UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Form 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1997
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 1-8952
INTERSTATE/JOHNSON LANE, INC.
(Exact name of Registrant as specified in its charter)
Delaware
(State or other jurisdiction of incorporation or organization)
56-1470946
(I.R.S. Employer Identification No.)
Interstate Tower, P.O. Box 1012, Charlotte, North Carolina 28201-1012
(Address of principal executive offices, zip code)
(704) 379-9000
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for 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 July 31, 1997
(Common stock, $.20 par value) 6,206,914
PAGE 1 OF 14
<PAGE>
INTERSTATE/JOHNSON LANE, INC. AND SUBSIDIARIES
Index
<TABLE>
<CAPTION>
Page Number
<S> <C>
Part I. Financial Information
Item 1. Financial Statements
Condensed Consolidated Statements of
Financial Condition--June 30, 1997 and
September 30, 1996 3
Condensed Consolidated Statements of
Operations--Nine Months Ended
June 30, 1997 and 1996 4
Condensed Consolidated Statements of
Cash Flows--Nine Months Ended
June 30, 1997 and 1996 5
Notes to Condensed Consolidated Financial
Statements 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 9
Part II. Other Information
Item 1. Legal Proceedings 12
Item 6. Exhibits and Reports on Form 8-K 12
</TABLE>
Page 2
<PAGE>
INTERSTATE/JOHNSON LANE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(UNAUDITED)
<TABLE>
<CAPTION>
(All dollars in thousands)
June 30, September 30,
1997 1996
------------- --------------
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 39,362 $ 37,285
Cash and securities segregated for
regulatory purposes 78,046 80,501
Loans under matched securities resale agreements 3,920 5,874
Receivables:
Securities resale agreements 62,671 63,801
Customers 284,258 234,779
Brokers, dealers and clearing agencies 19,504 31,406
Other 6,936 4,234
Trading securities owned 88,484 59,796
Land, buildings, and improvements, net 4,920 5,574
Office facilities and equipment, net 7,922 9,236
Goodwill and intangible assets 13,085 13,076
Other assets 26,404 22,779
------------- --------------
$ 635,512 $ 568,341
============= ==============
LIABILITIES AND SHAREHOLDERS' EQUITY
Short-term borrowings:
Checks payable $ 18,498 $ 16,561
Securities repurchase agreements 44,955 31,078
Borrowings under matched securities repurchase agreements 4,025 5,983
Payables:
Customers 328,416 292,450
Brokers and dealers 14,427 7,375
Other 7,147 7,262
Accrued compensation and benefits 21,785 20,939
Securities sold but not yet purchased 64,706 65,784
Notes payable 5,505 6,208
Other liabilities and accrued expenses 21,745 16,875
------------- --------------
531,209 470,515
------------- --------------
Minority interests 200 200
------------- --------------
Long-term debt: (See Note 6)
Senior secured note 16,000 -
Convertible subordinated debentures - 20,999
------------- --------------
16,000 20,999
------------- --------------
Shareholders' equity:
Common stock 1,433 1,377
Additional paid-in-capital 36,290 31,231
Retained earnings 60,508 53,670
------------- --------------
98,231 86,278
Less: treasury stock, at cost (10,128) (9,651)
------------- --------------
Total shareholders' equity 88,103 76,627
------------- --------------
$ 635,512 $ 568,341
============= ==============
</TABLE>
The accompanying notes are an integral part of the condensed consolidated
financial statements.
