Conformed Copy
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------------------
FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED March 31,
1997
OR
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission File No. 0-28122
TYSONS FINANCIAL CORPORATION
(Name of small business issuer in its charter)
Virginia 54-1527945
(State or Other Juris- (I.R.S. Employer Identification No.)
diction of Incorporation)
8200 Greensboro Drive Suite 100
McLean, Virginia 22102
(Address of Principal Executive Offices) (Zip Code)
Issuer's telephone number, including area code: (703) 556-0015
Securities registered under Section 12(b) of the Exchange Act: Common Stock,
par value $5.00 per share
Securities registered under Section 12(g) of the Exchange Act: None
Check whether the issuer (1) 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:
Yes X No
_____ _____
As of March 31, 1997, 1,071,119 shares of the registrant's common stock, par
value $5.00 per share, were outstanding.
Transitional Small Business Disclosure Format: Yes No X
_____ _____
<PAGE>
PART I
FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page(s)
-------
<S> <C>
Consolidated Statements of Financial Condition as of March 31, 1997 and December 31, 1996 2
Consolidated Statements of Operations for the three months ended March 31, 1997 and 1996 3
Consolidated Statements of Cash Flows for the three months ended March 31, 1997 and 1996 4
</TABLE>
1
<PAGE>
TYSONS FINANCIAL CORPORATION AND SUBSIDIARY
Consolidated Statements of Financial Condition
<TABLE>
<CAPTION>
(unaudited)
March 31, December 31,
Assets 1997 1996
- -------------------------------------------------------------------------------------------------------------------
<S> <C>
Cash and due from banks $ 4,265,26 $ 6,814,233
Federal funds sold 2,220,828 6,810,371
Interest-bearing deposits in other banks 100,000 100,000
Investment securities available-for-sale, at fair value 9,532,590 11,040,897
Investment securities held-to-maturity, at cost, fair value
of $2,948,000 in 1997 and $3,734,415 in 1996 2,969,149 3,726,535
Loans, net 58,387,304 56,982,848
Property and equipment, net 571,611 499,977
Premium paid for deposits acquired 949,133 982,067
Accrued interest receivable and other assets 883,684 879,782
- -------------------------------------------------------------------------------------------------------------------
Total Assets $ 79,879,567 $ 87,836,710
===================================================================================================================
Liabilities and Stockholders' Equity
Liabilities:
Deposits:
Noninterest-bearing demand $ 18,300,086 $ 20,113,231
NOW and money market accounts 31,472,702 37,956,032
Savings 2,318,339 2,438,259
Certificates of deposit, under $100,000 13,830,285 13,672,085
Certificates of deposit, $100,000 and over 4,274,700 4,374,231
- -------------------------------------------------------------------------------------------------------------------
Total deposits 70,196,112 78,553,838
Accrued interest payable and other liabilities 531,162 642,787
Federal funds purchased and repurchase agreements 388,746 -
Long-term debt 362,500 375,000
- -------------------------------------------------------------------------------------------------------------------
Total Liabilities 71,478,520 79,571,625
- -------------------------------------------------------------------------------------------------------------------
Stockholders' equity:
Common stock, par value $5; 10,000,000 shares authorized; 1,071,119 shares
issued and outstanding March 31, 1997
668,619 shares issued and outstanding in December 31, 1996 5,355,595 5,355,595
Additional paid-in capital 4,040,053 4,035,209
ESOP Trust, 45,737 shares in 1997 and 47,166 shares (362,500) (375,000)
in 1996
Accumulated deficit (622,982) (802,960)
Unrealized (loss)gain on investment securities available-for-sale (9,119) 52,241
- -------------------------------------------------------------------------------------------------------------------
Total Stockholders' Equity 8,401,047 8,265,085
- -------------------------------------------------------------------------------------------------------------------
Total Liabilities and Stockholders' Equity $ 79,879,567 $ 87,836,710
===================================================================================================================
</TABLE>
2
<PAGE>
TYSONS FINANCIAL CORPORATION AND SUBSIDIARY
Consolidated Statements of Operations
<TABLE>
<CAPTION>
Three months Three months
ended ended
(Unaudited) March 31, March 31,
1997 1996
- -------------------------------------------------------------------------------------
<S> <C>
Interest Income:
Loans $ 1,361,851 $ 1,104,019
Investment securities:
Available-for-sale 189,890 85,739
Held-to-maturity 42,322 74,361
Federal funds sold 66,409 160,850
Deposits in other banks 1,409 1,587
- ------------------------------------------------------------------------------------
Total interest income 1,661,881 1,426,556
- ------------------------------------------------------------------------------------
Interest expense:
Interest on deposits:
NOW and money market accounts 267,439 224,999
Savings accounts 16,910 23,309
Certificates of deposit, under $100,000 187,552 221,704
Certificates of deposit, $100,000 and over 60,659 52,886
Interest on short-term borrowings 5,003 -
