SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-Q
Quarterly Report Under Section 13 or 15(d) of the Securities and Exchange Act
of 1934
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For the Quarter Ended March 31, 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.)
100 North Rollins
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 1,371,538 at April 30, 1996.
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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 March 31,
1996 (unaudited) and June 30, 1995 . . . . . . . . . . . . . . 2
Consolidated Statements of Operations for the Three Months
ended March 31, 1996 and 1995 and for the Nine Months
ended March 31, 1996 and 1995 (unaudited) . . . . . . . . . . 3
Consolidated Statements of Changes in Stockholders' Equity
for the Nine Months ended March 31, 1996 and
1995 (unaudited) . . . . . . . . . . . . . . . . . . . . . . 4
Consolidated Statements of Cash Flows for the Nine Months
ended March 31, 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
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MBLA FINANCIAL CORPORATION
CONSIDATED STATEMENTS OF FINANCIAL CONDITION
March 31,
1996 June 30,
ASSETS (unaudited) 1995
----------- ----------
(Dollars in thousands)
Cash on hand and noninterest-earning deposits $ 325 $ 340
Interest-earning deposits in other institutions 4,006 2,291
Certificates of deposit - 99
Investment securities available-for-sale,
at fair value 12,509 14,604
Mortgage-backed and related securities
available-for-sale, at fair value 68,052 69,482
Loans receivable, net 104,363 104,700
FHLB stock 4,173 4,091
Accrued interest receivable 1,164 1,140
Real estate owned 50 -
Premises and equipment 286 313
Other assets 146 192
-------- --------
Total assets $195,074 $197,252
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits $ 87,293 $ 85,162
Advances from Federal Home Loan Bank 78,137 81,787
Advances from borrowers for taxes and insurance 120 197
Income taxes payable 533 189
Dividends payable - 298
Accrued expenses and other liabilities 626 531
-------- --------
Total liabilities $166,709 $168,164
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 at March 31, 1996
and 1,738,111 shares at June 30, 1995 17 17
Additional paid-in capital 16,709 16,615
Retained earnings, substantially restricted 17,545 16,806
Less:
Treasury stock, at cost - 366,373 shares at March 31, 1996
and 246,336 shares at June 30, 1995 (5,766) (3,667)
Common stock acquired by the ESOP (449) (524)
Common stock awarded by Association
Recognition and Retention Plan (345) (357)
Unrealized gain (loss) on securities available-for-sale,
net of applicable deferred income taxes 654 198
--------- ---------
Total stockholders' equity $ 28,365 $ 29,088
--------- ---------
Total liabilities and stockholders' equity $ 195,074 $ 197,252
See accompanying Notes to Unaudited Consolidated Financial Statements
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MBLA FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended Nine Months Ended
March 31, March 31,
1996 1995 1996 1995
(In thousands) (In thousands)
------ ------ ------ ------
Interest income:
Loans receivable $ 1,835 $ 1,805 $ 5,428 $ 5,200
Investment securities 253 246 770 625
Mortgage-backed and related
securities 1,156 1209 3,611 1,952
Other interest-earning assets 63 9 224 69
------ ------ ------ ------
Total interest income 3,307 3,269 10,033 7,846
Interest expense:
Deposits 1,180 1,021 3,504 2,992
Advances 1,158 1,215 3,758 1,869
------ ------ ------ ------
Total interest expense 2,338 2,236 7,262 4,861
Net interest income 969 1,033 2,771 2,985
Provision for loan losses - 35 - 115
------ ------ ------ ------
Net interest income after provision
for loan losses 969 998 2,771 2,870
Noninterest income:
Commitment fees - - - -
Other 13 5 19 12
------ ------ ------ ------
Total noninterest income 13 5 19 12
Noninterest expense:
Compensation and benefits 258 204 725 615
Occupancy and equipment 35 44 101 114
SAIF deposit insurance premiums 64 62 188 180
Loss (gain) on sale of real
estate owned 2 6 2 6
Other 42 48 141 171
------ ------ ------ ------
Total noninterest expense 401 364 1,157 1,086
Income before income taxes 581 639 1,633 1,796
Income tax expense 221 249 624 712
------ ------ ------ ------
Net income $ 360 $ 390 $ 1,009 $ 1,084
Earnings per share:
Primary $0.26 $0.26 $0.71 $0.71
Fully diluted $0.26 $0.26 $0.71 $0.71
See accompanying Notes to Unaudited Consolidated Financial Statements