Page 3
<PAGE>
INTERSTATE/JOHNSON LANE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
For the Nine Months For the Three Months
Ended June 30, Ended June 30,
(All dollars in thousands) (All dollars in thousands)
1997 1996 1997 1996
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
REVENUES:
Agency commissions $ 73,292 $ 69,703 $ 24,945 $ 23,608
Principal transactions:
Sales credits 40,459 41,516 13,603 13,568
Trading gains, net 6,414 5,709 1,885 1,800
Investment banking and underwriting 4,497 3,718 1,214 782
Asset management and advisory 9,470 6,823 3,632 2,433
Interest 25,550 25,162 8,916 8,353
Other 7,074 5,948 2,715 2,038
------------ ------------ ------------ ------------
Total revenues 166,756 158,579 56,910 52,582
Interest expense 14,726 16,067 5,088 5,305
------------ ------------ ------------ ------------
Net revenues 152,030 142,512 51,823 47,277
------------ ------------ ------------ ------------
EXPENSES:
Compensation and benefits 98,883 92,738 33,336 31,038
Technology and telephone 13,572 13,166 4,818 4,524
Occupancy 7,005 6,454 2,342 2,205
Execution, clearance and depository 3,166 3,017 1,157 956
Promotion and development 6,096 4,909 2,238 1,742
Professional services 2,955 2,315 896 802
Printing, postage and supplies 3,027 2,702 1,028 911
Other operating expenses 5,045 5,191 1,950 1,343
------------ ------------ ------------ ------------
Total expenses 139,749 130,492 47,766 43,521
------------ ------------ ------------ ------------
Income before income taxes 12,281 12,020 4,057 3,756
Income tax expense 4,716 4,850 1,508 1,463
------------ ------------ ------------ ------------
NET INCOME $ 7,565 $ 7,170 $ 2,549 $ 2,293
============ ============ ============ ============
Earnings per share:
Primary $ 1.20 $ 1.18 $ 0.39 $ 0.38
============ ============ ============ ============
Fully diluted $ 1.11 $ 1.04 $ 0.37 $ 0.34
============ ============ ============ ============
Weighted average shares:
Primary 6,289,829 6,076,846 6,549,284 6,005,992
============ ============ ============ ============
Fully diluted 6,829,605 7,600,951 6,988,662 7,530,097
============ ============ ============ ============
</TABLE>
The accompanying notes are an integral part of the condensed consolidated
financial statements.
Page 4
<PAGE>
INTERSTATE/JOHNSON LANE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the nine months ended June 30,
(UNAUDITED)
<TABLE>
<CAPTION>
(All dollars in thousands)
1997 1996
------------- -------------
CASH FLOWS FROM OPERATING ACTIVITIES:
- - ---------------------------------------
<S> <C> <C>
Net income $ 7,565 $ 7,170
------------- -------------
Adjustments to reconcile net income to cash provided (used) by operating
activities:
Depreciation and amortization 5,669 3,653
Deferred income taxes - (410)
Provision for real estate charges - 850
Other non-cash items 854 1,091
------------- -------------
6,523 5,184
------------- -------------
Changes in operating assets and liabilities:
Cash and securities segregated for
regulatory purposes 2,455 20,018
Loans under matched securities resale and repurchase agreements, net (3) (414)
Net payables to customers (13,513) (30,811)
Net receivables from brokers, dealers and clearing agencies 18,954 (5,884)
Other receivables (2,702) (241)
Trading securities owned, net (29,765) 30,397
Other assets (4,419) (4,976)
Accrued compensation and benefits 846 3,349
Other liabilities and accrued expenses 4,864 1,293
------------- -------------
(23,283) 12,731
------------- -------------
Cash used by operating activities (9,195) 25,085
------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
- - ---------------------------------------
Proceeds from (repayment of ):
Short-term bank borrowings 1,938 3,420
Borrowings under securities repurchase and resale agreements, net 15,006 (41,490)
Notes payable (703) (1,309)
Senior secured note (see Note 6) 16,000 -
Retirement of subordinated debentures (see Note 6) (15,980) -
Proceeds from stock options exercised 215 126
Purchase of stock for treasury (1,954) (2,765)
Dividends paid (728) (549)
------------- -------------
Cash provided by financing activities 13,794 (42,567)
------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
- - ---------------------------------------
Capital expenditures (2,522) (2,814)
------------- -------------
Cash used by investing activities (2,522) (2,814)
------------- -------------
Net increase (decrease) in cash and cash equivalents 2,077 (20,296)
Cash and cash equivalents at beginning of period 37,285 26,537
------------- -------------
Cash and cash equivalents at end of period $ 39,362 $ 6,241
============= =============
Cash paid during the period for:
Interest $ 14,552 $ 11,098
Income taxes $ 7,233 $ 7,802
Non-cash activity:
Conversion of subordinated debentures into common stock $ 5,012
(See Note 6)
The accompanying notes are an integral part of the condensed consolidated
financial statements.
