<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-QSB
[X] Quarterly Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the quarterly period ended March 31, 1999.
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the transition period from _____ to _____
Commission file number 001-13819
MegaBank Financial Corporation
(Exact name of small business issuer as specified in its charter)
Colorado 84-0949755
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
8100 E. Arapahoe Road, Suite 214, Englewood, Colorado 80112
(Address of principal executive offices) (Zip code)
(303) 740-2265
(Issuer's telephone number)
Check mark whether the issuer (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter
period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past
90 days.
[X] Yes [ ]No
At April 15, 1999, there were 7,769,709 shares of the issuer's
common stock, no par value, outstanding.
Transitional Small Business Disclosure Format
[ ] Yes [X] No
<PAGE>
MEGABANK FINANCIAL CORPORATION
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION PAGE NO.
Item 1. Financial Statements 3
Item 2. Management's Discussion and
Analysis of Financial Condition
And Results of Operations 8
PART II. OTHER INFORMATION
Item 2. Changes in Securities and
Use of Proceeds 14
Item 6. Exhibits and Reports on Form 8-K 14
SIGNATURES 15
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<PAGE>
PART I. FINANCIAL INFORMATION
<TABLE>
<CAPTION>
Item 1. Financial Statements
MEGABANK FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
March 31, December 31,
1999 1998
---- ----
(unaudited)
<S> <C> <C>
ASSETS
Cash and due from banks $ 11,048 $ 10,326
Interest-bearing deposits 97 128
Federal funds sold 1,175 5,625
------ ------
Cash and cash equivalents 12,320 16,079
Investment securities available for sale 15,776 15,677
Loans 205,940 189,602
Less allowance for loan losses (2,747) (2,610)
------- -------
203,193 186,992
Federal Home Loan Bank stock, at cost 491 482
Bank premises, leasehold improvements and
equipment, net 9,462 8,846
Accrued interest receivable 1,335 1,104
Deferred tax asset 721 718
Preferred securities issuance costs, net 721 729
Other 311 192
------- -------
Total assets $244,330 $230,819
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
Deposits
Demand, non-interest bearing $ 52,239 $ 54,093
Demand, interest bearing 74,576 72,444
Savings 7,259 6,271
Time 66,337 57,071
------- -------
Total deposits 200,411 189,879
Federal Home Loan Bank borrowings 1,000 -
Securities sold under agreement to
repurchase 421 443
Income taxes payable 654 71
Accrued interest payable 564 434
Other 573 601
------- -------
Total liabilities 203,623 191,428
Company obligated manditorily redeemable
preferred securities of subsidiary trust
holding solely Junior Subordinated
Debentures 12,000 12,000
Shareholders' equity
Preferred stock; no par value, 10,000,000
shares authorized, none issued - -
Common stock; no par value, 50,000,000
shares authorized, 7,607,340
shares issues and outstanding 13,974 13,974
Retained earnings 14,591 13,383
Accumulated other comprehensive income 142 34
------- -------
Total shareholders' equity 28,707 27,391
Total liabilities and shareholders'
equity $244,330 $230,819
======== ========
</TABLE>
The accompanying notes are an integral part of these statements.
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<PAGE>
<TABLE>
<CAPTION>
MEGABANK FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
Three months ended March 31, 1999 and 1998 (Unaudited)
(Dollars in thousands, except per share data)
Three months ended March 31,
1999 1998
---- ----
(Unaudited)
<S> <C> <C>
Interest income
Loans, including fees $5,540 $3,902
Taxable investment securities 86 72
Nontaxable investment securities 176 187
Funds sold 7 106
Other interest 43 35
----- -----
Total interest income 5,852 4,302
Interest expense
Deposits 1,542 1,265
Borrowed funds 62 73
Trust preferred securities 288 149
Notes payable - 19
----- -----
Total interest expense 1,892 1,506
----- -----
Net interest income 3,960 2,796
Provision for loan losses 150 90
----- -----
Net interest income after
provision for loan losses 3,810 2,706
Other income
Service charges on deposit accounts 42 28
Gain on sale of investment securities - 25
Other income 243 168
----- -----
Total other income 285 221
Other expenses
Salaries and employee benefits 1,282 896
Occupancy expenses of premises 328 185
Furniture and equipment expense 125 115
Other expenses 513 699
----- -----
Total other expenses 2,248 1,895
----- -----
Income before income taxes 1,847 1,032
Income tax expense 639 349
----- -----
Net income $1,208 $ 683
Other comprehensive income, net of tax
Unrealized gains (losses) on invest-
ment securities available for sale 108 (3)
----- -----
Other comprehensive income (loss) 108 (3)
----- -----
Comprehensive income $1,316 $ 680
===== =====
Income per share
Basic earnings per share $ .16 $ .11
===== =====
Common shares outstanding 7,607,340 6,407,340
========= =========
</TABLE>
The accompanying notes are an integral part of these statements.
