<PAGE>
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 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 September 30, 1997
OR
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
EXCHANGE ACT
For the transition period from ________________ to ______________
Commission File Number 0-24304
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FORREST CITY FINANCIAL CORPORATION
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(Exact name of small business issuer as specified in its charter)
Delaware 71-0756156
- -------------------- --------------
(State or other jurisdiction (IRS Employer
of incorporation or Identification
organization) Number)
715 North Washington Street, Forrest City, AR 72335
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(Address of principal executive offices)
(870) 633-1525
----------------
(Registrant's telephone number)
Indicate by checkmark whether the registrant (1) has 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 [ ]
State the number of shares outstanding of each of the registrant's classes of
common equity, as of the latest practicable date: As of November 7, 1997, there
were 194,677 shares of the registrant's common stock issued and outstanding.
Transitional Small Business Disclosure Format (check one):
Yes [ ] No [ ]
<PAGE>
FORREST CITY FINANCIAL CORPORATION
AND SUBSIDIARY
INDEX
PART I. FINANCIAL INFORMATION (unaudited) PAGE NO.
Item 1. Consolidated Condensed Financial Statements
Consolidated Condensed Statements of Financial
Condition September 30, 1997 and June 30, 1997 3
Consolidated Condensed Statements of Operations
for the Three Months Ended September 30, 1997
and 1996 4
Consolidated Condensed Statements of Cash Flows
for the Three Months Ended September 30, 1997
and 1996 5
Notes to Consolidated Condensed
Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 9
PART II. OTHER INFORMATION 16
Signature Page 17
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<PAGE>
FORREST CITY FINANCIAL CORPORATION AND SUBSIDIARY
FORREST CITY, ARKANSAS
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Unaudited)
<TABLE>
<CAPTION>
September 30, June 30,
1997 1997
------------- -------
<S> <C> <C>
ASSETS
Cash and Cash Equivalents
Cash and amounts due from depository institution $ 371,803 $ 279,536
Interest-bearing deposits in other banks 4,061,752 1,076,087
------------ ------------
Total cash and cash equivalents $ 4,433,555 $ 1,355,623
Securities available for sale, at fair value 8,108,313 8,089,367
Securities held to maturity (fair value $7,711,932
at September 30, 1997 and $8,132,530 at
June 30, 1997) 7,862,987 8,331,062
Loans receivable, net 36,572,993 35,505,539
Office properties and equipment, net 506,862 486,398
Stock in FHLB and FRB, at cost 1,253,200 1,235,900
Accrued interest receivable 381,161 377,934
Foreclosed real estate, net -- 217,283
Other assets 205,388 201,271
------------ ------------
Total Assets $ 59,324,459 $ 55,800,377
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Deposits $ 33,872,182 $ 31,633,909
Borrowed Funds 19,288,486 18,270,673
Advances from borrowers for taxes and insurance 201,393 140,875
Accrued expenses and other liabilities 568,015 515,778
Income taxes 92,100 92,100
------------ ------------
Total Liabilities $ 54,022,176 $ 50,653,335
------------ ------------
STOCKHOLDERS' EQUITY
Preferred stock, $.01 par value; 100,000
shares authorized; none issued $ -- $ --
Common Stock, $.01 par value; 500,000 shares
authorized; 236,109 issued; 194,677
outstanding 2,361 2,361
Additional Paid In Capital 3,215,529 3,215,529
Retained Earnings - substantially restricted 2,810,206 2,721,959
Unrealized gain on securities available-for-sale 62,007 13,924
Less common stock acquired by:
Employee Stock Ownership Plan (96,274) (110,028)
Management Recognition & Retention Plan (42,975) (48,132)
Treasury Stock - 41,432 shares, at cost (648,571) (648,571)
------------ ------------
Total Stockholders' Equity $ 5,302,283 $ 5,147,042
------------ ------------
Total Liabilities and Stockholders' Equity $ 59,324,459 $ 55,800,377
============ ============
</TABLE>
See accompanying Notes to Consolidated Condensed Financial Statements.
