SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly Report Under Section 13 or 15(d) of the Securities and Exchange Act
of 1934
For the Quarter Ended September 30, 1996 Commission File No. 0-21482
MBLA FINANCIAL CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 43-1637679
(State of Incorporation) (I.R.S. Employer Identification No.)
101 Vine Street
Macon, Missouri 63552
(Address of principal executive offices) (Zip Code)
Registrant's telephone number: (816) 385-2122
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes [ X ] No [ ]
The number of shares outstanding of the issuer's common stock, par value $.01
per share, was 1,343,961 at November 4, 1996.
<PAGE>
<PAGE>
MBLA FINANCIAL CORPORATION AND SUBSIDIARY
FORM 10-Q
Index
Part I. Financial Information
- ------------------------------
Item 1 Financial Statements Page
----
Consolidated Statements of Financial Condition as of September 30,
1996 (unaudited) and June 30, 1996 . . . . . . . . . . . . . . . . 2
Consolidated Statements of Operations for the Three Months
ended September 30, 1996 and 1995 (unaudited). . . . . . . . . . . 3
Consolidated Statements of Changes in Stockholders' Equity
for the Three Months ended September 30, 1996 and
1995 (unaudited) . . . . . . . . . . . . . . . . . . . . . . . . . 4
Consolidated Statements of Cash Flows for the Three Months
ended September 30, 1996 and 1995 (unaudited). . . . . . . . . . . 5
Notes to Unaudited Consolidated Financial Statements . . . . . . . 7
Item 2 Management's Discussion and Analysis of Financial Condition
and Results of Operations. . . . . . . . . . . . . . . . . . . 9
Part II. Other Information
- ----------------------------
Item 1 Legal Proceedings. . . . . . . . . . . . . . . . . . . . . . . 16
Item 2 Changes in Securities. . . . . . . . . . . . . . . . . . . . . 16
Item 3 Default upon Senior Securities . . . . . . . . . . . . . . . . 16
Item 4 Submission of Matters to a Vote of Security Holders. . . . . . 16
Item 5 Other Information. . . . . . . . . . . . . . . . . . . . . . . 16
Item 6 Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . 16
Signature Page . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
<PAGE>
<PAGE>
MBLA FINANCIAL CORPORATION
Consolidated Statements of Financial Condition
September 30, June 30,
1996 1996
(unaudited)
ASSETS (In thousands)
------- -------
Cash on hand and noninterest-earning deposits $ 114 $ 320
Interest-earning deposits in other institutions 890 4,811
Investment securities available-for-sale,
at fair value 37,878 12,437
Mortgage-backed and related securities
available-for-sale, at fair value 70,276 71,129
Loans receivable, net 110,946 106,485
FHLB stock 5,603 4,256
Accrued interest receivable 1,248 1,152
Real estate owned 30 23
Premises and equipment 273 284
Other assets 133 142
------- -------
Total assets $227,391 $201,039
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits $85,950 $86,716
Advances from Federal Home Loan Bank 112,033 85,086
Advances from borrowers for taxes and insurance 204 155
Income taxes payable 19 240
Dividends payable - 274
Accrued expenses and other liabilities 1,199 500
------- -------
Total liabilities $199,405 $172,971
Preferred stock, $.01 par value;
authorized 500,000 shares; none outstanding $ - $ -
Common stock, $.01 par value; authorized 2,500,000
shares, issued 1,738,111 shares at September 30,
1996 and June 30, 1996 17 17
Additional paid-in capital 16,790 16,754
Retained earnings, substantially restricted 17,771 17,665
Less:
Treasury stock, at cost - 384,150 shares at
September 30, 1996 and 373,000 shares at
June 30, 1996 (6,164) (5,924)
Common stock acquired by the ESOP (390) (390)
Common stock awarded by Association
Recognition and Retention Plan (208) (208)
Unrealized loss on securities available-for-sale,
net of applicable deferred income taxes 170 154
------- -------
Total stockholders' equity $27,986 $28,068
------- -------
Total liabilities and stockholders' equity $227,391 $201,039
See accompanying Notes to Unaudited Consolidated Financial Statements
2
<PAGE>
<PAGE>
MBLA FINANCIAL CORPORATION
Consolidated Statements of Operations
(Unaudited)
Three Months Ended
September 30,
1996 1995
(In thousands)
-------- --------
Interest income:
