UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark one)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1997
--------------------------------------------------
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
------------------------------------------------
Commission file number 0-24668
FFVA FINANCIAL CORPORATION
- --------------------------------------------------------------------------------
(exact name of registrant specified in its charter)
Virginia 74-2712490
- --------------------------------------------------------------------------------
(state or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
925 Main Street, Lynchburg, Virginia 24504
- --------------------------------------------------------------------------------
(address of principal executive offices) (Zip Code)
(804) 845-2371
- --------------------------------------------------------------------------------
(Registrant's telephone number including area code)
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 registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days. Yes (X) No ( )
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class $.10 par value common stock 4,520,552 shares outstanding
as of August 1, 1997
- --------------------------------------------------------------------------------
Page 1 of 16 Pages
<PAGE>
FFVA FINANCIAL CORPORATION AND SUBSIDIARY
FORM 10-Q
Index
-----
<TABLE>
<CAPTION>
<S> <C> <C>
Part I Financial Information Page
- ------ --------------------- ----
Item 1. Financial Statements (unaudited)
Consolidated Statements of Financial Condition as of
June 30, 1997 and December 31, 1996 3
Consolidated Statements of Income for the Three and Six
Month Periods ended June 30, 1997 and 1996 4
Consolidated Statements of Changes in Stockholders'
Equity for the Six Months ended June 30, 1997 and 1996 5
Consolidated Statements of Cash Flows for the Six
Months ended June 30, 1997 and 1996 6
Notes to 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 14
Item 2 Changes in Securities 14
Item 3 Defaults upon Senior Securities 14
Item 4 Submission of Matters to a Vote of Security Holders 14
Item 5 Other Information 14
Item 6 Exhibits and Reports on Form 8-K 14
Signature Page 16
</TABLE>
2
<PAGE>
FFVA FINANCIAL CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(In Thousands)
<TABLE>
<CAPTION>
June 30, December 31,
1997 1996
---------- ----------
(unaudited)
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 8,078 $ 6,634
Investment securities, held to maturity (Estimated market of $38,297
at June 30, 1997 and $36,498 at December 31, 1996) 38,244 36,290
Investment securities, available for sale, at market 31,212 21,652
Investment securities, restricted, at cost 3,550 3,268
Mortgage-backed securities, held to maturity (Estimated market of $53,666
at June 30, 1997 and $46,738 at December 31, 1996) 53,494 46,570
Mortgage-backed securities, available for sale, at market 83,013 84,899
Loans receivable, net 328,169 321,528
Foreclosed real estate 29 154
Property and equipment, net 6,170 6,283
Accrued interest receivable 4,320 4,054
Prepaid expenses and other assets 1,059 886
Goodwill 1,548 1,608
--------- ---------
Total assets $ 558,886 $ 533,826
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Deposits $ 409,700 $ 397,435
Advances from Federal Home Loan Bank and other borrowed funds 73,000 60,000
Advances from borrowers for taxes and insurance 1,032 917
Other liabilities 1,507 993
--------- ---------
Total liabilities 485,239 459,345
--------- ---------
Stockholders' equity
Preferred stock, $.10 par value, 500,000 shares authorized, none issued - -
Common stock, $.10 par value, 11,500,000 shares authorized,
4,520,552 and 4,692,552 outstanding, respectively 452 469
Additional paid-in capital 43,471 45,336
Less unearned ESOP and MSBP shares (3,280) (3,726)
Retained earnings, substantially restricted 31,754 31,220
Unrealized gain on assets available for sale, net of taxes 1,250 1,182
--------- ---------
Total stockholders' equity 73,647 74,481
--------- ---------
Total liabilities and stockholders' equity $ 558,886 $ 533,826
========= =========
</TABLE>
See Notes to Consolidated Financial Statements
3
<PAGE>
FFVA FINANCIAL CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
(In Thousands)
<TABLE>
<CAPTION>
For the three months For the six months
ended June 30, ended June 30,
1997 1996 1997 1996
---- ---- ---- ----
(unaudited)
<S> <C> <C> <C> <C>
INTEREST INCOME
Loans $ 7,227 $ 6,674 $14,324 $13,282
Mortgage-backed securities 2,394 2,158 4,701 4,256
U. S. Government obligations, agencies, and
other investments including overnight deposits 1,306 1,323 2,534 2,603
------- ------- ------- -------
