==============================================================================
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 December 31, 1997 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: (660) 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 1,253,889 at February 2, 1998.
==============================================================================
<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
December 31, 1997 (unaudited) and June 30, 1997. . . . . . 2
Consolidated Statements of Operations for the Three Months
ended December 31, 1997 and 1996 and for the six months ended
December 31, 1997 and 1996 (unaudited) . . . . . . . . . . 3
Consolidated Statements of Changes in Stockholders' Equity
for the Six Months ended December 30, 1997 and 1996
(unaudited). . . . . . . . . . . . . . . . . . . . . . . . 4
Consolidated Statements of Cash Flows for the Six Months
ended December 31, 1997 and 1996 (unaudited). . . . . . . . 6
Notes to Unaudited Consolidated Financial Statements. . . . 8
Item 2 Management's Discussion and Analysis of Financial Condition
and Results of Operations . . . . . . . . . . . . . . . . . 10
Part II. Other Information
- ---------------------------
Item 1 Legal Proceedings . . . . . . . . . . . . . . . . . . . . . 17
Item 2 Changes in Securities . . . . . . . . . . . . . . . . . . . 17
Item 3 Default upon Senior Securities. . . . . . . . . . . . . . . 17
Item 4 Submission of Matters to a Vote of Security Holders . . . . 17
Item 5 Other Information . . . . . . . . . . . . . . . . . . . . . 17
Item 6 Exhibits and Reports on Form 8-K. . . . . . . . . . . . . . 17
Signature Page . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
<PAGE>
<PAGE>
MBLA FINANCIAL CORPORATION
Consolidated Statements of Financial
December June 30
1997 1997
(unaudited)
---------------------
ASSETS (In thousands)
Cash on hand and noninterest-earning deposits $1,129 $230
Interest-earning deposits in other institutions 6,336 4,484
Investment securities available-for-sale, at fair
value 11,263 27,039
Mortgage-backed and related securities
available-for-sale, at fair value 67,500 68,975
Loans receivable, net 129,902 126,448
FHLB stock 5,652 5,652
Accrued interest receivable 1,405 1,595
Real estate owned - -
Premises and equipment 293 308
Other assets 78 92
-------- --------
Total assets $223,558 $234,823
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits $108,919 $101,959
Advances from Federal Home Loan Bank 84,757 102,870
Advances from borrowers for taxes and insurance 55 171
Income taxes payable 801 590
Accrued expenses and other liabilities 420 697
Dividends payable 259 -
-------- --------
Total liabilities $195,211 $206,287
-------- --------
Preferred stock, $.01 par value;
authorized 500,000 shares; none outstanding $ - $ -
Common stock, $.01 par value; authorized 2,500,000
shares, issued 1,753,611 shares at December 31,
1997 and 1,738,111 shares at June 30, 1997 17 17
Additional paid-in capital 17,209 16,944
Retained earnings, substantially restricted 18,964 18,535
Less:
Treasury stock, at cost - 483,622 shares at
December 31, 1997 and 439,699 shares at
June 30, 1997 (8,436) (7,347)
Common stock acquired by the ESOP (235) (282)
Common stock awarded by Association
Recognition and Retention Plan (58) (58)
Unrealized loss on securities available-for-sale,
net of applicable deferred income taxes 886 727
-------- --------
Total stockholders' equity $28,347 $28,536
-------- --------
Total liabilities and stockholders' equity $223,558 $234,823
======== ========
See accompanying Notes to Unaudited Consolidated Financial Statements
2
<PAGE>
<PAGE>
MBLA FINANCIAL CORPORATION
Consolidated Statements of Operations
(Unaudited)
Three Months Ended Six Months Ended
December 31, December 31,
------------------ ----------------
1997 1996 1997 1996
---- ---- ---- ----
(In thousands) (In thousands)
Interest income:
Loans receivable $2,386 $2,072 $4,760 $4,036
Investment securities 278 767 627 1,077
Mortgage-backed and related
securities 1,171 1,186 2,373 2,390
Other interest-earning assets 101 36 167 62
------ ------ ------ ------
Total interest income 3,936 4,061 7,927 7,565
Interest expense:
Deposits 1,521 1,227 2,985 2,402
Advances 1,247 1,558 2,581 2,801
------ ------ ------ ------
Total interest expense 2,768 2,785 5,566 5,203
Net interest income 1,168 1,276 2,361 2,362
Provision for loan losses 15 5 30 25
------ ------ ------ ------
Net interest income after
provision for loan losses 1,153 1,271 2,331 2,337
Noninterest income:
Commitment fees - - 1 -
