federal funds purchased 17,965 ----
Securities sold with agreements to repurchase 69,959 39
------------------------------------------------
Total interest expense 1,370,715 1,043,254
------------------------------------------------
Net interest income 2,366,696 1,816,313
Provision for loan losses ---- (200,000)
------------------------------------------------
Net interest income after provision for loan losses 2,366,696 2,016,313
------------------------------------------------
Other income:
Trust department income 287,259 310,583
Service charges 272,748 242,705
Credit card fees 37,066 40,675
Brokerage fees 80,247 39,316
Other income 141,041 93,492
------------------------------------------------
Total other income 818,361 726,771
------------------------------------------------
Other expenses:
Salaries and employee benefits 1,095,418 974,005
Occupancy expenses 263,027 243,199
Furniture and equipment expenses 181,188 178,444
Amortization of intangible assets 29,993 ----
Net cost to operate other real estate 21,411 14,444
Legal and professional fees 133,870 170,758
Insurance expenses 21,529 102,430
Advertising expenses 16,027 47,307
Other operating expenses 369,040 370,940
------------------------------------------------
Total other expenses 2,131,503 2,101,527
------------------------------------------------
Income before income taxes
1,053,554 641,557
Applicable income taxes 390,433 221,453
------------------------------------------------
Net income $ 663,121 $ 420,104
================================================
Weighted average of common stock and common
stock equivalents outstanding 1,702,113 1,679,436
================================================
Net income per common share $ .39 $ .25
================================================
</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 three months
ended March 31, 1995 ---- 420,104 ---- 420,104
Cash dividends, declared,
$.0625 per share ---- (100,000) ---- (100,000)
Net change in unrealized losses
on securities available for sale
for the three months ended
March 31, 1995 ---- ---- 558,142 558,142
-------------------------------------------------------------------------
Balance at March 31, 1995 $ 8,000,000 $ 6,817,308 $ (500,601) $ 14,316,707
=========================================================================
Balance at January 1, 1996 $ 8,000,000 $ 8,032,273 $ 22,424 $ 16,054,697
Net income for three months
ended March 31, 1996 ---- 663,121 ---- 663,121
Cash dividends, declared,
$.0750 per share ---- (120,000) ---- (120,000)
Net change in unrealized losses
on securities available for sale
for the three months ended
March 31, 1996 ---- ---- (158,994) (158,994)
-------------------------------------------------------------------------
Balance at March 31, 1996 $ 8,000,000 $ 8,575,394 $ (136,570) $ 16,438,824
=========================================================================
</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 March 31,
1996 1995
----------------------------------------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 663,121 $ 420,104
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 169,579 159,454
Provision for loan losses ---- (200,000)
Deferred federal income tax expense 75,621 82,519
Gain on sale of bank premises and equipment (13,435) ----
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 164,966 122,192
Valuation provisions for other real estate 15,000 30,000
Decrease in accrued interest receivable 60,078 200,295
Decrease (increase) in other assets 128,327 (491,187)
Increase (decrease) in accrued interest payable (23,343) 15,434
Increase in other liabilities 660,052 410,958
----------------------------------------------
Net cash provided by operating activities 1,899,966 731,425
----------------------------------------------
Cash flows from investing activities:
Net decrease (increase) in federal funds sold 5,900,000 (4,425,000)
Proceeds from sales of securities available for sale ---- ----
Proceeds from maturities of securities available for sale 5,519,656 6,916,895
Proceeds from maturities of securities held to maturity 30,000 ----
Purchase of securities available for sale (5,760,579) (1,938,750)
Purchase of securities held to maturity ---- ----
Net increase in loans (1,722,686) (3,679,326)
Recoveries of charged-off loans 177,020 155,427
Purchase of bank premises and equipment (67,029) (133,401)
Proceeds from sale of bank premises and equipment ---- ----
Proceeds from sale of other real estate 74,660 89,689
----------------------------------------------
Net cash provided (used) by investing activities 4,151,042 (3,014,466)
----------------------------------------------
Cash flows from financing activities:
Net decrease in demand, interest bearing transaction
and savings accounts (14,784,285) (1,639,311)
Net increase (decrease) in certificates of deposit (474,627) 1,180,852
Net increase in federal funds purchased 900,000 ----
Net increase in securities sold with agreements to
repurchase 687,611 403,000
Dividends paid (120,000) (100,000)
----------------------------------------------
Net cash used by financing activities (13,791,301) (155,459)
----------------------------------------------
Net decrease in cash and cash equivalents (7,740,293) (2,438,500)
Cash and cash equivalents at beginning of quarter 18,683,168 15,161,017
----------------------------------------------
Cash and cash equivalents at end of quarter $ 10,942,875 $ 12,722,517
==============================================
Supplementary Information:
Interest paid $ 1,394,058 $ 1,027,820
==============================================
Income taxes paid $ 89,007 $ ----
==============================================
</TABLE>
See accompanying notes to Consolidated Financial Statements.
