<PAGE> 1
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 March 31, 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 #0-17403
ROOSEVELT FINANCIAL GROUP, INC.
-----------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 43-1498200
--------------------------------- ------------------------
(State or other Jurisdiction (I.R.S. Employer ID No.)
of incorporation or organization)
900 ROOSEVELT PARKWAY, CHESTERFIELD, MISSOURI 63017
---------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (314) 532-6200
------------------
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 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 registrant's
classes of common stock, as of the latest practicable date.
Class Outstanding at
---------------------- -------------------------------
Common Stock 42,149,737
Par Value $.01
<PAGE> 2
<TABLE>
INDEX
ROOSEVELT FINANCIAL GROUP, INC.
<CAPTION>
PAGE
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
- Consolidated Balance Sheets 2
- Consolidated Statements of Operations 3
- Consolidated Statements of Stockholders'
Equity 4
- Consolidated Statements of Cash Flows 5
- Notes to Consolidated Financial
Statements 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 10
PART II. OTHER INFORMATION
SIGNATURES 21
</TABLE>
<PAGE> 3
<TABLE>
ROOSEVELT FINANCIAL GROUP, INC.
Consolidated Balance Sheets
(dollars in thousands, except share data) (Unaudited)
<CAPTION>
March 31, December 31,
1997 1996
---------- ----------
<S> <C> <C>
Assets:
Cash and cash equivalents $ 43,025 $ 48,642
Securities available for sale:
Investment securities 181,345 183,227
Mortgage-backed securities 2,726,682 2,974,530
Loans 4,288,411 4,298,469
Real estate owned 14,015 12,438
Office properties and equipment, net 54,275 54,966
Other assets 200,556 224,140
---------- ----------
$7,508,309 $7,796,412
========== ==========
Liabilities and Stockholders' Equity:
Deposits $5,306,723 $5,347,071
Securities sold under agreements to repurchase 2,076 3,095
Advances from Federal Home Loan Bank 1,584,000 1,837,756
Other liabilities 145,952 111,063
---------- ----------
Total Liabilities 7,038,751 7,298,985
---------- ----------
Stockholders' equity:
Preferred stock - $.01 par value; $50 preference value; 6.5% non-cumulative
perpetual convertible; aggregate preference value of $63,575 and $64,441
at March 31, 1997 and December 31, 1996, respectively; 3,000,000
shares authorized and 1,271,493 and 1,288,825 issued and outstanding at
March 31, 1997 and December 31, 1996, respectively 13 13
Common stock - $.01 par value; 90,000,000 shares authorized;
44,151,837 and 44,183,124 shares issued and 42,614,943 and 44,183,124
shares outstanding at March 31, 1997 and December 31, 1996, respectively 442 442
Paid-in capital 294,481 298,283
Retained earnings - subject to certain restrictions 215,176 202,550
Treasury stock, at cost; 1,536,894 shares at March 31, 1997 (32,552) --
Unrealized loss on securities available for sale, net of taxes (6,441) (2,226)
Unamortized restricted stock awards (1,561) (1,635)
---------- ----------
Total Stockholders' Equity 469,558 497,427
---------- ----------
$7,508,309 $7,796,412
========== ==========
See accompanying notes to consolidated financial statements
</TABLE>
2
<PAGE> 4
<TABLE>
ROOSEVELT FINANCIAL GROUP, INC.
Consolidated Statements of Operations
(dollars in thousands, except per share information) (Unaudited)
<CAPTION>
Three Months Ended
March 31,
1997 1996
---------- ----------
<S> <C> <C>
Interest income:
Loans $ 82,685 $ 72,010
Securities available for sale 54,389 29,348
Securities held to maturity -- 64,477
Other 2,938 308
---------- ----------
Total interest income 140,012 166,143
---------- ----------
Interest expense:
Deposits 64,471 61,164
Other borrowings 27,849 53,346
Interest rate exchange agreements, net (1,730) 5,259
---------- ----------
Total interest expense 90,590 119,769
---------- ----------
Net interest income 49,422 46,374
Provision for losses on loans 640 300
---------- ----------
Net interest income after provision for losses on loans 48,782 46,074
---------- ----------
Noninterest income:
Retail banking fees 5,979 3,132
Insurance and brokerage sales commissions 2,975 1,698
Loan servicing fees, net 2,754 2,019
Net gain from financial instruments 392 341
Other 252 1,328
---------- ----------
Total noninterest income 12,352 8,518
---------- ----------
Noninterest expense:
Compensation and employee benefits 11,160 9,882
Occupancy 4,811 3,922
Federal insurance premiums 756 2,339
Other 8,711 5,575
---------- ----------
Total noninterest expense 25,438 21,718
---------- ----------
Income before income tax expense 35,696 32,874
Income tax expense 13,605 11,309
---------- ----------
Net income $ 22,091 $ 21,565
========== ==========
Net income attributable to common stock $ 21,060 $ 20,508
========== ==========
Earnings per share:
Primary $ 0.49 $ 0.48
========== ==========
Fully-diluted $ 0.46 $ 0.46
========== ==========
Dividends Paid $ 0.17 $ 0.155
========== ==========
See accompanying notes to consolidated financial statements
</TABLE>
3
<PAGE> 5
<TABLE>
ROOSEVELT FINANCIAL GROUP, INC.