Other 1 5 4 6
------ ------ ------ ------
Total noninterest income 1 5 5 6
------ ------ ------ ------
Noninterest expense:
Compensation and benefits 244 238 475 472
Occupancy and equipment 39 35 73 67
SAIF deposit insurance premiums 32 64 61 686
Net loss (gain) on sale of real
estate owned - 8 - 6
Net loss (gain) on sale of
investments (14) - (14) -
Other 62 74 109 114
------ ------ ------ ------
Total noninterest expense 363 419 704 1,345
------ ------ ------ ------
Income before income taxes 791 857 1,632 998
Income tax expense 317 335 653 370
------ ------ ------ ------
Net income $474 $522 $979 $628
====== ====== ====== ======
Earnings per share:
Basic $0.38 $0.40 $0.78 $0.48
Diluted $0.36 $0.38 $0.74 $0.46
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)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Six Months Ended
- ----------------
December 31, 1996
- ------------------
Balance at June 30,
1996 $17 $16,754 $17,665 ($5,924) ($390) ($208) $154 $28,068
Additions (deductions)
for the six months
ended December 31,
1996:
Net income - - 628 - - - - 628
Compensation expense
related to ESOP - 68 - - - - - 68
Reduction of ESOP
obligation - - - - 61 - - 61
Dividends on
unallocated
ESOP shares - - 8 - - - - 8
Deferred tax on
RRP - 36 - - - - - 36
Purchase of
treasury stock
(26,250 shares) - - - (569) - - - (569)
Dividends declared - - (268) - - - - (268)
Unrealized gain
(loss) on
securities
available-for-
sale, net of
deferred
income tax of
$231,000 - - - - - - 392 392
-----------------------------------------------------------------------------
Balance, December 31,
1996 $17 $16,858 $18,033 ($6,493) ($329) ($208) $546 $28,424
=============================================================================
See accompanying Notes to Unaudited Consolidated Financial Statements
4
</TABLE>
<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)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Six Months Ended
- ----------------
December 31, 1997
- ------------------
Balance at June 30,
1997 $17 $16,944 $18,535 ($7,347) ($282) ($58) $727 $28,536
Additions (deductions)
for the six months
ended December 31,
1997:
Net income - - 979 - - - - 979
Compensation expense
related to ESOP - 74 - - - - - 74
Reduction of ESOP
obligation - - - - 47 - - 47
Dividends on
unallocated
ESOP shares - - 6 - - - - 6
Deferred tax on RRP - 36 - - - - - 36
Stock options
exercised - 155 - - - - - 155
Stock options
retired - - (299) - - - - (299)
Purchase of
treasury stock
(43,923 shares) - - - (1,089) - - - (1,089)
Dividends declared - - (257) - - - - (257)
Unrealized gain
(loss) on securities
available-for-sale,
net of deferred
income tax of
$93,000 - - - - - - 159 159
-----------------------------------------------------------------------------
Balance, December 31,
1997 $17 $17,209 $18,964 ($8,436) ($235) ($58) $886 $28,347
=============================================================================
See accompanying Notes to Unaudited Consolidated Financial Statements
5
<PAGE>
<PAGE>
MBLA FINANCIAL CORPORATION
Consolidated Statements of Cash Flows
(Unaudited)
Six Months End
December 31,
---------------
1997 1996
---- ----
(In thousands)
Cash flow from operating activities:
Net income $979 $628
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Provision for loan losses 30 25
Net loss on sale of real estate owned - 6
Net loss (gain) on sale of mortgage-backed
and related securities (14) -
Net loss on disposal of fixed assets 2 -
Depreciation 22 22
Amortization of premiums and discounts (19) (40)
Excess of fair value over cost of ESOP
unallocated shares 74 68
Deferred tax on RRP 36 36
Decrease (increase) in interest receivable 194 (180)
Decrease (increase) in other assets 15 59
Increase (decrease) in income tax payable 117 17
Increase (decrease) in other liabilities (17) 60
------ -----
Net cash provided by operating activities $1,419 $701
Cash flow from investing activities:
Loans purchased and originated (13,193) (13,717)
Loans sold 95 -
(Increase) decrease in loans, net 9,614 8,033
Proceeds from maturities of available-for-sale
investment securities 18,682 28,026
Purchase of available-for-sale investment
securities (2,933) (28,408)
Principal collected on repayments and
maturities of available-for-sale mortgage-
backed and related securities 1,882 1,783
Purchase of mortgage-backed and related
securities (4,000) -
Proceeds from sale of mortgage-backed and
related securities 3,905 -
Purchase of FHLB stock - (1,396)
Proceeds from the sale of real estate owned - 32
