<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File No. 0 - 21328
FORT BEND HOLDING CORP.
A Delaware Corporation I.R.S. Employer Identification
No. 76-0391720
Address Telephone Number
3400 Avenue H (713) 342-5571
Rosenberg, Texas 77471
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding twelve months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No .
---- ----
There were 907,372 shares and 819,198 shares of Common Stock ($0.01 par value)
issued and outstanding, respectively as of October 1, 1996.
1 of 24
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
FORT BEND HOLDING CORP.
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL CONDITION
(Unaudited)
<TABLE>
<CAPTION>
ASSETS September 30, 1996 March 31, 1996
------------------ --------------
<S> <C> <C>
Cash and due from banks $ 5,807,516 $ 3,451,880
Short-term investments 8,323,211 13,541,782
Certificates of deposit 200,000 200,000
------------ ------------
Total cash and cash equivalents 14,330,727 17,193,662
Investment securities available for sale,
at market value 2,740,491 2,684,607
Investment securities held to maturity
(estimated market value of $21,899,058 and
$9,064,153 at September 30, 1996 and
March 31, 1996, respectively) 22,221,861 9,233,505
Mortgage-backed securities available for sale,
at market value 723,355 873,502
Mortgage-backed securities held to maturity
(estimated market value of $103,019,682 and
$110,676,779 at September 30, 1996
and March 31, 1996, respectively) 103,809,238 110,489,617
Loans receivable, net 122,150,817 92,861,594
Loans held for sale 74,857 922,422
Accrued interest receivable 1,687,563 1,466,272
Real estate, net 871,634 155,372
Federal Home Loan Bank stock, at cost 1,878,300 1,460,200
Premises and equipment, net 4,563,745 3,635,046
Mortgage servicing rights, net 2,468,087 1,235,714
Prepaid expenses and other assets 2,420,625 1,538,171
Deferred income taxes 423,123 418,949
Goodwill, net 1,329,959 ---
------------ ------------
Total assets $281,694,382 $244,168,633
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits $235,123,114 $203,913,715
Convertible Subordinated Debentures 12,100,000 12,100,000
Other borrowings 4,295,563 4,363,688
Advances from borrowers for taxes and insurance 8,992,026 4,224,796
Accounts payable, accrued expenses and other
liabilities 3,787,068 1,994,063
------------ ------------
Total liabilities 264,297,771 226,596,262
------------ ------------
Stockholders' Equity:
Serial preferred stock, $.01 par value -
500,000 shares authorized, none outstanding
Common Stock $.01 par value, 2,000,000 shares
authorized 907,372 shares issued and 819,198
shares outstanding at September 30, 1996 and
905,572 shares issued and 817,398 shares
outstanding at March 31, 1996 9,073 9,055
Additional paid-in capital 8,580,932 8,514,562
Unearned employee stock ownership plan shares (351,000) (394,875)
Deferred compensation (106,921) (98,668)
Net unrealized depreciation on available for
sale securities, net of tax (11,756) (21,786)
Retained earnings (substantially restricted) 10,732,784 11,020,584
Treasury stock, at cost - 88,174 shares at
September 30, 1996 and March 31, 1996 (1,456,501) (1,456,501)
------------ ------------
Total stockholders' equity 17,396,611 17,572,371
------------ ------------
Total liabilities and stockholders'
equity $281,694,382 $244,168,633
============ ============
</TABLE>
The accompanying notes are an integral part of the condensed
consolidated financial statements.
2
<PAGE>
FORT BEND HOLDING CORP.
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
September 30, September 30,
---------------------------- ----------------------------
1996 1995 1996 1995
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Interest Income:
Loans $2,389,598 $1,813,066 $4,520,287 $3,546,958
Short-term investments 231,586 88,870 418,981 166,765
Investment securities 202,532 189,560 350,528 439,858
Mortgage-backed securities 1,755,901 1,953,969 3,585,160 3,896,698
---------- ---------- ---------- ----------
Total interest income 4,579,617 4,045,465 8,874,956 8,050,279
---------- ---------- ---------- ----------
Interest expense:
Deposits 2,467,155 2,334,249 4,787,306 4,583,685
Borrowings 335,644 115,159 665,694 252,071
---------- ---------- ---------- ----------
Total interest expense 2,802,799 2,449,408 5,453,000 4,835,756
---------- ---------- ---------- ----------
Net interest income before provision for
loan losses 1,776,818 1,596,057 3,421,956 3,214,523
Provision for loan losses 43,000 18,000 68,000 45,053
---------- ---------- ---------- ----------
Net interest income after provision for
loan losses 1,733,818 1,578,057 3,353,956 3,169,470
---------- ---------- ---------- ----------
Noninterest income:
Gain (loss) on sale of loans 56,350 64,640 106,299 123,845
Service charges 131,092 72,607 244,510 147,239
Loan servicing income 193,524 134,453 363,155 275,252
Other income 317,032 215,670 596,170 398,326
---------- ---------- ---------- ----------
Total noninterest income 697,998 487,370 1,310,134 944,662
---------- ---------- ---------- ----------
Noninterest expenses:
Compensation and benefits 938,549 767,365 1,770,420 1,532,137
Office occupancy and equipment 242,525 158,452 429,545 323,350
Federal insurance premiums 133,307 113,924 257,589 227,215
Savings Association Insurance Fund Assessment 1,492,686 --- 1,492,686 ---
Amortization of mortgage servicing rights 82,787 48,076 147,037 108,076
Insurance and surety bond expense 37,923 28,389 71,539 54,458
Other 404,070 282,155 780,586 575,875
---------- ---------- ---------- ----------
Total noninterest expenses 3,331,847 1,398,361 4,949,402 2,821,111
Income (loss) before income tax (900,031) 667,066 (285,312) 1,293,021
Income tax provision (benefit) (321,200) 226,112 (112,200) 449,012
---------- ---------- ---------- ----------
Net income (loss) $ (578,831) $ 440,954 $ (173,112) $ 844,009
========== ========== ========== ==========
Primary earnings (loss) per common share $ (0.69) $ 0.50 $ (0.21) $ 0.96
========== ========== ========== ==========
Fully diluted earnings (loss) per common share $ (0.69) $ 0.50 $ (0.21) $ 0.96
========== ========== ========== ==========
Dividends per common share $ 0.07 $ 0.07 $ 0.14 $ 0.14
========== ========== ========== ==========
</TABLE>
The accompanying notes are an integral part of the condensed
consolidated financial statements.