AND SUBSIDIARIES
Consolidated Statements of Stockholders' Equity
(Dollars in thousands) (Unaudited)
<CAPTION>
Unrealized
gain
(loss) on
securities
available Un-
for amortized Total
Preferred Stock Common Stock Paid- Treasury Stock sale, Restricted Stock-
---------------- ---------------- in Retained -------------------- net Stock holders
Shares Amount Shares Amount Capital Earnings Shares Amount of taxes Awards Equity
--------- ------ -------- ------ ------- -------- ---------- -------- ---------- ---------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1995 1,301,000 $13 41,991,701 $420 $262,381 $223,606 -- $ -- $ 12,019 $(1,533) $496,906
Net income -- -- -- -- -- 9,662 -- -- -- -- 9,662
Purchase of common stock
for treasury -- -- -- -- -- -- (57,000) (923) -- -- (923)
Issuance of common stock
for stock options and
employee stock plans -- -- 219,991 2 2,748 (205) 57,000 923 -- (242) 3,226
Issuance of common stock
for acquisitions -- -- 1,925,776 19 33,155 -- -- -- -- -- 33,174
Exchange of preferred
stock for common stock (12,175) -- 45,656 1 (1) -- -- -- -- -- --
Amortization of restricted
stock awards -- -- -- -- -- -- -- -- -- 140 140
Cash dividends declared:
Common stock -- -- -- -- -- (26,303) -- -- -- -- (26,303)
Preferred stock -- -- -- -- -- (4,210) -- -- -- -- (4,210)
Unrealized loss on
securities available
for sale, net -- -- -- -- -- -- -- -- (14,245) -- (14,245)
--------- --- ---------- ---- -------- -------- ---------- -------- -------- ------- --------
Balance, December 31, 1996 1,288,825 13 44,183,124 442 298,283 202,550 -- -- (2,226) (1,635) 497,427
Net income -- -- -- -- -- 22,091 -- -- -- -- 22,091
Purchase of common stock
for treasury -- -- -- -- -- -- (1,700,000) (35,916) -- -- (35,916)
Issuance of common stock
for stock options and
employee stock plans -- -- (31,287) -- (2,936) (690) 98,111 2,024 -- -- (1,602)
Exchange of preferred
stock for common stock (17,332) -- -- -- (866) (474) 64,995 1,340 -- -- --
Amortization of restricted
stock awards -- -- -- -- -- -- -- -- -- 74 74
Cash dividends declared:
Common stock -- -- -- -- -- (7,270) -- -- -- -- (7,270)
Preferred stock -- -- -- -- -- (1,031) -- -- -- -- (1,031)
Unrealized loss on
securities available
for sale, net -- -- -- -- -- -- -- -- (4,215) -- (4,215)
--------- --- ---------- ---- -------- -------- ---------- -------- -------- ------- --------
Balance, March 31, 1997 1,271,493 $13 44,151,837 $442 $294,481 $215,176 (1,536,894) $(32,532) $ (6,441) $ 1,561 $469,558
========= === ========== ==== ======== ======== ========== ======== ======== ======= ========
See accompanying notes to consolidated financial statements
</TABLE>
4
<PAGE> 6
<TABLE>
ROOSEVELT FINANCIAL GROUP, INC.
Consolidated Statements of Cash Flows
(dollars in thousands) (Unaudited)
<CAPTION>
Three Months Ended
March 31,
1997 1996
---------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 22,091 $ 21,565
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 1,099 1,046
Amortization of discounts and premiums, net 10,449 6,591
Decrease (increase) in accrued interest receivable 905 (2,901)
Decrease in accrued interest payable (964) (3,914)
Provision for losses on loans 640 300
Federal tax refund 27,967 -
Other, net (1,808) (6,392)
---------- -----------
Net cash provided by operating activities 60,379 16,295
---------- -----------
Cash flows from investing activities:
Principal payments and maturities of securities available for sale 201,204 55,770
Principal payments and maturities of securities held to maturity - 271,370
Principal payments on loans 243,290 256,427
Proceeds from sales of securities available for sale 96,964 358,252
Purchase of securities available for sale (61,387) (274,727)
Purchase of securities held to maturity - (301,363)
Purchase of loans (17,921) (170,830)
Originations of loans (212,517) (288,923)
Net proceeds from sales of real estate 1,484 3,179
Purchase of office properties & equipment (378) (526)
---------- -----------
Net cash provided by (used in) investing activities 250,739 (91,371)
---------- -----------
Cash flows from financing activities:
Proceeds from FHLB advances 5,215,000 4,992,500
Principal payments on FHLB advances (5,468,756) (4,914,000)
Proceeds received from termination of interest rate exchange agreements - 14,185
Excess of deposit (withdrawals over receipts) receipts over withdrawals (40,393) 13,430
Decrease in securities sold under agreements to repurchase, net (1,019) (14,090)
Proceeds from exercise of stock options 177 1,019
Purchase of treasury stock (35,916) -
Cash dividends paid (8,301) (7,582)
Net increase in advances from borrowers for taxes and insurance 22,473 18,927
---------- -----------
Net cash (used in) provided by financing activities (316,735) 104,389
---------- -----------
Net (decrease) increase in cash and cash equivalents (5,617) 29,313
Cash and cash equivalents at beginning of period 48,642 15,433
---------- -----------
Cash and cash equivalents at end of period $ 43,025 $ 44,746
========== ===========
Supplemental disclosures of cash flow information:
Payments during the period for:
Interest $ 91,555 $ 123,683
Income tax refund 27,967 -
Noncash investing and financing activities:
Redesignation of interest rate exchange and cap agreements to securities
available for sale - 3,235
See accompanying notes to consolidated financial statements
</TABLE>
5
<PAGE> 7
ROOSEVELT FINANCIAL GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - BASIS OF PRESENTATION
The consolidated financial statements include the accounts of Roosevelt
Financial Group, Inc. (the Company), its wholly-owned subsidiaries,
Roosevelt Bank (the Bank), Missouri State Bank (MSB), and F & H Realty
(Realty) and the Bank's wholly-owned subsidiaries as of March 31, 1997 and
for the three month periods ended March 31, 1997 and 1996.
In the opinion of management, the preceding unaudited consolidated
financial statements contain all adjustments (consisting of normal recurring
accruals) necessary for a fair presentation of the financial condition of the
Company as of March 31, 1997 and the results of its operations for the three
month periods ended March 31, 1997 and 1996.
The preceding unaudited consolidated financial statements have been
prepared in accordance with the instructions to Form 10-Q and therefore do
not include all information and footnotes necessary for a fair presentation
of financial condition, results of operations and cash flows in conformity
with generally accepted accounting principles. The following material under
the heading "Management's Discussion and Analysis of Financial Condition and
Results of Operations" is written with the presumption that the users of the
interim financial statements have read, or have access to, the Company's
latest audited financial statements and notes thereto, together with
Management's Discussion and Analysis of Financial Condition and Results of
Operations as of December 31, 1996 and for the three year period then ended.
Therefore, only material changes in financial condition and results of
operations are discussed in the remainder of Part I.
When necessary, reclassifications have been made to prior period
balances to conform to the current period presentation.
NOTE 2 - PROPOSED MERGER
On December 23, 1996, Roosevelt Financial Group, Inc. announced its
plans to merge with Mercantile Bancorporation Inc. (MTL). Pursuant to the
agreement, Roosevelt shareholders will be able to elect to receive either $22
in cash or .4211 shares of common stock (subject to the issuance of a maximum
number of shares of MTL common stock). Plans call for the merger, which is
subject to the approval of Roosevelt shareholders and all appropriate
regulatory agencies to be completed in mid-1997.