Total interest income 10,927 10,155 21,559 20,141
------- ------- ------- -------
INTEREST EXPENSE
Deposits 4,718 4,534 9,320 9,173
Borrowed money 1,054 681 1,968 1,241
------- ------- ------- -------
Total interest expense 5,772 5,215 11,288 10,414
------- ------- ------- -------
Net interest income 5,155 4,940 10,271 9,727
PROVISION FOR CREDIT LOSSES -- -- -- 60
------- ------- ------- -------
Net interest income after provision for credit losses 5,155 4,940 10,271 9,667
------- ------- ------- -------
NONINTEREST INCOME
Service charges and fees on loans 108 130 225 225
Net gain on sale of investments 84 - 123 91
Net gain on sale of equipment 3 - 3 1
Other income 195 160 382 306
------- ------- ------- -------
Total noninterest income 390 290 733 623
------- ------- ------- -------
NONINTEREST EXPENSES
Compensation and other personnel costs 1,574 1,499 3,098 2,949
Office occupancy and equipment 260 245 528 485
Federal insurance of accounts 61 204 121 407
Data processing 244 221 504 464
Advertising 81 91 139 177
Net loss on foreclosed real estate 1 2 3 2
Other 301 369 620 716
------- ------- ------- -------
Total noninterest expense 2,522 2,631 5,013 5,200
------- ------- ------- -------
Income before income tax expense 3,023 2,599 5,991 5,090
Income tax expense 1,093 889 2,167 1,771
------- ------- ------- -------
Net Income $ 1,930 $ 1,710 $ 3,824 $ 3,319
======= ======= ======= =======
Primary earnings per share $ .42 $ .32 $ .82 $ .62
Fully diluted earnings per share $ .42 $ .32 $ .81 $ .61
Cash dividends paid per common share $ .12 $ .10 $ .22 $ .175
</TABLE>
See Notes to Consolidated Financial Statements 4
<PAGE>
FFVA FINANCIAL CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(in thousands)
unaudited
<TABLE>
<CAPTION>
Unrealized
Gain
Additional on Assets Unearned Unearned
Common Paid-In Retained Available ESOP MSBP
Six Months Ended June 30, 1996: Stock Capital Earnings For Sale, Net Shares Shares Total
---------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1995 $ 285 $ 55,057 $ 35,824 $ 1,508 $ (2,339) $ (2,276) $ 88,059
Net Income - - 3,319 - - - 3,319
Change in unrealized gain on
assets available for sale, net - - - (1,014) - - (1,014)
Allocation of unearned MSBP
shares - (97) - - - 550 453
Exercise of stock options - 25 - - - - 25
Two-for-one stock split 271 (271) - - - - -
Repurchase of common stock (38) (5,059) (3,374) - - - (8,471)
Cash dividends paid - - (929) - - - (929)
--------------------------------------------------------------------------------
Balance at June 30, 1996 $ 518 $ 49,655 $ 34,840 $ 494 $ (2,339) $ (1,726) $ 81,442
================================================================================
Six months ended June 30, 1997:
Balance at December 31, 1996 $ 469 $ 45,336 $ 31,220 $ 1,182 $ (2,000) $ (1,726) $ 74,481
Net Income - - 3,824 - - - 3,824
Change in unrealized gain on
assets available for sale, net - - - 68 - - 68
Allocation of unearned MSBP
shares - (216) - - - 446 230
Repurchase of common stock (17) (1,649) (2,323) - - - (3,989)
Cash dividends paid - - (967) - - - (967)
--------------------------------------------------------------------------------
Balance at June 30, 1997 $ 452 $ 43,471 $ 31,754 $ 1,250 $ (2,000) (1,280) $ 73,647
================================================================================
</TABLE>
5
<PAGE>
FFVA FINANCIAL CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
<TABLE>
<CAPTION>
Six months ended June 30,
1997 1996
------ -----
(unaudited)
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 3,824 $ 3,319
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for credit losses - 60
Gain on sale of equipment (3) (1)
Provision for depreciation and amortization 311 290
Amortization of premium on sale of loans 5 12
Realized investment security gains (123) (91)
Loss on sale of foreclosed real estate 3 2
Increase in interest receivable (266) (217)
(Increase) decrease in other assets (194) 588
Increase in other liabilities 626 345
-------- --------
Net cash provided by operating activities 4,183 4,307
-------- --------
INVESTING ACTIVITIES
Proceeds from maturities of investment securities held to maturity 46 4,048
Purchases of investment securities held to maturity and FHLB stock (2,282) (8,266)
Proceeds from sales of investment securities available for sale 6,074 6,661
Purchases of investment securities available for sale (15,584) (4,790)
Proceeds from collections on mortgage-backed securities held to maturity 3,213 3,641
Purchases of mortgage-backed securities held to maturity (10,137) (10,129)
Proceeds from sales of mortgage-backed securities available for sale 10,637 11,731
Purchases of mortgage-backed securities available for sale (8,586) (14,833)