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<PAGE>
FORREST CITY FINANCIAL CORPORATION AND SUBSIDIARY
FORREST CITY, ARKANSAS
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
September 30,
------------------------------------
1997 1996
---- ----
<S> <C> <C>
INTEREST INCOME
Interest on loans $ 820,152 $ 685,820
Interest on mortgage-backed securities 230,610 272,332
Interest on investment securities 65,765 64,081
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Total interest income $ 1,116,527 $ 1,022,233
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INTEREST EXPENSE
Savings and time deposits 369,546 330,191
Borrowed Funds 286,726 294,271
----------- -----------
Total interest expense $ 656,272 $ 624,462
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Net interest income $ 460,255 $ 397,771
PROVISION FOR LOAN LOSSES 28,104 44,418
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Net interest income after provision
for loan losses $ 432,151 $ 353,353
----------- -----------
OTHER INCOME
Loan fees and service charges $ 22,570 $ 14,462
Service charge on deposit accounts 45,140 34,106
Gain on sale of securities -- 7,841
Other operating income 9,027 4,456
----------- -----------
Total other income $ 76,737 $ 60,865
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OTHER EXPENSE
Compensation and benefits $ 191,120 $ 157,802
Occupancy expense 18,938 14,584
Federal insurance premiums 11,079 190,073
Data processing expense 28,332 24,415
Professional fees 21,274 24,219
Net cost of operations of foreclosed
real estate 21,823 (416)
Other operating expenses 73,075 61,422
----------- -----------
Total other expense $ 365,641 $ 472,099
----------- -----------
Income (loss) before income tax expense $ 143,247 $ (57,881)
INCOME TAX EXPENSE 55,000 25,000
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NET INCOME (LOSS) $ 88,247 $ (82,881)
=========== ===========
Earnings (loss) per common share $ .45 (.41)
=========== ===========
</TABLE>
See accompanying Notes to Consolidated Condensed Financial Statements.
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<PAGE>
FORREST CITY FINANCIAL CORPORATION AND SUBSIDIARY
FORREST CITY, ARKANSAS
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
September 30,
-------------------------------------
1997 1996
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income (Loss) $ 88,247 $ (82,881)
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation 9,744 8,271
Amortization of deferred compensation 18,911 18,910
Amortization of deferred loan fees (15,806) 9,205
Premium amortization, net of discount accretion 10,853 10,159
Provision for losses on loans and real estate 28,104 44,418
Loss on sale of foreclosed real estate 17,636 --
Net realized gains on available for sale securities -- (7,841)
Decrease (increase) in accrued interest (3,227) (6,308)
Decrease (increase) in other assets 1,283 (695)
Decrease (increase) in cash value life insurance (5,400) (5,607)
Increase (decrease) in accrued expenses 52,237 229,089
----------- -----------
Net cash provided by operating activities $ 202,582 $ 216,720
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Net increase in loans made to customers $(1,079,752) $(1,088,553)
Proceeds from sale of foreclosed real estate 199,647 --
Purchase of office property and equipment (30,208) (11,433)
Purchase of FHLB and FRB stock (17,300) (111,700)
Proceeds from maturities of held-to-maturity securities 459,456 620,447
Purchases of available-for-sale securities (222,150) (1,725,430)
Proceeds from sales of available-for-sale securities -- 562,018
Proceeds from maturities of available-for-sale securities 249,053 468,285
----------- -----------
Net cash used in investing activities $ (441,254) $(1,286,366)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in deposits $ 2,238,273 $ 444,994
Net decrease in short-term Federal Home Loan Bank advances (2,000,000) (700,000)
Proceeds from long-term Federal Home Loan Bank advances 3,375,000 2,500,000
Payment on long-term Federal Home Loan Bank advances (357,187) (124,564)
Purchase of treasury stock -- (8,944)
Net increase in advances from borrowers for taxes
and insurance 60,518 40,904
----------- -----------
Net cash provided by financing activities $ 3,316,604 $ 2,152,390
----------- -----------
Net increase (decrease) in cash $ 3,077,932 $ 1,082,744
Cash - beginning of year 1,355,623 1,253,364
----------- -----------
Cash - end of year $ 4,433,555 $ 2,336,108
=========== ===========
CASH PAID DURING THE PERIOD FOR:
Interest $ 391,270 $ 395,134
Income Taxes 30,000 74,000
SUPPLEMENTAL SCHEDULE OF NON-CASH ACTIVITIES:
Increase (decrease) in unrealized gain on
securities available-for-sale 48,083 (9,817)
</TABLE>
See accompanying Notes to Consolidated Condensed Financial Statements.