6
<PAGE> 8
NOTE 3 -SECURITIES AVAILABLE FOR SALE
The amortized cost and market value of securities available for sale at
March 31, 1997 are summarized as follows:
<TABLE>
<CAPTION>
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED MARKET
COST GAINS LOSSES VALUE
---------- ---------- ---------- ----------
(in thousands)
<S> <C> <C> <C> <C>
Investment Securities:
U.S. Government and agency obligations $ 12,594 $ 244 $ (84) $ 12,754
Corporate securities 11,731 1,002 (3) 12,730
---------- ------- -------- ----------
24,325 1,246 (87) 25,484
FHLB stock 155,861 -- -- 155,861
---------- ------- -------- ----------
180,186 1,246 (87) 181,345
---------- ------- -------- ----------
Mortgage-backed Securities:
Mortgage-backed certificates:
GNMA 59,865 662 (351) 60,176
FNMA 129,677 2,946 (528) 132,095
FHLMC 127,139 1,475 (1,754) 126,860
Private pass throughs 2,158,888 14,286 (17,686) 2,155,488
Collateralized mortgage obligations 160,871 1,945 (4,526) 158,290
Other 32,472 1,788 (536) 33,724
Derivative financial instruments:
Interest rate cap agreements 68,540 1,758 (11,108) 59,190
Interest rate floor agreements 83 776 -- 859
---------- ------- -------- ----------
2,737,535 25,636 (36,489) 2,726,682
---------- ------- -------- ----------
$2,917,721 $26,882 $(36,576) $2,908,027
========== ======= ======== ==========
</TABLE>
Gross realized gains and gross realized losses on sales of securities
available for sale are summarized as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
----------------------------
1997 1996
------ -------
<S> <C> <C>
Gross realized gains $3,980 $ 6,157
Gross realized losses -- (3,067)
------ -------
$3,980 $ 3,090
====== =======
</TABLE>
7
<PAGE> 9
NOTE 4 - SECURITIES HELD TO MATURITY
In December, 1996, the Company reclassified its entire investment and
mortgage-backed securities portfolios from held to maturity to available for
sale. This action was taken to provide the Company with maximum flexibility
to manage its portfolio. As a result of the Company's decision to reclassify
its entire securities portfolios from held to maturity to available for sale,
it will not be able to classify any securities as held to maturity for a
minimum period of one year from the initial redesignation date.
NOTE 5 - COMMON STOCK DIVIDENDS AND PREFERRED STOCK DIVIDENDS
On April 24, 1997, the Board of Directors declared the Company's thirty
seventh common stock cash dividend in the amount of 22.5 cents per share
payable May 30, 1997 to stockholders of record on May 15, 1997. The 22.5
cent dividend consists of the Company's regular quarterly dividend of 17
cents per share and a special transition dividend of 5.5 cents per share.
The special transition dividend ensures that Roosevelt shareholders do not
receive a shortfall based on the record and payment dates of Roosevelt's
anticipated last dividend prior to its merger with Mercantile Bancorporation
Inc. (see Note 2) and the record and payment dates of Mercantile's first
dividend following the merger. On March 27, 1997, the Board of Directors
declares a regular quarterly cash dividend on the Company's Series A and F 6.5%
non-cumulative perpetual convertible preferred stock in the amount of
81.25 cents per share payable May 15, 1997 to shareholders of record
May 5, 1997.
NOTE 6 - STOCK REPURCHASE PROGRAM
On December 15, 1994, the Board of Directors of Roosevelt Financial
Group, Inc. authorized the Company to acquire up to 1,750,000 shares of its
own common stock, subject to market conditions, prior to December 31, 1997.
The stock repurchased is to be held in treasury in order to fund, from time
to time, the Company's benefit programs. Shares of stock repurchased may
also be retired, from time to time, if not needed for other corporate
purposes. Through December 31, 1996, 281,500 shares of common stock of the
Company have been repurchased pursuant to the stock repurchase program at a
weighted average price of $15.98 per share.
On January 2, 1997, the Board of Directors of the Company authorized an
expansion of the capacity of the above-mentioned stock repurchase plan by an
additional 5,529,880 shares. This expansion, when coupled with the remaining
authorization prior to the expansion (1,468,500 shares), resulted in a total
authorization of 6,998,380 shares, the number of shares that the Company has
agreed to use its reasonable best efforts, subject to prudent business
practices, to acquire in open market transactions prior to the closing date
of its planned merger with Mercantile Bancorporation Inc. (see Note 2).
December 31, 1996 and through April 24, 1997, an additional 2,325,000 shares
have been repurchased at a weighted average price of $21.32 per share.
NOTE 7 - EARNINGS PER SHARE
Net income for primary earnings per share is adjusted for the dividends
on convertible preferred stock. Primary earnings per share have been
computed based on the weighted average number of common shares outstanding
and common stock equivalents arising from the assumed exercise of outstanding
stock options unless their effect would be anti-dilutive. Common stock
equivalents are computed under the treasury stock method. Average common and
common stock equivalents outstanding for the three month periods ended March
31, 1997 and 1996 were 43,395,534 and 42,373,404, respectively.
Fully-diluted earnings per share have been computed using the weighted
average number of common shares and common stock equivalents, which include
the effect of the assumed conversion of the 6.5% non-cumulative convertible
preferred stock into common stock. Net income has not been adjusted for the
preferred stock dividend for the purposes of the fully-diluted earnings per
share calculation. Average common and common stock equivalents outstanding,
for the purpose of calculating fully-diluted earnings per share, for the
three month periods ended March 31, 1997 and 1996 were 48,163,633 and
47,258,439, respectively.
NOTE 8 - ACCOUNTING PRONOUNCEMENTS
In February 1997, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 128, Earnings Per Share
(SFAS 128). SFAS 128 establishes standards for computing and presenting
earnings per share (EPS). SFAS 128 simplifies existing standards for computing
EPS and makes them comparable to international standards. It replaces the
presentation of primary EPS with a presentation of basic EPS. It also requires
dual presentation of basic and diluted EPS on the face of the income statement
for all entities with complex capital structures and requires a reconciliation
of the components of basic and diluted EPS. Basic EPS excludes dilution and is
computed by dividing income available to common shareholders by the
weighted-average number of common shares outstanding for the period. Diluted
EPS reflects the potential dilution that could occur if securities or other
contracts to issue common stock were exercised or converted into common stock or
resulted in the issuance of common stock that then shared in the earnings of the
Company. SFAS 128 is effective for financial statements issued for periods
ending after December 31, 1997, including interim periods, and requires
restatement of all prior EPS data presented. The Company does not believe
the adoption of SFAS 128 will have a material effect on its financial
condition or results of operations.
During June 1996, the FASB issued Statement of Financial Accounting
Standards No. 125, "Accounting for Transfers and Servicing of Financial Assets
and Extinquishments of Liabilities" (SFAS 125). SFAS 125 provides accounting
and reporting standards for transfers and servicing of financial assets and
extinguishments of liabilities based on consistent application of a financial
components approach that focuses on control. It distinguishes transfers of
financial assets that are sales from transfers that are secured borrowings.
