UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 For the transition period from _________ to ________
Commission File Number 0-24468
Guthrie Savings, Inc.
(Exact name of registrant as specified in its charter)
Oklahoma 73-1452383
(State or other jurisdiction of IRS Employer
incorporation or organization) Identification Number
120 NORTH DIVISION, GUTHRIE, OKLAHOMA 73044
(Address and Zip Code of principal executive offices)
(405) 282-2201
(Registrant's telephone number, including area code)
N/A
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registration (1) has filed all reports
required to be filed by section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that 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 [ ]
The number of shares outstanding of each of the issuer's
classes of common stock, as of August 5, 1999:
$.01 par value common stock 402,257 shares
(Class) (Outstanding)
Transitional Small Business Disclosure Format
Yes [ ] No [X]
<PAGE>
GUTHRIE SAVINGS, INC.
INDEX
<TABLE>
<CAPTION>
Page Number
<S> <C> <C> <C>
PART I - FINANCIAL INFORMATION
Item 1 Financial Statements
Consolidated Statements of Financial Condition as of March 31, 1999 and
June 30, 1999 (unaudited) 1
Consolidated Statements of Income for the Three Months Ended
June 30, 1998 and 1999 (unaudited) 2
Consolidated Statements of Comprehensive Income for the Three
Months Ended June 30, 1998 and 1999 (unaudited) 3
Consolidated Statement of Cash Flows for the Three Months
Ended June 30, 1998 and 1999 (unaudited) 4-5
Notes to Consolidated Financial Statements 6-9
Item 2 Management's Discussion and Analysis of Financial
Condition and Results of Operations 10-14
PART II - OTHER INFORMATION
Item 1 Legal Proceedings 15
Item 2 Changes in Securities 15
Item 3 Defaults in Senior Securities 15
Item 4 Submission of matters to a vote of security holders 15
Item 5 Other Information 15
Item 6(a). Exhibits 15
Item 6(b). Reports on Form 8-K 15
SIGNATURES 16
</TABLE>
2
<PAGE>
GUTHRIE SAVINGS, INC.
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
Consolidated Statements of Financial Condition
<TABLE>
<CAPTION>
June 30,
March 31, 1999
ASSETS 1999 (unaudited)
------ ---- -----------
<S> <C> <C>
Cash and cash equivalents
Interest bearing $ 6,778,318 $ 9,744,806
Non-interest bearing 407,796 507,619
------------ ------------
7,186,114 10,252,425
Time deposits in other financial institutions 500,000 500,000
Held-to-maturity investment securities 1,000,000 200,000
Available-for-sale investment securities 648,400 335,500
Mortgage-backed securities held to maturity 11,460,461 10,518,094
Loans receivable,net 23,802,225 23,934,308
Loans held-for-sale - -
Accrued income receivable 229,454 198,633
Real estate owned and other
repossessed property, net - -
Office properties and equipment, net 716,549 717,969
Income taxes receivable, current 89,231 126,587
Prepaid expenses and other assets 135,967 12,383
------------ ------------
$ 45,768,401 $ 46,795,899
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Deposits $ 35,078,760 $ 35,981,308
FHLB line of credit and advances 3,000,000 3,000,000
Advances from borrowers for taxes and insurance 57,312 82,888
Deferred income 43,153 42,557
Accrued expenses and other liabilities 70,940 74,862
Income taxes
Deferred 125,142 125,142
------------ ------------
38,375,307 39,306,757
------------ ------------
Stockholders' Equity
Preferred stock, $.01 oar value; 1,000,000
shares authorized, no shares outstanding - -
Common stock, $.01 par value; 3,000,000 shares
authorized, 515,125 shares issued and outstanding 5,151 5,151
Additional paid-in capital 4,845,752 4,845,752
Retained income (substantially restricted) 4,580,402 4,665,812
Treasury Stock, at cost112,868 shares at March 31, 1999
and 112,868 shares at June 30, 1999 (1,750,618) (1,750,618)
Unamortized stock acquired by Employee Stock Ownership Plan (226,655) (226,655)
Unamortized stock acquired by Management Stock Bonus Plan (60,938) (50,300)
Accumulated other comprehensive income
- -
------------ ------------
$ 45,768,401 $ 46,795,899
============ ============
</TABLE>
Page 1
<PAGE>
GUTHRIE SAVINGS, INC.