Interest on long-term debt 9,503 10,875
- ------------------------------------------------------------------------------------
Total interest expense 547,066 533,773
- ------------------------------------------------------------------------------------
Net interest income 1,114,815 892,783
Provision for loan losses 42,501 -
- ------------------------------------------------------------------------------------
Net interest income after provision for loan losses 1,072,314 892,783
Non-interest income:
Service charge income 41,774 50,747
Other income 27,539 29,752
- ------------------------------------------------------------------------------------
Total non-interest income 69,313 80,499
- ------------------------------------------------------------------------------------
Non-interest expense:
Salaries and employee benefits 413,469 390,797
Occupancy, equipment and depreciation 120,806 90,050
Operations expense 155,907 123,926
Administration expense 171,067 177,573
- ------------------------------------------------------------------------------------
Total non-interest expense 861,249 782,346
- ------------------------------------------------------------------------------------
Net income before income taxes 280,378 190,936
Income tax expense (benefit) 100,400 (87,000)
- ------------------------------------------------------------------------------------
Net income $ 179,978 $ 277,936
- ------------------------------------------------------------------------------------
Net income per weighted average share $ 0.16 $ 0.44
Weighted average shares outstanding 1,095,194 620,511
</TABLE>
3
<PAGE>
TYSONS FINANCIAL CORPORATION AND SUBSIDIARY
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
(Unaudited) Three months Three months
ended ended
March 31, 1997 March 31, 1996
- ------------------------------------------------------------------------------------------------------------------------
<S> <C>
Cash flows from operating activities:
Net income $ 179,978 $ 277,935
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization 38,064 57,718
Provision for loan losses 42,501 -
Income tax benefit - (87,000)
Compensation expense for ESOP Trust 17,087 12,500
(Increase) decrease in accrued interest receivable and other assets (3,902) 31,269
Increase (decrease) in accrued interest payable and other liabilities (111,625) (2,481)
- ------------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 162,103 289,941
- ------------------------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Purchases of available-for-sale securities (986,975) (454,679)
Purchases of held-to-maturity securities - (494,063)
Proceeds from maturities and principal payments of
available-for-sale securities 2,397,613 373,405
Proceeds from maturities and principal payments of
held-to-maturity securities 758,582 1,265,355
Net decrease in interest-bearing deposits in banks - -
Purchase of property and equipment (103,757) (53,883)
Net decrease (increase) in loan portfolio (1,384,594) 201,777
- ------------------------------------------------------------------------------------------------------------------------
Net cash used in investing activities 680,869 837,912
- ------------------------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Net increase (decrease) in deposits (8,357,726) 5,448,737
Net increase in other borrowed funds 388,746 -
Repayments of long term debt (12,500) (12,500)
- ------------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) financing activities (7,981,480) 5,436,237
- ------------------------------------------------------------------------------------------------------------------------
Net increase(decrease) in cash and cash equivalents (7,138,508) 6,564,090
Cash and cash equivalents, beginning of period 13,624,604 14,399,076
- ------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents, end of period $ 6,486,096 $ 20,963,166
- ------------------------------------------------------------------------------------------------------------------------
Supplemental disclosures of cash flow information:
Interest paid $ 538,013 $ 510,773
Income taxes paid - -
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
4
<PAGE>
SPECIAL NOTE REGARDING FORWARD-LOOKING INFORMATION
Certain statements under the caption "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and elsewhere in this
Quarter Report and the documents incorporated herein by reference constitute
"forward-looking statements" within the meaning of the United States Private
Securities Litigation Reform Act of 1995. Such forward-looking statements
involve known and unknown risks, uncertainties and other factors which may cause
the actual results, performance or achievements of the Company, or industry
results, to be materially different from any future results, performance, or
achievements expressed or implied by such forward-looking statements. Such
factors include, among others, the following: general economic and business
conditions in the Company's market area, inflation, fluctuations in interest
rates, changes in government regulations and competition, which will, among
other things, impact demand for loans and banking services: the ability of the
Company to implement its business strategy; and changes in, or the failure to
comply with, government regulations.
