<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 December 31, 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 908,550 shares and 820,376 shares of Common Stock ($0.01 par value)
issued and outstanding, respectively as of February 1, 1997.
1 of 23
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
FORT BEND HOLDING CORP.
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL CONDITION
(Unaudited)
ASSETS December 31, 1996 March 31, 1996
Cash and due from banks $ 6,981,332 $ 3,451,880
Short-term investments 14,472,756 13,541,782
Certificates of deposit 200,000 200,000
------------ ------------
Total cash and cash equivalents 21,654,088 17,193,662
Investment securities available for
sale, at market value 2,779,442 2,684,607
Investment securities held to maturity
(estimated market value of $10,943,103
and $9,064,153 at December 31, 1996
and March 31, 1996, respectively) 11,231,671 9,233,505
Mortgage-backed securities available
for sale, at market value 630,583 873,502
Mortgage-backed securities held to
maturity (estimated market value
of $101,181,513 and $110,676,779
at December 31, 1996 and March 31,
1996, respectively) 101,175,340 110,489,617
Loans receivable, net 122,889,848 92,861,594
Loans held for sale 296,706 922,422
Accrued interest receivable 1,697,381 1,466,272
Real estate, net 2,425,325 155,372
Federal Home Loan Bank stock, at cost 1,905,900 1,460,200
Premises and equipment, net 4,490,676 3,635,046
Mortgage servicing rights, net 2,574,015 1,235,714
Prepaid expenses and other assets 3,019,404 1,538,171
Deferred income taxes 420,277 418,949
Goodwill, net 1,341,432 --
------------ ------------
Total assets $278,532,088 $244,168,633
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits $238,497,915 $203,913,715
Convertible Subordinated Debentures 12,100,000 12,100,000
Other borrowings 4,239,279 4,363,688
Advances from borrowers for taxes
and insurance 3,585,017 4,224,796
Accounts payable, accrued expenses
and other liabilities 2,203,471 1,994,063
------------ ------------
Total liabilities 260,625,682 226,596,262
============ ============
Stockholders' Equity:
Serial preferred stock, $.01 par value
- 500,000 shares authorized,
none outstanding
Common Stock $.01 par value, 2,000,000
shares authorized 908,550 shares
issued and 820,376 shares outstanding at
December 31, 1996 and 905,572 shares
issued and 817,398 shares outstanding
at March 31, 1996 9,085 9,055
Additional paid-in capital 8,669,193 8,514,562
Unearned employee stock ownership
plan shares (307,125) (394,875)
Deferred compensation (94,622) (98,668)
Net unrealized depreciation on available
for sale securities, net of tax (6,233) (21,786)
Retained earnings (substantially
restricted) 11,092,609 11,020,584
Treasury stock, at cost - 88,174 shares
at December 31, 1996 and March 31, 1996 (1,456,501) (1,456,501)
------------ ------------
Total stockholders' equity 17,906,406 17,572,371
------------ ------------
Total liabilities and
stockholders' equity $278,532,088 $244,168,633
============ ============
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 Nine Months Ended
December 31, December 31,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Interest Income:
Loans $2,673,173 $1,860,596 $ 7,193,460 $ 5,407,554
Short-term investments 256,338 155,188 675,319 321,953
Investment securities 214,074 213,492 564,602 653,350
Mortgage-backed securities 1,701,684 1,929,554 5,286,844 5,826,252
---------- ---------- ----------- -----------
Total interest income 4,845,269 4,158,830 13,720,225 12,209,109
---------- ---------- ----------- -----------
Interest expense:
Deposits 2,643,474 2,377,799 7,430,780 6,961,484
Borrowings 329,035 141,878 994,729 393,949
---------- ---------- ----------- -----------
Total interest expense 2,972,509 2,519,677 8,425,509 7,355,433
---------- ---------- ----------- -----------
Net interest income before provision
for loan losses 1,872,760 1,639,153 5,294,716 4,853,676
Provision for loan losses 60,000 60,000 128,000 105,053
---------- ---------- ----------- -----------
Net interest income after provision