Under the financial components approach, after a transfer of financial assets,
an entity recognizes all financial and servicing assets it controls and
liabilities it has incurred and derecognizes financial assets it no longer
controls and liabilities that have been extinguished. The financial
components approach focuses on the assets and liabilities that exist after
the transfer. Many of these assets and liabilities are components of
financial assets that existed prior to the transfer. If a transfer does not
meet the criteria for a sale, the transfer is accounted for as a secured
borrowing with pledge of collateral.
8
<PAGE> 10
SFAS 125 extends the "available-for-sale" or "trading" approach in SFAS
115 to nonsecurity financial assets that can contractually be prepaid or
otherwise settled in such a way that the holder of the asset would not
recover substantially all of its recorded investment. Thus, nonsecurity
financial assets (no matter how acquired) such as loans, other receivables,
interest-only strips or residual interests in securitization trusts that are
subject to prepayment risk that could prevent recovery of substantially all
of the recorded amount are to be reported at fair value with the change in
fair value accounted for depending on the asset's classification as
"available-for-sale" or "trading". SFAS 125 also amends SFAS 115 to prevent
a security from being classified as held-to-maturity if the security can be
prepaid or otherwise settled in such a way that the holder of the security
would not recover substantially all of its recorded investment.
SFAS 125 is effective for transfers and servicing of financial assets
and extinguishments of liabilities occurring after December 31, 1996, and is
to be applied prospectively. Earlier or retroactive application is not
permitted. Also, the extension of the SFAS 115 approach to certain
nonsecurity financial assets and the amendment to SFAS 115 is effective for
financial assets held on or acquired after January 1, 1997.
Reclassifications that are necessary because of the amendment do not call
into question an entity's intent to hold other debt securities to maturity in
the future. The Company's adoption of SFAS 125 effective January 1, 1997 did
not have any impact on the Company's financial statements.
9
<PAGE> 11
ROOSEVELT FINANCIAL GROUP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FORWARD-LOOKING STATEMENTS
When used in this Form 10-Q or future filings by the Company with the
Securities and Exchange Commission, in the Company's press releases or other
public or shareholder communications, or in oral statements made with the
approval of an authorized executive officer, the words or phrases "will
likely result", "are expected to", "will continue", "is anticipated",
"estimate", "project" or similar expressions are intended to identify
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995. The Company wishes to caution readers not to
place undue reliance on any such forward-looking statements, which speak only
as of the date made, and to advise readers that various factors, including
regional and national economic conditions, substantial changes in levels of
market interest rates, credit and other risks of lending and investment
activities and competitive and regulatory factors, could affect the Company's
financial performance and could cause the Company's actual results for future
periods to differ materially from those anticipated or projected.
The Company does not undertake, and specifically disclaims any obligation, to
update any forward-looking statements to reflect occurrence of anticipated or
unanticipated events or circumstances after the date of such statements.
RESULTS OF OPERATIONS
Net Income
- ----------
The Company recorded net income totaling $22.1 million for the three
month period ended March 31, 1997 as compared to $21.6 million for the three
month period ended March 31, 1996. Net income on a fully diluted per share
basis was $0.46 for each of the three month periods. The Company took several
actions in the fourth quarter of 1996 to reposition its balance sheet and
improve its operating results. These actions included the sale of marginally
profitable assets, the transfer of its securities held to maturity portfolio
to the available for sale portfolio, the repayment of higher cost wholesale
liabilities and the removal of derivative positions which had been designated
as synthetic alterations of some of the assets sold or the liabilities
repaid. These actions and others were part of continuous efforts to
transition the Bank to become a more retail-oriented institution and
contributed to the $526,000 increase in net income in the first quarter
of 1997.
Interest Income
- ---------------
Interest income declined $26.1 million or 15.6% to $140.0 million for the
three month period ended March 31, 1997 as compared to $166.1 million for the
three month period ended March 31, 1996. Interest income on loans increased
$10.7 million primarily as a result of a $608.6 million increase in the
average balance of loans outstanding which was partially offset by a small
decrease in the average yield on the loan portfolio from 7.72% to 7.62%. The
increase in the average balances of loans is primarily attributable to the
Company's continuing efforts to originate a greater portion of its assets in
the form of mortgage and consumer loans, as well as strong demand for such
loans in the Company's retail markets. Interest income on securities
available for sale increased $25.0 million while interest income on
securities held to maturity declined $64.5 million. The increase in available
for sale interest income and decrease in held to maturity interest income is
primarily a factor of the average balances outstanding reflecting the net
impact of the transfer of securities between portfolios in the fourth quarter
of 1996 and purchases, sales and repayments occurring subsequent to March 31,
1996 and through March 31, 1997.
Interest Expense
- ----------------
Interest expense decreased $29.2 million or 24.4% to $90.6 million for
the three month period ended March 31, 1997 as compared to $119.8 million for
the same period in 1996. Interest expense on deposits increased $3.3 million
to $64.5 million for the three month period ended March 31, 1997 as compared
to $61.2 million for the 1996 period primarily as a result of a $423.0
million increase in the average balance outstanding. The remaining $32.5
million net decrease in interest expense primarily results from the fourth
quarter of 1996 repayment of higher cost wholesale liabilities and the
removal of interest rate exchange agreements which had been used as synthetic
alterations of the liabilities repaid.
10
<PAGE> 12
Average Balances, Interest Rates and Yields
- -------------------------------------------
The following table presents at the date and for the periods indicated
the Company's average interest-earning assets, average interest-bearing
liabilities, interest income and expense and average rates earned and paid.
Average rates earned and paid are derived by dividing income or expense by
the average balance of assets and liabilities, respectively.
