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 September 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
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Commission file number 0-24668
FFVA FINANCIAL CORPORATION
- --------------------------------------------------------------------------------
(exact name of registrant specified in its charter)
Virginia 74-2712490
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(state or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
925 Main Street, Lynchburg, Virginia 24504
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(address of principal executive offices) (Zip Code)
(804) 845-2371
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(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 4,523,885 shares outstanding as of November 3,
1997
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Page 1 of 15 Pages
<PAGE>
FFVA FINANCIAL CORPORATION AND SUBSIDIARY
FORM 10-Q
Index
-----
<TABLE>
<CAPTION>
Part I Financial Information Page
- ------ --------------------- ----
<S> <C> <C>
Item 1. Financial Statements (unaudited)
Consolidated Statements of Financial Condition as of
September 30, 1997 and December 31, 1996 3
Consolidated Statements of Income for the Three and Nine
Month Periods ended September 30, 1997 and 1996 4
Consolidated Statements of Changes in Stockholders'
Equity for the Nine Months ended September 30, 1997 and 1996 5
Consolidated Statements of Cash Flows for the Nine
Months ended September 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 15
</TABLE>
2
<PAGE>
FFVA FINANCIAL CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(In Thousands)
<TABLE>
<CAPTION>
September 30, December 31,
1997 1996
------------- ------------
(unaudited)
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 9,283 $ 6,634
Investment securities, held to maturity (Estimated market of $45,591
at September 30, 1997 and $36,498 at December 31, 1996) 45,349 36,290
Investment securities, available for sale, at market 35,748 21,652
Investment securities, restricted, at cost 3,550 3,268
Mortgage-backed securities, held to maturity (Estimated market of $63,615
at September 30, 1997 and $46,738 at December 31, 1996) 63,328 46,570
Mortgage-backed securities, available for sale, at market 69,960 84,899
Loans receivable, net 326,616 321,528
Foreclosed real estate 29 154
Property and equipment, net 6,061 6,283
Accrued interest receivable 4,295 4,054
Prepaid expenses and other assets 1,529 886
Goodwill 1,518 1,608
--------- ---------
Total assets $ 567,266 $ 533,826
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Deposits $ 413,873 $ 397,435
Advances from Federal Home Loan Bank and other borrowed funds 74,000 60,000
Advances from borrowers for taxes and insurance 1,623 917
Other liabilities 2,271 993
---------- --------
Total liabilities 491,767 459,345
---------- --------
Stockholders' equity
Preferred stock, $.10 par value, 500,000 shares authorized, none issued -- --
Common stock, $.10 par value, 11,500,000 shares authorized,
4,521,600 and 4,692,552 outstanding, respectively 452 469
Additional paid-in capital 43,484 45,336
Less unearned ESOP and MSBP shares (3,280) (3,726)
Retained earnings, substantially restricted 33,317 31,220
Unrealized gain on assets available for sale, net of taxes 1,526 1,182
--------- ---------
Total stockholders' equity 75,499 74,481
--------- ---------
Total liabilities and stockholders' equity $ 567,266 $ 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 nine months
ended September 30, ended September 30,
1997 1996 1997 1996
---- ---- ---- ----
INTEREST INCOME (unaudited)
<S> <C> <C> <C> <C>
Loans $ 7,282 $ 6,935 $21,606 $20,217
Mortgage-backed securities 2,302 2,172 7,003 6,428
U. S. Government obligations, agencies, and
other investments including overnight deposits 1,466 1,300 4,000 3,903
------- ------- ------- -------
Total interest income 11,050 10,407 32,609 30,548
------- ------- ------- -------
INTEREST EXPENSE
Deposits 4,877 4,585 14,197 13,758
Borrowed money 988 776 2,956 2,017
------- ------- ------- -------
Total interest expense 5,865 5,361 17,153 15,775