for loan losses 1,812,760 1,579,153 5,166,716 4,748,623
---------- ---------- ----------- -----------
Noninterest income:
Gain on sale of loans 91,237 110,453 197,536 234,298
Service charges 160,387 79,337 404,897 226,576
Loan servicing income 213,615 135,733 576,770 410,985
Other income 355,764 301,646 951,934 699,972
---------- ---------- ----------- -----------
Total noninterest income 821,003 627,169 2,131,137 1,571,831
---------- ---------- ----------- -----------
Noninterest expenses:
Compensation and benefits 1,030,093 770,830 2,800,513 2,302,967
Office occupancy and equipment 290,975 163,550 720,520 486,900
Federal insurance premiums 110,092 118,179 367,681 345,394
Savings Association Insurance Fund Assessment --- --- 1,492,686 ---
Amortization of mortgage servicing rights 100,828 49,315 247,865 157,391
Insurance and surety bond expense 34,571 37,726 106,110 92,184
Other 474,327 315,344 1,254,913 891,219
---------- ---------- ---------- -----------
Total noninterest expenses 2,040,886 1,454,944 6,990,288 4,276,055
Income before income tax 592,877 751,378 307,565 2,044,399
Income tax provision 175,709 275,100 63,509 724,112
---------- ---------- ---------- -----------
Net income $ 417,168 $ 476,278 $ 244,056 $ 1,320,287
========== ========== ========== ===========
Primary earnings per common share $ 0.49 $ 0.55 $ 0.29 $ 1.50
========== ========== ========== ===========
Fully diluted earnings per common share $ 0.42 $ 0.51 $ 0.29 $ 1.47
========== ========== ========== ===========
Dividends per common share $ 0.07 $ 0.07 $ 0.21 $ 0.21
========== ========== ========== ===========
The accompanying notes are an integral part of the condensed consolidated financial statements.
</TABLE>
3
<PAGE>
FORT BEND HOLDING CORP.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
December 31,
1996 1995
<S> <C> <C>
Operating activities:
Net income (loss) $ 244,056 $ 1,320,287
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Provision for losses on loans and real estate 128,000 105,053
Depreciation 236,600 149,023
Amortization of deferred compensation 36,896 31,968
Compensation charge related to release of ESOP shares 101,785 70,020
Amortization of premiums and discounts on securities, net 1,364 76,453
Amortization of loan premium, discount, and deferred fees, net (582,090) (128,609)
Deferred income tax provision (benefit) (9,342) 103,110
Gain on sale of real estate (31,087) (74,212)
Amortization of unearned income (7,721) (3,826)
Amortization of mortgage servicing rights 247,865 157,391
Amortization of debt issue costs 60,327 5,683
Amortization of goodwill 28,996 ---
Net gain on sale of loans (197,536) (234,298)
Dividends on Federal Home Loan Bank stock (75,700) (68,500)
Origination of loans held for sale (10,347,663) (9,432,300)
Proceeds from sale of loans 11,170,915 9,630,608
Net change in accrued interest receivable (231,109) (27,440)
Net change in prepaid expenses and other assets (1,358,560) (271,486)
Net change in accounts payable, accrued expenses
and other liabilities 19,127 80,846
----------- ---------
Net cash provided by (used in) operating activities (564,877) 1,489,771
----------- ---------
Continued
</TABLE>
4
<PAGE>
FORT BEND HOLDING CORP.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
December 31,
1996 1995
<S> <C> <C>
Investing activities:
Net change in loans receivable $(11,094,936) $(11,007,330)
Proceeds from sale of real estate 37,233 48,123
Improvements to real estate --- (1,118)
Purchase of premises and equipment (402,228) (117,369)
Proceeds from maturity of investment securities 21,000,000 5,000,000
Purchase or origination of mortgage servicing rights (1,586,166) (102,627)
Purchase of investment securities available for sale (89,035) ---
Principal collected on mortgage-backed securities held to maturity 9,296,119 10,096,092
Principal collected on mortgage-backed securities available for sale 260,746 ---
Purchase of investment securities held to maturity (22,981,432) ---
Purchase of mortgage-backed securities held to maturity --- (2,485,347)