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
----------------------------------------------------------------------
1997 1996
---------------------------------- ---------------------------------
INTEREST AVERAGE INTEREST AVERAGE
AVERAGE INCOME/ RATE AVERAGE INCOME/ RATE
BALANCE EXPENSE % BALANCE EXPENSE %
------- -------- ------- ------- -------- -------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
Assets:
Cash equivalents $ 227.8 $ 2.9 5.16% $ 24.0 $ 0.3 5.13%
Securities available for sale<F1> 3,050.9 54.4 7.13 1,563.2 29.3 7.51
Securities held to maturity -- -- -- 3,599.3 64.5 7.17
Loans<F2><F3> 4,339.9 82.7 7.62 3,731.3 72.0 7.72
-------- ------ -------- ------
Total interest-earning assets 7,618.6 140.0 7.35% 8,917.8 166.1 7.45%
------ ---- ------ -----
Other assets 326.8 383.9
-------- --------
$7,945.4 $9,301.7
======== ========
Liabilities
Deposits:
NOW and money market accounts $1,187.9 8.9 2.98% $ 904.9 6.6 2.92%
Passbook savings deposits 285.0 1.6 2.28 321.1 1.8 2.27
Time deposits<F4> 3,819.2 52.3 5.47 3,643.1 51.3 5.63
-------- ------ -------- ------
5,292.1 62.8 4.74 4,869.1 59.7 4.90
Borrowings:
Securities sold under agreements
to repurchase<F4> 52.3 .8 6.17 1,163.7 18.7 6.43
Advances from FHLB<F4> 1,984.3 27.0 5.45 2,577.1 40.1 6.22
Other borrowings -- -- -- 47.5 1.2 10.26
-------- ------ -------- ------
Total interest-bearing liabilities 7,328.7 90.6 4.94% 8,657.4 119.7 5.53%
------ ---- ------ -----
Other liabilities 139.7 142.1
-------- --------
7,468.4 8,799.5
Stockholders' equity 477.0 502.2
-------- --------
Total liabilities and
stockholders' equity $7,945.4 $9,301.7
======== ========
Net interest income $ 49.4 $ 46.4
====== ======
Interest rate spread<F5> 2.41% 1.92%
==== =====
Effective net spread<F6> 2.60% 2.08%
==== =====
<FN>
- -------------------------
<F1> The securities available for sale are included in the following
table at historical cost with the corresponding average rate
calculated upon historical balances.
<F2> Average balances include non accrual loans. Interest on such
loans is included in interest income upon receipt.
<F3> Interest includes amortization of deferred fees.
<F4> Includes the effect of interest rate exchange agreements.
<F5> Equals average rate earned on all assets minus average rate paid
on all liabilities.
<F6> Net interest income annualized divided by average balance of all
interest-earning assets.
</TABLE>
At March 31, 1997 the weighted average yield on interest-earning assets
was 7.55% and the weighted average cost on interest-bearing liabilities was
4.96%.
11
<PAGE> 13
The following table presents the dollar amount of changes in interest
income and interest expense for major components of interest-earning assets
and interest-bearing liabilities. It distinguishes between changes related
to volume and those due to changes in interest rates. For each category of
interest income and interest expense, information is provided on changes
attributed to (i) changes in volume (i.e., changes in volume multiplied by
prior year rate) and (ii) changes in rate (i.e., changes in rate multiplied
by prior year volume). For purposes of this table, changes attributable to
both rate and volume, which cannot be segregated, have been allocated to the
change due to rate.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
1997 VS. 1996
---------------------------------------------
INCREASE (DECREASE) TOTAL
DUE TO INCREASE
(DOLLARS IN THOUSANDS) VOLUME RATE (DECREASE)
-------- -------- ----------
<S> <C> <C> <C>
Interest income:
Loans $ 11,744 $(1,069) $ 10,675
Securities available for sale 28,107 (3,066) 25,041
Securities held to maturity (64,477) -- (64,477)
Other earning assets 2,613 17 2,630
-------- ------- --------
Total interest income $(22,013) $(4,118) $(26,131)
-------- ------- --------
Interest expense:
Deposits $ 5,313 $(2,006) $ 3,307
Securities sold under agreements to
repurchase (15,501) 77 (15,424)
Advances from Federal Home Loan Bank (8,256) (597) (8,853)
Other borrowings (1,220) -- (1,220)
Interest rate exchange agreements (7,937) 948 (6,989)
-------- ------- --------
Total interest expense $(27,601) $(1,578) $(29,179)
-------- ------- --------
Change in net interest income $ 5,588 $(2,540) $ 3,048
======== ======= ========
</TABLE>
Provision for Losses on Loans
- -----------------------------
The provision for losses on loans recorded for the three month period
ended March 31, 1997 was $640,000 as compared to $300,000 for the three month
period ended March 31, 1996. The provision for losses on loans represents a
charge against current net income to maintain a level of the allowance for
losses on loans that has been determined necessary to absorb losses inherent
in the Company's loan portfolio. The increase in the provision in 1997
reflects growth in the Bank's loan portfolio, especially consumer loans.
Noninterest Income
- ------------------
Retail Banking Fees
Retail banking fees increased $2.8 million to $5.9 million for the three
month period ended March 31, 1997 compared to $3.1 million for the three
month period ended March 31, 1996. The increase resulted from increased
levels of transaction account activities, primarily ATM fees, returned check
fees, telephone banking fees and the Company's credit card and debit card
programs.
Insurance and Brokerage Sales Commissions
Insurance and brokerage sales commissions increased $1.3 million to $3.0
million for the three month period ended March 31, 1997 compared to $1.7
million for the three month period ended March 31, 1996. The increase is
primarily the result of an increase in the sales volume of commission
generating products as the Company successfully increases its penetration of
its existing customer base as well as attracts new customers.
Loan Servicing Fees, Net
Loan servicing fees increased $735,000 to $2.7 million for the three month
period ended March 31, 1997 compared to $2.0 million for the three month
period ended March 31, 1996. This increase is due primarily to several
purchases of loan servicing rights in 1996 which were completed after the first
quarter of 1996 and added approximately $3.5 billion to the amount of loans
serviced.
12
<PAGE> 14
Net Gain (Loss) from Financial Instruments
In the conduct of its business operations, the Company has determined
the need to sell or terminate certain assets, liabilities, or off-balance
sheet positions due to various unforeseen events. Fundamental to the conduct
of such sale or termination activities is the effect such transactions will
have on the future volatility of the net market value of the Company.
Consequently, in pursuing these sale or termination of activities, the
Company does not seek net gains in a reporting period to the detriment of
earnings in future periods.
Net gain from financial instruments is summarized as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
1997 1996
---- ----
(IN THOUSANDS)
<S> <C> <C>
Mortgage-backed securities
available for sale $ 3,980 $ 3,090
Options expense (3,588) (2,749)
------- -------
$ 392 $ 341
======= =======
</TABLE>
13
<PAGE> 15
Noninterest Expense
- -------------------
General and Administrative Expense
General and administrative expense increased $3.7 million to $25.4
million for the three month period ended March 31, 1997 when compared to
$21.7 million for the three month period ended March 31, 1996. Such increase
was due primarily to an increase in compensation and employee benefits
partially offset by a decrease in federal insurance premiums. Compensation
and employee benefits increased approximately $1.2 million as a result of
normal wage increases, additions to staff, and an increase in the costs
related to other employee benefits expense. Federal insurance premiums
decreased approximately $1.6 million as a result of a decrease in the
insurance premium rate paid by the Company on its deposits following the
recapitalization of the Savings Association Insurance Fund in the third
quarter of 1996.
