U.S. Securities and Exchange Commission
Washington, D.C. 20549
----------
FORM 10Q
[x] QUARTERLY REPORT UNDER SECTION 13
OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended September 30, 2000
OR
[ ] TRANSITION REPORT UNDER SECTION 13
OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
----------
Commission File No. 0-24023
TEJAS BANCSHARES, INC.
State of Organization IRS Employer Identification
Texas No. 75-1950688
905 S. Fillmore, Suite 701
Amarillo, Texas 79101
Registrant's telephone number: 806-373-7900
----------
Check whether the issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 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. (1) Yes [X]
No [_] (2) Yes [X] No [_]
As of September 30, 2000, 13,415,267 shares of the Registrant's common stock
were outstanding.
<PAGE>
TEJAS BANCSHARES, INC.
INDEX
Page
----
Part I. Financial Information
Item 1: Financial Statements:
Condensed Consolidated Balance Sheets
at September 30, 2000 and December 31, 1999 1
Condensed Consolidated Statements of Operations and
Comprehensive Income for the three-month and nine-month
periods ended September 30, 2000 and 1999 2
Condensed Consolidated Statements of Cash Flows for the
nine-month periods ended September 30, 2000 and 1999 3
Notes to Condensed Consolidated Financial Statements 4
Item 2: Management's Discussion and Analysis of Financial Condition
And Results of Operations 6
Part II. Other Information 13
Signatures 14
<PAGE>
TEJAS BANCSHARES, INC. AND SUBSIDIARIES
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
TEJAS BANCSHARES, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets (Unaudited)
September 30, 2000 and December 31, 1999
<TABLE>
<CAPTION>
ASSETS
September 30, December 31,
2000 1999*
------------- -------------
<S> <C> <C>
Cash and due from banks $ 23,614,564 $ 20,711,268
Federal funds sold 2,130,000 4,350,000
Securities available-for-sale 7,250,349 6,723,147
Loans 312,677,304 262,247,493
Less allowance for loan losses (6,017,037) (4,524,678)
------------- -------------
Loans, net 306,660,267 257,722,815
------------- -------------
Bank premises and equipment, net 5,152,119 4,353,326
Accrued interest receivable 4,282,928 3,234,949
Net deferred tax asset 2,211,373 1,719,300
Other assets 466,602 226,591
------------- -------------
TOTAL ASSETS $ 351,768,202 $ 299,041,396
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Deposits
Demand - noninterest bearing $ 74,356,566 $ 70,029,027
Demand - interest bearing 92,813,514 89,490,720
Time and savings 112,082,030 92,447,906
------------- -------------
Total deposits 279,252,110 251,967,653
------------- -------------
Federal funds purchased 5,000,000 --
Other borrowings 16,000,000 --
Accrued interest payable 1,028,999 879,291
Federal income taxes payable 221,620 206,181
Other liabilities 886,577 627,507
------------- -------------
Total liabilities 302,389,306 253,680,632
------------- -------------
STOCKHOLDERS' EQUITY
Common stock 13,415,267 13,418,017
Paid-in capital 26,515,193 26,532,993
Retained earnings 9,674,545 5,743,180
Accumulated other comprehensive income (4,109) (6,426)
Deferred directors' compensation (222,000) (327,000)
------------- -------------
Total stockholders' equity 49,378,896 45,360,764
------------- -------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 351,768,202 $ 299,041,396
============= =============
</TABLE>
* Condensed from audited financial statements.
These condensed financial statements should be read only in
connection with the accompanying notes to the condensed financial statements.