------- ------- ------- -------
Net interest income 5,185 5,046 15,456 14,773
PROVISION FOR CREDIT LOSSES -- -- -- 60
------- ------- ------- -------
Net interest income after provision for credit losses 5,185 5,046 15,456 14,713
------- ------ ------- -------
NONINTEREST INCOME
Service charges and fees on loans 158 124 383 349
Net gain on sale of investments 178 9 301 100
Net gain on sale of equipment -- -- 3 1
Other income 213 138 595 444
------- ------- ------- -------
Total noninterest income 549 271 1,282 894
------- ------- ------- -------
NONINTEREST EXPENSES
Compensation and other personnel costs 1,585 1,488 4,683 4,437
Office occupancy and equipment 267 243 795 728
Federal insurance of accounts 61 2,436 182 2,843
Data processing 213 239 717 703
Advertising 71 73 210 250
Net loss on foreclosed real estate -- -- 3 2
Other 269 274 889 990
------- ------- ------- -------
Total noninterest expense 2,466 4,753 7,479 9,953
------- ------- ------- -------
Income before income tax expense 3,268 564 9,259 5,654
Income tax expense 1,186 206 3,353 1,977
------- ------- ------- -------
Net Income $ 2,082 $ 358 $ 5,906 $ 3,677
======= ======= ======= =======
Primary earnings per share $ .45 $ .07 $ 1.27 $ .70
Fully diluted earnings per share $ .44 $ .07 $ 1.25 $ .69
Cash dividends paid per common share $ .12 $ .10 $ .34 $ .275
</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
Stock Capital Earnings For Sale, Net Shares Shares Total
------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Nine months ended September 30, 1996:
Balance at December 31, 1995 $ 285 $ 55,057 $ 35,824 $ 1,508 $ (2,339) $ (2,276) $ 88,059
Net Income -- -- 3,677 -- -- -- 3,677
Change in unrealized gain on
assets available for sale, net -- -- -- (832) -- -- (832)
Allocation of unearned MSBP
shares -- (97) -- -- -- 550 453
Exercise of stock options -- 32 -- -- -- -- 32
Two-for-one stock split 271 (271) -- -- -- -- --
Repurchase of common stock (54) (6,571) (4,600) -- -- -- (11,225)
Cash dividends paid -- -- (1,424) -- -- -- (1,424)
---------------------------------------------------------------------------------
Balance at September 30, 1996 $ 502 $ 48,150 $ 33,477 $ 676 $ (2,339) $ (1,726) $ 78,740
================================================================================
Nine months ended September 30, 1997:
Balance at December 31, 1996 $ 469 $ 45,336 $ 31,220 $ 1,182 $ (2,000) $ (1,726) $ 74,481
Net Income -- -- 5,906 -- -- -- 5,906
Change in unrealized gain on
assets available for sale, net -- -- -- 344 -- -- 344
Allocation of unearned MSBP
shares -- (216) -- -- -- 446 230
Exercise of stock options -- 13 -- -- -- -- 13
Repurchase of common stock (17) (1,649) (2,323) -- -- -- (3,989)
Cash dividends paid -- -- (1,486) -- -- -- (1,486)
--------------------------------------------------------------------------------
Balance at September 30, 1997 $ 452 $ 43,484 $ 33,317 $ 1,526 $ (2,000) (1,280) $ 75,499
================================================================================
</TABLE>
See Notes to Consolidated Financial Statements
5
<PAGE>
FFVA FINANCIAL CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
<TABLE>
<CAPTION>
Nine months ended September 30,
1997 1996
-------- --------
(unaudited)
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 5,906 $ 3,677
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 467 444
Amortization of premium on sale of loans 6 18
Realized investment security gains (301) (100)
Loss on sale of foreclosed real estate 3 2
Increase in interest receivable (241) (48)
Increase in other assets (664) (957)
Increase in other liabilities 1,825 3,323
-------- --------
Net cash provided by operating activities 6,998 6,418
-------- --------
INVESTING ACTIVITIES
Proceeds from maturities of investment securities held to maturity 12,071 6,074
Purchases of investment securities held to maturity and FHLB stock (21,412) (10,266)
Proceeds from sales of investment securities available for sale 10,923 13,722
Purchases of investment securities available for sale (24,753) (8,846)
