<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
______________________________
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
________________________________________________________________________________
Date of Report (Date of earliest event reported): March 14, 1997 (December 30,
----------------------------
1996)
-----
JEFFERSON SAVINGS BANCORP, INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE
----------------------------------------------
(State or other jurisdiction of incorporation)
0-21466 43-1625841
---------------------- -------------------------------
(Commission File Number) (IRS Employer Identification No.)
14915 MANCHESTER ROAD, BALLWIN, MISSOURI 63011
--------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (314) 227-3000
Not Applicable
-----------------------------------------------------------
(Former name or former address, if changed since last report)
Index Exhibit on Page 44
<PAGE>
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
- ------ ------------------------------------
On February 28, 1997, Jefferson Savings Bancorp, Inc., Ballwin, Missouri
(the "Registrant") acquired L & B Financial, Inc., Sulphur Springs, Texas ("L &
B"), and its wholly-owned thrift subsidiary, Loan & Building State Savings Bank,
Sulphur Springs, Texas ("Savings Bank"), in accordance with the terms of an
Agreement and Plan of Merger dated September 25, 1996, between the Registrant,
the Registrant's wholly-owned subsidiary, Jefferson Savings AcquisitionCo, Inc.,
Ballwin, Missouri ("AcquisitionCo"), and L & B (the "L & B Merger Agreement"),
pursuant to which L & B merged with and into AcquisitionCo, with AcquisitionCo
being the survivor under its articles of incorporation. Simultaneously
therewith, pursuant to a separate Agreement and Plan of Merger dated January 7,
1997, between Savings Bank and the Registrant's wholly-owned subsidiary, First
Federal Savings Bank of North Texas, Denton, Texas ("First Federal"), Savings
Bank merged with and into First Federal, with First Federal being the survivor
under its charter.
Under the terms of the L & B Merger Agreement, each share of L & B common
stock issued and outstanding on February 28, 1997 was converted into the right
to receive a combination of cash in the amount of $9.2778 and 0.3328 shares of
common stock of the Registrant, subject to adjustment for fractional shares in
accordance with the terms of the L & B Merger Agreement. On February 28, 1997, L
& B had 1,548,625 shares of common stock issued and outstanding, none of which
were owned by the Registrant. The acquisition was accounted for under the
purchase method of accounting in accordance with Accounting Principles Board
Opinion 16, "Business Combinations," as amended. The total basic merger
consideration payable to holders of common stock of L & B at February 28, 1997,
is $28,735,722.50. This amount was calculated in part based on the consolidated
earnings of L & B during the period from April 1, 1996 through January 31, 1997.
At September 30, 1996, L & B, a Texas corporation, had consolidated
assets of approximately $144.6 million, deposits of approximately $104.2
million, loans receivable of approximately $69 million and shareholders' equity
of approximately $24.6 million. The business of L & B consists primarily of the
ownership, supervision and control of Savings Bank. The principal executive
office of L & B is located in Sulphur Springs, Texas. Savings Bank is primarily
engaged in the business of attracting deposits from the general public and using
such deposits, together with borrowings and other funds, to originate mortgage
loans secured by one- to four-family residential property and commercial real
estate, construction and development, and consumer loans, and to make other
investments. Savings Bank's operations are conducted through its principal
office in Sulphur Springs, Texas and five full service branch facilities located
in the Texas communities of Mount Vernon, Mount Pleasant, Daingerfield,
Pittsburg, and Texarkana. Prior to the Registrant's acquisition of L & B and
Savings Bank, there were no material relationships between L & B and its
shareholders and the Registrant, or any of the affiliates, directors or officers
of the Registrant or any associates of any such directors or officers.
ITEM 5. OTHER EVENTS
- ------ ------------
On December 30, 1996, the Registrant acquired Texas Heritage Savings
Association/Banc, a Texas savings association having its main office in Rowlett,
Texas ("Texas Heritage") pursuant to an Agreement and Plan of Merger dated May
31, 1996, as amended on August 31, 1996 and on October 9, 1996 (as amended, the
"Texas Heritage Merger Agreement").
Under the terms of the Texas Heritage Merger Agreement, each share of
Texas Heritage common stock issued and outstanding on December 30, 1996 was
converted into the right to receive a combination of $9.1781 cash and 0.3976
shares of common stock of the Registrant (together with any rights attached
2
<PAGE>
thereto under or by virtue of the Rights Agreement dated August 17, 1994,
between the Registrant and Boatmen's Trust Company, St. Louis, Missouri, as
Rights Agent), representing approximately 200% of book value of Texas Heritage
common stock, subject to adjustment for fractional shares pursuant to the terms
of the Texas Heritage Merger Agreement. On December 30, 1996, Texas Heritage had
561,000 shares of common stock issued and outstanding, none of which were owned
by the Registrant. The acquisition was accounted for under the purchase method
of accounting in accordance with Accounting Principles Board Opinion 16,
"Business Combinations," as amended.
At June 30, 1996, Texas Heritage, which is a state chartered savings
association, had assets of approximately $69.2 million, deposits of
approximately $60.7 million, loans receivable of approximately $54.2 million and
shareholders' equity of approximately $4.8 million. Texas Heritage offers
complete banking services to the commercial and residential areas that it serves
and focuses its activity on commercial lending. Texas Heritage's operations are
conducted through its principal office located at 9802 Lakeview Parkway in
Rowlett, Texas, and through three full-service facilities located in Garland,
Bedford, and Rockwall. Prior to the Registrant's acquisition of Texas Heritage,
there were no material relationships between Texas Heritage and its shareholders
and the Registrant, or any of the affiliates, directors or officers of the
Registrant or any associates of any such directors or officers.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
- ------- ---------------------------------
(a) Financial Statements of Businesses Acquired
-------------------------------------------
Audited Financial Statements of L & B.
-------------------------------------
The following audited financial statements of L & B are submitted
herewith:
1. Report of Independent Auditors.
2. Consolidated Balance Sheets as of June 30, 1996 and 1995.
3. Consolidated Statements of Income for the Years Ended June 30,
1996, 1995 and 1994.
4. Consolidated Statement of Stockholders' Equity for the Years Ended
June 30, 1996, 1995 and 1994.
5. Consolidated Statements of Cash Flows for the Years Ended June 30,
1996, 1995 and 1994
6. Notes to Consolidated Financial Statements.
Unaudited Financial Statements of L & B:
----------------------------------------
The following unaudited financial statements of L & B are submitted
herewith:
1. Consolidated Balance Sheet as of December 31, 1996 and 1995.
2. Consolidated Statements of Income for the Six Months Ended December
31, 1996 and 1995.
It is impracticable for the Registrant to provide the following
unaudited financial information at this time. However, the Registrant
shall provide such information to the Securities and Exchange
Commission at a later date, but in no event later that sixty (60) days
from the date of filing hereof as allowed pursuant to Item 7 of
Form 8-K:
3
<PAGE>
3. Consolidated Statement of Stockholders' Equity for the Six Months
Ended December 31, 1996 and 1995.
4. Consolidated Statements of Cash Flows for the Six Months Ended
December 31, 1996 and 1995.
(b) Unaudited Pro Forma Financial Information:
-----------------------------------------
It is impracticable for the Registrant to provide the following
unaudited pro forma financial information at this time. However, the
Registrant shall provide such information to the Securities and
Exchange Commission at a later date, but in no event later that sixty
(60) days from the date of filing hereof as allowed pursuant to Item 7
of Form 8-K:
1. Pro Forma Combined Condensed Balance Sheet as of December 31, 1996.
2. Pro Forma Combined Condensed Statement of Income for the Year Ended
December 31, 1996, and notes thereto.
(c) Exhibits The following exhibits are submitted herewith:
--------
Exhibit No. Exhibit
----------- -------
2(a) Agreement and Plan of Merger, dated September 25, 1996,
by and between the Registrant, Jefferson Savings
AcquisitionCo, Inc. and L & B Financial, Inc.,
incorporated herein by reference to the Registrant's
Registration Statement on Form S-4 filed with the
Commission on December 19, 1996, with a Pre-Effective
Amendment No. 1 filed on January 24, 1997, and effective
on January 28, 1997.
2(b) Agreement and Plan of Merger, dated January 7, 1997, by
and between Loan & Building State Savings Bank and First
Federal Savings Bank of North Texas.
2(c) Agreement and Plan of Merger, dated May 31, 1996, as
amended on August 31, 1996 and on October 9, 1996, by and
between the Registrant, First Federal Savings Bank of
North Texas, and Texas Heritage Savings Association/Banc,
incorporated herein by reference to the Registrant's
Registration Statement on Form S-4 filed with the
Commission on October 28, 1996, and effective on October
29, 1996.
99(a)(i) Press Release, dated January 2, 1997, with respect to the
Registrant's acquisition of Texas Heritage Savings
Association/Banc.
99(a)(ii) Press Release, dated March 3, 1997, with respect to the
Registrant's acquisition of L & B Financial, Inc.
4
<PAGE>
[LETTERHEAD OF OAKERSON, ARNOLD, WALKER & CO. APPEARS HERE]
INDEPENDENT AUDITOR'S REPORT
----------------------------
The Board of Directors
L&B Financial, Inc.
We have audited the accompanying consolidated balance sheets of L&B Financial,
Inc. and subsidiary (the "Corporation") as of June 30, 1996, and 1995, and the
related consolidated statements of income, stockholders' equity, and cash flows
for each of the three years ended June 30, 1996, 1995, and 1994. These
consolidated financial statements are the responsibility of the Corporation's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. These standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the consolidated financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of the Corporation as
of June 30, 1996, and 1995, and the results of its operations and its cash flows
for each of the three years ended June 30, 1996, 1995, and 1994, in conformity
with generally accepted accounting principles.
/s/ OAKERSON, ARNOLD, WALKER & CO.
- ----------------------------------------
Oakerson, Arnold, Walker & Co.
Mt. Pleasant, Texas
August 14, 1996
<PAGE>
L&B FINANCIAL, INC.
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
June 30, June 30,
1996 1996
------------------------
<S> <C> <C>
ASSETS
- ------
Cash and amounts due from depository institutions $ 1,386 $ 1,866
Short-term interest-bearing deposits 7,530 4,552
------------------------
Total cash and cash equivalents 8,916 6,418
------------------------
Investment and mortgage-backed securities:
Held-to-maturity, at amortized cost (fair value 1996 - $42,232, 1995 - $63,649) 42,178 63,557
Available-for-sale, at fair value (amortized cost 1996 - $22,153, 1995 -$202) 21,986 193
------------------------
Total investment and mortgage-backed securities 64,164 63,750
------------------------
Loans receivable, net:
Held-for-sale, at fair value (amortized cost 1996 - $495, 1995 -$796) 490 792
Held-for-investment 65,862 58,590
------------------------
Total loans receivable, net 66,352 59,382
------------------------
Office properties and equipment, net 2,268 1,325
Real Estate:
Acquired for development 0 758
Acquired through foreclosure, less allowance (1996 - $0, 1995 - $0) 353 294
------------------------
Total real estate owned, net 353 1,052
------------------------
Federal Home Loan Bank stock, at cost 751 705
Accrued interest receivable, less allowance 972 919
Other assets 354 232
------------------------
TOTAL ASSETS $144,130 $133,783
========================
LIABILITIES
- -----------
Deposit accounts $104,565 $100,933
Advances from the Federal Home Loan Bank 13,500 4,904
Advances from borrowers for taxes and insurance 826 824
ESOP debt 0 896
Accrued interest and other liabilities 456 572
------------------------
TOTAL LIABILITIES 119,347 108,129
------------------------
STOCKHOLDERS' EQUITY
- --------------------
Preferred stock - no par value, 5,000,000 authorized, 0 issued and outstanding 0 0
Common stock - $0.01 par value - 25,000,000 shares authorized, 1,667,500 and
1,667,500 issued and outstanding, respectively 17 17
Additional paid-in capital 15,165 15,998
Treasury Stock - 83,375 shares at par (1) 0
Unearned ESOP shares (825) (896)
Unearned stock compensation (308) 0
Net unrealized loss on investment and mortgage-backed securities available for sale (118) (9)
Retained earnings, substantially restricted 10,853 10,544
------------------------
TOTAL STOCKHOLDERS' EQUITY 24,783 25,654
------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $144,130 $133,783
========================
</TABLE>
See notes to consolidated financial statements.
- -------------------------------------------------------------------------------
L&B FINANCIAL, INC.
16
<PAGE>
L&B FINANCIAL, INC.
CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended June 30,
-------------------
1996 1995 1994
---------------------------------------------
<S> <C> <C> <C>
Interest Income:
Loans $ 5,746 $ 5,105 $ 5,080
Interest and dividends on investment securities 934 1,167 1,543
Mortgage-backed securities 3,507 2,596 1,279
Deposits and overnight funds 344 212 336
---------------------------------------------
Total interest income 10,531 9,080 8,238
---------------------------------------------
Interest Expense:
Deposit accounts 4,985 4,041 3,819
Advances from the FHLB 658 121 0
---------------------------------------------
Total interest expense 5,643 4,162 3,819
---------------------------------------------
Net interest income 4,888 4,918 4,419
Provision for loan loss 100 (5) (204)
---------------------------------------------
Net interest after provision for loan loss 4,988 4,913 4,215
---------------------------------------------
Other Income:
Fees for financial services 155 82 79
Loan servicing fees 54 64 54
Net realized gains on the sale of available-for-sale securities 26 0 0
Net gains on the sale of loans 94 0 0
---------------------------------------------
Total other income 329 146 133
---------------------------------------------
Other Expense:
Compensation and employee benefits 1,544 1,626 1,416
Occupancy and equipment 400 412 355
Deposit insurance premiums 231 245 246
Professional services 521 335 228
(Income) loss on foreclosed real estate, net (25) (15) 35
Other 682 525 488
---------------------------------------------
Total other expense 3,353 3,128 2,768
---------------------------------------------
Income before income taxes 1,964 1,931 1,580
Income tax expense 514 549 552
---------------------------------------------
Net income $ 1,450 $ 1,382 $ 1,028
=============================================
Earnings per common share of stock $ 0.93 $ 0.63 n/a
Weighted average number of common shares outstanding: 1,556,720 1,572,790 n/a
</TABLE>
See notes to consolidated financial statements.
- --------------------------------------------------------------------------------
L&B FINANCIAL, INC.
17
<PAGE>
L&B FINANCIAL, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(Dollars in thousands)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Net unrealized
gain/(loss) on Retained
Additional Unearned securities Earnings- Total
Common Paid-in Treasury ESOP Unearned available Substantially Stockholder's
Stock Capital Stock Shares Compensation for sale Restricted Equity
-----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE AT JUNE 30, 1993 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 8,996 $ 8,996
-----------------------------------------------------------------------------------------------------------
Net change in unrealized
gain (loss on investment
securities - - - - - (13) - (13)
Net income - - - - - 1,028 1,028
-----------------------------------------------------------------------------------------------------------
BALANCE AT JUNE 30, 1994 0 0 0 0 - (13) 10,024 10,011
-----------------------------------------------------------------------------------------------------------
Proceeds from sale of
common stock, net of
issuance cost of $660 17 15,998 - (1,000) - - - 15,015
Net change in unrealized
gain (loss) on securities
available-for-sale - - - - - 4 - 4
Fair value of shares
committed to be
released from ESOP - - - 104 - - - 104
Cash dividend ($0.55
per share) - - - - - - (862) (862)
Net income - - - - - - 1,382 1,382
-----------------------------------------------------------------------------------------------------------
BALANCE AT JUNE 30, 1995 17 15,998 0 (896) 0 (9) 10,544 25,654
-----------------------------------------------------------------------------------------------------------
Net change in unrealized
gain (loss) on securities
available-for-sale - - - - - (109) - (109)
Purchase of treasury
stock - (833) (1) - - - (365) (1,199)
Fair value of shares
committed to be
released from ESOP - - - 71 - - - 71
Shares purchased for
stock compensation
plan - - - - (420) - (151) (571)
Compensation expense
under stock
compensation plan - - - - 112 - - 112
Cash dividend ($0.40 per
share) - - - - - - (625) (625)
Net income - - - - - - 1,450 1,450
-----------------------------------------------------------------------------------------------------------
BALANCE AT JUNE 30. 1996 $ 17 $ 15,165 $ (1) $ (825) $ (308) $ (118) $ 10,853 $ 24,783
===========================================================================================================
</TABLE>
See notes to consolidated financial statements.
- -------------------------------------------------------------------------------
L&B FINANCIAL, INC.