FINANCIAL CONDITION
Total assets decreased $288.1 million or 3.7% to $7.5 billion at March
31, 1997 from $7.8 billion at December 31, 1996. During the three month
period ended March 31, 1997 the Bank originated $212.5 million in loans and
purchased $17.9 million in loans. These increases were offset by principal
repayments totaling $238.4 million. Securities available for sale decreased
$249.7 million primarily as a result of principal repayments and sales of
such securities totaling $298.2 million exceeding purchases which totaled
$61.4 million. Other assets decreased $23.6 million primarily reflecting the
receipt of a federal income tax refund of $28.0 million in the period ended
March 31, 1997.
Total liabilities decreased $260.2 million or 3.6% to $7.0 billion at
March 31, 1997 from $7.3 billion at December 31, 1996. Net cash provided by
investing activities during the quarter ended March 31, 1997, was used to
reduce advances from the Federal Home Loan Bank by $253.8 million. The decrease
in retail deposits of $40.3 million during the quarter ended March 31, 1997
results in part from customer uncertainty regarding the planned merger with
Mercantile Bancorporation Inc. (see Note 2) and from single-product customers
who did not renew high rate maturing time deposits. The increase in other
liabilities results primarily from a $22.5 million increase in escrow balances
on loans.
14
<PAGE> 16
ASSET QUALITY
The following table sets forth the amounts and categories of
non-performing assets. Loans are placed on non-accrual status when the
collection of principal and/or interest becomes doubtful. Troubled debt
restructurings involve forgiving a portion of interest or principal on any
loans or making loans at a rate materially less than that of market rates.
Foreclosed assets include assets acquired in settlement of loans. "Other than
temporarily impaired" mortgage-backed securities represent private issuer
mortgage-backed securities that have been determined to be "other than
temporarily impaired" under the provisions of Statement of Financial
Accounting Standards No. 115 and for which the previously existing credit
enhancement support, in the form of subordination, has been totally absorbed
and therefore any future losses will flow directly to the Company as a senior
position holder. These securities were issued with several classes available
for purchase. Certain classes are subordinate to the position of senior
classes in that such subordinate classes absorb all credit losses and must be
completely eliminated before any losses flow to senior position holders. The
securities purchased by the Company were purchases of the most senior
positions, thus intended to be protected by the subordination credit
enhancement feature. In an attempt toward a conservative presentation, the
Company includes the entire estimated fair value of these securities
(approximately 75% of the unpaid principal balances at March 31, 1997) in this
table when the credit enhancement, in the form of subordination, is exhausted
even though a substantial portion of the underlying loans (approximately 76%
at March 31, 1997) are either current or less than 90 days delinquent. In
addition, the remaining amount of "other than temporarily impaired"
mortgage-backed securities that continue to be protected by remaining credit
enhancement, but for which the Company has concluded it is probable that such
credit enhancement will be absorbed before the duration of the underlying
security, are disclosed in the paragraphs following the table as other
potential problem assets.
<TABLE>
<CAPTION>
Nonperforming Assets MARCH 31, DECEMBER 31,
(in thousands) 1997 1996
--------- ------------
<S> <C> <C>
Nonaccruing loans:
Residential $ 5,958 $ 9,659
Commercial real estate 760 1,968
Consumer 2,600 597
------------ ------------
Total 9,318 12,224
------------ ------------
Accruing loans delinquent more than 90 days:
Residential 10,955 10,126
------------ ------------
Troubled-debt restructurings:
Commercial real estate 53 53
------------ ------------
Foreclosed assets:
Residential 5,922 4,761
Commercial real estate 8,308 7,804
Consumer 215 238
------------ ------------
Total 14,445 12,803
------------ ------------
Sub-total 34,771 35,206
------------ ------------
Sub-total nonperforming assets
as a percentage of total assets .46% .45%
============ ============
"Other than temporarily impaired" mortgage-backed
securities with approximately 76% of the underlying
loans either current or less than 90 days delinquent 38,814 41,828
------------ ------------
Total non-performing assets $ 73,585 $ 77,034
============ ============
Total as a percentage of total
assets .85% .99%
============ ============
</TABLE>
Not included in the preceding table is a private issuer mortgage-backed
security with a carrying value of $4.7 million which was performing
according to its contractual terms at March 31, 1997. However, this security
was determined by the Company to be "other than temporarily impaired" and
written down to fair value, since at March 31, 1995, the subordination
protection had been substantially reduced to the point where the Company
concluded it was probable that the securities would not continue to perform
to 100% of their contractual terms over the course of their remaining lives.
This security will be included in the preceding non-performing assets table
in future periods when, and if, the remaining subordination is exhausted.
15
<PAGE> 17
The allowance for losses on loans is established when a loss is probable
and can be reasonably estimated. This allowance is provided based on past
experience and the prevailing market conditions. Management's evaluation of
loss considers various factors including, but not limited to, general economic
conditions, loan portfolio composition and prior loss experience. Provisions
for loan losses are recorded to maintain the Company's overall allowance for
loan losses within an acceptable range to cover probable credit losses inherent
in the portfolio.
Management believes that the allowance for losses on loans is
adequate. While management uses available information to recognize losses,
future additions to the allowance may be necessary based on changes in
economic conditions.
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
----------------------------
1997 1996
------- -------
<S> <C> <C>
Balance at beginning of period $22,719 $21,855
Provision charged to expense 640 300
Charge-offs:
Mortgage loans (1,636) (518)
Consumer loans (150) (22)
------- -------
(1,786) (540)
------- -------
Recoveries:
Mortgage loans 24 84
Consumer loans 6 12
------- -------
30 96
------- -------
Net charge-offs (1,756) (444)
------- -------
Balance at end of period $21,603 $21,711
======= =======
</TABLE>
Included in the mortgage loans charged-off during the three months ended
March 31, 1997, are two loans which account for a significant portion of
the total charge-offs during the period. It is Management's opinion that
these two charge-offs do not reflect a continuing trend or a deterioration
in the quality of the total portfolio of mortgage loans.
ASSET/LIABILITY MANAGEMENT
The Company's primary objective regarding asset/liability management is
to position the Company such that changes in interest rates do not have a
material adverse impact upon net interest income or the net market value of
the Company. The Company's primary strategy for accomplishing its
asset/liability management objective is achieved by matching the weighted
average maturities of assets, liabilities, and off-balance sheet items
(duration matching). A portion of the duration matching strategy has
involved, more historically than currently, the use of derivative financial
instruments such as interest rate exchange agreements, interest rate cap
and floor agreements and, to a much more limited extent, financial futures
contracts. The Company uses derivative financial instruments solely for risk
management purposes. None of the Company's derivative instruments are what
are termed leveraged instruments. These types of instruments are riskier
than the derivatives used by the Company in that they have embedded options
that enhance their performance in certain circumstances but dramatically
reduce their performance in other circumstances. The Company is not a dealer
nor does it make a market in such instruments. The Company does not trade
the instruments and the Board of Directors' approved policy governing the
Company's use of these instruments strictly forbids speculation of any kind.