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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
Nine Months Ended Common Paid-In Retained Treasury Acquired Acquired Income
March 31, 1995 Stock Capital Earnings Stock by ESOP by RRP Taxes Total
------ ---------- -------- -------- -------- -------- ---------- --------
(in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at June 30, 1994 $ 17 $ 16,422 $ 15,931 ($2,178) ($588) ($506) (401) $ 28,697
Additions (deductions) for
the six months ended
March 31, 1995:
Net income - - 1,084 - - - - $ 1,084
Stock options exercised - 129 - - - - - $ 129
Compensation expense - - - - - - - 0
related to ESOP - 21 - - - - - 21
Reduction of ESOP
obligation - - - - 30 - - 30
Amortization of RRPs - - - - - 12 - 12
Purchase of treasury stock
(99,421 shares) - - - (1,489) - - - (1,489)
Dividends declared - - (301) - - - - (301)
Unrealized gain (loss) on
securities available-for-
sale, net of deferred
income tax of $74,000 - - - - - - 127 127
Balance, March 31, 1995 $ 17 $ 16,572 $ 16,714 ($3,667) ($558) ($494) ($274) $ 28,310
Nine Months Ended
March 31, 1996
Balance at June 30, 1995 $ 17 $ 16,615 $ 16,806 ($3,667) ($524) ($357) $198 $ 29,088
Additions (deductions) for
the six months ended
March 31, 1996:
Net income - - 1,009 - - - - 1,009
Compensation expense
related to ESOP - 80 - - - - - 80
Reduction of ESOP
obligation - - - - 75 - - 75
Amortization of RRPs - - - - - 12 - 12
Dividends on unallocated
ESOP shares - - 10 - - - - 10
Deferred tax on RRP - 14 - - - - - 14
Purchase of Treasury stock
(120,037 shares) - - - (2,099) - - - (2,099)
Dividends declared - - (280) - - - - (280)
Unrealized gain (loss) on
securities available-for-
sale, net of deferred
income tax of $267,000 - - - - - - 456 456
Balance, March 31, 1996 $ 17 $ 16,709 $ 17,545 ($5,766) ($449) ($345) $ 654 $ 28,365
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MBLA FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Nine Months Ended
March 31,
1996 1995
------ ------
Cash Flow from operating activities: (In thousands)
Net income $ 1,009 $ 1,084
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Provision for loan losses - 10
Net loss (gain) on sale of real estate owned (2) 6
Depreciation 33 39
Amortization of premiums and discounts (58) (32)
Excess of fair value over cost of
ESOP unallocated shares 80 21
Amortization of RRP 12 12
Deferred tax on RRP 15 -
FHLB stock dividend (82) -
Decrease (increase) in interest receivable (24) (350)
Decrease (increase) in other assets 47 (75)
Increase (decrease) in income tax payable 75 72
Increase (decrease) in other liabilities 90 198
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Net cash provided by operating activities $ 1,195 $ 1,085
Cash flow from investing activities:
Loans purchased (10,353) (21,921)
Loans sold - 4,158
(Increase) decrease in loans, net 10,587 4,700
Proceeds from maturities of available-for-sale
investment securities and certificates of deposit 7,674 12,984
Purchase of available-for-sale investment
securities and certificates of deposit (5,488) (9,903)
Principal collected on repayments and maturities of
available-for-sale mortgage-backed and
related securities 4,749 580
Sale of available-for-sale mortgage-backed and
related securities 3,502 -
Purchase of available-for-sale mortgage-backed
and related securities (6,023) (50,075)
Purchase of FHLB stock - (2,819)
Proceeds from sale of real estate owned 51 3
Purchase of equipment and office building improvements (6) (52)
------- -------
Net cash provided (used) by investing activities $ 4,693 ($ 62,345)
Cash flows from financing activities:
Net proceeds from issuance of common stock - 129
Net increase (decrease) in deposits 2,131 (2,751)
Net increase (decrease) in advances from
borrowers for taxes and insurance (77) (63)
Proceeds from FHLB advances - 69,500
Principal payments on FHLB advances (3,649) (3,140)
Dividends paid (568) (625)
Purchase of treasury stock (2,100) (2,156)
Unearned ESOP compensation decrease 75 30
------- -------
Net cash provided (used) by financing activities ($ 4,188) $ 60,924
Increase (decrease) in cash and cash equivalents $ 1,700 ($ 336)
Cash and cash equivalents at beginning of period 2,631 1,021
Cash and cash equivalents at end of period $ 4,331 $ 685
See accompanying Notes to Unaudited Consolidated Financial Statements
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MBLA FINANCIAL CORPORATION