1
<PAGE>
TEJAS BANCSHARES, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
and Comprehensive Income (Unaudited)
Three-month and nine-month periods ended September 30, 2000 and 1999
<TABLE>
<CAPTION>
Three-month periods ended Nine-month periods ended
September 30, September 30,
------------------------------- -------------------------------
2000 1999 2000 1999
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
INTEREST INCOME AND FEES
Interest and fees on loans $ 7,085,420 $ 4,573,436 $ 19,127,264 $ 12,521,704
Interest and dividends on
investment securities 104,563 95,018 298,505 292,651
Interest on due from banks 376 -- 376 --
Interest on federal funds sold 16,156 291,798 104,098 983,269
------------ ------------ ------------ ------------
Total interest income 7,206,515 4,960,252 19,530,243 13,797,624
INTEREST EXPENSE 2,689,160 1,520,222 6,970,196 4,117,881
------------ ------------ ------------ ------------
Net interest income 4,517,355 3,440,030 12,560,047 9,679,743
PROVISION FOR LOAN LOSSES 600,000 330,000 1,500,000 990,000
------------ ------------ ------------ ------------
Net interest income after provision
for loan losses 3,917,355 3,110,030 11,060,047 8,689,743
OTHER OPERATING INCOME
Service charges 462,064 361,392 1,290,222 883,599
Other 249,138 136,656 627,020 414,536
------------ ------------ ------------ ------------
Total other operating income 711,202 498,048 1,917,242 1,298,135
OTHER OPERATING EXPENSES
Salaries and employee benefits 1,127,564 921,838 3,453,065 2,816,491
Depreciation 179,726 113,262 482,039 308,602
Advertising 73,561 94,265 262,775 239,385
Occupancy expense 123,464 116,545 330,803 324,031
Federal Deposit Insurance Corporation
premiums, net 12,513 5,744 36,858 16,762
Professional fees 66,467 40,433 157,787 130,283
Supplies, stationary and office expenses 91,944 95,562 435,043 279,426
Taxes other than on income and salaries 76,737 27,383 227,205 72,971
Data processing 210,692 205,530 691,168 636,833
Postage 41,131 40,368 139,705 127,470
Other 267,322 204,859 787,303 636,508
------------ ------------ ------------ ------------
Total other operating expenses 2,271,121 1,865,789 7,003,751 5,588,762
------------ ------------ ------------ ------------
Earnings before income taxes 2,357,436 1,742,289 5,973,538 4,399,116
INCOME TAXES 812,700 592,302 2,042,173 1,495,623
------------ ------------ ------------ ------------
NET EARNINGS 1,544,736 1,149,987 3,931,365 2,903,493
OTHER COMPREHENSIVE INCOME
Change in unrealized gains (losses)
on securities, net of tax 7,078 (4,917) 2,317 (24,936)
------------ ------------ ------------ ------------
COMPREHENSIVE INCOME $ 1,551,814 $ 1,145,070 $ 3,933,682 $ 2,878,557
============ ============ ============ ============
NET EARNINGS PER SHARE-Basic $ 0.12 $ 0.09 $ 0.29 $ 0.22
============ ============ ============ ============
NET EARNINGS PER SHARE-Diluted $ 0.11 $ 0.08 $ 0.29 $ 0.21
============ ============ ============ ============
</TABLE>
These condensed financial statements should be read only in
connection with the accompanying notes to the condensed financial statements.
2
<PAGE>
TEJAS BANCSHARES, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows (Unaudited)
Nine-month periods ended September 30, 2000 and 1999
<TABLE>
<CAPTION>
Nine-month periods
ended September 30,
----------------------------------
2000 1999
------------ ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings $ 3,931,365 $ 2,903,493
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Depreciation 482,039 308,602
Deferred income taxes (493,266) (218,117)
Amortization of deferred directors' compensation 80,400 43,200
Provision for loan losses 1,500,000 990,000
Amortization of premium or (accretion) of
discount relating to investment securities, net (12,096) 15,971
Changes in:
Accrued interest receivable (1,047,979) (506,713)
Other assets (240,011) 96,312
Accrued interest payable 149,708 (48,147)
Federal income taxes payable 15,439 219,739
Other liabilities 259,070 330,584
------------ ------------
Net cash provided by operating activities 4,624,669 4,134,924
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from maturities and pay-downs on
securities available-for-sale 3,150,950 2,639,886
Purchases of securities available-for-sale (3,662,546) (2,210,141)
Change in loans to customers (50,437,452) (41,857,225)
Expenditures for bank premises and equipment (1,280,832) (1,392,299)
------------ ------------
Net cash used by investing activities (52,229,880) (42,819,779)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in deposits 27,284,457 33,675,082
Net increase in federal funds purchased 5,000,000 --
Net increase in other borrowings 16,000,000 --
Proceeds from the exercise of stock options 4,050 61,299
------------ ------------
Net cash provided by financing activities 48,288,507 33,736,381
------------ ------------
Net increase (decrease) in cash and cash equivalents 683,296 (4,948,474)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 25,061,268 50,113,175
------------ ------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 25,744,564 $ 45,164,701
============ ============
</TABLE>
SUPPLEMENTAL DISCLOSURE OF CASH-FLOW INFORMATION
During the nine-months ended September 30, 2000, pursuant to the Company's
Directors' Stock Compensation Plan, 4,100 shares of common stock (total value of
$24,600) were forfeited by directors for missed meetings.