Consolidated Statements of Income
Three Months Ended
June 30,
-------------------------
1998 1999
---- ----
(unaudited) (unaudited)
INTEREST INCOME
Interest on loans $ 579,028 $ 525,984
Interest and dividends
on investment securities 121,782 114,574
Interest on mortgage-
backed securities 208,628 164,454
--------- ---------
Total interest income 909,438 805,012
--------- ---------
INTEREST EXPENSE
Deposits 385,206 348,718
Borrowed money 67,405 36,248
--------- ---------
Total interest expense 452,611 384,966
--------- ---------
Net interest income 456,827 420,046
PROVISION FOR LOSSES
ON LOANS 4,321 309
--------- ---------
Net interest income after
provision for loan losses 452,506 419,737
--------- ---------
NON-INTEREST INCOME
Service charges and late fees 43,072 49,616
Other income 3,713 7,050
Gain (Loss) from real estate operations 2,153 (79)
--------- ---------
48,938 56,587
--------- ---------
NON-INTEREST EXPENSE
Compensation and related expenses 154,945 164,880
Occupancy expense 13,757 11,530
Professional fees 48,973 60,036
Federal insurance premium 5,377 5,190
Data processing 22,579 30,450
Bank charges 13,673 14,111
Other expense 68,230 52,410
--------- ---------
327,534 338,607
--------- ---------
Income before income taxes 173,910 137,717
INCOME TAX EXPENSE (BENEFIT) 66,100 52,306
--------- ---------
Net income $ 107,810 $ 85,411
========= =========
BASIC:
Earnings per share $ 0.28 $ 0.23
========= =========
Weighted average common shares
outstanding 382,721 375,762
========= =========
DILUTED:
Earnings per share $ 0.27 $ 0.22
========= =========
Weighted average common shares
outstanding 395,938 390,013
========= =========
DIVIDENDS PER SHARE $ -- $ --
========= =========
Page 2
<PAGE>
GUTHRIE SAVINGS, INC.
Consolidated Statements of Comprehensive Income
Three Months Ended
June 30,
--------
1998 1999
---- ----
(Unaudited) (Unaudited)
Net income $ 107,810 $ 85,411
--------- ---------
Other comprehensive income, net of tax:
Unrealized gains (losses on securities:
Unrealized holding gains (losses)
arising during period (1,603) -
Less: reclassification adjustment
for gains included in net income - -
--------- ---------
Total other comprehensive
income (1,603) -
--------- ---------
Comprehensive income $ 106,207 $ 85,411
========= =========
Page 3
<PAGE>
GUTHRIE SAVINGS, INC.
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
Three Months Ended June 30,
---------------------------
1998 1999
---- ----
(unaudited) (unaudited)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 107,810 $ 85,411
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 6,899 13,815
FHLB Stock dividend (12,700) (8,600)
Decrease (increase) in accrued interest receivable 5,527 30,821
Increase (decrease) in accrued and deferred
income taxes 36,649 76,848
Increase (decrease) in accrued expenses (48,746) 3,922
Origination of loans held-for-sale (293,050) (68,400)
Sale of loans held-for-sale 472,858 69,051
Gain on sales of loans held-for-sale (3,047) (651)
Amortization of premiums and discounts
on investments and loans (2,647) (233)
Amortization of deferred gain on sale of real estate owned (2,168) (596)
Provision for losses on loans and real estate owned 4,321 309
Amortization related to ESOP and MSBP 10,638 10,637
(Increase) decrease in other assets 21,973 9,380
----------- -----------
NET CASH PROVIDED BY OPERATING ACTIVITIES 304,317 221,714
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Net loan (originations) and principal payments on loans
held for investment (468,421) (124,530)
Principal repayments on mortgage-backed securities
held to maturity 493,753 935,047
Acquisition of mortgage-backed investment securities
held to maturity (527,940) -
Acquisition of held to maturity investment securities (300,000) -
Maturity of held to maturity investment securities 2,400,000 800,000
Proceeds from sales of investment securities
available for sale - 321,500
Acquisition of fixed assets (53,563) (15,235)
----------- -----------
NET CASH PROVIDED (USED) BY INVESTING ACTIVITIES 1,543,829 1,916,782
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase (decrease) in deposits 56,333 902,239
Net increase (decrease) in escrow accounts 31,777 25,576
Purchase of treasury stock (57,544) -
----------- -----------
NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES $ 30,566 $ 927,815
----------- -----------
</TABLE>
Page 4
<PAGE>
Consolidated Statements of Cash Flow (Continued)
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS $ 1,878,712 $ 3,066,311
BEGINNING CASH AND CASH EQUIVALENTS $ 3,307,419 $ 7,186,114
----------- -----------
ENDING CASH AND CASH EQUIVALENTS $ 5,186,131 $10,252,425
=========== ===========
SUPPLEMENTAL DISCLOSURES Cash paid for:
Interest on deposits and advances $ 458,581 $ 384,128
Income taxes $ 73,000 $ 10,279
Page 5
<PAGE>
GUTHRIE SAVINGS, INC.