Forward-looking statements are intended to apply only at the time they
are made. Moreover, whether or not stated in connection with a forward-looking
statement, the Company undertakes no obligation to correct or update a
forward-looking statement should the Company later become aware that it is not
likly to be achieved. If the Company were to update or correct a forward-looking
statement, investors and others should not conclude that the Company will make
additional updates or corrections thereafter.
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Overview
The following discussion of the financial condition and results of
operations of Tysons Financial Corporation (the "Company") should be read in
conjunction with the Company's financial statements and 1996 annual report on
form 10-KSB. Results reflect the operations of the Company and Tysons National
Bank, the Company's wholly owned subsidiary ("the Bank") during the three months
ended March 31, 1997 and 1996.
Net income before taxes for the three months ended March 31, 1997 was
$280,000 an increase of 46.6% over $191,000 for the same period of 1996. Net
income for the first quarter of 1997 reached $180,000 which included tax expense
of $100,000. Net income for the first quarter of 1996 of $278,000 included a tax
benefit of $87,000 and reached $278,000. Earnings per share for the three month
period ended March 31, 1997 was $0.16 as compared to $0.44 over the same period
of 1996. Return on average assets was 0.88% for the first quarter of 1997 and
1.57% for the same period of 1996. Return on average equity was 8.72% for the
first quarter of 1997 as compared to 26.00% for the same period in 1997. Equity
to average assets was 10.07% for the first quarter of 1997 and 6.24% for the
same period in 1996.
As of March 31, 1997 the Company's total assets were $79,880,000 as
compared to $87,837,000 as of December 31, 1996 which represented a decrease of
9.1%. The 1997 first quarter's decline in assets of $7,957,000 was primarily due
to a temporary decrease in certain escrow account balances. The Bank's overall
asset size and customer base, both individual and business, increased
significantly during 1996. Although there was a decrease in total assets of
9.1%, average assets only decreased by 1.3% for the first quarter of 1997.
Total loans, net of allowance for loan losses, at March 31, 1997 were
$58,387,000 as compared to $56,983,000 at December 31, 1996, which represented
an increase of $1,404,000 or 2.5%. Changes in the balances of total loans from
December 31, 1996 to March 31, 1997 were increases in commercial real estate of
$974,000, and consumer loans of $553,000 with smaller increases in real estate
residential and commercial loans. Real estate construction loans decreased
$826,000 for the first quarter of 1997. The composition of the loan portfolio as
of March 31, 1997 and December 31, 1996 is presented below.
5
<PAGE>
Table 1: Composition of Loan Portfolio
<TABLE>
<CAPTION>
March 31, 1997 December 31, 1996
-------------- -------------------
($ in thousands) % of % of
Loan Category Amount Total Amount Total
- ------------- -------- ----- -------- -----
<S> <C>
Commercial $17,467 29.5 $17,308 30.0
Real estate-construction 3,428 5.8 4,255 7.4
Real estate-residential 13,474 22.8 12,933 22.4
Real estate-Commercial 14,846 25.1 13,872 24.0
Consumer 9,942 16.8 9,389 16.2
-------------------------------------------------------------
Gross loans 59,157 100.0 57,757 100.0
Less: unearned income (63) (80)
-------------------------------------------------------------
59,094 57,677
Allowance for loan losses (707) (694)
-------------------------------------------------------------
Net loans $58,387 $56,983
-------------------------------------------------------------
</TABLE>
Average loans as a percentage of average total earning assets increased
to 75.2% as of March 31, 1997, as compared to 67.9% as of December 31, 1996 due
to the decrease in deposits and slight growth in loans. Table 2 below is a
summary of the composition of earning assets as of March 31, 1997, as compared
to December 31, 1996.