These condensed financial statements should be read only in
connection with the accompanying notes to the condensed financial statements.
3
<PAGE>
TEJAS BANCSHARES, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)
(1) General
See the Summary of Significant Accounting Policies included in the
consolidated financial statements in the Company's report on Form 10K.
The unaudited condensed consolidated financial statements included herein
were prepared from the books of the Company in accordance with generally
accepted accounting principles and reflect all adjustments (consisting of
normal recurring accruals) which are, in the opinion of management,
necessary to a fair statement of the results of operations and financial
position for the interim periods. Such financial statements generally
conform to the presentation reflected in the Company's Annual Report to
Stockholders. The current interim period reported herein is included in the
fiscal year subject to independent audit at the end of that year and is not
necessarily an indication of the expected results for the fiscal year.
(2) Net Earnings Per Share
The following is a reconciliation of the numerators and the denominators of
the basic and diluted earnings per share computations for net income for
the three-month and nine-month periods ended September 30.
<TABLE>
<CAPTION>
2000 1999
------------------------------------ ------------------------------------
Income Shares Per share Income Shares Per share
numerator denominator amount numerator denominator amount
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Nine-months ended September 30:
Basic EPS $3,931,365 13,415,157 $ 0.29 $2,903,493 13,404,009 $ 0.22
Effect of dilutive
stock options -- 209,858 -- 215,125
---------- ---------- ---------- ----------
Diluted EPS $3,931,365 13,625,015 $ 0.29 $2,903,493 13,619,134 $ 0.21
========== ========== ========== ==========
Three-months ended September 30:
Basic EPS $1,544,736 13,415,268 $ 0.12 $1,149,987 13,408,794 $ 0.09
Effect of dilutive
stock options -- 209,858 -- 215,125
---------- ---------- ---------- ----------
Diluted EPS $1,544,736 13,625,126 $ 0.11 $1,149,987 13,623,919 $ 0.08
========== ========== ========== ==========
</TABLE>
(3) Incentive Stock Plan
On May 19, 1998, the Company's stockholders approved the Tejas Bancshares,
Inc. 1998 Incentive Stock Plan (the Plan). The Plan's objectives are to
attract, retain and provide incentive to employees, officers and directors
and to increase overall shareholder value. The number of shares reserved
for issuance under the plan is 1,333,333. The Plan provides for the grant
of both incentive stock options and non-qualified stock options as well as
the
4
<PAGE>
grant of restricted stock, stock appreciation rights, dividend equivalent
rights, stock awards and other stock-based awards. During the nine months
ended September 30, 2000 the Company granted 5,000 in shares under
incentive stock options to certain employees and officers at the option
price of $6.00, which is the fair market value of the common stock of the
Company as determined by a majority of the disinterested directors of the
Company.
(4) New Banking Center
During the first quarter of 2000, the Company opened a new banking center
at 45th and Coulter in Amarillo.
