SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
(Mark One)
[X] Annual report pursuant to section 13 or 15 (d) of the Securities Exchange
Act of 1934 (Fee required)
For the fiscal year ended March 31, 1996
[ ] Transition report pursuant to section 13 or 15(d) of the Securities
Exchange Act of 1934 (No fee required) For the transition period from to .
Commission File No. 0-24468
GUTHRIE SAVINGS, INC.
(Name of Small Business Issuer in Its Charter)
Oklahoma 73-1452383
(State or Other Jurisdiction of Incorporation I.R.S. Employer
or Organization) Identification No.
120 North Division, Guthrie, Oklahoma 73044
(Address of Principal Executive Offices (Zip Code)
Issuer's Telephone Number, Including Area Code: (405) 282-2201
---------------
Securities registered under to Section 12(b) of the Exchange Act: None
Securities registered under to Section 12(g) of the Exchange Act:
Common Stock, par value $0.01 per share
(Title of Class)
Check whether the issuer: (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.
Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [X]
State issuer's revenues for its most recent fiscal year. $3,609,959.00
The aggregate market value of the voting stock held by non-affiliates of
the registrant, based on the average bid and asked price of the registrant's
Common Stock on June 7, 1996, was $5,133,982.50 ($13.50 per share based on
380,295 shares of Common Stock outstanding).
As of June 7, 1996, there were issued and outstanding 464,901 shares of the
registrant's Common Stock.
Transition Small Business Disclosure Format (check one):
YES NO X
DOCUMENTS INCORPORATED BY REFERENCE
1. Portions of the Annual Report to Stockholders for the Fiscal Year
ended March 31, 1996. (Parts I, II, and IV)
2. Portions of the Proxy Statement for the Annual Meeting of
Stockholders for the Fiscal Year ended March 31, 1996. (Part III)
<PAGE>
PART I
Item 1. Business
Business of the Company
Guthrie Savings, Inc. (the "Company") is an Oklahoma corporation organized
in May 1994 at the direction of Guthrie Federal Savings and Loan Association
(the "Association") in connection with the Association's conversion from the
mutual to stock form. On October 11, 1994, the Association completed its
conversion and changed its name to Guthrie Federal Savings Bank (the "Bank") and
became a wholly owned subsidiary of the Company. The Company is a unitary
savings and loan holding company which, under existing laws, generally is not
restricted in the types of business activities in which it may engage provided
the Bank retains a specified amount of its assets in housing-related
investments. At March 31, 1996, the Company had total assets of $46.8 million
and stockholders' equity of $8.0 million.
Business of the Bank
The Bank is a federally chartered stock savings bank headquartered in
Guthrie, Oklahoma. The Bank was founded in 1906 with a charter from the
Territory of Oklahoma under the name of "Employees Building and Loan
Association." Employees Building and Loan Association became known as "Guthrie
Savings and Loan Association" in 1968 when it changed its name. In early August
1994, the Bank became a federal association under the name "Guthrie Federal
Savings and Loan Association." The Bank changed its name to Guthrie Federal
Savings Bank in October of 1994 in connection with its conversion from mutual to
stock form. The Bank's deposits have been federally insured by the Savings
Association Insurance Fund ("SAIF") and its predecessor, the Federal Savings and
Loan Insurance Corporation, since 1948, and the Bank is a member of the Federal
Home Loan Bank (the "FHLB") System.
The Bank is primarily engaged in attracting deposits from the general
public and using those funds to originate real estate loans on one- to
four-family residences and, to a lesser extent, consumer loans. The Bank has one
office in Guthrie, Oklahoma, which is located in its primary market area of
Logan County, Oklahoma. In addition, the Bank holds interest bearing deposits in
other financial institutions and invests in mortgage-backed securities and
investment securities. The Bank offers its customers fixed-rate and
adjustable-rate mortgage loans, as well as consumer loans, including home equity
and savings account loans. Fixed-rate mortgage loans with maturities more than
15 years and Federal Housing Administration/Veterans Administration ("FHA/VA")
loans are originated on behalf of mortgage banking companies, not the Bank.
Adjustable-rate mortgage loans and fixed-rate mortgage loans with terms of up to
15 years are originated for retention in the Bank's portfolio, while 30 year
fixed-rate mortgage loans are originated under a correspondent banking
relationship for mortgage banking companies. All consumer loans are retained in
the Bank's portfolio.
The Bank is subject to examination and comprehensive regulation by the
Office of Thrift Supervision ("OTS") and its deposits are insured by the Federal
Deposit Insurance Corporation ("FDIC") under the SAIF. The Bank is a member of
and owns capital stock in the FHLB of Topeka, which is one of the 12 regional
banks in the FHLB System.
The principal sources of funds for the Bank's lending activities are
deposits and the amortization, repayment, and maturity of loans, investment
securities, and mortgage-backed securities. Principal sources of income are
interest and fees on loans, mortgage-backed certificates, investment securities,
and deposits held in other financial institutions. The Bank's principal expense
is interest paid on deposits.
2
<PAGE>
Market Area and Competition
Logan County, Oklahoma is considered to be the Bank's primary market area.
Agriculture and the oil and gas industry dominate the economy. During the past
several years, the economic conditions in this area have stabilized from the
major downturn in activity experienced during the mid- to late-1980s.
During its 90 year existence, the Bank has focused on serving its
customers located in the Oklahoma communities of Guthrie and surrounding
communities in Logan County, and to a lesser extent, the cities of Kingfisher
and Stillwater and parts of the Oklahoma counties of Payne, Kingfisher, and
Oklahoma. The Bank is one of nine local thrifts and commercial banks serving
Logan County. Guthrie must also compete with credit unions and mortgage banking
companies located outside of Logan County.
The Bank encounters strong competition both in the attraction of deposits
and origination of real estate and other loans. Competition comes primarily from
seven savings institutions and commercial banks with offices in Logan County. In
addition, the Bank competes with credit unions and mortgage banking companies
that operate in Logan County. Due to their size, many of the Bank's competitors
possess greater financial and marketing resources. The Bank competes for savings
accounts by offering depositors competitive interest rates and a high level of
personal service.
Competition for mortgage loans is not limited to local financial
institutions. The Bank competes for loans primarily through the interest rates
and loan fees it charges and the efficiency and quality of services it provides
borrowers, real estate brokers and contractors.
The Bank's market place has seen moderate unemployment and some population
decline. Because of the lack of economic growth and stagnant population, the
Bank has had to invest in mortgage-backed and investment securities.
Lending Activities
General. The Bank's loan portfolio predominantly consists of
adjustable-and fixed-rate mortgage loans secured by one- to four-family
residences and, to a lesser extent, land and lot development loans,
non-residential loans, and loans for other dwelling units. The Bank also makes
consumer loans, including automobile and savings account loans.
3
<PAGE>
Analysis of Loan Portfolio. Set forth below is selected data relating to
the composition of the Company's loan portfolio by type of loan and type of
security on the dates indicated:
<TABLE>
<CAPTION>
1995 1996
------------------- ------------------
Type of Loan: $ % $ %
- ------------ ----- ----- ----- -----
Real estate loans:
<S> <C> <C> <C> <C>
Construction ........................... $ 121 0.52% $ 1,490 6.49%
Residential ............................ 19,848 85.62 18,484 80.46
Non-residential ........................ 1,461 6.30 1,496 6.51
Second mortgage and other equity ....... 1,246 5.37 896 3.90
Consumer loans:
Savings account ........................ 376 1.62 508 2.21
Automobile ............................. 423 1.83 733 3.19
Other .................................. 326 1.41 339 1.48
-------- ------ -------- ------
Gross loans .......................... 23,801 102.67 23,946 104.24
Less:
Loans in process ....................... (2) 0.00 (506) (2.20)
Deferred loan origination fees and costs (78) (0.34) (77) (0.34)
Allowance for loan losses .............. (539) (2.33) (391) (1.70)
-------- ------ -------- ------
Total loans, net ......................... $ 23,182 100.00% $ 22,972 100.00%
======== ====== ======== ======
Type of Security:
Residential real estate:
1-4 family ........................... $ 20,141 86.88% $ 19,940 86.80%
Other dwelling units ................. 398 1.71 352 1.53
Land ................................. 676 2.92 578 2.52
Non-residential ...................... 1,461 6.30 1,496 6.51
Savings accounts ......................... 376 1.62 508 2.21
Automobiles .............................. 423 1.83 733 3.19
Other .................................... 326 1.41 339 1.48
Less:
Loans in process ....................... (2) 0.00 (506) (2.20)
Deferred loan origination fees and costs (78) (0.34) (77) (0.34)
Allowance for loan losses .............. (539) (2.33) (391) (1.70)
-------- ------ -------- ------
Total loans, net ..................... $ 23,182 100.00% $ 22,972 100.00%
======== ====== ======== ======
</TABLE>
4
<PAGE>
Loan Maturity Tables
The following table sets forth the maturity of the Company's loan
portfolio at March 31, 1996. The table does not include prepayments or scheduled
principal repayments. Prepayments and scheduled principal repayments on loans
totalled $4.7 million and $5.2 million for the years ended March 31, 1995 and
1996, respectively. All mortgage loans are shown as maturing based on
contractual maturities.
<TABLE>
<CAPTION>
Other
1-4 Family Residential,
Real Estate Land,
Mortgage Commercial Construction Consumer Total
(In Thousands)
<S> <C> <C> <C> <C> <C>
Non-performing ......... $ 531 $ 57 $ -- $ 36 $ 624
------ ------ ------ ------ ------
Amounts Due:
Within 3 months ........ 1 0 0 151 152
3 months to 1 Year ..... 47 1 1,490 475 2,013
After 1 year:
1 to 3 years ......... 207 80 0 536 823
3 to 5 years ......... 785 144 0 337 1,266
5 to 10 years ........ 2,944 630 0 35 3,609
10 to 20 years ....... 8,029 1,474 0 0 9,503
Over 20 years ........ 5,906 40 0 10 5,956
------ ------ ------ ------ ------
Total due after one year 17,871 2,368 0 918 21,157
------ ------ ------ ------ ------
Total amount due ....... $ 18,450 $ 2,426 $ 1,490 $ 1,580 23,946
====== ====== ====== ======
Less:
Allowance for loan loss (391)
Loans in process ....... (506)
Deferred loan fees ..... (77)
------
Loans receivable, net $ 22,972
======
</TABLE>
5
<PAGE>
The following table sets forth the dollar amount of all loans due after
March 31, 1997 which have pre-determined fixed interest rates or which have
floating or adjustable interest rates.
Floating or
Adjustable
Fixed Rates Rates Total
----------- ----------- -------
(In Thousands)
One- to four-family...... $7,244 $10,627 $17,871
Other residential, land
and commercial......... 985 1,383 2,368
Construction............. 0 0 0
Consumer................. 918 0 918
----- ------ ------
Total.................. $9,147 $12,010 $21,157
===== ====== ======
Residential Loans. The Bank's primary lending activity consists of the
origination of one- to four-family, owner-occupied, residential mortgage loans
secured by property located in the Bank's primary market area. Management
believes that this policy of focusing on one- to four-family lending has been
effective in contributing to net interest income while keeping loan
delinquencies and losses to a minimum. The Bank also originates a small number
of residential real estate loans secured by multi-family dwellings.
The Bank currently offers, for retention in its portfolio and for
correspondent banks and mortgage banking companies, adjustable-rate mortgages
("ARMs") that adjust every one and three years and have terms from one to 30
years, and fixed-rate mortgage loans with terms of one to 30 years. The interest
rates on ARMs are based on treasury bill rates and the national cost of funds.
The Bank considers the market factors and competitive rates on loans as well as
its own cost of funds when determining the rates on the loans that it offers.
The Bank has a small network of correspondents to whom the Bank refers loans
that it does not wish to originate for its portfolio. The Bank originates
adjustable-rate loans for its own loan portfolio and refers fixed-rate loans
with terms of more than 15 years to its correspondents. The Bank originates
fixed-rate loans with terms of 15 years or less for its portfolio. The Bank also
refers FHA/VA loans to its correspondents. Although the Bank only originates
fixed rate and adjustable-rate mortgage loans for its own portfolio, they are
generally underwritten to Federal Home Loan Mortgage Corporation ("FHLMC")
standards.
Generally, during periods of rising interest rates, the risk of default on
an ARM is considered to be greater than the risk of default on a fixed-rate loan
due to the upward adjustment of interest costs to the borrower. ARM loans are
made at up to 90% of the loan to value ratio. The Bank does not originate ARMs
with negative amortization.
Regulations limit the amount that a savings association may lend in
relationship to the appraised value of the real estate securing the loan, as
determined by an appraisal at the time of loan origination. Such regulations
permit a maximum loan-to-value ratio of 100% for residential property and 90%
for all other real estate loans. The Bank's lending policies, however, generally
limit the maximum loan-to-value ratio to 80% of the appraised value of the
property, based on an independent or staff appraisal. When the Bank makes a loan
in excess of 80% of the appraised value or purchase price, private mortgage
insurance is required for at least the amount of the loan in excess of 80% of
the appraised value.
The loan-to-value ratio, maturity, and other provisions of the residential
real estate loans made by the Bank reflect the policy of making loans generally
below the maximum limits permitted under
6
<PAGE>
applicable regulations. The Bank requires an independent or staff appraisal,
title insurance or an attorney's opinion with an abstract, flood hazard
insurance (if applicable), and fire and casualty insurance on all properties
securing real estate loans made by the Bank. The Bank reserves the right to
approve the selection of which title insurance companies' policies are
acceptable to insure real estate in loan transactions.
While one- to four-family residential real estate loans are normally
originated with one to 30 year terms, such loans typically remain outstanding
for substantially shorter periods because borrowers often prepay their loans in
full upon sale of the property pledged as security or upon refinancing the
original loan. In addition, substantially all of the fixed-interest rate loans
in the Bank's loan portfolio contain due-on-sale clauses providing that the Bank
may declare the unpaid amount due and payable upon the sale of the property
securing the loan. The Bank enforces these due-on-sale clauses to the extent
permitted by law. Thus, average loan maturity is a function of, among other
factors, the level of purchase and sale activity in the real estate market,
prevailing interest rates and the interest rates payable on outstanding loans.
Second Mortgage Loans. The Bank makes loans on real estate secured by
secondary, or junior, mortgages. Secondary mortgage loans possess somewhat
greater risk than primary mortgage loans since the security underlying the
second mortgage loan must first be used to satisfy the obligation under the
primary mortgage loan. The Bank's lending policies for second mortgage loans
secured by one- to four-family residences are similar to those used for
residential loans, including the required loan-to-value ratio. The Bank does not
currently originate any second mortgage loans outside its primary market area.
Land Loans. The Bank makes loans secured by raw land, in amounts up to 70%
of the appraised value of the land. The loans are primarily secured by lots in
the Bank's primary market area. Although those loans are generally considered to
be of a higher credit risk than home loans, the Bank has not experienced a high
rate of delinquencies.
Consumer Loans. Consumer loans consist of personal unsecured loans, home
improvement loans, automobile loans and savings account loans, at fixed rates.
The underwriting standards employed by the Bank for consumer loans include
a determination of the applicant's payment history on other debts and an
assessment of ability to meet existing obligations and payments on the proposed
loan. In addition, the stability of the applicant's monthly income from primary
employment is considered during the underwriting process. Creditworthiness of
the applicant is of primary consideration; however, the underwriting process
also includes a comparison of the value of the security in relation to the
proposed loan amount.
Consumer loans entail greater credit risk than do residential mortgage
loans, particularly in the case of consumer loans which are unsecured or secured
by assets that depreciate rapidly, such as automobiles, mobile homes, boats, and
recreational vehicles. In such cases, repossessed collateral for a defaulted
consumer loan may not provide an adequate source of repayment for the
outstanding loan and the remaining deficiency often does not warrant further
substantial collection efforts against the borrower. In particular, amounts
realizable on the sale of repossessed automobiles may be significantly reduced
based upon the condition of the automobiles and the lack of demand for used
automobiles. The Bank adds a general provision to its consumer loan loss
allowance, based on general economic conditions, prior loss experience and
management's periodic evaluation.
Commercial Real Estate Loans. Loans secured by commercial real estate are
originated in amounts up to 80% of the appraised value of the property. Such
appraised value is determined by an
7
<PAGE>
independent appraiser previously approved by the Bank. The Bank's commercial
real estate loans are permanent loans secured by improved property such as small
office buildings, retail stores, small strip plazas, and other non-residential
buildings. The Bank originates commercial real estate loans with amortization
periods of one to 20 years, primarily as adjustable-rate mortgages.
Loans secured by commercial real estate generally involve a greater degree
of risk than residential mortgage loans and carry larger loan balances. This
increased credit risk is a result of several factors, including the
concentration of principal in a limited number of loans and borrowers, the
effects of general economic conditions on income producing properties, and the
increased difficulty of evaluating and monitoring these types of loans.
Furthermore, the repayment of loans secured by commercial real estate is
typically dependent upon the successful operation of the related real estate
project. If the cash flow from the project is reduced, the borrower's ability to
repay the loan may be impaired. At March 31, 1996, the largest commercial real
estate loan was secured by an apartment complex and had a balance of $273,000
and was current.
Construction Loans. The Bank primarily makes construction loans to
individuals to construct single-family owner-occupied homes, for which the Bank
also provides permanent financing. Construction financing is generally
considered to involve a higher degree of risk of loss than long-term financing
on improved, occupied real estate. Risk of loss on a construction loan is
dependent largely upon the accuracy of the initial estimate of the property's
value at completion of construction or development and the estimated cost
(including interest) of construction. During the construction phase, a number of
factors could result in delays and cost overruns. If the estimate of
construction costs proves to be inaccurate, the Bank may be required to advance
funds beyond the amount originally committed to permit completion of the
development. If the estimate of value proves to be inaccurate, the Bank may be
confronted, at or prior to the maturity of the loan, with a project having a
value that is insufficient to assure full repayment.
Loan Purchases and Sales. The Bank did not sell or purchase loans during
the years ended March 31, 1995 and 1996. Instead, the Bank has offered 30-year
fixed rate mortgage loans that are underwritten by correspondent banks and
mortgage banking companies. The Bank has generally not purchased loans during
the past five years.
Loan Commitments. The Bank issues written, formal commitments to
prospective borrowers on all real estate approved loans. The commitment requires
acceptance within 10 days of the date of issuance. For commercial real estate
loans or commercial loans in general, the commitment is issued for approximately
10 days and must be closed within 30 days of issuance. Commitments for consumer
loans expire 30 days after issuance. At March 31, 1996, the Bank had $94,500 in
commitments to originate mortgage loans.
Loan Processing Fees. In addition to interest earned on loans, the Bank
recognizes service charges that consist primarily of late charges. The Bank
recognized loan processing fees of $13,586, and $13,737 for the years ended
March 31, 1995, and 1996, respectively.
Loans to One Borrower. A savings association may not make a loan or extend
credit to a single or related group of borrowers in excess of 15% of the
association's unimpaired capital and surplus. An additional amount may be lent,
equal to 10% of unimpaired capital and surplus, under certain circumstances.
Loan Delinquencies. The Bank's collection procedures provide that when a
mortgage loan is 10 days past due, a computer printed delinquency notice is
sent. If payment is still delinquent at the end
8
<PAGE>
of that month, within 10 days a telephone call is made to the borrower. If the
delinquency continues, subsequent efforts are made to eliminate the delinquency.
If the loan continues in a delinquent status for 120 days or more, the Board of
Directors of the Bank generally approves the initiation of foreclosure
proceedings unless other repayment arrangements are made. Collection procedures
for non-mortgage loans generally begin after a loan is one day delinquent.
Loans are reviewed on a regular basis and are generally placed on a
non-accrual status when the loan becomes more than 90 days delinquent and, in
the opinion of management, the collection of additional interest is doubtful.
Interest accrued and unpaid at the time a loan is placed on non-accrual status
is charged against interest income. Subsequent interest payments, if any, are
either applied to the outstanding principal balance or recorded as interest
income, depending on the assessment of the ultimate collectibility of the loan.
Real estate acquired by the Bank as a result of foreclosure or by deed in
lieu of foreclosure is classified as foreclosed real estate until such time as
it is sold. When foreclosed real estate is acquired, it is recorded at the lower
of fair value or cost. Valuations are periodically performed by management and
subsequent charges to general mortgage loan reserves are taken when it is
determined that the carrying value of the property exceeds the fair value less
estimated costs to sell.
The following table sets forth information regarding non-accrual loans,
real estate owned, and other repossessed assets and loans that are 90 days or
more delinquent but on which the Company was accruing interest at the dates
indicated.
<TABLE>
<CAPTION>
At March 31,
1995 1996
(Dollars in Thousands)
Loans accounted for on a non-accrual basis:
Mortgage loans:
<S> <C> <C>
Permanent loans secured by 1-4 dwelling units......... $ 699 $ 531
All other mortgage loans.............................. 75 57
Non-mortgage loans:
Commercial............................................ 0 0
Consumer.............................................. 29 36
------ -------
Total................................................... $ 803 $ 624
====== =======
Accruing loans which are contractually past due 90 days
or more:
Mortgage loans:
Permanent loans secured by 1-4 dwelling units......... 0 0
All other mortgage loans.............................. 0 0
------- -------
Total................................................... $ 0 $ 0
======= =======
Total non-accrual and accrual loans..................... $ 803 $ 624
======= =======
Real estate owned....................................... $ 64 $ 0
======= =======
Total nonperforming assets.............................. $ 867 $ 624
======= =======
Total non-accrual and accrual loans to net loans........ 3.46% 2.72%
======= =======
Total non-accrual and accrual loans to total assets..... 1.80% 1.33%
======= =======
Total nonperforming assets to total assets.............. 1.94% 1.33%
======= =======
</TABLE>
9
<PAGE>
Interest income that would have been recorded on renegotiated loans and
loans accounted for on a non-accrual basis under the original terms of such
loans was $92,000 and $65,000 for the years ended March 31, 1995 and 1996,
respectively. Amounts foregone and not included in the Bank's interest income
for the years ended March 31, 1995 and 1996 totalled $27,000 and $20,000,
respectively.