Table 2: Summary of Earning Assets
<TABLE>
<CAPTION>
March 31, 1997 December 31, 1996
--------------------- -------------------
($ dollars in thousands) % of % of
Earning Assets Amount Total Amount Total
--------- ----- --------- -----
<S> <C>
Federal funds sold $2,221 3.1 $6,810 8.6
Interest bearing
deposits in banks 100 0.1 100 0.1
Investment securities
Available-for-sale 9,532 12.9 11,041 13.9
Held-to-maturity 2,969 4.0 3,727 4.7
Loans, net of unearned 59,095 79.9 57,677 72.7
------ ---- ------ ----
income
Total earning assets $73,917 100.0 $79,355 100.0
------- ----- ------- -----
</TABLE>
Federal funds sold and cash and due from banks represent the Company's
cash and cash equivalents. Federal funds sold and cash and due from banks at
March 31, 1997 totaled $6,486,000 compared to $13,625,000 at December 31, 1996,
representing a decrease of $7,139,000, or 52.4%. Federal funds sold represented
most of the decrease with cash and due from banks decreasing $2,549,000. The
decrease was attributable to the expected decrease in certain escrow balances of
the Bank's deposit base.
Total deposits were $70,196,000 at March 31, 1997, down from
$78,554,000 at December 31, 1996, representing a decrease of 10.6%. The decrease
of $8,358,000 was primarily the result of decreased balances in certain customer
escrow accounts. Non-interest bearing deposits decreased by $1,813,000 while
interest-bearing deposit accounts decreased $6,545,000. Table 3 presents the
composition of deposits on March 31, 1997 as compared to December 31, 1996.
6
<PAGE>
Table 3: Deposit Summary
<TABLE>
<CAPTION>
March 31, 1997 December 31, 1996
-------------- -----------------
($ in thousands) % of % of
Amount Total Amount Total
------ ----- ------ -----
<S> <C>
Non-interest bearing demand $18,300 26.1 $20,113 25.6
NOW and Money Market 31,473 44.8 37,956 48.3
Savings 2,318 3.3 2,439 3.1
Time, $100,000 and over 4,275 6.1 4,374 5.6
Time, under $100,000 13,830 19.7 13,672 17.4
------ ---- ------ ----
Total deposits $70,196 100.0 $78,554 100.0
------- ----- ------- -----
</TABLE>
Results of Operations for the Three Months Ended March 31, 1997 and
1996.
Net income for the three months ended March 31, 1997 was $180,000, a
$98,000 decrease from the $278,000 net income for the same quarter of 1996. The
primary reason for the decrease was the change from a tax benefit of $87,000 in
the first quarter of 1996 to a tax expense of $100,000 in the same period of
1997. This increased tax expense of $187,000 was due to the net operating loss
carryforward for the Company becoming fully recognized in the last quarter of
1996. Net income before taxes of $280,000 for the first quarter of 1997 as
compared to $191,000 for the same period of 1996 represents a 46.6% increase.
Net interest income for the quarter ended March 31, 1997 increased $222,000 or
24.9% over the same quarter of 1996. During the same time period non-interest
income decreased $11,000 due to a reduction in overdraft and return check
charges. In the first quarter of 1997 non-interest expenses increased only
79,000 or 10.1% over the same period of 1996 due to increased operational and
facility costs of additional customers and the McLean branch which opened in
September of 1996.
In view of the loan growth for 1997 and the fact that there was no
deterioration in the Bank's loan portfolio, a provision of $43,000 was made for
loan losses in the first quarter of 1997. The allowance for loan losses at March
31, 1997 was 1.20% of outstanding loans.
Net income per share was $0.16 for the three month period
ended March 31, 1997 compared to $0.44 per share for the same period of 1996.
The decrease is due to the tax increase of $187,000 and increased number of
shares outstanding. At March 31, 1996 there were 668,619 shares outstanding as
compared to 1,071,119 at March 31, 1997. This increase in shares outstanding is
primarily the result of the May 1996 stock offering.