Loans receivable $ 1,964 $ 1,788
Investment securities 310 257
Mortgage-backed and related securities 1,204 1,232
Other interest-earning assets 26 77
-------- --------
Total interest income 3,504 3,354
Interest expense:
Deposits 1,175 1,148
Advances 1,243 1,308
-------- --------
Total interest expense 2,418 2,456
Net interest income 1,086 898
Provision for loan losses 20 -
-------- --------
Net interest income after provision for loan losses 1,066 898
Noninterest income:
Commitment fees - -
Other 1 4
-------- --------
Total noninterest income 1 4
Noninterest expense:
Compensation and benefits 234 208
Occupancy and equipment 32 33
SAIF deposit insurance premiums 622 61
Loss (gain) on sale of real estate owned (2) -
Other 40 46
-------- --------
Total noninterest expense 926 348
Income before income taxes 141 554
Income tax expense 35 206
-------- --------
Net income $ 106 $ 348
Earnings per share:
Primary $0.08 $0.24
Fully diluted $0.08 $0.24
See accompanying Notes to Unaudited Consolidated Financial Statements
3
PAGE
<PAGE>
<TABLE>
MBLA FINANCIAL CORPORATION
Consolidated Statements of Changes in Stockholders' Equity
(Unaudited)
Unrealized
Gain (Loss)
Securities
Available-
For-Sale,
Net of
Common Common Applicable
Additional Stock Stock Deferred
Common Paid-In Retained Treasury Acquired Acquired Income
Stock Capital Earnings Stock by ESOP by RRP Taxes Total
----- ------- -------- -------- ------- ------- ------ -------
(In thousands)
Three Months Ended September 30, 1995
- -------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at June 30, 1995 $17 $16,615 $16,806 ($3,667) ($524) ($357) $198 $29,088
Additions (deductions) for
the three months ended
September 30, 1995:
Net income - - 348 - - - - 348
Compensation expense
related to ESOP - 10 - - - - - 10
Deferred tax on RRP - 5 - - - - - 5
Purchase of treasury stock
(50,339 shares) - - - (799) - - - (799)
Unrealized gain (loss) on
securities available-for-
sale, net of deferred
income tax of $4,000 - - - - - - 8 8
----- ------- -------- -------- ------- ------- ------ -------
Balance, September 30, 1995 $17 $16,630 $17,154 ($4,466) ($524) ($357) $206 $28,660
Three Months Ended September 30, 1996
- -------------------------------------
Balance at June 30, 1996 $17 $16,754 $17,665 ($5,924) ($390) ($208) $154 $28,068
Additions (deductions) for
the three months ended
September 30, 1996:
Net income - - 106 - - - - 106
Compensation expense
related to ESOP - 36 - - - - - 36
Deferred tax on RRP - - - - - - - 0
Purchase of Treasury stock
(11,150 shares) - - - (240) - - - (240)
Unrealized gain (loss) on
securities available-for-
sale, net of deferred
income tax of $10,000 - - - - - - 16 16
----- ------- -------- -------- ------- ------- ------ -------
Balance, September 30, 1996 $17 $16,790 $17,771 ($6,164) ($390) ($208) $170 $27,986
See accompanying Notes to Unaudited Consolidated Financial Statements
4
</TABLE>
<PAGE>
<PAGE>
MBLA FINANCIAL CORPORATION
Consolidated Statements of Cash Flows
(Unaudited)
Three Months Ended
September 30,
1996 1995
(In thousands)
------ ------
Cash flow from operating activities:
Net income $ 106 $ 348
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Provision for loan losses 20 -
Net loss (gain) on sale of real estate owned (2) -
Depreciation 11 14
Amortization of premiums and discounts (20) (24)
Excess of fair value over cost of ESOP
unallocated shares 35 10
Deferred tax on RRP - 5
Decrease (increase) in interest receivable (95) 20
Decrease (increase) in other assets 9 11
Increase (decrease) in income tax payable (232) 29
Increase (decrease) in other liabilities 698 (28)
------ ------
Net cash provided by operating activities $ 530 $ 385
Cash flow from investing activities:
Loans purchased (10,089) (849)
(Increase) decrease in loans, net 5,578 2,502
Proceeds from maturities of available-for-sale
investment securities and certificates of deposit 1,510 4,168
Purchase of available-for-sale investment securities
and certificates of deposit (26,907) (1,498)
Principal collected on repayments and maturities of
available-for-sale mortgage-backed and related
securities 857 1,301
Purchase of FHLB stock (1,347) -
Proceeds from the sale of real estate owned 25 -
------ ------