18
<PAGE>
L&B FINANCIAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended June 30,
------------------
1996 1995 1994
-------------------------------------------
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net income $ 1,450 $ 1,382 $ 1,028
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loan loss (100) 5 204
Depreciation expense 142 103 81
Unearned compensation expense 183 - -
Net gain on the sale of investment securities available-for-sale (26) - -
Net gain on the sale of loans held-for-sale (94) - -
Gain on the sale of REO (6) (8) (8)
FHLB stock dividends (46) (36) (23)
(Increase) decrease in accrued interest receivable (53) (158) 20
(Increase) decrease in other assets (122) 104 (69)
(Decrease) increase in interest payable (37) 63 -
(Decrease) increase in other liabilities (922) 243 94
-------------------------------------------
Net cash provided by operating activities 369 1,698 1,327
-------------------------------------------
FINANCING ACTIVITIES:
Net increase from issuance of common stock - 16,015 -
Dividends paid (625) (862) -
Purchase of stock for stock compensation plan (571) - -
Purchase of treasury stock (83,375 shares at $14.38 per share) (1,199) - -
Net increase (decrease) in deposits 3,632 (5,229) 151
Proceeds from FHLB advances 18,404 28,665 -
Repayment of FHLB advances (9,808) (23,761) -
-------------------------------------------
Net cash provided by financing activities 9,833 14,828 151
-------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
L&B FINANCIAL, INC.
19
<PAGE>
L&B FINANCIAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended June 30,
-------------------
1996 1995 1994
-----------------------------------
<S> <C> <C> <C>
INVESTING ACTIVITIES:
Loan originations (38,509) (21,966) (22,615)
Principal repayments on loans 22,929 11,669 14,950
Proceeds from the sale of loans 8,652 3,846 9,427
Purchase of investment and mortgage-backed Securities
Held-to-maturity (11,904) (20,500) (18,935)
Available-for-sale (4,463) - -
Proceeds from the sale and maturity of investments and mortgage-backed
Held-to-maturity 1,387 5,362 5,426
Available-for-sale 8,332 - -
Principal repayments on mortgage-backed securities 6,100 4,876 1,701
proceeds from sale of real estate acquired through foreclosure 100 159 237
Property improvement to real estate owned (1) (2) -
Purchase of premises and equipment (327) (370) (210)
-----------------------------------
Net cash used in investing activities (7,704) (16,926) (10,019)
-----------------------------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 2,498 (400) (8,541)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 6,418 6,818 15,359
-----------------------------------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 8,916 $ 6,418 $ 6,818
===================================
SUPPLEMENTAL DISCLOSURES:
Cash paid for:
Income taxes $ 525 $ 512 $ 580
Interest $ 5,680 $ 4,099 $ 3,835
Non-cash transactions:
Loans foreclosed $ 153 $ 62 $ 109
</TABLE>
See notes to consolidated financial statements.
- --------------------------------------------------------------------------------
L&B FINANCIAL, INC.
20
<PAGE>
L&B FINANCIAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
YEARS ENDED JUNE 30, 1996, 1995, 1994
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization - L&B Financial, Inc. ("L&B") was incorporated in the State of
- ------------
Texas in November 1995) for the purpose of becoming a savings and loan holding
company for the Loan and Building State Savings Bank (the "Bank"). On October
17, 1995, the shareholders of the Bank approved a plan to reorganize the Bank
into the holding company form of ownership. The reorganization was completed on
November 13, 1995, on which date the Bank became a wholly-owned subsidiary of
L&B and the shareholders of the Bank exchanged all of their outstanding shares
(1,667,500) for I ,667,500 shares of L&B and became shareholders of L&B Prior to
the completion of the reorganization, L&B had no material assets or liabilities
and engaged in no business activity. Subsequent to the acquisition of the Bank,
L&B has engaged in no significant activity other than holding the stock of the
Bank and engaging in certain passive investment activities. Accordingly, the
1996 consolidated financial statements are those of the reorganization.
Consolidated financial statements and related data for years prior to 1996 are
those of the Bank. L&B and the Bank are collectively referred to herein as the
"Corporation".
Business - L&B Financial, Inc.'s principal subsidiary, Loan and Building State
- --------
Savings Bank, is a state-chartered stock savings bank conducting business from
its branch bank system located in northeast Texas in the counties of Hopkins,
Franklin, Titus, Camp, Morris and Bowie. The Corporation is subject to
competition from other financial institutions and other financial services
companies. The business of the Corporation consists primarily of attracting
deposits from the general public and originating loans on residential
properties. The Corporation also makes commercial real estate, construction and
consumer loans. The Corporation is subject to the regulations of certain federal
and state agencies and undergoes periodic examinations by those regulatory
authorities.
Basis of Financial Statement Presentation - The consolidated financial
- -----------------------------------------
statements have been prepared in conformity with generally accepted accounting
principles. In preparing the consolidated financial statements, management is
required to make estimates and assumptions that affect the reported amounts of
assets, liabilities, revenues and expenses for the period. Actual results could
differ significantly from those estimates.
Material estimates that are particularly susceptible to significant change in
the near-term relate to the determination of the allowance for loan loss, the
valuation of other real estate owned, and the valuation o{deferred tax assets
and the effect of prepayments on mortgage servicing rights and the premiums and
discounts associated with mortgage-related securities. Management believes that
the allowance for loan loss, the valuations of other real estate owned and
deferred tax assets are adequate, and that the effect of prepayments on mortgage
servicing rights and premiums and discounts associated with investments and
mortgage-related securities has been adequately evaluated. Various regulatory
agencies, as an integral part of their examination process, periodically review
the Corporation's allowance for loan loss and valuation of other real estate
owned.
Principals of Consolidation - The accompanying consolidated financial
- ---------------------------
statements include the accounts of L&B Financial, Inc., Loan and Building State
Savings Bank and its wholly owned subsidiary, L. B. Resource, Inc. All
significant intercompany transactions and balances are eliminated in
consolidation.
Cash and Cash Equivalents - Cash and cash equivalents include cash on hand and
- -------------------------
amounts due from depository institutions, federal funds sold and short-term,
interest-bearing deposits with original maturities of three months or less. The
Corporation maintains cash deposits in other depository institutions which
occasionally exceed the amount of deposit insurance available. Management
periodically assesses the financial condition of these institutions.
The Corporation is required to maintain certain daily reserve balances in
accordance with Federal Reserve Board requirement.
- --------------------------------------------------------------------------------
L&B FINANCIAL, INC.
21
<PAGE>
Investments and Mortgage-backed Securities - Effective January 1,1994, the
- ------------------------------------------
Corporation adopted SFAS 115, and accounts for its investment in debt and equity
securities as prescribed in the pronouncement. The following summarizes FASB 115
security classifications and corresponding accounting treatment:
Held-to-Maturity securities are debt securities that the Corporation has
the positive intent and ability to hold to maturity and are reported at
amortized cost. Premiums and discounts are amortized or accreted as
adjustments to income over the life of the security using the level yield
method.
Trading securities are debt and equity securities that are bought and
held principally for the purpose of selling in the near term and are
reported at fair value, with unrealized gains and losses included in
earnings. At June 30, 1996 and 1995, no securities have been classified
as trading securities.
Available-for-sale securities are debt and equity securities not
classified as either held-to-maturity or trading securities and reported
at fair value with unrealized gains and losses excluded from earnings and
reported as a separate component of stockholders' equity, net of tax.
Premiums and discounts are amortized or accreted as adjustments to income
over the life of the security using the level yield method.
Gains or losses on the sale of securities is based on the specific
identification method. The fair value of securities is based on quoted market
prices, or dealer quotes. If a quoted market price is not available, fair value
is estimated using quoted market prices for similar securities.
Transfers of securities between classifications are accounted for at fair
value.
Federal Home Loan Bank stock is owned due to regulatory and collateral
requirements. Federal Home Loan Bank stock is not considered to be a marketable
equity security under SFAS 1 ~ 5 and, therefore, is carried at cost.
Loans - Loans that the Corporation has the intent and ability to hold to
- -----
maturity or repayment, are recorded at cost and represent the unpaid principal
balances, adjusted for allowance for loan loss, net deferred origination fees
or costs on originated loans and unamortized premiums or discounts on loans
purchased. Loans consist principally of conventional one-to-four family
residential loans, commercial real estate loans, multi-family real estate
loans, one-to-.1four family construction loans and consumer loans, which
primarily consist of automobile loans, loans on deposits and other personal
loans.
Loans are placed on a non-accrual status when, in the opinion of management,
the possibility of collection of additional interest is deemed insufficient to
warrant further accrual. Generally, the Corporation places all loans more than
ninety days past due on non-accrual status. when a loan is placed on non-
accrual status, interest accruals are suspended until, in the opinion of
management, the borrower has regained the ability to make periodic interest and
principal payments in accordance with the terms of the loan agreement.
Discounts on acquired first mortgage loans are amortized to income using
methods that approximate the interest method over the remaining period to
contractual maturity, adjusted for anticipated prepayments of principal.
Discounts and premiums on consumer loans are recognized over the lives of the
loans using methods that approximate the interest method.
Loans Held for Sale - Mortgage loans originated and intended for sale in the
- -------------------
secondary market are valued at the aggregate of lower of cost or market. Net
unrealized losses are recognized through a valuation allowance by charges to
income. Most loans sold are sold with servicing rights retained, however, the
Corporation does sell some loans with servicing released. The decision to
retain or sell the servicing rights is a function of the loan product and the
buyer. Gains and tosses on the sale of such loans are recognized when
substantially all risks and rewards of ownership are transferred. If the loan
servicing rights are retained, the value of future servicing rights are
considered in the determination of the amount of gain or loss.
Allowances for Estimated Losses - The Corporation maintains allowances for
- -------------------------------
estimated loan loss, uncollected accrued interest receivable and losses on real
estate acquired in the settlement of loans. Loss provisions are charged to
income when, in the opinion of management, such losses for which no provision
has been made are probable.
- --------------------------------------------------------------------------------
L&B FINANCIAL, INC.
22
<PAGE>
The allowance for loan loss is maintained at a level that management considers
adequate to provide for potential losses based upon an evaluation of known and
inherent risks in the loan portfolio. Management believes that the allowance for
loan loss is adequate. Management's periodic evaluation is based upon analysis
of the portfolio, past loss experience, current economic conditions, and other
relevant factors. while management uses the best information available to make
such evaluations, hiture adjustments to the allowance may be necessary if
economic conditions differ substantially from the assumptions used in making the
evaluation. In addition, various regulatory agencies as an integral part of
their examination process, periodically review the allowance for loan loss. Such
agencies may require the Corporation to recognize additions to the allowance for
loan loss based on their judgments of information which is available to them at
the time of their examination.
Effective July 1, 1995, the Corporation adopted Statement of Financial
Accounting Standards No. 114, "Accounting by Creditors for Impairment of a Loan"
(SFAS 114), and the Statement of Financial Accounting Standards No. 11 S,
"Accounting by Creditors for Impairment of a Loan - Income Recognition and
Disclosures" (SFAS 118), which amends SFAS 114.
SFAS 114, as amended by SFAS 118, defines the recognition criteria for loan
impairment and the measurement methods for certain impaired loans and loans for
which terms have been modified in troubled debt restructuring (a restructured
loan). Specifically, a loan is considered impaired when it is probable a credhor
will be unable to collect all amounts due - both principal and interest -
according to the contractual terms of the loan agreement. when measuring
impairment, the expected filture cash flows of an impaired loan are required to
be discounted at the loan's effective interest rate. Alternatively, Impairment
can be measured by reference to an observable market price, if one exists, or
the fair value of the co] lateral for a collateral dependent loan. Regardless of
the historical measurement method used, SFAS 114 requires a creditor to measure
impairment based on the fair value of the collateral when the creditor
determines foreclosure is probable. Additionally, impainnent of a restructured
loan is measured by discounting the total expected fliture cash flows at the
loan's effective rate of interest as stated in the original loan agreement.
SFAS I 18 amends SFAS 114 to allow a creditor to use existing methods for
recognizing interest on an impaired loan. The Corporation has elected to
continue to use its existing nonaecrual methods for recognizing interest income
on impaired loans. The adoption of SFAS 118 and SFAS 114 resulted in no
adjustment to the allowance for loan loss.
Office Properties and Equipinsia - Office properties and equipment are
- --------------------------------
presented at cost less accumulated depreciation. Depreciation is provided on the
straight-line basis over the estimated useful lives of the assets. Estimated
useflil lives for buildings and improvements are 20 - 50 years and generally 5 -
10 years for flirniture, fixtures, and equipment.
The cost of maintenance and repairs is charged to expense as incurred, and
improvements and other expenditures, which materially increase property lives
are capitalized. The costs and accumulated depreciation applicable to premises
and equipment retired, or otherwise disposed of, are eliminated from the related
accounts, and any resulting gains or losses are credited or charged to income.
Real Estate Held-for-Development - Real estate held-for-development is
- --------------------------------
carried at the lower of depreciated cost or estimated net realizable value. The
Corporation's investment in real estate consisted of land and commercial rental
property.
Real Estate Acquired Through Foreclosure - Real estate acquired through
- ----------------------------------------
foreclosure is stated at the lower of cost or estimated fair value less selling
costs. Any accrued interest on the related loan at the date of acquisition is
charged to operations. Costs related to the development and improvement of the
property are capitalized to the extent that such costs do not exceed the
estimated fair value less selling costs of the property. Costs related to
holding the property are charged to expense.
Deferred Loan Origination Fees and Costs - Nonrefundable loan fees and
- ----------------------------------------
certain direct loan origination costs are deferred and recognized over the lives
of the loans using the level yield method. Amortization of these deferrals is
recognized as interest income.
- --------------------------------------------------------------------------------
L&B FINANCIAL, INC.
23
<PAGE>
Mortgage Servicing Rights - Mortgage servicing rights represent the carrying
- -------------------------
value of the rights to service mortgage loans for others. The mortgage servicing
rights are amortized against loan servicing fee income on an accelerated basis
in proportion to, and over the period of, estimated net future loan servicing
fee income, which periods initially do not exceed seven years. Service fee
income is recognized when the related loan payments are collected. On a
quarterly basis, management evaluates and makes any necessary adjustments to the
remaining balances of mortgage servicing rights, if the fair value of the
disaggregated servicing rights indicate that the carrying value is not
considered recoverable. Assumptions utilized in the quarterly evaluations are
based on current prepayment and investor rates of return provided by an
independent investment advisor.
Effective July 1, 1995, the Corporation adopted SFAS 122 "Accounting for
Mortgage Servicing Rights." This standard prospectively requires the
Corporation, which services mortgage loans for others in return for a servicing
fee, to recognize these servicing rights as assets, regardless of how such
assets were acquired. Additionally, the Company is required to assess the fair
value of these assets at each reporting date to determine impairment. The
adoption of SFAS 122 resulted in an increase of approximately $42,000 in gains
on the sale of loans held-for-sale and a reduction of approximately $4,000 in
loan servicing fees due to the amortization of originated mortgage servicing
rights. At June 30, 1996, the Corporation had $41,000 in mortgage servicing
rights.
Income taxes - The Corporation and its subsidiaries file a consolidated
- ------------
federal income tax return. The Corporation adopted SFAS 109, "Accounting for
Income Taxes" effective July 1, 1993. Deferred tax assets and liabilities are
recognized for the future effects attributable to the differences between the
financial statement carrying amounts of existing assets and liabilities and
respective tax bases, as well as operating loss and tax credit carryforwards.
Deferred tax assets are recognized for the future deductible "temporary
differences" and tax loss and credit carryforwards if their realization is "more
likely than not." Deferred tax assets and liabilities are measured using enacted
tax rates expected to apply to taxable income in years in which those temporary
differences are expected to be recovered or settled. The effect on deferred
taxes of a change in tax rates is recognized in income in the period that
includes the enactment date.
Employee Stock Ownership Plan and Recognition and Retention Plan - Shares of
- ----------------------------------------------------------------
common stock issued to the Corporation's Employee Stock Ownership Plan Q'ESOP")
were recorded as unearned ESOP shares in stockholders' equity at the fair value
of the shares at the date of issuance to the plan. As shares are committed to be
released, the Corporation reduces the carrying value of the unearned shares and
records compensation expense equal to the current fair value of the shares
committed to be released.
Shares of common stock acquired for the Corporation's Recognition and Retention
Plan were recorded as unearned compensation in stockholders' equity at the fair
value of the shares at the date of award. Total compensation cost was measured
at the fair value of the shares as of the date of the award and is recognized as
compensation expense over sixty months, the term over which the awards vest. The
difference between the fair value of the shares at the date of award and the
purchase price of those shares was charged against additional paid-in capital.