Net Interest Income/Margins
The primary source of revenue for the Company is net interest income,
which is the difference between income earned on interest-earning assets, such
as loans and investment securities, and interest incurred on interest-bearing
liabilities, such as deposits and borrowings. The level of net interest income
is determined primarily by the average balances of interest-earning assets and
the various rate spreads between the interest-earning assets and the Company's
funding sources.
Net interest income was $1,662,000 for the first three months of 1997,
a 16.5% increase from the $1,427,000 earned during the same period of 1996.
Earning assets averaged $76,807,000 in the first quarter of 1997, a 17.0%
increase as compared to $65,631,000 in the first quarter of 1996. The increase
in net interest income is due to the growth of the loan portfolio, and an
increase in the volume of investment securities. Average loans as a percentage
of total average earning assets increased to 75.2% in the first quarter of 1997
as compared with 66.4% in the same period of 1996. Total average investment
securities as a percent of total average earning assets increased slightly for
the first quarter of 1997; representing 18.9% as compared to 15.3% in 1996.
Average federal funds sold in the three months ended March 31, 1997 decreased to
5.3% of total average earning assets from 18.3% in the comparable period in
1996. The decrease in federal funds sold was partially due to the lower amount
of volatile deposits at March 31, 1997 as compared to March 31, 1996. Federal
funds sold are used to maintain liquidity for the volatile deposits as well as
other liquidity needs. The overall increase in average earning assets increased
net
7
<PAGE>
interest income for the Company in the first quarter of 1997.
Interest income on loans of $1,362,000 for the three months ended March
31, 1997 represented an increase of $258,000, or 23.4% from $1,104,000 for the
same period of 1996, constituting the largest dollar increase in interest income
and reflecting an increase in the average balance of loans to $57,785,000 for
the quarter ended March 31, 1997 from $43,589,000 for the same period of 1996.
The net interest spread, which is the difference between the yield on earning
assets and the cost of interest-bearing liabilities, increased to 4.81% in the
first quarter of 1997 from 4.52% in the same period of 1996. The higher net
interest spread was attributable to the increase in loans as a percentage of
earning assets from 66.4% for the three months ended March 31, 1996 as compared
to 75.2% for the same period of 1997. As balances were moved from lower yielding
federal funds sold to loans, the yield on earning assets increased.
Non-Interest Income
Non-interest income consists of revenues generated from service charges
on deposit accounts, as well as servicing fees on loans, wire transfer fees,
official check fees, and collection fees.
Non-interest income in the three months of 1997 was $69,000, an
decrease of $11,000, or 13.8%, from $80,000 for the same period of 1996. The
decrease was primarily due to lower overdraft and return check activity. Deposit
service charges accounted for 60.3% and 63.0% of total non-interest income for
the three months ended March 31, 1997 and 1996, respectively.
Non-Interest Expense
Non-interest expense totaled $861,000 for the three month period ended
March 31, 1997, as compared to $782,000 for the same period of 1996;
representing an increase of $79,000, or 10.1%. Although total non-interest
expense increased during the first quarter of 1997, non-interest expense as a
percentage of average total assets decreased to 1.0% in the first three months
of 1997 as compared to 1.1% for the same period in 1996.
Salaries and employee benefits continued to account for the largest
component of non-interest expense, comprising 48.0% of total non-interest
expenses for the first quarter of 1997 and 50.0% in for the same period of 1996.
Salaries and employee benefits increased by $23,000, or 5.9%, for the three
month period ended March 31, 1997 as compared to the three month period ended
March 31, 1996. The increase was mainly attributable to increased staffing as a
result of the addition of the McLean branch.
Operations expense increased $32,000, or 25.8%, from the first quarter
of 1996 as compared to the first quarter of 1997 primarily due to increased data
processing, ATM charges, and supply costs. All of the increases are volume
driven.
Occupancy and equipment expenses increased by $31,000, or 34.2%. The
increase was due to the addition of the McLean Branch rent expense and
additional equipment purchases and upgrades necessary to service the Bank's
customer base.
Administrative expense decreased by $7,000 or 3.7% primarily due to
decreased FDIC insurance. The FDIC insurance rate decreased once the Bank became
"well capitalized" in June 1996. FDIC insurance for the first quarter of 1997 wa
$3,000 as compared to $12,000 for the same period of 1996.