Net increase in loans receivable (6,646) (12,577)
Proceeds from sale of premise and equipment 4 -
Purchases of premise and equipment (139) (879)
Purchases of foreclosed real estate (9) (49)
Proceeds from sales of foreclosed real estate 131 47
-------- --------
Net cash used by investing activities (23,278) (25,395)
-------- --------
</TABLE>
(continued)
6
<PAGE>
FFVA FINANCIAL CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS, continued
(In Thousands)
<TABLE>
<CAPTION>
Six months ended June 30,
1997 1996
------ ------
(unaudited)
FINANCING ACTIVITIES
<S> <C> <C>
Net increase in deposit accounts $ 12,265 $ 8,268
Proceeds from advances and other borrowed money 45,020 38,882
Repayments of advances and other borrowed money (32,020) (15,319)
Repurchase of common stock (3,989) (8,471)
Proceeds from the exercise of options - 25
Allocation of MSBP Shares 230 453
Payment of cash dividend (967) (929)
-------- --------
Net cash provided by financing activities 20,539 22,909
-------- --------
Increase in cash and cash equivalents 1,444 1,821
Cash and cash equivalents at beginning of period 6,634 7,683
-------- --------
Cash and cash equivalents at end of period $ 8,078 $ 9,504
======== ========
Supplemental disclosures
Gross unrealized gain on assets available for sale $ 1,953 $ 772
Deferred income tax (703) (278)
-------- --------
Net unrealized gain on assets available for sale $ 1,250 $ 494
======== ========
Cash paid for:
Interest on deposits and borrowed funds $ 11,123 $ 10,370
Income taxes $ 1,938 $ 1,569
</TABLE>
See Notes to Consolidated Financial Statements
7
<PAGE>
FFVA FINANCIAL CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Three and Six Months Ended June 30, 1997 and 1996
(1) Principles of Consolidation
The accompanying unaudited consolidated financial statements include the
accounts of FFVA Financial Corporation ("the Company") and its wholly owned
subsidiary, First Federal Savings Bank of Lynchburg ("the Bank"). The Company's
business is conducted principally through the Bank. All material intercompany
balances and transactions have been eliminated in the consolidation.
(2) Basis of Presentation
The accompanying unaudited consolidated financial statements were prepared in
accordance with the instructions for Form 10-Q and do not include information or
footnotes necessary for a complete presentation of financial condition, results
of operations and cash flows in conformity with generally accepted accounting
principles. These statements should be read in conjunction with the audited
consolidated financial statements and notes thereto for the year ended December
31, 1996 of FFVA Financial Corporation. In the opinion of management, all
adjustments (consisting only of normal recurring adjustments) necessary for a
fair presentation of the consolidated financial statements have been included.
The results of operations and other data for the three and six month periods
ended June 30, 1997 are not necessarily indicative of the results that may be
expected for the entire fiscal year ended December 31, 1997.
(3) Stock Benefit and Option Plans
The Company has in place a Management and Director Stock Bonus Plan (MSBP) under
which common stock has been awarded, subject to plan vesting requirements, to
directors and personnel in key positions of responsibility. A total of 49,008
shares were distributed on April 29, 1997 and 146,992 shares remain allocated to
directors and personnel at June 30, 1997 with distribution scheduled annually
until April 27, 2000. As of June 30, 1997, the Company held 89,996 shares at an
average purchase price of $14.23 for future distribution. The cost of the 89,996
shares held has been accounted for as a reduction of the stockholders' equity in
the consolidated balance sheet.
The Company also established a stock option plan which provided for the grant to
directors and personnel in key positions of responsibility 630,366 options to
purchase common stock at a price of $12.50 per share (the adjusted fair market
price of the stock on the date of approval). The options vest over a five year
period, with the first options having vested on April 27, 1996. As of June 30,
1997 there were 240,729 vested options outstanding.
The Bank also has an Employee Stock Ownership Plan ("ESOP") for eligible
employees. The Company funded a loan for the purchase of ESOP shares and there
are currently 200,000 shares of unallocated stock securing the loan. The Company
accounts for its ESOP in accordance with Statement of Position 93-6.
Accordingly, the shares pledged as collateral are reported as a reduction of the
stockholder's equity in the consolidated balance sheet.