3
<PAGE>
FORT BEND HOLDING CORP.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
September 30,
-------------------------------
1996 1995
------------ ------------
<S> <C> <C>
Operating activities:
Net income (loss) $ (173,112) $ 844,009
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Provision for losses on loans and real estate 68,000 45,053
Depreciation 134,898 100,081
Amortization of deferred compensation 24,597 21,312
Compensation charge related to release of ESOP shares 33,538 32,461
Amortization of premiums and discounts on securities, net 6,064 71,547
Amortization of loan premium, discount, and deferred fees, net (119,248) (83,665)
Deferred income tax provision (benefit) (9,172) 114,883
Gain on sale of real estate (31,087) (13,583)
Amortization of unearned income (6,070) ---
Amortization of mortgage servicing rights 147,037 (2,733)
Amortization of debt issue costs 40,218 108,076
Amortization of goodwill 6,796
Net (gain) loss on sale of loans (92,864) (123,845)
Dividends on Federal Home Loan Bank stock (48,100) (45,500)
Origination of loans held for sale (6,264,911) (5,565,886)
Proceeds from sale of loans 7,205,340 4,976,183
Net change in accrued interest receivable (221,291) (25,457)
Net change in prepaid expenses and other assets (739,672) (723,303)
Net change in accounts payable, accrued expenses
and other liabilities 1,601,073 18,669
----------- -----------
Net cash provided by (used in) operating activities 1,562,034 (251,698)
----------- -----------
</TABLE>
Continued
4
<PAGE>
FORT BEND HOLDING CORP.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
September 30,
-------------------------------
1996 1995
------------- --------------
<S> <C> <C>
Investing activities:
Net change in loans receivable (9,171,383) (7,072,479)
Proceeds from sale of real estate 37,233 13,123
Improvements to real estate -- (1,118)
Purchase of premises and equipment (373,595) (68,494)
Proceeds from maturity of investment securities 10,000,000 1,000,000
Purchase or origination of mortgage servicing rights (1,379,410) (53,074)
Purchase of investment securities available for sale (58,473) ---
Principal collected on mortgage-backed securities held to
maturity 6,670,245 6,158,258
Principal collected on mortgage-backed securities available
for sale 167,974 (2,485,347)
Purchase of investment securities held to maturity (22,984,496) ---
Net cash acquired in acquisition 3,541,250 ---
------------ -------------
Net cash used in investing activities (13,550,655) (2,509,131)
------------ -------------
Financing activities:
Net increase in deposits 4,658,394 7,729,453
Net increase (decrease) in short-term borrowings --- 160,300,000
Payment on long-term borrowings (24,250) (165,807,677)
Increase in advances from borrowers for taxes and insurance 4,606,230 4,229,859
Net proceeds from issuance of common stock --- 15,500
Dividends paid (114,688) (120,390)
Purchase of treasury stock --- (168,750)
------------ -------------
Net cash provided by financing activities 9,125,686 6,177,995
------------ -------------
Net increase (decrease) in cash and cash equivalents (2,862,935) 3,417,166
Cash and cash equivalents at beginning of period 17,193,662 6,832,312
------------ -------------
Cash and cash equivalents at end of period $ 14,330,727 $ 10,249,478
============ =============
Supplemental disclosure of cash flow information:
Cash paid for:
Interest $ 2,890,723 $ 2,385,986
Income taxes 420,000 425,000
Supplemental disclosure of noncash activities:
Real estate acquired in settlement of loans $ 617,408 $ 1,435
Loans originated related to sales of real estate 182,000 69,300
Stock issued to recognition and retention plan 32,850 22,500
Reduction of ESOP debt by the ESOP 43,875 43,875
Net unrealized depreciation on available for sale
securities, net of tax 10,030
</TABLE>
The accompanying notes are an integral part of the condensed
consolidated financial statements.
5
<PAGE>
Financial Statements, Continued
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. BASIS OF PRESENTATION
The unaudited information for the three and six months ended September
30, 1996 and 1995 includes the results of operations of Fort Bend Holding Corp.
(the "Holding Corp.") and its wholly-owned subsidiary Fort Bend Federal Savings
and Loan Association of Rosenberg (the "Association"). In the opinion of
management, the information reflects all adjustments (consisting only of normal
recurring adjustments) which are necessary for a fair presentation of the
results of operations for such periods but should not be considered as
indicative of results for a full year.
The March 31, 1996 condensed consolidated statement of financial
condition data was derived from the audited financial statements, but does not
include all disclosures required by generally accepted accounting principles.
Accordingly, the condensed consolidated financial statements should be read in
conjunction with the audited consolidated financial statements.
2. RECOGNITION AND RETENTION PLAN
The Holding Corp. has a Recognition and Retention Plan ("RRP") as a
method of providing key officers with a proprietary interest in the Holding
Corp. in a manner designed to encourage such individuals to remain with the
Holding Corp. or the Association. All outstanding awards vest at a rate of 20%
per year. On April 1, 1996, an additional 1,800 shares were granted under the
RRP. A total of 26,325 shares have been authorized of which 21,852 shares had
been granted under the RRP as of September 30, 1996.
3. IMPAIRED LOANS
Impaired loans decreased $412,000 during the three months ended
September 30, 1996 and $1,405,000 during the six months ended September 30,
1996. The recent quarter decline resulted from the foreclosure of a commercial
real estate loan while the prior quarter decline reflected the payoff of a
multifamily loan. Each of these loans were previously recognized as impaired.
The following table summarizes impaired loan information as of
September 30, 1996.
Impaired loans $2,458,000
Impaired loans which have a specific reserve
for loan losses calculated under SFAS 114 -0-
Impaired loans which do not have a specific
reserve for loan losses calculated under
SFAS 114 $2,458,000
6
<PAGE>
Financial Statements, Continued
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, Continued
(Unaudited)
4. OTHER BORROWINGS
Borrowings at September 30, 1996 consisted of a $4.0 million advance
from the Federal Home Loan Bank bearing a rate of 6.205% amortizing based on a
30 year term and maturing on June 20, 2000. The advance is collateralized by
mortgage-backed securities. Borrowings also included an ESOP loan with a balance
of $351,000 at September 30, 1996 with principal payments due each June 30 and
December 31 and maturing June 30, 2001.