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<PAGE>
<TABLE>
<CAPTION>
MEGABANK FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Three months ended March 31, 1999 and 1998 (unaudited)
(Dollars in thousands)
Three months ended March 31,
1999 1998
---- ----
(Unaudited)
<S> <C> <C>
Cash flows from operating activities
Net income $1,208 $ 683
Adjustments to reconcile net income to net
cash provided by operating activities
Provision for loan losses 150 90
Depreciation and amortization 140 110
Gain on sale of investment securities
available for sale - (25)
Deferred income taxes (3) (1)
Changes in deferrals and accruals
Interest receivable (231) (95)
Interest payable 130 162
Income taxes payable 583 158
Other, net (119) (63)
------ ------
Net cash provided by operating activities 1,858 1,019
Cash flows from investing activities
Net (increase) decrease in federal funds sold 4,450 (24,370)
Net decrease in interest-bearing deposits 31 97
Purchase of securities available for sale - (150)
Proceeds from maturities of investment
securities available for sale - -
Proceeds from sales of securities available
for sale - 175
Net increase in loans (16,351) (3,535)
Expenditures for bank premises and equipment (748) (117)
------ ------
Net cash used in investing activities (12,618) (27,900)
Cash flows from financing activities
Net increase in deposits 10,532 21,041
Net increase (decrease) in advances from
Federal Home Loan Bank 1,000 (1,423)
Net increase (decrease) in repurchase
agreements (22) 1,025
Proceeds from trust preferred securities - 12,000
Debt issuance costs - (496)
Principal payments on notes payable - (2,000)
Other (28) (167)
------ ------
Net cash provided by financing activities 11,482 29,980
------ ------
Net increase in cash and due from banks 722 3,099
Cash and due from banks at beginning of period 10,326 9,910
------ ------
Cash and due from banks at end of period $11,048 $13,009
====== ======
Supplemental disclosures of cash flow
information
Cash paid year to date for:
Interest expense $ 1,762 $ 1,324
Income taxes 17 179
</TABLE>
The accompanying notes are an integral part of these statements.
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<PAGE>
MEGABANK FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Three month period ended March 31, 1999 and 1998
(Unaudited)
1. Unaudited Financial Statements
The accompanying unaudited interim financial statements have
been prepared in accordance with the instructions for Form 10-QSB
and do not include all of the information and footnotes required
by generally accepted accounting principles for complete
financial statements. All adjustments that are, in the opinion
of management, of a normal recurring nature necessary to a fair
statement of results for the interim periods presented have been
made. The results of operations for such interim periods are not
necessarily indicative of results of operations for a full year.
The statements should be read in conjunction with the summary of
significant accounting policies and notes to consolidated
financial statements included in the Form 10-KSB for the year
ended December 31, 1998.
In the opinion of management, the accompanying financial
statements contain all adjustments necessary to present fairly
the financial position of the Company at March 31, 1999, and the
results of operations and cash flows for the quarters ended March
31, 1999 and 1998.
The consolidated financial statements include the accounts
of the Company's respective subsidiaries. All material
intercompany transactions have been eliminated.
2. Nature of Operations
MegaBank Financial Corporation (the "Company") was founded
in 1984 with the objective of building a banking franchise in the
Denver, Colorado metropolitan area that would deliver a broad
based package of products and services to businesses and
individuals. The Company's banking subsidiary, MegaBank (the
"Bank"), was organized in 1983. Since the advent of branch
banking in Colorado in 1993, the Bank has opened seven additional
banking locations throughout the Denver area for a total of eight
locations, with two more branches are in the planning and
construction phases. The eighth branch is scheduled to open the
2nd quarter of 1999.