Net cash acquired in acquisition 3,541,250 ---
------------ ------------
Net cash provided by (used in) investing activities (2,018,449) 1,430,424
------------ ------------
Financing activities:
Net increase in deposits 8,033,195 8,510,821
Net increase (decrease) in short-term borrowings --- (7,519,341)
Payment on long-term borrowings (36,659) ---
Net proceeds from issuance of convertible subordinated debentures --- 11,302,202
Decrease in advances from borrowers for taxes and insurance (800,779) (1,880,075)
Net proceeds from issuance of common stock 20,026 15,500
Dividends paid (172,031) (179,988)
Purchase of treasury stock --- (475,264)
------------ ------------
Net cash provided by financing activities 7,043,752 9,773,855
------------ ------------
Net increase in cash and cash equivalents 4,460,426 12,694,050
Cash and cash equivalents at beginning of period 17,193,662 6,832,312
------------ ------------
Cash and cash equivalents at end of period $ 21,654,088 $ 19,526,362
============ ============
Supplemental disclosure of cash flow information:
Cash paid for:
Interest $ 8,655,053 $ 6,864,750
Income taxes 420,000 495,000
Supplemental disclosure of noncash activities:
Real estate acquired in settlement of loans $ 2,171,099 $ 37,784
Loans originated related to sales of real estate 182,000 200,358
Stock issued to recognition and retention plan 32,850 22,500
Reduction of ESOP debt by the ESOP 87,750 87,750
Transfer of investment in mortgage back securities from held
to maturity to available for sale --- 1,498,953
Net unrealized depreciation on available for sale securities,
net of tax 15,553 10,830
</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 nine months ended December
31, 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
December 31, 1996.
3. NON-PERFORMING ASSETS
Impaired loans decreased $2,049,000 during the three months ended
December 31, 1996 and $3,454,000 during the nine months ended December
31, 1996. The recent quarter decline resulted primarily from the
foreclosure of a $1.9 million multifamily loan while the prior two
quarter decline reflected the payoff of a multifamily loan and the
foreclosure of a commercial real estate loan. Each of these loans were
previously recognized as impaired. Foreclosed assets increased $1.5
million for the quarter ended December 31, 1996, which primarily
reflects the $1.9 million multifamily loan after a $456,000 charge-off.
6
<PAGE>
Financial Statements, Continued
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, Continued
(Unaudited)
The following table summarizes impaired loan information as of
December 31, 1996.
Impaired loans $ 409,170
Impaired loans which have a specific reserve
for loan losses calculated under SFAS 114 ---
Impaired loans which do not have a specific
reserve for loan losses calculated under
SFAS 114 $ 409,170
4. CONVERTIBLE SUBORDINATED DEBENTURES AND OTHER BORROWINGS
Borrowings at December 31, 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 $307,125 at December 31, 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 $ 12,603 $ ---
1998 52,405 87,750
1999 55,752 87,750
2000 59,312 87,750
2001 3,752,082 43,875
In December 1995, the Holding Corp. issued $12.1 million of 8%
Convertible Subordinated Debentures due December 1, 2005. Interest is
payable June 1 and December 1 of each year through maturity. The
debentures are convertible at any time prior to maturity at the rate of
46.296 shares of common stock for each $1,000 of principal or $21.60 per
share. The debentures may be redeemed at the option of the Holding
Corp., in whole or in part, at any time on or after December 1, 1998.
5. EARNINGS PER COMMON SHARE
Primary earnings per common share for the three and nine months ended
December 31, 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.
7
<PAGE>
Financial Statements, Continued
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, Continued
(Unaudited)
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 nine months ended
December 31, 1996 was 853,843 shares and 853,324 shares, respectively.