Earnings Per Common Share of Stock - Earnings per common share of stock is
- ----------------------------------
computed by dividing net income by the weighted average number of common shares
outstanding during each year. Stock options outstanding are not considered in
determining earnings per share because they have no significant dilutive effect.
The Corporation accounts for the 100,050 shares acquired by the ESOP in
accordance with Statement of Position 93-6. Shares controlled by the ESOP are
not considered in the weighted average shares outstanding until the shares are
committed for allocation.
The Bank completed its initial stock offering on October 14, 1994, and
accordingly, earnings per share for 1995 is calculated by dividing net income
since October 14, 1994 of approximately $990,000 ,by the weighted average number
of common shares outstanding.
Reclassifications - Certain amounts in prior years' financial statements have
- -----------------
been reclassified to conform with current year classifications.
- --------------------------------------------------------------------------------
L&B FINANCIAL, INC.
24
<PAGE>
2. INVESTMENT AND MORTGAGE-BACKED SECURITIES
Held-to-Maturity - Securities classified as held-to-maturity consisted of the
- ----------------
following (in thousands):
<TABLE>
<CAPTION>
June 30, 1996
-------------
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
--------------------------------------------------
<S> <C> <C> <C> <C>
Investment securities:
U.S. Agency obligations $ 7,388 $ 49 $ (96) $ 7,341
Municipal securities 784 6 (3) 787
--------------------------------------------------
Total investment securities 8,172 55 (99) 8,128
--------------------------------------------------
Mortgage-backed securities:
FHLMC 4,893 28 (54) 4,867
FNMA 1,827 29 (9) 1,847
GNMA 2,149 26 (8) 2,167
CMO's 25,137 319 (233) 25,223
--------------------------------------------------
Total mortgage-backed securities 34,006 402 (304) 34,104
--------------------------------------------------
Total held-to-maturity securities $ 42,178 $ 457 $ (403) $ 42,232
==================================================
</TABLE>
<TABLE>
<CAPTION>
June 30, 1995
-------------
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
--------------------------------------------------
<S> <C> <C> <C> <C>
Investment securities:
U.S. Agency obligations $ 16,595 $ 92 $ (401) $ 16,286
Municipal securities 818 5 (8) 815
--------------------------------------------------
Total investment securities 17,413 97 (409) 17,101
--------------------------------------------------
Mortgage-backed securities:
FHLMC 11,428 206 (19) 11,615
FNMA 7,312 97 (12) 7,397
GNMA 7,985 223 (115) 8,093
CMO's 19,419 292 (268) 19,443
--------------------------------------------------
Total mortgage-backed securities 46,144 818 (414) 46,548
--------------------------------------------------
Total held-to-maturity securities $ 63,557 $ 915 $ (823) $ 63,649
==================================================
</TABLE>
- --------------------------------------------------------------------------------
L&B FINANCIAL, INC.
25
<PAGE>
Available-for-sale - Securities classified as available-for-sale consisted of
- ------------------
the following (in thousands):
<TABLE>
<CAPTION>
June 30, 1996
-------------
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
----------------------------------------------
<S> <C> <C> <C> <C>
Investment securities
U.S. Government and agency obligations $ 5,964 $ 0 $ (98) $ 5,866
Mutual funds 1,264 0 (23) 1,241
FNMA stock 2 18 0 20
----------------------------------------------
Total investment securities 7,230 18 (121) 7,127
----------------------------------------------
Mortgage-backed securities:
FHLMC 3,958 97 0 4,055
FNMA 2,486 3 (23) 2,466
GNMA 4,614 24 (123) 4,515
CMO's 3,865 17 (59) 3,823
----------------------------------------------
Total mortgage-backed securities 14,923 141 (205) 14,859
----------------------------------------------
Total available-for-sale securities $ 22,153 $ 159 $ (326) $ 21,986
==============================================
</TABLE>
<TABLE>
<CAPTION>
June 30, 1995
-------------
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
----------------------------------------------
<S> <C> <C> <C> <C>
Investment securities:
Mutual funds $ 200 $ 0 $ (22) $ 178
FNMA stock 2 13 0 15
----------------------------------------------
Total investment securities 202 13 (22) 193
----------------------------------------------
Total available-for-sale securities $ 202 $ 13 $ (22) $ 193
==============================================
</TABLE>
Gross realized gains and gross realized losses on sales of available-for-sale
securities were $76,000 and $50,000, respectively, for the year ended June 30,
1996. There were no sales of securities during the years ended June 30, 1995 and
1994.
In accordance with the Financial Accounting Standards Board's implementation
guidance on SFAS 115, the Corporation reassessed the classification of all
securities held on November 31, 1995. As a result of such reassessment, the
Corporation transferred investment and mortgage-backed securities with an
amortized cost of $28,421,000 from held-to-maturity to available-for-sale. The
securities were transferred at fair value resulting in an unrealized gain of
approximately $160,000, which was recognized, net of deferred tax, as a separate
component of stockholders' equity.
- --------------------------------------------------------------------------------
L & B FINANCIAL, INC.
26
<PAGE>
The maturities of the investment and mortgage-backed securities at June 30, 1996
are as follows (in thousands);
<TABLE>
<CAPTION>
Held-to-maturity Available-for-sale
---------------- ------------------
Amortized Fair Amortized Fair
Cost Value Cost Value
-----------------------------------------------------------
<S> <C> <C> <C> <C>
Due in one year or less $ 4,906 $ 4,095 $ 573 $ 570
Due after one year through five years 3,834 3,749 6,679 6,591
Due after five years through ten years 1,037 2,627 5,739 5,776
Due after ten years 33,211 31,761 7,896 7,790
-----------------------------------------------------------
Total debt investment and mortgage-backed securities 42,178 42,232 20,887 20,727
-----------------------------------------------------------
Mutual funds 0 0 1,264 1,241
FNMA stock 0 0 2 18
-----------------------------------------------------------
Total investment and mortgage-backed securities $ 42,178 $ 42,232 $ 22,153 $ 21,986
===========================================================
</TABLE>
As of June 30, 1996, $300,000 par value of debt securities were pledged as
collateral to secure certain deposit accounts.
At June 30, 1996, approximately $9,110,000 par value of the debt securities were
structured notes, which included $4,965,000 of adjustable-rate debt securities
and $4,000,000 with call provisions ranging form 1 month to 3 years. The
adjustment periods for the adjustable-rate debt securities range from monthly to
annual adjustments and are generally adjusted based on the movement of two
specific interest rates plus a margin, such as the ten year constant maturity
rate minus one month London interbank overnight rate ("LIBOR"), plus 250 basis
points. These securities are more sensitive to the movements between interest
rates and the slope of the yield curve than the relative level of interest
rates.
The mortgage-backed securities held at June 30, 1996 mature between one and
forty years. The actual lives of these securities may be significantly shorter
as the result of payments and prepayments of the underlying collateral.
Adjustable-rate mortgage-backed securities totaled approximately $7,757,000 at
June 30, 1996. These securities have interest rates that adjust with movements
in the Cost of Funds Index ("COFI ARM's") and the one year Constant Maturity
Treasury ("CMT ARM's"). Adjustment periods range from monthly to annually.
At June 30, 1996, the Corporation's Collateralized Mortgage Obligations
("CMO's") portfolio consisted of securities issued by the Federal Home Loan
Mortgage Corporation ("FHLMC") or the Federal National Mortgage Corporation
("FNMA"). The Corporation purchases only CMO's that are considered non-high
risk, as computed using the Federal Financial Institution Exam Council (the
"FFIEC") guidelines. All CMO's are subsequently subjected to the FFIEC test at
least annually. At June 30, 1996, all CMO's "passed" the FFIEC test and are
classified non-high risk for regulatory purposes. Adjustable-rate CMO's totaled
approximately $25,137,000 at June 30, 1996 and generally have interest rates
that adjust monthly with movements in one month LIBOR and the prime rate. The
yield on the CMO portfolio was 6.88% at June 30, 1996.
- -------------------------------------------------------------------------------
L&B FINANCIAL, INC.
27
<PAGE>
3. LOANS RECEIVABLE, NET
Loans receivable consisted of the following (in thousands):
<TABLE>
<CAPTION>
June 30,
--------------------
1996 1995
--------------------
<S> <C> <C>
Real estate loans:
Fixed-rate single-family residential $ 15,726 $ 15,478
Adjustable-rate single-family residential 24,403 22,083
Loan held-for-sale, at fair value 490 792
Multi-family residential 5,228 3,755
Construction 4,669 4,168
Land 1,760 1,152
Commercial mortgage 12,616 11,611
-------------------
Total real estate loans 64,892 59,039
--------------------
Other loans:
Share loans 1,772 1,576
Consumer and installment loans 2,756 2,133
--------------------
Total other loans 4,528 3,709
--------------------
Total loans 69,420 62,748
--------------------
Less:
Undisbursed portion of interim construction loans (2,230) (2,248)
Allowance for loan loss (756) (858)
Unearned discount (82) (260)
----------------------
Total loans, net $ 66,352 $ 59,382
======================
Weighted-average interest rate of loans 8.70% 8.73%
</TABLE>
Participations sold and serviced by the Corporation at June 30, 1996, 1995, and
1994 were approximately $21,669,000, $20,521,000 and $21,651,000, respectively.
The Corporation sells loans in the secondary market without recourse and retains
servicing rights on the sale of conventional mortgage loans. The Corporation
originates and sells all FHA/VA servicing released. Servicing loans for others
consists of collecting mortgage payments, maintaining escrow accounts,
disbursing payments to investors and foreclosure processing. Loan servicing
income is recorded on the accrual basis and includes servicing fees received
from the investors as well as certain charges collected from the borrower, such
as late payment fees. In connection with these loans serviced for others, the
Corporation held borrowers' escrow balances of $490,000 at June 30, 1996 and
$517,000 at June 30, 1995.
Adjustable-rate real estate loans ($37,707,000 and $34,986,000 at June 30, 1996
and 1995, respectively) are subject to rate adjustments annually and generally
are adjusted based on the movement of One year Constant Maturity Treasury index.
The maximum loan rates can be adjusted is 200 basis points in any one year with
a maximum life time cap of 500 basis points.
At June 30, 1996 and 1995, loans which were accounted for on a non-accrual basis
or were contractually past due ninety days or more totaled approximately
$137,000 and $183,000, respectively. The amount the Corporation will ultimately
realize from these loans could differ materially from their carrying value
because of future developments affecting the underlying collateral or the
borrower's ability to repay the loans. During the years ended June 30, 1996,
1995 and 1994, the Corporation recognized no interest income on loans past due
90 days or more, whereas, under the original terms of these loans, the
Corporation would have recognized additional interest income of approximately
$1,000, $6,000 and $10,000, respectively.
- --------------------------------------------------------------------------------
L&B FINANCIAL, INC.
28
<PAGE>
Activity in the allowance for loan loss consisted of the following:
<TABLE>
<CAPTION>
Year Ended June 30,
-------------------
1996 1995 1994
--------------------------------
<S> <C> <C> <C>
Balance at beginning of year $ 858,000 $ 876,000 $ 716,000
Provisions for loan loss (100,000) 5,000 204,000
Charge-offs, net of recoveries (2,000) (23,000) (44,000)
--------------------------------
Balance at end of year $ 756,000 $ 858,000 $ 876,000
================================
</TABLE>
Directors and officers of the Corporation are customers of the Corporation in
the ordinary course of business. Loans to directors and officers have terms
consistent with those offered to other customers. The aggregate amount of such
loans outstanding at June 30, 1996 was $518,000. During 1996, new loans to such
related parties amounted to $137,000 and repayments amounted to $107,000.
The Corporation has no commitments to loan additional funds to the borrowers of
impaired or nonaccrual loans.
At June 30, 1996 and 1995, accrued interest receivable on loans was $413,000 and
$433,000, respectively.
4. OFFICE PROPERTIES AND EQUIPMENT
Office properties and equipment consisted of the following (in thousands):
<TABLE>
<CAPTION>
June 30,
--------
1996 1995
---------------------
<S> <C> <C>
LAND $ 553 $ 297
Building and improvements 1,697 969
Office furniture, fixtures, and equipment 632 531
---------------------
Total 2,882 1,797
Less accumulated depreciation (614) (472)
---------------------
Office properties and equipment, net $ 2,268 $ 1,325
=====================
</TABLE>
Depreciation expense totaled $142,000, $103,000, and $81,000 for the years ended
June 30, 1996, 1995, and 1994, respectively.
5. REAL ESTATE OWNED
Real estate acquired through foreclosure (REO) consists of the following types:
<TABLE>
<CAPTION>
June 30,
--------
1996 1995
-----------------------
<S> <C> <C>
Real estate acquired through foreclosure
Single-family residential $ 203,000 $ 144,000
Commercial 150,000 150,000
-----------------------
Total real estate acquired through foreclosure $ 353,000 $ 294,000
=======================
</TABLE>
- --------------------------------------------------------------------------------
L&B FINANCIAL, INC.
29
<PAGE>
The following is a summary of the results of real estate acquired through
foreclosure operations for the periods indicated:
<TABLE>
<CAPTION>
Year ended June 30,
-------------------
1996 1995 1994
--------------------------------------
<S> <C> <C> <C>
Income from the rental and operation of REO $ 34,000 $ 32,000 $ 13,000
Net gain on the sale of REO property 6,000 8,000 8,000
Expense of holding REO (15,000) (25,000) (56,000)
--------------------------------------
Net income (expense) $ 25,000 $ 15,000 $ (35,000)
======================================
</TABLE>
There were no balances in the allowance for loss on real estate acquired through
foreclosure for the years ended June 30, 1996, 1995 and 1994.
6. INVESTMENT IN JOINT VENTURE
The Corporation had an ownership interest in a joint venture project, Plaza 30
II, through a wholly-owned subsidiary, L.B. Resource, Inc. (dissolved in
December 1995). The Corporation's ownership share of the joint venture project
was 75.5% and was accounted for by the equity method of accounting. The venture
involved the acquisition, development and rental of commercial real estate.
Plaza 30 II was dissolved in December 1995 with the Corporation acquiring direct
ownership of the sole remaining property. A summary of the financial position
and results of operations of Plaza 30 II were as follows (in thousands):
<TABLE>
<CAPTION>
June 30
-------
1996 1995
-----------------
<S> <C> <C>
Assets
- ------
Land, buildings and improvements $ 0 $ 758
Other assets 0 15
-----------------
Total assets 0 773
=================
Liabilities and Equity
- ----------------------
Notes payable - SSLBA 0 792
Equity (deficit) 0 (19)
-----------------
Total liabilities and equity $ 0 $ 773
=================
</TABLE>
<TABLE>
<CAPTION>
Year ended June 30,
-------------------
1996 1995 1994
-----------------------------
<S> <C> <C> <C>
Income $ 849 $ 74 $ 100
Expense (822) (99) (109)
-----------------------------
Net income (Loss) $ 27 $ (25) $ (9)
=============================
</TABLE>
- --------------------------------------------------------------------------------
L&B FINANCIAL, INC.
30
<PAGE>
7. SUBSIDIARY CORPORATION
In January 1983, the Corporation established its wholly-owned subsidiary, L.B.
Resource, Inc. This subsidiary was established to acquire, develop, an sell or
rent real estate. In December 1995, L.B. Resource, Inc. was dissolved. A summary
of the financial position and results of operations of the subsidiary follows
(in thousands):
<TABLE>
<CAPTION>
June 30,
--------
1996 1995
-------------------
<S> <C> <C>
Assets $ 0 $ 0
- ------ ===================
Liabilities and Equity
- ----------------------
Other liabilities $ 0 $ 12
Equity (deficit) $ 0 (12)
-------------------
Total liabilities and equity (deficit) $ 0 $ 0
===================
</TABLE>
<TABLE>
<CAPTION>
Year ended June 30,
-------------------
1996 1995 1994
------------------------------
<S> <C> <C> <C>
Income $ 27 $ 74 $ 100
Expense 0 99 109
------------------------------
Net income (Loss) $ 27 $ (25) $ (9)
==============================
</TABLE>
8. DEPOSIT ACCOUNTS
Deposit accounts at June 30, were as follows (dollars in thousands):
<TABLE>
<CAPTION>
1996 1995
--------------------------------------------------------------------
Account Type Rate Balance % Rate Balance %
- ------------ --------------------------------------------------------------------
<S> <C>
NOW accounts:
Commercial-noninterest bearing 0.00% $ 1,949 1.86% 0.00% $ 82 0.08%
Noncommercial 1.57% 2.895 2.68% 1.87% 2,908 2.88%
Super NOW accounts 2.39% 746 0.71% 2.77% 758 0.75%
Money market checking accounts 3.12% 7,750 7.41% 3.00% 8,452 8.37%
Savings accounts 3.03% 4,794 4.58% 2.75% 4,773 4.73%
--------------------------------------------------------------------
Total demand and savings deposits 2.39% 18,044 17.26% 2.71% 16,973 16.81%
--------------------------------------------------------------------
Certificates of deposits:
Up to 3.99% 995 0.95% 13,213 13.09%
4.00%-5.99% 74,021 70.79% 62,504 61.93%
6.00%-6.99% 8,241 7.88% 7,366 7.30%
Above 7.00% 3,264 3.12% 877 0.87%
----------------------- --------------------
Total certificates of deposits 5.32% 86,521 82.74% 5.11% 83,960 83.19%
--------------------------------------------------------------------
Total deposit accounts 4.81% $ 104,565 100.00% 4.71% $ 100,933 100.00%
====================================================================
</TABLE>
As of June 30, 1996 and 1995, total deposit accounts included approximately
$1,743,000 and $1,756,000.