3. Trust Preferred Securities
On February 9, 1998 the Company and its wholly-owned
subsidiary, MB Capital I (the "Trust"), completed the sale of
$12.0 million of 8.75% Cumulative Trust Preferred Securities of
the Trust. Net proceeds were approximately $11.2 million after
payment of sales commissions and other offering costs, and were
invested in Junior Subordinated Debentures maturing February 9,
2028, issued by the Company to the Trust in connection with the
public offering. Interest on the Junior Subordinated Debentures
will be paid by the Company to the Trust, will be the sole
revenues of the Trust and the source for distributions by the
Trust to the holders of the Trust Preferred Securities.
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<PAGE>
For financial reporting purposes, the Trust is treated as a
subsidiary of the Company, and accordingly, the accounts of the
Trust are included in the consolidated financial statements of
the Company. The Trust Preferred Securities are presented as a
separate line item in the consolidated balance sheet under the
caption "Company obligated mandatorily redeemable preferred
securities of subsidiary trust holding solely Junior Subordinated
Debentures." For financial reporting purposes, the Company
records distributions payable on the Trust Preferred Securities
as interest expense in the consolidated statements of income.
The Junior Subordinated Debentures are unsecured and rank
junior and are subordinate to all senior debt of the Company and
constitute a full and unconditional guarantee on a subordinated
basis by the Company of the obligations of the Trust under the
Preferred Securities.
-7-
<PAGE>
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Overview
It is presumed that readers of these interim financial
statements have read or have access to the Management's
Discussion and Analysis of Financial Condition and Results of
Operations for the year ended December 31, 1998, included in the
Company's Form 10-KSB, SEC File No. 1-13819. The following
discussion of the financial condition and results of operation of
the Company should be read in conjunction with the unaudited
consolidated financial statements of the Company included
elsewhere herein.
Information herein contains forward-looking statements
within the meaning of the Private Securities Litigation Reform
Act of 1995, which can be identified by words such as "may,"
"will," "expect," "anticipate," "believe," "estimate," or
"continue," or comparable words. In addition, all statements
other than statements of historical facts that address activities
that the Company expects or anticipates will or may occur in the
future are forward-looking statements. Readers are encouraged to
read the SEC reports of the Company, particularly its Form 10-KSB
for the Year Ended December 31, 1998, for meaningful cautionary
language disclosing why actual results may vary materially from
those anticipated by management.
Results of Operations
In the quarter ended March 31, 1999, the Company generated
interest income of $5.9 million compared to $4.3 million for the
same period last year. The increase was due to higher balances
of interest earning assets. Interest expense for the same period
was $1.9 million compared to $1.5 million. Additional interest
bearing deposits contributed to the increase in interest expense,
as well as the additional interest expense of the Trust Preferred
Securities offering discussed elsewhere herein. Other income
generated in the first quarter of 1999 increased slightly to
approximately $285,000 as compared to $221,000 for the first
quarter of 1998. This increase is attributable to an increase in
service and bank charges. Other expenses in the first quarter of
1999 were $2.2 million as compared to $1.9 million for the same
period last year. An increase in other expenses is primarily due
to additional employee and occupancy expenses required by branch
expansion and internal growth.
In the quarter ended March 31, 1999, the Company generated
net income after provisions for income tax of $1.2 million
compared to approximately $683,000 for the same period last year.
This improvement is attributable to the overall growth of the
Bank. Total assets of the Company were approximately $244.3
million and $189.4 million at March 31, 1999 and 1998,
respectively.
With a portion of the net proceeds obtained in the public
offering of Trust Preferred Securities, the Company infused the
Bank with $6 million in capital of which $2 million was targeted
for additional branch expansion. In November 1998, the Company
completed an initial public offering of 1.2 million shares of
common stock, with resulting net proceeds of approximately $12.0
million. Approximately $5.0 million of these proceeds were also
infused into the Bank. This additional capital has allowed the
Bank to increase its legal lending limits. The increased lending
limit is designed to further the Bank's internal growth
objectives. This growth is evidenced by the amount of loans
generated and the growth in assets during the first quarter of
1999.
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<PAGE>
Net increases in loans were $16.3 million and $3.5 million
during the quarters ended March 31, 1999 and 1998, respectively.
It is important to note that this was a net increase. Actual
origination of new loans was approximately $109.6 million during
the first quarter of 1999 as compared to $60.6 million during the
same period in 1998.
Net increases in deposits were $10.5 million for the first
quarter of 1999 compared to a net increase of $21.0 million for
the same time period in 1998. Although the net increase is lower
than the previous year, total deposits were approximately $200.4
million at March 31, 1999 compared to $162.9 million at March 31,
1998.