Notes to Consolidated Financial Statements
(Unaudited)
1. Basis of Presentation
The accompanying unaudited financial statements were prepared in
accordance with the instructions for Form 10-QSB and,
accordingly, do not include all information and disclosures
necessary to present financial condition, results of operations
and cash flows of Guthrie Savings, Inc. (the "Company") and its
wholly-owned subsidiary, Guthrie Federal Savings Bank (the
"Bank") in conformity with generally accepted accounting
principles. However, all normal recurring adjustments have been
made which, in the opinion of management; are necessary for the
fair presentation of the financial statements.
The results of operation for the three month period ended June
30, 1999 are not necessarily indicative of the results which may
be expected for the year ending March 31, 2000.
2. Mutual - To - Stock Conversion
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, $.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.
Subsequent to the conversion, neither the Bank nor the Company
may declare or pay cash dividends on any of their shares of
common stock if the effect would be to reduce stockholders'
equity below applicable regulatory capital requirements or if
such declaration and payment would otherwise violate regulatory
requirements. Additionally, 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 the amount required for the
liquidation account (amounting to $3,410,000 as of date of
conversion).
Page 6
<PAGE>
3. Investment Securities
A summary of the Bank's investment securities as of March 31,
1999 and June 30, 1999 is as follows:
<TABLE>
<CAPTION>
Carrying Value Market Value
March 31, June 30, June 30,
1999 1999 1999
---------------- --------------- ---------------
<S> <C> <C> <C>
Held-to-maturity:
Bonds, notes and debentures:
Government Agency Securities $ 1,000,000.00 $ 200,000.00 $ 194,264.00
---------------- -------------- --------------
Total held-to-maturity $ 1,000,000.00 $ 200,000.00 $ 194,264.00
================ ============== ==============
Available-for-sale:
Equity securities:
Stock in Federal Home Loan Bank $ 648,400.00 $ 335,500.00 $ 335,500.00
---------------- -------------- --------------
Total available-for-sale $ 648,400.00 $ 335,500.00 $ 335,500.00
================ ============== ==============
</TABLE>
4. Mortgage-Backed Securities
All of the Bank's mortgage-backed securities are classified as
held-to-maturity. A summary of the Bank's mortgage-backed
securities as of March 31, 1999 and June 30, 1999 is as follows:
<TABLE>
<CAPTION>
Carrying Value Market Value
March 31, June 30, June 30,
1999 1999 1999
---- ---- ----
<S> <C> <C> <C>
Mortgage-Backed Securities(Held-to-Maturity):
GNMA-ARM's $ 2,549,667 $ 2,366,949 $ 2,373,607
FNMA-ARM's 1,571,307 1,503,479 1,534,194
FHLMC-ARM's 999,562 953,378 934,048
FHLMC-fixed rate 889,386 867,507 860,547
GNMA-fixed rate 161,474 153,157 159,136
FNMA-fixed rate 1,664,399 1,588,541 1,565,138
Collateralized mortgage obligation
-Government Agency 3,507,208 2,974,944 3,044,260
------------ ------------ ------------
11,343,003 10,407,955 10,470,930
Unamortized premiums 123,000 115,373
Unearned discounts (5,542) (5,234)
------------ ------------ ------------
Total Mortgage-Backed Securities
(Held-to-Maturity) $ 11,460,461 $ 10,518,094 $ 10,470,930
============ ============ ============
</TABLE>
Page 7
<PAGE>
5. Loans Receivable, Net
A summary of the Bank's loans receivable at March 31, 1999 and
June 30, 1999 is as follows:
March 31, June 30,
1999 1999
---- ----
Mortgage loans:
Secured by one to four family residences $ 17,630,833 $ 17,279,003
Secured by other properties 1,721,601 1,737,953
Construction loans 1,630,000 1,793,000
Other 1,120,530 1,121,766
---------- ---------
22,102,964 21,931,722
Less:
Unearned discounts and loan fees (56,056) (50,999)
Undisbursed loan proceeds (1,331,516) (1,298,671)
Allowance for loan losses (269,245) (269,245)
--------- ---------
Total mortgage loans 20,446,147 20,312,807
----------- ----------
Consumer and other loans:
Loans on deposits 352,018 320,322
Home equity and second mortgage 1,013,203 1,278,672
Other 2,060,902 2,092,777
---------- ---------
3,426,123 3,691,771
Less:
Undisbursed loan proceeds - -
Allowance for loan losses (70,045) (70,270)
-------- --------
Total consumer and other loans 3,356,078 3,621,501
---------- ---------
Net Loans Receivable $ 23,802,225 $ 23,934,308
============== =============
A summary of the Bank's allowance for loan losses for the periods
indicated is as follows:
Three Months Ended
June 30,
--------------------------------
1998 1999
---- ----
Balance, beginning $ 353,236 $ 339,290
Provision charged
to operations 4,321
309
Loans charged off,
net of recoveries (10,718) (84)
--------- ---------
$ 346,839 $ 339,515
========= =========
page 8
<PAGE>
6. Real Estate Owned or in Judgement and Other Repossessed Property:
The Bank held $0 in real estate owned at March 31, 1999 and June
30, 1999.