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<PAGE>
FORREST CITY FINANCIAL CORPORATION
AND SUBSIDIARY
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)
1. BASIS OF PRESENTATION
The accompanying consolidated financial statements include the accounts of
Forrest City Financial Corporation (the "Holding Corporation") and its
wholly-owned subsidiary, Forrest City Bank, NA (the "Bank"). All
significant intercompany transactions have been eliminated in
consolidation. The accompanying financial statements for the interim
periods are unaudited. In the opinion of management, the accompanying
consolidated financial statements contain all adjustments (consisting of
normal recurring adjustments) which are necessary for a fair presentation
of the results of operations for such periods but should not be considered
as indicative of results for a full year.
2. CONVERSION
The Bank completed a conversion from a mutual to a stock savings and loan
association on July 28, 1994. Simultaneous with the conversion was the
formation of the Holding Corporation, incorporated in the State of
Delaware. The initial issuance of shares of common stock in the Holding
Corporation on July 28, 1994 was 229,233 shares at $15 per share, resulting
in net proceeds of $3,116,713 and was accomplished through a subscription
and community offering. Costs associated with the conversion and stock
offering amounted to $322,000 and was accounted for as a reduction of the
proceeds from the issuance of common stock of the Holding Corporation. Upon
closing of the stock offering, the Holding Corporation purchased all common
shares issued by the Bank. This transaction was accounted for in a manner
similar to the pooling of interests method.
Federal regulations require that, upon conversion from a mutual to stock
form of ownership, a "liquidation account" be established by restricting a
portion of net worth for the benefit of eligible savings account holders
who maintain their savings accounts with the Bank after conversion.
- 6 -
<PAGE>
FORREST CITY FINANCIAL CORPORATION
AND SUBSIDIARY
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)
In the event of complete liquidation (and only in such event), each savings
account holder who continues to maintain his savings account shall be
entitled to receive a distribution from the liquidation account after
payment to all creditors, but before any liquidation distribution with
respect to capital stock. This account will be proportionately reduced for
any subsequent reduction in the eligible holders' savings accounts.
Federal regulations imposes limitations on the payment of dividends and
other capital distributions, including, among other, that the Bank may not
declare or pay a cash dividend on any of its stock if the effect thereof
would cause the Bank's capital to be reduced below the amount required for
the liquidation account or the capital requirements imposed by the
Financial Institutions Reform Recovery and Enforcement Act (FIRREA).
3. EMPLOYEE STOCK OWNERSHIP PLAN
The Holding Corporation has established an employee stock ownership plan
("ESOP"). At the date of the conversion described in Note 2, the ESOP
purchased 18,338 shares of common stock of the Holding Corporation financed
by a loan to the ESOP from the Holding Corporation. The balance of the loan
was $96,274 at September 30, 1997 and is reflected as a reduction of
consolidated stockholders' equity although the borrowing is not guaranteed
by the Holding Corporation or the Bank and does not constitute a legally
binding contribution commitment. The borrowing is payable in quarterly
principal payments of $13,754 over a five year period plus interest. All
full-time employees are eligible to participate in the ESOP after attaining
age 21 and completing one year of service during which they worked at least
1,000 hours.
4. MANAGEMENT RECOGNITION AND RETENTION PLAN
The Holding Corporation has established a Management Recognition and
Retention Plan ("MRP") as a method of providing key officers with a
proprietary interest in the Holding Corporation in a manner designed to
encourage such individuals to remain with the Holding Corporation or
- 7 -
<PAGE>
FORREST CITY FINANCIAL CORPORATION
AND SUBSIDIARY
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)
Bank. The awards vest at a rate of 20% per year, with the first installment
vesting October 25, 1995, and annually thereafter.
Pursuant to the MRP, restricted stock awards for shares of the
Corporation's common stock aggregating 3% or 6,876 shares of common stock
issued during conversion were reserved from authorized but unissued shares.
The Corporation has outstanding grants of 6,175 shares as of September 30,
1997. Consolidated stockholder's equity was reduced by the unearned
compensation in the amount of $103,140. The balance of the unvested portion
was approximately $43,000 at September 30, 1997.