(5) Other Borrowings
During the third quarter of 2000, the Company became a member of the
Federal Home Loan Bank System. As a member, the Company may borrow up to
$28,790,000 with various rate and repayment options. The outstanding
balance as of September 30, 2000 was $16,000,000.
This information is an integral part of the accompanying
condensed consolidated financial statements.
5
<PAGE>
TEJAS BANCSHARES, INC. AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Results of Operations - Three-Month and Nine-Month Periods Ended September 30,
2000 as Compared to the Three-Month and Nine-Month Periods Ended September 30,
1999:
Earnings
Tejas Bancshares, Inc. and subsidiaries (the Company) reported net earnings for
the three-month period ended September 30, 2000 of $1,544,736 as compared to
earnings of $1,149,987 for the three-month period ended September 30, 1999. The
Company's net earnings were $3,931,365 for the nine-month period ended September
30, 2000 as compared to earnings of $2,903,493 for the nine-month period ended
September 30, 1999. The increase in earnings for 2000 was primarily the result
of improved net interest income as a result of growth in earning assets. The
return on average assets for the nine-month period ended September 30, 2000 and
1999 was 1.62% and 1.51%, respectively, and return on average equity was 11.05%
and 9.08%, respectively.
Net Interest Income
The largest component of operating income is net interest income, which is the
difference between the income earned on assets and interest paid on deposits.
Net interest income is determined by the rates earned on the Company's
interest-earning assets and the rates paid on its interest-bearing liabilities,
the relative amounts of interest-earning assets and interest-bearing
liabilities, and the degree of mismatch and the maturity and repricing
characteristics of its interest-earning assets and interest-bearing liabilities.
During the nine-month periods ended September 30, 2000 and 1999 net interest
income was $12,560,047, and $9,679,743, respectively. The increase in net
interest income from 1999 to 2000 of $2,880,304 (29.76%) is primarily due to an
increase in average interest-earning assets of approximately $61,533,000, net of
an increase in average interest-bearing liabilities of approximately
$47,944,000.
The following table sets forth the average consolidated balance sheets of the
Company for the nine-month periods ended September 30, 2000 and 1999 along with
an analysis of net interest earnings for each major category of interest-earning
assets and interest-bearing liabilities, the average yield or rate paid on each
category and net yield on interest-earning assets:
6
<PAGE>
<TABLE>
<CAPTION>
2000 1999
--------------------------------------- ---------------------------------------
Average Total Average Average Total Average
Balance(1) Interest Rate Balance(1) Interest Rate
------------ ------------ ---- ------------ ------------ ----
<S> <C> <C> <C> <C> <C> <C>
INTEREST-EARNING ASSETS
Interest bearing due from banks $ 11,432 $ 376 4.39% $ -- $ -- --
Loans
Commercial and agricultural 152,828,208 10,165,028 8.88% 109,025,302 6,700,137 8.22%
Real estate - mortgage 105,635,597 6,912,541 8.74% 76,791,822 4,811,502 8.38%
Installment loans to individuals 28,573,977 2,049,695 9.58% 14,761,101 1,010,065 9.15%
------------ ------------ ---- ------------ ------------ ----
Total loans 287,037,782 19,127,264 8.90% 200,578,225 12,521,704 8.35%
Securities taxable 6,679,159 298,505 5.97% 7,026,540 292,651 5.57%
Federal funds sold and other
interest-earning assets 2,411,316 104,098 5.77% 27,001,952 983,269 4.87%
------------ ------------ ---- ------------ ------------ ----
Total interest-earning assets 296,139,689 19,530,243 8.81% 234,606,717 13,797,624 7.86%
NONINTEREST-EARNING ASSETS
Cash and due from banks 21,424,885 18,389,898
Other assets 11,466,218 7,330,652
Less: allowance for loan losses (5,158,923) (3,863,047)
------------ ------------
Total $323,871,869 $256,464,220
============ ============
INTEREST-BEARING
LIABILITIES
Interest-bearing demand $ 36,774,784 $ 555,534 2.02% $ 33,457,954 $ 417,367 1.67%
Money market deposits 54,688,737 1,567,529 3.83% 47,965,621 1,110,735 3.10%
Other savings deposits 5,971,574 101,968 2.28% 5,027,053 77,217 2.05%
Time deposits 95,311,282 4,160,544 5.83% 69,844,128 2,512,562 4.81%
Federal funds purchased 9,850,182 502,289 6.81% -- -- --
Other borrowings 1,642,336 82,332 6.70% -- -- --
------------ ------------ ---- ------------ ------------ ----
Total interest-bearing
liabilities 204,238,895 6,970,196 4.56% 156,294,756 4,117,881 3.52%
NONINTEREST-BEARING
LIABILITIES AND STOCK-
HOLDERS' EQUITY
Demand deposits 69,935,009 56,149,757
Other 2,187,793 1,247,141
Stockholders' equity 47,510,172 42,772,566
------------ ------------
Total $323,871,869 $256,464,220
============ ============
Net interest income $ 12,560,047 $ 9,679,743
============ ============
Net yield on earning assets 5.67% 5.52%
==== ====
</TABLE>
(1) For purposes of these computations, nonaccruing loans are included in the
daily average loan amounts outstanding.