Proceeds from collections on mortgage-backed securities held to maturity 5,363 4,970
Purchases of mortgage-backed securities held to maturity (22,121) (12,124)
Proceeds from collections on and sales of mortgage-backed securities available for sale 24,084 18,632
Purchases of mortgage-backed securities available for sale (8,586) (19,783)
Net increase in loans receivable (5,094) (23,122)
Purchases of premises and equipment (156) (1,029)
Proceeds from sale of premises and equipment 4 --
Purchases of foreclosed real estate (9) (87)
Proceeds from sales of foreclosed real estate 131 47
-------- --------
Net cash used by investing activities (29,555) (31,812)
-------- --------
</TABLE>
(continued)
6
<PAGE>
FFVA FINANCIAL CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS, continued
(In Thousands)
<TABLE>
<CAPTION>
Nine months ended September 30,
1997 1996
-------- --------
(unaudited)
<S> <C> <C>
FINANCING ACTIVITIES
Net increase in deposit accounts $ 16,438 $ 13,261
Proceeds from advances and other borrowed money 65,020 60,980
Repayments of advances and other borrowed money (51,020) (35,402)
Repurchase of common stock (3,989) (11,225)
Proceeds from the exercise of options 13 32
Allocation of MSBP Shares 230 453
Payment of cash dividend (1,486) (1,424)
-------- --------
Net cash provided by financing activities 25,206 26,675
-------- --------
Increase in cash and cash equivalents 2,649 1,281
Cash and cash equivalents at beginning of period 6,634 7,683
-------- --------
Cash and cash equivalents at end of period $ 9,283 $ 8,964
======== ========
Supplemental disclosures
Gross unrealized gain on assets available for sale $ 2,385 $ 1,056
Deferred income tax (859) (380)
-------- --------
Net unrealized gain on assets available for sale $ 1,526 $ 676
======== ========
Cash paid for:
Interest on deposits and borrowed funds $ 16,912 $ 15,707
Income taxes $ 3,078 $ 2,678
</TABLE>
See Notes to Consolidated Financial Statements
7
<PAGE>
FFVA FINANCIAL CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Three and Nine Months Ended September 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 nine month periods
ended September 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 September 30, 1997 with distribution scheduled
annually until April 27, 2000. As of September 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 September
30, 1997 there were 238,633 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 retirement of the shares. The company did not repurchase any shares during
the quarters ended June 30, 1997 and September 30, 1997.
8
<PAGE>
(5) Earnings per Share
Earnings per share of common stock for the three and nine month periods ended
September 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 September 30, 1997, the Company had outstanding commitments to originate
mortgage loans of $5.6 million. Unused consumer, equity and commercial lines of
credit available to customers were $21.5 million at September 30, 1997. The
undisbursed portion of construction loans totalled $2.8 million at September 30,
1997 and the Company had outstanding commitments to purchase $1.5 million
investment 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 $33.5 million, or 6.28%, from $533.8
million at December 31, 1996 to $567.3 million at September 30, 1997. The
increase in total assets during the first nine 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 $2.7 million, or 40.91%, to $9.3 million
at September 30, 1997. Investment securities increased by $23.4 million, or
38.24%, to $84.6 million at September 30, 1997. At September 30, 1997, $48.9
million of the Company's investment securities (which include restricted
securities totalling $3.6 million) were classified as held to maturity and $35.7
million of investment securities were classified as available for sale.
Mortgage-backed securities increased by $1.8 million, or 1.37%, to $133.3
million at September 30, 1997. At September 30, 1997, $63.3 million of the
Company's mortgage-backed securities were classified as held to maturity, and
$70.0 million of mortgage-backed securities were classified as available for
sale.