For fully-diluted earnings per share the weighted average number of
common shares and common share equivalents outstanding was 1,414,025 and
1,413,506 for the three and nine months ended December 31, 1996.
6. SUBSEQUENT EVENTS
On January 16, 1997, the Holding Corp. declared a cash dividend of $.07
per share payable on February 27, 1997 to shareholders of record on
February 6, 1997.
On January 2, 1997 the Holding Corp. executed its 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"). This follows the signing of a letter of intent and a
definitive agreement on August 5, 1996 and October 31, 1996,
respectively. 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 contributed
certain mortgage loans and its mortgage 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 contributed 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. New
Mitchell is proposed to be operated in a manner consistent with that
currently engaged in by Mitchell, and is expected to 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
8
<PAGE>
Financial Statements, Continued
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, Continued
(Unaudited)
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 is 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.
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 nine months ended December 31, 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 nine months ended
December 31,
1996 1995
Revenue $ 14,868,000 $ 14,374,000
============== ============
Net income $ 160,000 $ 1,402,000
============== ============
Primary earnings per share $ 0.19 $ 1.60
============== ============
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 December 31, 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 nine months ended December 31, 1996, which management believes
will assist in the expansion of the Association's core deposit base.
10
<PAGE>
Item 2.
Management's Discussion and Analysis of Financial Condition And Results Of
Operations
CONTINUED
The Association continues to look for opportunities to expand the loan servicing
portfolio. 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, 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. New 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. The transaction to acquire New Mitchell closed January 2,
1997.
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 nine
months ended December 31, 1996, the Association purchased the right to service
approximately $127 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 11.93%
at December 31, 1996. 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 December 31, 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
11
<PAGE>
Item 2.
Management's Discussion and Analysis of Financial Condition And Results Of
Operations
CONTINUED
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, 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. As of
December 31, 1996 the Association had the ability to borrow up to an additional
$134 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>
<TABLE>
<CAPTION>
Schedule of Investment and Mortgage-Backed Securities
Held to Maturity
DECEMBER 31, 1996 MARCH 31, 1996
---------------------------------------------------- ---------------------------------------------------
UNREALIZED UNREALIZED
BOOK MARKET -------------------- BOOK MARKET -----------------------
TYPE OF SECURITY VALUE VALUE GAINS LOSSES VALUE VALUE GAINS LOSSES
------------ ---------- ---------- ------- ---------- ----------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
INVESTMENT SECURITIES:
U.S. Treasury Notes $ 998,631 $ 1,000,470 $ 1,839 $ $ 996,839 $ 998,120 $ 1,281 $
World Bank Bonds &
FHLB Debentures 7,239,510 7,048,874 56,262 246,898 5,247,145 5,186,785 40,039 100,399
FNMA & FHLMC Debentures 2,993,530 2,893,759 99,771 2,989,521 2,879,248 110,273
----------- ------------ -------- --------- ---------- ----------- --------- --------
TOTAL HELD TO MATURITY $ 11,231,671 $ 10,943,103 $ 58,101 $ 346,669 $ 9,233,505 $ 9,064,153 $ 41,320 $ 210,672
=========== ============ ======== ========= ========== =========== ========= ========
MORTGAGE-BACKED SECURITIES:
FNMA
Fixed $ 10,140,991 $ 10,398,002 $ 289,390 $ 32,379 $ 11,631,375 $ 11,969,697 $ 393,627 $ 55,305