(4) Stock Repurchase and Retirement
During the first quarter of 1997, the Company repurchased and retired 172,000
shares of common stock at an average price of $23.19 per share. As a result of
the repurchase, common stock was reduced $17,000, Additional paid-in capital was
reduced $1.6 million and retained earnings were reduced $2.3 million to reflect
the elimination of the shares. The company did not repurchase any shares during
the quarter ended June 30, 1997.
8
<PAGE>
(5) Earnings per Share
Earnings per share of common stock for the three and six month periods ended
June 30, 1997 and 1996 has been determined by dividing the net income for the
periods by the calculated weighted average number of shares of common stock and
common stock equivalents outstanding. In accordance with Statement of Position
93-6, shares controlled by the ESOP are not considered in the weighted average
number of shares outstanding until the shares are committed for allocation to an
employee's individual account.
(6) Commitments and Contingencies
At June 30, 1997, the Company had outstanding commitments to originate mortgage
loans of $5.7 million. Unused consumer, equity and commercial lines of credit
available to customers were $21.1 million at June 30, 1997. The undisbursed
portion of construction loans totalled $2.7 million at June 30, 1997 and the
Company had outstanding commitments to sell $7.5 million mortgage backed
securities. In addition, the Bank is also party to interest rate swap agreements
with a regional bank totalling $15.0 million.
9
<PAGE>
Management's Discussion and Analysis of Financial Condition and Results of
Operations
Changes in Financial Condition
- ------------------------------
Total assets of the Company increased by $25.1 million, or 4.70%, from $533.8
million at December 31, 1996 to $558.9 million at June 30, 1997. The increase in
total assets during the first six months of 1997 was due primarily to the
purchase of mortgage-backed and investment securities and an increase in the
balance of net loans receivable.
Cash and cash equivalents increased by $1.5 million, or 22.73%, to $8.1 million
at June 30, 1997. Investment securities increased by $11.8 million, or 19.28%,
to $73.0 million at June 30, 1997. At June 30, 1997, $41.8 million of the
Company's investment securities (which include restricted securities totalling
$3.6 million) were classified as held to maturity and $31.2 million of
investment securities were classified as available for sale. Mortgage-backed
securities increased by $5.0 million, or 3.80%, to $136.5 million at June 30,
1997. At June 30, 1997, $53.5 million of the Company's mortgage-backed
securities were classified as held to maturity, and $83.0 million of
mortgage-backed securities were classified as available for sale.
Loans receivable, net, increased by $6.7 million, or 2.08%, to $328.2 million at
June 30, 1997 compared to $321.5 million at December 31, 1996. While the
outstanding balance of mortgage loans outstanding decreased slightly, the
outstanding balance of non-mortgage loans increased by approximately $7.0
million.
Deposits increased by $12.3 million, or 3.10%, from $397.4 million at December
31, 1996 to $409.7 million at June 30, 1997.
FHLB Advances and Other Borrowed Money increased by $13.0 million, or 21.67%, to
$73.0 million at June 30, 1997, compared to $60.0 million at December 31, 1996.
During the period, the Company increased its net outstanding FHLB Advances by
$18.0 million. The balance outstanding under reverse repurchase agreements at
June 30, 1997 was $14.0 million. Funds from the additional borrowings were used
to fund the purchase of mortgage backed securities and investment securities and
to fund the growth of the company's loan portfolio.
Equity decreased by $900,000, or 1.21%, from $74.5 million at December 31, 1996
to $73.6 million at June 30, 1997. The decrease was primarily a result of the
company's decision to repurchase and retire 172,000 shares of common stock,
reducing equity by $4.0 million. This was partially offset by net income of $3.8
million during the six month period and an increase resulting from the
allocation of MSBP plan shares. Equity decreased $967,000 as the result of the
Company paying a $.10 per share dividend for the first quarter of 1997 and a
$.12 per share dividend for the second quarter of 1997.
Comparison of Results of Operation for the Three Months and Six Months ended
June 30, 1997 and 1996.
- --------------------------------------------------------------------------------
Net Income
The Company reported net income of $1.9 million and $1.7 million for the three
months ended June 30, 1997 and 1996, respectively, and $3.8 million and $3.3
million for the six months ended June 30, 1997 and 1996 respectively. The
$200,000, or 11.76%, increase in net income for the three months ended June 30,
1997 compared to the three months ended June 30, 1996 was due primarily to a
$215,000 increase in net interest income, a $100,000 increase in noninterest
income and a $109,000 decrease in noninterest expense. This was partially offset
by a $204,000 increase in income tax expense.
10
<PAGE>
Net income for the six month period ended June 30, 1997 reflected an increase of
$505,000, or 15.22% over the net income reported for the same period in 1996.
