19
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number 0-84254
Pioneer Bancshares, Inc.
(Exact name of Registrant as specified in its Charter)
Delaware 62-1469913
(State of other jurisdiction of (I.R.S. Employer Identification
incorporation No.)
or organization)
801 Broad Street, Chattanooga, 37402
TN
(Address of principal executive Zip Code
offices)
Registrant's telephone number, including area code 423-755-0000
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 issuer's
classes of common stock, as of March 31, 1996:
Title of Class Number of Shares Outstanding
Common Stock, $.01 Par Value 1,879,956
PIONEER BANCSHARES, INC.
INDEX PAGE
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets - March 31, 1996,
December 31, 1995 and March 31, 1995 1
Consolidated Statements of Income -
Three Months Ended March 31, 1996 and March 31, 2
1995
Consolidated Statements of Changes in Shareholders'
Equity - 3
Three Months Ended March 31, 1996 and March 31,
1995
Consolidated Statements of Cash Flows -
Three Months Ended March 31, 1996 and March 31, 4
1995
Notes to Consolidated Financial Statements 5-6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations
of Pioneer Bancshares, Inc. 7-17
PART II. OTHER INFORMATION 18
Signatures 19
Exhibit Index 20
PART 1
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CONSOLIDATED STATEMENTS OF CONDITION
Unaudited Unaudited
(in thousands) March 31, December 31, March 31,
ASSETS 1996 1995 1995
Cash and due from banks $ 56,574 $ 54,938 $ 44,752
Investment securities:
Held-to-maturity (market value
of $67,323 at March 31, 1996,
$78,260 at December 31,1995,
and $80,571 at March 31, 1995) 68,350 78,040 83,439
Available-for-sale 209,082 208,968 185,518
Federal funds sold 4,275 5,935 14,295
Loans 452,847 423,191 347,527
Less: Unearned income 1,578 1,688 1,451
Allowance for loan loss 5,741 5,872 5,440
Net loans 445,528 415,631 340,636
Premises and equipment, net of
accumulated depreciation 18,676 17,084 14,286
Intangible assets 7,071 7,271 192
Other assets 12,636 11,401 12,308
Total Assets $ 822,192 $ 799,268 $ 695,426
LIABILITIES
Deposits
Noninterest bearing demand dep $ 126,076 $ 127,776 $ 108,496
Interest bearing demand dep 119,893 118,084 111,842
Money market accounts 42,580 44,652 42,987
Savings deposits 86,347 88,556 81,646
Time deposits of less than $100,000 234,394 231,563 187,704
Time deposits of $100,000 or more 56,795 51,464 53,024
Total deposits 666,085 662,095 585,699
Federal funds purchased and
securities sold under
agreements to repurchase 50,330 41,915 24,063
Other borrowings 10,000 0 0
Other liabilities 6,729 7,633 4,064
Total liabilities 733,144 711,643 613,826
STOCKHOLDERS' EQUITY
Common stock par value
$.01 per share;
4,000,000 authorized;
1,879,956 issued. 19 19 19
Surplus 64,728 64,728 64,728
Retained earnings 24,238 23,045 20,057
Unrealized appreciation/(depreciation) on
securities available for sale 83 312 (3,117)
Less: treasury stock - at cost 20 479 87
Total stockholders' equity 89,048 87,625 81,600
Total Liabilities and
Stockholders' Equity $ 822,192 $ 799,268 $ 695,426
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share data)
Unaudited
Three months ended
INTEREST INCOME March 31,
1996 1995
Interest and fees on loans $ 9,428 $ 7,155
Interest on investment securities
Taxable 2,980 2,876
Tax exempt 971 1,017
Interest on federal funds sold 94 260
Interest on other earning assets 3 4
Total interest income 13,476 11,312
INTEREST EXPENSE
Interest bearing demand deposits 780 692
Money market accounts 400 318
Savings deposits 564 568
Time deposits of less than $100,000 3,248 2,250
Time deposits of $100,000 or more 704 705
Federal funds purchased and
securities sold under
agreements to repurchase 485 326
Other borrowed money 51 0
Total interest expense 6,232 4,859
Net interest income 7,244 6,453
Provision for loan losses 280 80
Net interest income
after the provision for
loan losses 6,964 6,373
NONINTEREST INCOME
Trust income 313 280
Service charge on deposit accounts 863 786
Net securities gains (losses) 162 (46)
Other income 603 376
Total noninterest income 1,941 1,396
NONINTEREST EXPENSE
Salaries and employee benefits 3,274 2,760
Occupancy 897 641
Other 1,937 1,847
Total noninterest expense 6,108 5,248
Income before provision for
income taxes 2,797 2,521
Provision for income taxes 786 614
NET INCOME $ 2,011 $ 1,907
Net income per common share $ 1.07 $ 1.01
Dividends declared per common share $ 0.435 $ 0.400
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS'EQUITY
Pioneer Bancshares, Inc.