Net cash provided (used) by investing activities ($30,373) $5,624
Cash flows from financing activities:
Net increase (decrease) in deposits (766) 347
Net increase (decrease) in advances from
borrowers for taxes and insurance 49 38
Proceeds from FHLB advances 27,000 -
Principal payments on FHLB advances (52) (49)
Dividends paid (274) (298)
Purchase of treasury stock (241) (799)
------ ------
Net cash provided (used) by financing activities $25,716 ($761)
Cash and cash equivalents at beginning of period 5,131 2,631
------ ------
Cash and cash equivalents at end of period $1,004 $7,879
5
<PAGE>
<PAGE>
MBLA FINANCIAL CORPORATION
Consolidated Statements of Cash Flows
(Continued)
Three Months Ended
September 30,
1996 1995
(In thousands)
------ ------
Supplemental cash flow disclosures:
Cash paid for:
Interest $1,655 $1,749
Income Taxes $267 $165
Noncash activity:
Loans transferred to real estate owned $30 -
See accompanying Notes to Unaudited Consolidated Financial Statements
6
<PAGE>
<PAGE>
MBLA FINANCIAL CORPORATION AND SUBSIDIARY
Notes to Unaudited Consolidated Financial Statements
(1) Basis of Presentation
The accompanying unaudited consolidated financial statements have been
prepared in accordance with Generally Accepted Accounting Principles (GAAP)
for interim financial information and with the instructions to Form 10-Q and
Article 10 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by GAAP for complete financial statements.
In the opinion of management, all adjustments (consisting of only normal
recurring accruals) necessary for a fair presentation have been included. The
results of operations and other data for the three month period ended
September 30, 1996 are not necessarily indicative of results that may be
expected for the entire fiscal year ending June 30, 1997.
The unaudited consolidated financial statements include the amounts of
MBLA Financial Corporation (the "Holding Company") and its wholly-owned
subsidiary, Macon Building and Loan Association, (the "Association"), and the
Association's wholly-owned subsidiary, MBL Financial Services, for the three
months ended September 30, 1996. The consolidated financial statements for
the prior periods include accounts of the Holding Company and its
subsidiaries. Material intercompany accounts and transactions have been
eliminated in consolidation.
(2) Conversion to Stock Ownership
The Board of Directors of the Association, on December 10, 1992,
unanimously adopted a Plan of Conversion pursuant to which the Association
converted from a state chartered mutual savings and loan association to a
state chartered stock savings and loan association, with the concurrent
formation of the Holding Company. The Holding Company, on June 24, 1993, sold
1,725,000 shares of common stock at $10.00 per share to depositors, borrowers
from and employees of the Association during the subscription offering. The
proceeds from the conversion, after recognizing conversion expenses and
underwriting costs of approximately $840,000, were $16,410,000 and are
recorded as common stock and additional paid in capital on the accompanying
unaudited consolidated statement of financial condition. The Holding Company
utilized approximately $8,205,000 of the net proceeds to purchase all of the
capital stock of the Association.
The Association has established for eligible employees an Employee Stock
Ownership Plan ("ESOP") in connection with the conversion. The ESOP borrowed
$685,000 from the Holding Company and purchased 68,500 common shares issued in
the conversion. The Association is making the scheduled discretionary cash
contributions to the ESOP sufficient to service the amount borrowed. To
date, the Association has made payments of $364,000 ($295,000 in principal) to
the Holding Company. The $390,000 ESOP obligation ($685,000 in stock issued
by the Holding Company on June 30, 1993 less the principal payments made by
the Association) is reflected in the accompanying consolidated financial
statements as a charge to unearned compensation and a credit to common stock
and paid-in capital. The unamortized balance of unearned compensation is
shown as a deduction of stockholders' equity. The unpaid balance of the ESOP
loan is eliminated in consolidation.