Classified Assets. OTS regulations provide for a classification system for
problem assets of insured institutions which covers all problem assets. Under
this classification system, problem assets of insured institutions are
classified as "substandard," "doubtful," or "loss." An asset is considered
substandard if it is inadequately protected by the current net worth and paying
capacity of the obligor or of the collateral pledged, if any. Substandard assets
include those characterized by the "distinct possibility" that the insured
institution will sustain "some loss" if the deficiencies are not corrected.
Assets classified as doubtful have all of the weaknesses inherent in those
classified substandard, with the added characteristic that the weaknesses
present make "collection or liquidation in full," on the basis of currently
existing facts, conditions and values, "highly questionable and improbable."
Assets classified as loss are those considered "uncollectible" and of such
little value that their continuance as assets without the establishment of a
specific loss reserve is not warranted. Assets may be designated "special
mention" because of potential weakness that do not currently warrant
classification in one of the aforementioned categories. In addition, the Bank
maintains an internal "watchlist" of all loans that were removed from
classification during the prior one year period.
When an insured institution classifies problem assets as either
substandard or doubtful, it may establish general allowances for loan losses in
an amount deemed prudent by management. General allowances represent loss
allowances which have been established to recognize the inherent risk associated
with lending activities, but which, unlike specific allowances, have not been
allocated to particular problem assets. When an insured institution classifies
problem assets as loss, it is required either to establish a specific allowance
for losses equal to 100% of that portion of the asset so classified or to charge
off such amount. An institution's determination as to the classification of its
assets and the amount of its valuation allowances is subject to review by the
OTS, which may order the establishment of additional general or specific loss
allowances. A portion of general loss allowances established to cover possible
losses related to assets classified as substandard or doubtful may be included
in determining an institution's regulatory capital, while specific valuation
allowances for loan losses generally do not qualify as regulatory capital. At
March 31, 1996, that Bank had a general loan loss allowance of $276,000.
Real Estate Owned. Real estate acquired by the Bank as a result of
foreclosure or by deed in lieu of foreclosure is classified as real estate owned
until it is sold. When property is acquired it is recorded at the lower of the
cost or fair value.
The Bank held no real estate owned at March 31, 1996.
Allowance for Loan and Real Estate Losses. It is management's policy to
provide for losses on unidentified loans in its loan portfolio and foreclosed
real estate. A provision for loan losses is charged to operations based on
management's evaluation of the potential losses that may be incurred in the
Bank's loan portfolio. Such evaluation, which includes a review of all loans of
which full collectibility of interest and principal may not be reasonably
assured, considers, among other matters, the estimated net realizable value of
the underlying collateral. During the years ended March 31, 1995 and 1996, the
Bank charged (credited) $12,000 and $(132,000), respectively, to the provision
for loan losses and $(28,000) and $0, respectively, to the provision for losses
on real estate owned and other repossessed assets.
10
<PAGE>
Management will continue to review the entire loan portfolio to determine
the extent, if any, to which further additional loss provisions may be deemed
necessary. There can be no assurance that the allowance for losses will be
adequate to cover losses which may in fact be realized in the future and that
significant additional provisions for losses will not be required.
The distribution of the Bank's allowance for losses on loans at the dates
indicated is summarized as follows:
At March 31,
1995 1996
----------------------- ---------------------
Percent of Percent of
Loans in Each Loans in Each
Category to Category to
Amount Total Loans Amount Total Loans
------ ------------- ------ ------------
(Dollars in Thousands)
Residential real estate...... $421 89.13% $272 87.15%
Commercial real estate....... 23 6.14 14 6.25
Consumer..................... 95 4.73 105 6.60
---- ------ --- ------
Total........................ $539 100.00% $391 100.00%
=== ====== === ======
11
<PAGE>
The following table sets forth information with respect to the Bank's
allowance for loan losses at the dates indicated:
At March 31,
--------------------
1995 1996
-------- --------
(Dollars in Thousands)
Total loans outstanding, net......................... $23,182 $22,972
====== ======
Average loans outstanding............................ $22,316 $22,729
====== ======
Allowance balances (at beginning of period).......... 558 539
Provision (credit):
Residential........................................ 10 (135)
Consumer........................................... 1 3
------- -------
11 (132)
Charge-offs:
Residential........................................ (5) (24)
Consumer........................................... (31) (6)
------- -------
(36) (30)
------- -------
Recoveries:
Residential....................................... 0 2
Consumer........................................... 6 12
------- -------
6 14
------- -------
Net (charge-offs) recoveries......................... (30) (16)
------- -------
Allowance balance (at end of period)................. $ 539 $ 391
======= =======
Allowance for loan losses as a percent of total loans
outstanding, net................................... 2.33% 1.70%
Net loans charged off as a percent of average loans
outstanding........................................ 0.13% 0.07%
12
<PAGE>
The following table sets forth information with respect to the Bank's
allowance for losses on real estate owned and other repossessed assets at the
dates indicated:
At March 31,
1995 1996
(Dollars in Thousands)
Total real estate owned and other
repossessed assets, net...................... $ 64 $ 0
===== ====
Allowance balances-beginning................... $ 33 $ 8
Provision...................................... 28 0
Net charge-offs................................ (53) (8)
----- ----
Allowance balances - ending.................... $ 8 $ 0
===== ====
Allowance for losses on real estate owned and
other repossessed assets to net real estate
owned and other repossessed assets........... 12.50% 0.00%
===== ====
Interest-Bearing Accounts
At March 31, 1996, the Company held $489,674 in interest-bearing demand
deposits in other financial institutions, principally the FHLB of Topeka. The
Company maintains these accounts in order to maintain liquidity and improve the
interest-rate sensitivity of its assets.
Mortgage-Backed Securities and Investment Activities
General. The Bank is required under federal regulations to maintain a
minimum amount of liquid assets which may be invested in specified short-term
securities and certain other investments. The Bank has generally maintained a
liquidity portfolio well in excess of regulatory requirements. Liquidity levels
may be increased or decreased depending upon the yields on investment
alternatives and upon management's judgment as to the attractiveness of the
yields then available in relation to other opportunities and its expectation of
future yield levels, as well as management's projections as to the short-term
demand for funds to be used in the Bank's loan origination and other activities.
At March 31, 1996, the Bank had an investment portfolio of approximately $11.8
million, consisting primarily of U.S. government agency obligations, U.S.
Treasury securities, and FHLB stock, as permitted by the OTS regulations. The
Bank has found its level of investment securities has increased in recent years
as a result of repayments and prepayments on loans and mortgage-backed
securities exceeding loan demand. The Bank has invested in mortgage-backed
securities to offset this excess liquidity principally in Government National
Mortgage Association ("GNMA") ARMs, Federal National Mortgage Association
("FNMA") ARMs, and FHLMC ARMs.
The Financial Accounting Standards Board ("FASB") has issued Statement of
Financial Accounting Standards ("SFAS") No. 115 "Accounting for Certain
Investments in Debt and Equity Securities. SFAS No. 115 requires the Bank to
classify all of its investments in debt and equity securities ("securities")
into three categories. Debt securities which management has the positive intent
and ability to hold until maturity are to be classified as held-to-maturity.
Securities that are bought and held principally for the purpose of selling them
in the near term are to be classified as trading securities. All other
securities are to be classified as available-for-sale securities.
13
<PAGE>
Unrealized holding gains and losses for trading securities are to be
included in earnings. Unrealized gains and losses for available-for-sale
securities are to be excluded from earnings and reported net of income tax
effect as a separate component of shareholders' equity until realized.
Investments classified as held to maturity are to be accounted for at amortized
cost. The Bank adopted SFAS No. 115 effective April 1, 1994, and designated its
investment and mortgage-backed securities portfolio into the required three
categories. As a result of SFAS No. 115, the Bank reviewed and classified its
securities as held for investment or available for sale.
SFAS No. 115 requires the Bank to account for a portion of its holding of
debt securities at market value (as opposed to amortized cost) and may result in
greater volatility in its earnings and capital position. It also may discourage
investment in longer term debt securities, which tend to have higher yields than
short term debt securities, and hence reduce the earnings of the Bank. No
securities can be moved from a particular category without Board approval.
The market value of investments and mortgage-backed securities held to
maturity at March 31, 1996, was $11.8 million and $9.4 million, resulting in a
net unrealized loss at such dates of approximately $71,000 and $55,000,
respectively. The Bank anticipates having the ability to fund all of its
investing activities from funds held on deposit at FHLB of Topeka. The Bank will
continue to seek high quality investments with short to intermediate maturities
and duration from one to five years. At March 31, 1996, the securities
classified as available for sale had a carrying value of $2.1 million net of an
unrealized loss of $15,000
The Revenue Reconciliation Act of 1993 added a Section 475 to the Internal
Revenue Code. Section 475 is a mark-to-market tax provision that is different
from SFAS No. 115. The term "securities" in the tax statute includes not just
traditional debt and equity securities, but mortgages as well. Section 475 and
the temporary regulations issued thereunder apply to "dealer" institutions that
regularly buy or sell more than a nominal amount of securities in the ordinary
course of a trade or business. Section 475 requires the Bank to identify
securities held for sale within the meaning of the tax code and include
unrealized gains or losses on related security transactions with its fiscal tax
return. The tax reporting of unrealized gains and losses on securities held for
sale as defined by Section 475 and the related regulations, if different from
SFAS No. 115, is a temporary difference as defined under SFAS No. 109 and the
recording of a related deferred tax liability or asset will not affect generally
accepted accounting principles ("GAAP") basis net income. At March 31, 1996, the
Bank did not have any investments subject to Section 475.
Mortgage-Backed Securities
To supplement lending activities in periods of deposit growth and/or
declining loan demand, the Bank has increased its investments in residential
mortgage-backed securities during recent years. Although such securities are
held for investment, they can serve as collateral for borrowings and, through
repayments, as a source of liquidity.
The mortgage-backed securities portfolio as of March 31, 1996 consisted
primarily of adjustable-rate certificates issued by FHLMC ($1.6 million), GNMA
($3.7 million), and FNMA ($963,000). To a lesser extent the mortgage backed
securities portfolio also contains fixed-rate certificates issued by FHLMC,
GNMA, and FNMA. At March 31, 1996, the carrying value of mortgage-backed
securities totalled $9.4 million, or 20.1% of total assets. The market value of
such securities totalled approximately $9.4 million at March 31, 1996, resulting
in a net unrealized loss of $55,000 in this portfolio. Additionally, as of March
31, 1996, the Bank held an investment in a collateralized mortgage obligation
amounting to $200,000.
14
<PAGE>
Mortgage-backed securities represent a participation interest in a pool of
single-family or multi-family mortgages, the principal and interest payments on
which are passed from the mortgage originators, through intermediaries
(generally quasi-governmental agencies) that pool and repackage the
participation interests in the form of securities, to investors such as the
Bank. Such quasi-governmental agencies, which guarantee the payment of principal
and interest to investors, primarily include FHLMC, FNMA, and GNMA.
FHLMC is a corporation chartered by the United States Government and owned
by the 12 Federal Home Loan Banks and federally insured savings institutions.
FHLMC issues participation certificates backed principally by conventional
mortgage loans. FHLMC guarantees the timely payment of interest and the ultimate
return of principal within one year. FHLMC securities are indirect obligations
of the United States Government. FNMA is a private corporation chartered by
Congress with a mandate to establish a secondary market for conventional
mortgage loans. FNMA guarantees the timely payment of principal and interest,
and FNMA securities are indirect obligations of the United States Government.
GNMA is a government agency within the Department of Housing and Urban
Development ("HUD") which is intended to help finance government assisted
housing programs. GNMA guarantees the timely payment of principal and interest,
and GNMA securities are backed by the full faith and credit of the United States
Government. Since FHLMC, FNMA and GNMA were established to provide support for
low- and middle-income housing, there are limits to the maximum size of loans
that qualify for these programs. GNMA limits its maximum loan size for Veterans
Administration ("VA") loans and for Federal Housing Authority ("FHA") loans.
FNMA and FHLMC limit their loans. To accommodate larger-sized loans, and loans
that, for other reasons, do not conform to the agency programs, a number of
private institutions have established their own home-loan origination and
securitization programs.
Mortgage-backed securities typically are issued with stated principal
amounts, and the securities are backed by pools of mortgages that have loans
with interest rates that are within a range and have varying maturities. The
underlying pool of mortgages can be composed of either fixed-rate mortgages or
adjustable-rate mortgage loans. Mortgage-backed securities are generally
referred to as mortgage participation certificates or pass-through certificates.
As a result, the interest rate risk characteristics of the underlying pool of
mortgages (i.e., fixed rate or adjustable rate) as well as prepayment risk, are
passed on to the certificate holder. The life of a mortgage-backed pass-through
security is equal to the life of the underlying mortgages. Mortgage-backed
securities issued by FHLMC, FNMA, and GNMA make up a majority of the
pass-through market.
15
<PAGE>
The following table sets forth the carrying value of the Company's
mortgage-backed securities portfolio at the dates indicated:
At March 31,
--------------------
Weighted
Average Rate
1995 1996 March 31, 1996
------ ------ --------------
(Dollars in Thousands)
Held to Maturity:
GNMA ARMs.................. $4,325 $3,728 6.88%
FNMA ARMs.................. 1,074 964 6.63
FHLMC ARMs................. 1,813 1,612 6.18
FHLMC-fixed rate........... 681 1,548 7.11
FNMA-fixed rate............ 1,124 922 6.57
GNMA-fixed rate............ 607 454 8.00
Collateralized mortgage
obligations-government
agency issue............. 245 200 5.81
----- -----
Total mortgage-backed
securities............... $9,869 $9,428 6.78%
===== ===== ====
Mortgage-Backed Securities Maturity. The following table sets forth the
maturity of the Company's mortgage-backed securities portfolio at March 31,
1996. The table does not include scheduled principal payments or estimated
prepayments. All mortgage-backed securities are shown as maturing based on
contractual maturities.
Contractual
Maturities Due
(In Thousands)
Less than 1 year....................... $ 0
1 to 3 years........................... 0
3 to 5 years........................... 391
5 to 10 years.......................... 288
10 to 20 years......................... 1,338
Over 20 years.......................... 7,411
-----
Total mortgage-backed securities....... $9,428
=====
16
<PAGE>
Investment Portfolio. The following table sets forth the carrying value of
the Company's investment securities portfolio, short-term investments, and FHLB
stock, at the dates indicated. At March 31, 1996, the market value of the
Company's investment securities portfolio was $11.8 million.
At March 31,
-------------------
1995 1996
------ ------
(In Thousands)
Investment Securities:
Held to Maturity:
U.S. Government Securities............... $2,565 $ 1,551
U.S. Agency Securities (1)............... 5,801 8,200
----- ------
Total Debt Securities................. 8,366 9,751
----- ------
Available for Sale:
U.S. Agency Securities .................... 299 1,445
U.S. League Stock.......................... 55 95
FHLB Stock................................. 574 592
Other Equity Securities (2)................ 1 1
----- ------
929 2,133
----- ------
Total Investments........................ $9,295 $11,884
===== ======
- -------------------
(1) Consists of bonds and notes issued by the FHLB and FNMA. FHLB bonds owned
at March 31, 1995 and 1996 included $1.0 million, at cost, of dual indexed
or inverse floating rate structures whose yield may not move consistent
with general interest rate movements.
(2) Consists of equity investment in prior service bureau.
The market value of investments and mortgage-backed securities held to
maturity at March 31, 1996, was $9.7 million and $9.4 million, resulting in a
gross unrealized loss at such dates of approximately $56,000 and $55,000,
respectively. The Bank anticipates having the ability to fund all of its
investing activities from funds held on deposit at FHLB of Topeka. The Bank will
continue to seek high quality investments with short to intermediate maturities
and duration from one to five years.
17
<PAGE>
Investment Portfolio Maturities
The following table sets forth certain information regarding the carrying
values, weighted average yields, and maturities of the Company's debt securities
portfolio at March 31, 1996.
<TABLE>
<CAPTION>
As of March 31, 1996
----------------------------------------------------------------------------------------------------
One Year or Less One to Five Years Five to Ten Years More than Ten Years Total Debt Securities
----------------- ------------------ ------------------ ------------------- ------------------------
Carrying Average Carrying Average Carrying Average Carrying Average Carrying Average Market
Value Yield Value Yield Value Yield Value Yield Value Yield Value
-------- ------- -------- ------- -------- ------- -------- ------- ------- ------- ------
(Dollars in Thousands)
Held to maturity:
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. Government Securities $ 1,551 7.07% $ 0 0.00% $ 0 0.00% $ 0 0.00% $ 1,551 7.07% $ 1,557
U.S. Agency Securities ... 0 0.00 4,700 5.78 3,500 7.11 0 0.00 8,200 6.35 8,137
----- ----- ----- ---- ------ ------
1,551 7.07 4,700 5.78 3,500 7.11 0 0.00 9,751 6.47 9,694
----- ----- ----- ---- ------ ------
Available for Sale:
U.S. Agency Securities ... 0 0.00 0 0.00 1,445 6.39 0 0.00 1,445 6.39 1,445
----- ----- ----- ---- ------ ------
Total ................ $ 1,551 7.07% $ 4,700 5.78% $ 4,945 6.90% $ 0 0.00% $11,196 6.40% $11,139
====== ==== ====== ==== ====== ==== ===== ==== ====== ==== ======
</TABLE>
18
<PAGE>
Sources of Funds
General. Deposits are the major source of the Bank's funds for lending and
other investment purposes. The Bank derives funds from amortization and
prepayment of loans and mortgage-backed securities, maturities of investment
securities, and operations. Scheduled loan principal repayments are a relatively
stable source of funds, while deposit inflows and outflows and loan prepayments
are significantly influenced by general interest rates and market conditions.
The Bank may also utilize advances from the FHLB of Topeka and other borrowings
as a source of funds.
Deposits. Consumer and commercial deposits are attracted principally from
within the Bank's primary market area through the offering of a broad selection
of deposit instruments including regular savings, demand and NOW accounts, and
term certificate accounts (including negotiated jumbo certificates in
denominations of $100,000 or more). Deposit account terms vary according to the
minimum balance required, the time period the funds must remain on deposit, and
the interest rate, among other factors.
Jumbo Certificate Accounts. The following table indicates the approximate
amount of the Company's certificate accounts of $100,000 or more by time
remaining until maturity as of March 31, 1996.
Certificates
Accounts
Maturity Period (In Thousands)
- ---------------
Within three months............................ $ 622
Over three through six months.................. 100
Over six through twelve months................. 802
Over twelve months............................. 100
-----
Total.................................... $1,624
=====
Borrowings
Deposits are the primary source of funds of the Bank's lending and
investment activities and for its general business purposes. The Bank may obtain
advances from the FHLB of Topeka to supplement its supply of lendable funds.
Advances from the FHLB of Topeka would typically be secured by a pledge of the
Bank's stock in the FHLB of Topeka and a portion of the Bank's first mortgage
loans and certain other assets. The Bank, if the need arises, may also access
the Federal Reserve Bank discount window to supplement its supply of lendable
funds and to meet deposit withdrawal requirements.
To supplement lending activities in periods of deposit growth and/or
declining loan demand, the Bank has increased its investments in residential
mortgage-backed securities. Although such securities are held for investment,
they can serve as collateral for borrowings and, through repayments, as a source
of liquidity.
19
<PAGE>
The following table sets forth certain information regarding short-term
borrowings by the Company at the end of and during the periods indicated,
consisting of amounts borrowed under a line of credit with the FHLB of Topeka.
At or For the Year Ended
March 31,
------------------------
1995 1996
------------ -----------
(Dollars in Thousands)
Weighted average rate paid....................... 6.53% 0.00%
Maximum amount of borrowings outstanding
at any month end............................... $2,500 $1,200
Approximate average short-term
borrowings outstanding......................... $ 916 $ 0
Approximate weighted average rate (1)............ 6.44% 6.06%
(1) Average balances represent the arithmetic average of month-end balances.
Subsidiary Activity
The Company has one wholly-owned subsidiary, the Bank. The Bank is
permitted to invest up to 2% of its assets in the capital stock of, or secured
or unsecured loans to, subsidiary corporations, with an additional investment of
1% of assets when such additional investment is utilized primarily for community
development purposes. As of March 31, 1996, the Bank had no subsidiaries.
Employees
Substantially all of the activities of the Company are conducted through
the Bank, therefore, at March 31, 1996, the Company did not have any salaried
employees.
As of March 31, 1996, the Bank had 15 full-time employees and three
part-time employees. None of the Bank's employees are represented by a
collective bargaining group. The Bank believes that its relationship with its
employees is good.
Regulation
Set forth below is a brief description of certain laws which related to
the regulation of the Company and the Bank. The description does not purport to
be complete and is qualified in its entirety by reference to applicable laws and
regulations.
Company Regulation
General. The Company is a unitary savings and loan holding company subject
to regulatory oversight by the OTS. As such, the Company is required to register
and file reports with the OTS and is subject to regulation and examination by
the OTS. In addition, the OTS has enforcement authority over the Company and its
non-savings association subsidiaries, should such subsidiaries be formed, which
also permits the OTS to restrict or prohibit activities that are determined to
be a serious risk to the subsidiary savings association. This regulation and
oversight is intended primarily for the protection of the depositors of the Bank
and not for the benefit of stockholders of the Company.
20
<PAGE>
Qualified Thrift Lender Test. As a unitary savings and loan holding
company, the Company generally is not subject to activity restrictions, provided
the Bank satisfies the Qualified Thrift Lender ("QTL") test. If the Company
acquires control of another savings association as a separate subsidiary, it
would become a multiple savings and loan holding company, and the activities of
the Company and any of its subsidiaries (other than the Bank or any other
SAIF-insured savings association) would become subject to restrictions
applicable to bank holding companies unless such other associations each also
qualify as a QTL and were acquired in a supervisory acquisition. See "-
Regulation of the Bank Qualified Thrift Lender Test."
