UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
__X__ QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended December 31, 1996
______ TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from _____________ to ______________
Commission file number: 0-24598
TSB Financial, Inc.
(Exact name of small business issuer as specified in its charter)
Delaware 37-1325942
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
100 South Sampson, Tremont, Illinois 61568
(Address of principal executive offices)
(309) 925-2511
(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 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 _____
269,875 shares of the registrant's common stock, par value $.01 per share, were
outstanding at January 31, 1997.
TSB FINANCIAL, INC.
Table of Contents
Page
----
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements 3
Item 2. Management's Discussion and Analysis 7
of Plan of Operation
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 12
Item 2. Changes in Securities 12
Item 3. Defaults Upon Senior Securities 12
Item 4. Submission of Matters to a Vote of Security Holders 12
Item 5. Other Information 12
Item 6. Exhibits and Reports on Form 8-K 12
SIGNATURES 13
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
TSB Financial, Inc. and Subsidiary -- Note to Consolidated Financial Statements
Note 1. The accompanying unaudited consolidated financial statements have been
prepared in accordance with the instructions to Form 10-QSB and therefore do not
include all information and footnotes necessary for a fair presentation of
financial position, results of operations, and cash flows in conformity with
generally accepted accounting principles.
In the opinion of management, the consolidated financial statements of TSB
Financial, Inc. (the "Company") and subsidiary at December 31, 1996 and
September 30,1996 and for the three month periods ended December 31, 1996 and
1995 include all adjustments necessary for a fair presentation of the results of
those periods. All such adjustments are of a normal recurring nature.
Results of operations for the three month period ended December 31, 1996 are not
necessarily indicative of the results that may be expected for the year ending
September 30, 1997.
<TABLE>
<CAPTION>
TSB FINANCIAL, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF FINANCIAL CONDITION
(UNAUDITED)
December 31 September 30
1996 1996
------------ ------------
<S> <C> <C>
Assets
Cash $ 223,881 $ 290,585
Short-term interest bearing deposits 581,112 340,336
------------ ------------
Total cash and cash equivalents 804,993 630,921
Interest-bearing deposits 388,926 484,161
Investment securities available for sale 2,610,456 2,606,422
Investment securities held to maturity -
approximate market value $312,276 and $310,768 305,937 306,037
Mortgage-backed securities available for sale 2,452,860 2,476,846
Mortgage-backed securities held to maturity -
approximate market value $62,511 and $62,938 61,522 61,829
Loans, net 23,418,685 22,481,246
Premises and equipment 189,251 200,316
Federal Home Loan Bank of Chicago stock, at cost 318,300 318,300
Other assets 230,271 244,000
------------ ------------
Total Assets $ 30,781,201 $ 29,810,078
------------ ------------
Liabilities
Deposits $ 21,093,952 $ 20,149,937
Short-term borrowings 5,613,583 5,615,992
Advances by borrowers for taxes and insurance 86,934 60,340
Other liabilities 86,905 193,323
------------ ------------
Total Liabilities $ 26,881,374 $ 26,019,592
------------ ------------
Stockholders' Equity
Preferred Stock 0 0
Authorized and unissued-200,000 shares
Common Stock, $.01 par value
Authorized-550,000 shares
Issued and outstanding-269,875 shares 2,699 2,699
Capital surplus 2,218,894 2,218,894
Retained earnings-substantially restricted 2,221,713 2,159,413
Treasury stock - 26,987 shares (342,548) (342,548)
Net unrealized (loss)/gain on securities
available for sale (12,828) (48,129)
Unearned compensation related to ESOP and MRP (188,103) (199,843)
Total stockholders' equity 3,899,827 3,790,486
------------ ------------
Total Liabilities and Stockholders' Equity $ 30,781,201 $ 29,810,078
------------ ------------
</TABLE>
See note to consolidated financial statements
TSB FINANCIAL, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF INCOME
(UNAUDITED)
Three Months Ended December 31 1996 1995
-------- --------
Interest Income
Loans $447,532 $331,575