5. EARNINGS PER COMMON SHARE
Earnings per share of common stock is computed by dividing the weighted
average number of shares of common stock and common stock equivalents
outstanding during the periods ended. The weighted average number of shares
used in the earnings per share computation were 194,677 and 201,589 for the
three-month periods ended September 30, 1997, and 1996, respectively.
On October 25, 1994, shareholders of the Corporation ratified the adoption
of the Corporation's 1994 Stock Option and Incentive Plan. Pursuant to the
Stock Option and Incentive Plan, 22,923 shares of the Corporation's common
stock has been reserved for issuance from authorized but unissued shares.
At September 30, 1997, there were 16,587 options outstanding with a
weighted average exercise price of $14.34 per share. There were 6,647
shares of options exercisable under the plan as of September 30, 1997.
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<PAGE>
FORREST CITY FINANCIAL CORPORATION AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
GENERAL
Forrest City Financial Corporation (the "Holding Corporation") was
incorporated under the laws of the State of Delaware to become a savings and
loan holding company with Forrest City Bank, FSB (the "Bank") as its subsidiary.
The Holding Corporation was incorporated at the direction of the Board of
Directors of the Bank and on July 28, 1994 acquired all of the capital stock of
the Bank upon its conversion from mutual to stock form (the "Conversion"). Prior
to the Conversion, the Holding Corporation did not engage in any material
operations and had no significant assets.
The Bank is principally engaged in the business of attracting retail
savings deposits from the general public and investing those funds in first
mortgage loans on owner occupied, single-family residential loans, multi-family
loans, investment and mortgage-backed securities. To a lesser extent, the Bank
offers secured consumer loans, including home equity loans, loans secured by
savings deposits and unsecured consumer credit. The Bank currently originates
all of its consumer loans in its primary market area. The Bank originates
consumer loans on a direct basis by extending credit directly to the borrower.
At September 30, 1997, approximately $178,000 of the consumer loan portfolio was
not performing. There can be no assurance that additional delinquencies will not
occur in the future.
The Corporation's results of operations are primarily dependent upon
the difference (or "spread") between the average yield earned on loans,
mortgage-backed securities and other investments and the average rate paid on
deposits and borrowings. The interest rate spread is affected by regulatory,
economic and competitive factors that influence interest rates, loan demand and
deposit flows. The Corporation had experienced a decline in this spread as a
result of increases in interest rates paid on interest-bearing liabilities as
compared to interest earned on interest-earning assets due to repricing. The
Corporation has seen recent improvement in the spread with the stabilization of
short-term rates and repricing of rate sensitive assets.
The Corporation commenced a stock repurchase program whereby the
Corporation may repurchase its common stock in the open market. The Board has
authorized the repurchase of approximately 9,700 additional shares, up to 5% of
its outstanding stock as of October 28, 1997. It is anticipated that the
- 9 -
<PAGE>
FORREST CITY FINANCIAL CORPORATION AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
repurchase will occur during the second quarter ending December 31, 1997. At
September 30, 1997, the Corporation had repurchased and held 41,432 shares as
treasury stock at a cost of $648,571.
Effective January 1, 1997, Forrest City Bank, FSB converted to a
national-chartered bank and changed its name to Forrest City Bank, N.A. In
conjunction with this conversion, Forrest City Financial Corporation has
converted its charter to a national bank holding company.
FINANCIAL CONDITION
Total assets of the Corporation increased $3.5 million, or 6.3% to
$59.3 million at September 30, 1997 compared to $55.8 million at June 30, 1997.
This increase was primarily reflected in an increase in net loans receivable and
cash in banks.
Securities available for sale increased $19,000, or .23% to $8.11
million at September 30, 1997 compared to $8.09 million at June 30, 1997. The
net increase results from purchases of $222,000 offset by maturities of $249,000
and an increase in unrealized gains of $48,000. There were no sales for the
quarter ended September 30, 1997.
Securities held to maturity decreased $.4 million, or 5.6% to $7.9
million at September 30, 1997 compared to $8.3 million at June 30, 1997. This
decrease is due to maturities and principal payments received for assets in this
classification. There were no purchases of securities under the held to maturity
category for the quarter ended September 30, 1997.