New Accounting Standards
In February 1997, the Financial Accounting Standards Board (FASB)
issued Statement of Financial Accounting Standards No. 128, Earnings Per Share
(SFAS 128) which is effective for financial statements issued for periods ending
after December 15, 1997, including interim periods. SFAS 128 establishes
standards for computing and presenting earnings per share (EPS) and applies to
entities with publicly held common stock or potential common stock. Management
does not expect that the adoption of SFAS 128 will have a material impact on the
Company's financial condition or reported earings per share.
8
<PAGE>
In February 1997, the FASB issued Statement of Financial Accounting
Standards No. 129, Disclosure of Information about Capital Structure (SFAS 129)
which is effective for financial statements issued for periods ending after
December 15, 1997. SFAS 129 establishes standards for disclosing information
about an entity's capital structure and applies to all entities. Management does
not expect that the adoption of SFAS 129 will have a material impact on the
Company's financial condition or reported capital structure.
Income Taxes
The Company recognized a net income tax expense of $100,000 in the
first quarter of 1997, as compared to an income tax benefit of $87,000 in the
same period of 1996. The net operating loss carryforward related to the start-up
of the Company became completely utilized for accounting purposes in the last
quarter of 1996. This accounted for $187,000 of the $98,000 change in net income
from March 31, 1996 to March 31, 1997. Net income before taxes increased by
$89,000 for the first quarter periods of 1997 and 1996.
Loan Quality
The Bank attempts to manage the risk characteristics of its loan
portfolio through various control processes, such as credit evaluation of
borrowers, establishment of lending limits and application of lending
procedures, including the holding of adequate collateral and the maintenance of
compensating balances. However, the Bank seeks to rely primarily on the cash
flow of its borrowers as the principal source of repayment. Although credit
policies are designed to minimize risk, management recognizes that loan losses
will occur and that the amount of these losses will fluctuate depending on the
risk characteristics of the loan portfolio as well as general and regional
economic conditions.
The allowance for loan losses represents a reserve for potential losses
in the loan portfolio. The adequacy of the allowance for loan losses is
evaluated periodically based on a review of all significant loans, with a
particular emphasis on non-accruing, past due and other loans that management
believes require special attention. As of March 31, 1997, the Company had loans
for $75,000 in non-accrual loans as compared to $182,000 as of December 31, 1996
and $309,000 as of March 31, 1996.
For significant problem loans, management's review consists of
evaluation of the financial strengths of the borrower, the related collateral,
and the effects of economic conditions. Specific reserves against the remaining
loan portfolio are based on analysis of historical loan loss ratios, loan
charge-offs, delinquency trends, and previous collection experience, along with
an assessment of the effects of external economic conditions.
The provision for loan losses is a charge to earnings in the current
period to replenish the allowance and maintain it at a level management has
determined to be adequate. The Company made a provision for loan losses for the
first quarter of 1997 of $43,000 as compared to zero in the first quarter of
1996. The Bank's total loan balances increased with no decreases in the loan
quality and therefore management determined the above provision was appropriate.
As of March 31, 1997 the allowance for loan losses was 1.20% of
outstanding loans, which remanined unchanged from December 31, 1996.
Management's judgment as to the level of future losses on existing loans is
based on management's internal review of the loan portfolio, including an
analysis of the borrowers' current financial position, the consideration of
current and anticipated economic conditions and their potential effects on
specific borrowers, an evaluation of the existing relationships among loans,
potential loan losses, and the present level of the loan loss allowance; and
results of examinations by independent consultants. In determining the
collectibility of certain loans, management also considers the fair value of any
underlying collateral. However, management's determination of the appropriate
allowance level is based upon a number of assumptions about future events, which
are believed to be reasonable, but which may or may not prove valid. Thus, there
can be no assurance that charge-offs in future periods will not exceed the
allowance for loan loss or that additional increases in the loan loss allowance
will not be required.
Non-performing loans are defined as non-accrual and renegotiated loans.