7
<PAGE> 8
CORPUS CHRISTI BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. 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 is not
presented for the periods presented because the effect is not dilutive.
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 strategy and such securities may be sold in
response to changes in interest rates, resultant prepayment risk and other
factors related to interest rate and resultant risk changes.
8
<PAGE> 9
Included in securities classified as securities available for sale are
mortgage pass-through and related securities which represent participating
interests 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 $680,200 and Texas Independent Bank of $62,750 at
March 31, 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
March 31, 1996 and December 31, 1995 were as follows:
<TABLE>
<CAPTION>
March 31, 1996
--------------------------------------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
--------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Treasury securities $ 36,301,297 $ 123,058 $ (42,011) $ 36,382,344
Mortgage pass-through and
related securities 44,040,670 159,041 (201,619) 43,998,092
Other securities 742,950 ---- ---- 742,950
--------------------------------------------------------------------------
$ 81,084,917 $ 282,099 $ (243,630) $ 81,123,386
==========================================================================
<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 $6,586,719 and
$6,599,170 at March 31, 1996 and December 31, 1995, respectively, 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 investing 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 held to
maturity at March 31, 1996 and December 31, 1995 are as follows:
<TABLE>
<CAPTION>
March 31, 1996
--------------------------------------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
--------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Government agencies $ 1,002,736 $ 48,202 $ ---- $ 1,050,938
Obligations of states and political
subdivisions 4,810,793 136,710 (7,443) 4,940,060
--------------------------------------------------------------------------
$ 5,813,529 $ 184,912 $ (7,443) $ 5,990,998
==========================================================================
<CAPTION>
December 31, 1995
--------------------------------------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
--------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Obligations of other 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 $1,165,821 and
$2,355,126 at March 31, 1996 and December 31, 1995, respectively, were
pledged to secure public and trust-fund deposits and for other purposes
required or permitted by law.
10
<PAGE> 11
5. Loans
Major classifications of loans are as follows:
<TABLE>
<CAPTION>
March 31, December 31,
1996 1995
----------------------------------------
<S> <C> <C>
Commercial and industrial $ 28,835,878 $ 28,481,910
Energy 1,733,919 1,691,571
Installment 38,010,541 36,670,868
Real estate-construction 1,783,899 1,172,986
Real estate-mortgage 36,268,862 37,835,935
Agricultural 3,968,460 3,102,465
Other 43,438 22,461
----------------------------------------
110,644,997 108,978,196
Unearned discount (4,617,942) (4,444,346)
----------------------------------------
106,027,055 104,533,850
Allowance for loan losses (2,490,052) (2,542,513)
----------------------------------------
$ 103,537,003 $ 101,991,337
========================================
</TABLE>
6. Allowance for Loan Losses
Transactions in the allowance for loan losses for the three months ended
March 31, 1996, and the year ended December 31, 1995 are summarized as
follows:
<TABLE>
<CAPTION>
March 31, December 31,
1996 1995
---------------------------------------
<S> <C> <C>
Balance at beginning of period $ 2,542,513 $ 1,990,638
Loans charged-off (229,481) (475,134)
Recoveries on loans 177,020 1,369,464
---------------------------------------
Net loans (charged-off) recovered (52,461) 894,330
Provisions charged to operating expenses ---- (600,000)
Allowance acquired in purchase transaction ---- 257,545
---------------------------------------
Balance at end of period $ 2,490,052 $ 2,542,513
=======================================
</TABLE>
7. Certificates of Deposit
Included in certificates of deposits are certificates of deposits in excess
of $100,000 aggregating $15,099,865 and $15,156,682 at March 31, 1996 and
December 31, 1995, respectively. Interest expense on certificates of
deposits in denominations of $100,000 or more amounted to $202,512 and
$121,832 for the months ended March 31, 1996 and March 31, 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. At March 31, 1996,
options for all 160,000 shares were outstanding, all of which are
exercisable, as no options were exercised through March 31, 1996.