The Association has established several Recognition and Retention Plans
("RRP's") which purchased in the aggregate 69,000 shares of common stock in
the conversion. The Association contributed $690,000 to fund the purchase of
the RRP shares. All but 9,384 shares were awarded to directors and officers
and are designed to be earned over varying annual rates, depending upon the
individual's position in the Association. The aggregate
7
<PAGE>
<PAGE>
purchase price of these shares will be amortized as compensation expense over
the participants' vesting period. The unamortized cost is reflected as a
reduction of stockholders' equity.
The Holding Company has adopted stock option plans for the benefit of
directors, officers, and other key employees of the Association. The number
of shares of common stock reserved for issuance under the stock option plans
was equal to 10% of the total number of common shares issued pursuant to the
Association's conversion to the stock form of ownership. The option exercise
price was $10.00 as of the date of the option grant, and the maximum option
term cannot exceed ten years. The stock options awarded to directors may be
exercised at any time after grant.
The stock options awarded to officers and other key employees are
exercisable on a cumulative basis in equal installments over varying time
periods, depending upon the officer's or employee's position with the
Association. At June 24, 1993, 172,500 stock options were issued with 9,833
reserved for future use and 162,667 granted. As of September 30, 1996, 13,111
options had been exercised, leaving a total of 149,556 which had not been
exercised.
(3) Earnings Per Share
Earnings per share of common stock have been determined by dividing net
income for the period by the weighted average number of shares of common
stock, common stock equivalents outstanding, shares held by the RRP plans and
allocated ESOP shares. Unallocated ESOP shares are not used in either primary
or fully diluted earnings per share calculations. Stock options are regarded
as common stock equivalents and are therefore considered in both primary and
fully diluted earnings per share calculations. Common stock equivalents are
computed using the treasury stock method.
(4) Stock Repurchase Program
As of November 1, 1996, MBLA Financial Corporation has repurchased a
total of 394,150 shares of its common stock.
(5) Commitments and Contingencies
Commitments to originate and purchase mortgage loans of $4.335 million
(of which $3.694 million are adjustable-rate commitments) at September 30,
1996, represent amounts which the Association plans to fund within the normal
commitment period of sixty to ninety days. As of September 30, 1996, the
Association had no commitments to purchase mortgage-backed securities, CMOs or
investment securities. The Association had no commitments outstanding to sell
mortgage loans, mortgage-backed securities, CMOs or investment securities at
September 30, 1996.
(6) Reclassifications
None.
8
<PAGE>
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
General
MBLA Financial Corporation was organized, as a Delaware corporation, in
February 1993 at the direction of the Association's Board of Directors to
acquire all of the capital stock that the Association issued upon its
conversion from the mutual to stock form of ownership. The business of the
Holding Company consists primarily of the business of the Association. There
are no current arrangements, understandings or agreements to expand its
business activities or make any business acquisitions.
Macon Building and Loan Association, originally founded in 1885, is a
Missouri chartered stock savings and loan association headquartered in Macon,
Missouri. Its deposits are insured up to the maximum allowable amount by the
Federal Deposit Insurance Corporation (the "FDIC"). The Association serves
Macon and Randolph Counties, Missouri. The Association conducts business
through its main office and one branch office in Moberly, Missouri.
The business of the Association consists principally of attracting
deposits from the general public and using such deposits to purchase and
originate mortgage loans secured by one- to four-family residences. The
servicing rights on substantially all loans purchased by the Association are
retained by the sellers. To a lesser extent, the Association invests in U.S.
government and federal agency securities and mortgage-backed and related
securities, interest-earning deposits and commercial and multi-family real
estate loans and consumer loans.