(in thousands except for share data)
Unrealized
Appreciation
Common Stock (Depreciation)
# of Par Capital Retained AFS Treasury Total
Shares Value Surplus Earnings Sec's Stock
Balances,
12/31/94 1,879,956 19 64,728 18,812 (5,591) (63) 77,905
Net income 1,907 1,907
Cash dividend (662) (662)
Net Changes in
Unrealized
Appreciation on
AFS Securities 2,474 2,474
Purchases of Treasury (24) (24)
Stock
Balances,
3/31/95 1,879,956 19 64,728 20,057 (3,117) (87) 81,600
(unaudited)
Balances,
12/31/95 1,879,956 19 64,728 23,045 312 (479) 87,625
Net income 2,011 2,011
Cash dividend (818) (818)
Net Changes in
Unrealized
Appreciation on
AFS Securities (229) (229)
Sales of Treasury 631 631
Stock
Purchases of Treasury (172) (172)
Stock
Balances,
3/31/96 1,879,956 19 64,728 24,238 83 (20) 89,048
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands) Unaudited
Three months ended
OPERATING ACTIVITIES March 31,
1996 1995
Net income $ 2,011 $ 1,907
Adjustments to reconcile net
income to cash provided
by operating activities:
Provision for loan losses 280 80
Depreciation on premises and 436 333
equipement
Amortization and accretion
of investment securities 205 133
(Increase) decrease in other (1,035) 2,327
assets
Increase (decrease) in other (904) 145
liabilities
Net cash provided by operating 993 4,925
activities
INVESTING ACTIVITIES
Proceeds from sales and
maturities of
available-for-sale securities 15,340 10,718
Proceeds from maturities of
held-to-maturity securities 9,703 527
Purchases of investment (15,220) (9,925)
securities
Net (increase) decrease in 1,660 (6,655)
federal funds sold
Net (increase) decrease in (30,177) (10,167)
loans
Purchases of premises and (2,709) (1,382)
equipment
Net cash used in investing (21,403) (16,884)
activities
FINANCING ACTIVITIES
Net increase (decrease) in 109 (11,999)
demand deposits
Net increase (decrease) in (4,281) (15,300)
savings and MMDA
Net increase (decrease) in time 8,162 37,749
deposits
Net increase (decrease) in
repurchase agreements and
federal funds purchased 8,415 (14,407)
Net increase (decrease) in 10,000
other borrowings
Cash dividends paid (818) (662)
Sales of treasury stock 631 0
Purchase of treasury stock (172) (24)
Net cash provided (used) by 22,046 (4,643)
financing activities
Increase (decrease) in cash
and cash equivalents 1,636 (16,602)
Cash and cash equivalents at
the beginning of the period 54,938 61,354
Cash and cash equivalents at
the end ofthe period 56,574 44,752
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
PIONEER BANCSHARES, INC.
A. PRESENTATION OF FINANCIAL INFORMATION
The financial statements in this report have not been audited.
The information included herein should be read in conjunction
with the notes to consolidated financial statements included in
the 1995 Annual Report to Shareholders which was furnished to
each shareholder of the Company on April 30, 1996. The
consolidated financial statements presented herein conform to
generally accepted accounting principles and to general industry
practices. All prior period financial statement data has been
restated to reflect the pooling of interest method of accounting.
Consolidation
The accompanying consolidated financial statements include the
accounts of Pioneer Bancshares, Inc., its subsidiaries, Pioneer
Bank and Valley Bank, and Pioneer Bank's subsidiaries and
trusteed affiliates. Pioneer Bank's subsidiaries include Pioneer
Securities, Inc. (PSI), Marion Properties, Inc. and Center
Finance Corporation. The trusteed affiliates of Pioneer Bank
include Frontier Corporation and Valley Company with Valley's
wholly-owned subsidiary. Collectively Pioneer Bancshares and its
subsidiaries and trusteed affiliates are referred to as the
"Company." Frontier Corporation and Valley Company are held in
trust for the benefit of Pioneer Bank's shareholders for a period
of one hundred years from 1956. At any time, the trusts may be
liquidated by a two-thirds vote of Pioneer Bank's shareholders.