Loans receivable increased $1.1 million, or 3.0% to $36.6 million at
September 30, 1997 compared to $35.5 million at June 30, 1997. This increase was
primarily due to increases in consumer loans. Stock in the Federal Home Loan and
Federal Reserve Banks increased $17,300, or 1.4% to $1,253,200 at September 30,
1997 compared to $1,235,900 at June 30, 1997. This increase is due to required
purchases as a result of increased borrowings and total assets.
Total deposits increased $2.3 million or 7.1% to $33.9 million at
September 30, 1997 compared to $31.6 million at June 30, 1997. Management
believes the increase in deposit base to be attributable to the stabilization of
interest rates in the market area and an increase in its efforts in checking
account services offered by the Bank. These factors have had a direct impact on
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<PAGE>
FORREST CITY FINANCIAL CORPORATION AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
both the number of transaction accounts and the resulting increase in deposit
account balances.
Borrowed funds increased $1.0 million, or 5.5% to $19.3 million at
September 30, 1997 compared to $18.3 million at June 30, 1997. The increase in
borrowed funds was primarily used to fund increased lending activity.
RESULTS OF OPERATIONS - THREE MONTHS ENDED SEPTEMBER 30, 1997
COMPARED TO THREE MONTHS ENDED SEPTEMBER 30, 1996
Net income increased by $171,000 to $88,000 for the quarter ended
September 30, 1997 compared to a net loss of $(83,000) for the quarter ended
September 30, 1996. The increase was primarily due to a reduction in federal
insurance premiums incurred during the quarter ended September 30, 1996 as a
result of recapitalization of the Savings Association Insurance Fund. As part of
the omnibus spending bill passed by Congress, the Bank was required to make a
one-time payment of approximately $168,000 during the quarter ended September
30, 1996. Further discussion of changes in these and other items are discussed
below.
Net Interest Income. Net interest income increased $62,000 or 15.7%
from $398,000 to $460,000 for the quarter ended September 30, 1997. This
increase reflects an improving interest rate spread and an increase in average
interest earning assets over interest bearing liabilities. The impact of
repricing and lower cost of funds as a result of increases in transaction
account deposits has had a positive effect on the interest rate spread.
Interest Income. Interest income increased $94,000 or 9.2% to
$1,116,000 for the quarter ended September 30, 1997 compared to $1,022,000 for
the same period ended September 30, 1996. The increase was primarily due to
increases in interest earned on loans. Interest income on loans increased
$134,000 for the quarter ended September 30, 1997 compared to the quarter ended
September 30, 1996. This increase is primarily attributable to greater balances
in the loan portfolio as well as a slight increase in yields for the comparable
periods. Interest earned on mortgage-backed securities was down $42,000 due to
smaller balances invested in these securities during the comparative periods.
Interest Expense. Interest expense increased by $32,000 or 5.1% to
$656,000 for the quarter ended September 30, 1997 compared to $624,000 for the
same period ended September 30, 1996. The increase was due to increased interest
- 11 -
<PAGE>
FORREST CITY FINANCIAL CORPORATION AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
expense on deposit and transaction accounts as a result of larger balances
outstanding during the current period. Interest expense on deposit accounts
totaled $370,000 compared to $330,000 for the quarter ended September 30, 1997
and 1996, respectively. The increase in interest expense on deposit accounts was
slightly offset by a decrease in expense on borrowed funds. Interest expense on
borrowed funds decreased by $7,000 or 2.6% to $287,000 for the quarter ended
September 30, 1997 compared to $294,000 for the quarter ended September 30,
1996.
Provision for Loan Losses. The Bank's provision for loan losses was
$28,000 for the quarter ended September 30, 1997 compared to $44,000 for the
quarter ended September 30, 1996. Management continues to monitor its allowance
for loan losses and may make future additions to the allowance through the
provision for loan losses as economic and regulatory conditions dictate.
Although the Bank maintains its allowance for loan losses at a level which it
considers to be adequate to provide for potential losses, there can be no
assurance that future losses will not exceed estimated amounts or that
additional provisions for loan losses will not be required in future periods. In
addition, the Bank's determination as to the amounts of the allowance for loan
losses is subject to review by regulatory agencies which can order the
establishment of additional general or specific allowances.