Consolidated Statements of Cash Flows
(Continued)
Nine Months Ended
March 31,
1996 1995
------ ------
(In thousands)
Supplemental cash flow disclosures:
Cash paid for:
Interest $ 4,386 $ 2,911
----- -----
Income Taxes $ 527 $ 639
----- -----
Noncash activity:
Loans transferred to real estate owned $ 103 $ 26
----- -----
See accompanying Notes to Unaudited Consolidated Financial Statements
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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 March
31, 1996 and the nine month period ended March 31, 1996 are not necessarily
indicative of results that may be expected for the entire fiscal year ended
June 30, 1996.
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 March 31, 1996 and the nine months ended March 31, 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 $840,123.95, were $16,409,876.05 and are recorded as
common stock and additional paid in capital on the accompanying unaudited
consolidated statement of financial condition. The Holding Company utilized
$8,204,938.03 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 $294,907.26 ($235,466.59 in
principal) to the Holding Company. The $449,533.41 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
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individual's position in the Association. The aggregate 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 March 31, 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
On November 27, 1995, the Company announced a stock repurchase plan to
buy 10% or 141,719 shares of its common stock. Since the announcement, the
Company has repurchased 45,648 shares of its common stock. As of April 26,
1996, MBLA Financial Corporation has repurchased a total of 366,573 shares of
its common stock.
(5) COMMITMENTS AND CONTINGENCIES
Commitments to originate and purchase mortgage loans of $5.867 million
(of which $4.236 million are adjustable-rate commitments) at March 31, 1996,
represent amounts which the Association plans to fund within the normal
commitment period of sixty to ninety days. As of March 31, 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
March 31, 1996.
(6) RECLASSIFICATIONS
None.
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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.
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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 March 31, 1996, cash, due from banks
and interest-earning deposits totalled $4.331 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 10.41% and 14.79% at March 31, 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 March 31, 1996 and
1995, the Association originated and purchased mortgage loans in the aggregate
amount of $6.276 million and $3.556 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 March 31, 1996, the Association had outstanding loan commitments to
originate and purchase $5.867 million of loans. The Association believes that
it will have sufficient funds available to meet all of these commitments. At
March 31, 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 March 31,
1996, certificates of deposit which are scheduled to mature in one year or
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less from March 31, 1996, totalled $49.548 million. Management believes that
a significant portion of these funds will remain with the Association.
At March 31, 1996, the Association exceeded each of the three OTS capital
requirements. The Association's ratios were: 13.65% tangible capital ratio;
13.65% core capital ratio; and 39.50% risk- based capital ratio. These
regulatory capital ratio requirements at March 31, 1996 were 1.5%, 3.0%, and
8.0%, respectively.
CHANGES IN FINANCIAL CONDITION
Total assets decreased $2.178 million to $195.074 million at March 31,
1996 from $197.252 million at June 30, 1995. Cash due from banks and
interest-earning deposits increased $1.7 million to $4.331 million. Loans
receivable decreased $337,000 to $104,363 at March 31, 1996 from $104.700
million at June 30, 1995. Mortgage-backed and related securities decreased
$1.43 million to $68.052 million at March 31, 1996. Investment securities
decreased $2.095 million to $12.509 million at March 31, 1996. Investment
certificates of deposit decreased $99,000 during the nine months ended March
31, 1996. FHLB stock increased $82,000 to $4.173 million because of a stock
dividend during the second quarter ended December 31, 1995.