Center Finance Corporation will engage in consumer finance and
related activities in Athens, Tennessee and is expected to open
in the second quarter of 1996.
Substantially all intercompany transactions, profits and balances
have been eliminated.
Accounting Policies
During interim periods, the Company follows the accounting
policies set forth in its Form 10-K for the year ended December
31, 1995, as filed with the Securities and Exchange Commission.
Since 1995, there have been no changes in any accounting
principles or practices, or in the method of applying any such
principles or practices.
Interim Financial Data (Unaudited)
In the opinion of Company management, the accompanying interim
financial statements contain all material adjustments, consisting
only of normal recurring adjustments necessary to present fairly
the financial condition, the results of operations, cash flows
and stockholders' equity of the Company for the interim periods.
Results for interim periods are not necessarily indicative of the
results to be expected for a full year.
Deferred Taxes
Deferred income taxes arise from temporary differences between
the income tax basis and the financial reporting basis of assets
and liabilities. If it is more likely than not that some portion
or all of a deferred tax asset will not be realized, a valuation
allowance is recognized.
Common Stock Data
Earnings per share is computed by dividing the net income for the
period by the weighted average number of common shares
outstanding during the period.
FASB Statements No. 114 & 118
The Company adopted FASB Statements No. 114 & 118 in the first
quarter of 1995. For purposes of these Statements, management
maintains the following policy. Impaired loans are divided into
two classifications: doubtful and loss. "Doubtful" loans
indicate probable loss and are reserved at 50% of outstanding
principal regardless of underlying collateral value. If
collateral value is less than 50% of principal, then additional
specific reserves are allocated. "Loss" loans are deemed
uncollectible by management and are reserved at 100% of
uotstanding principal value. The Company charges-off loans that
it deems to be substantially uncollectible. The Directors Loan
Committee approves all loan charge-offs. The following table
details impaired loans:
March 31,
1996 1995
Principal balance 63,616 238,404
Interest income recorded during loan 0 0
impairment
Reserve for potential credit losses 32,605 123,092
Unreserved portion of impaired loans 31,011 115,312
Average principal balance QTD 98,965 242,746
Average principal balance YTD 98,965 242,746
Impaired loans are identified according to the two classification
methods in the following table:
March 31,
1996 1995
Doubtful loans outstanding 62,022 230,624
Loss loans outstanding 1,594 7,780
ITEM 2.
Management's Discussion and Analysis of Financial
Condition and Results of Operations
of Pioneer Bancshares, Inc.
OVERVIEW
The Company ended the first quarter with total assets of $822.2
million, a 2.9% increase from December 31, 1995. The Company
reported net income of $2.0 million, or $1.07 per share, for the
three months ended March 31, 1996, compared to $1.9 million, or
$1.01 per share, for the same period in 1995.
NET INTEREST INCOME
Net interest income was approximately $7.2 million for the three
months ended March 31, 1996, compared to $6.5 million for the
same period in 1995. This level of net interest income resulted
primarily from, among other things, net interest spread narrowing
13 basis points to 3.47% from 3.60% . The net interest margin
was 4.28% in the first quarter of 1996 compared to 4.43% in the
first quarter of 1995. The margin declined due to the rate paid
on interest bearing liabilities increasing 35 basis points, while
the yield on interest earning assets increased 22 basis points.
(See "ASSET/LIABILITY MANAGEMENT."
CASH and DUE FROM BANKS
Cash and due from banks increased from $54.9 million as of
December 31, 1995, to $56.6 million as of March 31, 1996,
representing a 3.0% increase. The increase is indicative of
normal business cycles in the industry. Cash and due from bank
balances will fluctuate depending on monthly cycles and the
volume of uncollected funds deposited by bank customers. It is
management's desire to maintain adequate cash reserves to meet
our customers' cash needs.
INVESTMENTS
Investment securities decreased from $287.0 million to $277.4
million, or 3.3% from December 31, 1995 to March 31, 1996. This
decrease was due to maturities in the held to maturity category
which were not reinvested in investment securities, but rather
funded loan portfolio growth.
The increase in long term interest rates from January 1996 to
April 1996 has devalued the investment portfolio by $1.5 million.
Interest rates increased due to indices that reflect that the
economy is generally strong, as well as a to curb inflation.