The Association's results of operations are dependent primarily on net
interest income, which is the difference between the interest income earned on
its loans and investment portfolio, and its cost of funds, consisting of the
interest paid on its deposits and also interest paid on FHLB advances. The
Association's operating expenses consist primarily of employee compensation,
occupancy expenses, FDIC insurance premiums and other general and
administrative expenses. The Association's results of operations are also
significantly affected by general economic and competitive conditions,
particularly changes in market interest rates, government policies, and
actions of regulatory authorities.
The Association's operating strategies have been developed to respond to
the economic conditions prevailing in the Association's primary market area.
Macon's deposits are generated primarily from customers located in the
Association's primary market area. However, due to low loan demand, the
Association has, for over 30 years, purchased the majority of its loans from
selected mortgage banking companies and financial institutions located
primarily in Columbia, Boone County, Missouri, and to a lesser extent, the
Kansas City, St. Louis and Springfield areas. The sellers retain servicing
rights on the loans purchased by the Association. By extending its lending
market area and employing alternative investment opportunities, such as
mortgage-backed and related securities and other investment securities, the
Association has attempted to limit, and believes it has been successful in
limiting, the impact of these economic conditions on its results of
operations.
The economy of Boone County is primarily dependent on the services and
government industries. The education industry also plays an important role in
the economy of Boone County as three colleges and universities are located
there.
9
<PAGE>
<PAGE>
The Association has continued to maintain a high level of asset quality
and has remained profitable notwithstanding the decline in the local economy
and low demand for mortgage loans in its market area.
The operations of Macon Building and Loan Association are influenced
significantly by local economic conditions and by policies of the OTS and the
FDIC. The Association's cost of funds is influenced by interest rates on
competing investments and general market interest rates. Lending activities
are affected by the demand for financing of real estate and other types of
loans, which in turn is affected by the interest rates at which such financing
may be offered.
Liquidity and Capital Resources
The Holding Company and Association's most liquid assets are cash, due
from banks and interest-earning deposits. The levels of these assets are
dependent on the Association's lending, investing, operating, and deposit
activities during any given period. At September 30, 1996, cash, due from
banks and interest-earning deposits totalled $1.004 million.
The Association's primary sources of funds are deposits, advances from
the FHLB, proceeds from principal and interest payments on loans, proceeds
from principal and interest payments on mortgage-backed and related
securities, and proceeds from the maturing of investment securities. While
maturity and scheduled amortization of loans and investment securities are
predictable sources of funds, deposit inflows and mortgage prepayments are
greatly influenced by local conditions, general interest rates and regulatory
changes.
The Association is required to maintain minimum levels of liquid assets
as defined by OTS regulations. Liquid assets consist of cash, due from banks,
interest-earning deposits, short and intermediate term U.S. Government and
government agency securities. This requirement, which periodically varies
depending upon economic conditions and deposit flows, is based upon a
percentage of deposits and short term borrowings. The current required
liquidity ratio is 5%. The Association historically has maintained a level of
liquid assets in excess of this regulatory requirement. The Association's
liquidity ratios were 5.70% and 23.23% at September 30, 1996 and 1995,
respectively. Liquidity management for the Association is both a daily and
long term function of the Association's management strategy. In the event
that the Association should require funds beyond its ability to generate
internally, additional sources of funds are available through the use of
Federal Home Loan Bank advances and reverse repurchase agreements.
The primary investment activity of the Association is the origination and
purchase of mortgage loans. During the three months ended September 30, 1996
and 1995, the Association originated and purchased mortgage loans in the
aggregate amount of $10.145 million and $1.43 million, respectively. Another
investment activity of the Association is the investment of funds in U.S.
Treasury securities, agency bonds, mortgage-backed securities, collateralized
mortgage obligations and FHLB overnight funds. During periods when the
Association's loan demand is limited, the Association may purchase short-term
investment securities to obtain a higher yield than otherwise available.
At September 30, 1996, the Association had outstanding loan commitments
to originate and purchase $4.335 million of loans. The Association believes
that it will have sufficient funds available to meet all of these commitments.