- --------------------------------------------------------------------------------
L&B FINANCIAL, INC.
31
<PAGE>
respectively, of deposits from the Corporation's officers, directors, employees
or parties related to them.
As of June 30, 1996, deposit accounts with balances of $100,000 and over totaled
approximately $13,702,000.
Certificates of deposits by maturity were as follows (in thousands):
<TABLE>
<CAPTION>
June 30,
--------
Maturity Date 1996 1995
- ------------- ------------------------
<S> <C> <C>
Within 1 year $ 68,843 $ 66,247
After 1 year but within 2 years 9,874 10,937
After 2 years but within 3 years 3,716 3,251
Thereafter 4,088 3,525
------------------------
Total certificates of deposits $ 86,521 $ 83,960
========================
</TABLE>
Interest expense on deposits consisted of the following (in thousands):
<TABLE>
<CAPTION>
Year ended June 30,
-------------------
Account type 1996 1995 1994
- ------------ -------------------------------------
<S> <C> <C> <C>
NOW accounts $ 79 $ 72 $ 76
Money market deposit accounts 239 285 361
Savings accounts 146 217 212
Certificate of deposit accounts 4,541 3,486 3,186
Early withdrawal penalties (20) (19) (16)
-------------------------------------
Total interest expense $ 4,985 $ 4,041 $ 3,819
=====================================
</TABLE>
9. ADVANCES FROM THE FEDERAL HOME LOAN BANK
Advances from the Federal Home Loan Bank consisted of the following (in
thousands):
<TABLE>
<CAPTION>
June 30,
--------
1996 1995
-------------------------
<S> <C> <C>
Contractual Maturity:
- --------------------
Within one year - fixed rate $ 13,500 $ 4,904
-------------------------
Total advances $ 13,500 $ 4,904
=========================
Weighted average interest rate 5.51% 6.01%
</TABLE>
The Corporation pledges as collateral to these borrowings their Federal Home
Loan Bank stock and has entered into blanket collateral agreements with the
Federal Home Loan Bank whereby the Corporation maintains, free of other
encumbrances, qualifying mortgages (as defined) with unpaid principal balances
equal to, when discounted at 75% of the principal balances, 100% of total
advances. Under this borrowing arrangement, the Corporation had the ability to
borrow an additional $11,940,000 at June 30, 1996.
As of June 30, 1995, investment securities with a carrying value of $5,004,000
were pledged as collateral for FHLB advances. No investment securities were
pledged as collateral for FHLB advances at June 30, 1996.
- --------------------------------------------------------------------------------
L&B Financial, INC.
32
<PAGE>
10. INCOME TAXES
The consolidated provision for income taxes consists of the following (in
thousands):
<TABLE>
<CAPTION>
June 30,
--------
1996 1995 1994
------------------------------
<S> <C> <C> <C>
Current federal tax expense $ 611 $ 493 $ 491
Deferred federal tax (benefit) expense (97) 56 61
------------------------------
Total federal tax expense $ 514 $ 549 $ 552
==============================
</TABLE>
The provision for federal income taxes differs from that computed by applying
federal statutory rates to income before federal income tax expense, as
indicated in the following analysis (in thousands):
<TABLE>
<CAPTION>
Year ended June 30,
-------------------
1996 1995 1994
-------------------------------
<S> <C> <C> <C>
Expected tax provision at a 34% rate $ 667 $ 656 $ 537
Increase (decrease) resulting from:
Bad debt deduction (45) (39) (9)
Negative loan loss provision (34) 0 0
Goodwill amortization 0 0 4
Exempt municipal interest (12) (15) (13)
Other, net (62) (53) 33
-------------------------------
Total provision for federal income taxes $ 514 $ 549 $ 552
===============================
</TABLE>
The tax effect of temporary differences that give rise to significant portions
of the deferred tax assets and deferred tax liabilities at June 30, 1996, and
1995 are as follows (in thousands):
<TABLE>
<CAPTION>
June 30,
--------
1996 1995
-----------------
<S> <C> <C>
Deferred tax assets:
Deferred compensation expense $ 26 $ 41
Net unrealized losses on available-for-sale assets 51 5
Other 0 3
-----------------
Total gross deferred tax assets 77 49
-----------------
Deferred tax liabilities:
FHLB Stock dividends 58 43
Depreciation 25 49
Other 30 34
-----------------
Total 113 126
-----------------
Net deferred tax liability (included in other liabilities) $ 36 $ 98
=================
</TABLE>
The Corporation is permitted a special bad debt deduction in determining federal
taxable income, subject to certain limitations. If the amounts that qualify as
bad debt deductions for federal income tax purposes are later used for purposes
other than for bad debt losses, they will be subject to federal income tax at
the then current corporate rate. As permitted under SFAS 109, no deferred tax
liability is provided for approximately $2,200,000 ($748,000 approximate tax
effect) of such tax bad debt reserves that arose prior to January 1, 1988.
Under recent tax legislation, thrift institutions must recapture certain
"applicable excess bad debt reserves" over a six
- --------------------------------------------------------------------------------
L & B FINANCIAL, INC.
33
<PAGE>
year period, subject to certain requirements, and begin paying taxes on such.
Generally, the 1987 and prior reserves would be exempt from such recapture. The
corporation believes the implementation of this legislation will not have a
material effect on the Corporation's financial statements. At June 30, 1996, the
pre 1988 tax bad debt reserves totaled approximately $2,400,000.
11. EMPLOYEE BENEFIT PLANS
Prior to June 30, 1995, the Corporation maintained a target benefit plan
covering substantially all employees. The plan required an employer's
contribution based on 17.5% of the participants average compensation. Effective
September 15, 1994, the plan and assets thereof were merged into the
Corporation's 401(k) Plan. The Corporation has maintained a section 401(k) plan
since the adoption of such plan during 1993. Full-time employees who have been
credited with at least 1,000 hours of service during a twelve-month period and
who have attained age 21 are eligible to participate in the plan. The
Corporation's Board of Directors considers a discretionary matching contribution
on an annual basis. Participant benefits ceased to accrue under the target
benefit plan as a result of the merger. Expenses relating to these two plans
included in compensation and employee benefits expense were approximately $0,
$9,000 and $56,000, for the years ended June 30, 1996, 1995 and 1994,
respectively.
In addition to the aforementioned benefit plans, the Corporation has an unfunded
deferred compensation arrangements with two key officers. Expense reported in
the consolidated statements of income under this arrangement totaled
approximately $5,000, $4,000, and $4,000 for the years ended June 30, 1996,
1995, and 1994, respectively. At June 30, 1996, the Corporation had recorded a
liability of $126,000 related to this arrangement.
Effective February 28, 1995, the Corporation established a Recognition and
Retention Plan. The purpose of this plan is to retain personnel of experience
and ability by providing employees and non-employee directors with a
proprietary interest in the Corporation as compensation for their contributions
and as an incentive for such contributions in the future. The Corporation
acquired 40,000 shares of its common stock on behalf of the Recognition and
Retention Plan through open market purchases. The shares acquired were recorded
as unearned compensation at the fair value of the shares as of the date of the
award. The fair value of such shares at February 28, 1995, was $10.50 per share,
or $420,000. The difference of $151,000 between the average purchase price of
$14.27 and fair market value of the shares acquired was charged against
additional paid-in-capital. For the years ended June 30, 1996 and 1995,
compensation expense relating to the recognition and retention plan was $82,000
and $32,000, respectively. There was no compensation expense related to the
Recognition and Retention Plan for the year ended June 30, 1994.
Effective October 14, 1994, the Corporation established an ESOP that covers all
employees who meet eligibility requirements. The Corporation makes contributions
to the ESOP in an amount equal to the ESOP's debt service less dividends
received, if any, on unallocated shares. For the year ended June 30, 1996,
dividends of $70,000 were used to pay ESOP debt service (including dividends
of $35,000 paid in fiscal 1995). The ESOP shares are pledged as collateral on
the debt. As the debt is repaid, shares are released from collateral and
allocated to active participants accounts based on the principal and interest
method. During the year ended June 30, 1995, the Corporation adopted AICPA
Statement of Position 93-6, "Employers' Accounting for Employee Stock Ownership
Plans" ("SOP 93-6"). In accordance with SOP 93-6, the ESOP's debt is reflected
in the Bank's balance sheet as a long-term borrowing, with such debt being
eliminated through consolidation at June 30, 1996. A corresponding reduction in
stockholders' equity termed "Unearned ESOP Shares" reflect the value of the
unreleased ESOP shares. The adoption of SOP 93-6 had no effect on prior year
financial statements. For the years ended June 30, 1996 and 1995, ESOP expense
charged to compensation and employee benefits was $108,000 and $198,000,
respectively, of which $63,000 and $58,000 represented interest expense on ESOP
debt. For the year ended June 30, 1994, there were no ESOP related expenses.
- --------------------------------------------------------------------------------
L&B Financial, Inc.
34
<PAGE>
At June 30, 1996, ESOP shares were as follows:
Shares allocated 14,723
Shares committed to be released 4,232
Unallocated shares 81,095
The ESOP had outstanding debt to LAB Financial, Inc at June 30, 1996 of
(Pounds)825,000. Such debt is to be repaid over a period often years at an
interest rate of 9.0%. Debt service paid quarterly. L&B Financial, Inc.
acquired the debt from a local financial institution in February 1996. Debt
outstanding to this financial institution was (Pounds)896,000 at June 30, 1995.
12. COMMITMENTS AND CONTINGENCIES
Loan Commitments - Commitments to extend credit are agreements to lend a
- ----------------
customer funds as long as there is no violation of any condition established in
the contract. Commitments extend over periods of time with the majority of such
commitments to be disbursed within a thirty day period. Commitments generally
have fixed expiration dates or other termination clauses and may require the
payment of a fee. Commitments to extend credit at fixed rates expose the
Corporation to some degree of interest rate risk. The Corporation evaluates each
customer's credit worthiness on a case-by-case basis. The type and amount of
collateral obtained varies and is based on management's evaluation of the
potential borrower's ability to repay the debt.
The Corporation had outstanding loan commitments as follows (in thousands):
<TABLE>
<CAPTION>
June 3O,
--------
1996 1995
----------------
<S> <C> <C>
Commitments to extend credit:
Variable interest rate $ 999 $ 282
Fixed interest rate 1,177 624
----------------
Total loan commitments 2,176 906
Undisbursed portion of interim construction loans 2,230 1,902
----------------
Total commitment to extend credit $4,406 $2,808
================
</TABLE>
Financial Instruments With off-Balance Sheet Risk - The Corporation has no
- -------------------------------------------------
additional financial instruments with off-balance sheet risks.
Concentrations of Credit Risk - The Corporation's business is principally with
- -----------------------------
customers located in northeast Texas. Except for residential mortgage loans in
the Corporation's market area, the Corporation has no other significant
concentrations of credit risk.
Litigation - The Corporation is involved in legal actions in the normal course
- ----------
of business. In the opinion of management, based on the advice of its general
counsel, the resolution of these matters will not have a material adverse impact
on the future results of operations or the financial position of the
Corporation.
Potential Impact of Changes in Interest Rates - The Corporation's profitability
- ---------------------------------------------
depends to a large extent on its net interest income, which is the difference
between interest income from loans and investments and interest expense on
deposits and borrowings. Like most financial institutions, the Corporation's
interest income and interest expense are significantly affected by changes in
market interest rates and other economic factors beyond its control. The
Corporation's interest earning assets consist primarily of long-term, fixed-rate
mortgage loans and investments which adjust more slowly to changes in interest
rates than its interest-bearing liabilities which are primarily term deposits.
Accordingly, the Corporation's earnings would be adversely affected during
periods of rising interest rates.
- --------------------------------------------------------------------------------
L&B FINANCIAL, INC.
35
<PAGE>
13. STOCK OPTION AND OWNERSHIP PLANS
On February 28, 1995, the Corporation implemented the 1995 Stock Option Plan
("Plan") for the benefit of all employees and directors. Under the Plan, 166,750
shares of authorized common stock are reserved for the exercise of stock
options. The options have a maximum duration of ten years from the date of
grant. At June 30, 1996, the Corporation had the following options outstanding:
<TABLE>
<CAPTION>
Grant Date Shares Granted Average Option Price per Share Expiration Date
- ---------- -------------- ------------------------------ ---------------
<S> <C> <C> <C>
February 1995 136,483 $10.50 February 2OO5
April 1995 10,000 $10.25 April 2005
February 1996 4,015 $14.25 February 2006
</TABLE>
The Plan calls for the grant in February 1997 to non-employee members of the
Board of Directors of options to purchase a total of 4,015 shares of common
stock.
As of June 30, 1996, no options had been exercised.
The Plan also provides for stock appreciation rights ("SAR's"). To date, no
SAR's have been granted.
Employees participate in stock ownership through the 401(k) plan.
In October, 1995, the FASB issued Statement of Accounting Standards No.123,
"Accounting for Stock Based Compensation" ("SEAS 123") which established
accounting and reporting standards for stock-based employee compensation plans.
Under SFAS 123, companies are encouraged to adopt a new accounting method that
accounts for stock compensation awards based on their estimated fair value at
the date they are granted. Companies are allowed to continue following
accounting standards that currently exist (Accounting Principal Board Opinion
No. 25) which generally do not result in an expense charge for most options
issued. If a company continues to follow existing accounting practices to
account for stock compensations plans, pro-forma disclosures of net income and
earnings per share as if the fair value method of accounting defined by SEAS 123
had been applied are required.
SEAS 123 is generally effective for fiscal years beginning after December 15,
1995. Earlier adoption is permitted. The Corporation has not determined if the
fair value method defined by the new standard will be adopted or if the existing
accounting method will be maintained.
14. STOCKHOLDERS' EQUlTY AND DIVIDEND RESTRICTIONS
On October 14, 1994, the Bank converted from a Texas-chartered mutual savings
and loan association to a Texas-chartered stock savings and loan association
through the sale of common stock. The Bank sold shares in a Subscription
Offering to eligible account holders, an Employee Stock Ownership Plan,
supplemental eligible account holders, and other members, officers, directors,
and employees. Shares were also sold in a concurrent Community Offering. Of the
25,000,000 authorized common $0.01 par value shares, 1,667,500 shares were sold
at a price of $10.00 per share. The net proceeds of the offering, after
conversion costs of approximately $660,000, were $15,998,000.
The plan of conversion provided that upon completion of the conversion, a
special liquidation account for the benefit of the eligible account holders and
the supplemental account holders would be established. In this account is an
amount equal to the net worth of the Bank as of the date of its latest statement
of condition contained in the final offering circular used in connection with
the conversion, such date being March 31, 1994. The liquidation account is
maintained for the benefit of the eligible account holders and supplemental
eligible account holders who continue to maintain their accounts at the Bank.
The liquidation account is reduced from time to time to the extent qualifying
balances are reduced. In the event of a complete liquidation, each eligible and
supplemental eligible account holder will be entitled to receive a distribution
from the adjusted qualifying balances for accounts then held. As of June 30,
1996 the amount of retained earnings appropriated as a "liquidation account" was
$9,698,000.
- --------------------------------------------------------------------------------
L&B FINANCIAL, INC.
36
<PAGE>
The Corporation is prohibited from declaring cash dividends on its common stock,
or repurchasing its common stock if the effect thereof would cause its net worth
to be reduced below either the amount required for the liquidation account or
the minimum regulatory capital requirement. In addition, the Bank is also
prohibited from declaring cash dividends and repurchasing its own stock without
prior regulatory approval in any calendar year in excess of 100% of its current
year's net income to the date of any such dividend or repurchase, plus 50% of
the excess of its capital at the beginning of the year in excess of its minimum
regulatory capital requirement.