Regarding the investment portfolio, management intends to (i) buy
securities only during those times when prices appear most
favorable, (ii) maintain maturities four years or less and (iii)
avoid mortgage-backed securities and structured notes.
FASB 115 requires that the "Available for Sale" portfolio be
valued at market prices and any difference be recorded as a
change in asset value of the investment portfolio and capital.
As of March 31, 1996, the FASB 115 adjustment resulted in an
increase in the asset value of the investment portfolio of
$134,000 and an adjustment to the capital account of $83,000,
after reserving $51,000 for deferred taxes.
As of March 31, 1996, the Company invested $4.3 million in
Federal Funds compared to $5.9 million at December 31, 1995, or a
$1.7 million decrease. Management continually monitors the
Company's liquidity position to determine the necessary balances
of short term investments and to consider alternative uses of
such funds.
LOAN PORTFOLIO
Loans, net of unearned income increased $29.8 million or 7.1%
from December 31, 1995 to March 31, 1996. The loan mix changed
marginally from year end 1995 to quarter end, March 31, 1996. A
large increase is noted in commercial loans of $10.2 million or
12.9% from December 1995 to March 1996. Similarly, commercial
real estate loans increased $6.9 million over the same period.
The remaining majority of the loan growth occurred within
consumer installment loans, due to the indirect auto loan
program; the increase from year end 1995 to quarter end March,
1996 is $6.8 million. Real estate construction loans and
residential real estate loans increased $2.0 million and $3.6
million, respectively, for the same period.
The Company had no foreign loans or loans to lesser developed
countries as of March 31, 1996. The Company's loan mix is
further described in the table below.
LOAN PORTFOLIO
(in thousands)
March Percent December Percent
1996 of Total 1995 of Total
Commercial,
financial
and agricultural 89,520 19.77% 79,324 18.74%
Real estate:
Construction 20,682 4.57% 18,671 4.41%
and development
Residential 120,768 26.67% 117,182 27.69%
Commercial 160,152 35.36% 153,354 36.24%
Consumer
Credit cards 3,361 0.74% 3,253 0.77%
Installments 57,988 12.81% 51,040 12.06%
Lease financing 376 0.08% 367 0.09%
Total Gross Loans452,847 100.00% 423,191 100.00%
Less:
Unearned income 1,578 1,688
Allowance for
loan loss 5,741 5,872
Total Net Loans 445,528 415,631
Management does not expect the current loan mix to change
significantly over the course of 1996.
PROVISION AND ALLOWANCE FOR POSSIBLE LOAN LOSSES
The allowance for possible loan losses decreased $131,000 or 2.2%
during the first quarter of 1996 from December 31, 1995. The
provision charged to expense is based on continuous analysis by
the Company's management of potential losses in the loan
portfolio.
ALLOWANCE FOR LOAN LOSSES
(in thousands)
1996 1995
Quarter Ending Mar 31 Dec 31 Sept 30 June 30 Mar 31
Balance at beginning
of period 5,872 5,609 5,500 5,440 5,355
Loans charged-off 481 146 119 148 118
Loans recovered 70 80 49 178 123
Net charge-offs 411 66 70 (30) (5)
(recoveries)
Provision for loan
losses charged to expense 280 329 179 30 80
Balance at end of period 5,741 5,872 5,609 5,500 5,440
Allowance for loan
losses as a percentage
of average loans 1.32% 1.45% 1.52% 1.55% 1.61%
outstanding
for the period
Allowance for loan
losses as a percentage
of nonperforming
assets and loans 90 211.77% 255.64% 251.86% 330.53% 256.36%
days past due
outstanding
at end of the
period
Annualized QTD net
charge-offs as
a percentage of 0.38% 0.07% 0.08% -0.03% -0.01%
average loans
outstanding for the
period
Annualized YTD net
charge-offs as
a percentage of 0.38% 0.03% 0.01% -0.02% -0.01%
average loans
outstanding for the
period
The Company's allowance for possible loan losses as a percentage
of loans, net of unearned income, was 1.32% at March 31, 1996 as
compared to 1.45% at December 31, 1995. The allowance for loan
losses at March 31, 1996, and December 31, 1995, provided 211.8%
and 255.6% coverage, respectively, of nonperforming assets. Net
charge-offs (annualized as a percentage of average quarter-to-
date loans) were 0.38% during the first quarter of 1996 as
compared to -0.01% for the same period one year ago. At March
31, 1996, management believes that the allowance for possible
loan losses is sufficient to absorb potential losses.