Mortgage-backed securities 44,310 44,969
Interest-bearing deposits 9,310 22,541
Investment securities 54,159 41,307
-------- --------
Total interest income 555,311 440,392
-------- --------
Interest Expense
Deposits 243,578 213,302
Borrowings 83,891 20,089
-------- --------
Total interest expense 327,469 233,391
Net Interest Income 227,842 207,001
Provision for losses on loans 4,500 3,000
-------- --------
Net Interest Income after provision 223,342 204,001
for losses on loans
Other Income
Loan fees and service charges 7,022 15,830
Other income 11,721 6,417
-------- --------
Total other income 18,743 22,247
-------- --------
Other Expense
Salaries and employee benefits 77,963 77,579
Net occupancy expense 6,939 5,331
Equipment expense 13,694 4,909
Deposit insurance expense 0 10,711
Computer services expense 10,268 9,059
Office supplies expense 3,173 6,865
Advertising promotion expense 3,867 4,510
Other expense 36,873 33,032
-------- --------
Total other expense 152,777 151,996
-------- --------
Income before Income tax 89,308 74,252
Income tax expense 27,008 24,581
-------- --------
Net Income $ 62,300 $ 49,671
-------- --------
Per Share Data
Assuming no dilution
Net income $ 0.28 $ 0.20
-------- --------
Average number of shares 219,817 242,888
Assuming full dilution
Net income $ 0.25 $ 0.17
-------- --------
Average number of shares 251,192 296,863
See note to consolidated financial statements
<TABLE>
<CAPTION>
TSB FINANCIAL, INC. AND SUBSIDIARY
CONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS
(UNAUDITED)
Three Months Ended December 31 1996 1995
----------- -----------
<S> <C> <C>
Operating Activities
Net Income $ 62,300 $ 49,671
Adjustments to reconcile net income to net cash
provided by operating activities:
Provision for loan losses 4,500 3,000
Premium and discount amortization, net 30 (1,266)
Depreciation 11,400 3,900
Allocation of ESOP shares 6,747 6,747
Amortization of MRP 4,993 4,993
Change in:
Interest receivable (8,125) 5,688
Interest payable and other liabilities 12,403 (24,586)
Prepaid expense and other assets 3,669 39,610
Accrued FDIC insurance premium (118,821) 0
----------- -----------
Net cash provided by operating activities $ (20,904) $ 87,757
Investing Activities
Net change in interest-bearing deposits 95,235 (94,834)
Purchases of securities available for sale 0 (458,383)
Purchases of securities held to maturity 0 350,000
Proceeds from maturities of securities available for sale 30,578 1,206
Proceeds from paydowns of mortgage-backed
securities available for sale 42,936 79,293
Purchases of mortgage-backed securities held to maturity 0 (765,567)
Proceeds from paydowns of mortgage-backed securities
held to maturity 301 25,954
Net changes in loans (941,939) (312,367)
Purchase of premises and equipment (335) (52,089)
----------- -----------
Net cash provided (used) by investing activities $ (773,224) $(1,226,787)
Financing Activities
Net change in deposits 944,015 737,319
Proceeds from FHLB advances 0 1,000,000
Repayment of FHLB advances (2,409) 0
Net change in advances by borrowers for
taxes and insurance 26,594 33,749
Cash dividends 0 0
Net cash provided (used) by financing activities 968,200 1,771,068
Net Change in Cash and Cash Equivalents 174,072 632,038
Cash and Cash Equivalents, Beginning of Period 630,921 948,047
----------- -----------
Cash and Cash Equivalents, End of Period $ 804,993 $ 1,580,085
Additional Cash Flows and Supplementary Information
Interest Paid $ 244,064 $ 238,668
Income tax paid 0 0
See note to consolidated financial statements
</TABLE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF PLAN OF OPERATION
GENERAL
The Company is a one-bank holding company with Tremont Savings Bank (the "Bank")
as its wholly-owned subsidiary. The Bank converted from a mutual state savings
bank to a stock state savings bank on September 30, 1994 and issued 100% of its
stock to the Company. The fiscal year end of the Company is September 30th.
COMPARISON OF OPERATING RESULTS FOR THE THREE MONTH PERIODS
ENDED DECEMBER 31, 1996 AND DECEMBER 31, 1995.
For the first quarter of fiscal year 1997, the Company reported net earnings of
$62,300 or $0.28 per share, which represented a 25.4% increase in net earnings
over the same three month period in fiscal 1996. The primary reason for this
increase was a 10.1% rise in net interest income coupled with only a 0.5% rise
in overhead expenses.