Analysis of Allowance for Loan Losses. The allowance for
loan losses represents management's recognition of the risks of
extending credit and its evaluation of the quality of the loan
portfolio. The allowance is maintained at a level considered
adequate to provide for anticipated loan losses based on
management's assessment of various factors affecting the loan
portfolio. The allowance is increased by additional charges to
operating income and reduced by loans charged off, net of
recoveries. Management added an additional $150,000 in loan loss
reserves for the first quarter of 1999.
The following table sets forth information regarding changes
in the allowance for loan losses of the Company for the period
indicated.
<TABLE>
<CAPTION>
Three Months Ended March 31, 1999
(Dollars in thousands)
<S> <C>
Average total loans $198,536
========
Total loans at end of period $205,940
========
Allowance at beginning of period $ 2,610
Charge-offs:
Construction -
Commercial and industrial (13)
Installment -
Mortgage -
Other -
--------
Total charge-offs (13)
Recoveries:
Construction -
Commercial and industrial -
Installment -
Mortgage -
Other -
--------
Total recoveries -
--------
Net (charge-offs) recoveries (13)
Provisions for loan losses 150
Allowance at end of period $ 2,747
========
Ratio of net (charge-offs) recoveries
to average loans 0.01%
Allowance to total loans at end of period 1.33%
Allowance to nonperforming loans 79.62%
</TABLE>
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<PAGE>
The Company's lending personnel are responsible for
continuous monitoring of the quality of loan portfolios. The
loan portfolios are also monitored and examined by the Company
loan review personnel. The allowance for loan losses is based
primarily on management's estimates of possible loan losses from
the foregoing processes and historical experience. These
estimates involve ongoing judgments and may be adjusted over time
depending on economic conditions and changing historical
experience.
State and federal regulatory agencies, as an integral part
of their examination process, review the Company's loans and its
allowance for loan losses. Management believes that the
Company's allowance for loan losses is adequate to cover
anticipated losses. There can be no assurance, however, that
management will not determine a need to increase the allowance
for loan losses or that regulators, when reviewing the Company's
loan portfolios in the future, will not require the Company to
increase such allowance, either of which could adversely affect
the Company's earnings. Further, there can be no assurance that
the Company's actual loan losses will not exceed its allowance
for loan losses.
Nonperforming loans. Nonperforming loans consist of loans
90 days or more delinquent and still accruing interest,
nonaccrual loans and restructured loans. When, in the opinion of
management, a reasonable doubt exists as to the collectibility of
interest, regardless of the delinquency status of a loan, the
accrual of interest income is discontinued and interest accrued
during the current year is reversed through a charge to current
year's earnings. While the loan is on nonaccrual status,
interest income is recognized only upon receipt and then only if,
in the judgment of management, there is no reasonable doubt as to
the collectibility of the principal balance. Loans 90 days or
more delinquent generally are changed to nonaccrual status unless
the loan is in the process of collection and management
determines that full collection of principal and accrued interest
is probable.
Restructured loans are those for which concessions,
including the reduction of interest rates below a rate otherwise
available to the borrower or the deferral of interest or
principal, have been granted due to the borrower's weakened
financial condition. Interest on restructured loans is accrued
at the restructured rates when it is anticipated that no loss of
original principal will occur. The Company did not have any
restructured loans as of March 31, 1999.
The following table sets forth information concerning the
nonperforming assets of the Company at the dates indicated:
<TABLE>
<CAPTION>
March 31, December 31,
1999 1998
---- ----
<S> <C> <C>
Nonaccrual loans $3,450 $3,388
Other loans 90 days past due - -
Other real estate - -
------ ------
Total nonperforming loans $3,450 $3,388
====== ======
Ratio of nonaccrual and other loans
90 days past due to total loans 1.70% 1.81%
Ratio of nonperforming assets to
total loans plus other real estate 1.70 1.81
Ratio of nonperforming assets to
total assets 1.41 1.47
</TABLE>
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<PAGE>
Of the amount of nonaccrual loans as of March 31, 1999,
approximately $1.4 million is the Bank's portion of five related
loans totaling approximately $4.0 million, which are subject to a
Chapter 11 bankruptcy proceeding. The loans were originated by
the Bank and were made at various times during 1994, 1995, and
1997 in connection with a real estate development on which the
developer had constructed a residential building assembly plant.