NONPERFORMING ASSETS AND PAST DUE LOANS
Nonperforming assets include nonperforming loans, foreclosed
realestate held for sale and foreclosed other personal property
held for sale. As of March 31, 1996, nonperforming assets were
$2.1 million as compared to $1.9 million at December 31, 1995.
The ratio of nonperforming assets to loans, net of unearned
income, other real estate and other nonperforming assets was
0.47% at March 31, 1996, compared to 0.47% at December 31, 1995
and 0.60% at March 31, 1995.
Total nonperforming loans to total average loans decreased from
0.28% at December 31, 1996, to 0.27% at March 31, 1996. Whereas,
loans past due 90 days or more as a percentage of total average
loans increased to 0.16% as of March 31, 1996, compared to 0.09%
as of December 31, 1995.
Net loans charged off during the first quarter of 1996 were
$411,000 compared to a $5,000 net recovery for the same period of
1995. Further detail of loan charge-offs and recoveries is
presented in the table "Allowance for Loan Losses."
NONPERFORMING ASSETS AND PAST DUE LOANS
(in thousands)
1996 1995
Quarter Ending Mar 31 Dec 31 Sept 30 June 30 Mar 31
Avg loans, net of
unearned income 434,323 406,150 369,385 353,762 338,760
Nonaccrual loans 1,160 1,153 881 694 1,127
Renegotiated or 0 0 0 0 0
restructured loans
Total nonperforming 1,160 1,153 881 694 1,127
loans
Other real estate 840 761 699 834 902
owned, net
Other non-performing 54 0 0 0 0
assets
Total nonperforming
assets 2,054 1,914 1,580 1,528 2,029
Loans 90 days or more
past due
and still accruing 711 383 647 136 93
Total nonperforming
loans as a 0.27% 0.28% 0.24% 0.20% 0.33%
percentage of total
loans
Total nonperforming
assets as a
percentage of total 0.47% 0.47% 0.43% 0.43% 0.60%
loans, ORE
and other
nonperforming assets
Loans 90 days past due
as a 0.16% 0.09% 0.18% 0.04% 0.03%
percentage of total
loans
DEPOSITS
Total deposits increased $4.0 million or 0.6% from $662.1 million
at December 31, 1995 to $666.1 million at March 31, 1996. The
increase is due to customers investing in time deposits to attain
marginally higher yields over other deposit products. Total time
deposits increased $8.2 million from December 31, 1995 to March
31, 1996.
Federal funds purchased and securities sold under agreements to
repurchase increased $8.4 million or 20.1% from December 31, 1995
to March 31, 1996. Counterparties to the agreements to
repurchase are commercial account customers, where excess funds
from noninterest bearing checking accounts are transferred
nightly to a collateralized interest bearing repurchase account.
These accounts are not FDIC insured, therefore the Company
collateralizes the deposits with securities from the investment
portfolio. For the quarter ended March 31, 1996, none of the
repurchased agreements were brokered. As of March 31, 1996, the
Company's federal funds purchased position was zero compared to
$5.0 million as of December 31, 1995.
LIQUIDITY AND CAPITAL RESOURCES
Liquidity represents the ability to provide funding for lending
and investment activities, as well as to cover deposit
withdrawals and pay debt and operating obligations. Maintaining
an adequate level of liquidity is an important component of the
Company's balance sheet management objectives.
Net cash provided by operating activities for the three months
ended March 31, 1996, totaled $993,000. For the same period, net
cash used by investing activities totaled $21.4 million
consisting of proceeds from maturities and sales of investment
securities of $25.0 million, with cash outflows of $15.2 million
in investment securities purchases, and a $30.2 million increase
in loans outstanding. Net cash provided by financing activities
of $22.0 million consisted of increases in demand deposits, time
deposits, repurchase agreements and other borrowings of $26.7
million. The payment of $818,000 in common stock dividends
($0.435 per share) was funded from earnings. Management will
stagger the purchases of investment securities within a four year
maturity horizon to provide sufficient liquidity to the loan
portfolio. Management does not anticipate any unexpected funding
needs in the near future that could not be satisfied with current
cash generated from investing activities.