Non-Interest Income. Non-interest income increased $16,000 for the
quarter ended September 30, 1997 compared to the same period ended September 30,
1996. This increase was primarily due to an increase in service fee income
relative to the Bank's transaction account customers.
Non-Interest Expense. Non-interest expense decreased $106,000 or 22.5%
to $366,000 for the three months ended September 30, 1997 compared to $472,000
for the same period ended September 30, 1996. Compensation and benefits
increased $33,000 as a result of added personnel to handle the increase in
transaction volume of the Bank as well as the addition of an Executive Vice
President. Other operating expenses for office supplies, postage, processing and
service fees have increased due to the increase in transaction volume and new
accounts. In addition, as previously mentioned, the Bank's federal insurance
premium decreased by $179,000 to $11,000 for the quarter ended September 30,
1997 compared to $190,000 for the same period ended September 30, 1996. The
reduction in expense is attributable to the one-time charge to fund the SAIF
incurred during the quarter ended September 30, 1996 and lower insurance premium
rates currently being paid.
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<PAGE>
FORREST CITY FINANCIAL CORPORATION AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Income Tax Expense. Income tax expense was $55,000 for the quarter
ended September 30, 1997 compared to $25,000 for the quarter ended September 30,
1996. The current income tax expense represents estimated tax on an annualized
basis based on management's estimated earnings for the period.
NON-PERFORMING ASSETS AND LOAN LOSS PROVISION
The allowance for loan losses was $254,000 or .70% of loans receivable,
net at September 30, 1997 as compared to .74% of loans receivable, net at June
30, 1997.
The ratio of non-performing assets to total assets is one indicator of the
exposure to credit risk. Non-performing assets of the Company may consist of
non-accruing loans, accruing loans delinquent 90 days or more and foreclosed
assets which have been acquired as a result of foreclosure, deed-in-lieu of
foreclosure or deemed foreclosed.
The table below sets forth the amounts and categories of non-performing
assets in the Bank's loan portfolio.
September 30, June 30,
1997 1997
------------- --------
Non-accruing loans:
One- to four-family $ -- $ 4,881
Consumer 178,086 77,415
-------- --------
Total $178,086 $ 82,296
-------- --------
Foreclosed assets:
One- to four-family $ -- $217,283
Commercial real estate -- --
-------- --------
Total $ -- $217,283
-------- --------
Total non-performing assets $178,086 $299,579
======== ========
Total as a percentage of total assets .30% .54%
======== ========
Total non-performing assets decreased to $178,086 or .30% of total
assets at September 30, 1997 from $299,579 or .54% of total assets at June 30,
1997. The decrease in non-performing assets was primarily due to a decrease in
foreclosed assets at September 30, 1997 as compared to June 30, 1997.
- 13 -
<PAGE>
FORREST CITY FINANCIAL CORPORATION AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
The Bank's primary sources of funds are deposits and repayment of loans
and mortgage-backed securities and interest earned on investments. While
scheduled loan repayments and maturing investments are relatively predictable,
deposit flows and early loan repayments are more influenced by interest rates,
general economic conditions and competition. The Bank has been selective with
regard to deposit rates on certain savings products, and, when necessary, has
supplemented deposits with longer term and/or less expensive alternative sources
of funds.
Other potential sources of funds available to the Bank include
borrowings from the Federal Home Loan Bank of Dallas. At September 30, 1997, the
Bank had $19.3 million of Federal Home Loan Bank borrowings outstanding. The
Bank uses its liquid resources principally to meet on-going commitments, to fund
maturing certificates of deposit and deposit withdrawals, to invest, to fund
existing and future loan commitments, to maintain liquidity and to meet
operating expenses. The Bank anticipates that it will have sufficient funds
available to meet current loan commitments. At September 30, 1997, the Bank had
outstanding commitments to extend credit amounting to approximately $1.8
million. Management believes that loan repayments and other sources of funds
will be adequate to meet the Bank's foreseeable liquidity needs.
The Bank is subject to various regulatory capital requirements
administered by the federal banking agencies. Failure to meet minimum capital
requirements can initiate certain mandatory---and possibly additional
discretionary---actions by regulators that, if undertaken, could have a direct
material effect on the Bank's financial statements. Under capital adequacy
guidelines and the regulatory framework for prompt corrective action, the Bank
must meet specific capital guidelines that involve quantitative measures of the
Bank's assets,liabilities, and certain off-balance-sheet items as calculated
under regulatory accounting practices.