Purchase of equipment and office building
improvements (10) (4)
Net cash provided (used) by investing ------- -------
activities $14,042 ($5,651)
------- -------
Cash flows from financing activities:
Net increase (decrease) in deposits 6,960 5,404
Net increase (decrease) in advances from
borrowers for taxes and insurance (116) (100)
Proceeds from FHLB advances 2,000 40,000
Principal payments on FHLB advances (20,113) (38,106)
Dividends paid (254) (266)
Purchase of treasury stock (1,090) (569)
Issuance of common stock 155 -
Unearned ESOP compensation decrease 47 61
Stock options retired (299) -
Net cash provided (used) by financing -------- ------
activities ($12,710) $6,424
-------- ------
Increase (decrease) in cash and cash
equivalents $2,751 $1,474
Cash and cash equivalents at beginning of period 4,714 5,131
-------- ------
Cash and cash equivalents at end of period $7,465 $6,605
======== ======
6
<PAGE>
<PAGE>
MBLA FINANCIAL CORPORATION
Consolidated Statements of Cash Flows
(Continued)
Six Months End
December 31,
---------------
1997 1996
---- ----
(In thousands)
Supplemental cash flow disclosures:
Cash paid for:
Interest $3,666 $3,644
======== ======
Income Taxes $500 $319
======== ======
Noncash activity:
Loans transferred to real estate owned - $30
======== ======
See accompanying Notes to Unaudited Consolidated Financial Statements
7
<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 and six month periods ended
December 31, 1997 are not necessarily indicative of results that may be
expected for the entire fiscal year ending June 30, 1998.
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
and six month periods ended December 31, 1997. 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 $16.41 million 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 million 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 $538,000 ($450,000 in principal) to the
Holding Company. The $235,000 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 4,692 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
8
<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 remaining 4,692 shares were awarded to
directors on January 2, 1998.
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.
The 9,833 options were awarded to directors during the quarter ended September
30, 1997. As of December 31, 1997, 55,934 options had been exercised or
retired, leaving a total of 116,566 which had not been exercised. As of
January 26, 1998, an additional 29,341 options have been exercised or retired.
(3) Earnings Per Share
Earnings per share (EPS) computations follow SFAS No. 128 which is
effective for financial statements issued for periods ending after December
15, 1997. Basic EPS have been determined by dividing net income for the
period (numerator) by the weighted-average number of common shares outstanding
during the period (denominator). Weighted-average common shares include
shares held by the RRP plan and allocated ESOP shares. Unallocated ESOP
shares are not used in either basic or diluted EPS calculations. Shares
issued during the period and shares reacquired during the period are weighted
for the portion of the period outstanding. In determining diluted EPS, the
denominator used for basic EPS is increased to include the number of
additional common shares (common stock equivalents) that would have been
outstanding if the dilutive potential common shares had been issued. Stock
options are regarded as common stock equivalents and are computed using the
treasury stock method. Prior periods EPS have been restated to comply with
SFAS No. 128.
(4) Stock Repurchase Program
During the quarter ended December 31, 1997, the Company repurchased
13,779 shares of its common stock. For the six months ended December 31,
1997, the Company repurchased 43,923 shares of its common stock. As of
January 28, 1998, MBLA Financial Corporation has repurchased a total of
511,322 shares of its common stock.
(5) Commitments and Contingencies
Commitments to originate and purchase mortgage loans of $4.620 million
(of which $4.429 million are adjustable-rate commitments) at December 31,
1997, represent amounts which the Association plans to fund within the normal
commitment period of sixty to ninety days. As of December 31, 1997, 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
December 31, 1997.
(6) Reclassifications
None.
9
<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
Federally 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.
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.