When real estate acquired by
9
<PAGE>
foreclosure and held for sale is included with non-performing loans, such
category is reported as non-performing assets. Non-performing assets as of
March 31 1997 consisted of loans for $75,000. The non-performing loans were
classified for regulatory purposes as substandard, and as such, management had
allocated a portion of its allowance for possible loan losses for future
potential loss. There were $309,000 in non-performing loans as of March 31,
1996.
The Company had impaired loans with an unpaid principal balance of
$61,000 at March 31, 1997. These loans are on nonaccrual and have related
impairment reserves of $3,000 which represents 100% of the principal balance
less the Small Business Administration guarantee applicable to them.
As a result of management's ongoing review of the loan portfolio, loans
are classified as non-accrual when collection of full principal and interest
under the original terms is not expected. These loans are classified as
non-accrual, even though the presence of collateral or the borrower's financial
strength may be sufficient to provide for ultimate repayment. Interest on
non-accrual loans is recognized only when received.
Capital Resources
Stockholders' equity was $8,401,000 as of March 31, 1997 as compared to
$8,265,000 as of December 31, 1996. The $136,000 increase, or 1.6%, was
primarily the result of net income of $180,000. The remaining change in
stockholders' equity was due to a payment on the long-term liability relating to
the Employee Stock Ownership Plan and a $61,000 reduction in the unrealized gain
on investment securities available-for-sale. No dividends have been declared by
the Company since its inception. In addition, no stock warrants have been
exercised and no options under the Stock Option Plan have been exercised.
Under the Federal Reserve's capital regulations, for as long as the
Company's assets are under $150 million, the Company's capital ratios are
reviewed on a bank-only basis. The Bank exceeded its capital adequacy
requirements as of March 31, 1997 and December 31, 1996. The Company continually
monitors its capital adequacy ratios to assure that the Bank remains within the
guidelines.
Liquidity and Interest Rate Sensitivity
The primary objective of asset/liability management is to ensure the
steady growth of the Company's primary earnings component, net interest income.
Net interest income can fluctuate with significant interest rate movements. To
lessen the impact of these rate swings, management endeavors to structure the
balance sheet so that repricing opportunities exist for both assets and
liabilities in roughly equivalent amounts at approximately the same time
intervals. Imbalances in these repricing opportunities at any point in time
constitute interest rate sensitivity.
The measurement of the Company's interest rate sensitivity, or "gap,"
is one of the principal techniques used in asset/liability management.
Interest-sensitive gap is the dollar difference between assets and liabilities
which are subject to interest-rate repricing within a given time period,
including both floating rate or adjustable rate instruments and instruments
which are approaching maturity.
In theory, interest rate risk can be diminished by maintaining a
nominal level of interest rate sensitivity. In practice, this is made difficult
by a number of factors, including cyclical variations in loan demand, different
impacts on interest-sensitive assets and liabilities when interest rates change,
and the availability of funding sources. Accordingly, the Company undertakes to
manage the interest-rate sensitivity gap by adjusting the maturity of and
establishing rate prices on the earning asset portfolio and certain
interest-bearing liabilities to keep it in line with management's expectations
relative to market interest rates. Management generally attempts to maintain a
balance between rate-sensitive assets and liabilities as the exposure period is
lengthened to minimize the overall interest rate risk to the Company.
The Bank's Executive Committee which oversees the asset/liability
management function meets periodically to monitor and manage the structure of
the balance sheet, control interest rate exposure, and evaluate pricing
strategies for the Company. The asset mix of the balance sheet is continually
evaluated in terms of several variables: yield, credit quality, appropriate
funding sources and liquidity. Management of the liability mix of the
10
<PAGE>
balance sheet focuses on expanding the various funding sources.
At March 31, 1997 the Company had an asset sensitive gap (more assets
than liabilities subject to repricing within the stated timeframe) of $4,561,000
which represents 6.2% of earning assets over a 30 day period. This suggests that
if interest rates were to increase over this period, the net interest margin
would improve, and if interest rates were to decrease, the net interest margin
would decline. Since all interest rates and yields do not adjust at the same
velocity, the gap is only a general indicator of interest rate sensitivity. The
analysis presents only a static view of the timing of maturities and repricing
opportunities, without taking into consideration that changes in interest rates
do not affect all assets and liabilities equally. Net interest income may be
impacted by other significant factors in a given interest rate environment,
including changes in the volume and mix of earning assets and interest-bearing
liabilities.