The Corporation is subject to various regulatory capital requirements
administered by the federal and state banking agencies. Failure to meet minimum
capital requirements can initiate certain mandatory and possibly additional
discretionary actions by the regulators that, if taken, could have a material
effect on the Corporation's financial statements. Under capital adequacy
guidelines and the regulatory framework requiring prompt corrective action, the
Bank must meet specific capital guidelines that involve quantitative measures of
the bank's assets, liabilities, and certain off-balance-sheet items as
calculated under regulatory accounting practices. The Bank's capital amounts
and classification are also subject to qualitative judgements by the regulators
about components, risk weighting, and other factors.
Quantitative measures established by regulation to ensure capital adequacy
require the Bank to maintain minimum amounts and ratios of total and Tier I
capital (as defined by regulation) to risk weighted assets (as defined), and
Tier I capital to average assets (as defined). The following table sets forth
(in thousands) the Bank's current capital requirements, actual capital position
and excess capital in both a dollar and percentage basis for June 30, 1996:
<TABLE>
<CAPTION>
Tier One Tier One Tier Two
Core Risk-based Risk-based
Capital Capital Capital
----------------------------------------
<S> <C> <C> <C>
Adjusted capital $19,006 $19,006 $19,762
Capital ratio 21.38% 22.45% 23.34%
Minimum capital requirement 3,555 3,386 6,773
Minimum capital ratio 4.00% 4.00% 8.00%
Excess capital 15,451 15,620 12,989
Excess capital ratio 17.38% 18.45% 15.34%
Total adjusted assets $88,875 $84,666 $84,666
----------------------------------------
</TABLE>
15. SUPERVISORY AGREEMENT
On May 17, 1994, the Corporation executed a Supervisory Agreement with the
Office of Thrift Supervision. The Supervisory Agreement related to deficiencies
in the Corporation's electronic data processing ("EDP") capability. The
Supervisory Agreement required the Board to adopt and submit a written plan of
action to ensure that the Corporation is provided with adequate EDP audit
coverage, submit a strategic plan that provides for the EDP planning in
accordance with the guidelines of the Federal Financial Institution Examination
Council, adopt a capital expenditures policy setting forth minimum EDP
requirements, establish an EDP Steering Committee and implement various
safeguards regarding computer operations and security. On July 7, 1995, the
Corporation was notified as to its compliance with the terms and conditions of
the Supervisory Agreement and that said Agreement was terminated.
- --------------------------------------------------------------------------------
L&B FINANCIAL, INC.
37
<PAGE>
16. DISCLOSURE ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
The estimated fair value amounts have been determined by the Corporation using
available market information and appropriate valuation methodologies.
Considerable judgement is required to interpret this information and develop
estimates of fair value. Accordingly, the estimates presented herein are not
necessarily indicative of the amounts the Corporation could realize in a current
market exchange. The use of different market assumptions and/or estimation
methodologies may have a material effect on the estimated fair value amounts.
<TABLE>
<CAPTION>
June 30, 1996 June 30, 1995
------------- -------------
Notional Carrying Fair Notional Carrying Fair
Amount Amount Value Amount Amount Value
---------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Assets:
Cash and cash equivalents $ 8,916 $ 8,916 $ 6,418 $ 6,418
Investment and mortgage-backed securities
Available-for-sale 21,986 21,986 193 193
Held-to-maturity 42,178 42,232 63,557 63,649
Mortgage loans held for sale 490 490 792 792
Loan receivable, net 65,862 65,340 58,590 57,771
Federal Home Loan Bank stock 751 751 705 705
Liabilities:
Deposits 104,565 104,653 100,933 101,314
Borrowings 13,500 13,500 4,904 4,904
Off balance sheet:
Commitments to extend credit $ 4,406 $ 4,406 $ 2,808 $ 2,808
</TABLE>
Cash and cash equivalents - The carrying amounts of cash and short-term
instruments is a reasonable estimate of fair value.
Investments and mortgage-backed securities - The estimated fair value of debt
and equity securities equals quoted market price.
Mortgages held-for-sale - The estimated fair value of mortgage loans held-for-
sale is estimated at the quoted secondary market prices for such loans without
regard to the Corporation's other commitments to make or sell loans.
Loans receivable - The fair value of loans receivable was estimated by
discounting the future cash flows using current rates at which similar loans
would be made to borrowers with similar credit histories and maturities.
Federal Home Loan Bank stock - The carrying amount is a reasonable estimate of
fair value.
Deposits - The fair value of NOW accounts, savings accounts, and certain money
market deposits is the amount payable on demand at the reporting date. The fair
value of fixed-maturity certificates of deposit is based on the present value of
the contractual cash flows discounted using the rates currently offered for
deposits of similar maturities.
Borrowed funds - The carrying amount of borrowed funds is a reasonable estimate
of fair value. All borrowings outstanding have maturities of less than one year
and interest rates that adjust with current market rates.
Commitments to extend credit - The notional amount of commitments to extend
credit is a reasonable estimation of fair value because the differences between
current market rates and committed rates are insignificant.
- --------------------------------------------------------------------------------
L&B FINANCIAL, INC
38
<PAGE>
The fair value estimates presented herein are based on information available to
management as of June 30, 1996 and 1995. Such amounts have not been
comprehensively revalued for purposes of financial statement presentation since
the dates noted.
17. L&B FINANCIAL, INC. FINANCIAL STATEMENTS (PARENT COMPANY ONLY)
Condensed financial statements for L&B are presented as follows (in thousands)
<TABLE>
<CAPTION>
Condensed Balance Sheet June 30, 1996
------------------------------------------------------------------
<S> <C>
Assets
Cash and cash equivalents $ 4,968
Investment in subsidiary 18,893
Other 922
-------------
Total Assets 24,783
=============
Liabilities and Stockholders' Equity
Liabilities 0
Stockholders' Equity 24,783
-------------
Total Liabilities and Stockholders' Equity $ 24,783
=============
</TABLE>
Included in other assets is a note receivable due from the Loan and Building
State Savings Bank ESOP in the amount of $825,000. See Note 11 for further
information.
<TABLE>
<CAPTION>
Year Ended
Condensed Statement of Income June 30, 1996
---------------------------------------------------------------
<S> <C>
Equity in undistributed earnings of subsidiary $ 1,392
Other income 204
-------------
Total Income 1,596
Other expenses 146
-------------
Net income $ 1,450
=============
</TABLE>
- --------------------------------------------------------------------------------
L&B FINANCIAL, INC.
39
<PAGE>
<TABLE>
<CAPTION>
Condensed Statement of Cash Flows June 30, 1996
---------------------------------------------------------------
<S> <C>
Operating Activities:
Net income $ 1,450
Equity in undistributed earnings of subsidiary (1,392)
Increase in other assets (922)
-------------
Net cash used in operating activities (864)
-------------
Financing Activities:
Dividends received from subsidiary 7,500
Purchase of treasury stock (1,199)
Dividends paid (469)
-------------
Net cash provided by financing activities 5,832
-------------
Net increase in cash 4,968
Cash and cash equivalents at beginning of year 0
-------------
Cash and cash equivalents at end of year $ 4,968
=============
</TABLE>
18. PROPOSED ACQUISITION OF THE CORPORATION
On June 25, 1996, the Corporation announced the signing of a Letter of Intent
between the Corporation and Jefferson Sayings Bancorp, Inc., Ballwin, Missouri,
outlining the terms of a proposed acquisition by Jefferson Bancorp of all of the
outstanding common stock of the Corporation. That agreement has expired,
however, negotiations were continuing as of the date of this report.
- --------------------------------------------------------------------------------
L&B FINANCIAL, INC.
40
<PAGE>
L & B FINANCIAL, INC.
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
December 31, 1996, (Dollars in thousands)
<TABLE>
<CAPTION>
December 1996
-------------
(unaudited)
<S> <C>
ASSETS
Total cash and cash equivalents $ 9.134
Investment and mortgage-backed securities:
Held-to-maturity, at amortized cost 37,586
Available-for-sale, at market value 21,262
Loans receivable, net:
Held-for-sale, at market value 724
Held-for-Investment 68,933
Office property and equipment, net 2,257
Real estate acquired in the settlement of loans 293
Federal Home Loan Bank stock, at cost 773
Accrued interest and other assets 1,440
-------------
Total Assets 142,402
-------------
LIABILITIES
Deposit accounts 104,267
Advances from the Federal Home Loan Bank 12,500
Accrued interest and other liabilities 826
-------------
Total Liabilities 117,593
-------------
STOCKHOLDERS' EQUITY
Common stock - $0.01 par value - 25,000.000 shares authorized,
1,667,600 issued and 1,684,125 outstanding, respectively 17
Treasury stock - $3,375 share, on par (1)
Additional paid-in capital 16,165
Unearned ESOP shares (775)
Unearned compensation (266)
Net unrealized gain (loss) on investment and
mortgage-backed securities available-for-sale 35
Retained earnings, substantially restricted 10,634
-------------
Total Stockholders' Equity 24,809
-------------
Total Liabilities and Stockholders' Equity $ 142,402
=============
Tier I Capital $ 19,244
Risk-based Capital $ 20,000
</TABLE>
<PAGE>
SULPHUR SPRINGS LOAN & BLDG PAGE 1
Consol Balance Sheet REPORT DATE: 12-31-96
AS - L&B Financial, Inc. RUN DATE: 12-31-96
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
$ VARIANCE $ VARIANCE
DECEMBER 1996 NOVEMBER 1996 DEC 1996 MON ACT DECEMBER 1995 DEC 1996 MON ACT
DESCRIPTION MONTH ACTUAL MONTH ACTUAL NOV 1996 MON ACT MONTH ACTUAL DEC 1995 MON ACT NUMBER
- -------------------------- --------------- ------------- ---------------- ------------- ---------------- ------
Cash
- ----
<S> <C> <C> <C> <C> <C> <C>
Teller Cash 135,958.49 136,434.75 -476.26 149,040.00 -13,081.51 100000
Petty Cash 1,850.00 1,850.00 0.00 0.00 1,850.00 100010
Vault Cash 123,729.00 216,079.00 -92,350.00 82,500.00 41,229.00 100050
ATM Suspense 6,996.50 4,270.00 2,726.50 2,260.00 4,736.50 100100
ATM Suspense Pulse -3,218.88 -1,746.08 -1,472.80 -224.00 -2,994.88 100110
1st Nat'l Bank - Commerce 8,271.98 6,797.18 1,474.80 0.00 8,271.98 100115
City Nat'l Bank 521,993.15 340,097.04 181,896.11 642,388.03 -120,394.88 100200
Guaranty Bank 152,575.69 155,252.35 37,726.34 95,422.77 97,555.92 100210
Sulphur Springs State Bk 17,060.02 9,567.75 7,492.27 83,701.41 -66,641.39 100215
Bank of Oklahoma 66,808.05 39,204.88 27,603.17 2,449,007.24 -2,382,199.19 100216
National Bank 0.00 0.00 0.00 60,845.54 -60,845.54 100220
Lone Star Bank 83,587.84 73,697.32 9,890.52 188,698.09 -105,110.25 100225
Nat'l Bank Daingerfield 69,659.47 78,328.42 -8,688.95 90,969.31 -21,309.84 100230
1st Nat'l Bank - Mt Vernon 50,301.31 111,610.46 -61,309.15 81,797.75 -31,496.44 100235
First Heritage Bank PB 8,800.21 7,542.26 1,257.95 5,706.20 3,094.01 100240
1st Bank - Texarkana 33,595.56 395,783.93 -362,188.37 13,618.29 19,977.27 100245
1st State Bank - Pittsburg 26,854.65 33,468.98 -6,614.33 139,790.66 -112,936.01 100250
--------------- ------------- ---------------- ------------- ----------------
Total 1,345,226.04 1,608,238.24 -263,012.20 4,085,521.29 -2,740,295.25
Cash Equivalence
- ----------------
Time Deposits 0.00 0.00 0.00 0.00 0.00 100500
Fed Funds Sold 4,605,000.00 4,755,000.00 -150,000.00 4,100,000.00 505,000.00 100600
FHLB Demand 3,183,671.99 2,568,387.47 615,284.52 620,683.08 2,562,788.91 100800
--------------- ------------- ---------------- ------------- ----------------
Total 7,788,671.99 7,323,387.47 465,284.52 4,720,683.08 3,067,788.91
Investment Securities - HTM
- ---------------------------
Municipal Bonds 663,908.85 663,908.85 0.00 877,826.05 -213,917.20 110000
Prem/(Disc) Municipal Bds -5,567.35 -5,377.80 -189.55 -6,548.23 980.88 110005
Gov't Agency Bonds 4,351,448.51 4,352,217.18 -760.67 14,539,859.24 -10,188,410.73 110100
Prem/(Disc) Gov't Agency -13,159.33 -13,076.97 -82.36 -12,111.40 -1,047.93 110105
--------------- ------------- ---------------- ------------- ----------------
Total 4,996,630.68 4,997,671.26 -1,040.58 15,399,025.66 -10,402,394.98
Investment Securities - AFS 0.00 0.00 0.00 0.00 0.00
- ---------------------------
Gov't Agency Sec AFS 6,483,437.50 6,982,507.50 -499,070.00 0.00 6,483,437.50 110800
Prem/(Disc) Gov't Agency AFS 3,472.54 4,257.69 -785.15 0.00 3,472.54 110805
MTM - Gov't Agency Sec -32,382.04 -6,203.57 -26,178.47 0.00 -32,382.04 110810
FNMA Stock 2,217.44 2,217.44 0.00 2,217.44 0.00 111000
MTM Allowance - FNMA St 19,701.31 20,245.06 -543.75 16,570.00 3,131.31 111005
Mutual Funds 1,296,848.68 1,291,189.70 5,658.98 1,233,198.98 63,649.70 111100
MTM Allowance - Mutual Funds -17,388.85 -22,065.41 4,676.56 -15,361.00 -2,027.85 111105
--------------- ------------- ---------------- ------------- ----------------
Total 7,755,906.58 8,272,148.41 -516,241.83 1,236,625.42 6,519,281.16
</TABLE>
<PAGE>
SULPHUR SPRINGS LOAN & BLDG PAGE 2