The following is a schedule by fiscal year of future principal payments
required under the amortizing advance agreement and the ESOP loan:
FHLB Advances ESOP Loan
------------- ---------
1997 $ 25,012 $43,875
1998 52,405 87,750
1999 55,752 87,750
2000 59,312 87,750
2001 3,752,082 43,875
5. EARNINGS PER COMMON SHARE
Primary earnings per common share for the three and six months ended
September 30, 1996 have been computed based on net income divided by the
weighted average number of common shares and common share equivalents
outstanding during the period. When dilutive, stock options are included as
share equivalents using the treasury stock method. Additionally, net income and
shares outstanding are adjusted to assume the conversion of the Convertible
Subordinated Debentures for fully diluted earnings per common share. For
purposes of determining primary earnings per share the weighted average number
of common shares and common share equivalents outstanding for the three and six
months ended September 30, 1996 was 842,476 and for fully-diluted earnings per
share, 1,402,658.
6. SUBSEQUENT EVENTS
On October 25, 1996, the Holding Corp. declared a cash dividend of $.07
per share payable on December 6, 1996 to shareholders of record on November 15,
1996.
On August 5, 1996, the Association signed a letter of intent and on
October 31, 1996, signed a definitive agreement with The Woodlands Corporation
to acquire a controlling interest in a new limited liability company to be
called the New Mitchell Mortgage Company ("New Mitchell"). It is being formed
for the purpose of engaging in the mortgage banking business, including the
origination and servicing of single family purchase loans, single family
construction loans and commercial and multifamily real estate loans. The
Woodlands would contribute certain mortgage loans and its mortgage
7
<PAGE>
Financial Statements, Continued
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, Continued
(Unaudited)
servicing portfolio and liabilities of its wholly-owned mortgage banking
subsidiary, Mitchell Mortgage Company ("Mitchell"), in exchange for a 49%
ownership interest in New Mitchell and Fort Bend would contribute cash of
approximately $2.6 million in exchange for a 51% ownership interest in New
Mitchell. Mitchell Mortgage Company was formed in 1974 and has had a mortgage
banking relationship with Fort Bend Holding Corp. for seven years. The
transaction should be completed by January, 1997. New Mitchell is proposed to be
operated in a manner consistent with that currently engaged in by Mitchell, and
will have approximately $600 million of loan servicing.
7. SPECIAL DEPOSIT INSURANCE ASSESSMENT
The deposits of savings institutions such as the Association are
presently insured by the Savings Association Insurance Fund (the "SAIF"), which,
along with the Bank Insurance Fund (the "BIF"), are the two insurance funds
administered by the Federal Deposit Insurance Corporation (the "FDIC").
Financial institutions which are members of the BIF have experienced
substantially lower deposit insurance premiums because the BIF has achieved its
required level of reserves while the SAIF has not yet achieved its required
reserves. A recapitalization plan for the SAIF was signed by the President on
September 30, 1996 as part of the Economic Growth and Regulatory Paperwork
Reduction Act and provides for a one-time special assessment of .657% of
deposits imposed on all SAIF insured institutions to enable the SAIF to achieve
its required level of reserves. The assessment of .657% was assessed based on
deposits as of March 31, 1995 and the Association's special assessment amounted
to approximately $985,000 after taxes. Accordingly, this special assessment has
significantly increased non-interest expense, and adversely affected the
Company's results of operations. Conversely, depending upon the Association's
capital level and supervisory rating, future annual deposit insurance premiums
are expected to decrease for periods beginning January 1, 1997, to approximately
.064% from .23% of deposits currently paid by the Association.
8. FIRSTBANC SAVINGS ACQUISITION
On May 10, 1996, the Holding Corp. entered into an agreement to acquire
all the outstanding stock of FirstBanc Savings Association of Texas
("FirstBanc"). On August 16, 1996, the transaction was closed and the Holding
Corp. immediately merged FirstBanc into the Association. FirstBanc was a state
chartered savings and loan association with one full service office located in
Missouri City, Texas. The Missouri City/Sugarland area is located in east Fort
Bend County. Management believes that this will be a strategic location for the
Association as east Fort Bend County has several master planned communities
including the rapidly growing First Colony and a new 7,000 acre project known as
Sienna Plantation. As of August 16, 1996, FirstBanc reported unaudited total
assets of $30.0 million, deposits of $26.8 million and shareholders' equity of
$3.0 million. Goodwill created from this transaction was approximately $1.3
million and will be amortized to expense over fifteen years.
8
<PAGE>
Financial Statements, Continued
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, Continued
(Unaudited)
The FirstBanc acquisition has been recorded using the purchase method of
accounting and, accordingly, the purchase price of approximately $4.2 million,
was allocated to the assets based on their estimated fair values at the date of
acquisition. The operating results of FirstBanc have been included in the
Company's results of operations commencing August 16, 1996.
The following summarized unaudited pro forma results of operations for
the Holding Corp. for the six months ended September 30, 1996 and 1995 assume
the FirstBanc acquisition occurred as of April 1, 1995. These pro forma results
have been prepared for comparative purposes only and do not purport to be
indicative of the results of operations that actually would have resulted had
the acquisition occurred at the beginning of the periods presented, or that may
result in the future.
For the six months ended
September 30,
----------------------------------
1996 1995
----------- ----------
Revenues $10,023,000 $9,493,000
=========== ==========
Net income (loss) $ (257,000) $ 899,000
=========== ==========
Primary earnings (loss)
per share $ (0.31) $ 1.02
=========== ==========
9
<PAGE>
Item 2.
Management's Discussion and Analysis of Financial Condition And
Results Of Operations
GENERAL
Fort Bend Holding Corp. (the "Holding Corp.") was incorporated under the laws of
the State of Delaware to become a savings and loan holding company with Fort
Bend Federal Savings and Loan Association of Rosenberg (the "Association") as
its subsidiary. The Holding Corp. was incorporated at the direction of the Board
of Directors of the Association, and on June 30, 1993 acquired all of the
capital stock of the Association upon its conversion from mutual to stock form
(the "Conversion"). Prior to the Conversion, the Holding Corp. did not engage in
any material operations and at September 30, 1996, it had no significant assets
other than the investment in the capital stock of the Association, investment
securities, deferred charges from subordinated debenture issue and cash and cash
equivalents. Unless the context otherwise requires, all references herein to the
Holding Corp. include the Holding Corp. and the Association on a consolidated
basis.
The Association is principally engaged in the business of attracting retail
savings deposits from the general public and investing those funds in first
mortgage loans on owner occupied, single-family residences, mortgage-backed
securities and investment securities. The Association originates residential
construction and commercial real estate loans. The Association also originates
consumer loans, including loans for the purchase of automobiles and home
improvement loans.