Liquidity represents the ability to provide steady sources of funds for
loan commitments and investment activities, as well as to provide sufficient
funds to cover deposit withdrawals and payment of debt and operating
obligations. These funds can be obtained by converting assets to cash or by
attracting new deposits. The Bank seeks to rely primarily on core deposits from
customers to provide stable and cost-effective sources of funding to support
asset growth. Other sources of funds available to the Bank include short-term
borrowings, primarily in the form of federal funds purchased. In the normal
course of business, the Bank enters into various off balance sheet credit
facilities with its customers, including commitments to extend credit at a
future date and letters of credit. Since many of the commitments can be expected
to expire without being drawn upon, the total commitment amounts do not
necessarily represent future cash requirements. At March 31, 1997 the Bank had
$268,000 in letters of credit and $16,785,000 in unfunded loan commitments.
Average liquid assets (cash and amounts due from banks,
interest-bearing deposits in other banks, federal funds sold, investment
securities and other short-term investments) were 32.4% of average deposits for
the first quarter of 1997, as compared to 39.6% for the same period of 1996.
Average loans were 78.2% of average deposits for the first quarter of 1997, as
compared to 66.6% for the first quarter of 1996. Average deposits were 96.2% of
average earning assets for the three months ended March 31, 1997 as opposed to
100.5% for the same period of 1996.
Securities maintained in the available-for-sale portfolio may be sold
prior to maturity in order to provide the Company and the Bank with increased
liquidity. Available-for-sale investment securities totaled $9,533,000 and
$5,051,000 as of March 31, 1997 and 1996, respectively.
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
Not applicable
ITEM 2. CHANGES IN SECURITIES
Not applicable
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable
11
<PAGE>
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
A. Exhibits required by Item 601 Regulation S-K:
Exhibit 11: Computation of Per Share Earnings
Exhibit 27: Financial Data Schedule
B. Reports on Form 8-K:
None.
12
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
TYSONS FINANCIAL CORPORATION
____________________________
(Registrant)
BY: /s/Terrie G. Spiro
_________________________
Terrie G. Spiro, President, Principal Executive
Officer, and Director
BY: /s/Janet A. Valentine
_________________________
Janet A. Valentine, Principal Financial and
Accounting Officer
Date: May 14, 1997
13
Exhibit 11
Computation of Per Share Earnings
<TABLE>
<CAPTION>
For the Quarter Ended
---------------------
March 31, 1997 March 31, 1996
<S> <C>
Number of shares of common stock
outstanding (weighted average) 1,071,119 668,619
Shares held in ESOP trust (weighted average) (42,402) (48,108)
Increase for common stock equivalents 66,477 -
Weighted average number of shares
outstanding during the period 1,095,194 620,511
Fully diluted weighted average number of
shares outstanding during the period 1,095,194 620,511
Income for the period $ 179,978 $ 277,936
Income per share:
Primary $ 0.16 $ 0.44
Fully diluted $ 0.16 $ 0.44
</TABLE>
14
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The schedule contains summary financial information derived from Tysons
Financial Corporation's unaudited financial statements for the three months
ended March 31, 1997, and is qualified in its entirety by reference to such
financial statements and the notes thereto.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1997
<CASH> 4,265,268
<SECURITIES> 12,501,739
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 571,611
<DEPRECIATION> 0
<TOTAL-ASSETS> 79,879,567
<CURRENT-LIABILITIES> 0
<BONDS> 362,500
0
0
<COMMON> 5,355,595
<OTHER-SE> 4,040,053
<TOTAL-LIABILITY-AND-EQUITY> 79,879,567
<SALES> 0
<TOTAL-REVENUES> 1,731,194
<CGS> 0
<TOTAL-COSTS> 705,342
<OTHER-EXPENSES> 155,907
<LOSS-PROVISION> 42,501
<INTEREST-EXPENSE> 547,066
<INCOME-PRETAX> 280,378
<INCOME-TAX> 100,400
<INCOME-CONTINUING> 179,978
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 179,978
<EPS-PRIMARY> $0.16
<EPS-DILUTED> $0.16
</TABLE>