- 14 -
<PAGE>
FORREST CITY FINANCIAL CORPORATION AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The Bank's capital amounts and classification are also subject to qualitative
judgments by the regulators about components, risk weightings, and other
factors. The table below presents the capital position at September 30, 1997 (in
thousands).
Actual Required Excess
Amount Percent Amount Percent Amount Percent
------ ------- --------- ------- ------ -------
Risk-based capital:
Tier 1 capital 4,237 13.3% 1,278 4.0% 2,959 9.3%
Total capital 4,297 13.4% 2,556 8.0% 1,741 5.4%
Tier 1 leverage ratio 4,237 7.2% 1,278 4.0% 2,959 3.2%
- 15 -
<PAGE>
FORREST CITY FINANCIAL CORPORATION
AND SUBSIDIARY
PART II: OTHER INFORMATION
Item 1: Legal Proceedings
Not Applicable
Item 2: Changes in Securities
Not Applicable
Item 3: Defaults Upon Senior Securities
Not Applicable
Item 4: Submission of Matters to a Vote of Security Holders
(a) On October 28, 1997, Forrest City Financial
Corporation held its fourth Annual Meeting of
Stockholders.
(b) At the meeting, Steven K. Cranford, Diana S. Arwood, and
Frankie L. Pratt were elected as directors for terms to expire
in 2000.
(c) Stockholders voted on the following matters:
(i) The election of the following three directors
of the Corporation;
For Withheld
------- --------
Steven K. Cranford 156,951 0
Diana S. Arwood 156,951 0
Frankie L. Pratt 156,726 225
(ii) The ratification of the appointment of Frazee, Fox &
Dodge, Ltd. as independent auditors of the Corporation for
the fiscal year ended June 30, 1998.
For Against Abstain
------- ------- -------
138,232 18,719 0
Item 5: Other Information
Not Applicable
Item 6: Exhibits and Reports on Form 8-K
(a) Exhibits
27 Financial Data Schedule
(b) Reports on Form 8-K
None
- 16 -
<PAGE>
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.
FORREST CITY FINANCIAL CORPORATION
Registrant
Date: November 7, 1997 /s/ John R. Stipe
------------------ -----------------------------------
John R. Stipe
President & Chief Executive Officer
Date: November 7, 1997 /s/ Kevin S. Jumper
------------------ -----------------------------------
Kevin S. Jumper
Treasurer & Chief Financial Officer
- 17 -
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE QUARTERLY
REPORT ON FORM 10-QSB FOR THE QUARTER ENDED SEPTEMBER 30, 1997 AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-START> JUL-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 371,803
<INT-BEARING-DEPOSITS> 4,061,752
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 8,108,313
<INVESTMENTS-CARRYING> 7,862,987
<INVESTMENTS-MARKET> 7,711,932
<LOANS> 36,572,993
<ALLOWANCE> 254,300
<TOTAL-ASSETS> 59,324,459
<DEPOSITS> 33,872,182
<SHORT-TERM> 7,000,000
<LIABILITIES-OTHER> 861,508
<LONG-TERM> 12,288,486
0
0
<COMMON> 2,361
<OTHER-SE> 5,299,922
<TOTAL-LIABILITIES-AND-EQUITY> 59,324,459
<INTEREST-LOAN> 820,152
<INTEREST-INVEST> 230,610
<INTEREST-OTHER> 65,765
<INTEREST-TOTAL> 1,116,527
<INTEREST-DEPOSIT> 369,546
<INTEREST-EXPENSE> 656,272
<INTEREST-INCOME-NET> 460,255
<LOAN-LOSSES> 28,104
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 365,641
<INCOME-PRETAX> 143,247
<INCOME-PRE-EXTRAORDINARY> 143,247
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 88,247
<EPS-PRIMARY> .45
<EPS-DILUTED> .45
<YIELD-ACTUAL> 0
<LOANS-NON> 178,086
<LOANS-PAST> 178,086
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 262,800
<CHARGE-OFFS> 39,250
<RECOVERIES> 2,646
<ALLOWANCE-CLOSE> 254,300
<ALLOWANCE-DOMESTIC> 254,300
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 177,500
</TABLE>