Net market value as prescribed by Statement of Financial Accounting
Standards No. 107 "Disclosures about Fair Value of Financial Instruments"
(SFAS 107) is calculated by adjusting stockholders' equity for differences
between the estimated fair values and the carrying values (historical cost
basis) of the Company's assets, liabilities, and off-balance sheet items.
Net market value, as calculated by the Company and presented herein, should
not be confused with the value of the Company's stock or of the amounts
distributable to stockholders in connection with a sale of the Company or in
the unlikely event of its liquidation. Under SFAS 107 certain valuations,
such as the estimated value of demand deposits, are not considered as part of
the net market value calculation. As a result the Company calculates an economic
net market which is comprised of net market value as calculated under SFAS 107
plus the estimated value of demand deposits. The economic net market value
(including the estimated value of demand deposits totaling $39.2 million and
$33.2 million at March 31, 1997 and December 31, 1996, respectively) as
calculated by the Company decreased to approximately $535.3 million at March
31, 1997 as compared to approximately $557.6 million at December 31, 1996.
Such decrease in economic net market value was primarily the result of the
Company's stock repurchase program. To measure the impact of interest rate
changes, the Company recalculates its net market value on a pro forma basis
assuming instantaneous, permanent parallel shifts in the yield curve, in
varying amounts both upward and downward. Larger increases or decreases in
the Company's net market value as a result of these assumed interest rate
changes indicate greater levels of interest rate sensitivity than do smaller
increases or decreases in net market value. The Company endeavors to maintain
a position whereby it experiences no material change in net market value as a
result of assumed 100 and 200 basis point increases and decreases in general
levels of interest rates.
The OTS issued a regulation, effective January 1, 1994, which uses a
similar methodology to measure the
16
<PAGE> 18
interest rate risk exposure of thrift institutions. This exposure is a
measure of the potential decline in the net portfolio value of the institution
based upon the effect of an assumed 200 basis point increase or decrease in
interest rates. "Net portfolio value" is the present value of the expected
net cash flow from the institution's assets, liabilities, and off-balance
sheet contracts. Under the OTS regulation, an institution's "normal" level of
interest rate risk in the event of this assumed change in interest rates is a
decrease in the institution's net portfolio value in an amount not exceeding
two percent of the present value of its assets. The regulation provides for a
two quarter lag between calculating interest rate risk and recognizing any
deduction from capital. The amount of that deduction is one-half of the
difference between (a) the institution's actual calculated exposure to the 200
basis point interest rate increase or decrease (whichever results in the
greater pro forma decrease in net portfolio value) and (b) its "normal" level
of exposure which is two percent of the present value of its assets. The OTS
recently announced that it will delay the effectiveness of the regulation
until it adopts the process by which an association may appeal an interest
rate risk capital deduction determination.
Utilizing this measurement concept, the interest rate risk of the Company at
March 31, 1997 is as follows:
<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Basis point changes in interest rates -200 -100 +100 +200
Change in net market value due to changes in
interest rates (Company methodology) $ (16,163) $(1,035) $(12,877) $ (39,687)
Interest rate exposure deemed "normal" by the OTS $(150,166) N/A N/A $(150,166)
</TABLE>
The Company's operating strategy is designed to avoid material changes in
net market value as a result of fluctuations in interest rates. As of March
31, 1997, the Company believes it has accomplished its objectives as the pro
forma changes in net market value brought about by changes in interest rates
are not material relative to the Company's net market value. A net loss when
rates increase indicates the duration of the Company's assets is slightly
longer than the duration of the Company's liabilities. A loss when rates
decrease is due primarily to borrowers prepaying their loans resulting in the
Company's assets repricing down more quickly than the Company can reprice its
liabilities.
LIQUIDITY AND CAPITAL RESOURCES
OTS regulations require federally insured savings institutions to
maintain a specified ratio (presently 5.0%) of cash and short-term United
States Government, government agency, and other specified securities to net
withdrawable accounts and borrowings due within one year. The Company has
maintained liquidity in excess of required amounts having had ratios of
5.16%, and 5.05% at March 31, 1997 and December 31, 1996, respectively.
The Company's cash flows are comprised of cash flows from operating,
investing and financing activities. Cash flows provided by operating
activities, consisting primarily of interest received on investments
(principally loans and mortgage-backed securities) less interest paid on
deposits and other short-term borrowings, were $60.4 million for the three
month period ended March 31, 1997. Net cash related to investing activities,
consisting primarily of purchases of securities and originations and purchases
of loans, offset by principal repayments on securities and loans and sales of
mortgage-backed securities available for sale, provided $250.7 million for the
three month period ended March 31, 1997. Net cash related to financing
activities, consisting of proceeds, net of repayments, from FHLB
advances, proceeds from securities sold under agreements to repurchase and
excess of saving flows utilized $316.7 million for the three month period
ended March 31, 1997.
At March 31, 1997, the Company had commitments outstanding to originate
fixed-rate mortgage loans of approximately $25.0 million and adjustable-rate
mortgages of approximately $70.8 million. The Company expects to satisfy
such commitments through its primary source of funds. At March 31, 1997,
there were no commitments to either purchase or sell mortgage-backed
securities.
The Company's merger agreement with Mercantile Bancorporation Inc. (see
Note 2) requires the redemption of all the Company's issued and outstanding
shares of preferred stock on May 16, 1997. In addition, under the same
agreement, Roosevelt is required to use its reasonable best efforts, subject
to prudent business practices, to acquire
17
<PAGE> 19
in open market transactions prior to the closing date of the planned merger up
to 6,998,380 of its own common shares at a cost per share in each transaction
not to exceed $22.00
The Company anticipates that prior to the above mentioned redemption
date, most if not all, existing preferred shareholders will elect to convert
their preferred shares into common shares due to the significant currently
existing value differential between post-conversion shares and the $50.00 per
share redemption price. To the extent that certain preferred shareholders
allow their shares to be redeemed at $50.00 per share by not electing
conversion prior to the May 16, 1997 redemption date, such redemptions, if
any, are anticipated to be funded by the Company from either then existing
cash on hand or with funds drawn on a credit facility provided by Mercantile
Bancorporation Inc. To the extent that all preferred shareholders elect to
convert their shares into common stock prior to the May 16, 1997 redemption
date, total stockholders' equity of the Company will not be impacted by such
conversion. Any actual cash redemptions will have the impact of reducing the
Company's stockholders' equity by the redemption price of $50.00 per share plus
accrued and unpaid dividends for each share of preferred stock so redeemed.