Consol Balance Sheet REPORT DATE: 12-31-96
BS - L&B Financial, Inc. RUN DATE: 12-31-96
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
$ VARIANCE $ VARIANCE
DECEMBER 1996 NOVEMBER 1996 DEC 1996 MON ACT DECEMBER 1996 DEC 1996 MON ACT
DESCRIPTION MONTH ACTUAL MONTH ACTUAL NOV 1996 MON ACT MONTH ACTUAL DEC 1996 MON ACT NUMBER
- ----------------------- ---------------- ------------------ ----------------- --------------- ----------------- -------
<S> <C> <C> <C> <C> <C> <C>
MBS Securities
- -------------------
GNMA MBS HTN 1,990,616.79 2,017,858.79 -27,242.00 7,028,527.75 -5,037,910.96 120000
Prem/(Disc) GNMA -52.64 0.63 -53.27 198,625.15 -198,677.79 120005
FHLMC MBS HTM 23,604,169.87 23,832,176.48 -228,006.61 9,283,027.15 14,321,142.72 120100
Prem/(Disc) FHLMC -118,231.75 -145,132.14 26,900.39 -120,695.48 2,453.73 120105
FNMA MBS HTM 7,122,772.84 7,295,227.08 -472,454.24 10,362,817.51 -3,240,044.67 120200
Prem/(Disc) FNMA -10,240.68 -11,167.01 916.33 -2,175.67 -8,065.01 120205
MBS - AFS 13,167,542.08 13,379,188.57 -211,646.49 24,881,818.20 -11,714,276.12 121000
Prem/(Disc) MBS - AFS 255,102.77 254,670.55 432.22 0.00 255,102.77 121005
HTM - MBS AFS 83,707.55 180,237.08 -96,529.53 215,748.42 -132,040.87 121010
---------------- ------------------ ----------------- --------------- -----------------
Total 46,095,386.83 46,803,070.03 -707,683.20 51,847,693.03 -5,752,306.20
Loans
- -----
BF 1-4 Mtg 85,765,231.11 85,789,123.84 -19,892.73 77,566,117.71 8,203,113.40 130000
Loans HFS 724,095.63 468,313.55 255,782.08 534,735.45 189,360.18 130060
MIM - Loans HFS 0.00 0.00 0.00 0.00 0.00 130065
Loans Sold - FHLMC -824,173.04 -849,153.15 24,980.11 -1,106,675.09 282,502.05 130100
Loans Sold - FNMA -21,831,931.30 -21,729,873.35 -102,057.95 -20,145,980.96 -1,685,950.34 130120
Mortgage Servicing Rights 76,577.82 72,905.74 3,672.08 0.00 76,577.82 130200
Construction Loans 3,708,528.11 3,940,050.11 -231,522.00 3,503,555.07 204,973.04 131000
Loans in Process -2,035,264.33 -2,049,429.88 14,165.55 -1,903,912.45 -131,351.88 131010
Deffered Loan Fees 56,777.74 56,777.74 0.00 0.00 56,777.74 132010
Customer Loans 972,858.13 1,025,588.12 -52,729.99 1,061,095.26 -88,237.13 135000
Auto Loans 1,660,875.84 1,675,066.96 -14,188.12 1,213,018.16 447,860.68 135100
Share Loans 2,013,465.53 1,845,503.36 166,962.17 1,604,603.21 407,862.32 135200
Customer Ins - Purchased
TCC 260,313.88 266,769.93 -6,456.05 352,495.42 -92,181.54 135500
Item/(Disc) - Loans Trimble -4,309.40 -4,346.55 37.15 -4,755.20 445.80 139000
Prem/(Disc) - Loans MP -79,345.00 -81,062.75 1,717.76 -97,078.76 17,733.76 139100
Prem/(Disc) - Loans
Scharlach -76,884.86 -77,370.63 485.77 -80,531.95 3,647.09 139150
Prem/(Disc) - TCC Loans
Pirch 23,187.06 24,111.53 -924.47 42,045.49 -18,858.43 139200
UIN - Mtg 90 Del Loans 0.00 0.00 0.00 -7,863.09 7,863.02 139980
GVA - Mtg Loans -100.00 -100.00 0.00 -120,000.00 119,900.00 139990
GVA - Loans -755,679.30 -755,679.30 0.00 -737,617.25 -18,082.05 139995
----------------- ------------------ ---------- ---------------- -----------------
Total 69,657,226.62 69,617,195.27 40,031.35 61,673,251.02 7,983,975.60
REO
- ---
REO 293,163.72 293,199.85 -36.13 322,173.90 -29,010.18 140000
Reserve for Loss - REO 0.00 0.00 0.00 0.00 0.00 149000
--------------- ----------------- ---------- --------------- ----------------
Total 293,163.72 293,199.85 -36.13 322.173.90 -29,010.18
</TABLE>
<PAGE>
SULPHUR SPRINGS LOANS & BLDG PAGE 3
Consol Balance Sheet REPORT DATE: 12-31-96
BS - L&B Financial, Inc. RUN DATE: 12-31-96
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
$ VARIANCE $ VARIANCE
DECEMBER 1996 NOVEMBER 1996 DEC 1996 MON ACT DECEMBER 1995 DEC 1996 MON ACT
DESCRIPTION MONTH ACTUAL MONTH ACTUAL NOV 1996 MON ACT MONTH ACTUAL DEC 1995 MON ACT NUMBER
- --------------------------------- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Property and Equipment
- ----------------------
Land 593,253.03 593,253.03 0.00 455,146.09 138,106.94 150000
Property Improvements 1,697,314.19 1,697,314.19 0.00 969,550.71 727,763.48 151000
Depr - Property Improvements -306,170.20 -299,992.47 -6,177.73 -242,562.74 -63,607.46 151100
DEPR - In Process 0.00 0.00 0.00 1,601.25 -1,601.25 151150
Leasehold Improvements 1,723.34 1,723.31 0.00 836,188.20 -834,464.86 151200
Depr - Leasehold Improvements -1,005.27 -861.66 -143.61 0.00 -1,005.27 151300
FF&E 668,740.58 668.740.58 0.00 579,868.23 88,872.35 152000
Depr - PP&E -396,977.02 -387,977.65 -9,019.37 -287,273.48 -109,723.54 152100
------------ ------------ ---------- ------------ -----------
Total 2,256,858.65 2,272,199.36 -15,340.71 2,312,518.26 -55,659.61
Accrued Interest Rec
- --------------------
AIR - Mtg Loans 430,983.03 463,358.73 -32,375.70 414,857.44 16,125.59 160000
AIR - Loans HFS 1,040.17 803.79 236.38 1,569.51 -529.34 160100
AIR - TCC Loans 6,843.03 6,139.58 703.45 7,139.06 -296.03 160200
AIR Share Loans 34,798.60 31,969.38 2,829.22 21,511.95 13,286.65 160300
AIR Auto Loans 11,602.13 10,100.00 1,502.13 5,984.91 5,617.22 160400
AIR Consumer Loans 9,736.26 10,769.33 -1,033.07 11,505.52 -1,769.26 160500
AIR - GNMA MBS 36,809.91 36,838.76 -28.85 40,088.86 -3,278.95 161000
AIR - FHLMC PC 205,478.67 216,238.55 -10,759.88 244,134.07 -38,655.40 161100
AIR - FNMA 48,756.77 49,888.09 -1,131.32 54,809.23 -6,052.46 161200
AIR - Moni Bonds 18,448.38 15,551.71 2,896.67 15,992.35 2,456.03 165000
AIR - Gov't Agency 160,955.93 135,371.51 25,584.42 145,792.12 15,163.81 165100
AIR - CD's 0.00 0.00 0.00 0.00 0.00 165200
Accr Dividend FNMA 0.00 0.00 0.00 0.00 0.00 165300
Accr Dividend PHLB -76.84 7,502.76 -7,579.60 11,861.98 -11,938.82 165400
------------ ---------- ---------- ----------- -----------
Total 965,376.04 984,532.19 -19,156.15 975.247.00 -9,870.96
FHLB Stock 773,400.00 762,200.00 11,200.00 728,500.00 44,900.00 159000
</TABLE>
<PAGE>
SULPHUR SPRINGS LOAN & BLDG PAGE 4
Consol Balance Sheet REPORT DATE: 12-31-96
BS - L&B Financial, Inc. RUN DATE: 12-31-96
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
$ VARIANCE
DECEMBER 1996 NOVEMBER 1996 DEC 1996 MON ACT DECEMBER 1995 DEC 1996 MON ACT
DESCRIPTION MONTH ACTUAL MONTH ACTUAL NOV 1996 MON ACT MONTH ACTUAL DEC 1995 MON ACT NUMBER
- ----------------------------- ---------------- --------------- ----------------- --------------- ----------------- ------
<S> <C> <C> <C> <C> <C> <C>
Other Assets
- ------------
Prepaid Insurance 31,908.12 36,960.27 -5,052.15 32,607.45 -699.33 170000
Prepaid - other 20,577.41 23,904.84 -3,327.43 17,227.54 3,349.87 170150
Prepaid FDIC Insurance 0.00 19,936.27 -19,936.27 0.00 0.00 170400
Prepaid OTS Assessment 0.00 0.00 0.00 0.00 0.00 170500
Accts Rec - General 10,047.30 6,029.32 5,017.98 642,435.39 -632,388.09 171100
Accts Rec - FNMA 4,523.37 4,702.05 -178.68 8.07 4,515.30 171200
A/R - FHLMC 1,251.11 1,251.11 0.00 0.00 1,251.11 171300
Prepaid Franchise Tax 8,039.62 10,049.53 -2,009.91 0.00 8,039.62 171400
Capitalized Holding Co Costs 68,061.98 50,297.34 -1,235.36 70,245.39 -12,183.41 180000
Deferred Tax - Current 217,840.00 217,840.00 0.00 0.00 217,840.00 181000
Deferred Tax - Noncurrent 26,418.00 26,418.00 0.00 58,984.00 -32,566.00 181100
Inv in LBSSB 0.00 0.00 0.00 0.00 0.00 189000
Other Assets 0.00 0.00 0.00 0.00 0.00 190000
Surrender Value Insurance 90,416.47 90,416.47 0.00 65,711.47 24,705.00 191000
Mtg Escrow FHA/VA 0.00 0.00 0.00 25,866.00 -26,866.00 192000
Commemerative Currency 4,287.50 4,287.50 0.00 4,347.50 -60.00 192400
US Savings Bonds Redeemed 962.24 1,160.00 -197.76 748.24 214.00 192500
Cash Items 200.00 200.00 0.00 0.00 200.00 192600
Note Receivable - ESOP 0.00 0.00 0.00 0.00 0.00 193000
Investment in Service Corp 0.00 0.00 0.00 2,000.00 -2,000.00 194000
Equity in LBRC 0.00 0.00 0.00 -2,000.00 2,000.00 195000
Misc - Suspense -34.73 -18.44 -16.29 -84,244.08 84,209.35 196000
Expense Checks Clearing Account 0.00 0.00 0.00 0.00 0.00 198000
---------------- --------------- ----------------- --------------- -----------------
Total 474,498.39 501,434.25 -26,935.87 833,936.97 -355,438.58
TOTAL ASSETS 142,402,345.54 143,345,276.34 -1,032,930.60 144,135,375.63 -1,733,030.09
================ =============== ================= =============== =================
</TABLE>
<PAGE>
SULPHUR SPRINGS LOAN & BLDG PAGE 5
Consol Balance Sheet REPORT DATE: 12-31-96
BS - L&B Financial, Inc. RUN DATE: 12-31-96
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
$ VARIANCE $ VARIANCE
DECEMBER 1996 NOVEMBER 1996 DEC 1996 MON ACT DECEMBER 1995 DEC 1996 MON ACT
DESCRIPTION MONTH ACTUAL MONTH ACTUAL NOV 1996 MON ACT MONTH ACTUAL DEC 1995 MON ACT NUMBER
- ---------------------- ---------------- ---------------- ------------------- ---------------- ------------------ ------
<S> <C> <C> <C> <C> <C> <C>
Deposits
- --------
Passbook Savings 4,296,644.28 4,380,811.79 -84,167.51 4,767,770.60 -471,126.32 200000
CD's 64,750,324.39 63,749,048.84 1,001,275.55 62,378,659.20 2,371,665.19 200010
IRA's 7,798,189,77 7,657,570.02 140,619.75 7,437,144.40 361,045.37 200020
6 Month Money Market 14,683,757.64 15,135,161.79 -451,404.15 15,488,944.22 -805,186.58 200030
MMDA 7,915,669.06 7,937,944.78 -22,275.72 7,868,080.22 47,588.84 200040
NOW 3,959,905.51 3,831,283.87 128,621.64 3,280,078.80 679,826.71 200050
Super NOW 863,920.68 887,624.44 -23,703.76 821,146.15 42,774.53 200060
---------------- --------------- ---------------- --------------- ------------- ------
Total 104,268,411.33 103,579,445.53 688,965.80 102,041,823.59 2,226,587.74
FHLB Advances 12,500,000.00 13,500,000.00 -1,000,000.00 13,600,000.00 -1,000,000.00 210000
Accrued Interest Payable
- ------------------------
AIP - Passbook 0.00 21,681.95 -21,681.95 37.38 -37.38 220000
AIP - CD's 77.29 270,743.70 -370,666.41 2,896.04 -2,818.75 220010
AIP - IRA's 0.00 65,847.93 -65,847.93 0.00 0.00 220020
AIP - 6 Month Money Market 91,803.00 116,552.15 -24,749.15 98,760.63 -6,957.63 220030
AIP - MMDA 7,801.94 7,145.77 656.17 7,121.92 600.02 220040
AIP - NOW and Super NOW 2,046.55 2,629.01 217.54 2,238.57 607.98 220050
AIP - PHLB Advance 0.00 0.00 0.00 0.00 0.00 221000
---------------- --------------- ---------------- --------------- ------------- ------
Total 102,528.78 584,600.51 -482,071.73 111,054.54 -8,525.76
Escrow
- ------
Escrow - Consumer Loans 920.22 738.59 181.63 744.70 175.52 230000
Escrow - PHA/VA 0.00 0.00 0.00 25,793.82 -25,793.82 231000
Escrow - Mtg Loans 355,952.01 342,343.82 13,608.19 534,532.13 -178,580.12 232000
Escrow - FMMA -9,019.83 5,622.77 -14,642.60 4,417.30 -13,437.13 233000
Escrow - FHLMC SS 374.18 0.00 374.18 0.00 374.18 234000
Escrow - FHLMC MP 121.81 475.96 -354.15 229.54 -107.73 235000
---------------- --------------- ---------------- --------------- ------------- ------
Total 348,348.39 349,181.14 -832.76 565,717.49 -317,369.10
</TABLE>
<PAGE>
SULPHUR SPRINGS LOAN & BLDG PAGE 6
Consol Balance Sheet REPORT DATE: 12-31-96
BS- L&B Financial, Inc. RUN DATE: 12-31-96
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
$ VARIANCE $ VARIANCE
DECEMBER 1996 NOVEMBER 1996 DEC 1996 MON ACT DECEMBER 1995 DEC 1996 MON ACT
DESCRIPTION MONTH ACTUAL MONTH ACTUAL NOV 1996 MON ACT MONTH ACTUAL DEC 1996 MON ACT NUMBER
- ---------------------------- ------------------ ---------------- ------------------ ------------- ----------------- -------
<S> <C> <C> <C> <C> <C> <C>
Other Liabilities
- -----------------
Accrued Audit Fees 8,104.00 4,068.00 4,036.00 20,926.00 -12.822.00 240000
AP Social Security Taxes 0.00 0.00 0.00 -2,606.25 3,606.25 240100
AP Loan Exp 0.00 0.00 0.00 0.00 0.00 240200
Accrued Property Taxes 17,060.54 14,561.54 2,499.00 -112.69 17,173.23 240300
HFS - Escrow 10,187.96 5,811.76 4,376.20 3,371.93 6,816.03 240400
AP IRA Backup Withholding 1,224.98 129.06 1,095.92 91.87 1,133.11 240600
AP IRS Backup Withholding 524.50 33.50 491.00 542.89 -18.39 240700
Savings Bonds Sold 600.00 2,875.00 -2,275.00 3,650.00 -3.050.00 240800
AP Travelers Checks 0.00 0.00 0.00 0.00 0.00 240900
AP FNMA Int 16,330.05 10,310.28 6,019.77 7,539.51 8,790.54 241000
AP FHLMC Int SS 689.76 0.00 689.76 0.00 689.76 241100
AP FHLMC Int - MP 150.85 185.49 -34.64 99.62 51.23 241200
ESOP Advance 0.00 0.00 0.00 0.00 0.00 243000
Dividends Payable 0.00 0.00 0.00 0.00 0.00 243100
Accr Bonus 0.00 0.00 0.00 44,580.03 -44,580.03 244000
Accr Income Tax 7,885.00 87,885.00 -80,000.00 99,593.00 -91,708.00 244100
Accr State Franchise Tax 0.00 0.00 0.00 0.00 0.00 244200
Cash Advance 0.00 0.00 0.00 -800.00 800.00 244240
Accrued Expenses Payable 0.00 0.00 0.00 13,002.00 -13,002.00 244250
Def Liab - Officers Retirement 128,814.94 128,368.68 446.26 123,065.39 4,949.55 244300
Def Liab - Income Tax - Current 0.00 0.00 0.00 56,134.53 -56,134.53 244400
Def Liab - Income Tax -
Noncurrent 113,313.00 113,313.00 0.00 178,549.58 -65,236.58 244500
Def Liab - Income Tax - AFS 18,200.00 58,500.00 -40,300.00 0.00 18,200.00 244600
Liability - Other 49,815.34 60,180,39 -10,365.05 578,230.04 -528,414.70 299000
Accrued MRRP Expense 0.00 0.00 0.00 0.00 0.00 299050
Liability - REO Rent Property
Depot 1,425.00 1,425.00 0.00 1,425.00 0.00 299100
Liability - ESOP Trust Loan
Payable 0.00 0.00 0.00 897,122.50 -897,122.50 299200
---------------- -------------- ------------- -------------- ----------------
Total 374,325.92 487,646.70 -113,320.78 2,024,304.96 -1,649,979.03
TOTAL LIABILITIES 117,593,614.42 118,500,873.88 -907,259.46 118,242,900.57 -649,286.15
---------------- -------------- ------------- -------------- ----------------
Stockholder's Equity
- --------------------
Common Stock 16,750.00 16,750.00 0.00 16,750.00 0.00 500000
Treasury Stock -833.75 -833.75 0.00 0.00 -833.75 500100
Additional Paid in Capital 15,165,099.42 15,165,099.42 0.00 15,647,015.67 -881,916.25 501000