10
<PAGE>
<PAGE>
The operations of Macon Building and Loan Association are influenced
significantly by local economic conditions and by policies of the Office of
Thrift Supervision (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 December 31, 1997, cash, due from
banks and interest-earning deposits totalled $7.465 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 8.51% and 8.67% at December 31, 1997 and 1996,
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 December 31, 1997
and 1996, the Association originated and purchased mortgage loans in the
aggregate amount of $6.904 million and $3.932 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 December 31, 1997, the Association had outstanding loan commitments to
originate and purchase $4.620 million of loans. The Association believes that
it will have sufficient funds available to meet all of these commitments. At
December 31, 1997, the Association had no outstanding commitments to sell
mortgage loans, mortgage-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 December 31,
1997, certificates of deposit which are scheduled to mature in one year or
less from December 31, 1997, totalled $78.085 million. Management believes
that a significant portion of these funds will remain with the Association.
11
<PAGE>
<PAGE>
At December 31, 1997, the Association exceeded each of the three OTS
capital requirements. The Association's ratios were: 11.88% tangible capital
ratio; 11.88% core capital ratio; and 32.10% risk-based capital ratio. These
regulatory capital ratio requirements at December 31, 1997 were 1.5%, 3.0%,
and 8.0%, respectively.
Changes in Financial Condition
Total assets decreased $11.265 million to $223.558 million at December
31, 1997 from $234.823 million at June 30, 1997. The decrease in assets is
due primarily to a $15 million FHLB bond which was called in late July 1997.
Cash due from banks and interest-earning deposits increased $2.751 million to
$7.465 million. Loans receivable increased $3.454 million to $129.902 million
at December 31, 1997 from $126.448 million at June 30, 1997. Mortgage-backed
and related securities decreased $1.475 million to $67.500 million at December
31, 1997. Investment securities decreased $15.776 million to $11.263 million
at December 31, 1997 because of the $15 million FHLB bond discussed above
which was called. FHLB stock was unchanged at $5.652 million at December 31,
1997.
Deposits increased $6.960 million or 6.83% from $101.959 million at June
30, 1997 to $108.919 million at December 31, 1997. The average cost of
deposits increased from 5.64% at June 30, 1997 to 5.67% at December 31, 1997.
Advances from the Federal Home Loan Bank of Des Moines decreased $18.113
million to $84.757 million at December 31, 1997 from $102.870 million at June
30, 1997. The average cost of advances increased from 5.63% at June 30, 1997
to 5.80% at December 31, 1997.
Stockholders' equity decreased $189,000 or 0.66% to $28.347 million at
December 31, 1997, from $28.536 million at June 30, 1997. MBLA Financial
Corporation's capital to assets ratio was 12.68% as of December 31, 1997 as
compared to 12.15% at June 30, 1997.
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 89.86% of Macon Building and Loan Association's mortgage loan
portfolio as of December 31, 1997, consisted of ARMs, including ARM loans
secured by commercial real estate. Approximately 77.33% of all ARMs, or
69.49% of all loans, are adjustable in one, two, or three years from December
31, 1997.
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.
12
<PAGE>
<PAGE>
MBLA Financial Corporation and Macon Building and Loan Association have
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 December 31,
1997, the effect on stockholders' equity was an addition of $886,000 net of
deferred income taxes as compared to an addition of $727,000 at June 30, 1997
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 from
$577,000 at June 30, 1997 to $1.063 million at December 31, 1997.
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 December 31, 1997, the Association has no
restructured loans within the meaning of Financial Accounting Standards Board
Statement of Financial Accounting Standards No. 15.
13
<PAGE>
<PAGE>
MBLA FINANCIAL CORPORATION
Asset Quality
December 31, September 30, June 30, March 31, December 31,
1997 1997 1997 1997 1996
------------ ------------- -------- --------- ------------
(Dollars in thousands)
Non-accrual
mortgage loans
delinquent more
than 90 days $1,063 $1,283 $577 $514 $532
Non-accrual other
loans delinquent
more than 90 days 0 0 0 0 0
Total non-performing----------------------------------------------------
loans 1,063 1,283 577 514 532
Real estate owned
and in-substance
foreclosed loans
net of related
allowance 0 0 0 0 15
----------------------------------------------------
Total non-
performing
assets $1,063 $1,283 $577 $514 $547
====================================================
Non-performing
loans to
total loans 0.82% 0.99% 0.46% 0.44% 0.48%
Non-performing
assets to
total assets 0.48% 0.57% 0.25% 0.25% 0.26%
Allowance for
loan losses
to non-performing
loans 62.09% 50.27% 109.19% 111.87% 105.26%
14
<PAGE>
<PAGE>
Results of Operations
Comparison of quarterly results in this section are between the three
month periods ended December 31, 1997, and December 31, 1996 and between the
six month periods then ended.