Loans receivable, net, increased by $5.1 million, or 1.59%, to $326.6 million at
September 30, 1997 compared to $321.5 million at December 31, 1996. While the
outstanding balance of mortgage loans decreased slightly, the outstanding
balance of non-mortgage loans increased by approximately $7.8 million during the
nine month period.
Deposits increased by $16.5 million, or 4.15%, from $397.4 million at December
31, 1996 to $413.9 million at September 30, 1997.
FHLB Advances and Other Borrowed Money increased by $14.0 million, or 23.33%, to
$74.0 million at September 30, 1997, compared to $60.0 million at December 31,
1996. During the period, the Company increased its net outstanding FHLB Advances
by $28.0 million. Short term outstanding reverse repurchase agreements with a
regional bank have been reduced to $5.0 million at September 30, 1997 as
compared to $19.0 million at December 31, 1996. Funds from the additional
borrowings were used to fund the purchase of mortgage backed and investment
securities and to fund the growth of the company's loan portfolio.
Equity increased by $1.0 million, or 1.34%, from $74.5 million at December 31,
1996 to $75.5 million at September 30, 1997. The Company recognized net income
for the nine month period of $5.9 million and an increase in the market value of
assets available for sale, net of taxes, of $344,000. Equity was also increased
due to the allocation of MSBP plan shares. Equity was decreased $4.0 million as
a result of the repurchase and retirement of 172,000 shares of common stock.
Equity was also decreased $1.5 million 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 and third quarters of 1997.
Comparison of Results of Operation for the Three Months and Nine Months ended
September 30, 1997 and 1996.
- --------------------------------------------------------------------------------
Net Income
The Company reported net income of $2.1 million and $358,000 for the three
months ended September 30, 1997 and 1996, respectively, and $5.9 million and
$3.7 million for the nine months ended September 30, 1997 and 1996 respectively.
The $1.7 million increase in net income for the three months ended September 30,
1997 compared to the three months ended September 30, 1996 was due primarily to
a $2.3 million decrease in noninterest expense. The company also recognized a
$278,000 increase in noninterest income and a $139,000 increase in net interest
income. These were partially offset by a $1.0 million increase in income tax
expense. The $2.3 million decrease in noninterest expense can be almost entirely
attributed to a $2.2 million charge by the FDIC to recapitalize the Savings
Association Insurance Fund ("SAIF") incurred during the quarter ended September
30, 1996.
10
<PAGE>
Net income for the nine month period ended September 30, 1997 reflected an
increase of $2.2 million, or 59.45% from the net income reported for the same
period in 1996. The increase can be attributed to a $2.5 million decrease in
noninterest expense, primarily attributable to the $2.2 million charge by the
FDIC to recapitalize the Savings Association Insurance Fund ("SAIF") recorded in
the quarter ending September 30, 1996. The company also recognized a $700,000
increase in net interest income and a $388,000 increase in noninterest income.
These were partially offset by a $1.4 million increase in income tax expense.
Net Interest Income
Net interest income increased by $139,000, or 2.75%, in the three months ended
September 30, 1997 to $5.2 million compared to $5.0 million in the same period
in 1996. Net interest income increased by $700,000 for the nine month period
ended September 30, 1997 when compared to the nine month period ended September
30, 1996 from $14.8 million to $15.5 million. The Company's interest rate spread
and net interest margin were 3.30% and 3.83%, and 3.34% and 3.86%, respectively,
during the three and nine month periods ended September 30, 1997. This compares
to an interest rate spread and net interest margin of 3.37% and 3.98%, and 3.28%
and 3.94%, respectively, for the three and nine month periods ended September
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 nine month period ending
September 30, 1996. No provision for credit loss was recorded for the three or
nine month period ended September 30, 1997 or for the three month period ended
September 30, 1996. The allowance for credit losses at September 30, 1997
totaled $3.2 million or .97% of gross loans receivable.