The increase can be attributed to a $544,000 increase in net interest income, a
$60,000 decrease in the provision for credit losses, a $110,000 increase in
noninterest income and a $187,000 decrease in noninterest expense. These were
partially offset by a $396,000 increase in income tax expense.
Net Interest Income
Net interest income increased by $215,000, or 4.35%, in the three months ended
June 30, 1997 to $5.2 million compared to $4.9 million in the same period in
1996. Net interest income increased by $544,000 for the six month period ended
June 30, 1997 when compared to the six month period ended June 30, 1996 from
$9.7 million to $10.3 million. The Company's interest rate spread and net
interest margin were 3.34% and 3.84%, and 3.37% and 3.88%, respectively, during
the three and six month periods ended June 30, 1997. This compares to an
interest rate spread and net interest margin of 3.28% and 3.94%, and 3.23% and
3.92%, respectively, for the three and six month periods ended June 30, 1996.
Provision for Credit Losses
Based on managements' evaluation of the loan portfolio, the Company recorded a
provision for credit losses of $60,000 for the six month period ending June 30,
1996. No provision for credit loss was recorded for the three or six month
periods ended June 30, 1997 or for the three month period ended June 30, 1996.
The allowance for credit losses at June 30, 1997 totaled $3.2 million or .96% of
gross loans receivable.
NonInterest Income
Noninterest income increased $100,000 for the three month period ended June 30,
1997 to $390,000 from $290,000 for the comparable period in 1996. The increase
in noninterest income was primarily attributable to gains on the sale of
investments of $84,000 and an increase of $35,000 in other income for the three
months ended June 30, 1997 over the comparable prior year period. This was
partially offset by a decrease of $22,000 in service charges and fees on loans.
Noninterest income increased $110,000 for the six month period ended June 30,
1997 to $733,000 from $623,000 for the comparable 1996 period. For the six month
period ended June 30, 1997, the bank recorded an increase of $32,000 in the gain
on sale of investments category and an increase of $76,000 in other income over
the amounts recorded for the six month periods ended June 30, 1996.
Noninterest Expense
Noninterest expense decreased $109,000, or 4.14%, for the three month period
ending June 30, 1997 compared to the three month period ended June 30, 1996 from
$2.6 million to $2.5 million. Noninterest expense decreased $187,000, or 3.60%,
for the six month period ended June 30, 1997 as compared to the six month period
ended June 30, 1996 from $5.2 million to $5.0 million. The decrease was
primarily the result of a $143,000, or 70.10% decrease in the cost of federal
insurance of accounts for the three month period ending June 30, 1997 from
$204,000 to $61,000 and a $286,000 decrease in this cost for the six month
period ending June 30, 1997 from $407,000 to $121,000. Other expenses also
decreased $68,000, or 18.43% for the three month period ending June 30, 1997 and
$96,000, or 13.41%, for the six month period ending June 30, 1997 from the
comparable prior periods. For the three month period ending June 30, 1997,
compensation and other personnel costs increased $75,000, or 5.00%, and for the
six month period ending June 30, 1997 compensation and other personnel costs
increased $149,000, or 5.05%, over the comparable prior periods.
11
<PAGE>
Income Tax Expense
The company recognized income tax expense of $1.1 million for the three months
ended June 30, 1997 compared to $889,000 for the comparable period in 1996. For
the six months ended June 30, 1997 and 1996, the Company recognized income tax
expense of $2.2 million and $1.8 million, respectively. Such increases in income
tax expenses during the three and six month periods ended June 30, 1997
primarily reflect the increase in the Company's net income before taxes.
Liquidity and Capital Resources
- -------------------------------
The Bank's liquidity is a product of its operating, investing and financing
activities. The Bank's primary sources of funds are deposits, borrowings,
amortization, prepayments and maturities of outstanding loans and
mortgage-backed securities, maturities of investment securities and funds
provided from operations. While scheduled payments from the amortization of
loans and mortgage-backed securities and maturing investment securities are
relatively predictable sources of funds, deposit flows and loan prepayments are
greatly influenced by general interest rates, economic conditions and
competition. In addition, the Bank invests excess funds in overnight deposits to
fund cash requirements experienced in the normal course of business. The Bank
has been able to generate sufficient cash through its deposits as well as
borrowings (consisting primarily of advances from the FHLB of Atlanta and
reverse repurchase agreements with other banks). At June 30, 1997, the Bank had
$59.0 million of outstanding advances from the FHLB of Atlanta and $14.0 million
of reverse repurchase agreements with other banks. The Bank is also party to an
interest rate swap agreement whereby the Bank pays a fixed rate of interest and
receives a variable rate of interest from the counterparty. The net effect of
this transaction is to effectively convert $7.0 million of variable rate FHLB
advances to a fixed rate of 5.20% until January 1998 and $8.0 million of
variable rate FHLB advances to a fixed rate of 5.27% until February 1999.