7. Financial Instruments With Off Balance-Sheet Risk/Commitments
The bank 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 Bank has in particular classes of
financial instruments.
The Bank'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 June 30, 1999, the Bank had outstanding commitments to fund
real estate loans of $142,500. These commitments were to fund
three fixed rate loans at rates ranging from 7.25% to 8.75%.
8. Earnings Per Share
Basic earnings per share is computed by dividing income available
to common stockholders by the weighted-average number of common
shares outstanding for the period. Diluted earnings per share
reflect the potential dilution that could occur if securities or
other contracts to issue common stock (potential common stock)
were exercised or converted to common stock. For the periods
presented potential common stock includes outstanding stock
options and non-vested stock awarded under the Management Stock
Bonus Plan.
9. Comprehensive income
Effective April 1, 1998, the Corporation adopted the provisions
of Statement of Financial Accounting Standards No. 130 entitled
"Reporting Comprehensive Income" (SFAS No. 130). This statement
requires disclosures of the components of comprehensive income
and the accumulated balance of other comprehensive income within
consolidated total stockholders' equity. The adoption of the
provisions of SFAS No. 130, which are only of a disclosure
nature, did not effect the Corporation's consolidated financial
position, results of operations or liquidity.
Page 9
<PAGE>
Guthrie Savings, Inc.
Part I - Financial Information
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of Operations
Guthrie Savings, Inc. (the Company) may from time to time make
written or oral "forward-looking statements", including statements contained in
the Company's filings with the Securities and Exchange Commission (including
this report on Form 10-QSB), in its reports to stockholders and in other
communications by the Company, which are made in good faith by the Company
pursuant to the "safe harbor" provisions of the Private Securities Litigation
Reform Act of 1995.
These forward-looking statements involve risks and uncertainties,
such as statements of the Company's plans, objectives, expectations, estimates
and intentions, that are subject to change based on various important factors
(some of which are beyond the Company's control). The following factors, among
others, could cause the Company's financial performance to differ materially
from the plans, objectives, expectations, estimates and intentions expressed in
forward-looking statements: the strength of the United States economy in general
and the strength of the local economies in which the Company conducts
operations; the effects of, and changes in, trade, monetary and fiscal policies
and laws, including interest rate policies of the Board of Governors of the
Federal Reserve System, inflation, interest rate and market and monetary
fluctuations; the timely development of and acceptance of new products and
services of the company and the perceived overall value of these products and
services by users, including the features, pricing and quality compared to
competitors' products and services; the willingness of users to substitute
competitors' products and services for the Company's products and services; the
success of the Company in gaining regulatory approval of its products and
services, when required; the impact of changes in financial services' laws and
regulations (including laws concerning taxes, banking, securities and
insurance); technological changes, acquisitions; changes in consumer spending
and saving habits; and the success of the Company at managing the risks
described above involved in the foregoing.
The Company cautions that these important factors are not
exclusive. The Company does not undertake to update any forward-looking
statement, whether written or oral, that may be made from time to time by on
behalf of the Company.
General:
Guthrie Savings, Inc. (the "Company") was organized in May 1994
as the holding company for Guthrie Federal Savings Bank (the "Bank"). The
Company issued its common stock in a Subscription and Community Offering in
connection with the conversion of Guthrie Federal Savings Bank from a federally
chartered mutual savings and loan association to a federally chartered stock
savings bank and the issuance of all of the Bank's outstanding capital stock to
the Company. The Offering closed on October 11, 1994 with the issuance of
515,125 shares of common stock in Guthrie Savings, Inc.