NonInterest Income
Noninterest income increased $278,000 for the three month period ended September
30, 1997 to $549,000 from $271,000 for the comparable period in 1996. The
increase in noninterest income was primarily attributable to an increase of
$169,000 in the gain on sale of investments category and an increase of $75,000
in other income. Noninterest income increased $388,000 for the nine month period
ended September 30, 1997 to $1.3 million from $894,000 for the comparable 1996
period. For the nine month period ended September 30, 1997, the bank recorded an
increase of $201,000 in the gain on sale of investments category and an increase
of $151,000 in other income over the amounts recorded for the nine month periods
ended September 30, 1996. For both the three and nine month periods ended
September 30, 1997, the company recorded moderate increases in service charges
and fees on loans.
Noninterest Expense
Noninterest expense decreased $2.3 million, or 47.92%, for the three month
period ending September 30, 1997 compared to the three month period ended
September 30, 1996 from $4.8 million to $2.5 million. Noninterest expense
decreased $2.5 million, or 25.00%, for the nine month period ended September 30,
1997 as compared to the nine month period ended September 30, 1996 from $10.0
million to $7.5 million. Both the three and nine month periods ended September
30, 1996 reflect the special assessment of $2.2 million for Federal Insurance of
Accounts to recapitalize the Savings Association Insurance Fund ("SAIF"). The
recapitalization also resulted in lower ongoing premiums for 1997 when compared
to prior periods. The expense recognized for federal insurance of accounts
totalled $61,000 and $182,000 for the three and nine month periods ended
September 30, 1997 as compared to ongoing premium expense of $206,000 and
$613,000 for the three and nine month periods ended September 30, 1996.
11
<PAGE>
For the three month period ending September 30, 1997, compensation and other
personnel costs increased $97,000, or 6.52%, and for the nine month period
ending September 30, 1997 compensation and other personnel costs increased
$246,000, or 5.54%, over the comparable prior periods. For the three and nine
month period ending September 30, 1997, office occupancy and equipment expense
increased $24,000 or 9.88% and $67,000 or 9.20%, respectively, over the
comparable prior periods.
Income Tax Expense
The company recognized income tax expense of $1.2 million for the three months
ended September 30, 1997 compared to $206,000 for the comparable period in 1996.
For the nine months ended September 30, 1997 and 1996, the Company recognized
income tax expense of $3.4 million and $2.0 million, respectively. Such
increases in income tax expenses during the three and nine month periods ended
September 30, 1997 reflect the increase in income during the 1997 periods as
compared to the 1996 periods.
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 September 30, 1997, the Bank
had $69.0 million of outstanding advances from the FHLB of Atlanta and $5.0
million of reverse repurchase agreements with other banks.
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 September 30, 1997, the total approved loan commitments
outstanding amounted to $5.6 million. At the same date, commitments under unused
lines of credit and undisbursed loans in process amounted to $24.3 million. The
Company had also committed to purchase $1.5 million investment securities.
Certificates of deposit scheduled to mature in one year or less at September 30,
1997 totaled $173.4 million. Management believes that a significant portion of
maturing deposits will remain with the Bank. The Bank had an average liquidity
ratio of 12.83% during the quarter ended September 30, 1997, which exceeded the
required minimum liquid asset ratio of 5.0%.