The loans are secured by real estate, certificates of deposit,
and two personal guarantees from the owners of the developer, as
well as a guarantee by a related limited partnership.
In addition to the above, the Bank has a loan position of
approximately $2.0 million of two loans totaling $2.8 million
that was placed on nonaccrual status just prior to December 31,
1998. During the quarter ended March 31, 1999, one loan to the
same borrower in the amount of $178,000 was paid off. The loans
were originated as acquisition and development loans and are
secured by real estate, and a personal residence. Legal
proceedings have been suspended temporarily. The borrower has
contracts on various parcels of land and the Bank is continuing
to work with the borrower to pay off the remaining loan.
Management believes that the Company is adequately protected
on these loans. Management is not aware of any adverse trend
relating to the Company's loan portfolio.
As of March 31, 1999, there was no significant balance of
loans excluded from nonperforming loans set forth above. Nor was
there known information about possible credit problems of
borrowers causes management to have serious doubts as to the
ability of such borrowers to comply with the present loan
repayment terms and which may result in such loans becoming
nonperforming.
Liquidity and Capital Resources
The Company has two basic sources of liquidity. The first
source is its retail deposit market served by its banking
offices. The Company has increased core deposits through growth
of its existing deposits and through promotions directed at
existing and potential customers. Deposits increased to $200.4
million at March 31, 1999 compared to $162.9 million at March 31,
1998.
The second source of the Company's liquidity is Federal Home
Loan Bank ("FHLB") advances and Company lines of credit. FHLB
advances are used regularly in the cash management function both
to fund a portion of the lending portfolio and to manage the day-
to-day fluctuations in liquidity resulting from needs of
depositors and borrowers. At March 31, 1999, the Company had
available $20.0 million of unused borrowing capacity from the
FHLB and $15.5 million from its other lenders. The Company
anticipates that it will continue to rely primarily upon customer
deposits, FHLB borrowings, other lending sources, loan
repayments, loan sales and retained earnings to provide
liquidity, and will use funds provided primarily to make loans
and to purchase investment securities.
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<PAGE>
The Office of Thrift Supervision capital regulations require
savings associations to meet three capital standards: a 1.5%
tangible capital standard, a 4% leverage ratio (or core capital
ratio) and an 8% risk-based capital standard.
<TABLE>
<CAPTION>
At March 31, 1999
Minimum
Ratio Actual Required
<S> <C> <C>
Tangible capital 12.39% 1.50%
Core (Tier 1) capital 12.39% 4.00%
Risk-Based capital 14.76% 8.00%
</TABLE>
Year 2000 Considerations
As the year 2000 approaches, a significant business issue
has emerged regarding existing application software programs and
operating systems and their ability to accommodate the date value
for the year 2000. Many existing software application products,
including products used by the Bank, its suppliers and customers,
were designed to accommodate only a two-digit date value which
represents the year. For example, information relating to the
year 1996 is stored in the system as "96." As a result, the year
1999 (i.e., "99") could be the maximum date value that these
systems will be able to process accurately. In response to
concerns about this issue, regulatory agencies have begun to
monitor financial institutions and their holding companies'
readiness for the year 2000 as part of the regular examination
process.
The Company presently believes that with modifications to
existing software and conversion to new software, the year 2000
issue will not pose significant operational problems for the
Company's computer systems or business operations.
Implementation of the Company's plan to test in-house and out-
sourced software has been underway since the first quarter of
1998. Testing of applications considered to be "mission
critical" was completed in the first quarter of 1999 and
modifications and changes necessary have been completed and
tested. Compliance for all systems is expected by management to
be completed by the third quarter of 1999. Management currently
estimates that such total compliance will not exceed $150,000.
Costs incurred through March 31, 1999 were approximately $26,400.
Compliance audits performed to date have been positive and no
specific items of improvement were noted. The team for the plan
is responsible for the implementation of the plan and reports to
the Company's Board of Directors on a monthly basis until the
plan is completed.
However, if the modifications and conversions are not made,
or are not completed timely, the year 2000 issue could have a
material adverse impact on the operations of the Company.
Because of the factors discussed below, management cannot
estimate with any reasonable degree of certainty the magnitude of
lost revenues should management's reasonable worst case scenario
develop in which the Company would need to use an outside vendor
to become year 2000 compliant and noncompliant customers were
unable to repay their loans.