Apart from the operations of the Bank, the Company did not engage
in any significant operations during the quarter ended June 30, 1999. The Bank
is primarily engaged in the business of accepting deposits from the general
public and using these funds to originate traditional real estate loans on
one-to-four family dwellings along with consumer loans.
When deposit inflows exceeds loan demand, the Bank will also purchase
mortgage-backed securities and investment securities.
On May 26, 1999, the Registrant and Local Oklahoma Bank, N.A.
("Local Oklahoma") executed a Stock Purchase Agreement, whereby Local Oklahoma
will acquire the registrants stock and merge the Bank with and into Local
Oklahoma. The proposal to approve the Stock Purchase Agreement will be
considered by the shareholders of the Registrant at the annual meeting to be
held August 6, 1999. Upon consummation of the agreement, the Company and the
Bank will be acquired by Local Oklahoma Bank through a share acquisition of all
of the shares of common stock of the Company and the Bank will be owned by Local
Oklahoma Bank. All current stockholders of the Company will receive a cash
payment for their shares. Although the parties will remain separate until the
share acquisition procedure, the Company and the Bank may, prior to the share
acquisition procedure, begin to change the way they categorize and account for
certain items that are reflected in the consolidated financial statements to
reduce the number of changes that are made following the share acquisition
procedure. It is not expected that these changes will result in any material
differences from current practice until immediately prior to the share
acquisition procedure. In the event the share acquisition procedure does not
occur, there will be no material change in the operating of the Bank and the
Company although there would be a one-time charge to cover expenses incurred in
Page 10
<PAGE>
preparing for the acquisition. This charge could total approximately $150,000.
Under certain circumstances if Local Oklahoma Bank, N.A. breaches the agreement
with the Company, the Company could be entitled to receive a $500,000 earnest
money deposit, which was paid by Local Oklahoma Bank, and any interest earned.
Management Strategy:
Management's strategy has been to enhance earnings and
profitability and increase capital while maintaining asset quality. The Bank's
lending strategy has historically focused on the origination of traditional
one-to-four family mortgage loans with the primary emphasis on single family
residences in the Logan County area. Its secondary focus has been on consumer
loans, second mortgage loans and deposit loans and when available funds exceed
loan demand, the purchase of mortgage-backed securities and investment
securities. This focus, along with the adherence to underwriting standards, is
designed to reduce the risk of loss on the loan portfolio. The lack of
diversification in its loan portfolio structure does increase the Bank's
portfolio concentration risk by making the value of the portfolio more
susceptible to declines in real estate values in its market area. Management has
made an effort to mitigate this risk through the acquisition of mortgage-backed
securities.
Results of Operations: Comparison of the three months ended June 30, 1998 and
1999.
Net income for the three months ended June 30, 1998 compared to
the three months ended June 30, 1999 decreased $22,399 or 20.78%. This decrease
was due to a combination of factors, which include, called or matured
investments, paid off borrowed money, and an increase in expenses attributable
to the pending Stock Purchase Agreement.
Net interest income before provision for losses on loans, for the
three months ended June 30, 1999 decreased $36,781 or 8.05% compared to the
three months ended June 30, 1998, from $456,827 to $420,046. The decrease in net
interest income was due to an overall lowering of interest rates on loans,
investment securities, deposits and borrowing costs. Interest income decreased
$104,426 or 11.48% from $909,438 at June 30, 1998 to $805,012 at June 30, 1999.
This decrease in interest income was due to an increase in loan payoffs and
refinancing, increased Mortgage Back Security principle payments and investment
securities maturing or being called. Cost of funds decreased 53 basis points
from 4.42% at June 30, 1998 to 3.89% at June 30, 1999. Deposit interest expense
decreased by $36,488 or 9.47% from $385,206 for the three months ended June 30,
1998 to $348,718 for the three months ended June 30, 1999. This decrease in
deposit interest expense is attributable to a decrease in rates paid. Interest
expense on borrowed money decreased $31,157 or 46.22%. Borrowings were paid down
as securities matured or were called.
Provision for loan losses decreased from $4,321 for the three
months ended June 30, 1998 to $309 for the three months ended June 30, 1999.
This decrease was based on management's evaluation of the allowance for loan
losses.
Non-interest income increased $7,649 or 15.63% from $48,938 for
the three months ended June 30, 1998 to $56,587 for the three months ended June
30, 1999. This increase was due to an increase in service charges and late fees
of $6,544 during the three months ended June 30, 1999 compared to the three
months ended June 30, 1998. Other income for the three months ended June 30,
1998 compared to the three months ended June 30, 1999 increased $3,337. Gain
from real estate operations decreased $2,232 from $2,153 for the three months
ended June 30, 1998 to $(79) for the same period ended June 30, 1999.