The most significant outside factors influencing the operations of the
Association and other banks and savings institutions include general economic
conditions, competition in the local market place and the related monetary and
fiscal policies of agencies that regulate financial institutions. More
specifically, the cost of funds, primarily consisting of deposits, is influenced
by interest rates offered on competing investments and general market rates of
interest. Lending activities are influenced by the demand for real estate
financing and other types of loans, which in turn is affected by the interest
rates at which such loans may be offered and other factors affecting loan demand
and funds availability.
In order to continue to meet the financial services needs of the communities it
serves, the Association intends to grow in a reasonable, prudent manner which
may include expansion of the branch network or the acquisition of other
financial institutions and related companies operating generally within a 100
mile radius of Rosenberg, Texas. As a part of this intended growth, the
Association has increased the portfolio allocation of single-family construction
lending, commercial real estate lending and consumer lending. The Association
through its acquisition of FirstBanc, added an experienced construction lending
officer and, as a result, the Association expects to increase its residential
construction lending program, including the origination of speculative loans to
qualified builders. Residential construction loans to owner-occupants are
generally underwritten using the same criteria as for one- to four-family
residential loans. Loan proceeds are disbursed in increments as construction
progresses and inspections warrant. Certain improvements and expansion of
facilities were completed in fiscal 1996 and two additional branch offices were
added during the six months ended September 30, 1996, which management believes
will assist in the expansion of the Association's core deposit base. Finally,
the Association continues to look for opportunities to expand the loan servicing
portfolio.
10
<PAGE>
In furtherance of this goal, the acquisition of FirstBanc was completed on
August 16, 1996. See Note 8 to the Condensed Consolidated Financial Statements.
In addition, on August 5, 1996, the Association signed a letter of intent and on
October 31, 1996, signed a definitive agreement with The Woodlands Corporation
("The Woodlands") and Mitchell Mortgage Company ("Mitchell Mortgage"), a wholly-
owned subsidiary of The Woodlands, to acquire a controlling interest in a new
limited liability company to be called Mitchell Mortgage Company, L.L.C. ("New
Mitchell"). It is being formed for the purpose of engaging in the mortgage
banking business, including the origination and servicing of single family
purchase loans, single family construction loans and commercial and multifamily
real estate loans. Mitchell Mortgage would contribute certain mortgage loans and
its mortgage servicing portfolio and liabilities of Mitchell Mortgage, in
exchange for a 49% ownership interest in New Mitchell and Fort Bend would
contribute cash in exchange for a 51% ownership interest in New Mitchell.
Mitchell Mortgage was formed in 1974 and has had a mortgage banking relationship
with Fort Bend Holding Corp. for seven years. As part of the transaction the
Holding Corp. agreed to provide Mitchell Mortgage, or its successor with a right
to convert its ownership interest in New Mitchell into shares of the Holding
Corp. under limited circumstances at an exchange rate of $24.30 per share.
Loan servicing has been one of the stable income providers for the Association
and will continue to be expanded, to the extent possible, through the retention
of servicing for loans originated and sold into the secondary market, as well as
through the purchase of mortgage servicing rights, to the extent deemed
appropriate (and subject to market conditions at the time). During the six
months ended September 30, 1996, the Association purchased the right to service
approximately $62 million of mortgage loans. Management believes purchases of
loan servicing rights may allow the Association to take advantage of some
economies of scale related to servicing.
Interest rates have fluctuated subsequent to the fiscal year ended March 31,
1996. The impact of these changes, may be a lower volume of permanent single
family lending activity which would result in lower gains on sale of loans.
While there are no assurances that the Association will be able to generate new
sources of originations to neutralize the lower volume of permanent single
family loans, attention is being given to increasing the level of single family
construction lending, commercial real estate lending and consumer lending. It is
difficult to determine the impact of changing interest rates on the net interest
margin. The Association's one year interest sensitivity gap was positive 7.97%
at June 30, 1996 (the latest date available). A positive gap indicates there are
more interest-earning assets repricing during a stated period than interest-
bearing liabilities potentially, resulting in an increase in the spread on such
assets and liabilities, in a rising rate environment. A negative gap would have
the opposite effect.
At September 30, 1996, the Holding Corp. had unrealized gains and losses in its
investment securities and mortgage-backed securities portfolio which are being
held to maturity. The Holding Corp. has both the intent and ability to hold
these securities until maturity. Management believes the Holding Corp. will be
able to collect all amounts due according to the contractual terms of the debt
securities and is not aware of any information that would indicate the inability
of any issuer of such securities to make contractual payments in a timely
manner. Therefore,
11
<PAGE>
management does not believe these losses are other than temporary and will not
be realized, and should not be recognized in the financial statements.
Most of the mortgage-backed securities are agency securities and are either
guaranteed by the full faith and credit of the United States Government (GNMA)
or are insured by a Government Sponsored Enterprise (FNMA or FHLMC). Private
issue mortgage-backed securities consist of the "A" piece of "A-B" structured
securities where the "B" piece is subordinate to the "A" piece and which were
initially rated one of the two highest categories by one or several of the
rating agencies. These securities have pool insurance and/or reserve funds in
addition to the subordination of the "B" piece. Collateral for these securities
is whole mortgage loans. None of these securities are considered "high risk" as
defined by the Office of Thrift Supervision and none have failed to pass the
Federal Financial Institution Examination Council (FFIEC) mandatory test for
"high risk" securities. The Association does not invest in "high risk"
securities.
The management of the investment portfolio is not designed to be the primary
source of funds for the Association's operations. Rather, it is viewed as a use
of funds generated by the Association to be invested in interest-earning assets
to be held to maturity. Cash flow mismatches between sources and uses of funds
should not require any of the securities to be liquidated. While cash flows from
the securities varies depending on the prepayment speeds associated with each
particular security, the variance in the prepayment speeds does not impact the
over-all cash flow requirements of the Association since the Association has the
ability to borrow funds from the Federal Home Loan Bank of Dallas. Currently,
the Association has the ability to borrow up to an additional $112 million if
cash flow requirements cannot be met by attracting deposits from its customer
base (its primary source of funds), or from repayment of loans and other
sources.
The following schedule provides detail of the investment securities and the
mortgage-backed securities portfolio, which are held to maturity, along with the
related unrealized gains and losses.