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 three months ended March 31, 1996 as
compared to the same quarter of 1995 including the effect of the 1995
acquisition of The First National Bank of Taft, Texas ("Taft Acquisition") on
first quarter 1996 performance.
Overall Performance:
The Company's net earnings before taxes at March 31, 1996 was $1,053,554, up
$411,997, compared to $641,557 for the same quarter in 1995. Net income for the
quarter ended March 31, 1996 was $663,121, up $243,017, compared to $420,104
for the same quarter of 1995. The increase in after tax earnings for the first
quarter of 1996 compared to the same period last year was attributable in large
part to the increase in net interest income totaling $550,383 and to a increase
in noninterest income totaling $91,590. Earnings per share for the first
quarter ended March 31, 1996 was $.39 per share compared to $.25 per share for
the same quarter of 1995.
Provision for Loan Losses
The Company had no provisions for loan losses during the first quarter of 1996
compared to a $200,000 "negative" provision during the same quarter one year
ago. The Company made a $200,000 "negative" provision for loan losses during
the first quarter of 1995 as a result of continued increases in recoveries on
prior loans charged-off. During the quarter ended March 31, 1996, the Company
had net chargeoffs totaling $52,461 compared to net recoveries totaling $96,440
for the same quarter 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 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 March 31,
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 are as follows:
<TABLE>
<CAPTION>
March 31, December 31,
1996 1995
----------------------------------
<S> <C> <C>
Nonperforming assets:
Nonaccrual loans $ 1,381,595 $ 1,185,565
Other real estate 439,900 529,560
----------------------------------
$ 1,821,495 $ 1,715,125
==================================
Accruing loans past due 90 days or more $ 140,066 $ 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 March
31, 1996, nonaccrual loans totaled $1,381,595 compared to $1,185,565 at
December 31, 1995.
Further information regarding the balance of nonaccrual loans at March 31,
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 255,965 256,158
Reductions-principal payments (47,733) (85,198)
Reductions-interest payments (12,202) ----
Charge-offs ---- ----
Transferred to other real estate ---- ----
---------------------------------
Nonaccrual loans at March 31, 1996 $ 1,381,595 $ 1,460,508
=================================
</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
March 31, March 31, Interest Prior Partial Reduction of
1996 1996 Income Charge-offs Principal
--------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Contractually past due with:
Substantial performance $ 27,370 $ 27,889 $ ---- $ ---- $ ----
Limited perfromance 50,660 50,660 ---- ---- ----
Contractually current, however,
payment in full or principal
or interest in doubt 1,303,565 1,381,959 ---- ---- 12,202
--------------------------------------------------------------------------------------------
$ 1,381,595 $ 1,460,508 $ ---- $ ---- $ 12,202
============================================================================================
</TABLE>
Total nonperforming assets increased to $1,821,495 at March 31, 1996, up
$106,370, compared to $1,715,125 at December 31, 1995. Nonperforming assets at
March 31, 1995 totaled $883,567.