Deposits increased $2.131 million or 2.50% from $85.162 million at June
30, 1995 to $87.293 million at March 31, 1996. The average cost of deposits
increased from 5.28% at June 30, 1995 to 5.49% at March 31, 1996. Advances
from the Federal Home Loan Bank of Des Moines decreased $3.65 million to
$78.137 million at March 31, 1996 from $81.787 million at June 30, 1995.
The average cost of advances decreased from 6.36% at June 30, 1995 to 5.65% at
March 31, 1996.
Stockholders' equity decreased $723,000 or 2.49% to $28.365 million at
March 31, 1996, due to stock repurchases during the nine months ended March
31, 1996. MBLA Financial Corporation's capital to assets ratio was 14.54%
as of March 31, 1996 as compared to 14.75% at June 30, 1995.
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 86.92% of Macon Building and Loan Association's mortgage loan
portfolio as of March 31, 1996, consisted of ARMs, including ARM loans secured
by commercial real estate. Approximately 86.85% of all ARMs, or 75.49% of all
loans, are adjustable in one, two, or three years from March 31, 1996.
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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 March 31, 1996, the
effect on stockholders' equity was an addition of $654,000 net of deferred
income taxes as compared to an addition of $198,000 at June 30, 1995 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 increased $169,000
from $424,000 at June 30, 1995 to $593,000 at March 31, 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 March 31, 1996, the Association has no restructured
loans within the meaning of Financial Accounting Standards Board Statement of
Financial Accounting Standards No. 15.
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MBLA FINANCIAL CORPORATION
ASSET QUALITY
March 31, Dec. 31, Sept. 30, June 30, March 31,
1996 1995 1995 1995 1995
------- ------- ------- ------- -------
Non-accrual (Dollars in thousands)
mortgage loans
delinquent more
than 90 days $ 593 $ 749 $ 386 $ 424 $ 321
Non-accrual other
loans delinquent
more than 90 days 0 0 0 0 0
----- ----- ----- ----- -----
Total non-performing
loans 593 749 386 424 321
Real Estate owned and
in-substance fore-
closed loans net of
related allowance 50 0 0 0 20
----- ----- ----- ----- -----
Total non-performing
assets 643 749 386 424 341
Non-performing loans
to total loans 0.62% 0.73% 0.37% 0.40% 0.32%
Non-performing loans
to total assets 0.33% 0.38% 0.20% 0.21% 0.18%
Allowance for loan
losses to non-
performing loans 83.20% 71.43% 138.60% 126.18% 167.67%
<PAGE>
<PAGE>
RESULTS OF OPERATIONS
Comparison of quarterly results in this section are between the three
month periods ended March 31, 1996, and March 31, 1995 and between the nine
month periods then ended.
GENERAL
Net income for the third quarter ended March 31, 1996 was $360,000, a
decrease of $30,000 or 7.69% of the $390,000 net income for the third quarter
ended March 31, 1995. Earnings per share for the quarter ended March 31,
1996 were 26 cents per share as compared to 26 cents per share for the quarter
ended March 31, 1995. Net income for the nine months ended March 31, 1996 was
$1.009 million, a decrease of $75,000 or 6.92% of the $1.084 million net
income for the same period ended March 31, 1996. Earnings per share for the
nine month period ended March 31, 1996 was 71 cents as compared to 71 cents
for the same period ended March 31, 1995.
INTEREST INCOME
Interest income increased $38,000 or 1.16% to $3.307 million for the
quarter ended March 31, 1995 from $3.269 million for the quarter ended March
31, 1995. Interest income for the nine months ended March 31, 1996 was
$10.033 million, an increase of $2.187 million or 27.87% over the same period
ended March 31, 1995. The increase in the nine months ended March 31, 1996
resulted from an increase in interest on mortgage-backed and related
securities, a direct result of the leveraging of capital to purchase
mortgage-backed securities and CMOs during the second quarter of fiscal year
ended June 30, 1995. Interest on mortgage loans increased $30,000 for the
three months ended March 31, 1996 and $228,000 for the nine months ended March
31, 1996 over the same periods ended March 31, 1995. Interest on
mortgage-backed and related securities decreased $53,000 for the quarter ended
March 31, 1996 and increased $1.659 million for the nine months ended March
31, 1996 as compared to same periods ended March 31, 1995.