12
<PAGE>
SCHEDULE OF INVESTMENT AND MORTGAGE-BACKED SECURITIES
HELD TO MATURITY
<TABLE>
<CAPTION>
SEPTEMBER 30, 1996
-------------------------------------------------------------------
UNREALIZED
BOOK MARKET -------------------------------
TYPE OF SECURITY VALUE VALUE GAINS LOSSES
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
INVESTMENT SECURITIES:
U.S. Treasury Notes $ 998,032 $ 998,120 $ 88 $
World Bank Bonds & FHLB Debentures 18,231,640 18,030,359 45,700 246,981
FNMA & FHLMC Debentures 2,992,189 2,870,579 121,610
------------ ------------ ------------ ------------
TOTAL HELD TO MATURITY $ 22,221,861 $ 21,899,058 $ 45,788 $ 368,591
============ ============ ============ ============
MORTGAGE-BACKED SECURITIES:
FNMA
Fixed $ 10,479,715 $ 10,624,452 $ 242,815 $ 98,078
Adjustable 14,967,953 14,825,970 62,669 204,652
FHLMC
Fixed 6,798,667 6,774,951 59,479 83,195
Adjustable 16,307,829 16,117,648 72,820 263,001
GNMA
Fixed 2,516,844 2,570,704 54,891 1,031
Adjustable 7,238,079 7,220,088 17,596 35,587
Private Issue
Fixed
Adjustable 4,788,009 4,770,823 10,444 27,630
CMO
Fixed
FNMA 12,134,494 11,887,272 19,233 266,455
FHLMC 11,884,001 11,730,230 28,426 182,197
Private 3,952,428 3,959,014 17,626 11,040
Adjustable
FNMA 2,934,514 2,890,548 32,377 76,343
FHLMC 6,948,774 6,848,064 31,456 132,166
Private 2,857,931 2,799,918 58,013
------------ ------------ ------------ ------------
TOTAL HELD TO MATURITY $103,809,238 $103,019,682 $ 649,832 $ 1,439,388
============ ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
MARCH 31, 1996
-------------------------------------------------------------------
UNREALIZED
BOOK MARKET -------------------------------
TYPE OF SECURITY VALUE VALUE GAINS LOSSES
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
INVESTMENT SECURITIES:
U.S. Treasury Notes $ 996,839 $ 998,120 $ 1,281 $
World Bank Bonds & FHLB Debentures 5,247,145 5,186,785 40,039 100,399
FNMA & FHLMC Debentures 2,989,521 2,879,248 110,273
------------ ------------ ------------ ------------
TOTAL HELD TO MATURITY $ 9,233,505 $ 9,064,153 $ 41,320 $ 210,672
============ ============ ============ ============
MORTGAGE-BACKED SECURITIES:
FNMA
Fixed $ 11,631,375 $ 11,969,697 $ 393,627 $ 55,305
Adjustable 15,816,532 15,817,278 154,630 153,884
FHLMC
Fixed 7,457,968 7,540,961 119,060 36,067
Adjustable 17,801,264 17,808,211 100,262 93,315
GNMA
Fixed 2,622,503 2,725,387 102,884
Adjustable 8,018,104 8,041,718 44,574 20,960
Private Issue
Fixed
Adjustable 5,306,546 5,288,821 12,647 30,372
CMO
Fixed
FNMA 12,453,781 12,310,233 38,170 181,718
FHLMC 12,371,623 12,282,834 50,686 139,475
Private 3,969,574 4,022,320 57,736 4,990
Adjustable
FNMA 2,934,307 2,890,294 0 44,013
FHLMC 7,023,394 6,888,173 35,654 170,875
Private 3,082,646 3,090,852 8,206 0
------------ ------------ ------------ ------------
TOTAL HELD TO MATURITY $110,489,617 $110,676,779 $ 1,118,136 $ 930,974
============ ============ ============ ============
</TABLE>
13
<PAGE>
FORWARD-LOOKING STATEMENTS
When used in this Form 10-QSB, the words or phrases "will likely result", "are
expected to", "will continue", "is anticipated", "estimate", "project" or
similar expressions are intended to identify "forward-looking statements" within
the meaning of the Private Securities Litigation Reform Act of 1995. Such
statements are subject to certain risks and uncertainties - including, changes
in economic conditions in the Holding Corp.'s market area, changes in policies
by regulatory agencies, fluctuations in interest rates, demand for loans in the
Holding Corp.'s market area and competition, that could cause actual results to
differ materially from historical earnings and those presently anticipated or
projected. The Holding Corp. wishes to caution readers not to place undue
reliance on any such forward-looking statements, which speak only as of the date
made. The Holding Corp. wishes to advise readers that the factors listed above
could affect the Holding Corp.'s financial performance and could cause the
Holding Corp.'s actual results for future periods to differ materially from any
opinions or statements expressed with respect to future periods in any current
statements.
The Holding Corp. does not undertake - and specifically disclaims any
obligation - to publicly release the results of any revisions which may be made
to any forward-looking statements to reflect events or circumstances after the
date of such statements or to reflect the occurrence of anticipated or
unanticipated events.
RESULTS OF OPERATIONS
Comparison of Three Months ended September 30, 1996 and 1995
The Holding Corp. had a net loss of $579,000 or ($.69) primary and fully diluted
loss per share for the three months ended September 30, 1996 compared to net
income of $441,000 or $.50 per share for the same period in fiscal 1996. As more
fully discussed below, this change was primarily the result of the one-time SAIF
assessment.
During the quarter, the Holding Corp. acquired FirstBanc Savings Association
("FirstBanc") a $30 million savings and loan association located in Missouri
City, a southwest Houston suburb. The acquisition included approximately $21
million of loans receivable and a $27 million in deposits. The facility is
leased and is staffed with a branch manager, nine full-time and two part-time
employees. Goodwill of $1.3 million was created from this transaction and will
be amortized over fifteen years.
Net interest income, before provision for loan losses, increased $181,000 to
$1.8 million during the three months ended September 30, 1996. Interest income
increased $534,000 to $4.6 million and primarily reflected a $17.0 million
increase in the average balance of interest-earning assets, and an increase of
.23% in the average yield on interest-earning assets to 7.41% for the three
months September 30, 1996 compared to 7.18% for the three months ended September
30, 1995.
14
<PAGE>
The increase in average yield reflected the reinvestment of principal repayments
on mortgage-backed securities with an average rate of 6.65% into portfolio loans
with average rates of 8.51%. An increase of $24.3 million in the average balance
of loans receivable and $6.6 million in investments, partially offset by a
decrease of $14.2 million in mortgage-backed securities contributed to the
increase in interest-earning assets.
Interest expense increased $353,000 for the three months ended September 30,
1996 compared to the same period in fiscal 1996. The increase primarily
reflected a .09% increase in the average rate paid on average interest-bearing
liabilities to 4.85% for the three months ended September 30, 1996 compared to
4.76% for the three months ended September 30, 1995 and a $22.1 million increase
in the average balance of interest-bearing liabilities, reflecting increases of
$13.7 million in deposits and $8.4 million in borrowings.