Liquidity management is both a daily and long-term function of business
management. Excess cash is generally invested in overnight deposits. On a
longer-term basis, the Bank maintains a strategy of purchasing investment
securities and mortgage-backed securities. The Bank attempts to ladder the
maturities of its investment portfolio to provide an ongoing source of
liquidity. The Bank uses its sources of funds primarily to meet its ongoing
commitments, to pay maturing savings certificates and savings withdrawals, fund
loan commitments and maintain a portfolio of mortgage-backed and investment
securities. At June 30, 1997, the total approved loan commitments outstanding
amounted to $5.7 million. At the same date, commitments under unused lines of
credit amounted to $21.1 million, while the undisbursed portion of construction
loans totalled $2.7 million. The Company had also committed to sell $7.5 million
of mortgage backed securities. Certificates of deposit scheduled to mature in
one year or less at June 30, 1997 totaled $171.7 million. Management believes
that a significant portion of maturing deposits will remain with the Bank. The
Bank had an average liquidity ratio of 14.12% during the quarter ended June 30,
1997, which exceeded the required minimum liquid asset ratio of 5.0%.
At June 30, 1997, the Bank had regulatory capital which was well in excess of
applicable limits. At June 30, 1997, the Bank was required to maintain tangible
capital of 1.5% of adjusted total assets, core capital of 3.0% of adjusted total
assets, and risk-based capital of 8.0% of adjusted risk-weighted assets. At June
30, 1997, the Bank's tangible capital was $56.6 million, or 10.16% of adjusted
total assets, core capital was $56.6 million, or 10.16% of adjusted total assets
and risk-based capital was $59.8 million, or 20.69% of adjusted risk-weighted
assets, exceeding the requirements by $48.2 million, $39.9 million, and $36.7
million, respectively.
12
<PAGE>
Average Balance Sheet
The following table sets forth certain information relating to the Savings
Bank's statements of financial condition and the statements of income for the
three and six month periods ended June 30, 1997 and 1996 and reflects the
average yield on assets and average cost of liabilities for the periods
indicated. Such yields and costs are derived by dividing income or expense by
the average balance of assets and liabilities, respectively, for the periods
shown. Average balances are derived from month end balances. Management does not
believe that the use of month end balances instead of average daily balances has
caused any material difference in the information presented. The average
balances of loans receivable include loans on which the Savings Bank has
discontinued accruing interest. The yields and costs include fees which are
considered adjustments to yields. Market value adjustments recorded in
compliance with SFAS 115 are not considered when computing the yields and
average balances of securities.
<TABLE>
<CAPTION>
For the Three Months ended June 30,
1997 1996
-------------------------- ------------------------
Average Average
Average Yield/ Average Yield/
Balance Interest Cost Balance Interest Cost
------- -------- ---- ------- -------- ----
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>
Assets:
Interest-earning assets:
Mortgage loans, net.................... $289,672 $6,318 8.72% $276,766 $6,109 8.83%
Consumer and other loans, net.......... 37,465 909 9.71 23,648 565 9.56
Mortgage-backed and related
securities(1)........................ 134,386 2,394 7.13 123,742 2,158 6.97
Overnight and short term deposits...... 2,951 41 5.56 2,806 51 7.27
Investment securities (1)(2)........... 72,144 1,265 7.01 73,906 1,272 6.88
-------- ----- -------- -----
Total interest-earning assets...... 536,618 10,927 8.15 500,868 10,155 8.11
------ ------
Noninterest-earning assets............... 18,802 18,432
-------- --------
Total assets....................... $555,420 $519,300
======== ========
Liabilities and Equity Capital:
Interest-bearing liabilities:
Deposits:
Transaction accounts.................. $ 85,238 565 2.65 $ 82,379 573 2.78
Savings and certificates.............. 320,807 4,153 5.18 300,344 3,961 5.28
-------- ----- ------- -----
Total deposits..................... 406,045 4,718 4.65 382,723 4,534 4.74
FHLB advances and other borrowings..... 73,470 1,054 5.74 49,116 681 5.55
------- ------ -------- ------
Total interest-bearing liabilities. 479,515 5,772 4.81 431,839 5,215 4.83
----- -----
Other liabilities........................ 3,649 3,325
-------- --------
Total liabilities.................. 483,164 435,164
-------- --------