Restrictions on Acquisitions. The Company must obtain approval from the
OTS before acquiring control of any other SAIF-insured association. Such
acquisitions are generally prohibited if they result in a multiple savings and
loan holding company controlling savings associations in more than one state.
However, such interstate acquisitions are permitted based on specific state
authorization or in a supervisory acquisition of a failing savings association.
Federal law generally provides that no "person," acting directly or
indirectly or through or in concert with one or more other persons, may acquire
"control," as that term is defined in OTS regulations, of a federally insured
savings institution without giving at least 60 days written notice to the OTS
and providing the OTS an opportunity to disapprove the proposed acquisition.
Such acquisitions of control may be disapproved if it is determined, among other
things, that (i) the acquisition would substantially lessen competition; (ii)
the financial condition of the acquiring person might jeopardize the financial
stability of the savings institution or prejudice the interests of its
depositors; or (iii) the competency, experience or integrity of the acquiring
person or the proposed management personnel indicates that it would not be in
the interest of the depositors or the public to permit the acquisitions of
control by such person.
Subject to appropriate regulatory approvals, a bank holding company can
acquire control of a savings association, and if it controls a savings
association, merge or consolidate the assets and liabilities of the savings
association with, or transfer assets and liabilities to, any subsidiary bank
which is a member of the BIF with the approval of the appropriate federal
banking agency and the Federal Reserve Board. Generally, federal savings
associations can acquire or be acquired by any insured depository institution.
Federal Securities Law. The Company is subject to filing and reporting
requirement by virtue of having its common stock registered under the Securities
Exchange Act of 1934. Furthermore, Common Stock held by persons who are
affiliates (generally officers, directors and principal stockholders) of the
Company may not be resold without registration or unless sold in accordance with
certain resale restrictions. If the Company meets specified current public
information requirements, each affiliate of the Company is able to sell in the
public market, without registration, a limited number of shares in any
three-month period.
Regulation of the Bank
General. As a federally chartered, SAIF-insured savings association, the
Bank is subject to extensive regulation by the OTS and the FDIC. Lending
activities and other investments must comply with various federal statutory and
regulatory requirements. The Bank is also subject to certain reserve
requirements promulgated by the Federal Reserve Board.
The OTS, in conjunction with the FDIC, regularly examines the Bank and
prepares reports for the consideration of the Bank's Board of Directors on any
deficiencies that are found in the Bank's
21
<PAGE>
operations. The Bank's relationship with its depositors and borrowers is also
regulated to a great extent by federal and state law, especially in such matters
as the ownership of savings accounts and the form and content of the Bank's
mortgage documents.
The Bank must file reports with the OTS and the FDIC concerning its
activities and financial condition, in addition to obtaining regulatory
approvals prior to entering into certain transactions such as mergers with or
acquisitions of other savings institutions. This regulation and supervision
establishes a comprehensive framework of activities in which an institution can
engage and is intended primarily for the protection of the SAIF and depositors.
The regulatory structure also gives the regulatory authorities extensive
discretion in connection with their supervisory and enforcement activities and
examination policies, including policies with respect to the classification of
assets and the establishment of adequate loan loss reserves for regulatory
purposes. Any change in such regulations, whether by the OTS, the FDIC, or the
Congress could have a material adverse impact on the Company, the Bank, and
their operations.
Insurance of Deposit Accounts. The Bank's deposit accounts are insured by
the SAIF to a maximum of $100,000 for each insured member (as defined by law and
regulation). The FDIC has the authority, should it initiate proceedings to
terminate an institution's deposit insurance, to suspend the insurance of any
such institution without tangible capital. However, if a savings association has
positive capital when it includes qualifying intangible assets, the FDIC cannot
suspend deposit insurance unless capital declines materially, the institution
fails to enter into and remain in compliance with an approved capital plan or
the institution is operating in an unsafe or unsound manner.
Regardless of an institution's capital level, insurance of deposits may be
terminated by the FDIC upon a finding that the institution has engaged in unsafe
or unsound practices, is in an unsafe or unsound condition to continue
operations or has violated any applicable law, regulation, rule, order or
condition imposed by the FDIC or the institution's primary regulator.
The FDIC charges an annual assessment for the insurance of deposits based
on the risk a particular institution poses to its deposit insurance fund. Under
this system, a bank or thrift pays within a range of 23 cents to 31 cents per
$100 of domestic deposits, depending upon the institution's risk classification.
This risk classification is based on an institution's capital group and
supervisory subgroup assignment. In addition, the FDIC is authorized to increase
such deposit insurance rates, on a semi-annual basis, if it determines that such
action is necessary to cause the balance in the SAIF to reach the designated
reserve ratio of 1.25% of SAIF-insured deposits within a reasonable period of
time. The FDIC also may impose special assessments on SAIF members to repay
amounts borrowed from the U.S. Treasury or for any other reason deemed necessary
by the FDIC. The Bank's federal deposit insurance premium expense for the fiscal
year ended March 31, 1996, amounted to approximately $82,000.
The Bank expects a one-time assessment of approximately 85 basis points on
every $100 of deposits. If the assessment was applied to the Bank's deposits at
March 31, 1995 (as proposed by the U.S. Congress), the Bank would experience a
one time cost of approximately $200,000 (net of taxes). If the Bank is required
to pay the proposed special assessment, future deposit insurance premiums are
expected to be reduced. Based upon the Bank's deposits as of March 31, 1996, the
Bank's deposit insurance expense would decrease by approximately $70,000 per
year after taxes. Management of the Bank is unable to predict whether this
proposal or any similar proposal will be enacted or whether ongoing SAIF
premiums will be reduced to a level comparable to that of BIF premiums.
Regulatory Capital Requirements. OTS capital regulations require savings
institutions to meet three capital standards: (1) tangible capital equal to 1.5%
of total adjusted assets, (2) a leverage ratio
22
<PAGE>
(core capital) equal to at least 3% of total adjusted assets, and (3) a
risk-based capital requirement equal to 8.0% of total risk-weighted assets.
Dividend and Other Capital Distribution Limitations. OTS regulations
require the Bank to give the OTS 30 days advance notice of any proposed
declaration of dividends to the Company, and the OTS has the authority under its
supervisory powers to prohibit the payment of dividends to the Company.
OTS regulations impose limitations upon all capital distributions by
savings institutions, such as cash dividends, payments to repurchase or
otherwise acquire its shares, payments to shareholders of another institution in
a cash-out merger and other distributions charged against capital. The rule
establishes three tiers of institutions, based primarily on an institution's
capital level. An institution that exceeds all fully phased-in capital
requirements before and after a proposed capital distribution ("Tier 1
institution") and has not been advised by the OTS that it is in need of more
than the normal supervision can, after prior notice but without the approval of
the OTS, make capital distributions during a calendar year equal to the greater
of (i) 100% of its net income to date during the calendar year plus the amount
that would reduce by one-half its "surplus capital ratio" (the excess capital
over its fully phased-in capital requirements) at the beginning of the calendar
year, or (ii) 75% of its net income over the most recent four quarter period.
Any additional capital distributions require prior regulatory approval. As of
March 31, 1996, the Bank was a Tier 1 institution. In the event the Bank's
capital fell below its fully phased-in requirement or the OTS notified it that
it was in need of more than normal supervision, the Bank's ability to make
capital distributions could be restricted. In addition, the OTS could prohibit a
proposed capital distribution by any institution, which would otherwise be
permitted by the regulation, if the OTS determines that such distribution would
constitute an unsafe or unsound practice.
In addition, the Bank may not declare or pay a cash dividend on its
capital stock if the effect thereof would be to reduce the regulatory capital of
the Bank below the amount required for the liquidation account to be established
pursuant to the Bank's Plan of Conversion. Finally, a savings association is
prohibited from making a capital distribution if, after making the distribution,
the savings association would be undercapitalized (not meet any one of its
minimum regulatory capital requirements).
Qualified Thrift Lender Test. Savings institutions must meet a QTL test.
If the Bank maintains an appropriate level of Qualified Thrift Investments
(primarily residential mortgages and related investments, including certain
mortgage-related securities) ("QTIs") and otherwise qualifies as a QTL, it will
continue to enjoy full borrowing privileges from the FHLB of Seattle. The
required percentage of QTIs is 65% of portfolio assets (defined as all assets
minus intangible assets, property used by the institution in conducting its
business and liquid assets equal to 10% of total assets). Certain assets are
subject to a percentage limitation of 20% of portfolio assets. In addition,
savings associations may include shares of stock of the FHLBs, FNMA and FHLMC as
qualifying QTIs. An association must be in compliance with the QTL test on a
monthly basis in nine out of every 12 months. As of March 31, 1996, the Bank was
in compliance with its QTL requirement with 81.0% of its assets invested in
QTIs.
A savings association that does not meet a QTL test must either convert to
a bank charter or comply with the following restrictions on its operations: (i)
the savings association may not engage in any new activity or make any new
investment, directly or indirectly, unless such activity or investment is
permissible for a national bank; (ii) the branching powers of the savings
association shall be restricted to those of a national bank; (iii) the savings
association shall not be eligible to obtain any advances from its FHLB; and (iv)
payment of dividends by the savings association shall be subject to the rules
regarding payment of dividends by a national bank. Upon the expiration of three
years from the date the savings association ceases to be a QTL, it must cease
any activity and not retain any investment not permissible
23
<PAGE>
for a national bank and immediately repay any outstanding FHLB advances (subject
to safety and soundness considerations).
Loans-to-One Borrower. See "- Business of the Bank - Origination, Sale, and
Purchase of Loans - Loans-to-One Borrower."
Community Reinvestment. Under the Community Reinvestment Act ("CRA"), as
implemented by OTS regulations, a savings association has a continuing and
affirmative obligation consistent with its safe and sound operation to help meet
the credit needs of its entire community, including low and moderate income
neighborhoods. The CRA does not establish specific lending requirements or
programs for financial institutions nor does it limit an institution's
discretion to develop the types of products and services that it believes are
best suited to its particular community, consistent with the CRA. The CRA
requires the OTS, in connection with its examination of a savings institution,
to assess the institution's record of meeting the credit needs of its community
and to take such record into account in its evaluation of certain applications
by such institution. Federal law requires public disclosure of an institution's
CRA rating and requires the OTS to provide a written evaluation of an
institution's CRA performance utilizing a four-tiered system. The Bank received
a "satisfactory" rating as a result of its last evaluation in July 1994.
Transactions With Affiliates. Generally, restrictions on transactions with
affiliates require that transactions between a savings association or its
subsidiaries and its affiliates be on terms as favorable to the Bank as
comparable transactions with non-affiliates. In addition, certain of these
transactions are restricted to an aggregate percentage of the Bank's capital;
collateral in specified amounts must usually be provided by affiliates to
receive loans from the Bank. Affiliates of the Bank include the Company and any
company which would be under common control with the Bank. In addition, a
savings association may not lend to any affiliate engaged in activities not
permissible for a bank holding company or acquire the securities of any
affiliate that is not a subsidiary. The OTS has the discretion to treat
subsidiaries of savings associations as affiliates on a case-by-case basis.
The Bank's authority to extend credit to its officers, directors, and 10%
shareholders, as well as to entities that such persons control is currently
governed by Sections 22(g) and 22(h) of the Federal Reserve Act and Regulation O
promulgated by the Federal Reserve Board. Among other things, these regulations
require such loans to be made on terms substantially similar to those offered to
unaffiliated individuals, place limits on the amount of loans the Bank may make
to such persons based, in part, on the Bank's capital position, and require
certain approval procedures to be followed. OTS regulations, with minor
variation, apply Regulation O to savings associations.
Liquidity Requirements. All savings associations are required to maintain
an average daily balance of liquid assets equal to a certain percentage of the
sum of its average daily balance of net withdrawable deposit accounts and
borrowings payable in one year or less. The liquidity requirement may vary from
time to time (between 4% and 10%) depending upon economic conditions and savings
flows of all savings associations. At March 31, 1996, the Bank's required liquid
asset ratio is 5%.
Federal Home Loan Bank System. The Bank is a member of the FHLB of Topeka,
which is one of 12 regional FHLBs that administers the home financing credit
function of savings associations. Each FHLB serves as a reserve or central bank
for its members within its assigned region. It is funded primarily from proceeds
derived from the sale of consolidated obligations of the FHLB System. It makes
loans to members (i.e., advances) in accordance with policies and procedures
established by the Board of Directors of the FHLB.
24
<PAGE>
As a member, the Bank is required to purchase and maintain stock in the
FHLB of Topeka in an amount equal to at least 1% of its aggregate unpaid
residential mortgage loans, home purchase contracts or similar obligations at
the beginning of each year.
Federal Reserve System. The Federal Reserve Board requires all depository
institutions to maintain non-interest bearing reserves at specified levels
against their transaction accounts (primarily checking, NOW, and Super NOW
checking accounts) and non-personal time deposits. The balances maintained to
meet the reserve requirements imposed by the Federal Reserve Board may be used
to satisfy the liquidity requirements that are imposed by the OTS. At March 31,
1996, the Bank was in compliance with these Federal Reserve Board requirements.
Item 2. Description of Property
(a) Properties.
Currently, the Company does not own real property but utilizes the offices
of the Bank. The Bank operates from its office located at 120 North Division,
Guthrie, Oklahoma. The Bank owns this office facility which was opened in 1975
and has 6,000 square feet.
(b) Investment Policies.
See "Item 1. Business" above for a general description of the Bank's
investment policies and any regulatory or Board of Directors' percentage of
assets limitations regarding certain investments. All of the Bank's investment
policies are reviewed and approved by the Board of Directors of the Bank, and
such policies, subject to regulatory restrictions (if any), can be changed
without a vote of stockholders. The Bank's investments are primarily acquired to
produce income, and to a lesser extent, possible capital gain.
(1) Investments in Real Estate or Interests in Real Estate. See "Item 1.
Business - Lending Activities," "Item 1. Business - Regulation of the Bank," and
"Item 2. Description of Property. (a) Properties" above.
(2) Investments in Real Estate Mortgages. See "Item 1. Business - Lending
Activities" and "Item 1. Business - Regulation of the Bank."
(3) Investments in Securities of or Interests in Persons Primarily Engaged
in Real Estate Activities. See "Item 1. Business - Lending Activities," "Item 1.
Business - Regulation of the Bank," and "Item 1. Business - Subsidiary
Activity."
(c) Description of Real Estate and Operating Data.
Not Applicable.
Item 3. Legal Proceedings
There are various claims and lawsuits in which the Company or the Bank are
periodically involved, such as claims to enforce liens, condemnation proceedings
on properties in which the Bank holds security interests, claims involving the
making and servicing of real property loans, and other issues incident to the
Bank's business. In the opinion of management, no material loss is expected from
any of such pending claims or lawsuits.
25
<PAGE>
Item 4. Submission of Matters to a Vote of Security Holders
No matter was submitted to a vote of security holders during the fourth
quarter of the fiscal year.
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters
The information contained under the section captioned "Corporate Profile
and Stock Price Information" on page 2 of the Company's Annual Report to
Stockholders for the fiscal year ended March 31, 1996 (the "Annual Report"), is
incorporated herein by reference.
Item 6. Management's Discussion and Analysis or Plan of Operation
The information contained in the section captioned "Management's
Discussion and Analysis of Financial Condition and Results of Operations" on
pages 5 to 14 of the Annual Report is incorporated herein by reference.
Item 7. Financial Statements
The Registrant's financial statements listed under Item 13 are
incorporated herein by reference.
Item 8. Changes in and Disagreements with Accountants On Accounting and
Financial Disclosure.
There were no changes in or disagreements with accountants on accounting
and financial disclosure during the last fiscal year.
PART III
Item 9. Directors Executive Officers, of Promoters and Control Persons:
Compliance with Section 16(b) of the Exchange Act.
The information contained under the section captioned "I - Information
with Respect to Nominee for Director, Directors Continuing in Office, and
Executive Officers" in the Registrant's definitive proxy statement for the
Registrant's Annual Meeting of Stockholders to be held July 18, 1996 (the "Proxy
Statement") is incorporated herein by reference.
Additional information concerning executive officers is included in the
Proxy Statement in the section captioned "Filing of Beneficial Ownership
Reports."
Item 10. Executive Compensation
The information contained in the section captioned "Directors and
Executive Officer Compensation" in the Proxy Statement is incorporated herein by
reference.
26
<PAGE>
Item 11. Security Ownership of Certain Beneficial Owners and Management
(a) Security Ownership of Certain Beneficial Owners
Information required by this item is incorporated herein by
reference to the section captioned "Voting Securities and Principal
Holders Thereof" in the Proxy Statement.
(b) Security Ownership of Management
Information required by this item is incorporated herein by
reference to the chart in the section captioned "Voting Securities
and Principal Holders Thereof" and to the first chart in the section
captioned "I - Information with Respect to Nominee for Director,
Directors Continuing in Office, and Executive Officers" in the Proxy
Statement.
(c) Management of the Registrant knows of no arrangements, including any
pledge by any person of securities of the Registrant, the operation
of which may at a subsequent date result in a change in control of
the Registrant.
Item 12. Certain Relationships and Related Transactions
The information required by this item is incorporated herein by reference
to the section captioned "Certain Relationships and Related Transactions" in the
Proxy Statement.
Item 13. Exhibits, Lists, and Reports on Form 8-K
(a) The following documents are filed as a part of this report:
1. The following financial statements and the report of independent
accountants of the Registrant included in the Registrant's Annual Report to
Stockholders for the fiscal year ending March 31, 1996 are incorporated herein
by reference and also in Item 8 hereof.
Report of Independent Auditors
Consolidated Statements of Financial Condition as of March 31, 1996 and
1995.
Consolidated Statements of Operations for the Years Ended March 31, 1996,
1995, and 1994.
Consolidated Statements of Stockholders' Equity for the Years Ended March
31, 1996, 1995, and 1994.
Consolidated Statements of Cash Flows for the Years Ended March 31, 1996,
1995, and 1994.
Notes to Consolidated Financial Statements.
2. Financial Statement Schedules for which provision is made in the
applicable accounting regulations of the SEC are not required under the related
instructions or are inapplicable and therefore have been omitted.
27
<PAGE>
3. The following exhibits are included in this Report or
incorporated herein by reference:
(a) List of Exhibits:
3(i) Certificate of Incorporation of Guthrie Savings, Inc.*
3(ii)Bylaws of Guthrie Savings, Inc.*
10.1 Employment Agreement with William Cunningham**
10.2 1994 Stock Option Plan***
10.3 Management Stock Bonus Plan***
13 Annual Report to Stockholders for the fiscal year ended March
31, 1996
21 Subsidiaries of the Registrant**
23 Consent of Regier Carr & Monroe, L.L.P.
(b) No reports on Form 8-K were filed during the last quarter of
the period covered by this report.
- ---------------------
* Incorporated by reference to the registration statement on Form S-1 (File
No. 33-90286) declared
effective by the Commission on August 12, 1994.
** Incorporated by reference to the Annual Report on Form 10-K for the fiscal
year ended March 31, 1995 (File No. 0-24468) filed with the SEC.
*** Incorporated by reference to the proxy statement for the annual meeting of
stockholders held on July 27, 1995 and filed with the SEC on June 21, 1995
(File No. 0-24468).
28
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
GUTHRIE SAVINGS, INC.
Dated: June 28, 1996 By: /s/ William L. Cunningham
William L. Cunningham
President, Chief Executive
Officer, and Director (Duly
Authorized Representative)
Pursuant to the requirement of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
By: /s/ William L. Cunningham By: /s/ H. Stephen Ochs
William L. Cunningham H. Stephen Ochs
President, Chief Executive Officer, Vice President and Director
and Director (Principal Executive
Officer)
Date: June 28, 1996 Date: June 28, 1996
By: /s/ Keith Camerer By: /s/ James V. Seaman
Keith Camerer James V. Seamans
Director Director
Date: June 28, 1996 Date: June 28, 1996
By: /s/ Alvin R. Powell, Jr. By: /s/ Kimberly D. Walker
Alvin R. Powell, Jr. Kimberly D. Walker
Director Treasurer (Principal Accounting
and Financial Officer)
Date: June 28, 1996 Date: June 28, 1996
EXHIBIT 13
<PAGE>
[** LOGO **]
Guthrie Savings, Inc.
ANNUAL REPORT
1996
<PAGE>
Guthrie Savings, Inc.
ANNUAL REPORT - 1996
- -----------------------------------------------------------------
TABLE OF CONTENTS
- -----------------------------------------------------------------
Letter to Stockholders.......................................... 1
Corporate Profile and Stock Price Information.................... 2
Selected Financial and Other Data................................ 3
Management's Discussion and Analysis............................. 5
Independent Auditor's Report.....................................F-1
Consolidated Financial Statements................................F-2
Notes to Consolidated Financial Statements.......................F-7
Corporate Information............................................ 15
<PAGE>
[GUTHRIE SAVINGS, INC. LETTERHEAD]
TO OUR STOCKHOLDERS:
Guthrie Savings, Inc. has successfully completed its first full year as a public
company. We are pleased to report increased net income along with moderate
asset and deposit growth.
Net income for the year ended March 31, 1996 was $584,957 or $1.25 per share.
This represents a 7.28% increase in income from the year ended March 31, 1995.
This increase was primarily the result of a decrease in the provision for losses
on loans and gains from the sale of foreclosed real estate.
Total assets increased 4.68% to $46.8 million during the year while total
deposits increased 5.12% to $36.3 million. Stockholders' equity was $8.2 million
at March 31, 1995 compared to $8.0 million at March 31, 1996. This decrease is
the result of an approved repurchase of 5% of the outstanding shares of stock.
In March the Board of Directors declared a $0.50 per share special dividend
payable to stockholders of record March 29, 1996. This dividend was the second
dividend declared by the Bank since the issuance of our stock in October 1994.
The cash dividend was paid as a result of the continued profitability of the
Company and its wholly owned subsidiary, Guthrie Federal Savings Bank.
The Company was approved to repurchase an additional 5% or our outstanding
shares before October 11, 1996. If this repurchase is completed, the total
amount of stock repurchased will be 10% of the original outstanding shares. As
always, we will concentrate our efforts on building shareholder value while
maintaining and building on our financial strength.