Unrealized Gain on
Investments/MBS 35,437.97 113,713.16 -78,275.19 157,822.42 -122,384.45 510000
ESOP Trust Stock -775,387.50 -800,400.00 25,012.50 -897,122.50 121.735.00 520000
ESOP Trust Paid in Excess 0.00 0.00 0.00 0.00 0.00 521000
Unearned Compensation -266,000.00 -273,000.00 7,000.00 -350,000.00 94,000.00 522000
Contingent Reserve 0.00 0.00 0.00 0.00 0.00 523000
Retained Earnings 2,643,658.13 2,643,658.13 0.00 2,643,658.13 0.00 590000
Retained Earnings - Post
Conversion 7,908,255.59 8,059,344.49 -151,088.90 7,743,949.36 164,306.23 591000
YTD Earnings 81,751.26 10,071.01 71,680.25 730,401.98 -648,650.72
---------------- -------------- ------------- -------------- ----------------
Stockholders' Equity 24,808,731.12 24,934,402.46 -125,671.34 25,892,475.06 -1.083,743.94
TOTAL LIABILITIES and EQUITY 142,402,345.54 143,435,276.34 -1,032,930.80 144,135,375.63 -1,733,030.09
</TABLE>
<PAGE>
<TABLE>
=================== ================== ================= =================== =================
<S> <C> <C> <C> <C> <C>
Total Assets 142,402,345.54 143,435,276.34 -1,032,930.80 144,135,375.63 -1,733,030.09
Total Liab 117,593,614.42 118,500,573.88 -907,259.46 118,242,900.57 -649,286.15
Total Equity 24,726,979.86 24,924,331.45 -197,161.69 26,162,073.08 -435,093.22
</TABLE>
<PAGE>
SULPHUR SPRINGS LAW & BLDG PAGE 1
Consol Income Statement REPORT DATE: 22-31-96
BS - L&B Financial, Inc. RUN DATE: 12-31-96
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
$ VARIANCE
DECEMBER 1996 NOVEMBER 1996 DEC 1996 MON ACT DECEMBER 1996 DECEMBER 1995
NUMBER DESCRIPTION MONTH ACTUAL MONTH ACTUAL NOV 1996 MON ACT YTD ACTUAL YTD ACTUAL
- --------------------------- ----------------- --------------------- -------------------- ----------------- ---------------
<S> <C> <C> <C> <C> <C>
INT INC - LOANS
---------------
300000 Int Inc - SF 1-4 Mtg 444,971.90 436,286.75 8,685.15 2,649,934.59 2,410,773.68
300010 Int Inc - Loans HPS 4,358.27 5,120.36 -762.09 24,592.14 24,356.65
300020 FNMA Funding -802.77 -1,410.96 608.19 -4,230.79 -2,345.35
300100 Int Inc - Construction L 18,259.49 24,001.47 -5,741.98 113,004.97 108,272.30
300200 Int Inc - Multi-Family 0.00 0.00 0.00 0.00 -507.68
301000 Int Inc - Share Loans 11,515.77 10,886.19 629.58 70,299.11 37,264.33
301010 Int Inc - Auto Loans 25,991.44 16,030.29 -38.85 91,219.23 81,256.29
301020 Int Inc - Other Consummer 8,812.44 9,130.25 -317.81 54,008.00 46,994.98
302000 Loans Fees 4,020.50 2,455.00 1,565.50 28,053.72 53,586.95
302020 Earned Discount - MP Pur 522.92 2,227.74 -1,704.82 9,023.71 121,646.39
302030 Loan Fees - Loans Sold 0.00 0.00 0.00 0.00 35,715.42
302060 Premium/Discount - TCC L -924.47 -62.52 -861.95 -5,227.03 -7,351.70
302080 Interest Income - ESOP N 6,111.96 5,920.77 191.19 36,869.12 0.00
302090 Int Inc - Other 376.21 0.00 376.21 2,406.36 4,147.06
----------------- -------------------- --------------------- ----------------- ---------------
Total 513,213.66 510,585.34 2,628.32 3,069,953.13 2,913,809.32
Int Inc - Short-term Dep
------------------------
304000 Int Inc - Time Deposits 0.00 0.00 0.00 0.00 2,417.72
305000 Int Inc - PHLB Demand 38,536.93 33,413.83 5,123.10 222,476.63 102,265.18
----------------- -------------------- --------------------- ----------------- ---------------
Total 38,536.93 33,413.83 5,123.10 222,476.63 104,682.90
Int Inc - MBS's
---------------
306000 Int Inc - GNMA Cert 36,714.34 36,072.01 642.33 223,986.68 265,491.38
305010 Int Inc - FILMC Cert 168,082.72 163,732.09 4,350.63 1,042,866.51 1,136,342.85
306020 Int Inc - FNMA Cert 49,720.21 50,205.56 -485.35 301,954.15 404,050.45
----------------- -------------------- --------------------- ----------------- ---------------
Total 254,517.21 250,009.66 4,507.61 1,568,797.34 1,805,884.68
Int Inc - Investments
-------------
307000 Int Inc - Municipal Issu 2,707.12 2,707.65 -0.53 16,416.92 19,948.87
307020 Int Inc - Gov't Agency D 51,879.35 55,511.52 -3,632.17 321,171.83 432,624.39
307030 FHLB Stock Dividend 3,659.20 3,689.88 -30.68 22,312,81 24,255.93
307040 FNMA Stock Dividend 114.00 0.00 114.00 228.00 -979.43
307050 Mutual Fund Income 6,617.18 6,321.30 295.88 38,355.95 38,829.83
----------------- -------------------- --------------------- ----------------- ---------------
Total 64,976.85 68,230.35 -3,253.50 398,485.51 514,779.59
</TABLE>
<PAGE>
SULPHUR SPRINGS LOAN & BLDG PAGE 2
Consol Income Statement REPORT DATE: 12-31-96
BS - L&B FINANCIAL, INC RUN DATE: 12-31-96
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
$ VARIANCE
DECEMBER 1996 NOVEMBER 1996 DEC 1996 MON ACT DECEMBER 1996 DECEMBER 1995
NUMBER DESCRIPTION MONTH ACTUAL MONTH ACTUAL NOV 1996 MON ACT YTD ACTUAL YTD ACTUAL
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Other Income
------------
310000 FNMA/FHLMC Servicing Fee 4,622.02 5,108.21 -486.19 28,493.77 27,892.16
310100 Gain/Loss on Loans Sold 9,141.58 13,398.47 -4,256.89 62,932.31 0.00
310500 Amort of MSR -832.50 -791.31 -41.19 -5,159.79 0.00
311000 ATM Fees 518.00 471.00 47.00 3,022.00 1,538.00
311020 Credit Life Insurance Co. 0.00 0.00 0.00 7,804.68 9,084.51
311030 Credit Card Income -25.39 246.59 -271.98 521.18 - 87.57
311040 Late Fees 3,838.49 4,169.84 -331.35 22,084.87 16,039.35
311050 FMHA Comp 0.00 0.00 0.00 0.00 111.16
311060 Other Fees 124.50 100.60 23.90 477.66 166.00
311070 Services Charges 8,119.05 5,710.58 2,408.17 39,302.67 30,685.46
311080 Misc Income 51.23 24.25 26.58 3,070.02 6,421.97
311090 Safe Deposit Rent 0.00 0.00 0.00 120.00 60.00
319000 Service Corp. Income 0.00 0.00 0.00 0.00 21,211.82
390000 Gain/Loss on Sale of INV 0.00 0.00 0.00 0.00 -13,045.56
-------------- --------------- --------------- ------------- -------------
Total 25,556.98 24,438.53 -2,841.55 162,669.26 100,143.30
REO Operations
--------------
370000 Gain/Loss on Sale of REO 0.00 0.00 0.00 196.58 4,711.20
372000 REO Income 3,037.50 1,710.00 1,327.50 13,784.40 17,650.00
471000 REO Expense - Foreclosur 0.00 0.00 0.00 0.00 0.00
472000 REO Expense 1,442.33 1,550.43 -508.10 10,673.20 11,279.38
479000 Reserve for Losses - REO 0.00 0.00 0.00 0.00 0.00
-------------- --------------- --------------- ------------- -------------
Total 1,595.17 -240.43 1,835.60 3,307.78 11,081.82
Interest Expense
----------------
400000 Int Exp - Passbook 11,251.84 10,999.12 262.72 69,326.77 73,060.94
400010 Int Exp - CP's 293,577.65 281,582.53 11,995.12 1,720,143.69 1,625,990.90
400020 Int Exp - IRA 36,890.13 35,283.33 1,606.80 216,394.61 193,770.94
400030 Int Exp - 6 Month Money 62,541.09 60,800.90 1,740.19 376.896.57 424,084.51
400040 Int Exp - MMDA 21,880.25 21,682.73 197.52 132,058.82 121,645.31
400050 Int Exp - NOW & Super No 7,785.66 7,596.10 189.56 45,566.79 37,010.99
400060 Penalty Income -2,838.67 -1,209.94 -1,628.73 -7,951.75 -9,383.91
401000 PHLB Advance Int 58,368.75 62,700.69 -4,331.94 379,404.88 281,169.44
-------------- --------------- --------------- ------------- -------------
Total 489,456.70 479,435.46 10,021.24 2,931,840.38 2,747,349.12
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SULPHUR SPRINGS LOAN & BLDG PAGE 3
Consol Income Statement REPORT: 12-31-96
BS - L&B Financial, Inc RUN DATE 12-31-96
- ------------------------------------------------------------------------------------------------------------------------------------
$ VARIANCE
DECEMBER 1996 NOVEMBER 1996 DEC 1996 MON ACT DECEMBER 1996 DECEMBER 1995
NUMBER DESCRIPTION MONTH ACTUAL MONTH ACTUAL NOV 1996 MON ACT YTD ACTUAL YTD ACTUAL
- ------ ---------------------------- --------------- --------------- ------------------ --------------- ----------------
<S> <C> <C> <C> <C> <C>
Compensation and Benefit
------------------------
410000 Directors Fees 8,750.00 8,750.00 0.00 52,500.00 48,000.00
410010 Salaries 85,906.20 86,214.23 -308.03 554,415.26 503,544.26
410015 Contract Labor 1,045.00 725.00 320.00 5,340.27 7,732.75
410020 Deferred Comp 446.26 409.39 36.87 2,493.21 2,287.34
410030 Bonus Expense 0.00 0.00 0.00 -26,000.03 18,580.00
410040 Retirement Plan Contribu 0.00 0.00 0.00 0.00 0.00
410050 Group Insurance Premium 10,206.45 7,866.44 2,340.01 47,007.80 90,610.47
410060 Officers Life Insurance 919.28 919.28 0.00 -7,199.45 6,434.96
410070 ESOP Contributions 8,337.50 8,337.50 0.00 50,100.00 4,333.75
410075 ESOP Interest 13,435.66 3,506.20 9,929.36 37,614.32 31,943.81
410077 MRRP Expense 7,000.00 7,000.00 0.00 42,000.00 64,500.00
410080 Social Security/Unemploy 6,642.27 5,908.43 733.86 40,242.25 42,999.08
410090 Other Employee Expenses 3,680.26 790.93 2,889.33 8,829.98 16,224.00
411000 Officers Expense 0.00 0.00 0.00 0.00 961.17
412100 Meals and Entertainment 240.55 779.42 -638.87 4,244.20 3,807.77
--------------- --------------- ------------------ --------------- ----------------
Total 145,609.33 131,206.80 15,402.53 811,587.81 845,959.36
Occupancy and Equipment
-----------------------
420000 Rent 725.00 725.00 0.00 4,360.00 2,683.96
420010 Building Maintenance 6,637.03 6,282.60 354.43 22,947.75 20,395.34
420015 Rental Income -5,497.25 -6,844.25 1,347.00 -38,965.45 0.00
420020 Utilities 3,214.92 2,574.03 640.89 20,677.58 16,420.26
420030 Equipment Maintenance 2,469.58 3,195.00 -725.42 19,415.88 9,101.72
420035 Equipment Rental 761.09 832.71 -71.62 7,176.49 5,312.90
420040 Property/FFE Taxes and I 3,362.33 3,405.85 -53.52 24,495.54 13,906.68
421000 Depreciation - FPB 9,019.37 9,017.99 1.38 53,196.93 44,615.34
421005 Depreciation Leasehold I 143.61 143.61 0.00 861.66 0.00
421010 Equipment Expense 1,083.33 686.68 396.63 6,614.43 10,500.39
422000 Depreciation - Bldg & Im 6,177.73 6,177.75 -0.02 36,988.31 13,899.52
423000 Computer Supplies 1,540.95 1,016.22 524.73 8,251.49 0.00
425000 Data Processing 1,348.00 1,757.50 -409.50 9,323.50 25,404.17
452600 Data Communications 3,673.73 3,673.73 0.00 21,938.39 19,076.96
495000 (Gain)/Loss Sale - FP&R 0.00 0.00 0.00 634.51 0.00
--------------- --------------- ------------------ --------------- ----------------
Total 34,649.40 32,644.42 2,004.98 197,907.01 181,317.24
Professional Fees
-----------------
430000 Advertising 10,460.40 12,975.01 -2,614.26 70,432.89 57,128.09
431000 Legal Fees 11,884.34 30,302.08 -18,417.74 192,302.75 60,092.69
431100 Marketing 0.00 0.00 0.00 536.37 0.00
432000 Consulting Fees 2,421.77 2,421.78 -0.01 24,508.61 45,629.44
433000 Audit 5,000.00 5,000.00 0.00 30,117.50 27,185.05
433100 Amount of Capitalized Hol 1,235.36 1,235.36 0.00 7,412.16 0.00
434000 Regulatory Exam - OTS As 0.00 0.00 0.00 0.00 20,054.00
--------------- --------------- ------------------ --------------- ----------------
Total 31,002.22 51,934.23 -20,932.01 325,310.28 220,089.27
Other Expense
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C>
---------------
460010 Other Loan Expense 1,198.85 641.58 557.27 -7,639.48 3,138.71
460020 Loan Appraisal 0.00 0.00 0.00 0.00 8,800.00
460030 FHA Title I Premium 165.19 71.98 93.21 569.30 419.87
460040 FHA/VA Loan Fees 64.60 9.90 54.70 245.80 295.62
460050 Seminar & Travel 747.70 786.96 -39.26 9,022.74 20,852.15
460070 Automobile Expense 3,112.11 1,692.28 1,419.83 18,129.17 11,993.36
461000 Office Supplies 5,326.45 5,608.78 -282.33 31,295.14 51,974.91
461010 ATM Monthly Expense 1,922.19 1,864.09 58.10 11,164.12 8,590.48
462000 Postage 7,981.50 319.32 7,662.18 15,675.22 24,096,67
462010 Courier Service Expense 1,535.94 410.20 1,125.74 6,097.19 4,214.64
463000 Telephone 4,690.08 4,501.12 188.96 25,978.63 31,386.94
464000 Insurance/Bond Premiums 3,774.99 8,187.06 -4,412.07 24,643.76 23,152.74
465000 Organizational/Membership 4,761.32 2,977.36 1,783.96 22,796.69 11,650.77
465010 Subscriptions 1,184.24 1,147.55 36.69 7,836.09 6,229.60
465020 ATM Fees 87.23 121.04 -33.11 619.68 836.39
465030 Bank Service Charges 5,888.39 6,062.84 -174.45 31,577.85 23,536.84
465040 Cash Short 107.73 -0.10 107.83 160.27 551.80
465050 ATM Terminal - Cash Short 0.00 30.00 -30.00 210.00 107.00
465060 Donations 1,065.00 563.05 501.95 10,678.75 5,524.10
465070 Other Losses 236.27 1,166.87 -930.60 4,097.00 2,753.74
465080 NASDAQ Listing 0.00 0.00 0.00 0.00 8,668.00
465090 Stock Maintenance 1,775.42 0.00 1,775.42 6,119.03 7,561.34
466000 State Franchise Tax 5,259.45 2,009.91 3,249.54 15,499.18 21,701.88
466100 Deferred Income Tax 0.00 0.00 0.00 0.00 0.00
469000 Operating - Other G&A 3,540.92 18,208.55 -14,667.63 29,758.00 18,212.27
470000 Check Order Charges 635.61 759.81 -124.20 2,675.01 0.00
------------------ ------------------ ------------- --------------- ----------------
Total 55,061.88 57,140.15 -2,078.27 267,199.14 306,259.82
80000 FDIC/SAIF Insurance Prem 19,937.08 19,935.46 1.62 759,933.77 114,004.82
Loss Reserves
-------------
90000 Loan Loss Reserve - Mtg 0.00 0.00 0.00 0.00 0.00
91000 Loan Loss Reserve - Cons 0.00 0.00 0.00 0.00 0.00
92000 Loan Loss Reserve - Comm 0.00 0.00 0.00 0.00 0.00
------------------ ------------------ ------------- --------------- ----------------
Total 0.00 0.00 0.00 0.00 0.00
Income Taxes
------------
99000 Federal Income Tax 50,000.00 -174,840.00 224,840.00 50,160.00 305,000.00
99100 Deferred Income Tax 0.00 217,840.00 -227,840.00 0.00 0.00
------------------ ------------------ ------------- --------------- ----------------
Total 50,000.00 43,000.00 7,000.00 50,160.00 305,000.00
Net Income 71,680.25 75,140.76 -3,460.51 81,751.26 730,401.98
================== ================== ============= =============== ================
Total Income 899,839.19 892,387.71 7,451.48 5,436,362.85 5,461,660.99
Total Expense 828,158.94 817,246.95 10,911.99 5,354,611.59 4,731,259.01
Net Income 71,680.25 75,140.76 -3,460.51 81,751.26 730,401.98
</TABLE>
<PAGE>
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.