At September 30, 1996, the Association had no outstanding commitments to sell
mortgage loans, mortage-backed and related securities, or any other investment
securities. Should the Association need to, the Board of Directors has
authorized management to obtain additional short-term advances from the
Federal Home Loan Bank of Des Moines to fund loan purchases. At September 30,
1996, certificates of deposit which are scheduled to mature in one
10
<PAGE>
<PAGE>
year or less from September 30, 1996, totalled $52.151 million. Management
believes that a significant portion of these funds will remain with the
Association.
At September 30, 1996, the Association exceeded each of the three OTS
capital requirements. The Association's ratios were: 11.45% tangible capital
ratio; 11.45% core capital ratio; and 34.30% risk-based capital ratio. These
regulatory capital ratio requirements at September 30, 1996 were 1.5%, 3.0%,
and 8.0%, respectively.
Changes in Financial Condition
Total assets increased $26.352 million to $227.391 million at September
30, 1996 from $201.039 million at June 30, 1996. Cash due from banks and
interest-earning deposits decreased $4.126 million to $1.004 million. Loans
receivable increased $4.46 million to $110.946 million at September 30, 1996
from $106.486 million at June 30, 1996. Mortgage-backed and related
securities decreased $853,000 to $70.276 million at September 30, 1996.
Investment securities increased $25.441 million to $37.878 million at
September 30, 1996. FHLB stock increased $1.347 million to $5.603 million at
September 30, 1996.
The increase in total assets and investment securities is due to the
purchase of an 8% FHLB quarterly callable bond due March 26, 2004. This was
funded with an FHLB advance which can be paid-off if bond is called.
Deposits decreased $766,000 or 0.88% from $86.716 million at June 30,
1996 to $85.950 million at September 30, 1996. The average cost of deposits
increased from 5.46% at June 30, 1996 to 5.47% at September 30, 1996.
Advances from the Federal Home Loan Bank of Des Moines increased $26.947
million to $112.033 million at September 30, 1996 from $85.086 million at
June 30, 1996. The average cost of advances decreased from 5.61% at June 30,
1996 to 5.60% at September 30, 1996.
Stockholders' equity decreased $82,000 or 0.29% to $27.986 million at
September 30, 1996, from $28.068 million at June 30, 1996. MBLA Financial
Corporation's capital to assets ratio was 12.31% as of September 30, 1996 as
compared to 13.96% at June 30, 1996.
Interest Rate Sensitivity
Macon Building and Loan Association has employed various strategies
intended to minimize the adverse effect of interest rate risk on future
operations by providing a close match between the interest rate sensitivity of
its assets and liabilities and by expanding its activities which are not
directly dependent on interest rate spreads. The Association's strategies are
intended to stabilize net interest income for the long-term by protecting its
interest rate spread against changes in interest rates.
The Association utilizes ARMs to provide repricing opportunities more
closely matched within the time frames in which its deposits are repriced.
Management is charged with the responsibility to manage interest rate risk
while remaining sensitive to the Board's directive that credit risk not be
substituted for interest rate risk. As a result of these efforts,
approximately 90.43% of Macon Building and Loan Association's mortgage loan
portfolio as of September 30, 1996, consisted of ARMs, including ARM loans
secured by commercial real estate. Approximately 88.72% of all ARMs, or 80.22%
of all loans, are adjustable in one, two, or three years from September 30,
1996.
11
<PAGE>
<PAGE>
FASB 115
MBLA Financial Corporation and Macon and Building and Loan Association
have adopted and implemented FASB 115 which requires investments in equity
securities that have readily determinable fair values and all investments in
debt securities be classified as either: (1) held-to-maturity, (2) trading
securities or (3) available-for-sale.
During the fourth quarter of fiscal year ended June 30, 1994, MBLA
Financial Corporation and Macon Building and Loan Association classified all
securities as available-for-sale with all investments reported at fair value
with unrealized holding gains and losses excluded from earnings and reported
as a separate component of shareholders' equity. At September 30, 1996, the
effect on stockholders' equity was an addition of $170,000 net of deferred
income taxes as compared to an addition of $154,000 at June 30, 1996 net of
deferred income taxes.
Asset Quality
The Holding Company and the Association regularly review interest earning
assets to determine proper valuation. Management's monitoring of the asset
portfolio includes reviews of historical loss experience, known and inherent
risks in the portfolio, the value of any underlying collateral,
prospective economic conditions and the regulatory environment. The
Association's non-accrual mortgage loans delinquent more than 90 days
decreased $258,000 from $663,000 at June 30, 1996 to $405,000 at September 30,
1996.