The recorded investments in loans for which an impairment has been recognized
and the related allowance for loan losses at March 31, 1996 were $2,180,102 and
$781,668, respectively. The average recorded investment in
13
<PAGE> 14
impaired loans during the first quarter of 1996 was $2,291,532. Interest
recognized on impaired loans during the first quarter of 1996 was $20,668.
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 March 31, 1996 and December 31, 1995 not
classified as nonaccrual, restructured, or past due 90 days and still accruing
in the above table totaled $2.9 million and $3.1 million, respectively. Such
loans totaled $4.5 million at March 31, 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 March 31, 1996 was $439,900, compared to $529,560 and
$663,411 at December 31, 1995 and March 31, 1995, respectively. 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
quarter ended March 31, 1996, the Company made valuation provisions for other
real estate totaling $15,000 compared to $30,000 for the same quarter of 1995.
In the opinion of management, this appraisal process results in values which
represent current market conditions at March 31, 1996 and 1995.
Net Interest Income
Net interest income (the difference between interest income and interest
expense) at March 31, 1996 was $2,366,696, up $550,383, compared to $1,816,313
for the same quarter of 1995. The increase was largely attributable to the
increase in the volume of earning assets.
Earning assets at March 31, 1996 was $191.7 million, up $37.6 million, compared
to $154.1 million at March 31, 1995. The yield on earning assets at March 31,
1996 was 8.1% compared to 7.8% for the same period last year. Interest-bearing
liabilities at March 31, 1996 were $142.2 million, up $27.8 million, compared
to $114.4 million at March 31, 1995. Yields on interest-bearing liabilities
were 3.7% at March 31, 1996 compared to 4.3% at March 31, 1995. The increase in
earning assets and interest-bearing liabilities during the first quarter of
1996 as compared to the same quarter one year ago was primarily the results of
the Taft Acquistion.
Net interest income as a percentage of average earning assets ("net interest
margin") was 4.9% at March 31, 1996 compared to 4.9% at March 31, 1995. The net
interest margin averaged 4.7% during 1995.
14
<PAGE> 15
NonInterest Income
Noninterest income was $818,361 for the quarter ended March 31, 1996, up
$91,590 or 12.6%, compared to $726,771 for the same quarter of 1995. Trust
department income for the quarter ended March 31, 1996 was $287,259, down
$23,324, compared to $310,583 for the same period in 1995. The decrease was
largely attributable to nonrecurring estate and stock transfer fees collected
during the first quarter of 1995 totaling approximately $50,000. Service
charges were $272,748 for the quarter ended March 31, 1996, up $30,043,
compared to $242,705 for the same period in 1995. The increase was largely
attributable to an increase in nonsufficient fund charges totaling $15,016 and
to service charges related to the Taft Acqusition totaling $12,770. Credit card
fees were $37,066 for the quarter ended March 31, 1996, down $3,609, compared
to $40,675 for the same period last year. Brokerage fees totaled $80,247, up
$40,931, as compared to $39,316 for the same period one year ago. Other income
totaled $141,041 for the quarter ended March 31, 1996, up $47,549, compared to
$93,492 for the same period in 1995. The increase in other income for the first
quarter of 1996 was largely attributable to increases in automated teller
machine interchange fees totaling $42,258.
The following table details the changes in noninterest income for the first
quarter of 1996 as compared with the first quarter of 1995.
<TABLE>
<CAPTION>
Change for
Quarter
Ended March 31,
March 31, March 31, -----------------------------
1996 1995 Amount Percentage
------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Trust department income $ 287,259 $ 310,583 $ (23,324) (7.5)%
Service charges 272,748 242,705 30,043 12.4%
Credit card fees 37,066 40,675 (3,609) (8.9)%
Brokerage fees 80,247 39,316 40,931 104.1%
Other income 141,041 93,492 47,549 50.9%
------------------------------------------------------------------------
Total noninterest income $ 818,361 $ 726,771 $ 91,590 12.6%
========================================================================
</TABLE>
Noninterest expenses
The Company's noninterest expenses were $2,131,503, for the quarter ended March
31, 1996, up $29,976, compared to $2,101,527 for the same period of 1995.