We appreciate the strong and loyal support that our stockholders and employees
have given us during the past year and ask for your continued support in the
future.
Sincerely,
/s/William L. Cunningham
William L. Cunningham
President and Chief Executive Officer
-1-
<PAGE>
GUTHRIE SAVINGS, INC.
CORPORATE PROFILE AND RELATED INFORMATION
Guthrie Savings, Inc. (the "Company") is the parent company for Guthrie Federal
Savings Bank (the "Bank"). The Company is an Oklahoma corporation organized in
May 1994 at the direction of Guthrie Federal Savings and Loan Association (the
"Association") in connection with the Association's conversion from the mutual
to stock form of ownership (the "Conversion"). On October 11, 1994, the
Association completed its conversion and changed its name to Guthrie Federal
Savings Bank and became a wholly owned subsidiary of the Company. The Company is
a unitary savings and loan holding company which, under existing laws, generally
is not restricted in the types of business activities in which it may engage
provided the Bank retains a specified amount of its assets in housing-related
investments. At the present time, since the Company does not conduct any active
business, the Company does not intend to employ any persons other than officers
but utilizes the support staff and facilities of the Bank from time to time.
Guthrie Federal Savings Bank is a federally chartered stock savings bank
headquartered in Guthrie, Oklahoma. The Bank was founded in 1906 with a charter
from the Territory of Oklahoma under the name of "Employees Building and Loan
Association." Employees Building and Loan Association became known as "Guthrie
Savings and Loan Association" in 1968 when it changed its name. In early August
1994, Guthrie became a federal association under the name "Guthrie Federal
Savings and Loan Association." The Bank changed its name to Guthrie Federal
Savings Bank in October of 1994 in connection with its conversion from mutual to
stock form. The Bank's deposits have been federally insured by the Savings
Association Insurance Fund ("SAIF") and its predecessor, the Federal Savings and
Loan Insurance Corporation, since 1948, and the Bank is a member of the Federal
Home Loan Bank (the "FHLB") System.
Guthrie Federal Savings Bank is primarily engaged in attracting deposits from
the general public and using those deposits, together with other funds, to
originate real estate loans on one-to four-family residences and, to a lesser
extent, consumer loans. The Bank has one office in Guthrie, Oklahoma, which is
located in its primary market area of Logan County, Oklahoma. In addition, the
Bank holds interest bearing deposits in other financial institutions and invests
in mortgage-backed securities and investment securities. The Bank offers its
customers fixed-rate and adjustable-rate mortgage loans, as well as consumer
loans, including home equity and savings account loans.
STOCK MARKET INFORMATION
There were 515,125 shares of common stock of Guthrie Savings, Inc. outstanding
on March 31, 1996, held by approximately 190 stockholders of record (not
including the number of persons or entities holding the stock in nominee or
street name though various brokerage firms). Since its issuance in October 1994,
the Company's common stock has been traded in the over-the-counter market. The
following table reflects the stock price as published by the National Daily
Quotation System "pink sheets". The stock began trading on October 11, 1994.
Therefore, prices for the first and second quarters of fiscal 1995 are not
available.
<TABLE>
<CAPTION>
Year Ended March 31,
------------------------------------------
1996 1995
------------------- -------------------
HIGH LOW HIGH LOW
<S> <C> <C> <C> <C>
First Quarter 13 10 1/4 N/A N/A
Second Quarter 13 1/2 12 1/2 N/A N/A
Third Quarter 13 3/8 13 1/4 10 1/2 9
Fourth Quarter 13 1/2 13 3/8 11 10
</TABLE>
During the year ended March 31, 1996 the Board of Directors declared a dividend
of $0.50 per share payable April 10, 1996. During the year ended March 31, 1995
the Company declared and paid a dividend of $0.20 per share. The Company's
ability to pay dividends to shareholders is largely dependent upon the dividends
it receives from the Bank. The Bank is subject to regulatory limitations on the
amount of cash dividends it may pay. The Bank may not declare or pay a cash
dividend on any of its stock if the effect thereof would cause the Bank's
regulatory capital to be reduced below (1) the amount required for the
liquidation account established in connection with the Bank's conversion from
mutual to stock form, or (2) the regulatory capital requirements imposed by the
Office of Thrift Supervision ("OTS").
-2-
<PAGE>
<TABLE>
<CAPTION>
Guthrie Savings, Inc.
==================================================================================================
FIVE-YEAR FINANCIAL SUMMARY
Selected Financial Condition Data (Dollars in Thousands) (*)
==================================================================================================
At March 31, 1996 1995 1994 1993 1992
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Total assets $ 46,820 $ 44,727 $ 42,839 $ 44,723 $ 47,129
Loans receivable 22,972 23,182 21,630 23,867 26,646
Marketable equity securities - - - - 731
Investment securities held-to-maturity 9,751 8,366 5,485 3,281 3,819
Investment securities available-for-sale 2,133 929 659 - -
Mortgage-backed securities held-to-
maturity 9,428 9,869 11,145 14,025 11,663
Cash and cash equivalents 1,402 1,090 2,392 2,226 2,895
Deposits 36,311 34,543 39,084 41,194 44,345
Borrowed money 2,000 1,700 - - -
Stockholders' equity 8,049 8,236 3,410 2,746 2,167
</TABLE>
<TABLE>
Summary of Operations (Dollars in Thousands) (*)
- --------------------------------------------------------------------------------------------------
Year Ended March 31, 1996 1995 1994 1993 1992
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Interest income $ 3,416 $ 3,198 $ 3,274 $ 3,695 $ 4,277
Interest expense 1,761 1,489 1,512 1,950 2,769
----- ----- ----- ----- -----
Net interest income 1,655 1,709 1,762 1,745 1,508
Provision for loan losses (132) 12 70 247 266
----- ----- ----- ----- -----
Net interest income after
provision for loan losses 1,787 1,697 1,692 1,498 1,242
Non-interest income 201 209 215 243 287
Non-interest expense 1,094 1,111 1,093 967 1,100
----- ----- ----- ----- -----
Income before income taxes and
cumulative effect of accounting
change 894 795 814 774 429
Provision for income taxes 309 250 278 264 137
----- ----- ----- ----- -----
Income before cumulative effect of
accounting change 585 545 536 510 292
Cumulative effect of accounting change - - 128 - -
----- ----- ----- ----- -----
Net income $ 585 $ 545 $ 664 $ 510 $ 292
====== ====== ====== ====== ======
Earnings per share* (1) $ 1.25 $ 0.48 $ - $ - $ -
====== ====== ====== ====== ======
Dividends per share (1) $ 0.50 $ 0.20 $ - $ - $ -
====== ====== ====== ====== ======
Book Value per common
share outstanding at March 31 $16.61 $15.99 $ - $ - $ -
====== ====== ====== ====== ======
</TABLE>
(*) Data presented prior to October 11, 1994, the date of conversion, is for
Guthrie Federal Savings Bank only.
(1) For periods following conversion from mutual to stock on October 11, 1994
(1995 - October 11, 1994 through March 31, 1995).
-3-
<PAGE>
<TABLE>
<CAPTION>
Guthrie Savings, Inc.
================================================================================================
FIVE-YEAR FINANCIAL SUMMARY
Selected Ratios and Other Data (*)
================================================================================================
Year Ended March 31, 1996 1995 1994 1993 1992
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Return on average assets 1.30 % 1.24 % 1.51 % 1.10 % 0.60 %
Return on average equity 7.12 10.39 22.53 20.49 13.07
Average equity to average assets 18.18 11.93 6.71 5.38 4.62
Equity to assets at period end 17.19 18.41 7.96 6.14 4.60
Net interest spread 2.98 3.59 3.95 3.77 3.15
Net yield on average interest
earning asset 3.78 4.02 4.15 3.92 3.25
Non-performing loans to total assets 1.33 1.80 1.35 3.07 3.04
Non-performing loans to net loans 2.72 3.46 2.68 5.75 5.37
Non-performing assets to net assets 1.33 1.94 1.80 3.55 3.45
Allowance for loan losses to total
loans 1.70 2.33 2.58 2.68 2.09
Number of:
Real estate loans outstanding 576 621 633 738 756
Deposit accounts 4,772 4,744 5,133 5,335 5,740
</TABLE>
[Bar Chart 1]
Graphical bar chart presentation of net income for the years ended March
31, 1996, 1995, 1994, 1993, and 1992 as shown in "Summary of Operations"
above.
[Bar Chart 2]
Graphical bar chart presentation of ratio of non-performing assets to total
assets for the years ended March 31, 1996, 1995, 1994, 1993, and 1992 as
shown in "Selected Ratios and Other Data" above.
[Bar Chart 3]
Graphical bar chart presentation of total assets at March 31, 1996, 1995,
1994, 1993, and 1922 as shown in "Selected Financial Condition Data" above.
[Bar Chart 4]
Graphical bar chart presentation of stockholders' equity at March 31, 1996,
1995, 1994, 1993, and 1992 as shown in "Selected Financial Condition Data"
above.
(*) Data presented prior to October 11, 1994, the date of conversion, is for
Guthrie Federal Savings Bank only.
-4-
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
GENERAL
On October 11, 1994, Guthrie Federal Savings and Loan Association completed its
conversion from a federally chartered mutual savings association to a federally
chartered mutual savings bank and changed its name to Guthrie Federal Savings
Bank. The bank was simultaneously acquired by Guthrie Savings, Inc., a
corporation which was formed to act as the holding company of the Bank. At the
date of conversion, the Company completed the sale of 515,125 shares of common
stock, $0.01 par value, through concurrent Subscription and Community Offerings
at $10.00 per share. The $5,151,250 raised in the stock offering was comprised
of approximately $4,291,250 in cash and $860,000 of funds withdrawn by
depositors from existing accounts. Net proceeds from the Conversion were
$4,356,175, after recognizing Conversion expenses and underwriting costs of
$382,975 and the stock acquired by the Employees' Stock Ownership Plan ("ESOP").
Guthrie Federal Savings Bank is primarily engaged in the business of accepting
deposit accounts from the general public and using these funds to originate
mortgage loans for the purchase or refinancing of single-family residences
located in Logan and northern Oklahoma counties in Oklahoma, and for the
purchase of mortgage-backed and investment securities. The Bank also originates
automobile loans, second mortgage loans, and deposit loans.
The earnings of the Bank depend primarily on its level of net interest income,
which is the difference between interest income and interest expense. The Bank's
net interest income is a function of its interest rate spread, which is
determined by the difference between rates of interest earned on
interest-earning assets, and rates of interest paid on interest-bearing
liabilities. The Bank's earnings are also affected by its provision for losses
on loans, as well as the amount of non-interest income and non-interest expense,
such as compensation and related expenses, deposit insurance premiums, data
processing costs, and income taxes. Earnings of the Bank are also affected
significantly by general economic and competitive conditions, particularly
changes in market interest rates, government policies and actions of regulatory
authorities.
FINANCIAL CONDITION
The Bank's total assets increased $2,092,504, or 4.68%, from $44,727,127 at
March 31, 1995 to $46,819,631 at March 31, 1996. The principal factor
contributing to the growth in assets was an increase in investment securities
during the year, this increase is directly related to a corresponding increase
in deposit accounts.
INVESTMENT SECURITIES:
During the year ended March 31, 1996, the Bank's portfolio of investment
securities, including available-for-sale, increased $2,588,269, or 27.84%. This
increase relates to security purchases during the year that are the result of an
excess in liquidity generated from the increase in deposit accounts. The
majority of the increase was comprised of U.S. Government and agency securities
which increased $2,530,129, or 29.20%. The Bank's securities portfolio provides
liquidity for additional lending as well as additional interest income. The
investment securities in the portfolio have varying maturities of ten years or
less. The Bank's portfolio experienced a slight increase in yield during the
year ended March 31, 1996, with an average yield of 6.57% for the year ended
March 31, 1996 compared to an average yield of 6.24% for the year ended March
31, 1995.
-5-
<PAGE>
MORTGAGE-BACKED SECURITIES:
Mortgage-backed securities decreased $441,042, or 4.47%, from $9,869,408 at
March 31, 1995 to $9,428,366 at March 31, 1996 primarily as a result of
repayments during the year. The Bank purchased $1,000,965 of mortgage-backed
securities during the year ended March 31, 1996 compared to purchases of
$257,050 and $518,606 during the years ended March 31, 1995 and 1994,
respectively. Mortgage-backed securities generally provide for lower returns
than loans originated by the Bank. The Bank has been focusing on using its
excess funds to increase its investment portfolio during the year ended March
31, 1996, contributing to the decrease in mortgage-backed securities. The
average yield on investment securities for the year ended March 31, 1996 was
6.57% compared to an average yield on mortgage-backed securities of 6.31% for
the same period.
LOANS RECEIVABLE:
Net loans receivable decreased $209,969, or 0.91%, from $23,181,534 at March 31,
1995 to $22,971,565 at March 31, 1996. This decrease was primarily due to the
stabilizing loan market following a year of substantial loan originations. The
Bank originated 80 mortgage loans during the year ended March 31, 1995 compared
to 40 loans during the year ended March 31, 1996. First mortgage loans decreased
$305,303, or 1.46%, from $20,905,771 at March 31, 1995 to $20,600,468 at March
31, 1996. Although mortgage loans decreased during the year, other loans
increased slightly from $2,275,763 at March 31, 1995 to $2,371,097 at March 31,
1996. There were 307 consumer and other loans originated during the year ended
March 31, 1996 compared to 221 loans originated during the year ended March 31,
1995.
The Bank has recognized impaired loans having recorded investments of $348,895
at March 31, 1996 and $395,906 at March 31, 1995 in conformity with FASB
Statement No. 114, as amended by FASB Statement No. 118. A loan is impaired
when, based on management's evaluation of current and historical information and
events, it is probable that all amounts due according to the contractual terms
of the loan agreement will not be collected. Loans which are classified as
impaired are typically collateral dependent; therefore, impairment is measured
based upon the fair value of the collateral less estimated costs to sell.
Impairment is recognized by creating a valuation allowance with a corresponding
charge to provision for loss on loans.
Management, as a part of the monitoring and evaluation of non-performing loans,
classifies loans in accordance with regulatory provisions as loss, doubtful,
substandard or special mention. Total loans classified as of March 31, 1996 and
1995, amounted to $920,663 and $1,253,199, respectively, including loans
recognized as impaired. Those loans classified which are not recognized as
impaired include loans which are currently past due 60 days or more or have a
past history of delinquency. The level of classified loans has continued to
decline primarily as a result of improving economic conditions and real estate
values and does not represent trends or uncertainties which management
reasonably expects will materially impact future operating results, liquidity,
or capital resources. Classified loans have been considered by management in the
evaluation of the adequacy of the allowance for loan loss.
REAL ESTATE OWNED AND OTHER REPOSSESSED ASSETS:
There was no foreclosed real estate ("REO") at March 31, 1996 compared to
$63,827 at March 31, 1995. REO has been steadily decreasing during the last five
years.
DEPOSITS:
Deposits increased from $34,542,812 at March 31, 1995 to $36,310,860 at March
31, 1996, an increase of $1,768,048, or 5.12%. This increase has, in part,
resulted from higher interest rates being paid by the Bank on a promotional
account offered in April of 1995 for six month and one year certificates. Aside
from the promotional account offered in April, rates offered by the Bank were
consistent with rates offered by other financial institutions in the area. The
average yield on certificates of deposit increased from 4.38% for the year ended
March 31, 1995 to 5.69% for the year ended March 31, 1996. Certificates of
deposit increased $1,926,759 or 8.51% from $22,636,573 at March 31, 1995 to
$24,563,332 at March 31, 1996.
-6-
<PAGE>
ASSET AND LIABILITY MANAGEMENT
The ability to maximize net interest income is largely dependent upon the
achievement of a positive interest rate spread that can be sustained during
fluctuations in prevailing interest rates. Interest rate sensitivity is a
measure of the difference between amounts of interest-earning assets and
interest-bearing liabilities which either reprice or mature within a given
period of time. The difference, or the interest rate repricing "gap," provides
an indication of the extent to which an institution's interest rate spread will
be affected by changes in interest rates over a period of time. A gap is
considered positive when the amount of interest-rate sensitive assets maturing,
or repricing over a specified period of time, exceeds the amount of
interest-rate sensitive liabilities maturing or repricing within that period and
is considered negative when the amount of interest-rate sensitive liabilities
maturing or repricing over a specified period of time exceeds the amount of
interest-rate sensitive assets maturing or repricing within that period.
Generally, during a period of rising interest rates, a negative gap within a
given period of time would adversely affect net interest income, while a
positive gap within a given period of time would result in an increase in net
interest income; during a period of falling interest rates, a negative gap
within a given period of time would result in an increase in net interest income
while a positive gap within a given period of time would have the opposite
effect.
In an effort to reduce interest rate risk and protect it from the negative
effect of increases in interest rates, the Bank has instituted certain asset and
liability management measures. The primary elements of this strategy include:
(i) balance sheet restructuring, and (ii) asset/liability management.
Management's strategy for asset/liability management has consisted of (i)
originating fixed rate mortgage loans with maturities of not more than 15 years,
(ii) originating adjustable rate mortgage loans for portfolio where maturities
exceed 15 years, (iii) originating consumer and equity loans that are short-term
or adjustable, (iv) collecting fee income from fixed rate loans with terms of
more than 15 years that the Bank refers to other financial institution, and (v)
focusing marketing efforts and pricing to extend the average maturities on
deposits.
The OTS adopted a final rule in August 1993 incorporating an interest rate risk
("IRR") component into the risk-based capital rules. The rule has been waived
until the OTS finalizes the process under which institutions may appeal such
capital deductions. The IRR component is a dollar amount that will be deducted
from total capital for the purpose of calculating an institution's risk-based
capital requirement and is measured in terms of the sensitivity of its net
portfolio value ("NPV") to changes in interest rates. NPV is the difference
between incoming and outgoing discounted cash flows from assets, liabilities,
and off-balance sheet contracts. An institution's IRR is measured as the change
to its NPV as a result of a hypothetical 200 basis point change in market
interest rates. A resulting change in NPV of more than 2% of the estimated
market value of its assets will require the institution to deduct from its
capital 50% of that excess change. The rules provided that the OTS would
calculate the IRR component quarterly for each institution.
-7-
<PAGE>
The following table presents the Bank's NPV as of March 31, 1996, as calculated
by the OTS, based on information provided to the OTS by the Bank.
<TABLE>
<CAPTION>
Change in Interest
Rates in Basis NPV as % of
Points (Rate Shock) Net Portfolio Value Present Value of Assets
- ------------------- -------------------------------- -----------------------
$ Amount $ Change Change % NPV Ratio Change
-------- -------- -------- ------------- ------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C>
+400 bp $ 5,580 (1,667) (23)% 12.33% (283)bp
+300 bp $ 6,129 (1,117) (15)% 13.32% (184)bp
+200 bp(1) $ 6,612 (635) (9)% 14.15% (101)bp
+100 bp $ 6,988 (259) (4)% 14.77% (39)bp
0 bp $ 7,247 15.16%
-100 bp $ 7,428 181 3 % 15.41% 25 bp
-200 bp $ 7,531 284 4 % 15.51% 35 bp
-300 bp $ 7,681 435 6 % 15.69% 54 bp
-400 bp $ 7,980 734 10 % 16.13% 97 bp
- ---------------
(1) Denotes rate shock used to compute interest rate risk capital component.
</TABLE>
<TABLE>
<CAPTION>
March 31,1996
-------------
<S> <C>
Risk Measures (200 Basis Point Rate Shock):
Pre-Shock NPV Ratio: NPV as % of Present Value of Asset 15.16 %
Exposure Measure: Post-Shock NPV Ratio 14.15 %
Sensitivity Measure: Change in NPV Ratio (101) bp
Calculation of Capital Component:
Change in NPV as % of Present Value of Assets (1.33) %
Interest Rate Risk Capital Component ($000) 0
</TABLE>
Based upon the above calculations, no risk-based capital deduction would be
required when the new regulation is implemented. Additionally, the table
reflects that the net portfolio value of the Bank would decline in a rising
interest rate environment.
Set forth below is a breakout, by basis points of the Bank's NPV as of March 31,
1996 by assets, liabilities and off-balance sheet items.
<TABLE>
<CAPTION>
No
Net Portfolio Value -400 bp -300 bp -200 bp -100 bp Change +100 bp +200 bp +300 bp +400 bp
- ------------------- --------- --------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Assets $ 49,488 $ 48,944 $ 48,553 $ 48,216 $ 47,805 $ 47,322 $ 46,724 $ 46,025 $ 45,263
- -Liabilities 41,521 41,273 41,030 40,792 40,559 40,331 40,107 39,887 39,671
+Off Balance Sheet 13 10 8 4 1 (3) (5) (9) (12)
--------- --------- -------- -------- -------- -------- -------- -------- --------
Net Portfolio Value $ 7,980 $ 7,681 $ 7,531 $ 7,428 $ 7,247 $ 6,988 $ 6,612 $ 6,129 $ 5,580
======== ========= ======== ======== ======== ======== ======== ======== ========
</TABLE>
-8-
<PAGE>
AVERAGE BALANCES, INTEREST AND AVERAGE YIELDS AND RATES
The following table sets forth certain information relating to the Bank's
average balance sheet and reflects the average yield on assets and average cost
of liabilities for the periods indicated and the average yields earned and rates
paid. Such yields and costs are derived by dividing income or expense by the
average balance of assets or liabilities, respectively, for the periods
presented. Average balances are derived from month-end balances. Management does
not believe that the use of month-end balances instead of daily average balances
has caused any material difference in the information presented.