Non-interest expense increased $11,073 or 3.38% from $327,534 for
the three months ended June 30, 1998 to $338,607 for the three months ended June
30, 1999. The primary reason for the increase in non-interest expense is because
of an increase in professional fees of $11,063 for the three months ended June
30 1998 compared to the three months ended June 30, 1999 from $48,973 to
$60,036. This increase is due to the costs associated with the executed Stock
Purchase Agreement with Local Oklahoma, N.A. Compensation and related expenses
are up $9,935 for the three months ended June 30, 1998 compared to the three
months ended June 30, 1999. This increase is attributable to increased costs
associated with
Page 11
<PAGE>
the ESOP Plan expenses. Other expense decreased $15,820 or 23.19% for the
three-month period ended June 30, 1998 compared to the same period ended June
30, 1999.
Income tax decreased $13,794 or 20.87% from $66,100 for the
three months ended June 30, 1998 to $52,306 for the three months ended June 30,
1999, due to lower pre-tax income.
Additionally, accumulated comprehensive income for the three
months ended June 30, 1998 consisted of unrealized gains and losses on
available-for-sale securities. There were no components of comprehensive income
for the three months ended June 30, 1999.
Earnings Per Share:
Effective with the quarter ended December 30, 1997, the Company
adopted the provisions of Statement of Financial Accounting Standards No. 128,
Earnings per Share. The Statement is to be applied to financial statements
issued for periods ending after December 15, 1997, including interim periods;
earlier application is not permitted. The Statement requires restatement of all
prior-period earnings per share (EPS) data presented.
FAS No. 128 simplifies the standards for computing EPS and makes
them comparable to international EPS standards. It replaces the presentation of
primary EPS with a presentation of basic EPS. It also requires presentation of
basic and diluted EPS on the face of the income statement for all entities with
complex capital structures. Basic EPS excluded dilution and is computed by
dividing income available to common stockholders by the weighted-average number
of common shares outstanding for the period. Diluted EPS reflects the potential
dilution that could occur if securities or other contracts to issue common stock
were exercised or converted into common stock or resulted in the issuance of
common stock that then shared in the earnings of the company. Diluted EPS is
computed similarly to the previously presented fully diluted earnings per share.
Year 2000 Issue
A great deal of information has been disseminated about the
global computer crash that may occur in the year 2000. Many computer programs
that can only distinguish the final two digits of the year entered (a common
programming practice in earlier years) are expected to read entries for the year
2000 as the year 1900 and compute payment, interest or delinquency. Rapid and
accurate data processing is essential to the operation of the Bank. Data
processing is also essential to most other financial institutions and many other
companies.
The most significant data processing applications of the Bank
that could be affected by this problem are provided by a third party service
bureau. The Bank has developed a plan to evaluate and test critical systems as
they relate to the year 2000 issues and the Bank's service center. The Bank is
evaluating their internal data processing applications and has updated all
computer terminals and installed a network system. The Bank has estimated the
cost of addressing the Year 2000 issue to be approximately $100,000, consisting
of $60,000 for new bank computer equipment, $30,000 relating to service bureau
fees and approximately $10,000 for various other training and consulting fees.
As of June 30, 1999 the Bank has expended $40,000 for upgraded computer
equipment. This expenditure is all capitalized and will be depreciated over a
three period. Data processing costs and conversion costs of $24,200 associated
with Year 2000 expenses have been expensed as of June 30, 1999. Expenses
relating to training costs for the Year 2000 have been $3,500 as of June 30,
1999. The bank's data service center currently has started external and internal
testing of modifications to critical systems. This testing includes testing of
interfaces between the Bank computer network, installed in October 1998, and the
data service center. We have also been evaluating our non-information technology
systems (e.g., vault timers, electronic door lock and heating, ventilation and
air conditioning controls). We have examined all of our non-information
technology systems and have either received certifications of year 2000
compliance for systems controlled by third party providers or determined that
the systems should not be impacted by the year 2000. We expect to further test
the systems we control and receive third party certification, where appropriate,
that they will function. We do not expect any material costs to address our
non-information technology systems and have not had any material costs to date.
We have determined that the information technology systems (computer systems) we
use have substantially more year 2000 risk than the non-information technology
systems we use.