Salaries and employee benefits for the quarter ended March 31, 1996 were
$1,095,418, up $121,413, compared to $974,005 for the same quarter of 1995. The
increase in salaries and employee benefits was primarily attributable to
salaries and benefits related to the Taft Acquisition totaling $62,428,
increases in medical insurance totaling $17,001, and a 3% merit increase during
1995. Occupancy expenses were $263,027 for the quarter ended March 31, 1996, up
$19,828, compared to $243,199 for the same quarter in 1995. Furniture and
equipment expenses totaled $181,188 for the quarter ended March 31, 1996, up
$2,744, compared to $178,444 for the same quarter in 1995. The increase in
occupancy expenses and furniture and equipment expenses for the first quarter
of 1996 compared to the same quarter in 1995 was largely attributable to
depreciation expenses related to assets acquired in the Taft Acquisition
totaling $30,320, and $12,975, respectively. Amortization of intangible assets
related to the Taft Acquisition totaled $29,993 during the first quarter of
1996. Net cost to operate other real estate was $21,411 for the quarter ended
March 31, 1996, up $6,967, compared to $14,444 for the same quarter of 1995.
The increase in net cost to operate other real estate was primarily related to
a decrease in rental income on other real estate property in 1996 totaling
approximately $18,344. Legal and professional fees were $133,870 for the
quarter ended March 31, 1996, down $36,888, compared to $170,758 for the same
period in 1995. The decrease was largely attributable to decreases in legal
fees related to the Company totaling $16,806 and to decreased consulting fees
related to proxy solicitation services provided to the Company totaling
$23,176. Insurance expenses for the quarter ended March 31, 1996 were $21,529,
down $80,901, compared to $102,430 for the
15
<PAGE> 16
same period in 1995. The reduction in insurance expenses in the first quarter
of 1996 was the result of lower Federal Deposit Insurance Corporation ("FDIC")
insurance assessments totaling approximately $82,763 during the first quarter
of 1996. Advertising expenses totaled $16,027 at March 31, 1996, down $31,280,
compared to $47,307 for the same quarter in 1995. Other expenses totaled
$369,040 for the quarter ended March 31, 1996, down $1,900, compared to
$370,940 for the same period last year.
The following table details the changes in noninterest expenses for the first
quarter of 1996 as compared to the first quarter of 1995.
<TABLE>
<CAPTION>
Percent of Percent of Change for
Net Interest Net Interest Quarter
and and Ended March 31,
March 31, Noninterest March 31, Noninterest --------------------------
1996 Income 1995 Income Amount Percentage
--------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Salaries and employee benefits $ 1,095,418 34.39% $ 974,005 38.30% $ 121,413 12.5%
Occupancy expenses 263,027 8.26% 243,199 9.56% 19,828 8.2%
Furniture and equipment expenses 181,188 5.69% 178,444 7.01% 2,744 1.5%
Amortization of intangible assets 29,993 .94% ---- ---- 29,993 100.0%
Net cost to operate other real
estate 21,411 .67% 14,444 .57% 6,967 48.2%
Legal and professional fees 133,870 4.20% 170,758 6.71% (36,888) (21.6)%
Insurance expenses 21,529 .68% 102,430 4.03% (80,901) (79.0)%
Advertising expenses 16,027 .50% 47,307 1.86% (31,280) (66.1)%
Other operating expenses 369,040 11.59% 370,940 14.59% (1,900) (.5)%
--------------------------------------------------------------------------------------------
Total noninterest expenses $ 2,131,503 66.92% $ 2,101,527 82.63% $ 29,976 1.4%
============================================================================================
</TABLE>
Liquidity
Generally, the Company's largest source of funds is provided through deposits.