Adjustable 14,562,597 14,536,864 108,853 134,586 15,816,532 15,817,278 154,630 153,884
FHLMC
Fixed 6,496,435 6,597,573 122,238 21,100 7,457,968 7,540,961 119,060 36,067
Adjustable 15,789,665 15,724,723 103,171 168,113 17,801,264 17,808,211 100,262 93,315
GNMA
Fixed 2,459,139 2,571,037 111,898 2,622,503 2,725,387 102,884
Adjustable 6,974,897 7,041,792 74,238 7,343 8,018,104 8,041,718 44,574 20,960
Private Issue
Fixed
Adjustable 4,592,378 4,577,570 11,714 26,522 5,306,546 5,288,821 12,647 30,372
CMO
Fixed
FNMA 12,038,851 11,989,849 31,761 80,763 12,453,781 12,310,233 38,170 181,718
FHLMC 11,633,639 11,621,367 52,371 64,643 12,371,623 12,282,834 50,686 139,475
Private 3,859,944 3,906,575 48,039 1,408 3,969,574 4,022,320 57,736 4,990
Adjustable
FNMA 2,934,616 2,798,688 1,724 137,652 2,934,307 2,890,294 0 44,013
FHLMC 6,881,066 6,651,290 16,319 246,095 7,023,394 6,888,173 35,654 170,875
Private 2,811,122 2,766,183 44,939 3,082,646 3,090,852 8,206 0
----------- ------------ -------- --------- ---------- ----------- --------- --------
TOTAL HELD TO MATURITY $101,175,340 $101,181,513 $ 971,716 $ 965,543 $110,489,617 $110,676,779 $1,118,136 $ 930,974
=========== ============ ======== ========= ========== =========== ========= ========
</TABLE>
13
<PAGE>
Management's Discussion and Analysis of Financial Condition And
Results Of Operations
Continued
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 December 31, 1996 and 1995
The Holding Corp. had net income of $417,000 or $.49 primary earnings per share
and $.42 fully diluted earnings per share for the three months ended December
31, 1996 compared to net income of $476,000 or $.55 primary earnings per share
and $.51 fully diluted earnings per share for the same period in fiscal 1996.
Net interest income, before provision for loan losses, increased $234,000 to
$1.9 million during the three months ended December 31, 1996. Interest income
increased $686,000 to $4.8 million and primarily reflected a $29.7 million
increase in the average balance of interest-earning assets, and an increase of
.23% in the average yield on interest-earning assets to 7.52% for the three
months December 31, 1996 compared to 7.29% for the three months ended December
31, 1995. The increase in average yield reflected the reinvestment of principal
repayments on mortgage-backed securities with an average rate of 6.63% into
portfolio loans with average rates of 8.60%. An increase of $36.8 million in the
average balance of loans receivable and $5.8 million in investments, partially
offset by a decrease of $13.5 million in mortgage-backed securities contributed
to the increase in interest-earning assets.
14
<PAGE>
Management's Discussion and Analysis of Financial Condition And
Results Of Operations
Continued
Interest expense increased $453,000 and primarily reflected an increase of $38.7
million in the average interest-bearing liabilities. Average deposits increased
$30.8 million reflecting the acquisition of FirstBanc, and average borrowings
increased $7.9 million reflecting the full effect of issuance in December, 1995
of $12.1 million convertible subordinated debenture. The average rate paid on
interest-bearing liabilities decreased to 4.79% for the three months ended
December 31, 1996 compared to 4.81% for the three months ended December 31,
1995.
Non-interest income increased $194,000 to $821,000 for the three months ended
December 31, 1996 compared to $627,000 for the same period in fiscal 1996. The
increase was primarily due to an increase in service charges of $81,000 to
$160,000 which reflected increases in appraisal fees of $40,000, construction
loan fees of $31,000 and late fees of $10,000 for the three months ended
December 31, 1996. Loan servicing income increased $78,000 to $214,000 for the
three months ended December 31, 1996 compared to $136,000 for the same period in
fiscal 1996. This increase primarily reflects an increase of $129 million in
loans serviced for others of which $127 million was a result of purchased
servicing contracts. Other income increased $54,000 and primarily reflected an
increase in financial services income, which is income derived from offering
Discount Brokerage Services and from certain insurance related activities.