7
<PAGE>
Other Operating Income and Expenses
Other operating income for the three and nine-month periods for 2000 and 1999
increased by $213,154 (42.80%) and $619,107 (47.69%), respectively, primarily
because of increased activity on deposit accounts. Fees also increased in trust
services, ATM/debit cards and merchant credit cards. Other operating expenses
increased during the three and nine-month periods for 2000 and 1999 by $405,332
(21.72%) and $1,414,989 (25.32%), respectively. The increase was attributable to
the overall growth of the Company, including a significant increase in employees
from 1999 to 2000 and increases in costs to conduct banking operations,
primarily data processing, depreciation, franchise tax, supplies and office
expense.
Securities Portfolio
The objective of the Company in its management of the investment portfolio is to
maintain a portfolio of high quality, relatively liquid investments with
competitive returns. During the first nine-month period of 2000, the weighted
average yield on taxable securities was 5.97% as compared to 5.57% during 1999.
The Company primarily invests in U.S. Treasury securities and other U.S.
government agency obligations and mortgage-backed securities.
The amortized cost and estimated fair values of the major classifications of
available-for-sale securities at September 30, 2000 and December 31, 1999 were
as follows:
<TABLE>
<CAPTION>
September 30, 2000 December 31, 1999
------------------------------- -------------------------------
Amortized Amortized
Cost Market Cost Market
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Treasury securities $2,185,246 $2,182,811 $2,203,191 $2,199,312
Government agencies 1,804,694 1,803,406 1,826,368 1,817,992
Mortgage backed securities 1,250,960 1,248,457 1,487,649 1,490,168
Other securities 2,015,675 2,015,675 1,215,675 1,215,675
---------- ---------- ---------- ----------
Total securities $7,256,575 $7,250,349 $6,732,883 $6,723,147
========== ========== ========== ==========
</TABLE>
Loan Portfolio
At September 30, 2000, December 31, 1999, and September 30, 1999 net loans
accounted for 87.2%, 86.2%, and 78.9%, respectively, of total assets.
The amount of loans outstanding at September 30, 2000 and December 31, 1999 are
shown in the following table according to type of loans:
8
<PAGE>
September 30, December 31,
2000 1999
------------ ------------
Commercial $115,655,249 $ 94,893,660
Agriculture 50,815,068 39,265,713
Real estate
Commercial 78,311,470 80,150,036
1-4 single family 35,923,039 25,750,839
Installment loans to individuals 29,193,999 20,580,564
Student Loans 2,778,479 1,606,681
------------ ------------
Total $312,677,304 $262,247,493
============ ============
Provision and Allowance for Loan Losses
The following table summarizes the loan loss experience for the nine-month
periods ended September 30, 2000 and 1999:
2000 1999
----------- -----------
Balance of allowance for loan
losses at the beginning of period $ 4,524,678 $ 3,625,435
Provision charged to operations 1,500,000 990,000
Charge-offs (18,911) (656,968)
Recoveries 11,270 232,159
----------- -----------
Balance at end of period $ 6,017,037 $ 4,190,626
=========== ===========
The Bank had no significant nonaccrual or restructured loans at September 30,
2000. Loans past due 90 days or more were $144,000 on September 30, 2000. The
charge-offs that occurred last year were primarily caused by three credits.