Non-interest income increased $211,000 to $698,000 for the three months ended
September 30, 1996 compared to $487,000 for the same period in fiscal 1996. The
increase was primarily due to an increase in service charges of $58,000 to
$131,000 which reflected increases in appraisal fees of $24,000, construction
loan fees of $15,000 and late fees of $11,000 for the three months ended
September 30, 1996. Loan servicing income increased $59,000 to $194,000 for the
three months ended September 30, 1996 compared to $134,000 for the same period
in fiscal 1996. This increase primarily reflects an increase of $69 million in
loans serviced for others of which $62 million was a result of purchased
servicing contracts. Other income increased $101,000 and primarily reflected a
$62,000 increase in financial services income, which is income derived from
offering Discount Brokerage Services and from certain insurance related
activities.
Non-interest expense increased $1.9 million to $3.3 million for the three months
ended September 30, 1996 compared to $1.4 million for the same period in fiscal
1996. A one-time assessment of approximately $1.5 million by the Savings
Association Insurance Fund, which is administered by the Federal Deposit
Insurance Corporation, was responsible for a substantial part of the increase in
noninterest expense. Approximately $191,000 related to the FirstBanc deposits.
The assessment was based on deposits as of March 31, 1995, and was assessed at a
rate of .657%. In addition, compensation and benefits increased $171,000 and
primarily reflected additional personnel retained from the acquisition of
FirstBanc and the addition of a new branch and normal salary increases. Office
occupancy increased $84,000 to $243,000 for the three months ended September 30,
1996 compared to $158,000 for the same period in fiscal year 1996 and primarily
reflects an increase of $32,000 in depreciation and $32,000 in rent and
utilities. Most of the increase in occupancy cost is associated with the
addition of a new branch in Katy, Texas and the acquisition of FirstBanc.
Income tax provision (benefit) decreased $547,000 to ($321,000) for the three
months ended September 30, 1996 compared to $226,000 for the same period in
fiscal 1996. The decrease primarily reflected the net loss for the quarter.
15
<PAGE>
Comparison of Six Months Ended September 30, 1996 and 1995
The Holding Corp. had a net loss of 173,000 or $0.21 per share for the six
months ended September 30, 1996 compared to net income of $844,000 or $0.96 per
share for the same period in fiscal 1996. As more fully discussed below, this
change was primarily the result of the one-time SAIF assessment.
Net interest income, before provision for loan losses, increased $207,000 to
$3,422,000 during the six months ended September 30, 1996, compared to
$3,215,000 for the same period in fiscal 1996. Interest income increased
$825,000 and primarily reflected an increase of $13.8 million in the average
balance of interest-earning assets. An increase of $21.5 million in the average
balance of loans receivable reflecting the acquisition of FirstBanc Savings and
the Association's originations and additions to the portfolio and $5.4 million
in investments, partially offset by a decrease of $13.0 million in mortgage-
backed securities contributed to the increase in interest-earning assets.
Interest expense increased approximately $617,000 and primarily reflected an
increase of $18.6 million in the average balance of interest-bearing
liabilities. An increase of approximately $9.4 million in average deposits
reflecting the acquisition of FirstBanc Savings and $9.1 million in average
borrowings contributed to the increase in interest-bearing liabilities.
Convertible subordinated debentures of $12.1 million, issued in December 1995,
were primarily responsible for the increase in average borrowings. Net yield on
average interest-earning assets for the six months ended September 30, 1996 and
1995 was 2.84% and 2.88%, respectively.
Management periodically reviews the level of the allowance for loan losses,
which covers specific loans as well as estimated losses inherent in the loan
portfolio. The level of the allowance is based on such factors as the amount of
non-performing assets, historical loss experience, regulatory policies, general
economic conditions, the estimated fair value of the underlying collateral and
other factors related to the collectibility of the loans. The provision for loan
losses for the six months ended September 30, 1996 increased $23,000 as compared
to the same period in the last fiscal year, and was provided for estimated
losses believed by management to be inherent in the loan portfolio and the
increase in size of the loan portfolio.
Noninterest income for the six months ended September 30, 1996 was $1.3 million
compared to $945,000 for the same period in fiscal 1996. Service charges
increased approximately $97,000 which included an increase of $31,000 in late
charges due partially to a $17,000 late charge collected on a $928,000 loan paid
off during the six month period. Loan servicing income increased approximately
$88,000 and reflected the purchase of approximately $62 million of servicing
rights during the six month period. The average servicing fee at September 30,
1996 was .32%. Other income increased approximately $198,000 and primarily
reflected a $129,000 increase in financial services income, which is income
derived from offering discount brokerage services and from certain insurance
related activities. These increases were partially offset by gain on sale of
loans was $106,000 for the six months ended September 30, 1996 compared to a
gain of $124,000 for the same period in 1995. The volume of loans sold was $7.3
million and $5.0 million for the six months ended September 30, 1996 and
September 30, 1995, respectively.
16
<PAGE>
Noninterest expenses increased $2.1 million to $4.9 million for the six months
ended September 30, 1996. This was primarily the result of a one-time assessment
of $1.5 million by the Savings Association Insurance Fund (SAIF), which is
administered by the Federal Deposit Insurance Corporation, was responsible for a
substantial part of the increase in noninterest expense. Approximately $191,000
related to the FirstBanc deposits. The assessment was based on deposits as of
March 31, 1995, and was assessed at a rate of .657%. See Note 7 to the Condensed
Consolidated Financial Statements. In addition to the SAIF assessment,
compensation and benefits increased $238,000 for the six months ended September
30, 1996 and primarily reflected additional personnel retained from the
acquisition of FirstBanc, normal salary increases and additions to staff,
partially offset by a decrease in contributions to the retirement plan. Office
occupancy increased $106,000 and primarily reflected increases of $35,000 in
depreciation and $44,000 in utilities and rent expense. Most of the increase
relates to the construction and remodeling work on the branches and the main
office and the acquisition of FirstBanc.
Income tax provision (benefit) decreased $561,000 to ($112,000) for the six
months ended September 30, 1996 compared to $449,000 for the same period in
fiscal 1996. The decrease primarily reflected the decrease in income before tax.