Non-interest expense increased $586,000 to $2.0 million for the three months
ended December 31, 1996 compared to $1.5 million for the same period in fiscal
1996. Compensation and benefits increased $259,000 and primarily reflected
additional personnel retained from the acquisition of FirstBanc, the addition of
a new branch office in Katy, Texas and normal salary increases. Office occupancy
increased $127,000 to $291,000 for the three months ended December 31, 1996
compared to $164,000 for the same period in fiscal year 1996 and primarily
reflects an increase of $53,000 in depreciation, $39,000 in rent and utilities
and $16,000 in telephone expense. Most of the increase in occupancy cost is
associated with the addition of the new branch in Katy, Texas and the
acquisition of FirstBanc.
Income tax provision decreased $99,000 to $176,000 for the three months ended
December 30, 1996 compared to $275,000 for the same period in fiscal 1996. The
decrease primarily reflected the decrease in income before tax and an adjustment
to the tax accrual.
Comparison of Nine Months Ended December 31, 1996 and 1995
The Holding Corp. had net income of $244,000 or $0.29 per share for the nine
months ended December 31, 1996 compared to net income of $1,320,000 or $1.50 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.
Net interest income, before provision for loan losses, increased $441,000 to
$5,294,000 during the nine months ended December 31, 1996, compared to
$4,854,000 for the same period in fiscal 1996. Interest income increased
$1,511,000 and primarily reflected an increase of $18.9 million in the average
balance of interest-earning assets. An increase of $26.6 million in the average
balance of loans receivable reflecting the acquisition of FirstBanc Savings and
the Association's
15
<PAGE>
Management's Discussion and Analysis of Financial Condition And
Results Of Operations
Continued
originations and additions to the portfolio and $5.2 million in investments,
partially offset by a decrease of $13.1 million in mortgage-backed securities
contributed to the increase in interest-earning assets. Interest expense
increased approximately $1,070,000 and primarily reflected an increase of $25.3
million in the average balance of interest-bearing liabilities. An increase of
approximately $16.6 million in average deposits reflecting the acquisition of
FirstBanc Savings and $8.7 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 nine months ended December 31, 1996 and 1995 was 2.90% 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 nine months ended December 31, 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 nine months ended December 31, 1996 was $2.1 million
compared to $1.6 million for the same period in fiscal 1996. Service charges
increased approximately $178,000 which included an increase of $41,000 in late
charges due partially to a $17,000 late charge collected on a $928,000 loan paid
off during the nine month period. An increase of $104,000 in appraisal fees and
$39,000 in construction loan fees also contributed to the increase in service
charges. An increase of approximately $15.0 million in loan volume, reflecting
favorable interest rates, contributed to the increase in appraisal fees and
construction loan fees. Loan servicing income increased approximately $166,000
and reflected the purchase of approximately $127 million of servicing rights
during the nine month period. The average servicing fee at December 31, 1996 was
.32%. Other income increased approximately $252,000 and primarily reflected a
$187,000 increase in financial services income, which is income derived from
offering discount brokerage services and from certain insurance related
activities and approximately $86,000 increase in fees earned on transaction
accounts. These increases were partially offset by a decrease of $37,000 on gain
on sale of loans reflecting less favorable pricing on loans sold.
Noninterest expenses increased $2.7 million to $7.0 million for the nine months
ended December 31, 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. Approximately
$191,000 of this assessment 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 Unaudited Condensed Consolidated Financial Statements. In
addition to the SAIF assessment, compensation and benefits increased $498,000
for the nine months ended December 31, 1996 and primarily reflected additional
personnel retained from the acquisition of
16
<PAGE>
Management's Discussion and Analysis of Financial Condition And
Results Of Operations
Continued
FirstBanc, staffing for the new branch office opened in Katy, Texas, normal
salary increases and other additions to staff, partially offset by a decrease in
contributions to the retirement plan. Office occupancy increased $234,000 and
primarily reflected increases of $88,000 in depreciation and $83,000 in
utilities and rent expense. Most of the increase relates to the remodeling work
on the Katy branch, upgrading computer and telephone systems and the acquisition
of FirstBanc.