The table on the following page sets forth information regarding the
Association's non-accrual loans and foreclosed real estate at the dates
indicated. The Association discontinues accruing interest on delinquent loans
no later than ninety days past due, at which time all accrued but uncollected
interest is reversed. At September 30, 1996, the Association has no
restructured loans within the meaning of Financial Accounting Standards Board
Statement of Financial Accounting Standards No. 15.
12
<PAGE>
<PAGE>
MBLA FINANCIAL CORPORATION
ASSET QUALITY
September 30, June 30, March 31, December 31, September 30,
1996 1996 1996 1995 1995
------ ------ ------ ------ ------
Non-accrual Mortgage
loans delinquent more
than 90 days $405 $663 $593 $749 $386
Non-accrual other loans
delinquent more than
90 days 0 0 0 0 0
------ ------ ------ ------ ------
Total Non-
performing loans 405 663 593 749 386
Real estate owned and
in-substance foreclosed
loans net of related
allowance 30 23 50 0 0
------ ------ ------ ------ ------
Total non-
performing assets $435 $686 $643 $749 $386
Non-performing loans
to total loans 0.37% 0.62% 0.62% 0.73% 0.37%
Non-performing assets
to total assets 0.19% 0.34% 0.33% 0.38% 0.20%
Allowance for loan
losses to non-
performing loans 137.04% 80.69% 90.22% 71.43% 138.60%
13
<PAGE>
<PAGE>
Results of Operations
Comparison of quarterly results in this section are between the three
month periods ended September 30, 1996, and September 30, 1995.
General
Net income for the first quarter ended September 30, 1996 was $106,000, a
decrease of $242,000 or 69.54% of the $348,000 net income for the first
quarter ended September 30, 1995. Earnings per share for the quarter ended
September 30, 1996 were 8 cents per share as compared to 24 cents per share for
the quarter ended September 30, 1995. This decrease in net income is a direct
result of the one-time special assessment to be paid by institutions whose
deposit accounts are insured by the Savings Association Insurance Fund (SAIF).
The special assessment reduced pre-tax consolidated earnings for the quarter
approximately $558,000. Based on an estimated effective tax rate of 37%, the
after-tax charge was approximately $352,000 or 25 cents per share.
Interest Income
Interest income increased $150,000 or 4.47% to $3.504 million for the
quarter ended September 30, 1996 from $3.354 million for the quarter ended
September 30, 1995. Interest on mortgage loans increased $176,000 for the
three months ended September 30, 1996 to $1.964 million. Interest on
mortgage-backed and related securities decreased $28,000 for the quarter ended
September 30, 1996 to $1.204 million. Interest on investment securities
increased $53,000 to $310,000 for the quarter ended September 30, 1996.
Interest Expense
Interest expense for the quarter ended September 30, 1996 was $2.418
million as compared to $2.456 million for the quarter ended September 30,
1995, a decrease of $38,000 or 1.55%. Interest expenses on deposits increased
$27,000 to $1.175 million at September 30, 1996. Interest expense on advances
decreased $65,000 to $1.243 million at September 30, 1996. The average cost
of funds which includes both interest paid on deposits and interest paid on
advances, decreased from 5.79% at September 30, 1995 to 5.54% at September 30,
1996.
Net Interest Income
Net interest income before provisions for loan losses was $1.086 million
for the quarter ended September 30, 1996 as compared to $898,000 for the
quarter ended September 30, 1995, an increase of $188,000 or 20.94%.
14
<PAGE>
<PAGE>
Noninterest Income
Other income for the quarter ended September 30, 1996 was $1,000 as
compared to $4,000 for the same quarter of the previous year. Other income
is not considered a significant part of the overall income of the company.
Noninterest Expense
Noninterest expense for the quarter ended September 30, 1996 increased
$578,000 to $926,000, an increase of 166.09% as compared to $348,000 for the
quarter ended September 30, 1995. The increase in noninterest expense is due
to the one-time special assessment to be paid by institutions whose deposit
accounts are insured by the SAIF. The special assessment was approximately
$558,000.