Equity capital........................... 72,256 84,136
-------- --------
Total liabilities and equity capital $555,420 $519,300
======== ========
Net interest income/interest rate spread(3) $5,155 3.34% $4,940 3.28%
====== =====
Net earning assets/net interest margin(4) $57,103 3.84% $69,029 3.94%
======== ========
Ratio of interest- earning assets to
interest-bearing liabilities.......... 111.91% 115.98%
====== ======
</TABLE>
<TABLE>
<CAPTION>
For the Six Months ended June 30,
1997 1996
------------------------- --------------------------
Average Average
Average Yield/ Average Yield/
Balance Interest Cost Balance Interest Cost
------- -------- ---- ------- -------- ----
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>
Assets:
Interest-earning assets:
Mortgage loans, net.................... $289,560 $12,632 8.72% $275,381 $12,210 8.87%
Consumer and other loans, net.......... 35,525 1,692 9.53 22,470 1,072 9.54
Mortgage-backed and related
securities(1)........................ 131,531 4,701 7.15 122,532 4,256 6.95
Overnight and short term deposits...... 4,618 122 5.28 3,593 110 6.12
Investment securities (1)(2)........... 67,826 2,412 7.11 71,607 2,493 6.96
-------- ------- -------- -------
Total interest-earning assets...... 529,060 21,559 8.15 495,583 20,141 8.13
------- -------
Noninterest-earning assets............... 19,446 18,319
-------- --------
Total assets....................... $548,506 $513,902
======== ========
Liabilities and Equity Capital:
Interest-bearing liabilities:
Deposits:
Transaction accounts.................. $ 84,525 1,124 2.66 $ 81,897 1,175 2.87
Savings and certificates.............. 318,529 8,196 5.15 298,797 7,998 5.35
-------- ------- -------- -------
Total deposits..................... 403,054 9,320 4.62 380,694 9,173 4.82
FHLB advances and other borrowings..... 68,846 1,968 5.72 44,786 1,241 5.54
-------- ------- -------- -------
Total interest-bearing liabilities. 471,900 11,288 4.78 425,480 10,414 4.90
------- -------
Other liabilities........................ 3,517 3,283
-------- --------
Total liabilities.................. 475,417 428,763
-------- --------
Equity capital........................... 73,089 85,139
-------- --------
Total liabilities and equity capital $548,506 $513,902
======== ========
Net interest income/interest rate spread(3) $10,271 3.37% $ 9,727 3.23%
====== =======
Net earning assets/net interest margin(4) $57,160 3.88% $70,103 3.92%
======== ========
Ratio of interest- earning assets to
interest-bearing liabilities.......... 112.11% 116.48%
====== =======
</TABLE>
- ----------------------------------------------
(1) Includes assets available for sale.
(2) Includes FHLB-Atlanta stock.
(3) Interest-rate spread represents the difference between the average rate on
interest-earning assets and the average cost of interest-bearing liabilities.
(4) Net interest margin represents the net interest income before the provision
for credit losses divided by average interest-earning assets.
13
<PAGE>
FFVA FINANCIAL CORPORATION AND SUBSIDIARY
PART II-OTHER INFORMATION
Item 1 Legal Proceedings
-----------------
The Company is not engaged in any legal proceedings of a material
nature at the present time. From time to time the Savings Bank is a
party to legal proceedings in the ordinary course of business
wherein it enforces its security interest in loans.
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
---------------------------------------------------
see separate sheet
Item 5 Other Information
-----------------
None
Item 6 Exhibits and reports on Form 8-K
--------------------------------
(a) Exhibits:
11 Statement regarding computation of per share earnings
(b) Reports on Form 8-K:
none
14
<PAGE>
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
The Annual Meeting of Stockholders of FFVA Financial Corporation was held April
22, 1997 in Lynchburg, Virginia for the purpose of electing three individuals to
the Board of Directors, and approving the appointment of auditors. Proxies for
the meeting were solicited pursuant to Section 14(a) of the Securities Exchange
Act of 1934.
All of Management's nominees for directors as listed in the proxy statement were
elected with the following vote:
<TABLE>
<CAPTION>
Shares Shares Shares
voted voted not
for withheld voted Total
-------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Thomas O. Doyle 3,804,487 51,867 786,198 4,642,552
Edward A. Hunt, Jr. 3,809,464 46,891 786,197 4,642,552
Thomas P. Whitten 3,802,526 53,829 786,197 4,642,552
</TABLE>
In addition to the directors elected above, the following directors continued in
office: James L. Davidson, Jr,. V. Howard Belcher, James K. Candler, John W.