Even though the Company's "mission critical" systems have
tested year 2000 compliant, the Company has in place a business
resumption contingency plan in the event of an unforeseen problem
in its computer systems. This plan details actions to be taken
in the unlikely event of problems in the change over to the
millennium. This process of validation is in accordance with
Federal Financial Institutions Examination Council guidelines.
The Bank has sent direct mail to its customers regarding the
year 2000 issue and the need for readiness, pursuant to
guidelines of the banking industry regulators. Management intends
to continue to solicit customer response on this matter. The
Bank has also instituted a policy requiring a loan applicant to
sign a year 2000 acknowledgement certificate at closing as part
of a loan package. Failure of the Company's customers to prepare
for year 2000 compatibility could have a significant adverse
effect of customers' operations and profitability, thus
inhibiting their ability to repay loans and adversely affecting
the Company's operations. The Company does not have sufficient
information accumulated from customers to enable the Company to
assess the degree to which customers' operations are susceptible
to potential problems relating to the year 2000 issue or,
further, to quantify the potential lost revenue to the Company in
this case.
-12-
<PAGE>
Other Events
The Company formed a wholly owned real estate development
subsidiary, Empire/MB Land Company on February 24, 1999. This
subsidiary intends to purchase real estate for development and
sale to homebuilders. Management believes that this activity
should supplement the Company's revenues since many smaller
homebuilders do not have the resources to develop sites for home
building. Management believes that the subsidiary can generate
revenues through the sale of individual or bulk lots to these
homebuilders. Also, management believes that the Bank can
provide construction lending in connection with the sales of lots
to homebuilders, thereby providing additional loans to the Bank.
The subsidiary is not yet active.
The Company also formed a wholly owned subsidiary, MB Title
Company, on February 24, 1999. The subsidiary was formed with
the intention of engaging in the real estate title business,
which management believes will complement its banking services
and proposed real estate investment and development activities.
Subsequent Events
On April 5, 1999, the Company merged Empire Title and Escrow
Corporation and MB Title Company, a newly formed, wholly owned
subsidiaries of the Company. The consideration paid to the
stockholders of Empire Title and Escrow Corporation consisted of
the Company's common stock and cash. MB Title Company then
changed its name to Empire Title and Escrow Corporation
("Empire").
Empire provides a full range of title insurance products and
services to the real estate community including homebuilders and
real estate firms. The current officers and management team of
Empire will continue to direct Empire's operations. Management
expects that this merger will provide Empire the resources
necessary to accelerate its expansion plans while continuing to
provide services to the Colorado real estate community. This
merger also allows the Company to offer a broader array of
financial products and services to its customers.
Empire will operate as a subsidiary of the Company and
accordingly, the accounts of the subsidiary will be included in
the consolidated financial statements of the Company.
-13-
<PAGE>
PART II. OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds
On April 5, 1999, the Company merged Empire Title and
Escrow Corporation and MB Title Company, a newly formed,
wholly owned subsidiary of the Company. MB Title Company
then changed its name to Empire Title and Escrow
Corporation ("Empire"). The consideration paid to the
seven stockholders of Empire consisted of the Company's
common stock and cash. On April 5, 1999, 162,369 new
shares of common stock were issued as a portion of this
compensation. The Company used exemptions from
registration in Section 4(2) of the Securities Act of
1933, as well as Regulation D adopted thereunder based
upon the limited number of offerees and the sophistication
and worth of the purchasers.
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits.
Exhibit 27 - Financial Data Schedule (filed
electronically only).
b. Reports on Form 8-K.
Subsequent to the three months ended March 31, 1999,
the Registrant filed a current report on Form 8-K dated
April 5, 1999, under "Item 5. Other Events."
describing the merger of Empire Title and Escrow
Corporation and MB Title Company, a newly formed,
wholly-owned subsidiary of the Company.
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
MEGABANK FINANCIAL CORPORATION
(Registrant )
/s/ Hiram J. Welton
-----------------------------
Date: April 16, 1999 Hiram J. Welton
Treasurer, Duly authorized officer
and Chief Accounting Officer
-15-
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> MAR-31-1999
<CASH> 11048
<INT-BEARING-DEPOSITS> 97
<FED-FUNDS-SOLD> 1175
<TRADING-ASSETS> 0
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0
0
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</TABLE>