General
Net income for the quarter ended December 31, 1997 was $474,000, a
decrease of $48,000 or 9.20% from the $522,000 net income for the quarter
ended December 31, 1996. Basic earnings per share for the quarter ended
December 31, 1997 were 38 cents per share as compared to 40 cents per share
for the quarter ended December 31, 1996. Net income for the six months ended
December 31, 1997 was $979,000, an increase of $351,000 over the $628,000 net
income for the six months ended December 31, 1996. Basic earnings per share
for the six months ended December 31, 1997 were 78 cents per share as compared
to 48 cents per share for the six months ended December 31, 1996.
Net income for the six months ended December 31, 1996 was reduced by the
one-time special assessment 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 six months ended
December 31, 1996 by approximately $558,000. Based on an estimated effective
tax rate of 37%, the after-tax charge was approximately $352,000.
Interest Income
Interest income decreased $125,000 or 3.08% to $3.936 million for the
quarter ended December 31, 1997 from $4.061 million for the quarter ended
December 31, 1996. Interest income for the six months ended December 31, 1997
was $7.927 million, an increase of $362,000 over the same period ended
December 31, 1996.
Interest on mortgage loans increased $314,000 and $724,000 for the three
and six month periods ended December 31, 1997 over the same periods ended
December 31, 1996. Interest on investment securities decreased $489,000 and
$450,000 for the three and six month periods ended December 31, 1997 over the
same periods ended December 31, 1996. Interest on mortgage-backed and related
securities decreased $15,000 and $17,000 for the three and six month periods
ended December 31, 1997 as compared to the same periods ended December 31,
1996. Interest on other interest-earning assets increased $65,000 and
$105,000 for the three and six month periods ended December 31, 1997 as
compared to the same periods ended December 31, 1996.
Interest Expense
Interest expense for the quarter ended December 31, 1997 was $2.768
million as compared to $2.785 million for the quarter ended December 31, 1996,
a decrease of $17,000 or 0.61%. Interest expense for the six months ended
December 31, 1997 was $5.566 million as compared to $5.203 for the six months
ended December 31, 1996, an increase of $363,000 or 6.98%. Interest expense
on deposits increased $294,000 to $1.521 million at December 31, 1997 from
$1.227 million at December 31, 1996. Interest expense on deposits for the six
months ended December 31, 1997 increased $583,000 to $2.985 million from
$2.402 million for the six months ended December 31, 1996. Interest expense
on advances decreased $311,000 to $1.247 million at December 31, 1997 from
$1.558 million at December 31, 1996. Interest expense on advances for the six
months ended December 31, 1997 decreased $220,000 to $2.581 million from
$2.801 million for the six months ended December 31, 1996. The average cost
of funds which includes both interest paid on deposits
15
<PAGE>
<PAGE>
and interest paid on advances, increased from 5.55% at December 31, 1996 to
5.72% at December 31, 1997.
Net Interest Income
Net interest income before provisions for loan losses was $1.168 million
for the quarter ended December 31, 1997 as compared to $1.276 million for the
quarter ended December 31, 1996, a decrease of $108,000 or 8.46%. Net
interest income before provisions for loan losses for the six months ended
December 31, 1997 was $2.361 million as compared to $2.362 million for the six
months ended December 31, 1996.
Noninterest Income
Other income for the quarter ended December 31, 1997 was $1,000 as
compared to $5,000 for the same quarter of the previous year. Other income
for the six months ended December 31, 1997 was $5,000 as compared to $6,000
for the six months ended December 31, 1996. Other income is not considered a
significant part of the overall income of the company.
Noninterest Expense
Noninterest expense for the quarter ended December 31, 1997 decreased
$56,000 to $363,000, a decrease of 13.37% as compared to $419,000 for the
quarter ended December 31, 1996. Noninterest expense for the six months ended
December 31, 1997 decreased $641,000 to $704,000 from $1.345 million for the
six months ended December 31, 1996. The decrease in noninterest expense for
the six months ended December 31, 1997 is due to the one-time special
assessment paid by institutions whose deposit accounts are insured by the
SAIF. The special assessment was approximately $558,000 during the six months
ended December 31, 1996.