ASSET/LIABILITY MANAGEMENT
The Holding Corp. attempts to maximize net interest income by achieving a
positive interest rate spread that can be sustained during fluctuations in
prevailing interest rates. The Holding Corp.'s policies are designed to reduce
the impact of changes in interest rates on its net interest income by
maintaining a favorable match between the maturities or repricing dates of its
interest-earning assets and interest-bearing liabilities (interest sensitivity
gap). The Holding Corp. has implemented these policies by generally selling long
term fixed rate mortgage loan originations, retaining its adjustable rate
mortgage loans, originating and retaining short-term consumer loans and
purchasing adjustable rate or short term maturity loans, mortgage-backed
securities, collateralized mortgage obligations and investment securities. As a
result of these policies, the Holding Corp.'s cumulative one year interest
sensitivity gap at June 30, 1996 (the latest date available), was a positive
7.97%. Management does not believe that its cumulative one year interest
sensitivity gap at September 30, 1996, was substantially different from that at
June 30, 1996. As interest rates, prepayments and early withdrawal levels
change, however, the resulting interest sensitivity gap is expected to be
affected.
17
<PAGE>
ASSET QUALITY
The allowance for loan losses is established through a provision for loan losses
based on management's quarterly asset classification review and evaluation of
the risk inherent in its loan portfolio and changes in the nature and volume of
its loan activity.
As a result of this review process, management recorded a $43,000 provision for
loan losses during the three months ended September 30, 1996, and a $68,000
provision for the six months ended September 30, 1996. The allowance for loan
losses was further increased by the addition of $385,000 in allowance for loan
loss held by FirstBanc at the time of acquisition. Net charge-offs for the six
months ended September 30, 1996, totaled $209,000, attributed primarily to one
commercial real estate loan, which was a nonaccrual loan. The Holding Corp.'s
allowance for loan losses increased to $1,600,000 or 1.29% of total loans at
September 30, 1996, as compared to $1,350,000 or 1.43% of total loans at March
31, 1996. The percent to total loans decreased due to the acquisition of loans
from the FirstBanc merger. While management believes it uses the best
information available to make determinations regarding the adequacy of the
allowance, there is no assurance that the subsequent evaluations of the loan
portfolio may not require additional provisions for loan losses.
The non-performing assets to total assets ratio is one indicator of the exposure
to credit risk. Non-performing assets of the Holding Corp. consist of non-
accruing loans, troubled debt restructurings, and real estate which was acquired
as a result of foreclosure. The following table summarizes the various
categories of the Holding Corp.'s non-performing assets.
September 30, 1996 March 31, 1996
------------------ --------------
Non-accruing loans $ 220,574 $ 729,274
Troubled debt restructurings 2,618,672 2,307,947
Foreclosed assets 846,757 123,215
---------- ----------
Total non-performing assets $3,686,003 $3,160,436
========== ==========
Total non-performing assets as
a percentage of total assets 1.31% 1.29%
Total non-performing assets increased $526,000 for the six months ended
September 30, 1996. The increase was primarily a result of the addition of two
foreclosed properties held by FirstBanc at the time of acquisition and the
subsequent foreclosure of two other properties which had been nonaccrual loans
of FirstBanc. The increase in troubled debt restructurings reflected two loans
totaling $439,000 acquired in the merger with FirstBanc. The largest is a
$412,000 loan secured by a multi-tenant retail/restaurant and is paying as
agreed.
18
<PAGE>
At September 30, 1996, foreclosed assets consisted of two commercial properties
and three single family houses. Both commercial properties and one of the single
family houses are being marketed. The other two houses are being prepared for
listing. Subsequent to the quarter ended September 30, 1996, a $1.9 million,
multi-family loan matured on November 1, 1996. Management has discussed a
possible loan workout agreement with the borrower and is also moving towards
foreclosure. At the present time, the potential for loss cannot be determined.
LIQUIDITY AND CAPITAL RESOURCES:
The Holding Corp.'s primary sources of funds are deposits, sales of mortgage
loans, principal and interest payments on loans and mortgage-backed securities,
borrowings and funds provided by operations. While scheduled loan and mortgage-
backed securities principal repayments are a relatively predictable source of
funds, deposit flows, prepayments of loan and mortgage-backed securities
principal, and sales of mortgage loans are greatly influenced by general
interest rates, economic conditions, and competition. Current Office of Thrift
Supervision ("OTS") regulations require the Association to maintain cash and
eligible investments in an amount equal to at least 5% of customer accounts and
short-term borrowings to assure its ability to meet demands for withdrawals and
repayment of short-term borrowings. As of September 30, 1996, the Association's
liquidity ratio was 12.61%, which was in excess of the minimum regulatory
requirements.
During the six months ended September 30, 1996, total deposits increased
approximately $31.2 million. The increase primarily reflects the acquisition of
FirstBanc which had approximately $27 million in deposits, the Association's
marketing effort to attract funds into an 18 month certificate, and the opening
of a new branch in Katy, Texas.
The Holding Corp. uses its capital resources principally to meet its ongoing
commitments to fund maturing certificates of deposit and loan commitments,
maintain its liquidity and meet operating expenses. At September 30, 1996, the
Holding Corp. had commitments to originate loans totaling $7.8 million. The
Holding Corp. considers its liquidity and capital resources to be adequate to
meet its foreseeable short and long-term needs. The Holding Corp. expects to be
able to fund or refinance, on a timely basis, its material commitments and long-
term liabilities.
During the six months ended September 30, 1996, the borrowings from the Federal
Home Loan Bank of Dallas decreased $24,000 and ESOP debt decreased $44,000. It
is anticipated that the amount of outstanding borrowings will fluctuate during
the 1997 fiscal year depending upon cash flows from the various sources of
funds.
On July 24, 1996, the Holding Corp. declared a cash dividend of $0.07 per share
payable on September 4, 1996 to the shareholders of record on August 14, 1996.
19
<PAGE>
The Association is required to maintain specific amounts of regulatory capital
pursuant to regulations of the OTS. As of January 29, 1996, the Association was
notified by the OTS that based on its reported capital position, the Association
is considered to be "well capitalized" in accordance with the Prompt Corrective
Action provision of Section 38 of the Federal Deposit Insurance Act. The table
below presents the Association's capital position at September 30, 1996 relative
to the existing regulatory capital requirements. Such requirements may increase
if proposed capital regulations are implemented. Management believes the
Association will meet the requirements of the proposed capital regulations.
Amount Percent of
(000's) Assets (1)
------- ----------
Tangible capital $15,891 5.8%
Tangible capital requirement 4,082 1.5
------- ----
Excess $11,809 4.3%
======= ====
Core capital $15,891 5.8%
Capital requirement 8,164 3.0
------- ----
Excess $ 7,727 2.8%
======= ====
Total capital (i.e., core & supplemental
capital) $17,326 14.4%
Risk-based capital requirement 9,604 8.0
------- ----
Excess $ 7,722 6.4%
======= ====
(1) Based upon adjusted assets for purposes of the tangible capital and core
capital requirements, and risk-weighted assets for purposes of the risk-based
capital requirement.