</TABLE>
Page 5
<PAGE>
INTERSTATE/JOHNSON LANE, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Basis of Presentation:
The interim financial statements are unaudited; however, such information
reflects all normal recurring adjustments which, in the opinion of
management, are necessary for a fair presentation of the results for the
period. The nature of the Company's business is such that the results of
any interim period are not necessarily indicative of results for a full
fiscal year.
2. Net Capital Requirements:
As a registered broker-dealer and member of the New York Stock Exchange,
Interstate/Johnson Lane Corporation ("IJL"), the principal operating
subsidiary of the Company, is subject to the Securities and Exchange
Commission's uniform net capital rule. IJL has elected to operate under the
alternative method of the rule, which prohibits a broker-dealer from
engaging in any transactions when its "net capital" is less than 2% of its
"aggregate debit balances" arising from customer transactions, as these
terms are defined in the rule. The Exchange may also impose business
restrictions on a member firm if its net capital falls below 5% of its
aggregate debit balances. IJL is also subject to the Commodity Futures
Trading Commission minimum net capital requirement.
At June 30, 1997, IJL's net capital was 14% of its aggregate debit balances
and approximately $36.7 million in excess of its minimum regulatory
requirements.
3. Commitments and Contingencies:
Leases for office space and equipment are accounted for as operating
leases. Approximate minimum rental commitments under noncancelable leases,
some of which contain escalation clauses and renewal options, are as
follows:
Millions
--------
For the three months ended September 30, 1997 $2.3
For the fiscal year ended September 30,
1998 6.2
1999 3.7
2000 1.6
2001 0.7
Thereafter 4.5
--------
$ 19.0
========
Page 6
<PAGE>
INTERSTATE/JOHNSON LANE, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
3. Commitments and Contingencies, continued:
In connection with its involvement as a general partner and/or placement
agent of various real estate limited partnerships, the Company has
guaranteed certain obligations of limited partners and, with others, has
jointly or severally guaranteed mortgage loan obligations of some of the
partnerships. At June 30, 1997, there were no contingent liabilities under
these obligations.
Of a $20 million irrevocable letter of credit available, the amount
outstanding at June 30, 1997 under this facility was $1.6 million.
4. Legal Proceedings:
The Company is involved in certain litigation arising in the ordinary
course of business. While some actions seek substantial damages, management
believes, based upon discussion with counsel, that the outcome of this
litigation will not have a material effect on the Company's financial
position. The materiality of these legal matters to the Company's future
operating results depends on the level of future results of operations as
well as the timing and ultimate resolution of such legal matters.
5. Financial Instruments with Off-Balance-Sheet Risk:
IJL's business activities involve the execution, settlement and financing
of securities transactions generating accounts receivable, and thus may
expose IJL to financial risk in the event a customer or other counterparty
is unable to fulfill its contractual obligations. IJL controls the risk
associated with collateralized loans by revaluing collateral at current
prices, monitoring compliance with applicable credit limits and industry
regulations, and requiring the posting of additional collateral when
appropriate.
Obligations arising from financial instruments sold short in connection
with its normal trading activities expose IJL to risk in the event market
prices increase, since it may be obligated to repurchase those positions at
a greater price. IJL's short selling primarily involves debt securities,
which are typically less volatile, in periods of stable interest rates,
than equities or options.
Page 7
<PAGE>
INTERSTATE/JOHNSON LANE, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
5. Financial Instruments with Off-Balance-Sheet Risk, continued:
Forward and futures contracts provide for the seller agreeing to make
delivery of securities or other instruments at a specified future date and
price. Risk arises from the potential inability of counterparties to honor
contract terms, and from changes in values of the underlying instruments.
At June 30, 1997, IJL's commitments included forward purchase and sale
contracts involving mortgage-backed securities with long market values of
approximately $23.9 million and short market values of approximately $29.9
million and futures purchase and sale contracts with short market values of
$20.1 million used primarily to hedge municipal bonds. While the Company
may from time to time participate in the trading of some derivative
securities for its clients, this trading is not a significant portion of
the Company's business.
IJL enters into resale agreements, whereby it lends money by purchasing
U.S. government/agency or mortgage-backed securities from customers or
dealers with an agreement to resell them to the same customers or dealers
at a later date. Such loans are collateralized by the underlying
securities, which are held in custody by IJL and may be converted into cash
at IJL's option. In addition, IJL monitors the market value of the
collateral, and issues margin calls as necessary according to the
creditworthiness of the borrower. Approximately 83% of all loans under
securities resale agreements at June 30, 1997 were made to three
counterparties.