Income tax provision decreased $661,000 to $64,000 for the nine months ended
December 31, 1996 compared to $724,000 for the same period in fiscal 1996. The
decrease primarily reflected the decrease in income before tax reflecting the
one-time SAIF assessment and adjustment to the tax accrual.
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 December 31, 1996 was a positive 11.93%. As interest rates,
prepayments and early withdrawal levels change, however, the resulting interest
sensitivity gap is expected to be affected.
17
<PAGE>
Management's Discussion and Analysis of Financial Condition And
Results Of Operations
Continued
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 $60,000 provision for
loan losses during the three months ended December 31, 1996, and a $128,000
provision for the nine months ended December 31, 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 nine
months ended December 31, 1996, totaled $698,000, attributed primarily to one
commercial real estate loan, which was a nonaccrual loan and one multifamily
loan which matured November 1, 1996. The Holding Corp.'s allowance for loan
losses decreased to $1,166,000 or .95% of total loans at December 31, 1996, as
compared to $1,350,000 or 1.43% of total loans at March 31, 1996. 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.
December 31, 1996 March 31, 1996
Non-accruing loans $ 214,086 $ 729,274
Troubled debt restructurings 676,865 2,307,947
Foreclosed assets 2,400,448 123,215
---------- ----------
Total non-performing assets $3,291,399 $3,160,436
========== ==========
Total non-performing assets as a
percentage of total assets 1.18% 1.29%
Total non-performing assets increased $131,000 for the nine months ended
December 31, 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 three other properties which had been loans of
FirstBanc, two of which were nonaccrual loans. The addition of these assets to
the non-performing total was partially offset by the foreclosure and partial
charge-off of two loans, one of which was previously classified as trouble debt
restructuring and the other a non-accruing loan.
18
<PAGE>
Management's Discussion and Analysis of Financial Condition And
Results Of Operations
Continued
At December 31, 1996, foreclosed assets consisted of two commercial properties,
one multifamily property and five single family houses. Subsequent to the
quarter ended December 31, 1996, one of the single family houses was sold at a
gain of $6,000. Both commercial properties, the multi-family property and three
of the remaining single family houses are being marketed. The other house is
being prepared for listing.
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 December 31, 1996, the Association's
liquidity ratio was 11.59%, which was in excess of the minimum regulatory
requirements.
During the nine months ended December 31, 1996, total deposits increased
approximately $34.6 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 December 31, 1996, the
Holding Corp. had commitments to originate loans totaling $6.9 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 nine months ended December 31, 1996, the borrowings from the Federal
Home Loan Bank of Dallas decreased $37,000 and ESOP debt decreased $88,000. 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
and financing to be provided to Fort Bend's new subsidiary, Mitchell Mortgage
Company, L.L.C.
On October 25, 1996, the Holding Corp. declared a cash dividend of $0.07 per
share payable on December 6, 1996 to the shareholders of record on November 15,
1996.
19
<PAGE>
Management's Discussion and Analysis of Financial Condition And
Results Of Operations
Continued
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 December 31, 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 $16,554 6.0%
Tangible capital requirement 4,125 1.5
------- ----
Excess $12,429 4.5%
======= ====
Core capital $16,554 6.0%
Capital requirement 10,999 4.0
------- ----
Excess $ 5,555 2.0%
======= ====
Total capital (i.e., core &
supplemental capital) $17,590 14.4%
Risk-based capital requirement 9,804 8.0
------- ---
Excess $ 7,786 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.
The acquisition of New Mitchell is expected to increase tangible, core and risk-
based capital requirements to $4,505, $12,012 and $11,319, respectively and
reduce excess capital to $11,799, $4,292 and $6,021, respectively. See Note 6 to
Condensed Consolidated Financial Statements.
20
<PAGE>
Management's Discussion and Analysis of Financial Condition And
Results Of Operations
Continued
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>
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 three
months ended December 31, 1996.