Dated: March 14, 1997
JEFFERSON SAVINGS BANCORP, INC.
By: /s/ DAVID V. McCAY
-----------------------------------------
David V. McCay
Chairman of the Board, President and
Chief Executive Officer
<PAGE>
EXHIBIT INDEX
-------------
Exhibit No. Description Page*
- ----------- ----------- ----
2(a) Agreement and Plan of Merger, dated September 25,
1996, by and between the Registrant, Jefferson
Savings AcquisitionCo, Inc. and L & B Financial,
Inc., incorporated herein by reference to the
Registrant's Registration Statement on Form S-4
filed with the Commission on December 19, 1996,
with a Pre-Effective Amendment No. 1 filed on
January 24, 1997, and effective on January 28,
1997.
2(b) Agreement and Plan of Merger, dated January 7,
1997, by and between Loan & Building State
Savings Bank and First Federal Savings Bank of
North Texas.
2(c) Agreement and Plan of Merger, dated May 31, 1996,
as amended on August 31, 1996 and on October 9,
1996, by and between the Registrant, First
Federal Savings Bank of North Texas, and Texas
Heritage Savings Association/Banc, incorporated
herein by reference to the Registrant's
Registration Statement on Form S-4 filed with the
Commission on October 28, 1996, and effective on
October 29, 1996.
99(a)(i) Press Release, dated January 2, 1997, with respect to the
Registrant's acquisition of Texas Heritage Savings
Association/Banc.
99(a)(ii) Press Release, dated March 3, 1997, with respect to the
Registrant's acquisition of L & B Financial, Inc.
*Only manually signed original is sequentially numbered.
<PAGE>
EXHIBIT 2(B)
------------
<PAGE>
AGREEMENT AND PLAN OF MERGER
OF
LOAN & BUILDING STATE SAVINGS BANK
WITH AND INTO
FIRST FEDERAL SAVINGS BANK OF NORTH TEXAS
THIS MERGER AGREEMENT dated as of January 7, 1997, between FIRST FEDERAL
SAVINGS BANK OF NORTH TEXAS, a federally chartered stock-form savings bank
("First Federal"), and LOAN & BUILDING STATE SAVINGS BANK (formerly Sulphur
Springs Loan and Building Association), a Texas savings bank ("Savings Bank").
In consideration of the mutual covenants and agreements contained herein,
the parties agree as follows:
SECTION 1.
---------
Savings Bank shall merge with and into First Federal (the "Merger"). First
Federal shall be the surviving institution of such Merger (the "Resulting
Institution"). The Merger shall not be effective unless and until approved by
the Office of Thrift Supervision (the "OTS") and the Texas Savings and Loan
Department (the "T.S.L.D.").
SECTION 2.
---------
The name of the Resulting Institution shall be "First Federal Savings Bank
of North Texas."
SECTION 3.
---------
The location of the home office and branch offices of the Resulting
Institution shall be as follows:
321 West Oak Street (110 Piner), Denton, Texas (home office)
116 East South Street, Longview, Texas
3600 Gilmer Road, Longview, Texas
2721 East Marshall, Longview, Texas
3505 McCann Road, Longview, Texas
603 South White Oak Road, White Oak, Texas
1415 FM 51 South, Decatur, Texas
521 East Price, Keller, Texas
302 South Stemmons, Lewisville, Texas
Highway 377 South, Pilot Point, Texas
801 East Main, Suite B, Allen, Texas
119 South Market Street, Carthage, Texas
9802 Lakeview Parkway, Rowlett, Texas
987 W. Centerville Road, Garland, Texas
<PAGE>
500 Horwood Road, Bedford, Texas*
2914 Ridge Road, Rockwall, Texas*
306 North Davis Street, Sulphur Springs, Texas
101 Kaufman Street, Mount Vernon, Texas
801 North Jefferson Street, Mount Pleasant, Texas
101 Broadnax Street, Daingerfield, Texas
117 South Greer Street, Pittsburgh, Texas
101 East North Street, New Boston, Texas (LPO)
312 North Davis Street, Sulphur Springs, Texas (L & B Mortgage)
The [*] symbol identifies offices to be acquired by First Federal upon
consummation of the merger of Texas Heritage Savings Association/Banc with and
into First Federal, which acquisition is currently pending before the OTS.
SECTION 4.
---------
The basis on which the Resulting Institution's savings accounts will be
issued will be identical to that of First Federal's and Savings Bank's accounts
immediately prior to the effective time of the Merger.
SECTION 5.
---------
The number of directors which the Resulting Institution shall have shall be
nineteen, the terms which the directors shall serve shall be as provided in
First Federal's Bylaws or until their successors are duly elected and qualified,
and the directors who shall serve as of the effective time of the Merger shall
be:
NAME ADDRESS
---- -------
David McCay 14915 Manchester Road
Ballwin, Missouri 63011
Ronald G. Womack 116 East South Street
Longview, Texas 75606
Bennie G. Snider 408 Mimosa
Denton, Texas 76201
Joe L. Williams 9802 Lakeview Parkway
Rowlett, Texas 75088
2
<PAGE>
C. Glynn Lowe 341 Azalea lane
Sulphur Springs, Texas 75482
James R. Curtis, Jr. 1313 Inverness
Longview, Texas 75601
Alvin E. Davis 7 Cherrywood Click
Longview, Texas 75604
John N. Darby Lake Cherokee NL-3
Longview, Texas 75603
John S. Guttry, D.D.S. 1401 Robinwood Ct.
Longview, Texas 75601
W.D. Northcutt, III 1100 Yates Drive
Longview, Texas 75601
John C. Robbins 1614 Clarendon
Longview, Texas 75601
Philip W. Wilson 1500 Noble Drive
Longview, Texas 75601
John L. Zeigler Rt. 15 Box 21
Longview, Texas 75608
Robert H. Caldwell, Jr. 2603 Jamestown
Denton, Texas 76201
Carl Degan, Jr. 1955 South Valley Parkway
Lewisville, Texas 75067
Mark Hannah, Jr. 625 Dallas Drive, #100
Denton, Texas 76205
Richard D. Hayes 819 W. Oak
Denton, Texas 76201
Marjorie Pitner 3806 University Drive West
Denton, Texas 76201
Michael J. Whitten 2145 Woodbrook
Denton, Texas 76205
3
<PAGE>
SECTION 6.
---------
As of the time the Merger shall become effective, the charter of First
Federal, as previously amended, shall be the charter of the Resulting
Institution, and the bylaws of First Federal, as previously amended and
restated, shall be the bylaws of the Resulting Institution.
SECTION 7.
---------
The business of the Resulting Institution shall be that of a savings and
loan association organized under the laws of the United States. This business
shall be conducted by the Resulting Institution at its main office and at its
legally established branches, which shall be the main office and branch
locations of Savings Bank and the main office and branch locations of First
Federal as of the effective time of the Merger. The main office of First Federal
immediately prior to the effective time of the Merger shall be the main office
of the Resulting Institution.
SECTION 8.
---------
At the effective time of the Merger, the Resulting Institution shall be
considered the same business and corporate entity as each of Savings Bank and
First Federal (collectively, the "Constituent Institutions") and thereupon and
thereafter all the property, rights, privileges, powers and franchises of each
of the Constituent Institutions shall vest in the Resulting Institution and the
Resulting Institution shall be subject to and be deemed to have assumed all of
the debts, liabilities, obligations and duties, including any liquidation
account maintained by the Constituent Institutions, of each of the Constituent
Institutions and shall have succeeded to all of each of their relationships,
fiduciary or otherwise, as fully and to the same extent as if such property,
rights, privileges, powers, franchises, debts, liabilities, obligations, duties
and relationships had been originally acquired, incurred or entered into by the
Resulting Institution. In addition, any reference to either of the Constituent
Institutions in any contract or document, whether executed or taking effect
before or after the effective time of the Merger, shall be considered a
reference to the Resulting Institution if not inconsistent with the other
provisions of the contract or document; and any pending action or other judicial
proceedings to which either of the Constituent Institutions is a party shall not
be deemed to have been abated and shall have the same force and effect as if the
Merger had not occurred; or the Resulting Institution may be substituted as a
party to such action or proceedings, and any judgment, order or decree may be
rendered for or against it that might have been rendered for or against either
of the Constituent Institutions if the Merger had not occurred. The liquidation
account maintained by Savings Bank shall be assumed by the Resulting Institution
and shall be and become the liquidation account of the Resulting Institution
upon consummation of the Merger.
4
<PAGE>
SECTION 9
---------
(a) Each share of common stock, $0.01 par value per share, of First
Federal issued and outstanding immediately prior to the effective time of the
Merger shall remain issued and outstanding and shall be unaffected by the
Merger.
(b) Each share of common stock, $0.01 par value per share, of Savings Bank
issued and outstanding immediately prior to the effective time of the Merger
shall, by virtue of the Merger and without any action on the part of the holder
thereof, be canceled.
SECTION 10.
----------
Consummation of the Merger is subject to (i) the prior approval of the OTS
and the T.S.L.D., and (ii) the shareholders of each of First Federal and Savings
Bank, and (iii) consummation of the acquisition of L & B Financial, Inc. (the
parent company of Savings Bank) by Jefferson Savings Bancorp, Inc. (the parent
company of First Federal). Notwithstanding anything else herein to the contrary,
this Merger Agreement shall terminate immediately upon termination of that
certain Agreement and Plan of Merger dated September 25, 1996, between Jefferson
Savings Bancorp, Inc., Jefferson Savings AcquisitionCo, Inc. and L & B
Financial, Inc.
[THE REMAINDER OF THIS PAGE HAS BEEN LEFT BLANK INTENTIONALLY]
5
<PAGE>
IN WITNESS WHEREOF, First Federal and Savings Bank have caused this Merger
Agreement to be executed in multiple copies by their duly authorized officers,
and have caused their seals to be affixed hereto, as of the date first above
written.
FIRST FEDERAL SAVINGS BANK OF NORTH TEXAS
By: /s/ David V. McCay
-------------------------------------
Name: David V. McCay
-----------------------------------
Title: Chairman of the Board and C.E.O.
----------------------------------
Attest:
By: /s/ Gary G. Honerkamp
------------------------------
LOAN & BUILDING STATE SAVINGS BANK
By: /s/ C. Glynn Lowe
-------------------------------------
Name: C. Glynn Lowe
-----------------------------------
Title: President
----------------------------------
Attest:
By: /s/ Linda Galligher
------------------------------
6
<PAGE>
EXHIBIT 99(A)(I)
----------------
<PAGE>
[LOGO OF JEFFERSON SAVINGS APPEARS HERE]
- -------------------------------------------------------------------------------
FOR IMMEDIATE RELEASE
FOR MORE INFORMATION
Contact: Paul J. Milano
Chief Financial Officer
(314) 227-3000
NASDAQ Symbol: JSBA
In newspaper stock tables generally JeffSvg
JEFFERSON SAVINGS BANCORP, INC.
COMPLETES TEXAS HERITAGE ACQUISITION
-------------------------------------
ST. LOUIS, January 2, 1997 -- David. V. McCay, Chairman of Jefferson Savings
Bancorp, Inc. ("Jefferson"), St. Louis, Missouri, today announced the recent
completion of Jefferson's acquisition of Texas Heritage Savings
Association/Banc, Rowlett, Texas ("Texas Heritage"). Texas Heritage represents
Jefferson's fourth acquisition in the Texas market during the past eighteen
months. Jefferson presently expects to complete its pending acquisition of
another Texas financial institution, L & B Financial, Inc., Sulphur Springs,
Texas ("L & B"), and its subsidiary, Loan & Building State Savings Bank, during
the first quarter of 1997.
"The acquisition of Texas Heritage provides Jefferson even greater access to the
active expansion in a rapidly growing market through a well-represented
financial institution with a strong local presence and a solid operating
history," McCay said. "Texas Heritage shares Jefferson's commitment to providing
excellent personal service in the community which it serves. We believe that the
combined operations in this region have the potential to accelerate the growth
levels being realized by each company individually."
Texas Heritage will be consolidated under the charter of Jefferson's current
Texas thrift, First Federal Savings Bank of North Texas, and will operate under
that name. The primary focus of the institution will continue to be retail
banking, emphasizing residential mortgage lending and a full array of consumer
financial products and services.
As a result of its completed acquisition of Texas Heritage and the pending
acquisition of L & B, Jefferson will be a $1.3 billion holding company with two
thrift institution subsidiaries: Jefferson Savings and Loan Association, F.A.
with approximately $700 million in assets and 10 offices in Missouri, and First
Federal Savings Bank of North Texas with approximately $600 million in assets
and 21 offices in Texas.
McCay continued, "We now see even greater potential for the Texas operations.
The combined management teams have identified various potential expense savings
and business revenue opportunities that should result from the merger. Also, the
combined resources of the larger organization will provide additional products
and services to an expanding customer base."
McCay further emphasized the benefits of affiliating with a high-quality
financial institution in a high-growth market as a worthy capital investment on
the part of Jefferson. "Texas Heritage fits our acquisition criteria perfectly,
exhibiting strong earnings records, superior asset quality and an excellent
management team," McCay added.
Shareholders of Texas Heritage received aggregate cash consideration of
approximately $5.15 million and 223,000 shares of Jefferson common stock in the
merger. The transaction which was completed effective December 30, 1996, was
accounted for as a cash purchase acquisition, as will the pending acquisition of
L & B.
"We view Jefferson's further expansion into Texas as an advantageous
opportunity to leverage our capital base and generate additional returns for our
shareholders," said McCay. He affirmed that Jefferson will continue to be deemed
"well-capitalized" in accordance with regulatory measures.
<PAGE>
EXHIBIT 99(A)(II)
-----------------
<PAGE>
[LOGO OF JEFFERSON SAVINGS APPEARS HERE]
- --------------------------------------------------------------------------------
FOR IMMEDIATE RELEASE FOR MORE INFORMATION
- --------------------- --------------------
Paul J. Milano
Chief Financial Officer
(314) 227-3000
NASDAQ Symbol: JSBA
In newspaper stock tables generally JeffSvg
JEFFERSON SAVINGS BANCORP, INC. COMPLETES
ACQUISITION OF L & B FINANCIAL, INC.
------------------------------------
ST LOUIS, March 3, 1997 -- David V. McCay, Chairman of Jefferson Savings
Bancorp, Inc. ("Jefferson") announced the completion of Jefferson's acquisition
of L&B Financial, Inc., Sulphur Springs, Texas ("L&B Financial"), and L&B
Financial's wholly owned subsidiary, Loan & Building State Savings Bank ("Loan &
Building"). This represents Jefferson's fifth acquisition in northeast Texas
during the past two years. The operations of the acquired institution will be
merged with Jefferson's existing Texas thrift, First Federal Savings Bank of
North Texas.
McCay said, "L&B Financial shares Jefferson's commitment to provide excellent
personal service in the community which they serve. We believe that the combined
operations will generate more products and services to their core customer base.
We view Jefferson's further expansion in Northeast Texas as an opportunity to
leverage our capital base and create more value for our shareholder."
Total consideration paid in connection with the purchase of L&B Financial was an
aggregate of approximately $15.3 million in cash and 549,000 shares of
Jefferson's common stock.
As a result of its completed acquisition of L&B Financial, Jefferson is a $1.3
billion holding company with two thrift institution subsidiaries: Jefferson
Savings and Loan Association, F.A. with approximately $700 million in assets and
10 offices in Missouri, and First Federal Savings Bank of North Texas with $600
million in assets and 22 offices throughout northeast Texas.
###