Provision for Loan Losses
At September 30, 1996, the provision for loan losses general loan
valuation allowance is $555,000. For the three months ended September 30,
1996, provision for loan losses was increased $20,000 as compared to no
increase during the same quarter ended September 30, 1995. The Association
has a policy of maintaining a general loan valuation allowance of one-half of
one percent of outstanding loans.
Income Tax
The provision for federal and state income taxes decreased $171,000 to
$35,000 for the quarter ended September 30, 1996 as compared to $206,000 for
the quarter ended September 30, 1995. The decrease in income tax expense is
due to the one-time special SAIF assessment of approximately $558,000. Based
on an effective tax rate of 37%, the tax savings were approximately $206,000.
15
<PAGE>
<PAGE>
MBLA FINANCIAL CORPORATION AND SUBSIDIARY
Part II -- Other Information
Item 1 Legal Proceedings
The Holding Company and the Association are not involved in any
pending legal proceedings other than legal proceedings incident to
the business of the Holding Company and the Association, which
involve amounts in the aggregate which management believes are
immaterial to the financial condition and results of operations of
the Holding Company and the Association.
Item 2 Changes in Securities
Not applicable.
Item 3 Default upon Senior Securities
Not applicable.
Item 4 Submission of Matters to a Vote of Security Holders
Not applicable.
Item 5 Other Information
None.
Item 6 Exhibits and Reports on Form 8-K
(a) Exhibit 11. Statement re: Computation of Per Share Earnings
Quarter Ended
Sept. 30, 1996
1. Net income $ 106,000
2. Weighted average common shares outstanding 1,324,308
3. Common stock equivalents due to dilutive effect
of stock options 80,684
4. Total weighted average common shares and equivalents
outstanding for primary earnings per share computation 1,404,992
5. Primary earnings per share $ 0.08
6. Weighted average common shares outstanding 1,404,992
7. Additional dilutive shares using the higher of the end of
period market value versus average market value for the
period utilizing the treasury stock method regarding
stock options 0
8. Total weighted average common shares and equivalents
outstanding for fully diluted earnings per share
computation 1,404,992
9. Fully diluted earnings per share $ 0.08
(b) There were no reports filed on Form 8-K.
16
<PAGE>
<PAGE>
MBLA FINANCIAL CORPORATION AND SUBSIDIARY
Signatures
Pursuant to the requirement of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
MBLA Financial Corporation
(Registrant)
Dated November 4, 1996 /s/ John T. Neer
-----------------
John T. Neer
President and Chief Executive Officer
(Duly Authorized Officer)
Dated November 4, 1996 /s/ Clyde D. Smith
-------------------
Clyde D. Smith
Vice President and Chief Financial Officer
(Principal Financial Officer)
17
<PAGE>
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> SEP-30-1996
<CASH> 114
<INT-BEARING-DEPOSITS> 890
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 108154
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 111501
<ALLOWANCE> 555
<TOTAL-ASSETS> 227391
<DEPOSITS> 85950
<SHORT-TERM> 112033
<LIABILITIES-OTHER> 1422
<LONG-TERM> 0
0
0
<COMMON> 17
<OTHER-SE> 27969
<TOTAL-LIABILITIES-AND-EQUITY> 227391
<INTEREST-LOAN> 1964
<INTEREST-INVEST> 1514
<INTEREST-OTHER> 26
<INTEREST-TOTAL> 3504
<INTEREST-DEPOSIT> 1175
<INTEREST-EXPENSE> 2418
<INTEREST-INCOME-NET> 1086
<LOAN-LOSSES> 20
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 926
<INCOME-PRETAX> 141
<INCOME-PRE-EXTRAORDINARY> 141
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 106
<EPS-PRIMARY> 0.08
<EPS-DILUTED> 0.08
<YIELD-ACTUAL> 7.06
<LOANS-NON> 405
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 535
<CHARGE-OFFS> 0
<RECOVERIES> 0
<ALLOWANCE-CLOSE> 555
<ALLOWANCE-DOMESTIC> 555
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