20
<PAGE>
IMPACT OF NEW ACCOUNTING STANDARDS
In March, 1995, the Financial Accounting Standards Board issued SFAS No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed of" ("SFAS 121"). The Company adopted SFAS No. 121 on April 1, 1996.
The adoption of SFAS No. 121 did not have any impact on the Company's financial
position or result of operations.
In October 1995, the FASB issued SFAS No. 123 "Accounting for Stock-Based
Compensation" which establishes accounting and reporting standards for stock-
based employee compensation plans. Companies are encouraged to utilize the fair-
value method to measure stock based compensation but may continue to utilize the
methods prescribed by APB Opinion No. 25 and disclose the pro-forma affects of
the SFAS No. 123 method. Based on a preliminary review, the Company has elected
to adopt only the reporting disclosures of SFAS No. 123.
In June 1996, the FASB issued SFAS No. 125 "Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities" which uses a
"financial components" approach that focuses on content and provides consistent
standards for distinguishing transfers of financial assets that are sales from
transfers that are secured borrowings. The pronouncement is effective for
transactions occurring after December 31, 1996.
21
<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 hereunto duly authorized.
FORT BEND HOLDING CORP.
Registrant
/s/ Lane Ward
Date: November 13, 1996 ------------------------------------
Lane Ward
Vice Chairman, President and Chief
Executive Officer
/s/ David D. Rinehart
Date: November 13, 1996 -------------------------------------
David D. Rinehart
Executive Vice President and Chief
Financial Officer
22
<PAGE>
PART II - OTHER INFORMATION
Item 1. - LEGAL PROCEEDINGS
There are no material legal proceedings to which the Holding Corp. or
the Association is a party or of which any of their property is subject. From
time-to-time, the Association is a party to various legal proceedings incident
to its business.
Item 2. - CHANGES IN SECURITIES
None
Item 3. - DEFAULTS UPON SENIOR SECURITIES
None
Item 4. - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
Item 5. - OTHER INFORMATION
None
Item 6. - EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit 11 - Computation of earnings per share (attached)
Exhibit 27 - Financial Data Schedule (attached)
(b) Reports on Form 8-K
Fort Bend Holding Corp. filed the following Forms 8-K during
the six months ended September 30, 1996.
July 30, 1996 - The registrant issued a press release announcing
the results of operations for the quarter and fiscal year ended
June 30, 1996 and the declaration of a cash dividend for the
quarter ended June 30, 1996.
August 16, 1996 - The registrant issued a press release
announcing the completion of the acquisition of FirstBanc
Savings Association.
August 30, 1996 - The registrant issued a press release
announcing the purchase of controlling interest in Mortgage
Banking Business.
September 20, 1996 - The registrant issued a press release
announcing the stock repurchase program.
23
<PAGE>
EXHIBIT 11
COMPUTATION OF EARNINGS PER SHARE
For the three and six months ended September 30, 1996 and 1995
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
September 30 September 30,
--------------------------- ----------------------------
Primary Earnings per Share 1996 1995 1996 1995
- -------------------------- ------------ -------- ----------- ----------
<S> <C> <C> <C> <C>
Net income (loss) applicable to common stock $ (578,831) $440,954 $ (173,112) $ 844,009
========== ======== ========== =========
Weighted average number of common shares
outstanding 819,198 856,658 819,198 858,113
Common shares issuable under employee stock
option plan 58,817 51,139 58,817 51,139
Less shares assumed repurchased with proceeds (34,822) (27,861) (34,822) (27,861)
---------- -------- ---------- ---------
Weighted average common shares and common
share equivalents outstanding 843,193 879,936 843,193 881,391
========== ======== ========== =========
Primary earnings (loss) per common share $ (0.69) $ 0.50 $ (0.21) $ 0.96
========== ======== ========== =========
Fully Diluted Earnings Per Share
Net income (loss) applicable to common stock $ (578,831) $440,954 $ (173,112) $ 844,009
Interest on convertible subordinated debentures,
net of tax 172,991 --- 345,981 ---
---------- -------- ---------- ---------
Net income (loss), adjusted $ (405,840) $440,954 $ 172,869 $ 844,009
========== ======== ========== =========
Weighted average common share and common
share equivalents outstanding 843,193 879,936 843,193 881,391
Weighted average common shares issuable with
the conversion of debentures to common stock 560,182 --- 560,182 ---
---------- -------- ---------- ---------
Weighted average common shares and common
share equivalents 1,403,375 879,936 1,403,375 881,391
========== ======== ========== =========
Fully diluted earnings (loss) per common share $ (0.29) $ 0.50 0.12 0.96
========== ======== ========== =========
</TABLE>
Fully diluted earnings per share are not disclosed on the statement of
operations as they are anti-dilutive.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-START> APR-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 5,807,516
<INT-BEARING-DEPOSITS> 8,523,211
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 3,463,846
<INVESTMENTS-CARRYING> 126,031,099
<INVESTMENTS-MARKET> 124,918,740
<LOANS> 123,826,000
<ALLOWANCE> 1,600,326
<TOTAL-ASSETS> 281,694,382
<DEPOSITS> 235,123,114
<SHORT-TERM> 0
<LIABILITIES-OTHER> 12,779,094
<LONG-TERM> 16,395,563
0
0
<COMMON> 9,073
<OTHER-SE> 19,313,716
<TOTAL-LIABILITIES-AND-EQUITY> 281,694,382
<INTEREST-LOAN> 4,520,287
<INTEREST-INVEST> 4,354,669
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 8,874,956
<INTEREST-DEPOSIT> 4,787,306
<INTEREST-EXPENSE> 5,453,000
<INTEREST-INCOME-NET> 3,421,956
<LOAN-LOSSES> 68,000
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 780,586
<INCOME-PRETAX> (285,312)
<INCOME-PRE-EXTRAORDINARY> (285,312)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (173,112)
<EPS-PRIMARY> (.21)
<EPS-DILUTED> (.21)
<YIELD-ACTUAL> 2.84
<LOANS-NON> 220,574
<LOANS-PAST> 0
<LOANS-TROUBLED> 2,618,672
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 1,350,222
<CHARGE-OFFS> 203,180
<RECOVERIES> 0
<ALLOWANCE-CLOSE> 1,600,326
<ALLOWANCE-DOMESTIC> 166,185
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 1,434,141
</TABLE>