Management is not aware of any other loans in which it has serious doubts as to
the ability of such borrower to comply with present loan repayment terms.
Additions to the allowance for loan losses, which are recorded as the provision
for loan losses on the Company's statements of operations, are made periodically
to maintain the allowance at an appropriate level based on management's analysis
of the potential risk in the loan portfolio. The amount of the provision is a
function of the level of loans outstanding, the level of nonperforming loans,
historical loan-loss experience, the amount of loan losses actually charged off
or recovered during a given period, and current and anticipated economic
conditions. The Company believes that it is conservative in the identification
and charge off of problems and in certain instances, the Company has received
recoveries on loans that were previously charged off.
9
<PAGE>
At September 30, 2000 and December 31, 1999, the allowance for loan losses was
$6,017,037 and $4,524,678, respectively, which represented 1.92% and 1.73% of
outstanding loans at those respective dates.
During the nine-month period ended September 30, 2000, the Company recorded
provisions for loan losses of $1,500,000. The provisions were made in connection
with the analysis discussed above. Because the Company has a very limited loan
loss history, the rapid growth in the loan portfolio and the inherent
uncertainties in lending, management believes that a conservative approach to
providing loan losses is prudent. The allowance is subjective in nature and may
be adjusted in the near term because of changes in economic conditions or review
by regulatory examiners. Management expects that appropriate, additional future
provisions will be made as the loan portfolio grows.
Capital
The Company and The First National Bank of Amarillo (the Bank) are subject to
various regulatory capital requirements administered by banking agencies.
Failure to meet minimum capital requirements can initiate certain mandatory and
possibly additional discretionary actions by regulators that, if undertaken,
could have a direct material effect on the Company's financial statements. Under
capital adequacy guidelines and the regulatory framework for prompt corrective
action, the Company and Bank must meet specific capital guidelines that involve
quantitative measures of the assets, liabilities, and certain off-balance-sheet
items as calculated under regulatory accounting practices. The Company's and
Bank's capital amounts and classification are also subject to qualitative
judgments by the regulators about components, risk weightings and other factors.
Quantitative measures established by regulation to ensure capital adequacy
require the Company and Bank to maintain minimum amounts and ratios (set forth
in the table below) of Total and Tier I Capital (as defined in the regulations)
to risk-weighted assets (as defined), and of Tier I Capital (as defined) to
average assets (as defined). Management believes, as of September 30, 2000, that
the Company and Bank meet all capital adequacy requirements to which they are
subject.
The Company and the Bank exceeded their regulatory capital ratio at September
30, 2000, as set forth in the following table.
<TABLE>
<CAPTION>
To Be Well
Capitalized Under
For Capital Prompt Corrective
Actual Adequacy Purposes Action Provisions
---------------------- -------------------- --------------------
Amount Ratio Amount Ratio Amount Ratio
------------ ----- ------------ ------ ---------- -------
<S> <C> <C> <C> <C> <C> <C>
To Risk Weighted Assets:
Total Capital:
Tejas Bancshares, Inc. $ 53,280,000 17.22% $ 24,757,000 > 8.0% N/A
The Bank 52,457,000 16.95% 24,755,000 > 8.0% 30,944,000 > 10.0%
Tier I Capital:
Tejas Bancshares, Inc. $ 49,385,000 15.96% $ 12,379,000 > 4.0% N/A
The Bank 48,563,000 15.69% 12,377,000 > 4.0% 18,566,000 > 6.0%
</TABLE>
10
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
To Quarterly Average Assets
Tier I Capital:
Tejas Bancshares, Inc. $ 49,385,000 15.25% $ 12,955,000 > 4.0% N/A
The Bank 48,563,000 15.00% 12,954,000 > 4.0% 16,192,000 > 5.0%
</TABLE>
Liquidity Management
Liquidity management involves monitoring the Company's sources and uses of funds
in order to meet its day-to-day cash flow requirements while maximizing profits.