At September 30, 1997, the Bank had regulatory capital which was well in excess
of applicable limits. At September 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 September 30, 1997, the Bank's tangible capital was $58.5 million, or
10.35% of adjusted total assets, core capital was $58.5 million, or 10.35% of
adjusted total assets and risk-based capital was $61.7 million, or 20.94% of
adjusted risk-weighted assets, exceeding the requirements by $50.0 million,
$41.5 million, and $38.1 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 nine month periods ended September 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 September 30,
1997 1996
------------------------------------- -------------------------------------
Average Average Average Average
Balance Interest Yield/Cost Balance Interest Yield/Cost
------- -------- ---------- ------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Assets: (Dollars in Thousands)
Interest-earning assets:
Mortgage loans, net.................... $288,133 $6,326 8.78% $280,934 $6,261 8.91%
Consumer and other loans, net.......... 39,302 956 9.73 27,765 674 9.71
Mortgage-backed and related securities(1) 129,957 2,302 7.09 123,011 2,172 7.06
Overnight and short term deposits...... 7,678 107 5.57 3,885 76 7.82
Investment securities(1)(2)............ 76,975 1,359 7.06 71,473 1,224 6.85
-------- -------- -------- --------
Total interest-earning assets...... 542,045 11,050 8.15 507,068 10,407 8.21
-------- --------
Noninterest-earning assets............... 20,142 20,382
-------- --------
Total assets....................... $562,187 $527,450
======== ========
Liabilities and Equity Capital:
Interest-bearing liabilities:
Deposits:
Transaction accounts.................. $ 86,868 585 2.69 $ 83,154 573 2.76
Savings and certificates.............. 325,019 4,292 5.28 304,829 4,012 5.26
-------- -------- -------- --------
Total deposits..................... 411,887 4,877 4.74 387,983 4,585 4.73
FHLB advances and other borrowings..... 71,750 988 5.51 55,344 776 5.61
-------- -------- -------- --------
Total interest-bearing liabilities. 483,637 5,865 4.85 443,327 5,361 4.84
-------- --------
Other liabilities........................ 4,179 4,034
-------- --------
Total liabilities.................. 487,816 447,361
-------- --------
Equity capital........................... 74,371 80,089
-------- --------
Total liabilities and equity capital $562,187 $527,450
======== ========
Net interest income/interest rate spread(3) $ 5,185 3.30% $ 5,046 3.37%
======= =======
Net earning assets/net interest margin(4) $58,408 3.83% $63,741 3.98%
======= =======
Ratio of interest-earning assets to interest-
bearing liabilities...................... 112.08% 114.38%
====== ======
</TABLE>
<TABLE>
<CAPTION>
For the Nine Months ended September 30,
1997 1996
-------------------------------------- --------------------------------------
Average Average Average Average
Balance Interest Yield/Cost Balance Interest Yield /Cost
------- -------- ---------- ------- -------- -----------
<S> <C> <C> <C> <C> <C> <C>
Assets: (Dollars in Thousands)
Interest-earning assets:
Mortgage loans, net.................... $289,026 $18,958 8.75% $277,309 $18,471 8.88%
Consumer and other loans, net.......... 36,690 2,648 9.62 24,295 1,746 9.58
Mortgage-backed and related securities(1) 130,743 7,003 7.14 122,720 6,428 6.98
Overnight and short term deposits...... 5,649 229 5.41 3,600 186 6.89
Investment securities(1)(2)............ 71,156 3,771 7.07 71,414 3,717 6.94
-------- ------ -------- -----
Total interest-earning assets...... 533,264 32,609 8.15 499,338 30,548 8.16
------ ------
Noninterest-earning assets............... 19,660 19,091
-------- --------
Total assets....................... $552,924 $518,429
======== ========
Liabilities and Equity Capital:
Interest-bearing liabilities:
Deposits:
Transaction accounts.................. $ 85,351 1,709 2.67 $ 82,271 1,747 2.83
Savings and certificates.............. 320,572 12,488 5.19 300,783 12,011 5.32
-------- ------ -------- -----
Total deposits..................... 405,923 14,197 4.66 383,054 13,758 4.79
FHLB advances and other borrowings..... 69,592 2,956 5.66 48,206 2,017 5.58
-------- ------ -------- -----
Total interest-bearing liabilities. 475,515 17,153 4.81 431,260 15,775 4.88
------ ------
Other liabilities........................ 3,863 3,680
-------- --------
Total liabilities.................. 479,378 434,940
-------- --------
Equity capital........................... 73,546 83,489
-------- --------
Total liabilities and equity capital $552,924 $518,429
======== ========
Net interest income/interest rate spread(3) $15,456 3.34% $14,773 3.28%
======= =======
Net earning assets/net interest margin(4) $57,749 3.86% $68,078 3.94%
======== ========
Ratio of interest-earning assets to interest-
bearing liabilities...................... 112.14% 115.79%
====== ======
</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
---------------------------------------------------
None
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>
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: November 3, 1997 /s/ James L. Davidson, Jr.