IJL incurs risk in underwriting public securities offerings to the extent
that prospective buyers fail to purchase the securities. The Company
attempts to mitigate this risk through due diligence carried out prior to
undertaking the contractual obligation.
6. Long Term Debt:
During February 1997, the Company called for redemption of all its
outstanding 7.75% subordinated convertible debentures. Prior to the
redemption date of April 17, 1997, $5.0 million of the debentures were
converted into common stock. To fund the redemption of the remaining
debentures, the Company borrowed $16.0 million from a financial institution
to which it issued a senior secured note of like amount maturing April 15,
2007. The note provides for semi-annual interest payments at a stated rate
of 8.95% beginning October 15, 1997; principal is repayable over seven
years in equal annual installments beginning on April 15, 2001.
Page 8
<PAGE>
INTERSTATE/JOHNSON LANE, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
General Business Environment
The Company's principal activities -- securities brokerage for individual
(retail) and institutional investors, market-making in equity and fixed-income
securities, investment banking and underwriting, and investment management and
advisory services -- are highly competitive. Strategic alliances between
investment firms and commercial banks, insurance companies, and other financial
services entities have intensified this competition. Many of the Company's
revenue sources are sensitive to marketplace trading volumes and to interest
rate conditions, both of which can be cyclical and volatile. As a result,
revenues and earnings may vary significantly from quarter to quarter.
At June 30, 1997, approximately 22% of the Company's retail financial
consultants had fewer than three years' industry experience. Notwithstanding the
energized securities markets of recent years, a prolonged slowdown in individual
investor activity could more severely reduce the revenue production of a less
seasoned sales force. In addition, the continuing trend of increased regulation
of the securities industry could create significant incremental costs and
indirectly stifle certain revenue streams.
Liquidity and Capital Resources
The Company's net cash position increased $2.1 million for the nine months ended
June 30, 1997. Operating activities consumed $23.3 million of cash, partly
funded by $14.1 million of net income adjusted for depreciation and other
non-cash charges. Financing activities provided $13.8 million of cash, while
capital expenditures utilized $2.5 million of cash.
The Company's asset base consists primarily of cash, cash equivalents, and other
assets which can be converted to cash within one year; at June 30, 1997 these
assets comprised approximately 92% of the balance sheet. Day-to-day financing
requirements generally are influenced by the level of securities inventories,
net receivables from customers and broker-dealers, and net receivables under
resale agreements. Significant incremental cash requirements also may occur from
time to time in connection with payments under deferred compensation plans,
repurchase of the Company's common stock, retirement of its long term debt,
initial funding of new business unit activities, payment of dividends, and
litigation settlements arising from normal business operations. In addition,
$1.2 million of capital spending in the first nine months of fiscal 1997
reflects implementation of the second phase of a planned $10 million program of
technology improvements over a multi-year period.
Page 9
<PAGE>
INTERSTATE/JOHNSON LANE, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS, continued
Liquidity and Capital Resources, continued
At June 30, 1997, the Company had $155 million of unused call loan financing
available. In addition, the Company maintains credit lines of several hundred
million dollars for collateralizing repurchase agreements with other financial
institutions, and has financed its customer receivables with customer payables
for many years. Management believes that these resources, funds provided by
operations, and permanent capital of shareholders' equity and long-term debt,
will satisfy normal financing needs for the foreseeable future.
The Company's broker-dealer subsidiary, Interstate/Johnson Lane Corporation
("IJL"), is subject to liquidity and capital requirements of the Securities and
Exchange Commission, Commodity Futures Trading Commission, and The New York
Stock Exchange, and consistently has operated well in excess of the minimum
requirements. At June 30, 1997, IJL had net capital of $42.8 million, "excess
net capital" of approximately $36.7 million, and a net capital ratio of 14%.
Results of Operations
For the nine months ended June 30, 1997, net revenues increased $9.5 million, or
7%, from the previous year, while expenses, other than interest, increased $9.3
million, or 7%. Net income of $7.6 million was up $395,000 from the results of
the period of a year ago. Net revenues increased $4.5 million for the three
months ended June 30, 1997, while expenses, other than interest, increased $4.2
million. Net income of $2.5 million was up $256,000 from the results of the
quarter ended June 30, 1996.