Total deposits at March 31, 1996 were $185.6 million, down $15.3 million,
compared to $200.9 million at December 31, 1995. The decline in deposits during
the first quarter of 1996 is in part reflective of seasonal trends as
experienced during the prior five years. Total deposits at March 31, 1995 were
$157.2 million. In addition, at March 31, 1996 and at December 31, 1995, the
Company had approximately $100 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 $81.1 million at March 31, 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 March 31, 1996, the
Company's ratio of net loans to total deposits was 55.8%, compared to 50.8% at
December 31, 1995. The Company's ratio of net loans to total deposits at March
31, 1995 was 60.9%. At March 31, 1996, the Company's net loans to total
deposits ratio of 55.8% was above the median compared to peer banking
institutions in Texas with similar asset sizes which had net loans to total
deposit ratios ranging from a low of 41%, median of 52% and a high of 65% at
December 31, 1995. The Company's long-term strategy projects loan growth to 65%
to 70% of total deposits.
16
<PAGE> 17
Capital Resources
The Company and the Bank are required by federal regulations to meet certain
minimum regulatory 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 March 31, 1996, the Company and the Bank each had a
Tier 1 capital ratio of 12.3%, combined Tier 1 and Tier 2 capital ratio of
13.6% and leverage ratio of 7.0%. 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 March 31, 1996, the Company's equity to assets
ratio was 7.0% compared to 6.4% at December 31, 1995. The Company's equity to
asset ratio at March 31, 1995 was 8.4%. The decrease in the Company's equity to
assets ratio at March 31, 1996 as compared to 8.4% at March 31, 1995 was a
direct result of the Taft Acquisition.
At March 31, 1996, the Company's subsidiary bank had an equity ratio of 7.0%,
which exceeds the minimum requirement guideline of 6.0% specified by the Texas
Department of Banking.
17
<PAGE> 18
PART II - OTHER INFORMATION
Item 6. Exhibits and reports on Form 8-K.
(a) Exhibits: See Index to Exhibits, Page 20.
(b) The Company was not required to file any report on Form 8-K
during the three-month period ending March 31, 1996.
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
18
<PAGE> 19
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 March 31, 1996
Commission File Number 0-13668
___________________
CORPUS CHRISTI BANCSHARES, INC.
19
<PAGE> 20
CORPUS CHRISTI BANCSHARES, INC.
INDEX TO EXHIBITS
Sequentially
Numbered
Pages
27 Financial Data Schedule
-------
20
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 10,933,994
<INT-BEARING-DEPOSITS> 8,881
<FED-FUNDS-SOLD> 100,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 81,123,386
<INVESTMENTS-CARRYING> 5,813,529
<INVESTMENTS-MARKET> 5,990,998
<LOANS> 106,027,055
<ALLOWANCE> 2,490,052
<TOTAL-ASSETS> 211,210,731
<DEPOSITS> 185,638,998
<SHORT-TERM> 7,046,611
<LIABILITIES-OTHER> 2,086,298
<LONG-TERM> 0
<COMMON> 8,000,000
0
0
<OTHER-SE> 8,438,824
<TOTAL-LIABILITIES-AND-EQUITY> 211,210,731
<INTEREST-LOAN> 2,384,995
<INTEREST-INVEST> 1,350,921
<INTEREST-OTHER> 1,495
<INTEREST-TOTAL> 3,737,411
<INTEREST-DEPOSIT> 1,282,791
<INTEREST-EXPENSE> 1,370,715
<INTEREST-INCOME-NET> 2,366,696
<LOAN-LOSSES> 0
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 2,131,503
<INCOME-PRETAX> 1,053,554
<INCOME-PRE-EXTRAORDINARY> 1,053,554
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 663,121
<EPS-PRIMARY> .39
<EPS-DILUTED> .39
<YIELD-ACTUAL> 4.7
<LOANS-NON> 1,381,595
<LOANS-PAST> 140,066
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 2,896,281
<ALLOWANCE-OPEN> 2,542,513
<CHARGE-OFFS> 229,481
<RECOVERIES> 177,020
<ALLOWANCE-CLOSE> 2,490,052
<ALLOWANCE-DOMESTIC> 2,490,052
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