---------------- --------------------------
James L. Davidson, Jr.
President and Chief Executive Officer
Dated: November 3, 1997 /s/ Ronald W. Neblett,CPA
---------------- -------------------------
Ronald W. Neblett, CPA
Senior Vice-President, Treasurer, and
Chief Financial Officer
15
FFVA FINANCIAL CORPORATION AND SUBSIDIARY
EXHIBIT 11
Statement Regarding Computation of Earnings Per Share
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Primary Earnings per Share:
- ---------------------------
Weighted average number of shares
outstanding 4,521,600 5,075,330 4,553,264 5,325,620
Average unallocated ESOP Shares (200,000) (233,852) (200,000) (233,852)
Incremental shares attributed to
outstanding options 348,956 169,336 301,484 136,069
--------- --------- ---------- ---------
Weighted average number of common
stock equivalents 4,670,556 5,010,814 4,654,748 5,227,837
========= ========= ========= =========
Net Income $2,082,000 $ 358,000 $5,906,000 $3,677,000
========= ========= ========= =========
Primary earnings per common and
common equivalent share $ .45 $ .07 $ 1.27 $ .70
Earnings Per Share Assuming Full
- --------------------------------
Dilution:
- ---------
Weighted average number of shares
outstanding 4,521,600 5,075,330 4,553,264 5,325,620
Average unallocated ESOP shares (200,000) (233,852) (200,000) (233,852)
Incremental shares attributed to
outstanding options 366,659 198,238 366,659 199,519
--------- --------- ---------- ---------
Weighted average number of common
stock equivalents 4,688,259 5,039,716 4,719,923 5,291,287
========= ========= ========= =========
Net Income $2,082,000 $ 358,000 $5,906,000 $3,677,000
========= ========= ========= =========
Fully diluted earnings per common
and common equivalent shares $ .44 $ .07 $ 1.25 $ .69
</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> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 3,808
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 5,475
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 105,708
<INVESTMENTS-CARRYING> 112,227
<INVESTMENTS-MARKET> 112,756
<LOANS> 329,866
<ALLOWANCE> 3,250
<TOTAL-ASSETS> 567,266
<DEPOSITS> 413,873
<SHORT-TERM> 47,000
<LIABILITIES-OTHER> 3,894
<LONG-TERM> 27,000
0
0
<COMMON> 452
<OTHER-SE> 75,047
<TOTAL-LIABILITIES-AND-EQUITY> 567,266
<INTEREST-LOAN> 21,606
<INTEREST-INVEST> 11,003
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 32,609
<INTEREST-DEPOSIT> 14,197
<INTEREST-EXPENSE> 17,153
<INTEREST-INCOME-NET> 15,456
<LOAN-LOSSES> 0
<SECURITIES-GAINS> 301
<EXPENSE-OTHER> 7,479
<INCOME-PRETAX> 9,259
<INCOME-PRE-EXTRAORDINARY> 9,259
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,906
<EPS-PRIMARY> 1.27
<EPS-DILUTED> 1.25
<YIELD-ACTUAL> 8.15
<LOANS-NON> 869
<LOANS-PAST> 715
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 3,310
<CHARGE-OFFS> 62
<RECOVERIES> 2
<ALLOWANCE-CLOSE> 3,250
<ALLOWANCE-DOMESTIC> 1,484
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 1,766
</TABLE>