Overall, agency commissions increased $3.6 million or 5% and $1.3 million or 6%
for the same nine-month and three-month period of a year ago. Increased
retail sales of mutual funds and annuity products accounted for the bulk of
the increase in both the nine and three-month periods respectively, negating
a modest decline in institutional equities business.
Sales credits decreased $1.1 million, or 3% during the same nine-month period
and were unchanged from the three-month period of a year ago. Significant
decreases in NASDAQ activity were experienced in both cases with the June
quarters decline offset by strong gains in fixed income products.
Net trading gains increased $705,000 or 12% for the comparable nine month
period; largely from fixed-income trading activity; the change for the quarter
was nominal.
Page 10
<PAGE>
INTERSTATE/JOHNSON LANE, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS, continued
Results of Operations, continued
Investment banking fees and underwriting profits increased $779,000, or 21%, and
$432,000, or 55%, for the same nine and three month periods, respectively, of a
year ago due to an improved capital raising environment coupled with an
increased level of managed underwritings. Asset management and advisory fees
were up $2.6 million and $1.2 million for the comparable nine and three month
periods due to the continued growth of asset-based fees charged retail clients
in lieu of transaction-based commissions and to management and performance fees
associated with a newly organized "hedge" fund. Other income increased $1.1
million, or 19%, for the nine month period ($700,000 or 33% for the quarter) due
to an increase in money fund service fees and in the value of proprietary
investments.
Interest revenues were up about $388,000, while expenses decreased $1.3 million,
for the nine months ended June 30, 1997 compared to the corresponding period a
year ago. For the quarter, interest revenues increased $563,000, while expenses
decreased $217,000. The resultant increases of $1.7 million and $780,000,
respectively, in net interest income are due to an increase in net earnings on
higher levels of client margin loans and lower levels of average net unmatched
securities repurchase agreements, offset by a decrease in earnings on segregated
customer funds.
Compensation and benefits costs increased $6.1 million, or 7% ($2.3 million for
the quarter), for the nine-month period ended June 30, 1997, due primarily to an
increase in transaction based commission expense and other profit-driven
incentives and significant investments in new personnel in several revenue
producing areas. Promotion and development costs increased $1.2 million for the
nine month period and $496,000 for the quarter due to the Company's continuing
effort to build revenue. Professional services increased $640,000 for the
nine-month period and $94,000 for the quarter due to an increase in consulting
services for technology projects, various reengineering efforts and services
related to the formation of CapTrust Financial Advisors, LLC. Printing, postage
and supplies costs increased $325,000 for the nine month period and $117,000 for
the quarter due primarily to increases in postage costs and non-capitalized
office equipment and supplies. Other operating expenses decreased $145,000 for
the nine month period largely as a result of decreases in the adjustments to the
carrying value of certain assets. However, for the quarter, other operating
expenses increased $607,000 largely as a result of an increase in the valuation
of deferred compensation obligations.
Page 11
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
The Company is involved in certain litigation arising in the ordinary
course of business. While some actions seek substantial damages, management
believes, based upon discussion with counsel, that the outcome of this
litigation will not have a material effect on the Company's financial
position. The materiality of these legal matters to the Company's future
operating results depends on the level of future results of operations as
well as the timing and ultimate resolution of such legal matters.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Designation of Exhibit Sequential
in this Report Description Page Number
---------------------- ------------------- ----------
11 Statement Regarding
Computation of Per
Share Earnings 14
(b) Reports on Form 8-K
There were no reports on Form 8-K filed for the nine months
ended June 30, 1997.
Page 12
<PAGE>
INTERSTATE/JOHNSON LANE, INC.
AND CONSOLIDATED SUBSIDIARIES
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.
INTERSTATE/JOHNSON LANE, INC.