INTEREST EXPENSE
Interest expense for the quarter ended March 31, 1996 was $2.338 million
as compared to $2.236 million for the quarter ended March 31, 1995, an
increase of 4.56%. Interest expense for the nine months ended March 31,
1996 was $7.262 million as compared to $4.861 million for the nine months
ended March 31, 1995, an increase of $2.401 million or 49.39%. The average
cost of funds which includes both interest paid on deposits and interest paid
on advances, decreased from 5.68% at March 31, 1995 to 5.53% at March 31,
1996.
NET INTEREST INCOME
Net interest income before provisions for loan losses was $969,000 for
the quarter ended March 31, 1996 as compared to $1.033 million for the quarter
ended March 31, 1995, a decrease of $64,000 or 6.20%. Net interest income
before provisions for loan losses was $2.771 million for the nine months ended
March 31, 1996 as compared to $2.985 million for the nine months ended March
31, 1995, a decrease of $214,000 or 7.17%.
<PAGE>
<PAGE>
NONINTEREST INCOME
Other income for the quarter ended March 31, 1996 was $13,000 as compared
to $5,000 for the same quarter of the previous year. Other income for the
nine months ended March 31, 1996 was $19,000 as compared to $12,000 for the
same period ended March 31, 1995. Other income is not considered a
significant part of the overall income of the company.
NONINTEREST EXPENSE
Noninterest expense for the quarter ended March 31, 1996 increased
$37,000 to $401,000, an increase of 10.16% as compared to $364,000 for the
quarter ended March 31, 1995. Noninterest expense for the nine months ended
March 31, 1996 was $1.157 million, an increase of $71,000 or 6.54% as compared
to the same period ended March 31, 1995. The increase in noninterest expense
is due to an increase of compensation and benefits because of fair market
value adjustments on ESOP shares.
PROVISION FOR LOAN LOSSES
At March 31, 1996, the provision for loan losses general loan valuation
allowance is $535,000. For the three months ended March 31, 1996, provision
for loan losses was not increased as compared to an increase of $35,000
during the same quarter ended March 31, 1995. For the nine months ended March
31, 1996, provisions for loan losses was not increased as compared to an
increase of $115,000 during the same period ended March 31, 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 $28,000 to
$221,000 for the quarter ended March 31, 1996 as compared to $249,000 for the
quarter ended March 31, 1995. The provisions for federal and state income
taxes decreased $88,000 from $712,000 to $624,000 for the nine months ended
March 31, 1996. The decrease in income tax expense is due to the decrease in
taxable income for the periods.
<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
Mar. 31, 1996
-------------
1. Net income . . . . . . . . . . . . . . . . . . . . . . . $ 360,000
2. Weighted average common shares outstanding . . . . . . . 1,332,987
3. Common stock equivalents due to dilutive effect
of stock options . . . . . . . . . . . . . . . . . . . . 76,580
4. Total weighted average common shares and equivalents
outstanding for primary earnings per share computation . 1,409,567
5. Primary earnings per share . . . . . . . . . . . . . . . $ 0.26
6. Weighted average common shares outstanding . . . . . . . 1,409,567
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. . . . . . . . . . . . . . . . . . . . . . 464
8. Total weighted average common shares and equivalents
outstanding for fully diluted earnings per share
computation. . . . . . . . . . . . . . . . . . . . . . . 1,410,031
9. Fully diluted earnings per share . . . . . . . . . . . . $ 0.26
(b)There were no reports filed on Form 8-K.
<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 April 30, 1996 /s/ John T. Neer
--------------------
John T. Neer
President and Chief
Executive Officer
(Duly Authorized Officer)
Dated April 30, 1996 /s/ Clyde D. Smith
---------------------
Clyde D. Smith
Vice President and Chief
Financial Officer
(Principal Financial Officer)
<PAGE>
<PAGE>
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0
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