Page 12
<PAGE>
We have evaluated most of our borrowers and do not believe that the year 2000
problem should, on an aggregate basis, impact their ability to make payments to
the Bank. We believe that most of our residential borrowers are not dependent on
their home computers for income and that none of our commercial borrowers are so
large that a year 2000 problem would render them unable to collect revenue or
rent and, in turn, continue to make loan payments to the Bank. As a result, we
have not contacted residential borrowers concerning this issue and do not
consider this issue in our residential loan underwriting process. We have
contacted all our commercial borrowers and consider this issue during commercial
loan underwriting. We do not expect any material costs to address this risk
area.
If there is a problem with the service center or the Bank relating to the year
2000 issue the Bank would likely experience significant data processing delays,
mistakes or failures. These delays, mistakes or failures could have a
significant adverse impact on the financial condition and results of operation
of the Bank. If our service bureau fails, which we do not anticipate, we will
enter deposit and loan transactions by hand in our general ledger and compute
loan payments and deposit balances and interest with our existing computer
system. We can do this because of our relatively small number of loan and
deposit accounts and our internal bookkeeping system. Our computer systems are
independently able to generate label and mailings for all of our customers and
we periodically test this system and print and store this material. If this
labor-intensive approach is necessary, management and our employees will become
much less efficient. However, we believe that we would be able to operate in
this manner indefinitely, until our existing service bureau is able to again
provide data processing services.
Liquidity and Capital Resources:
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 Office of Thrift Supervision ("OTS") regulations require that
the bank maintain liquid assets of not less than 4% of its average daily balance
of net withdrawable deposit accounts and borrowings payable in one year or less.
The Bank is in compliance with all liquidity ratios as of June 30, 1999.
Management manages its liquidity ratio to meet its funding needs for deposit
outflows, loan principal disbursements, operating expenses, and disbursements of
payments collected from borrowers for taxes and insurance. The Bank also manages
its liquidity ratio to meet its asset/liability management objectives.
The Bank's primary sources of funds are deposits, amortization
and prepayment of loans and mortgage-backed securities, maturities of investment
securities and funds provided by operations. In addition the Bank may borrow
funds from time to time from the Federal Home Loan Bank of Topeka. At June 30,
1999 the Bank had $0 borrowed on its line of credit from the Federal Home Loan
Bank. The available line of credit currently is set at $3,000,000 with an
adjustable interest rate. The Bank draws against the line to met current
liquidity needs. Besides the line of credit the Bank has $3,000,000 in
adjustable rate advances at the Federal Home Loan Bank of Topeka outstanding at
June 30, 1999.
Scheduled loan repayments and maturing investment securities are
a relatively predictable source of funds. However, savings deposit flows and
prepayments of loans and mortgage-backed securities are influenced significantly
by changes in market interest rates, economic conditions and competition.
Management strives to manage the pricing of its deposits to maintain the
required projected cash needs. In some instances though, advances and lines of
credit provide lower incremental costs of funds than pricing deposits to attract
the new funds.
The Bank invests its excess funds in overnight deposits with the
Federal Home Loan Bank of Topeka, which generally provides liquidity to meet
lending requirements and savings withdrawal funding requirements. When
warranted, cash in excess of immediate funding needs is invested into
longer-term investments and mortgage-backed securities which typically earn a
higher yield than overnight deposits, some of which may also qualify as liquid
investments under current OTS regulations. At June 30, 1999 cash and cash
equivalents were $10,252,425 up from $7,186,114 at March 31, 1999. The primary
reason for this increase is due to investment securities and mortgage backed
securities being called in. These excess funds are being used to fund new loan
originations and pay off maturing advances.
Page 13
<PAGE>
The Bank is required to maintain specified amounts of capital
pursuant to regulations promulgated by OTS. 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. These standards require financial institutions to have minimum
regulatory capital equal to 2.0% of tangible assets; minimum core capital equal
to 4.0% of adjusted tangible assets; and risk-based capital equal to 8.0% of
risk-based assets. At June 30, 1999 the Bank's capital requirements and actual
capital under the OTS regulations are as follows:
Amount Percent
(thousands) of Assets
----------- ---------
Tangible capital:
Actual 7,119 15.21%
Required 936 2.00%
------ ------
Excess 6,183 13.21%
====== ======
Core capital:
Actual 7,119 15.21%
Required 1,872 4.00%
------ ------
Excess 5,247 11.21%
====== ======
Risk-based capital:
Actual 7,348 35.16%
Required 1,672 8.00%
------ ------
Excess 5,676 27.16%
====== ======
Additional regulations requiring prompt corrective action
concerning capital levels effectively impose higher capital requirements on the
Bank, all of which were met as of June 30, 1999.
Page 14
<PAGE>
21
GUTHRIE SAVINGS, INC.