Total stockholders' equity, adjusted for the unrealized
appreciation on securities available for sale, to total assets at
March 31, 1996 and December 31, 1995 was 10.82% and 10.92%,
respectively. The Company's book value per share increased from
$46.61 at December 31, 1995 to $47.37 at March 31, 1996. The
Company's Tier I risk based capital ratio, total risk based
capital ratio and leverage capital ratio at March 31, 1996 were
13.82%, 14.79% and 10.33%, respectively, exceeding the fully
phased-in required capital ratios of 4.00%, 8.00% and 3.00%,
respectively. These ratios as of December 31, 1995, were 14.77%,
15.85% and 10.11%, respectively. Increased regulatory activity
in the financial industry as a whole will continue to impact the
structure of the industry; however, management does not
anticipate any negative impact on the capital resources or
operations of the Company.
INTEREST RATE SENSITIVITY
The following table illustrates the Company's exposure to
interest rate fluctuations as of March 31, 1996:
Interest Rate Sensitivity Analysis
as of March 31, 1996
(in thousands)
Over 3 Over 1
Months Year Non-
3 through through Over Interest
Months 12 5 Years 5 Years Total
or less Months Sensitive
ASSETS:
Interest Earning Assets:
Loans, net of
unearned income 143,241 45,048 238,112 24,868 451,269
Less:
Allowance for
loan losses (5,741) (5,741)
Net loans 143,241 45,048 238,112 24,868 (5,741) 445,528
Investment 18,782 36,965 152,560 69,125 277,432
securities
Federal funds 4,275 4,275
sold
Total earning 166,298 82,013 390,672 93,993 (5,741) 727,235
assets
Cash and 94,957 94,957
other assets
Total assets 166,298 82,013 390,672 93,993 89,216 822,192
Over 3 Over 1
Months Year Non-
3 through through Over Interest
Months 12 5 Years 5 Years Total
or less Months Sensitive
LIABILITIES
AND
STOCKHOLDERS'
EQUITY:
Interest Bearing Liabilities:
Interest
bearing
demand 9,591 14,387 95,915 119,893
deposits
Money market 8,516 17,032 17,032 42,580
acct
Savings 6,908 10,362 69,077 86,347
deposits
Other time 81,425 110,392 42,532 45 234,394
deposits
CD's of
$100,000 26,582 24,307 5,906 56,795
or more
Federal funds
purchased
and
securities 50,330 50,330
sold
under
agreements
to
repurchase
Other 10,000 10,000
borrowings
Total
interest 183,352 176,480 240,462 45 600,339
bearing
liabilities
Non-interest
bearing 126,076 126,076
demand
deposits
Other 6,729 6,729
liabilities
Stockholders' 89,048 89,048
equity
Total
liabilities
and 183,352 176,480 240,462 45 221,853 822,192
stockholders'
equity
Interest
sensitivity (17,054) (94,467) 150,210 93,948
gap
Cumulative
interest (17,054) (111,521) 36,689 132,637
sensitivity
gap
Cumulative
interest
sensitivity -2.3% -15.3% 5.0% 18.2%
gap as a
percentage
of total
earning
assets
In analyzing the interest rate sensitivity at March 31, 1996, the
Company is liability sensitive in the less than twelve month
categories in the amount of $111.5 million. In the greater than
one year categories, the Company is asset sensitive in the amount
of $244.2 million. Overall the Company is asset sensitive in the
amount of $132.6 million. During periods of increasing interest
rates asset sensitivity would enable the Company to reprice
earning assets faster than interest bearing liabilities,
therefore optimizing net interest margins. During periods of
decreasing interest rates, being asset sensitive would narrow net
interest margins, because interest earning assets would reprice
faster at lower rates before the repricing of the interest
bearing liabilities. Management maintains several interest rate
risk models, regularly meets with the Board of Directors to
discuss asset/liability management issues and believes this level
of exposure to interest rate fluctuations to be acceptable.
NET INCOME
Net income for the three months ended March 31, 1996 increased
$104,000 or 5.5% over the same period in 1995. Net income per
share for the quarter increased $0.06 or 5.5% to $1.07 per share
compared to $1.01 per share for the same period one year ago.
Annualized return on average assets for the three months ending
March 31, 1996 was 1.01% as compared to 1.11% for 1995. The
annualized return on average equity for the first quarter of 1996
was 8.99% compared to 9.38% for the same period in 1995.
NET INTEREST MARGIN
The following table shows average balances, interest income and
interest expense, and yields/rates for the three months ending
March 31, 1996 and 1995.