Provision for Loan Losses
At December 31, 1997, the provision for loan losses general loan
valuation allowance is $660,000. For the three months ended December 31,
1997, provision for loan losses was increased $15,000 as compared to an
increase of $5,000 during the quarter ended December 31, 1996. For the six
months ended December 31, 1997 provision for loan losses was increased $30,000
as compared to an increase of $25,000 during the same period ended December
31, 1996. The Association has a policy of maintaining a general loan
valuation allowance of one-half of one percent of outstanding loans, but is
considering increasing the allowance in the future.
Income Tax
The provision for federal and state income taxes decreased $18,000 to
$317,000 for the quarter ended December 31, 1997 as compared to $335,000 for
the quarter ended December 31, 1996. The provision for federal and state
income taxes increased $283,000 for the six months ended December 31, 1997 to
$653,000 as compared to $370,000 for the six months ended December 31, 1996.
The increase is attributable to the special one-time SAIF assessment paid
during the six months ended December 31, 1996.
16
<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
On October 28, 1997, the Company held its 1997 Annual Meeting of
Stockholders for the purpose of (1) the election of two directors and (2) the
ratification of Lockridge, Constant and Conrad as the Company's independent
auditors.
(1) For election of directors:
Votes For Votes Withheld
--------- --------------
Carl B. Barrows 1,070,728 2,400
Arnold Walter 1,071,128 2,000
(2) For the ratification of Lockridge, Constant & Conrad as
independent auditors for the year ending June 30, 1998:
For Against Abstain
--- ------- -------
1,066,053 250 6,825
Item 5 Other Information
None.
Item 6 Exhibits and Reports on Form 8-K
(a) Exhibit 11. Statement re: Computation of Per Share Earnings
Exhibit 27. Financial Data Schedule*
*Submitted only with filing in electronic format.
(b) Reports on Form 8-K:
On October 24, 1997, the Company filed a Current Report on Form
8-K reporting under Item 5 first quarter earnings for the
period ended September 30, 1997.
On December 2, 1997, the Company filed a Current Report on Form
8-K reporting under Item 5 the declaration of a 20 cent per
share cash dividend for the period ending December 31, 1997.
17
<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: February 3, 1998 /s/ John T. Neer
---------------------------------------
John T. Neer
President and Chief Executive Officer
(Duly Authorized Officer)
Dated: February 3, 1998 /s/ Clyde D. Smith
---------------------------------------
Clyde D. Smith
Vice President and Chief Financial Officer
(Principal Financial Officer)
18
<PAGE>
<PAGE>
Exhibit 11
Exhibit 11. Statement re: Computation of Per Share Earnings
Quarter Ended
Dec. 31, 1997
-------------
1. Net income $ 474,000
=============
2. Weighted average common shares outstanding 1,242,018
=============
3. Basic earnings per share $ 0.38
=============
4. Weighted average common shares outstanding 1,242,018
5. Additional dilutive shares using the average market
value for the period utilizing the treasury stock
method regarding stock options 83,243
-------------
6. Total weighted average common shares and equivalents
outstanding for fully diluted earnings per share computation 1,325,261
=============
7. Diluted earnings per share $ 0.36
=============
<PAGE>
<PAGE>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> DEC-31-1997
<CASH> 1129
<INT-BEARING-DEPOSITS> 6336
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 78763
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 130562
<ALLOWANCE> 660
<TOTAL-ASSETS> 223558
<DEPOSITS> 108919
<SHORT-TERM> 84757
<LIABILITIES-OTHER> 1535
<LONG-TERM> 0
0
0
<COMMON> 17
<OTHER-SE> 28330
<TOTAL-LIABILITIES-AND-EQUITY> 223558
<INTEREST-LOAN> 4760
<INTEREST-INVEST> 3000
<INTEREST-OTHER> 167
<INTEREST-TOTAL> 7927
<INTEREST-DEPOSIT> 2985
<INTEREST-EXPENSE> 5566
<INTEREST-INCOME-NET> 2361
<LOAN-LOSSES> 30
<SECURITIES-GAINS> 14
<EXPENSE-OTHER> 718
<INCOME-PRETAX> 1632
<INCOME-PRE-EXTRAORDINARY> 1632
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 979
<EPS-PRIMARY> 0.78
<EPS-DILUTED> 0.74
<YIELD-ACTUAL> 7.11
<LOANS-NON> 1063
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 630
<CHARGE-OFFS> 0
<RECOVERIES> 0
<ALLOWANCE-CLOSE> 660
<ALLOWANCE-DOMESTIC> 660
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