<TABLE>
<CAPTION>
Years Ended March 31,
--------------------------------------------------------------------------
At March 31,
1996 1996 1995
------------ ------------------------------------ ------------------------------------
Average Average Average Average
Balance Interest Yield/Cost Balance Interest Yield/Cost
------------- ----------- ---------- ----------- -------- ----------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Loans receivable (1) 9.01 % $ 22,729 $ 2,087 9.19 % $ 22,316 $ 2,036 9.12 %
Mortgage-backed securities 6.78 % 9,507 599 6.31 % 10,341 584 5.65 %
Investment securities (2) 6.40 % 9,385 616 6.57 % 7,975 498 6.24 %
Other interest-earning assets 5.02 % 2,170 114 5.27 % 1,853 81 4.37 %
--------- ---------- -------- -------- ---------- -------- -------
Total interest-earning assets 7.78 % $ 43,791 $ 3,416 7.80 % $ 42,485 $ 3,199 7.53 %
========= ========== ======== ======== ========== ======== =======
Non-interest-earning liabilities: 1,376 1,513
---------- ----------
Total assets $ 45,167 $ 43,998
========== ==========
Interest-bearing liabilities:
Savings accounts 2.60 % $ 3,481 $ 102 2.94 % $ 3,772 $ 113 3.00 %
Demand deposits 2.46 % 8,083 235 2.90 % 9,426 278 2.95 %
Certificates of deposit 5.60 % 24,653 1,405 5.69 % 23,736 1,039 4.38 %
Other borrowed funds 6.18 % 348 19 5.46 % 916 59 6.44 %
--------- ---------- -------- -------- ---------- --------- -------
Total interest-bearing liabilities 4.68 % $ 36,565 $ 1,761 4.82 % $ 37,850 $ 1,489 3.93 %
========= ========== ======== ======== ========== ========= ======
Non-interest bearing liabilities 394 898
---------- ----------
Total liabilities $ 36,959 $ 38,748
========== ==========
Stockholder's equity 8,208 5,250
---------- ----------
Total liabilities and
stockholders' equity $ 45,167 $ 43,998
========== ==========
Net interest income $ 1,655 $ 1,710
======== =========
Interest rate spread (3) 3.10 % 2.98 % 3.60 %
========= ======== ======
Net yield on interest-earning assets (4) 3.78 % 4.03 %
======== ======
Ratio of average interest-earning assets
to average interest-bearing liabilities 119.79 % 112.25 %
======= ======
</TABLE>
<TABLE>
<CAPTION>
Year Ended March 31,
----------------------------------
1994
----------------------------------
Average Average
Balance Interest Yield/Cost
---------- --------- ----------
<S> <C> <C> <C>
Interest-earning assets:
Loans receivable (1) $ 22,740 $ 2,213 9.73 %
Mortgage-backed securities 12,919 699 5.41 %
Investment securities (2) 4,650 303 6.52 %
Other interest-earning assets 2,150 59 2.74 %
---------- --------- --------
Total interest-earning assets $ 42,459 $ 3,274 7.71 %
Non-interest-earning liabilities: 1,454 ========= ========
----------
Total assets $ 43,913
==========
Interest-bearing liabilities:
Savings accounts $ 3,877 $ 117 3.02 %
Demand deposits 10,246 306 3.00 %
Certificates of deposit 26,110 1,089 4.17 %
Other borrowed funds - - - %
---------- -------- --------
Total interest-bearing
liabilities $ 40,233 $ 1,512 3.76 %
========== ======== ========
Non-interest bearing liabilities 734
----------
Total liabilities $ 40,967
==========
Stockholder's equity 2,946
----------
Total liabilities and
stockholders' equity $ 43,913
==========
Net interest income $ 1,762
========
Interest rate spread (3) 3.95 %
========
Net yield on interest-earning assets (4) 4.15 %
========
Ratio of average interest-earning assets
to average interest-bearing liabilities 105.53 %
========
</TABLE>
(1) Average balances include non-accrual loans.
(2) Includes interest-bearing deposits in other financial institutions.
(3) Interest-rate spread represents the difference between the average yield on
interest-earning assets and the average cost of interest-bearing
liabilities.
(4) Net yield on interest-earning assets represents net interest income as a
percentage of average interest-earning assets. -9-
<PAGE>
The following Rate/Volume Analysis table presents, for the periods indicated,
information regarding changes in interest income and interest expense (in
thousands) of the Bank. For each category of interest-earning assets and
interest-bearing liabilities, information is provided on changes attributable to
(i) changes in volume (changes in average volume multiplied by old rate); (ii)
changes in rates (changes in rate multiplied by old average volume); and (iii)
changes in rate-volume (changes in rate multiplied by the change in average
volume).
<TABLE>
<CAPTION>
Years Ended March 31,
----------------------------------------------------------------------------
1996 vs. 1995 1995 vs. 1994
----------------------------------- -------------------------------------
Increase (Decrease) Due to Increase (Decrease) Due to
----------------------------------- -------------------------------------
Rate/ Rate/
Volume Rate Volume Net Volume Rate Volume Net
-------- ------ ------- ------- --------- ------- -------- --------
(In Thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Interest income:
Loans receivable $ 38 $ 16 $ (3) $ 51 $ (41) $(139) $ 3 $ (177)
Mortgage-backed securities (47) 68 (6) 15 (139) 31 (7) (115)
Investment securities 88 26 4 118 217 (13) (9) 195
Other interest-earning assets 14 17 2 33 (8) 35 (5) 22
----- ----- ---- ----- ----- ----- ---- ------
Total interest-earning assets $ 93 $ 127 $ (3) $ 217 $ 29 $ (86) $(18) $ (75)
===== ===== ==== ===== ===== ===== ==== ======
Interest expense:
Savings accounts $ (9) $ (2) $ - $ (11) $ (3) $ (1) $ - $ (4)
Demand deposits (40) (5) 2 (43) (25) (5) 2 (28)
Certificates of deposits 40 311 15 366 (99) 55 (6) (50)
Other borrowed funds (37) (9) 6 (40) - - 59 59
----- ----- ---- ----- ----- ----- ---- ------
Total interest-bearing
liabilities $ (46) $ 295 $ 23 $ 272 $(127) $ 49 $ 55 $ (23)
===== ===== ==== ===== ===== ===== ==== ======
Net change in interest income $ 139 $(168) $(26) $ (55) $156 $(135) $(73) $ (52)
===== ===== ==== ===== ==== ===== ==== ======
</TABLE>
COMPARISON OF OPERATING RESULTS FOR THE YEARS ENDED MARCH 31, 1996 AND 1995
GENERAL:
Net income increased $39,680, or 7.28%, from $545,278 for the year ended March
31, 1995 to $584,958 for the year ended March 31, 1996. This increase was
primarily the result of a decrease in the provision for losses on loans of
$143,576 and gain from real estate operations of $134,788. These items, which
have contributed to current year income, would not be expected to be recurring
in future years. Income before income taxes, excluding these items would have
been $627,305 at March 31, 1996, compared to $798,934 for the year ended March
31, 1995. Partially due to a negative gap and a rising interest rate
environment, net interest income declined from $1,709,142 for 1995 to $1,655,297
for 1996. Additionally, exclusive of the gain from real estate operations in
1996, non-interest expense increased from $1,111,816 for 1995 to $1,229,369 for
1996. Because significant items discussed above contributed to net income for
1996, which management believes to be nonrecurring, management anticipates net
income for the year ended March 31, 1997 to be less than that earned for the
year ended March 31, 1996.
-10-
<PAGE>
TOTAL INTEREST INCOME:
Total interest income increased $217,754, or 6.81%, from $3,198,633 for the year
ended March 31, 1995 to $3,416,387 for the year ended March 31, 1996. This
increase is primarily the result of an increase in investment securities during
the year ended March 31, 1996, this is reflected in the Bank's rate/volume
analysis as the increase in interest income resulting from the volume of
investment securities was $88,000.
INTEREST EXPENSE:
Total interest expense increased $271,599, or 18.23%, from $1,489,491 for the
year ended March 31, 1995 to $1,761,090 for the year ended March 31, 1996. This
increase is primarily due to an increase in market interest rates paid on
deposits and the relatively rapid repricing of the deposit base. This is
reflected in the Bank's rate/volume analysis as approximately $295,000 of the
increase in interest expense was due to interest rate changes. Although this
results in an increase in interest expense, there was a $46,000 reduction in
interest expense resulting from a decrease in the volume of interest-bearing
liabilities.
NET INTEREST INCOME:
As a result of rising interest rates during the year ended March 31, 1996, net
interest income declined from $1,709,142 for the year ended March 31, 1995 to
$1,655,297 for the year ended March 31, 1996. Net interest income declined
$168,000 as a result of rising interest rates. This was partially offset by an
increase in net interest income attributable to an increase in the volume of
interest bearing assets over interest bearing liabilities of $139,000.
PROVISION FOR LOSSES ON LOANS:
The Bank currently maintains an allowance for loan losses based upon
management's periodic evaluation of known and inherent risks in the loan
portfolio, the Bank's past loss experience, adverse situations that may affect
the borrowers' ability to repay loans, estimated value of the underlying
collateral and current and expected market conditions. The provision for losses
on loans is the method by which the allowance for losses is adjusted during the
period. The provision for losses on loans directly impacts net interest income;
the amount of the provision for losses on loans reduces net interest income by
the same amount. Likewise, if a provision for losses on loans is regularly
recorded in prior periods and a smaller, or no, provision for losses on loans is
recorded during a subsequent period, the amount of the reduction has the effect
of increasing net interest income by that same amount.
The provision for loan losses was ($131,875) and $11,701 for the years ended
March 31, 1996 and 1995, respectively. The provision for loan losses decreased
$143,576 for the year ended March 31, 1996 as a result of management's
evaluation of the adequacy of the allowance for losses on loans after
considering the loan portfolio in conjunction with current and expected market
conditions. The decrease in the provision for losses on loans is primarily
attributable to an improving economy and real estate market in the primary
market area, resulting in a decrease in non-performing loans. The allowance for
loan losses as a percent of non-performing assets was 62.7% at March 31, 1996
compared to 63.1% at March 31, 1995. Charge-offs remained comparable between
1996 and 1995, consisting of approximately $30,113 in 1996 and $36,270 in 1995.
NON-INTEREST INCOME:
Non-interest income decreased $7,936, or 3.79%, from $209,313 for the year ended
March 31, 1995 to $201,377 for the year ended March 31, 1996. This was primarily
due to a decrease in service charge income of $9,169. Service charge income is
made up of monthly NOW account service charges, overdraft charges, automatic
teller machine charges and NOW account check order charges.
-11-
<PAGE>
NON-INTEREST EXPENSE:
Total non-interest expense decreased $17,235, or 1.55%, from $1,111,816 for the
year ended March 31, 1995 to $1,094,581 for the year ended March 31, 1996. This
decrease is the result in a gain from real estate operations. The Company
experienced $134,788 income from real estate operations during the year ended
March 31, 1996 compared to a $16,418 loss from real estate operations for the
year ended March 31, 1995. The increase in income was the result of a gain on
the sale of a parcel of land that the bank obtained through foreclosure of a
participation loan.
Aside from the substantial change relating to the gain from real estate
operations, other non-interest expenses increased. Compensation and related
expenses increased $67,263 or 13.08% from $514,244 for the year ended March 31,
1995 to $581,507 for the year ended March 31, 1996, this primarily resulted from
additional compensation expense related to the ESOP and the Management Stock
Bonus Plan (the "MSBP") which were in place throughout all or most of the year.
Compensation expense included eight months of amortization expense relating to
the MSBP, this expense will increase approximately $13,500 next year as a result
of a full year of amortization of compensation relating to the MSBP.
Professional fees also increased $62,961 during the year from $71,783 for the
year ended March 31, 1995 to $134,744 for the year ended March 31, 1996, this
increase relates to additional professional services required as a result of the
conversion.
INCOME TAX EXPENSE:
Income tax expense increased 23.77% from $249,660 for the year ended March 31,
1995 to $309,010 for the year ended March 31, 1996. This increase relates to an
increase in pre-tax income.
COMPARISON OF OPERATING RESULTS FOR THE YEARS ENDED MARCH 31, 1995 AND 1994
GENERAL:
Net income decreased $118,574, or 17.86%, from $663,852 for the year ended March
31, 1994 to $545,278 for the year ended March 31, 1995. This decrease was
primarily the result of $127,796 of income from the cumulative effect of change
in accounting principle due to the adoption of SFAS No. 109, Accounting for
Income Taxes which was recognized during the year ended March 31, 1994. This
decrease was partially offset by a decrease in income tax expense.
NET INTEREST INCOME:
The Bank's net interest income for the year ended March 31, 1995 decreased
$53,267, or 3.02%, from $1,762,409 for the year ended March 31, 1994 to
$1,709,142 for the year ended March 31, 1995. Interest income declined $75,372
and interest expense declined $22,105. Yields on the Company's interest-earning
assets declined by 18 basis points during the year ended March 31, 1995, and the
rates paid on the Company's interest-bearing liabilities increased by 17 basis
points resulting in a slight reduction in the interest rate spread to 3.60% for
the year ended March 31, 1995 from 3.95% for the year ended March 31, 1994.
PROVISION FOR LOSSES ON LOANS:
The allowance for loan losses was $557,545 and $539,436 at March 31, 1994 and
1995, respectively. Non-performing loans to net loans was 3.46% at March 31,
1995 and 2.68% at March 31, 1994. The allowance for specific loss provisions
associated with impaired loans increased from $125,992 at March 31, 1994 to
$135,223 at March 31, 1995. While the Bank maintains its allowance for losses at
a level that it considers to be adequate to provide for potential losses, there
can be no assurance that further additions will not be made to the loss
allowance and that such losses will not exceed the estimated amounts.
-12-
<PAGE>
NON-INTEREST INCOME:
Non-interest income decreased $5,707, or 2.65%, from $215,020 for the year ended
March 31, 1994 to $209,313 for the year ended March 31, 1995. The decrease
relates to a decrease in various NOW account charges due to a decrease in demand
accounts during the year. Additionally, there were no sales of investment
securities during the year ended March 31, 1995.
NON-INTEREST EXPENSE:
Non-interest expense increased $18,237 or 1.66% for the year ended March 31,
1995 compared to March 31, 1994. The increase was primarily the result of an
increase in salaries and related employee benefits, including implementation of
the ESOP.
INCOME TAXES:
The Bank's income tax expense decreased $28,166, or 10.14%, from $277,826 for
the year ended March 31, 1994 to $249,660 for the year ended March 31, 1995 as
pretax income decreased for the year.
LIQUIDITY AND CAPITAL RESOURCES
Liquidity is measured by a financial institution's ability to raise funds
through deposits, borrowed funds, capital or the sale of highly marketable
assets such as available-for-sale securities. Additional sources of liquidity,
including cash flow from both repayment of loans and maturity of investment
securities, are also included in determining whether liquidity is satisfactory.
During the year ended March 31, 1996, cash and cash equivalents increased by
$311,636 as compared to March 31, 1995. The increase was the result of cash
generated from operating activities of $603,234 and financing activities of
$1,383,266 offset by $1,674,864 in cash used in investing activities. The
increase from financing activities was largely attributable to an increase in
deposits of $1,764,923 along with a net increase in Federal Home Loan Bank
("FHLB") advances and borrowings of $300,000. As of March 31, 1996, the Bank had
an existing line of credit with the FHLB of $2,500,000 against which the Bank
had no outstanding balance and that could serve as an additional source of
liquidity. Cash and cash equivalents used by investing activities resulted
primarily from the acquisition of held-to-maturity and available-for-sale
investment securities.
During 1995, cash and cash equivalents decreased by $1,301,734, primarily as a
result of loan originations in excess of repayments and acquisition of held-to-
maturity investment securities resulting in total funds used by investing
activities of $3,223,307. The use of cash in investing activities was partially
offset by cash provided by operations of $484,181 and cash provided by financing
activities of $1,437,392. Cash provided by financing activities were largely the
result of net proceeds of $4,376,238 from the issuance of stock in the
conversion from mutual to stock form.
The Bank is required under applicable federal regulations to maintain specified
levels of "liquid" investments in qualifying types of U.S. Government, federal
agency and other investments having maturities of five years or less. Current
OTS regulations require that a savings bank maintain liquid assets of not less
than 5% of its average daily balance of net withdrawable deposit accounts and
borrowings payable in one year or less, of which short-term liquid assets must
consist of not less than 1%. At March 31, 1996, the Bank met its liquidity
requirement and expects to meet this requirement in the future. The Bank adjusts
liquidity as appropriate to meet its asset/liability objectives.
-13-
<PAGE>
OTS has also set minimum capital requirements for savings banks such as the
Bank. The capital standards generally require the maintenance of regulatory
capital sufficient to meet a tangible capital requirement, a core capital
requirement and a risk-based capital requirement. At March 31, 1996 the Bank
exceeded all of the minimum capital requirements as currently required. Please
refer to Note 11 of the accompanying Notes to Consolidated Financial Statements
for more information regarding the Bank's regulatory capital position at March
31, 1996.
IMPACT OF INFLATION AND CHANGING PRICES
The financial statements of Guthrie Savings, Inc. and notes thereto, presented
elsewhere herein, have been prepared in accordance with generally accepted
accounting principles, which require the measurement of financial position and
operating results in terms of historical dollars without considering the change
in the relative purchasing power of money over time and due to inflation. The
impact of inflation is reflected in the increased cost of the Bank's operations.
Nearly all the assets and liabilities of the Bank are monetary. As a result,
interest rates have a greater impact on the Bank's performance than do the
effects of general levels of inflation. Interest rates do not necessarily move
in the same direction or to the same extent as the price of goods and services.
OTHER INFORMATION
Due to a disparity in the capitalization of federal deposit insurance funds,
effective September 30, 1995 the FDIC lowered the insurance premium for members
of the Bank Insurance Fund ("BIF") to a range of between 0.04% and 0.31% of
deposits while maintaining the current range of between 0.23% and 0.31% of
deposits for members of the Savings Association Insurance Fund ("SAIF").
Effective January 1, 1996, the FDIC lowered the annual insurance premium for
most BIF members to $2,000. This disparity in insurance premiums for BIF members
places SAIF members, such as the Bank, at a material competitive disadvantage to
BIF members. Proposals under consideration for addressing this disparity include
a possible one-time assessment on deposits of 0.85% on SAIF members, sufficient
to recapitalize SAIF to a level that would approach that of BIF. While there can
be no assurance that this or any other proposal will be effected, a one-time
assessment could have an adverse impact on the Bank's results of operations.
Based on outstanding deposits as of March 31, 1996, a 0.85% assessment would
result in expense to the Bank of approximately $300,000 on a pre-tax basis.
In connection with the consideration of the BIF/SAIF disparity, various bills
have been introduced in congress which would call for eventual combination of
the insurance funds and would address the tax deductibility of a proposed
one-time assessment. Certain bills introduced call for conversion of the thrift
charter into a bank charter. The tax impact of elimination of the thrift charter
could be significant if it resulted in recapture of existing tax bad debt
reserves in excess of those allowed for banks. As of March 31, 1996, tax bad
debt reserves for which no deferred or current tax liability has been accrued
amounted to approximately $1.3 million.
Other than the items addressed above, the Company is not aware of any current
recommendations by regulatory authorities which, if they were implemented, would
have a material effect on the company's liquidity, capital resources, or results
of operations.
IMPACT OF NEW ACCOUNTING STANDARDS
Please refer to Note 1 of the accompanying Notes to Consolidated Financial
Statements for more information regarding the impact of new accounting
standards.
-14-
<PAGE>
[REGIER CARR & MONROE, L.L.P. LETTERHEAD]
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors and Stockholders of
Guthrie Savings, Inc.
Guthrie, Oklahoma
We have audited the accompanying consolidated statements of financial condition
of Guthrie Savings, Inc. and subsidiary as of March 31, 1996 and 1995 and the
related consolidated statements of operations, changes in stockholders' equity,
and cash flows for each of the three years in the period ended March 31, 1996.
These financial statements are the responsibility of the Corporation's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Guthrie Savings, Inc. and
subsidiary as of March 31, 1996 and 1995, and the results of their operations
and cash flows for each of the three years in the period ended March 31, 1996 in
conformity with generally accepted accounting principles.
/s/Regier Carr & Monroe, L.L.P.
April 26, 1996
Wichita, Kansas
F-1
<PAGE>
GUTHRIE SAVINGS, INC.
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
MARCH 31, 1996 AND 1995
<TABLE>
<CAPTION>
ASSETS 1996 1995
------------ ------------
<S> <C> <C>
Cash and cash equivalents:
Interest bearing $ 989,674 $ 728,897
Non-interest bearing 412,435 361,576
Investment securities held-to-maturity (estimated market
value of $9,694,395 and $8,237,798 at March 31,
1996 and 1995, respectively) 9,750,531 8,366,252
Investment securities available-for-sale 2,133,093 929,103
Mortgage-backed securities held-to-maturity (estimated
market value of $9,373,000 and $9,599,223 at
March 31, 1996 and 1995, respectively) 9,428,366 9,869,408
Loans receivable, net 22,971,565 23,181,534
Accrued income receivable 363,528 356,022
Real estate owned and other repossessed assets, net 63,827
Office properties and equipment, net 627,836 663,281
Prepaid expenses and other assets 110,845 114,213
Income taxes receivable, current 31,758 52,096
Deferred income taxes 40,918
------------ ------------
Total assets $ 46,819,631 $ 44,727,127
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits $ 36,310,860 $ 34,542,812
Advances and other borrowings from
Federal Home Loan Bank 2,000,000 1,700,000
Advances from borrowers for taxes and insurance 40,298 101,106
Dividend payable 222,740
Other liabilities and accrued expense 78,784 60,452
Deferred income 61,143 86,388
Deferred income taxes 57,151
------------ ------------
Total liabilities 38,770,976 36,490,758
------------ ------------
Commitments
Stockholders' equity:
Preferred stock, $0.01 par value; 1,000,000 shares
authorized; no share outstanding
Common stock, $0.01 par value; 3,000,000 shares
authorized; 515,125 shares issued and outstanding 5,151 5,151
Additional paid-in capital 4,765,516 4,763,293
Retained income, substantially restricted 4,222,553 3,860,335
Unrealized loss on available-for-sale securities (9,916) (915)
Unamortized stock acquired by Employee Stock
Ownership Plan (350,285) (391,495)
Unamortized compensation related to Management
Stock Bonus Plan (175,286)
Treasury stock, at cost, 30,498 shares at
March 31, 1996 (409,078)
------------ ------------
Total stockholders' equity 8,048,655 8,236,369
------------ ------------
Total liabilities and stockholders' equity $ 46,819,631 $ 44,727,127
============ ============
</TABLE>
The Notes to Consolidated Financial Statements are an integral part of these
statements.