CONSOLIDATED AVERAGE
BALANCE SHEET
INTEREST
INCOME/EXPENSE AND
YIELD/RATES
Taxable Equivalent Basis
(in thousands) Three months ended
March 31,
Assets 1996 1995
Avera Incom Yield Avera Incom Yield
Earning assets: ge e/ / ge e/ /
Balan Expen Rate Balan Expen Rate
ce se ce se
Loans, net of unearned $ $ 8.68% $ $ 8.48%
income 434,3 9,420 338,7 7,183
23 60
Investment securities 283,6 4,480 6.32% 275,9 4,417 6.40%
69 98
Other earning assets 6,856 94 5.47% 18,00 264 5.86%
9
Total earning assets 724,8 13,99 7.72% 632,7 11,86 7.50%
48 4 67 4
Allowance for loan (5,74 (5,44
losses 3) 0)
Cash and other assets 80,29 60,99
4 0
TOTAL ASSETS $ $
799,3 688,3
99 17
Liabilities and
Stockholders' Equity
Interest bearing
liabilities:
Interest bearing demand $ 780 2.62% $ 692 2.51%
deposits 119,2 110,1
66 63
Savings deposits 88,15 584 2.65% 82,97 568 2.74%
2 5
Time deposits 276,6 3,630 5.25% 224,3 2,568 4.58%
55 25
Time deposits of 51,47 704 5.47% 54,15 705 5.21%
$100,000 or more 7 3
Federal funds purchased
and securities 44,04 484 4.40% 26,79 326 4.87%
sold under agreement 4 5
to repurchase
Other borrowings 6,703 51 3.04% 0 0 0.00%
Total interest 586,2 6,233 4.25% 498,4 4,859 3.90%
bearing liabilities 97 11
Net interest spread $ 3.47% $ 3.60%
7,761 7,005
Noninterest bearing 114,6 104,5
demand deposits 86 25
Accrued expenses and 8,899 4,064
other liabilities
Stockholders' equity 89,51 81,31
7 7
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ $
799,3 688,3
99 17
Net yield on earning 4.28% 4.43%
assets
Taxable equivalent
adjustment:
Loans $ $
39 28
Investment securities 509 524
Total adjustment $ $
548 552
ASSET/LIABILITY MANAGEMENT
The Company experienced a decrease in the net yield on earning
assets for the first quarter from 4.43% in 1995 to 4.28% in 1996.
This decrease resulted from changes in rates, volumes and mix of
interest earning assets and interest bearing liabilities. In
addition, the average balance of noninterest bearing demand
deposits increased $10.2 million or 9.7%. Interest income on
earning assets increased $2.2 million or 19.1% due to increases
in the rates earned on interest earning assets and an increase of
$92.1 million or 14.6% in the average volume of interest earning
assets. The mix of interest earning assets changed significantly
with the average balances of loans increasing $95.6 million or
28.2%, while the average balance of securities increased $7.7
million or 2.8% and the average balance of other earning assets,
primarily federal funds sold, decreased $11.2 million or 61.9%.
Rates earned on loans increased 20 basis points, while rates
earned on investment securities decreased 8 basis points. The
rates earned on other earning assets decreased 39 basis points.
The rate on total earning assets increased 22 basis points.
Interest expense on deposits increased $1.4 million or 28.3% in
the first quarter of 1996 compared to the same period last year.
Average balances on interest bearing liabilities increased by
$87.9 million or 17.6%. The average balances of interest bearing
demand deposits increased from first quarter of 1995 to first
quarter of 1996 by $9.1 million or 8.3%. Savings accounts
increased for the same time periods by $5.2 million or 6.2%. The
rates paid on these type of accounts during the three months
ending March 31, 1996, and 1995, increased 11 and decreased 9
basis points, for interest bearing demand deposits and savings
deposits, respectively. The average balance of time deposits,
including time deposits over $100,000, increased $49.7 million or
17.8% and the rate paid increased 58 basis points. Net interest
spread increased from first quarter 1995 to first quarter 1996 by
$756,000, however the spread rate declined 13 basis points.
NONINTEREST INCOME
Noninterest income consists of revenues generated from a broad
range of financial services and activities including fee-based
services and commissions.
NONINTEREST INCOME
(in thousands)
Three Months
Ended March 31, Percent
1996 1995 Change
Service charge on $ $ 9.80%
deposit accounts 863 786
Trust fees 313 280 11.79%
Net securities 162 (46) 452.17%
gains realized
Other income 603 376 60.37%
TOTAL $ $ 39.04%
1,941 1,396
Service charges increased $77,000, or 9.8%, for the three months
ended March 31, 1996, as compared to the quarter ended march 31,
1995. Trust fees increased $33,000, or 11.8%, from the first
quarter of 1995 compared to the first quarter of 1996. Net
securities gains of $162,000 were realized in the first three
months of 1996, compared to the loss of $46,000 realized in the
same period of 1995. Other noninterest income increased
$227,000, or 60.4%, for the first quarter 1996 compared to the
first quarter of 1995.