Ferguson, Jr., James E. McCausland, and Charles R.W. Schoew.
The ratification of Cherry, Bekaert, and Holland, L.L.P. as independent auditors
of FFVA Financial Corporation for the fiscal year ending December 31, 1997 was
approved by the following vote:
<TABLE>
<CAPTION>
Shares Shares Shares
voted voted Shares not
for against abstained voted Total
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
3,826,834 21,286 8,235 786,197 4,642,552
</TABLE>
There were no broker non-votes for either matter.
15
<PAGE>
SIGNATURES
Pursuant to the requirements 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.
FFVA FINANCIAL CORPORATION
Dated: August 1, 1997 /s/ James L. Davidson, Jr.
------------------------ ----------------------------------------
James L. Davidson, Jr.
President and Chief Executive Officer
Dated: August 1, 1997 /s/ Ronald W. Neblett,CPA
------------------------ -----------------------------------------
Ronald W. Neblett, CPA
Senior Vice-President, Treasurer, and
Chief Financial Officer
16
FFVA FINANCIAL CORPORATION AND SUBSIDIARY
EXHIBIT 11
Statement Regarding Computation of Earnings Per Share
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months ended June 30,
1997 1996 1997 1996
---- ---- ---- ----
Primary Earnings per Share:
- ---------------------------
<S> <C> <C> <C> <C>
Weighted average number of shares
outstanding 4,520,552 5,372,243 4,569,096 5,452,140
Average unallocated ESOP Shares (200,000) (233,852) (200,000) (233,852)
Incremental shares attributed to
outstanding options 288,653 131,544 277,747 116,546
---------- ---------- ---------- ----------
Weighted average number of common
stock equivalents 4,609,205 5,269,935 4,646,843 5,334,834
========== ========== ========== ==========
Net Income $1,930,000 $1,710,000 $3,824,000 $3,319,000
========== ========== ========== ==========
Primary earnings per common and
common equivalent share $ .42 $ .32 $ .82 $ .62
Earnings Per Share Assuming Full
- --------------------------------
Dilution:
- ---------
Weighted average number of shares
outstanding 4,520,552 5,372,243 4,569,096 5,452,140
Average unallocated ESOP shares (200,000) (233,852) (200,000) (233,852)
Incremental shares attributed to
outstanding options 329,232 194,268 329,232 194,452
---------- ---------- ---------- ---------
Weighted average number of common
stock equivalents 4,649,784 5,332,659 4,698,328 5,412,740
========== ========== ========== ==========
Net Income $1,930,000 $1,710,000 $3,824,000 $3,319,000
========== ========== ========== ==========
Fully diluted earnings per common
and common equivalent shares $ .42 $ .32 $ .81 $ .61
</TABLE>
The Company accounts for the shares acquired by the Employee Stock Ownership
Plan ("ESOP") in accordance with Statement of Position 93-6: shares controlled
by the ESOP are not considered in the weighted average shares outstanding until
the shares are committed for allocation.
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 4,853
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 3,225
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 114,225
<INVESTMENTS-CARRYING> 95,288
<INVESTMENTS-MARKET> 95,513
<LOANS> 331,418
<ALLOWANCE> 3,249
<TOTAL-ASSETS> 558,886
<DEPOSITS> 409,700
<SHORT-TERM> 46,000
<LIABILITIES-OTHER> 2,539
<LONG-TERM> 27,000
0
0
<COMMON> 452
<OTHER-SE> 73,195
<TOTAL-LIABILITIES-AND-EQUITY> 558,886
<INTEREST-LOAN> 14,324
<INTEREST-INVEST> 7,235
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 21,559
<INTEREST-DEPOSIT> 9,320
<INTEREST-EXPENSE> 11,288
<INTEREST-INCOME-NET> 10,271
<LOAN-LOSSES> 0
<SECURITIES-GAINS> 123
<EXPENSE-OTHER> 5,013
<INCOME-PRETAX> 5,991
<INCOME-PRE-EXTRAORDINARY> 5,991
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,824
<EPS-PRIMARY> .82
<EPS-DILUTED> .81
<YIELD-ACTUAL> 8.15
<LOANS-NON> 991
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 3,303
<CHARGE-OFFS> 55
<RECOVERIES> 2
<ALLOWANCE-CLOSE> 3,250
<ALLOWANCE-DOMESTIC> 1,557
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 1,693
</TABLE>