Total interest income for the three months ended December 31, 1996 was $555,311,
a 26.1% increase over the $440,392 reported for the three months ended December
31, 1995. This increase was achieved primarily through a $115,957 rise in
interest income on loans, from $331,575 to $447,532, comparing the quarters
ended December 31, 1995 and December 31, 1996, respectively. Net loans, the
Company's main focus of investment activity, rose over 37%, from $17.0 million
on December 31, 1995 to $23.4 million on December 31, 1996. Interest income on
interest bearing deposits declined from $22,541 for the three month period ended
December 31, 1995 to $9,310 for the same period ended December 31, 1996. This
$13,231 decline was offset, however, by a $12,852 increase in interest income
from investment securities.
Income from sources such as late payment fees, checking account fees, license
sticker sales and commissions on credit insurance products declined slightly,
from $22,247 for the quarter ended December 31,1995 to $18,743 for the quarter
ended December 31, 1996, a 15.8% decrease. The decline is attributable to
declines in customer service charges of approximately $8,800 being offset by
increases in commissions and other income of approximately $5,300.
Due to the Bank's enhanced use of Federal Home Loan Bank advances during the
last year, as well as almost 4.7% growth in deposits over the last three months,
interest expense increased 40.3%, from $233,391 for the three months ended
December 31, 1995 to $327,469 for the three months ended December 31, 1996.
Interest expense on the borrowed funds was $20,089 for the quarter ended
December 31, 1995 and rose to $83,891 for the period ended December 31, 1996 as
management attempted to effectively leverage the Company's strong capital
position through the use of FHLB advances which increased from $2.0 million at
December 31,1995 to $5.6 million at December 31,1996.
The Company's total of other expenses rose only 0.5%, from $151,996 to $152,777
when comparing the quarters ended December 31, 1995 and 1996, respectively.
Categories that experienced the largest changes were equipment expense, which
increased $8,785 from $4,909 to $13,694 for the respective periods due to
increased depreciation expense incurred by the Bank's investment in new
computers in June of 1996; and occupancy expense, which rose to $6,939 for the
quarter ended December 31,1996 from $5,331 for the quarter ended December 31,
1995 mainly because of rising costs of certain telecommunications support
systems. Other expense, which includes items such as audit services, examination
fees and certain dues and education expenses rose 11.6% or $3,841, from $33,032
for the three month period ended December 31, 1995 to $36,873 for the same
period ended December 31, 1996 due to general cost increases. These increases
were essentially offset by the decline in deposit insurance expense, due to the
premium rate reduction created by recent regulatory developments recapitalizing
the Savings Association Insurance Fund ("SAIF") of FDIC along with a refund of
the quarterly premium for the quarter ended December 31, 1996, which effectively
reduced the Bank's deposit insurance expense to zero for the quarter, a savings
of $10,711 from the same period a year ago.
Income tax expense rose 9.9%, from $24,581 for the three months ended December
31, 1995 to $27,008 for the three months ended December 31, 1996. The effective
tax rate dropped from 33% to 30% when comparing the respective periods.
Primary earnings per share rose to $ 0.28 for the first quarter of fiscal 1997
from $ 0.20 for the first quarter of fiscal 1996. Fully diluted earnings per
share for the quarter, taking into account certain deferred incentive
compensation award plans, went from $ 0.17 in fiscal 1996 to $ 0.25 in fiscal
1997.
FINANCIAL CONDITION
For the first quarter of fiscal 1997, the Company grew in total assets by
approximately a million dollars or 3.4%, from $29.8 million at September 30,
1996 to $30.8 million at December 31, 1996. This result was a indicative of
management's continued growth pursuits that were initiated following the mutual
to stock conversion in late 1995.
Cash and cash equivalents grew 27.6%, from $630,921 at September 30, 1996 to
$804,993 at December 31, 1996. This increase was due to management's plan to
rebuild liquidity during the seasonal lull in mortgage loan demand.
Net loans grew from $22.5 million to $23.4 million from September 30, 1996 to
December 31, 1996, attributable mainly to consumer loan growth, as mortgage loan
demand typically drops off somewhat during the months of October, November and
December.
The Company's total investment securities portfolio remained stable, increasing
only $3,934 or 0.1%. This includes securities classified "Available for Sale" as
well as those classified "Held to Maturity". No new securities were purchased
during the quarter.