F-2
<PAGE>
GUTHRIE SAVINGS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED MARCH 31, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
1996 1995 1994
---------- ---------- ----------
<S> <C> <C> <C>
Interest income:
Interest on loans $2,087,326 $2,036,441 $2,213,436
Interest on mortgage-backed securities 599,074 584,158 698,569
Interest and dividends on investment
securities 729,987 578,034 362,000
---------- ---------- ----------
Total interest income 3,416,387 3,198,633 3,274,005
---------- ---------- ----------
Interest expense:
Deposits 1,741,666 1,429,948 1,511,596
Borrowed funds 19,424 59,543
---------- ---------- ----------
Total interest expense 1,761,090 1,489,491 1,511,596
---------- ---------- ----------
Net interest income 1,655,297 1,709,142 1,762,409
Provision for losses on loans (131,875) 11,701 69,968
---------- ---------- ----------
Net interest income after loan loss
provision 1,787,172 1,697,441 1,692,441
---------- ---------- ----------
Non-interest income:
Service charges 166,907 176,076 178,334
Net gain on sale of investments 2,747
Other 34,470 33,237 33,939
---------- ---------- ----------
Total non-interest income 201,377 209,313 215,020
---------- ---------- ----------
Non-interest expense:
Compensation and related expenses 581,507 514,244 469,128
Occupancy expense 62,947 66,001 70,819
Professional fees 134,744 71,783 74,490
Federal insurance premium 82,267 87,970 90,613
Data processing 93,594 88,305 92,187
Loss (gain) from real estate operations (134,788) 16,418 24,055
Bank charges 52,438 53,326 60,501
Other expense 221,872 213,769 211,786
---------- ---------- ----------
Total non-interest expense 1,094,581 1,111,816 1,093,579
---------- ---------- ----------
Income before income taxes and
cumulative effect of change in
accounting principle 893,968 794,938 813,882
---------- ---------- ----------
Income taxes:
Currently payable 205,832 237,504 289,455
Deferred tax expense (benefit) 103,178 12,156 (11,629)
---------- ---------- ----------
309,010 249,660 277,826
---------- ---------- ----------
Income before cumulative effect
of change in accounting principle 584,958 545,278 536,056
Cumulative effect of April 1, 1994 change
in accounting for income taxes 127,796
--------- --------- ---------
Net income $ 584,958 $ 545,278 $ 663,852
========= ========= =========
Earnings per share (period subsequent to
initial issuance of common stock on
October 11, 1994 for 1995) $ 1.25 $ 0.48 $ -
========= ========= =========
Weighted average common shares outstanding 467,697 473,915 -
========= ========= =========
</TABLE>
The Notes to Consolidated Financial Statements are an integral part of these
statements.
F-3
<PAGE>
GUTHRIE SAVINGS, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
YEARS ENDED MARCH 31, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
Unrealized Unamortized
Gain (Loss) Common Unamortized Total
Additional on Available- Stock Compensation Stock-
Common Paid-In Retained for-Sale Acquired by Related to Treasury holders'
Stock Capital Earnings Securities ESOP MSBP Stock Equity
------ ---------- ---------- ---------- --------- --------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, March 31, 1993 $ - $ - $2,745,988 $ - $ - $ - $ - $2,745,988
Net income for the year
ended March 31, 1994 663,852 663,852
------ ---------- ---------- ---------- --------- --------- --------- ----------
Balance, March 31, 1994 - - 3,409,840 - - - - 3,409,840
Net proceeds on common stock
issued in stock conversion 5,151 4,763,124 (412,100) 4,356,175
Allocation of shares
by Employees'
Stock Ownership Plan 169 20,605 20,774
Net income for the year
ended March 31, 1995 545,278 545,278
Cash dividend paid ($0.20
per share) (94,783) (94,783)
Net change in unrealized loss
on available-for-sale
securities (915) (915)
------ ---------- ---------- ---------- --------- --------- --------- ----------
Balance, March 31, 1995 5,151 4,763,293 3,860,335 (915) (391,495) - - 8,236,369
Acquisition of 20,605 shares
of common stock by
Management Stock Bonus
Plan, 15,863 shares
awarded, 4,742
held in treasury (9,518) (202,253) (63,312) (275,083)
Allocation of shares by
Employees' Stock
Ownership Plan 11,741 41,210 52,951
Amortization of compensation
related to Management
Stock Bonus Plan 26,967 26,967
Net income for the year
ended March 31, 1996 584,958 584,958
Cash dividend paid ($0.50
per share) (222,740) (222,740)
Net change in unrealized
loss on available-
for-sale securities (9,001) (9,001)
Purchase of 25,756
treasury shares (345,766) (345,766)
------ ---------- ---------- ------- --------- --------- --------- ---------
$5,151 $4,765,516 $4,222,553 $(9,916) $(350,285) $(175,286) $(409,078) $8,048,655
====== ========== ========== ======= ========= ========= ========= ==========
</TABLE>
The Notes to Consolidated Financial Statements are an integral part of these
statements.
F-4
<PAGE>
GUTHRIE SAVINGS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED MARCH 31, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
1996 1995 1994
---------- ---------- ---------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 584,958 $ 545,278 $ 663,852
Adjustments to reconcile net income to net cash
provided by operating activities:
Gain on sale of investments (2,747)
Gain on sale of real estate acquired in
settlement of loans (114,611) (5,344) (873)
Equity loss in partnership 16,267
Depreciation 48,245 54,918 58,052
Amortization of premiums and
discounts on investments and loans 24,535 29,156 67,306
Provision for losses on loans and real
estate owned (131,875) 39,214 67,723
(Increase) decrease in accrued interest
receivable (7,506) (58,552) 20,486
(Increase) decrease in other assets 3,368 (1,674) 473
Increase (decrease) in accrued expenses 18,332 (72,974) 7,760
Increase (decrease) in accrued and deferred
income taxes 123,516 (58,196) (329,466)
Amortization related to ESOP and MSBP 79,918 20,774
Other non-cash items, net (25,646) (8,419) 7,563
---------- ---------- ---------
Net cash provided by operating activities 603,234 484,181 576,396
---------- ---------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Loan originations and principal payments
on loans held-for-investment 254,832 (1,465,163) 1,989,002
Proceeds from maturity of time deposits 200,000
Increase in time deposits (194,616)
Proceeds from sale of marketable equity securities 5,431
Proceeds from maturities and calls of investment
securities held-to-maturity 2,850,000
Proceeds from maturities and calls of investment
securities available-for-sale 300,000
Acquisition of investment securities
held-to-maturity (4,250,000) (2,899,531) (2,900,000)
Acquisition of investment securities
available-for-sale (1,518,100) (300,000)
Repayment of mortgage-backed securities 1,415,997 1,501,042 3,336,569
Acquisition of mortgage-backed securities
held-to-maturity (1,000,965) (257,050) (518,606)
Acquisition of fixed assets (12,800) (16,922) (43,695)
Proceeds from sale of real estate acquired in
settlement of loans 286,122 39,604 54,701
Other investing activities 50 (25,287) 125
---------- ---------- ---------
Net cash provided (used) by
investing activities (1,674,864) (3,223,307) 1,728,911
---------- ---------- ---------
</TABLE>
F-5
<PAGE>
GUTHRIE SAVINGS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
YEARS ENDED MARCH 31, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
1996 1995 1994
--------- --------- -----------
<S> <C> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase (decrease) in deposits 1,764,923 (4,542,902) (2,114,633)
Net decrease in escrow accounts (60,808) (1,161) (4,774)
Proceeds from FHLB advance and
other borrowings 2,300,000 2,700,000
Repayment of FHLB advance and other borrowings (2,000,000) (1,000,000)
Proceeds from stock issuance, net of conversion
costs and stock acquired by ESOP 4,376,238 (20,063)
Purchase of treasury stock (345,766)
Purchase of company stock by MSBP
held in treasury (63,312)
Purchase of company stock by MSBP
awarded to participants (211,771)
Cash dividends paid (94,783)
--------- --------- ---------
Net cash provided (used) by financing activities 1,383,266 1,437,392 (2,139,470)
--------- --------- ---------
Net increase (decrease) in
cash and cash equivalents 311,636 (1,301,734) 165,837
Cash and cash equivalents at beginning of year 1,090,473 2,392,207 2,226,370
--------- --------- ---------
Cash and cash equivalents at end of year $1,402,109 $1,090,473 $2,392,207
========= ========= =========
SUPPLEMENTAL DISCLOSURES
Cash paid during the year for:
Interest on deposits, advances and other
borrowings $1,760,621 $ 1,488,215 $ 1,514,098
========= ========= =========
Income taxes $ 226,170 $ 307,856 $ 479,496
========= ========= =========
Transfers from loans to real estate acquired
through foreclosure $ 107,333 $ 57,786 $ 618,467
========= ========= =========
Transfers to (from) real estate acquired
through foreclosure from deferred income $ (351) $ (11,398) $ 162,545
========= ========= =========
Loans to finance sale of real estate
through foreclosure $ 32,500 $ 136,038 $ 347,450
========= ========= =========
Dividend declared and payable $ 222,740 $ - $ -
========= ========= =========
</TABLE>
The Notes to Consolidated Financial Statements are an integral part of these
statements.
F-6
<PAGE>
GUTHRIE SAVINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1996, 1995 AND 1994
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF OPERATIONS:
Guthrie Savings, Inc. (the Company) is an Oklahoma corporation and is the
parent company of its wholly-owned subsidiary, Guthrie Federal Savings Bank
(the Bank). At the present time, the Company does not conduct any active
business.
Guthrie Federal Savings Bank is primarily engaged in attracting deposits from
the general public and using those deposits, together with other funds, to
originate real estate loans on one- to four-family residences, and, to a
lesser extent, consumer loans. The Bank has one office in Guthrie, Oklahoma,
which is located in its primary market area of Logan County, Oklahoma. In
addition, the Bank holds interest-bearing deposits in other financial
institutions and invests in mortgage-backed securities and investment
securities. The Bank offers its customers fixed-rate and adjustable-rate
mortgage loans, as well as consumer loans, including home equity and savings
account loans.
PRINCIPLES OF CONSOLIDATION:
The accompanying consolidated financial statements include the accounts of
Guthrie Savings, Inc. and its wholly-owned subsidiary, Guthrie Federal
Savings Bank. Significant intercompany transactions and balances have been
eliminated.
USE OF ESTIMATES:
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ significantly from those estimates.
Material estimates that are particularly susceptible to significant change in
the near-term relate to the determination of the allowance for loan losses
and the valuation of assets acquired in connection with foreclosures or in
satisfaction of loans. In connection with the determination of the allowances
for loan losses and the valuation of assets acquired by foreclosure,
management obtains independent appraisals for significant properties.
Management believes that the allowances for losses on loans and valuations of
assets acquired by foreclosure are adequate and appropriate. While management
uses available information to recognize losses on loans and assets acquired
by foreclosure, future loss may be accruable based on changes in economic
conditions, particularly in central Oklahoma. In addition, various regulatory
agencies, as an integral part of their examination process, periodically
review the Company's allowances for losses on loans and valuations of assets
acquired by foreclosure. Such agencies may require the Bank to recognize
additional losses based on their judgment of information available to them at
the time of their examination.
F-7
<PAGE>
GUTHRIE SAVINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
MARCH 31, 1996, 1995 AND 1994
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
CASH AND CASH EQUIVALENTS:
Cash and cash equivalents include unrestricted cash on hand, demand deposits
maintained in depository institutions and other readily convertible
investments with original contractual terms to maturity of three months or
less.
INVESTMENT AND MORTGAGE-BACKED SECURITIES:
In May 1993, the Financial Accounting Standards Board issued SFAS Statement
No. 115, Accounting for Certain Investments in Debt and Equity Securities.
This standard establishes three categories of investments, including
mortgage-backed securities; held-to-maturity, trading, and available-for-
sale. Under SFAS No. 115, held-to-maturity securities are reported at cost
adjusted for premiums and discounts that are recognized in interest income
using the interest method over the period to maturity. Trading securities are
reported at fair value, with unrealized changes in value reported in the
institution's income statement as part of its earnings. Available-for-sale
securities are also reported at fair value, but any unrealized appreciation
or depreciation, net of tax effects, are reported as a separate component of
equity. The Company adopted SFAS No. 115 with an effective adoption date of
April 1, 1994.
Prior to the adoption of SFAS No. 115, debt securities, including
mortgage-backed securities, were stated at cost, adjusted for amortization of
premiums and accretion of discounts by the level-yield method. The Company
had the positive intent and ability to hold such assets to maturity. Equity
securities that were non-marketable were carried at cost. All other equity
securities were carried at the lower of cost or estimated market value in the
aggregate. In the event the carrying amount was reduced below market, a
valuation account was established by a charge to equity representing the net
unrealized loss.
Gains or losses on sales of investment securities are determined using the
specific-identification method. All sales are made without recourse.
LOANS RECEIVABLE:
Loans receivable are stated at unpaid principal balances, net of deferred
income on loans, undisbursed loan proceeds and the allowance for loss on
loans. Premiums and discounts on loans are amortized into income using the
interest method.
The allowance for loan losses is increased by charges to income and decreased
by charge-offs (net of recoveries). Management's periodic evaluation of the
adequacy of the allowance is based on the Company's past loan loss
experience, known and inherent risks in the portfolio, adverse situations
that may affect the borrower's ability to repay, the estimated value of any
underlying collateral, current level of non-performing assets, and current
economic conditions.
F-8
<PAGE>
GUTHRIE SAVINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
MARCH 31, 1996, 1995 AND 1994
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
As part of the periodic evaluation of the allowance for loan losses,
management focuses on certain loans currently experiencing delinquency
problems and on certain loans with a prior significant delinquency history.
Based upon the loan's recent payment history, past payment history, knowledge
of the borrower and other factors, management may determine the loan to be
impaired. A loan is impaired when, based on management's evaluation of
current and historical information and events, it is probable that all
amounts due according to the contractual terms of the loan agreement will not
be collected. Loans which are classified as impaired are typically collateral
dependent; therefore, impairment is measured based upon the fair value of the
collateral less estimated costs to sell. Impairment is recognized by creating
a valuation allowance with a corresponding charge to provision for loss on
loans.
The accrual of interest on impaired loans is discontinued when, in
management's opinion, the borrower may be unable to meet payments as they
become due. When interest accrual is discontinued, all unpaid accrued
interest is reversed. Interest income is subsequently recognized only to the
extent cash payments are received.
LOAN ORIGINATION AND COMMITMENT FEES:
Loan origination fees, net of direct costs of originating the loan, are
recognized as an adjustment of the loan yield over the contractual life of
the loan using the interest method. When a loan is sold, unamortized fees are
recognized as income. Other loan fees and charges representing service costs
for the prepayment of loans, for delinquent payments or for miscellaneous
loan services are recognized when collected. Commitment fees and costs
relating to commitments whose likelihood of exercise is remote are recognized
over the commitment period on a straight-line basis. If the commitment is
subsequently exercised during the commitment period, the remaining
unamortized commitment fee at the time of exercise is recognized over the
life of the loan as an adjustment of yield.
REAL ESTATE OWNED AND OTHER REPOSSESSED ASSETS:
Real estate properties acquired through, or in lieu of, loan foreclosure are
initially recorded at the lower of fair value, minus estimated costs to sell,
or cost (recorded investment in the loan) at the date of foreclosure. Real
estate properties held for investment are carried at the lower of cost
including cost of improvements and amenities incurred subsequent to
acquisition, or net realizable value. Costs relating to development and
improvement of property are capitalized, whereas costs relating to the
holding of property are expensed. The portion of interest costs relating to
the development of real estate is capitalized.
Valuations are periodically performed by management, and an allowance for
losses is established by a charge to operations if the carrying value of a
property exceeds its fair value minus estimated costs to sell.
F-9
<PAGE>
GUTHRIE SAVINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
MARCH 31, 1996, 1995 AND 1994
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
OFFICE PROPERTIES AND EQUIPMENT:
Office properties and equipment are stated at cost less accumulated
depreciation. Depreciation is computed on a straight-line basis or
accelerated methods over the estimated useful lives of five to fifty years
for buildings and improvements and three to twenty years for furniture,
fixtures, equipment and automobiles.
INCOME TAXES:
In February, 1992, the Financial Accounting Standards Board issued SFAS No.
109, Accounting for Income Taxes. SFAS No. 109 requires a change from the
deferred method to the asset and liability method of accounting for income
taxes. Under the asset and liability method, deferred income taxes are
recognized for the tax consequences of "temporary differences" by applying
enacted statutory tax rates applicable to future years to differences between
the financial statement carrying amounts and the tax basis of existing assets
and liabilities. Under SFAS No. 109, the effect on deferred taxes of a change
in tax rates is recognized in income in the period that includes the
enactment date. The Company elected to adopt SFAS No. 109 during the year
ended March 31, 1994, and has reported the cumulative effect of the change in
the method of accounting for income taxes as of April 1, 1993, in the
statement of income for the year ended March 31, 1994.
IMPACT OF NEW ACCOUNTING STANDARDS:
In April, 1995, the FASB issued SFAS 121, Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of. Statement 121
establishes standards for recognizing and measuring impairment of long-lived
assets, certain identifiable intangibles, and goodwill when an entity is
unable to recover the carrying amount of those assets. This statement is
effective for fiscal years beginning after December 15, 1995. SFAS 121 is not
expected to have a material effect on the Company's financial statements.
In May, 1995, the FASB issued SFAS 122, Accounting for Mortgage Servicing
Rights. This statement amends SFAS 65, Accounting for Certain Mortgage
Banking Activities, to require that a mortgage banking enterprise recognize
as separate assets rights to service mortgage loans for others, however those
servicing rights are acquired. This statement requires that a mortgage
banking enterprise assess its capitalized mortgage servicing rights for
impairment based on the fair value of those rights. SFAS 122 is effective for
fiscal years beginning after December 15, 1995. The Company currently does
not service mortgage loans for others.
EARNINGS PER SHARE:
Earnings per share of common stock for 1995 was computed by dividing net
income subsequent to conversion by the weighted average number of common and
common equivalent shares outstanding subsequent to conversion, less
unallocated shares acquired by the Employee Stock Ownership Plan (Note 12).
F-10
<PAGE>
GUTHRIE SAVINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
MARCH 31, 1996, 1995 AND 1994
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Earnings per share of common stock for 1996 was computed based upon net
income divided by the weighted average number of common and common equivalent
shares outstanding for the year ended March 31, 1996, less unallocated shares
acquired by the Employees' Stock Ownership Plan.
FINANCIAL STATEMENT PRESENTATION:
Certain items in prior year financial statements have been reclassified to
conform to the 1996 presentation.
2. INVESTMENT SECURITIES
The amortized cost and estimated market values of investment securities at
March 31 are summarized as follows:
<TABLE>
<CAPTION>
March 31, 1996
---------------------------------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
---------- ------- -------- ----------
<S> <C> <C> <C> <C>
Held-to-maturity:
United States Treasury
Securities $1,550,531 $ 6,898 $ - $1,557,429
Government Agency Securities 8,200,000 47,500 110,534 8,136,966
---------- ------- -------- ----------
Total held-to-maturity $9,750,531 $54,398 $110,534 $9,694,395
========== ======= ======== ==========
Available-for-sale:
Government Agency Securities $1,500,000 $ - $55,065 $1,444,935
Stock in U.S. Savings League 55,000 40,040 95,040
Stock in Federal Home Loan Bank
at cost 592,300 592,300
Other, at fair value 818 818
---------- ------- -------- ----------
Total available-for-sale $2,148,118 $ 40,040 $55,065 $2,133,093
========== ======== ======= ==========
</TABLE>
F-11
<PAGE>
GUTHRIE SAVINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
MARCH 31, 1996, 1995 AND 1994
2. INVESTMENT SECURITIES (Continued)
<TABLE>
<CAPTION>
March 31, 1995
---------------------------------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
--------- ------ ------- ---------
<S> <C> <C> <C> <C>
Held-to-maturity:
United States Treasury
Securities $2,564,641 $ 18,425 $ 1,488 $2,581,578
Government Agency Securities 5,801,611 33,501 178,892 5,656,220
--------- ------ ------- ---------
Total held-to-maturity $8,366,252 $51,926 $180,380 $8,237,798
========== ======= ======== ==========
Available-for-sale:
Government Agency Securities $ 300,000 $ - $ 915 $ 299,085
Stock in U.S. Savings League 55,000 55,000
Stock in Federal Home Loan
Bank, at cost 574,200 574,200
Other, at fair value 818 818
--------- ------ ------- ---------
Total available-for-sale $ 930,018 $ - $ 915 $ 929,103
========== ======= ======== ==========
</TABLE>
Other equity securities include a limited partnership investment in the
former data processor of the Bank. The partnership is in the process of
liquidation and the investment has been adjusted to represent the
Association's interest in the estimated net realizable value of partnership
assets.
Government Agency Securities at March 31, 1996 and 1995 include $1,000,000 of
Federal Home Loan Bank bonds, at cost, with dual indexed or inverse floating
rate structures whose yield may not move consistent with general interest
rate movements.
Federal Home Loan Bank members are required to maintain an investment in
stock at an amount equal to a percentage of outstanding home loans. For
disclosure purposes, such stock, which is carried at cost, is assumed to have
a market value which is equal to cost.
The amortized cost and estimated market value of debt securities at March 31,
1996, by contractual maturity, are shown below. Expected maturities will
differ from contractual maturities because borrowers may have the right to
call or prepay obligations with or without call or prepayment penalties. The
equity securities have been excluded from the maturity table below because
they do not have contractual maturities associated with debt securities.