-----------------------------
Registrant
Signature Title Date
_________________________ President and Chief
James H. Morgan Executive Officer August 14, 1997
_________________________ Vice President - Finance
Edward C. Ruff and Treasurer (Principal
Financial Officer) August 14, 1997
_________________________ Assistant Vice President
C. Fred Wagstaff, III (Principal Accounting
Officer) August 14, 1997
Page 13
Exhibit 11
STATEMENT REGARDING COMPUTATION OF PER SHARE EARNINGS
<TABLE>
<CAPTION>
Nine Months Ended Three Months Ended
June 30, June 30,
--------------------------------- ---------------------------------
<S> <C> <C> <C> <C>
Net income per share was computed as follows: 1997 1996 1997 1996
------------ ------------ ------------ ------------
Primary:
Net income $ 7,565,347 $ 7,169,909 $ 2,548,617 $ 2,292,712
============ ============ ============ ============
1) Weighted average shares outstanding 6,042,268 6,076,846 6,201,325 6,005,992
2) Incremental shares under stock options
computed under the treasury stock method
using the average market price of
issuer's stock during the periods 247,561 34,465 347,959 37,459
------------ ------------ ------------ ------------
3) Weighted average shares and common
equivalent shares outstanding 6,289,829 6,111,311 6,549,284 6,043,451
============ ============ ============ ============
4) Weighted average shares outstanding
which were used for calculation 6,289,829 (A) 6,076,846 6,549,284 (A) 6,005,992
============ ============ ============ ============
Net income per share $ 1.20 $ 1.18 $ 0.39 $ 0.38
============ ============ ============ ============
Fully Diluted:
1) Unadjusted income $ 7,565,347 $ 7,169,909 $ 2,548,617 $ 2,292,712
2) Interest on convertible
subordinated debentures (See Note 6) - 720,134 - 240,045
------------ ------------ ------------ ------------
Adjusted net income $ 7,565,347 $ 7,890,043 $ 2,548,617 $ 2,532,757
============ ============ ============ ============
3) Weighted average shares outstanding 6,042,268 6,076,846 6,201,325 6,005,992
4) Incremental shares under stock options
computed under the treasury stock method
using the higher of the average or ending
market price of issuer's stock at the end
of the periods 437,337 41,063 437,337 41,063
5) Incremental shares relating to
convertible subordinated debentures (See Note 6) - 1,183,042 - 1,183,042
6) Incremental shares related to long-term
incentive compensation plan. 350,000 300,000 350,000 300,000
------------ ------------ ------------ ------------
7) Weighted average shares and common
equivalent shares outstanding 6,829,605 7,600,951 6,988,662 7,530,097
============ ============ ============ ============
Net income per share $ 1.11 $ 1.04 $ 0.37 $ 0.34
============ ============ ============ ============
</TABLE>
(A) Dilutive effect of common equivalent shares not included since dilution is
less than 3%.
Page 14
<PAGE>
<TABLE> <S> <C>
<ARTICLE> BD BD
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 9-MOS
<FISCAL-YEAR-END> SEP-30-1997 SEP-30-1997
<PERIOD-START> APR-01-1997 SEP-30-1996
<PERIOD-END> JUN-30-1997 JUN-30-1997
<CASH> 39,362 39,362
<RECEIVABLES> 297,589 297,589
<SECURITIES-RESALE> 66,591 66,591
<SECURITIES-BORROWED> 13,109 13,109
<INSTRUMENTS-OWNED> 88,484 88,484
<PP&E> 12,842 12,842
<TOTAL-ASSETS> 635,512 635,512
<SHORT-TERM> 18,498 18,498
<PAYABLES> 349,990 349,990
<REPOS-SOLD> 48,980 48,980
<SECURITIES-LOANED> 0 0
<INSTRUMENTS-SOLD> 64,706 64,706
<LONG-TERM> 21,505 21,505
0 0
0 0
<COMMON> 1,433 1,433
<OTHER-SE> 86,670 86,670
<TOTAL-LIABILITY-AND-EQUITY> 635,512 635,512
<TRADING-REVENUE> 1,885 6,414
<INTEREST-DIVIDENDS> 8,916 25,550
<COMMISSIONS> 38,548 113,751
<INVESTMENT-BANKING-REVENUES> 1,214 4,497
<FEE-REVENUE> 3,632 9,470
<INTEREST-EXPENSE> 5,088 14,726
<COMPENSATION> 33,336 98,883
<INCOME-PRETAX> 4,057 12,281
<INCOME-PRE-EXTRAORDINARY> 4,057 12,281
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 2,549 7,565
<EPS-PRIMARY> 0.39 1.20
<EPS-DILUTED> 0.37 1.11
</TABLE>