The Company's above mentioned share repurchases are being conducted
pursuant to a stock repurchase program authorized by the Board of Directors
of Roosevelt Financial Group, Inc. on December 15, 1994 and expanded by that
same board on January 2, 1997.
Subsequent to December 31, 1996 and through April 24, 1997, 2,325,000
shares have been purchased at a weighted average price of $21.32. The share
repurchases to date have been funded by the Company from dividends from
Roosevelt Bank. As a result of the recent trading range of Roosevelt's
common stock exceeding the $22.00 per share maximum specified in the merger
agreement, above which the Company is precluded from executing any repurchase
transactions, the Company cannot predict the amount, if any, of additional
share repurchases which may be accomplished prior to the anticipated closing
date of the merger. To the extent that the price of the Company's common
stock falls to $22.00 or below, the Company anticipates future repurchases
will be funded by either then existing cash on hand at the Company, or with
funds provided to the Company from dividends from Roosevelt Bank.
With respect to potential futures dividends from Roosevelt Bank, the
Company does not intend to allow the Bank to declare any such dividends that
would result in the Bank not being classified as well capitalized under
existing regulatory capital adequacy guidelines.
Future share repurchases, if any, prior to the anticipated effective
date of the merger with Mercantile, are expected to reduce total
shareholders' equity of the Company only in the unlikely event that such
shares are not reissued in connection with either Company benefit programs or
to fund the anticipated conversion, prior to May 16, 1997, of the Company's
existing preferred stock into common stock.
The potential funding by the Company of future share repurchases or
preferred stock redemptions, if any, utilizing Roosevelt Bank dividends as a
funding source is not anticipated to have a material adverse impact on the
Company's future operating income or earnings per share.
The Company and the subsidiary banks are subject to various regulatory
capital requirements administered by the federal 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 consolidated financial
statements. Under capital adequacy guidelines, the Company and the
subsidiary banks must meet specific capital guidelines that involve
quantitative measures of assets, liabilities, and certain off-balance sheet
items as calculated under regulatory accounting practices. The Company and
the subsidiary banks' capital amounts and classifications are also subject to
quantitative judgements by the regulators about components, risk-weightings
and other factors. Management believes, as of March 31, 1997 the Company and
the subsidiary banks meet all capital adequacy requirements.
The subsidiary banks are also subject to the regulatory framework for
prompt corrective action. The most recent notification from the regulatory
agencies categorized the banks as well capitalized. To be categorized as
well capitalized, the banks must maintain minimum total risk-based, Tier I
risk-based, and Tier I leverage ratios as set forth in the following table.
There are no conditions or events since the dates of the aforementioned
notifications that management believes have changed the banks' category.
18
<PAGE> 20
The Company and the banks' actual and required capital amounts and ratios as
of March 31, 1997 are as follows:
<TABLE>
<CAPTION>
REQUIREMENTS TO BE WELL-CAPITALIZED
CAPITAL UNDER PROMPT AND CORRECTIVE
ACTUAL REQUIREMENTS ACTION PROVISIONS
---------------------- ---------------------- -----------------------------------
AMOUNT RATIO AMOUNT RATIO AMOUNT RATIO
-------- ------- -------- ------- -------- -------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
Total Capital:<F1>
Roosevelt Financial Group, Inc. $ 453.4 12.15% $ 298.6 8.00% N/A N/A
Roosevelt Bank 420.7 11.46 293.6 8.00 $ 367.0 10.00%
Missouri State Bank 8.8 14.22 5.0 8.00 6.2 10.00
Tangible Capital: <F2>
Roosevelt Bank 400.0 5.36 112.0 1.50 N/A N/A
Core (Leverage) Capital: <F2>
Roosevelt Bank 401.9 5.38 224.1 3.00 N/A N/A
Tier I Capital: <F1>
Roosevelt Financial Group, Inc. 433.8 11.82 146.8 4.00 N/A N/A
Roosevelt Bank 401.9 10.95 N/A N/A 220.2 6.00
Missouri State Bank 8.0 12.97 2.5 4.00 3.7 6.00
Tier I Capital:
Roosevelt Bank <F2> 401.9 5.38 N/A N/A 373.4 5.00
Missouri State Bank 8.0 10.43 N/A N/A 3.9 5.00
<FN>
<F1> To risk weighted assets.
<F2> To adjusted total assets.
<F3> To average adjusted assets.
</TABLE>
19
<PAGE> 21
PART II OTHER INFORMATION
Item 1. Legal Proceedings
--------------------------------------------
None
Item 2. Changes in Securities
--------------------------------------------
None
Item 3. Defaults Upon Senior Securities
--------------------------------------------
None
Item 4. Submission of Matters to a Vote of Security Holders
--------------------------------------------
None
20
<PAGE> 22
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.
ROOSEVELT FINANCIAL GROUP, INC.
---------------------------
REGISTRANT
DATE: MAY 5, 1997 BY: /S/STANLEY J. BRADSHAW
-----------------------------------------
STANLEY J. BRADSHAW
PRESIDENT AND CHIEF EXECUTIVE OFFICER
DATE: MAY 5, 1997 BY: /S/GARY W. DOUGLASS
-----------------------------------------
GARY W. DOUGLASS
EXECUTIVE VICE PRESIDENT AND
CHIEF FINANCIAL OFFICER
21
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 41,875
<INT-BEARING-DEPOSITS> 1,150
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 2,908,027
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 4,310,014
<ALLOWANCE> 21,603
<TOTAL-ASSETS> 7,508,309
<DEPOSITS> 5,306,723
<SHORT-TERM> 1,458,076
<LIABILITIES-OTHER> 145,952
<LONG-TERM> 128,000
0
63,575
<COMMON> 198,809
<OTHER-SE> 207,174
<TOTAL-LIABILITIES-AND-EQUITY> 7,508,309
<INTEREST-LOAN> 82,685
<INTEREST-INVEST> 54,389
<INTEREST-OTHER> 2,938
<INTEREST-TOTAL> 140,012
<INTEREST-DEPOSIT> 64,471
<INTEREST-EXPENSE> 90,590
<INTEREST-INCOME-NET> 49,422
<LOAN-LOSSES> 640
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 25,438
<INCOME-PRETAX> 35,696
<INCOME-PRE-EXTRAORDINARY> 22,091
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 22,091
<EPS-PRIMARY> 0.49
<EPS-DILUTED> 0.46
<YIELD-ACTUAL> 2.60
<LOANS-NON> 9,318
<LOANS-PAST> 10,955
<LOANS-TROUBLED> 53
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 22,719
<CHARGE-OFFS> (1,786)
<RECOVERIES> 30
<ALLOWANCE-CLOSE> 21,603
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 18,833
</TABLE>