October 30, 1996 - The registrant issued an earnings release announcing
the declaration of a cash dividend and earnings for the quarter ended
September 30, 1996.
22
<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
Date: February 11, 1997 /s/ Lane Ward
---------------------------------------
Lane Ward
Vice Chairman, President and
Chief Executive Officer
Date: February 11, 1997 /s/ David D. Rinehart
---------------------------------------
David D. Rinehart
Executive Vice President and Chief
Financial Officer
23
<PAGE>
Exhibit 11
COMPUTATION OF EARNINGS PER SHARE
For the three and nine months ended December 31, 1996 and 1995
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
December 31 December 31,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Primary Earnings per Share
Net income applicable to common stock $ 417,168 $ 476,278 $ 244,056 $1,320,287
Weighted average number of common shares ========== ========== ========== ==========
outstanding 819,979 849,893 819,459 855,363
Common shares issuable under employee stock
option plan 61,317 51,139 61,317 51,139
Less shares assumed repurchased with proceeds (27,453) (28,952) (27,453) (28,952)
---------- ---------- ---------- ----------
Weighted average common shares and common
share equivalents outstanding 853,843 872,080 853,324 877,550
========== ========== ========== ==========
Primary earnings per common share $ 0.49 $ 0.55 $ 0.29 $ 1.50
========== ========== ========== ==========
Fully Diluted Earnings Per Share
Net income applicable to common stock $ 417,168 $ 476,278 $ 244,056 $1,320,287
Interest on convertible subordinated debentures,
net of tax 172,991 45,509 518,972 45,509
---------- ---------- ---------- ----------
Net income adjusted $ 590,159 $ 521,787 $ 763,028 $1,365,796
========== ========== ========== ==========
Weighted average common share and common
share equivalents outstanding 853,843 872,080 853,324 877,550
Weighted average common shares issuable with
the conversion of debentures to common stock 560,182 152,223 560,182 50,926
---------- ---------- ---------- ----------
Weighted average common shares and common share
equivalents 1,414,025 1,024,303 1,413,506 928,476
========== ========== ========== ==========
Fully diluted earnings per common share $ 0.42 $ 0.51 $ 0.54 $ 1.47
========== ========== ========== ==========
</TABLE>
Fully diluted earnings per share are not disclosed on the statement of
operations as they are anti-dilutive for the nine months ended December 31, 1996
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-START> APR-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 6,981,332
<INT-BEARING-DEPOSITS> 14,672,756
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 3,410,025
<INVESTMENTS-CARRYING> 112,407,011
<INVESTMENTS-MARKET> 112,124,616
<LOANS> 124,352,183
<ALLOWANCE> 1,165,629
<TOTAL-ASSETS> 278,532,088
<DEPOSITS> 238,497,915
<SHORT-TERM> 0
<LIABILITIES-OTHER> 5,788,488
<LONG-TERM> 16,339,279
0
0
<COMMON> 9,085
<OTHER-SE> 19,761,802
<TOTAL-LIABILITIES-AND-EQUITY> 278,532,088
<INTEREST-LOAN> 7,193,460
<INTEREST-INVEST> 6,526,765
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 13,720,225
<INTEREST-DEPOSIT> 7,430,780
<INTEREST-EXPENSE> 8,425,509
<INTEREST-INCOME-NET> 5,294,716
<LOAN-LOSSES> 128,000
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 1,254,913
<INCOME-PRETAX> 307,565
<INCOME-PRE-EXTRAORDINARY> 307,565
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 244,056
<EPS-PRIMARY> .29
<EPS-DILUTED> .29
<YIELD-ACTUAL> 2.90
<LOANS-NON> 214,086
<LOANS-PAST> 0
<LOANS-TROUBLED> 676,865
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 1,350,222
<CHARGE-OFFS> 789,193
<RECOVERIES> 91,316
<ALLOWANCE-CLOSE> 1,165,629
<ALLOWANCE-DOMESTIC> 183,674
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 981,955
</TABLE>