NONINTEREST EXPENSE
Salaries and benefits increased $514,000, or 18.6%, for the three
months ending March 31, 1996, as compared to March 31, 1995. The
increase was due primarily to the additional employees with the
Marion County Branch Purchase. Occupancy expenses increased
$256,000, or 39.9%, due to depreciation on the properties put
into commission in the second half of 1995. Management
anticipates this level of spending for occupancy expense to
increase through the remainder of the year of 1996 as renovations
for expanding the downtown office continue and new branches open.
Other expenses increased $90,000, or 4.9% over these same
periods.
NONINTEREST EXPENSE
(in thousands)
Three Months
Ended March 31, Percent
1996 1995 Change
Salaries and $ $ 18.62%
benefits 3,274 2,760
Net occupancy 897 641 39.94%
expense
Other expense 1,937 1,847 4.87%
TOTAL $ $ 16.39%
6,108 5,248
PROVISION FOR INCOME TAXES
The Company's provision for income taxes increased $172,000, or
28.0%, to $786,000 for the three months ended March 31, 1996, as
compared to $614,000 for the same period in 1995. The effective
tax rate was 28.1% for the three months ended March 31, 1996 as
compared to 24.4% for March 31, 1995. The notes to the financial
statements provide additional information regarding the Company's
taxes.
PART II
OTHER INFORMATION
ITEM 1. Legal Proceedings
None
ITEM 2. Change in Securities
None
ITEM 3. Defaults Upon Senior Securities
None
ITEM 4. Submission of Matters to a Vote of Security Holders
The annual meeting of Pioneer Bancshares, Inc.
stockholders will be held on May 21, 1996 at the
corporate offices of Pioneer Bank. Only those items
disclosed within the Pioneer Bancshares, Inc. Proxy
Statement will be voted.
ITEM 5. Other Information
None
ITEM 6. Exhibits and Reports on Form 8-K
(a) The exhibits filed as part of the Report are as follows:
Exhibit
Number Description
3(a) Certificate of Incorporation, incorporated
herein by reference
from Registrant's Registration Statement on Form
S-4
(Registration No. 33-49360).
3(b) By-laws, incorporated herein by reference
from Registrant's
Registration Statement on Form S-4 (Registration
No. 33-
49360)
11 Statement Re Computation of Per Share Earnings
(b) Reports on Form 8-K.
None
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.
Pioneer Bancshares, Inc.
Date: May 14, 1996 /s/ Rodger B. Holley
Rodger B. Holley
President and CEO
Date: May 14, 1996 /s/ Gregory B. Jones
Gregory B. Jones
Executive Vice President and
Treasurer
PIONEER BANCSHARES, INC. AND SUBSIDIARIES
INDEX TO EXHIBITS
Exhibit
Number Description Page
3(a) Certificate of Incorporation,
incorporated herein
by reference from Registrant's Registration
Statement on Form S-4 (Registration No. 33-
49360).
3(b) By-laws, incorporated herein by
reference from
Registrant's Registration Statement on Form S-
4
(Registration No. 33-49360).
11 Statement Regarding Computation of Net
Earnings
per Share 21
PIONEER BANCSHARES, INC.
Form 10-Q, Part II, Item 6
Exhibit 11 - Statement Regarding Computation of
Net Earnings Per Share
For the three months ended 1996 1995
March 31,
Income as reported in
consolidated $2,011,000 $1,907,000
statements of income
Per share computation of common
and dilutive common equivalent
shares:
Weighted average number of
shares outstanding 1,879,956 1,879,956
Weighted average number of
shares issuable upon exercise of 0 0
stock options applying the
treasury stock method
Weighted average number of
shares outstanding used to 1,879,956 1,879,956
calculate per share
data assuming no dilution
Net income per common and
common $ 1.07 $ 1.01
equivalent share
Per share computation assuming
full dilution:
Weighted average number of
shares 1,879,956 1,879,956
outstanding
Weighted average number of
shares issuable upon exercise of 0 0
stock options
applying the treasury stock
method
Weighted average number of
shares
outstanding used to 1,879,956 1,879,956
calculate per share
data assuming full dilution
Net income per common and
common $ 1.07 $ 1.01
equivalent share assuming
full dilution
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