<TABLE>
<CAPTION>
Amortized Estimated
Cost Market Value
--------- ---------
<S> <C> <C>
Held-to-maturity:
Due in one year or less $ 1,550,531 $ 1,557,429
Due after one year through five years 4,700,000 4,652,032
Due after five years through ten years 3,500,000 3,484,934
----------- -----------
Total held-to-maturity $ 9,750,531 $ 9,694,395
=========== ===========
Available-for-sale:
Due after five years through ten years $ 1,500,000 $ 1,444,935
=========== ===========
</TABLE>
F-12
<PAGE>
GUTHRIE SAVINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
MARCH 31, 1996, 1995 AND 1994
2. INVESTMENT SECURITIES (Continued)
There were no realized gains or loss on sales of investment securities during
the years ended March 31, 1996 and 1995.
Gross realized gains on sales of investment securities were $2,747 for the
year ended March 31, 1994. Sales consisted of an interest in an entity
related to the Bank's prior data processor. Sales proceeds amounted to $5,431
for the year ended March 31, 1994. There were no sales of securities for the
years ended March 31, 1996 and 1995.
3. MORTGAGE-BACKED SECURITIES
As of March 31, 1996 and 1995, all mortgage-backed securities were classified
as held-to-maturity. Mortgage-backed securities consist of the following:
<TABLE>
<CAPTION>
March 31,
--------------------------
1996 1995
----------- -----------
<S> <C> <C>
FHLMC - fixed rate $ 1,554,924 $ 683,819
FHLMC - ARM's 1,561,354 1,755,257
GNMA - ARM's 3,669,165 4,254,692
FNMA - ARM's 937,910 1,044,665
GNMA - fixed rate 454,441 607,456
FNMA - fixed rate 905,840 1,102,769
Collateralized mortgage obligations-
government agency issue 200,897 246,192
----------- -----------
9,284,531 9,694,850
Unamortized pemiums 155,454 183,262
Unamortized discounts (11,619) (8,704)
----------- -----------
$ 9,428,366 $ 9,869,408
=========== ===========
</TABLE>
As of March 31, 1996 and 1995, gross unrealized gains and losses on
mortgage-backed securities are as follows:
<TABLE>
<CAPTION>
March 31, 1996
------------------------------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
---------- -------- -------- ----------
<S> <C> <C> <C> <C>
FHLMC - fixed rate $1,547,901 $ 20,350 $ 15,267 $1,552,984
FHLMC - ARM's 1,612,398 860 25,556 1,587,702
GNMA - ARM's 3,728,225 11,641 18,200 3,721,666
FNMA - ARM's 963,478 21,453 942,025
GNMA - fixed rate 453,901 17,267 471,168
FNMA - fixed rate 922,293 25,798 896,495
Collateralized mortgage
obligations-government
agency issue 200,170 790 200,960
---------- -------- -------- ----------
$9,428,366 $ 50,908 $106,274 $9,373,000
========== ======== ======== ==========
</TABLE>
F-13
<PAGE>
GUTHRIE SAVINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
MARCH 31, 1996, 1995 AND 1994
3. MORTGAGE-BACKED SECURITIES (Continued)
<TABLE>
<CAPTION>
March 31, 1995
------------------------------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
--------- ------- ------ ---------
<S> <C> <C> <C> <C>
FHLMC - fixed rate $ 680,976 $ 4,468 $ - $ 685,444
FHLMC - ARM's 1,813,133 87,952 1,725,181
GNMA - ARM's 4,324,864 125,781 4,199,083
FNMA - ARM's 1,073,704 36,000 1,037,704
GNMA - fixed rate 606,785 8,314 615,099
FNMA - fixed rate 1,124,665 31,837 1,092,828
Collateralized mortgage
obligations-government
agency issue 245,281 1,397 243,884
--------- ------- ------ ---------
$9,869,408 $12,782 $282,967 $9,599,223
========== ======= ======== ==========
</TABLE>
Collateralized mortgage obligations consist of floating rate notes with
varying contractual principal maturities. The Bank has no principal only,
interest only, or residual collateralized mortgage obligations.
There were no realized gains or losses on sales of mortgage-backed securities
during the years ended March 31, 1996, 1995 and 1994.
There were no mortgage-backed securities classified as available-for-sale as
of March 31, 1996 and 1995.
F-14
<PAGE>
GUTHRIE SAVINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
MARCH 31, 1996, 1995 AND 1994
4. LOANS RECEIVABLE
Loans receivable at March 31, are summarized as follows:
<TABLE>
<CAPTION>
March 31,
----------------------------
1996 1995
----------- -----------
<S> <C> <C>
First mortgage loans:
Secured by one to four family residences $17,905,894 $18,719,114
Secured by other properties 1,495,642 1,913,266
Construction loans 1,490,250 121,112
Other 578,004 676,237
----------- -----------
21,469,790 21,429,729
Less: Undisbursed loan proceeds (506,148) (1,914)
Unearned discounts and loan fees (76,607) (78,114)
Allowance for loan losses (286,567) (443,930)
----------- -----------
Total first mortgage loans 20,600,468 20,905,771
----------- -----------
Consumer and other loans:
Home equity and second mortgage 895,782 1,245,637
Loans on deposits 507,757 376,579
Other 1,072,203 749,148
----------- -----------
2,475,742 2,371,364
Less: Undisbursed loan proceeds (23) (95)
Allowance for loan losses (104,622) (95,506)
----------- -----------
Total consumer and other loans 2,371,097 2,275,763
----------- -----------
Net loans receivable $22,971,565 $23,181,534
=========== ===========
</TABLE>
The following is an analysis of the allowance for loss on loans:
<TABLE>
<CAPTION>
March 31,
---------------------------------------
1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
Balance at beginning of year $ 539,436 $ 557,545 $ 638,700
Provision charged to operations (131,875) 11,701 69,968
Loans charged off (30,113) (36,270) (171,294)
Recoveries 13,741 6,460 20,171
--------- --------- ---------
Balance at end of year $ 391,189 $ 539,436 $ 557,545
========= ========= =========
</TABLE>
Impairment of loans having recorded investments of $348,895 at March 31, 1996
and $395,906 at March 31, 1995 has been recognized in conformity with FASB
Statement No. 114, as amended by FASB Statement No. 118. The average recorded
investment in impaired loans during the years ended March 31, 1996 and 1995,
was $372,401 and $402,966, respectively. The total allowance
F-15
<PAGE>
GUTHRIE SAVINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
MARCH 31, 1996, 1995 AND 1994
4. LOANS RECEIVABLE Continued)
for loan losses related to these loans was $115,420 and $135,223 on March
31, 1996 and 1995, respectively. Interest income on impaired loans of
$36,239 and $43,131 was recognized for cash payments received for the years
ended March 31, 1996 and 1995, respectively.
It is Bank policy not to modify interest rates on loans associated with
troubled debt restructuring. The Bank is not committed to lend additional
funds to debtors whose loans have been modified.
See Note 16 for disclosure of loans to related parties.
5. ACCRUED INCOME RECEIVABLE
Accrued interest receivable at March 31 is summarized as follows:
<TABLE>
<CAPTION>
1996 1995
---------- ----------
<S> <C> <C>
Mortgage-backed securities $ 65,059 $ 64,318
Loans receivable 134,589 131,930
Investments 163,880 159,774
---------- ----------
$ 363,528 $ 356,022
========== ==========
</TABLE>
6. REAL ESTATE OWNED AND OTHER REPOSSESSED ASSETS
<TABLE>
<CAPTION>
March 31,
-------------------------
1996 1995
------------ ----------
<S> <C> <C>
Real estate acquired by foreclosure $ - $ 71,715
Allowance for loss (7,888)
----------- ----------
$ - $ 63,827
=========== ==========
</TABLE>
The following is a statement of changes in the allowance for loss account for
the years ended March 31:
<TABLE>
<CAPTION>
1996 1995 1994
------- -------- --------
<S> <C> <C> <C>
Balance at beginning of year $ 7,888 $ 33,354 $ 38,515
Provision charged (credited) to income 27,513 (2,245)
Losses charged to allowance (7,888) (52,979) (2,916)
------- -------- --------
Balance at end of year $ - $ 7,888 $ 33,354
======= ======== ========
</TABLE>
F-16
<PAGE>
GUTHRIE SAVINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
MARCH 31, 1996, 1995 AND 1994
6. REAL ESTATE OWNED AND OTHER REPOSSESSED ASSETS (Continued)
(Income) loss from real estate operations for the years ended March 31 is as
follows:
<TABLE>
<CAPTION>
1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
Gain on sale of real estate owned $(139,158) $ (21,356) $ -
Provision 27,513 (2,245)
Rental income (500) (150) (1,400)
Operating expenses 4,870 10,411 27,700
--------- --------- ---------
$(134,788) $ 16,418 $ 24,055
========= ========= =========
</TABLE>
7. OFFICE PROPERTIES AND EQUIPMENT
Office properties and equipment are stated at cost less accumulated
depreciation as follows:
<TABLE>
<CAPTION>
March 31,
--------------------------
1996 1995
---------- ----------
<S> <C> <C>
Land $ 398,332 $ 398,332
Building and improvements 622,292 622,292
Furniture and equipment 239,036 242,215
Automobiles 13,103 11,878
---------- ----------
1,272,763 1,274,717
Less accumulated depreciation (644,927) (611,436)
---------- ----------
$ 627,836 $ 663,281
========== ==========
Depreciation expense (1994 - $58,052) $ 48,245 $ 54,918
========== ==========
</TABLE>
F-17
<PAGE>
GUTHRIE SAVINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
MARCH 31, 1996, 1995 AND 1994
8. DEPOSITS
Deposits at March 31 are summarized as follows:
<TABLE>
<CAPTION>
Weighted
Average
Rate at 1996 1995
March 31, -------------------- --------------------
1996 Amount Percent Amount Percent
--------- ---------- ------- ---------- -------
Demand and NOW accounts,
including non-interest
bearing deposits of
$262,559 and $50,303 at
March 31, 1996 and 1995,
<S> <C> <C> <C> <C> <C>
respectively 2.18 % $ 5,357,597 14.8 % $ 4,791,073 13.9 %
Money Market 2.97 2,914,221 8.0 3,639,640 10.5
Passbook savings 2.60 3,475,710 9.6 3,475,526 10.1
---------- ---- ---------- ----
11,747,528 32.4 11,906,239 34.5
---------- ---- ---------- ----
Certificates of deposits:
3.00% to 3.99% 3.00 4,261 0.0 377,526 1.1
4.00% to 4.99% 4.63 1,296,735 3.5 7,339,036 21.2
5.00% to 5.99% 5.35 17,748,005 48.9 8,281,104 24.0
6.00% to 6.99% 6.59 5,120,385 14.1 6,291,824 18.2
7.00% to 7.99% 7.02 393,946 1.1 347,083 1.0
---------- ---- ---------- ----
24,563,332 67.6 22,636,573 65.5
---------- ---- ---------- ----
4.60 % $36,310,860 100.0 % $34,542,812 100.0 %
=========== ===== =========== =====
</TABLE>
The aggregate amount of jumbo certificates of deposit with a minimum
denomination of $100,000 was $1,623,692 and $1,295,942 at March 31, 1996 and
1995, respectively.
At March 31, 1996, scheduled maturities of certificates of deposit are as
follows:
<TABLE>
<CAPTION>
Year Ending March 31,
---------------------
<S> <C>
1997 $19,539,194
1998 2,979,483
1999 940,066
2000 912,396
2001 192,193
-----------
$24,563,332
===========
</TABLE>
F-18
<PAGE>
GUTHRIE SAVINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
MARCH 31, 1996, 1995 AND 1994
8. DEPOSITS (Continued)
Interest expense on deposits for the years ended March 31 is summarized as
follows:
<TABLE>
<CAPTION>
1996 1995 1994
---------- ---------- ----------
<S> <C> <C> <C>
Demand deposits $ 234,746 $ 277,624 $ 306,408
Savings deposits 102,198 112,915 116,761
Certificates of deposit 1,412,507 1,057,712 1,095,422
Early withdrawal penalties (7,785) (18,303) (6,995)
---------- ---------- ----------
$1,741,666 $1,429,948 $1,511,596
========== ========== ==========
</TABLE>
9. ADVANCES AND OTHER BORROWINGS FROM FEDERAL HOME LOAN BANK
Advances and other borrowings from the Federal Home Loan Bank at March 31 are
summarized as follows:
<TABLE>
<CAPTION>
1996 1995
---------- ---------
<S> <C> <C>
Advances $2,000,000 $ -
Line of credit 1,700,000
---------- ---------
$2,000,000 $1,700,000
========== ==========
</TABLE>
At March 31, 1996 and 1995, respectively, the Company had $0 and $1,700,000
outstanding under a $2,500,000 line of credit with the Federal Home Loan
Bank. The existing line of credit expires August 15, 1996 and bears interest
at the line of credit rate established by the Federal Home Loan Bank. This
rate is adjusted from time to time.
Advances outstanding at March 31, 1996 are due February 27, 1998 and bear
interest of 5.47%.
The advances and line of credit are collateralized by a blanket pledge
agreement, including all stock in Federal Home Loan Bank, qualifying first
mortgage loans, certain mortgage-related securities and other investments.
10.INCOME TAXES
As discussed in Note 1, the Company adopted SFAS No. 109 as of April 1, 1993.
The cumulative effect of this change in accounting for income taxes as of
April 1, 1993 increased net income by $127,796 and is reported separately in
the statement of income for the year ended March 31, 1994.
F-19
<PAGE>
GUTHRIE SAVINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
MARCH 31, 1996, 1995 AND 1994
10. INCOME TAXES (Continued)
The Company's effective income tax rate was different than the statutory
federal income tax rate for the following reasons:
<TABLE>
<CAPTION>
March 31,
-------------------------------
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Statutory federal income tax 34.0 % 34.0 % 34.0 %
Increase (reductions) resultig from:
Non-deductible items 0.1 0.1 0.1
Other 0.5 (2.7)
---- ---- ----
34.6 % 31.4 % 34.1 %
==== ==== ====
</TABLE>
Deferred taxes are included in the accompanying Statement of Financial
Condition at March 31, 1996 and 1995 for the estimated future tax effects of
differences between the financial statement and federal income tax basis of
assets and liabilities given the provisions of currently enacted tax laws.
The net deferred tax asset (liability) at March 31, 1996 and 1995 was
comprised of the following:
<TABLE>
<CAPTION>
1996 1995
---------- ----------
<S> <C> <C>
Deferred tax assets:
Deferred loan fees and costs $ 15,192 $ 18,849
Allowance for loan losses 93,761 137,433
Accrual for Management Stock Bonus Plan 9,169
Unrealized loss on available-for-sale
securities 5,109
Accrued vacation payable 3,787 3,936
---------- ----------
Total deferred tax assets 127,018 160,218
---------- ----------
Deferred tax liabilities:
Accumulated depreciation (4,930) (6,143)
Special bad debt deduction (76,552) (10,437)
FHLB stock dividends (102,442) (102,442)
Equity earnings (245) (278)
---------- ----------
Total deferred tax liabilities (184,169) (119,300)
---------- ----------
Net asset (liability) $ (57,151) $ 40,918
========== ========
</TABLE>
No valuation allowance was recorded against deferred tax assets at March 31,
1996 or 1995.
F-20
<PAGE>
GUTHRIE SAVINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
MARCH 31, 1996, 1995 AND 1994
10. INCOME TAXES (Continued)
The Bank is allowed a special bad debt deduction based on a percentage of
taxable income (presently 8%) or on specified experience formulas, subject to
certain limitations based upon aggregate loan balances at the end of the
year. The Bank used the percentage-of-taxable income method in 1996, 1995 and
1994. If the amounts deducted are used for purposes other than for loan
losses, such as in a distribution in liquidation or otherwise, or if the Bank
would cease to be a qualified thrift lender under the tax law, the amounts
deducted would be subject to federal income tax at the then current corporate
tax rate. Prior to April 1, 1993, no deferred taxes were recorded for the
excess of the cumulative special bad debt deductions in excess of loan loss
provisions provided for financial statements purposes. Effective with the
adoption of SFAS No. 109, however, the Bank is required to record, and has
recorded, a deferred tax asset related to the allowance for loan losses
reported for financial reporting purposes and a deferred tax liability for
special bad debt deductions after December 31, 1987. The Bank, in accordance
with SFAS No. 109, has not recorded a deferred tax liability of approximately
$364,000 related to approximately $1,072,000 of cumulative special bad debt
deductions prior to December 31, 1987.
At March 31, 1996, the Corporation has net operating loss carryforward for
state income tax purposes of $513,000, which will expire March 31, 2006.
11.REGULATORY AND CAPITAL MATTERS
The Bank is subject to minimum regulatory capital requirements. Capital
regulations require institutions to have a minimum regulatory tangible
capital equal to 1.5 percent of total assets, a minimum 3.0 percent core
capital ratio and an 8.0 percent risk-based capital ratio.
The Bank at March 31, 1996, meets all capital requirements. At March 31,
1996, the Bank's regulatory tangible capital was $6,302,134 or 13.4 percent
of total assets, core capital was $6,302,134 or 13.4 percent of total assets,
and risk-based capital was $6,544,134 or 33.8 percent of total risk- adjusted
assets, as defined by regulation.
The following is a reconciliation of GAAP capital to regulatory capital and
the Bank's approximate regulatory capital position as reported to the Office
of Thrift Supervision (OTS) as of March 31, 1996:
<TABLE>
<CAPTION>
Regulatory
-------------------------------------
GAAP Tangible Core Risk-Based
Capital Capital Capital Capital
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
GAAP capital, as adjusted $6,312,050 $6,312,050 $6,312,050 $6,312,050
Additional capital items:
Unrealized loss on investment
securities held for sale 9,916 9,916 9,916
General valuation
allowances, limited 242,000
---------- ---------- ----------
Regulatory capital, computed 6,321,966 6,321,966 6,563,966
Minimum capital requirements 701,000 1,402,000 1,548,000
---------- ---------- ----------
Regualtory capital - excess $5,620,966 $4,919,966 $5,015,966
========== ========== ==========
</TABLE>
F-21
<PAGE>
GUTHRIE SAVINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
MARCH 31, 1996, 1995 AND 1994
11. REGULATORY AND CAPITAL MATTERS (Continued)
The Bank may not declare or pay a cash dividend to the Company if the effect
would cause the net worth of the Bank to be reduced below either the amount
required for the liquidation account or the net worth requirement imposed by
the OTS, and if all capital requirements continue to be met, may not declare
or pay a cash dividend in an amount in excess of the Bank's net earnings for
the fiscal year in which the dividend is declared plus one-half of the
surplus over the capital requirements, without prior approval of the OTS. OTS
approval is required for the Bank to pay dividends in excess of these
limitations.
12.EMPLOYEE BENEFITS PLANS
DEFINED BENEFIT PLAN:
The Bank had a noncontributory defined benefit, insurance-related pension
plan for all eligible employees. Benefits were based on employee compensation
and years of service (not to exceed 37 years). The Bank's funding policy was
to contribute annually the minimum amount necessary to fund the plan.
Contributions were intended to provide not only for benefits attributed to
service to date but also for those expected to be earned in the future.
During the year ended March 31, 1994, the Bank terminated the defined benefit
pension plan. At March 31, 1994, the Bank had accrued the estimated amount to
fully fund the plan. Plan assets consisted of accumulated cash and insurance
contracts. During the year ended March 31, 1995, the Bank purchased the
contracts and fully distributed funds to the participants and received a
favorable termination ruling from the Internal Revenue Service. Upon plan
termination, participants became fully vested. During the year ended March
31, 1994, the Bank incurred a curtailment and settlement gain on termination
of the plan of $21,000, which decreased pension expense for the year. The
gain was the result of the effects of the pension benefits based on future
compensation levels no longer being an obligation and the unrecognized net
asset from the initial application of FASB No. 87 that remained unamortized.
As a result of the plan termination, the projected benefit obligation used in
accruing the pension liability at March 31, 1994, represented the greater of
the benefit computed using the rate assumption disclosed below or the rates
prescribed by the PBGC, (Pension Benefit Guaranty Corporation). The
accumulated benefit obligation was computed using the rate assumptions
disclosed as follows.
F-22
<PAGE>
GUTHRIE SAVINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
MARCH 31, 1996, 1995 AND 1994
12. EMPLOYEE BENEFITS (Continued)
The following table sets forth the plan's funded status as of March 31, 1994:
<TABLE>
<S> <C>
Accumulated benefit obligation:
Vested $ 192,394
Nonvested -
---------
$ 192,394
=========
Plan assets at fair value $ 150,209
Projected benefit obligation (203,336)
---------
Plan assets short of projected benefit
obligation (53,127)
Unrecognized net gain (6,038)
Unamortized net asset from transition (4,235)
---------
Pension liability $ (63,400)
=========
</TABLE>
Net pension expense relating to the plan for the year ended March 31, 1994,
includes the following components:
<TABLE>
<CAPTION>
<S> <C>
Service cost $ 14,658
Interest cost 13,185
Expected return on assets (9,081)
Net amortization and deferral (426)
----------
$ 18,336
==========
Assumptions used in the accounting
for net pension expenses were:
Discount rate 5.00%
Rates of increase in compensation levels N/A
Long-term rate of return on assets 5.00%
</TABLE>
During the year ended March 31, 1995, an additional $8,826 was expended to
fully fund the accumulated benefit obligation of the terminated plan.
EMPLOYEE STOCK OWNERSHIP PLAN:
Upon conversion from mutual to stock form, the Bank established an employee
stock ownership plan (ESOP). The original acquisition of 41,210 shares of
Company stock by the plan was funded by a loan from the Company to the ESOP,
in the amount of $412,100. The loan, together with interest, is to be repaid
over a ten year period. The debt, which is accounted for as a liability of
the Bank and a receivable for the Company, has been eliminated in
consolidation.