Liquidity represents the ability of a Company to convert assets into cash or
cash equivalents without significant loss and to raise additional funds by
increasing liabilities. Liquidity management is made more complicated because
different balance sheet components are subject to varying degrees of management
control. For example, the timing of maturities of the investment portfolio is
very predictable and subject to a high degree of control at the time investment
decisions are made. However, net deposit inflows and outflows are far less
predictable and are not subject to nearly the same degree of control.
The Company has maintained a level of liquidity that is adequate to provide the
necessary cash requirements. The Company's uses federal funds and borrowings
from the Federal Home Loan Bank as its primary source of liquidity. Average
federal funds sold were $2,411,316 and $27,001,952 during the nine-month period
ended September 30, 2000 and 1999, respectively. Average federal funds purchased
were $9,850,182 during the nine-month period ended September 30, 2000. No
federal funds were purchased in the same period in 1999. The Company has
$45,000,000 in funds purchased lines available from correspondent banks of which
$5,000,000 was used as of September 30, 2000. Borrowings from the Federal Home
Loan Bank were $16,000,000 as of September 30, 2000. Management also has lined
out potential purchasers of loans as a tool to maintain liquidity. The Company
has numerous loan participations with other parties, primarily financial
institutions. Loan participations are a common commercial banking arrangements
whereby the Company sells, on a nonrecourse basis, a portion of a loan to
another party or parties. These arrangements spread the risk between or among
the parties and provide liquidity to the Company while reducing risk. Although
no formal agreements or commitments exist, management believes that additional
loan participations could readily be sold for liquidity purposes, if necessary.
Management regularly reviews the liquidity position of the Company and has
implemented internal policies which establish guidelines for sources of
asset-based liquidity. Management believes that the continued growth in the
deposit base will enable the Company to meet its long-term liquidity needs.
11
<PAGE>
Deposits and Other Interest-Bearing Liabilities
Average total deposits were $262,681,386 and $212,444,513 during the nine-month
periods for 2000 and 1999, respectively. Average interest-bearing deposits were
$192,746,377 in 2000 as compared to $156,294,756 in 1999.
The average daily amount of deposits and rates paid on deposits are summarized
for the nine-months ended September 30, 2000 and 1999 as indicated in the
following table:
<TABLE>
<CAPTION>
2000 1999
----------------------- ------------------------
Amount Rate Amount Rate
--------------- ------- --------------- -------
<S> <C> <C> <C> <C>
Deposits
Noninterest-bearing demand $ 69,935,009 0.00% $ 56,149,757 0.00%
Interest-bearing demand 36,774,784 2.02% 33,457,954 1.67%
Money market deposits 54,688,737 3.83% 47,965,621 3.10%
Other savings deposits 5,971,574 2.28% 5,027,053 2.05%
Time deposits 95,311,282 5.83% 69,844,128 4.81%
--------------- ---------------
Total $ 262,681,386 $ 212,444,513
=============== ===============
</TABLE>
12
<PAGE>
TEJAS BANCSHARES, INC. AND SUBSIDIARIES
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
27 Financial Data Schedule for September 30, 2000
(b) Reports on Form 8-K
No Form 8-K was filed with the SEC during the quarter ended September
30, 2000.
13
<PAGE>
TEJAS BANCSHARES, INC. AND SUBSIDIARIES
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant has
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
TEJAS BANCSHARES, INC.
DATE: November 13, 2000 BY: /s/ Donald E. Powell
-----------------------------------------
Donald E. Powell, Chief Executive Officer
DATE: November 13, 2000 BY: /s/ Jack Hall
-----------------------------------------
Jack Hall, Chief Financial Officer
14