The Company's mortgage-backed securities portfolio, which includes both MBSs
held to maturity and those available for sale, increased to $23,480,207 at
December 31, 1996 from $22,543,075 at September 30, 1996, or 4.2%. This increase
was primarily attributable to an increase in the market value of those mortgage-
backed securities that are available for sale.
The Company's investment in Federal Home Loan Bank stock remained constant at
$318,300 during the quarter as the Company's need for additional borrowed funds
was diminished. Borrowings declined only slightly,due to regular amortization of
principal on a portion of the advances, reducing the total outstanding less than
1%, remaining at $5.6 million.
A 5.0% increase was reported in deposit accounts, from $20.1 million on
September 30, 1996 to $21.1 million on December 31, 1996. The Bank created and
offered a variety of special certificates of deposit as well as actively
marketing basic checking accounts in stimulating this growth. Management will
continue to monitor the effectiveness of these programs to fund anticipated
rising loan demand during the next quarter.
An increase of $26,594, or 44.1%, was reflected in the balances of borrower's
escrow accounts for taxes and insurance, bringing the total to $86,934 at
December 31, 1996. This is directly related to the increase in mortgage lending
activity as well as borrowers taking advantage of the Bank's discount rate
incentive program option which encourages escrow deposits.
Other liabilities reflected a 55.1% decline, from $193,323 at September 30, 1996
to $86,905 at December 31, 1996. The primary difference in this account was the
accrual at September 30, 1996 of $119,000 for the SAIF special assessment that
was not recognized as an expense until paid in November 1996.
On December 31, 1996, stockholders' equity stood at $3,899,827, a 2.8% increase
over the $3,790,486 reported on September 30, 1996. Contributing to these
increases were net earnings for the period of $62,300 and a decrease in net
unrealized gains or losses on securities classified "Available for Sale" of
$35,301. Total stockholders' equity is calculated as follows for December 31,
1996:
<TABLE>
<CAPTION>
<S> <C>
Stockholders' Equity, September 30, 1996 $3,790,486
Decrease in unearned compensation 11,740
Change in net unrealized gains/(losses) on securities available for sale 35,301
Net Income 62,300
----------
Stockholders' Equity, December 31, 1996 $3,899,827
</TABLE>
TSB FINANCIAL, INC. AND SUBSIDIARY
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
There are no material pending legal proceedings to which the
Company or its subsidiary is a party other than ordinary routine
litigation incidental to their respective businesses.
Item 2. Changes in Securities None
Item 3. Defaults Upon Senior Securities None
Item 4. Submission of Matters to a Vote of Security Holders None
Item 5. Other Information None
Item 6. Exhibits and Reports on Form 8-K None
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
TSB FINANCIAL, INC.
Date: February 12,1997 By: /s/ Richard A Jameson
------------------------------
Richard A Jameson, President
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-END> DEC-31-1996
<CASH> 804,993
<INT-BEARING-DEPOSITS> 388,926
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 5,063,316
<INVESTMENTS-CARRYING> 367,459
<INVESTMENTS-MARKET> 374,787
<LOANS> 23,418,685
<ALLOWANCE> 129,124
<TOTAL-ASSETS> 30,781,201
<DEPOSITS> 21,093,952
<SHORT-TERM> 5,613,583
<LIABILITIES-OTHER> 86,905
<LONG-TERM> 0
0
0
<COMMON> 2,699
<OTHER-SE> 3,897,128
<TOTAL-LIABILITIES-AND-EQUITY> 30,781,201
<INTEREST-LOAN> 447,532
<INTEREST-INVEST> 98,469
<INTEREST-OTHER> 9,310
<INTEREST-TOTAL> 555,311
<INTEREST-DEPOSIT> 243,578
<INTEREST-EXPENSE> 327,469
<INTEREST-INCOME-NET> 227,842
<LOAN-LOSSES> 4,500
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 152,777
<INCOME-PRETAX> 89,308
<INCOME-PRE-EXTRAORDINARY> 89,308
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 62,300
<EPS-PRIMARY> 0.28
<EPS-DILUTED> 0.25
<YIELD-ACTUAL> 7.69
<LOANS-NON> 67,381
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 124,624
<CHARGE-OFFS> 0
<RECOVERIES> 0
<ALLOWANCE-CLOSE> 129,124
<ALLOWANCE-DOMESTIC> 129,124
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