F-23
<PAGE>
GUTHRIE SAVINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
MARCH 31, 1996, 1995 AND 1994
12. EMPLOYEE BENEFITS (Continued)
The Bank makes annual contributions to the ESOP equal to the ESOP's debt
service less dividends received by the ESOP. All dividends received by the
ESOP are used to pay debt service. The ESOP shares initially were pledged as
collateral for its debt. As the debt is repaid, shares are released from the
collateral and will be allocated to active employees, based on the proportion
of debt service paid in the year. The Bank accounts for its ESOP in
accordance with Statement of Position No. 93-6. Accordingly, the debt of the
ESOP is recorded as debt of the Bank and the shares pledged as collateral are
reported as unearned ESOP shares in the Statement of Financial Condition. As
shares are released from collateral, the Company reports compensation expense
equal to the current market price of the shares, and the shares become
outstanding for earnings per share (EPS) computations. Dividends on allocated
ESOP shares are recorded as a reduction of retained earnings; dividends on
unallocated ESOP shares are recorded as compensation expense. ESOP
compensation expense was $8,197 and $19,575 for the years ended March 31,
1996 and 1995, respectively. As of March 31, 1996, of the 41,210 shares of
Company stock acquired by the ESOP, 6,181 shares were allocated and 35,029
shares were unallocated. The 35,029 unallocated shares had an estimated
market value of $455,377 at March 31, 1996.
MANAGEMENT STOCK BONUS PLAN:
During the year ended March 31, 1996, the Bank adopted a Management Stock
Bonus Plan (MSBP), the objective of which is to enable the Bank to retain
personnel of experience and ability in key positions of responsibility. All
employees of the Bank are eligible to receive benefits under the MSBP.
Benefits may be granted at the sole discretion of a committee appointed by
the Board of Directors. The MSBP is managed by trustees who are non-employee
directors and who have the responsibility to invest all funds contributed by
the Bank to the trust created for the MSBP.
The MSBP has purchased 20,605 shares of the Company's stock for $275,083.
15,863 of these shares were granted in the form of restricted stock payable
over a five-year period at the rate of one-fifth of such shares per year
following the date of grant of the award. Compensation expense, in the amount
of the fair market value of the common stock at the date of the grant to the
employee, will be recognized pro rata over the five years during which the
shares are payable. A recipient of such restricted stock will be entitled to
all voting and other stockholder rights, except that the shares, while
restricted, may not be sold, pledged or otherwise disposed of and are
required to be held in escrow. If a holder of such restricted stock
terminates employment for reasons other than death, disability or retirement,
the employee forfeits all rights to the allocated shares under restriction.
If the participant's service terminates as a result of death, disability,
retirement or a change in control of the Bank, all restrictions expire and
all shares allocated become unrestricted. The 4,742 shares that have not been
granted are accounted for as treasury stock. The Board of Directors can
terminate the MSBP at any time, and if it does so, any shares not allocated
will revert to the Company.
F-24
<PAGE>
GUTHRIE SAVINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
MARCH 31, 1996, 1995 AND 1994
13.STOCK OPTION PLAN
The Company's Board of Directors and stockholders ratified, effective July
27, 1995, the 1994 Stock Option Plan (the Option Plan). Pursuant to the
Option Plan, 51,512 shares of common stock are reserved for issuance by the
Company upon exercise of stock options granted to officers, directors and
employees of the Company and Bank from time to time under the Option Plan.
The Option Plan provides for a term of ten years, after which no awards may
be made, unless earlier terminated by the Board of Directors pursuant to the
Option Plan.
The Option Plan will be administered by a committee of at least three
non-employee directors designated by the Board of Directors (the Option
Committee). The Option Committee will select the employees to whom options
are to be granted and the number of shares to be granted. The option price
may not be less than 100% of the fair market value of the shares on the date
of the grant, and no option shall be exercisable after the expiration of ten
years from the grant date. In the case of any employee who owns more than 10%
of the outstanding common stock at the time the option is granted, the option
price may not be less than 110% of the fair market value of the shares on the
date of the grant, and the option shall not be exercisable after the
expiration of five years from the grant date. The exercise price may be paid
in cash, shares of the common stock, or a combination of both.
Effective with ratification of the Option Plan, the Option Committee granted
31,936 shares of common stock, at an exercise price of $12.63 per share.
Except as otherwise noted, all such options shall be exercisable at the rate
of 20% on the one-year anniversary and 20% annually thereafter, except that
in the event that the fair market value of the common stock subject to such
grant to any one individual exceeds $100,000, the amount in excess of
$100,000 shall not be considered exercisable until the next calendar year.
Notwithstanding anything herein to the contrary, in no event shall any
options granted be exercisable for a period of six months from the date of
grant, except in the event of the death or disability of the option holder.
Options shall be immediately exercisable in the event of the retirement
following not less than 10 years of service, death or disability of the
option holder, or upon change of control in the Company as provided in the
plan. As of March 31, 1996, no options have been exercised and all options
granted remain outstanding.
14.FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK/COMMITMENTS
The Company is a party to financial instruments with off-balance-sheet risk
in the normal course of business to meet the financial needs of its customers
and to reduce its own exposure to fluctuations in interest rates. These
financial instruments include commitments to extend credit and commitments to
sell investments. These instruments involve, to varying degrees, elements of
credit and interest rate risk in excess of the amount recognized in the
Statement of Financial Condition. The contract or notional amounts of those
instruments reflect the extent of involvement the Company has in particular
classes of financial instruments.
F-25
<PAGE>
GUTHRIE SAVINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
MARCH 31, 1996, 1995 AND 1994
14.FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK/COMMITMENTS (Continued)
The Company's exposure to credit loss in the event of non-performance by the
other party to the financial instrument for loan commitments is represented
by the contractual notional amount of those instruments. The Bank uses the
same credit policies in making commitments as it does for on-balance-sheet
instruments.
At March 31, 1996, the Bank had outstanding commitments to fund real estate
loans of $94,500. All commitments outstanding were for fixed rate loans at
rates of 7 3/4% to 9 1/2%.
Loan commitments are agreements to lend to a customer as long as there is no
violation of any condition established in the contract. Commitments generally
have fixed expiration dates or other termination clauses and may require
payment of a fee. Since many of the commitments are expected to expire
without being drawn upon, the total commitment amounts do not necessarily
represent future cash requirements. The Company evaluates each customer's
creditworthiness on a case-by-case basis. The amount of collateral obtained
if deemed necessary by the Company upon extension of credit is based on
management's credit evaluation of the counter-party. Collateral held is
primarily residential real estate, but may include autos, accounts
receivable, inventory, property, plant and equipment.
15.SIGNIFICANT CONCENTRATIONS OF CREDIT RISK
The Company grants mortgage, consumer and business loans primarily to
customers within the state. Although the Bank has a diversified loan
portfolio, a substantial portion of its customers' ability to honor their
contracts is dependent upon the agribusiness and energy sectors of the
economy. The Company's net investment in loans is subject to a significant
concentration of credit risk given that the investment is primarily within a
specific geographic area.
As of March 31, 1996, the Company had a net investment of $22,971,565 in
loans receivable. These loans possess an inherent credit risk given the
uncertainty regarding the borrower's compliance with the terms of the loan
agreement. To reduce credit risk, the loans are secured by varying forms of
collateral, including first mortgages on real estate, liens on personal
property, savings accounts, etc. It is generally Company policy to file liens
on titled property taken as collateral on loans, such as real estate and
autos. In the event of default, the Company's policy is to foreclose or
repossess collateral on which it has filed liens.
In the event that any borrower completely failed to comply with the terms of
the loan agreement and the related collateral proved worthless, the Company
would incur a loss equal to the loan balance.
F-26
<PAGE>
GUTHRIE SAVINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
MARCH 31, 1996, 1995 AND 1994
16.RELATED PARTY TRANSACTIONS
Directors and officers of the Company were customers of, and had transactions
with, the Bank in the ordinary course of business during the years ended
March 31, 1996 and 1995, and similar transactions are expected in the future.
All loans included in such transactions were made on substantially the same
terms, including interest rates and collateral, as those prevailing at the
time for comparable transactions with other persons and did not involve more
than normal risk of loss or present other unfavorable features. Principal
officers, directors, employees and companies in which they have partial
ownership were indebted to the Bank in the aggregate amount of approximately
$365,709 and $434,744 at March 31, 1996 and 1995, respectively.
The following analysis is of loans made to principal officers and directors
which individually exceed $60,000 in the aggregate during the year ended
March 31, 1996:
<TABLE>
<S> <C>
Balance March 31, 1994 $ 234,581
New loans 131,209
Repayments (85,337)
Other changes 50,487
---------
Balance March 31, 1995 330,940
New loans 13,015
Repayments (195,135)
---------
Balance March 31, 1996 $ 148,820
=========
</TABLE>
17.CONVERSION TO STOCK FORM OF OWNERSHIP
On February 8, 1994, the Board of Directors of the Bank adopted a Plan of
Conversion to convert from a state chartered mutual savings and loan
association to a federally chartered stock savings bank with the concurrent
formation of Guthrie Savings, Inc. to act as a holding company of the Bank
(the Conversion).
At the date of conversion, October 11, 1994, the Company completed the sale
of 515,125 shares of common stock, $0.01 par value, through concurrent
subscription and community offerings at $10.00 per share. Included in the
total shares outstanding are 41,210 shares which were purchased by the Bank's
ESOP at $10.00 per share. Net proceeds from the conversion, after recognizing
conversion expenses and underwriting costs of $382,975 were $4,768,275. From
the net proceeds, the Company used $2,384,138 to purchase all of the capital
stock of the Bank and $412,100 to fund the purchase of 41,210 shares of the
Company stock by the ESOP (Note 12).
F-27
<PAGE>
GUTHRIE SAVINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
MARCH 31, 1996, 1995 AND 1994
17.CONVERSION TO STOCK FORM OF OWNERSHIP (Continued)
Federal Home Loan Bank regulations require that upon conversion from 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. In the event of complete liquidation (and only in such event)
each savings account holder who continues to maintain their 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 common stock. The initial liquidation account was established at
$3,534,000. This account may be proportionately reduced for any subsequent
reduction in the eligible holder's savings accounts.
See Note 11 for discussion of restrictions on retained earnings of the Bank.
18.DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used to estimate the fair value of
each class of financial instruments for which it is practicable to estimate
that value.
CASH AND CASH EQUIVALENTS:
For those short-term instruments, the carrying amount is a reasonable
estimate of fair value.
INVESTMENT SECURITIES AND MORTGAGE-BACKED SECURITIES: Fair values are based
on quoted market prices or dealer quotes, if available. If a quoted market
price or dealer quote is not available, fair value is estimated using quoted
market prices for similar securities.
LOANS RECEIVABLE:
The fair value of loans is estimated by discounting the future cash flows
using the current rates at which similar loans would be made to borrowers
with similar credit ratings and for the same remaining maturities.
DEPOSIT LIABILITIES:
The fair value of demand deposits, savings accounts, and certain money market
deposits is the amount payable on demand at the reporting date. The fair
value of fixed-maturity certificates of deposit are estimated using the rates
currently offered for deposits of similar remaining maturities.
ADVANCES AND OTHER BORROWINGS FROM FEDERAL HOME LOAN BANK: The fair value of
advances from the Federal Home Loan Bank are estimated using the rates
offered for similar borrowings.
COMMITMENTS TO EXTEND CREDIT:
The fair value of commitments is estimated using the fees currently charged
to enter into similar agreements, taking into account the remaining terms of
the agreements and the present
F-28
<PAGE>
GUTHRIE SAVINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
MARCH 31, 1996, 1995 AND 1994
18. DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS (Continued)
creditworthiness of the counterparties. For fixed-rate loan commitments, fair
value also considers the difference between current levels of interest rates and
the committed rates.
The estimated fair values of the Bank's financial instruments are as follows:
<TABLE>
<CAPTION>
March 31, 1996
--------------------------
Carrying
Amount Fair Value
----------- ----------
(In Thousands)
<S> <C> <C>
Financial assets:
Cash and cash equivalents:
Interest bearing $ 990 $ 990
Non-interest bearing 412 412
Investment securities held-to-maturity 9,751 9,694
Investment securities available-for-sale 2,133 2,133
Mortgage-backed securities held-to-maturity 9,428 9,373
Loans receivable 22,972 23,454
Financial liabilities:
Deposits 36,311 36,358
Advances and other borrowings from Federal Home
Loan Bank 2,000 1,981
</TABLE>
<TABLE>
<CAPTION>
Notional Amount Fair Value
--------------- ----------
(In Thousands)
Unrecognized financial instruments:
<S> <C> <C>
Commitments to extend credit $ 95 $ 1
</TABLE>
F-29
<PAGE>
GUTHRIE SAVINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
MARCH 31, 1996, 1995 AND 1994
19.PARENT COMPANY FINANCIAL INFORMATION
Condensed financial statements of Guthrie Savings, Inc. (Parent Company) are
shown below. The Parent Company has no significant operating activities.
CONDENSED STATEMENT OF FINANCIAL CONDITION
AS OF MARCH 31, 1996 AND 1995
(IN THOUSANDS)
<TABLE>
<CAPTION>
1996 1995
---------- ----------
<S> <C> <C>
Assets
Cash and cash equivalents $ 74 $ 69
Investment in subsidiary 2,630 2,238
Loans receivable (subsidiary and ESOP) 1,900 2,267
Other 5
---------- ----------
Total assets $ 4,609 $ 4,574
========== ==========
Liabilities and stockholders' equity
Liabilities:
Dividend payable $ 222 $ -
Payable to subsidiary 18
Other 20
---------- ----------
Total liabilities 242 18
---------- ----------
Stockholders' equity:
Common stock 5 5
Additional paid-in capital 4,765 4,763
Retained income 542 179
Net unrealized loss on available-for-
sale securities (10)
Unamortized amounts related to ESOP and MSBP (526) (391)
Treasury stock (409)
---------- ----------
Total stockholders' equity 4,367 4,556
---------- ----------
Total liabilities and stockholders'
equity $ 4,609 $ 4,574
========== ==========
</TABLE>
CONDENSED STATEMENT OF OPERATIONS
YEAR ENDED MARCH 31, 1996 AND 1995
(IN THOUSANDS)
<TABLE>
<CAPTION>
1996 1995
---------- ----------
<S> <C> <C>
Equity earnings of subsidiary $ 598 $ 245
Interest income 130 67
-------- --------
Total income 728 312
-------- --------
Other expenses 140 20
-------- --------
Income before income taxes 588 292
Income tax expense 3 18
-------- --------
Net income $ 585 $ 274
========= =========
</TABLE>
F-30
<PAGE>
GUTHRIE SAVINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
MARCH 31, 1996, 1995 AND 1994
19. PARENT COMPANY FINANCIAL INFORMATION (Continued)
CONDENSED STATEMENT OF CASH FLOWS
YEAR ENDED MARCH 31, 1996 AND 1995
(IN THOUSANDS)
<TABLE>
<CAPTION>
1996 1995
--------- ---------
<S> <C> <C>
Cash flows from operating activities
Net income $ 585 $ 274
Adjustments to reconcile net income to net cash
provided (used for) operating activities:
Equity in net income of subsidiary (598) (245)
Increase in other assets (5)
Increase in other liabilities 2 18
--------- ---------
Net cash provided (used) by operating activities (16) 47
--------- ---------
Cash flow from investing activities:
Investment in subsidiary (2,384)
Loans to subsidiary and ESOP, net 367 (2,267)
--------- ---------
Net cash provided (used) by investing activities 367 (4,651)
--------- ---------
Cash flows from financing activities:
Issuance of common stock, net 4,768
Cash dividends paid (95)
Purchase of treasury stock (346)
--------- ---------
Net cash provided (used) by financing activities (346) 4,673
--------- ---------
Increase in cash and cash equivalents 5 69
Cash at beginning of year 69
--------- ---------
Cash at end of year $ 74 $ 69
========= ========
</TABLE>
20.SUBSEQUENT EVENT
Subsequent to March 31, 1996, the Company received approval from the Office
of Thrift Supervision to implement an additional five-percent stock
repurchase program. The Company intends to purchase up to 24,468 shares of
common stock in the open market through October 11, 1996, (subject to the
availability of the stock, market conditions, and the trading price of the
stock). No assurances can be given as to when such repurchase will be made or
the actual number of shares that will be purchased.
F-31
<PAGE>
GUTHRIE SAVINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
MARCH 31, 1996, 1995 AND 1994
21.RECENT DEVELOPMENTS
Due to a disparity in the capitalization of federal deposit insurance funds,
effective September 30, 1995, the FDIC lowered the insurance premium for
members of the Bank Insurance Fund (BIF) to a range of between 0.04% and
0.31% of deposits while maintaining the current range of between 0.23% and
0.31% of deposits for members of the Savings Association Insurance Fund
(SAIF). Additionally, effective January 1996, the total annual insurance
premium for most BIF member was lowered to $2,000. These reductions in
insurance premiums for BIF members places SAIF members, such as the Bank, at
a material competitive disadvantage to BIF members. Proposals under
consideration for addressing this disparity include a possible one-time
assessment on deposits of 0.85% on SAIF members, sufficient to recapitalize
SAIF to a level that would approach that of BIF. While there can be no
assurance that this or any other proposal will be affected, a one-time
assessment could have a adverse impact on the Bank's results of operations.
Based on outstanding deposits as of March 31, 1996, a 0.85% assessment would
result in expense to the Bank of approximately $300,000 on a pre-tax basis.
In connection with the consideration of the BIF/SAIF disparity, various bills
have been introduced in congress which would call for eventual combination of
the insurance funds and would address the tax deductibility of a proposed
one-time assessment. Certain bills introduced call for conversion of the
thrift charter into a bank charter. The tax impact of elimination of the
thrift charter could be significant if it resulted in recapture of existing
tax bad debt reserves in excess of those allowed for banks. As of March 31,
1996, tax bad debt reserves for which no deferred or current tax liability
has been accrued amounted to approximately $1.3 million.
F-32
<PAGE>
OFFICE LOCATION
CORPORATE OFFICE
Guthrie Savings, Inc.
120 North Division
Guthrie, Oklahoma 73044
BOARD OF DIRECTORS OF GUTHRIE SAVINGS, INC.
William L. Cunningham H. Stephen Ochs
President and Chief Vice President
Executive Officer
Keith Camerer James V. Seamans
Co-Owner, Jelsma Abstract Company Dentist
Alvin R. Powell, Jr.
Self Employed, Theater Owner/Real Estate Broker
EXECUTIVE OFFICERS OF GUTHRIE SAVINGS, INC.
William L. Cunningham H. Stephen Ochs
President and Chief Vice President
Executive Officer
Kathleen Ann Warner Deborah K. Mason
Vice President Secretary
Kimberly D. Walker
Treasurer
Corporate Counsel: Independent Auditors:
Brian W. Pierson Law Offices, Inc. Regier Carr & Monroe, L.L.P.
109 E. Oklahoma 300 West Douglas
P.O. Box 1459 Suite 100
Guthrie, Oklahoma 73044 Wichita, Kansas 67202
Special Counsel: Transfer Agent and Registrar:
Malizia, Spidi, Sloane & Fisch, P.C. American Securities Transfer, Inc.
One Franklin Square 1825 Lawrence Street, Suite 444
1301 K Street, N.W., Suite 700 East Denver, Colorado 80202-1817
Washington, D.C. 20005
THE COMPANY'S ANNUAL REPORT FOR THE YEAR ENDED MARCH 31, 1996 FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION ON FORM 10-KSB IS AVAILABLE WITHOUT CHARGE
UPON WRITTEN REQUEST. FOR A COPY OF THE FORM 10-KSB OR ANY OTHER INVESTOR
INFORMATION, PLEASE WRITE OR CALL DEBORAH K. MASON, SECRETARY, AT THE COMPANY'S
CORPORATE OFFICE IN GUTHRIE, OKLAHOMA. THE ANNUAL MEETING OF STOCKHOLDERS WILL
BE HELD ON JULY 18, 1996 AT 5:00 P.M. AT GUTHRIE FEDERAL SAVINGS BANK, LOCATED
ON 120 N. DIVISION, GUTHRIE, OKLAHOMA.
-15-
<PAGE>
GUTHRIE SAVINGS, INC.
120 N. Division Street
P.O. Box 975
Guthrie, OK 73044
(405) 282-2201
EXHIBIT 23
<PAGE>
[LETTERHEAD OF REGIER CARR & MONROE, L.L.P.]
INDEPENDENT AUDITOR'S CONSENT
We consent to the incorporation by reference in the Registration Statement on
Form S-8 of Guthrie Savings, Inc., filed with the Securities and Exchange
Commission on March 1, 1996, of our report dated April 26, 1996 in this Annual
Report on Form 10-KSB of Guthrie Savings, Inc. for the fiscal year ended March
31, 1996.
/s/ Regier Carr & Monroe, L.L.P.
July 1, 1996
Wichita, Kansas
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAR-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 412
<INT-BEARING-DEPOSITS> 990
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 2,133
<INVESTMENTS-CARRYING> 19,179
<INVESTMENTS-MARKET> 19,067
<LOANS> 22,972
<ALLOWANCE> 391
<TOTAL-ASSETS> 46,820
<DEPOSITS> 36,311
<SHORT-TERM> 0
<LIABILITIES-OTHER> 460
<LONG-TERM> 2,000
0
0
<COMMON> 5
<OTHER-SE> 8,044
<TOTAL-LIABILITIES-AND-EQUITY> 46,820
<INTEREST-LOAN> 2,087
<INTEREST-INVEST> 1,329
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 3,416
<INTEREST-DEPOSIT> 1,742
<INTEREST-EXPENSE> 1,761
<INTEREST-INCOME-NET> 1,655
<LOAN-LOSSES> (132)
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 1,094
<INCOME-PRETAX> 894
<INCOME-PRE-EXTRAORDINARY> 894
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 585
<EPS-PRIMARY> 1.25
<EPS-DILUTED> 1.25
<YIELD-ACTUAL> 3.78
<LOANS-NON> 624
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 539
<CHARGE-OFFS> 30
<RECOVERIES> 14
<ALLOWANCE-CLOSE> 391
<ALLOWANCE-DOMESTIC> 391
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