Part II - Other Information
Item 1. Legal Proceedings
Not applicable
Item 2. Changes in Securities
Not applicable
Item 3. Defaults upon Senior Securities
Not applicable
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable.
Item 5. Other Information
On May 26, 1999, the Registrant and Local Oklahoma Bank, N.A.
("Local Oklahoma") executed a Stock Purchase Agreement, whereby
Local Oklahoma will acquire the registrants stock and merge the
Bank with and into Local Oklahoma. The proposal to approve the
Stock Purchase Agreement will be considered by the shareholders
of the Registrant at the annual meeting to be held August 6,
1999. For further discussion please refer to the Management's
Discussion and Analysis of Financial Condition on page 10.
Item 6. (a) Exhibit regarding computation of Earnings Per Share
Included in exhibit 11 is detail on computation of earnings per
share.
Item 6. (b) Reports on Form 8 - K
A report, dated May 26, 1999 (Items 5 and 7), was filed
concerning the execution of the Stock Purchase Agreement with
Local Oklahoma.
15
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
GUTHRIE SAVINGS, INC.
Date August5, 1999 By /s/William L. Cunningham
------------------- --------------------------------------------
William L. Cunningham
President and Chief Executive Officer
(Duly Authorized Representative)
Date August 5, 1999 By /s/Kimberly D. Walker
--------------------- ---------------------------------------------
Kimberly D. Walker
Treasurer
(Principal Financial and Accounting Officer)
16
EXHIBIT 11
<PAGE>
EXHIBIT 11
STATEMENT REGARDING COMPUTATION OF EARNINGS PER SHARE
Three Months Ended
June 30,
--------
1998 1999
---- ----
Computation Basic Earnings Per Share:
Weighted average common shares outstanding:
Average share issued 515,125 515,125
Less: Average unallocated ESOP shares (26,787) (22,666)
Less: Unearned MSBP shares (7,122) (3,829)
Less: Average Treasury shares (98,495) (112,868)
--------- --------
Weighted average shares outstanding 382,721 375,762
========= ========
Computation Diluted Earnings Per Share:
Weighted average shares
outstanding (per above basic EPS) 382,721 375,762
Plus: dilutive effect of MSBP shares 1,288 781
Plus: dilutive effect of Stock options 11,929 13,470
--------- --------
Diluted weighted average shares outstanding 395,938 390,013
========= ========
Net earnings $ 107,810 $ 85,411
========= =========
Earnings per shares:
Basic $ 0.28 $ 0.23
========= =========
Diluted $ 0.27 $ 0.22
========= =========
Beginning with the completed stock offering date of October 11, 1994, the
Company accounts for the 41,210 shares acquired by the Employee Stock Ownership
Plan ("ESOP") in accordance with Statement of Position 93.6. In accordance with
this statement, shares controlled by the ESOP are not considered in the weighted
average shares outstanding until the shares are committed for allocation.
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
QUARTERLY REPORT ON FORM 10-QSB AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL INFORMATION.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-2000
<PERIOD-END> JUN-30-1999
<CASH> 508
<INT-BEARING-DEPOSITS> 9,745
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 336
<INVESTMENTS-CARRYING> 10,718
<INVESTMENTS-MARKET> 10,665
<LOANS> 24,274
<ALLOWANCE> 340
<TOTAL-ASSETS> 46,796
<DEPOSITS> 35,981
<SHORT-TERM> 3,000
<LIABILITIES-OTHER> 326
<LONG-TERM> 0
0
0
<COMMON> 5
<OTHER-SE> 7,484
<TOTAL-LIABILITIES-AND-EQUITY> 46,796
<INTEREST-LOAN> 526
<INTEREST-INVEST> 115
<INTEREST-OTHER> 164
<INTEREST-TOTAL> 805
<INTEREST-DEPOSIT> 349
<INTEREST-EXPENSE> 385
<INTEREST-INCOME-NET> 420
<LOAN-LOSSES> 0
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 339
<INCOME-PRETAX> 138
<INCOME-PRE-EXTRAORDINARY> 138
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 85
<EPS-BASIC> .23
<EPS-DILUTED> .22
<YIELD-ACTUAL> 3.17
<LOANS-NON> 227
<LOANS-PAST> 0
<LOANS-TROUBLED> 717
<LOANS-PROBLEM> 1,325
<ALLOWANCE-OPEN> 339
<CHARGE-OFFS> 0
<RECOVERIES> 0
<ALLOWANCE-CLOSE> 339
<ALLOWANCE-DOMESTIC> 339
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 228
</TABLE>
