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 December 31, 1998
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 February 9, 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
PART I - FINANCIAL INFORMATION
<S> <C>
Item 1.Financial Statements
Consolidated Statements of Financial Condition as of March 31, 1998 and
December 31, 1998 (unaudited) 1
Consolidated Statements of Income for the Three and Nine Months Ended
December 31, 1997 and 1998 (unaudited) 2
Consolidated Statements of Comprehensive Income for the Three and Nine
Months Ended December 31, 1997 and 1998 (unaudited) 3
Consolidated Statement of Cash Flows for the Nine Months
Ended December 31, 1997 and 1998 (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>
<PAGE>
GUTHRIE SAVINGS, INC.
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
Consolidated Statements of Financial Condition
<TABLE>
<CAPTION>
December 31,
March 31, 1998
ASSETS 1998 (unaudited)
------ ------------ ------------
<S> <C> <C>
Cash and cash equivalents
Interest bearing $ 2,995,502 $ 4,817,784
Non-interest bearing 311,917 271,471
------------ ------------
3,307,419 5,089,255
Held-to-maturity investment securities 3,900,000 800,000
Available-for-sale investment securities 2,174,751 2,220,073
Mortgage-backed securities held to maturity 12,615,162 12,545,587
Loans receivable,net 25,573,437 24,492,251
Loans held-for-sale 81,757 111,624
Accrued income receivable 262,853 237,975
Real estate owned and other
repossessed property, net 10,500 --
Office properties and equipment, net 569,093 722,004
Prepaid expenses and other assets 131,926 154,705
------------ ------------
$ 48,626,898 $ 46,373,474
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Deposits $ 35,537,831 $ 35,749,037
FHLB line of credit and advances 5,196,000 3,000,000
Advances from borrowers for taxes and insurance 48,988 18,071
Deferred income 50,824 43,859
Accrued expenses and other liabilities 109,081 115,550
Income taxes
Deferred 121,206 (54,799)
Current 26,840 136,910
------------ ------------
41,090,770 39,008,628
------------ ------------
Stockholders' Equity
Preferred stock, $.01 par 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 4,811,997 4,811,997
Retained income (substantially restricted) 4,541,553 4,636,783
Treasury Stock, at cost 97,668 shares at March 31, 1998
and 112,868 shares at December 31, 1998 (1,447,775) (1,750,619)
Unamortized stock acquired by Employee Stock Ownership Plan (267,865) (267,865)
Unamortized stock acquired by Management Stock Bonus Plan (103,490) (71,576)
Accumulated other comprehensive income (3,443) 975
------------ ------------
7,536,128 7,364,846
------------ ------------
$ 48,626,898 $ 46,373,474
============ ============
</TABLE>
Page 1
<PAGE>
GUTHRIE SAVINGS, INC.
Consolidated Statements of Income
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
December 31, December 31,
------------ ------------
1997 1998 1997 1998
---------- ---------- ---------- ----------
(unaudited) (unaudited) (unaudited) (unaudited)
<S> <C> <C> <C> <C>
INTEREST INCOME
Interest on loans $ 556,162 $ 553,982 $1,643,652 $1,707,386
Interest and dividends
on investment securities 145,840 109,452 503,317 360,794
Interest on mortgage-
backed securities 188,736 193,043 604,769 594,915
---------- ---------- ---------- ----------
Total interest income 890,738 856,477 2,751,738 2,663,095
---------- ---------- ---------- ----------
INTEREST EXPENSE
Deposits 390,200 378,214 1,155,973 1,151,007
Borrowed money 64,380 48,344 260,276 183,499
---------- ---------- ---------- ----------
Total interest expense 454,580 426,558 1,416,249 1,334,506
---------- ---------- ---------- ----------
Net interest income 436,158 429,919 1,335,489 1,328,589
PROVISION FOR LOSSES
ON LOANS 1,395 2,445 2,708 6,709
---------- ---------- ---------- ----------
Net interest income after
provision for loan losses 434,763 427,474 1,332,781 1,321,880
---------- ---------- ---------- ----------
NON-INTEREST INCOME
Service charges and late fees 48,520 43,503 139,078 131,328
Other income 5,441 5,609 21,715 14,762
Gain (Loss) from real estate operations (2,222) 4,352 1,744 5,041
---------- ---------- ---------- ----------
51,739 53,464 162,537 151,131
---------- ---------- ---------- ----------
NON-INTEREST EXPENSE
Compensation and related expenses 165,580 170,145 473,664 488,504
Occupancy expense 19,558 37,784 48,718 67,844
Professional fees 17,191 21,800 81,863 110,278
Federal insurance premium 5,401 5,129 16,189 15,867
Data processing 19,686 32,369 63,753 80,450
Bank charges 12,967 13,526 39,231 43,909
Other expense 52,025 72,024 172,199 188,202
---------- ---------- ---------- ----------
292,408 352,777 895,617 995,054
---------- ---------- ---------- ----------
Income before income taxes 194,094 128,161 599,701 477,957
INCOME TAX EXPENSE (BENEFIT) 70,050 48,500 215,800 181,600
---------- ---------- ---------- ----------
Net income $ 124,044 $ 79,661 $ 383,901 $ 296,357
========== ========== ========== ==========
BASIC:
Earnings per share $ 0.33 $ 0.22 $ 1.01 $ 0.79
========== ========== ========== ==========
Weighted average common shares
outstanding 377,181 369,994 381,227 376,726
========== ========== ========== ==========
DILUTED:
Earnings per share $ 0.32 $ 0.22 $ 0.98 $ 0.76
========== ========== ========== ==========
Weighted average common shares
outstanding 389,850 385,350 392,941 391,169
========== ========== ========== ==========
DIVIDENDS PER SHARE $ -- $ -- $ 0.50 $ 0.50
========== ========== ========== ==========
</TABLE>
Page 2
<PAGE>
GUTHRIE SAVINGS, INC.
Consolidated Statements of Comprehensive Income
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
December 31, December 31,
----------------------- -------------------------
1997 1998 1997 1998
---------- ---------- ---------- -----------
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Net income $124,044 $ 79,661 $383,901 $296,357
-------- -------- -------- --------
Other comprehensive income,
net of tax:
Unrealized gains (losses on securities:
Unrealized holding gains (losses)
arising during period 32,659 (4,502) 43,180 4,418
Less: reclassification adjustment
for gains included in net income -- -- -- --
-------- -------- -------- --------
Total other comprehensive
income 32,659 (4,502) 43,180 4,418
-------- -------- -------- --------
Comprehensive income $156,703 $ 75,159 $427,081 $300,775
======== ======== ======== ========
</TABLE>
Page 3
<PAGE>
GUTHRIE SAVINGS, INC.
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
Nine Months Ended December 31,
------------------------------
1997 1998
------------ ------------
(unaudited) (unaudited)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 383,901 $ 296,357
Ajustments to reconcile net income to net
cash provided by operating activities:
Depreciation 23,694 24,042
FHLB Stock dividend (36,000) (38,200)
Decrease (increase) in accrued interest receivable 20,762 24,878
Increase (decrease) in accrued and deferred
income taxes 33,096 (68,639)
Increase (decrease) in accrued expenses 36,028 6,469
Origination of loans held-for-sale (289,950) (2,479,850)
Sale of loans held-for-sale 292,747 2,651,567
Gain (loss) on sales of loans held-for-sale 2,463 22,253
Amortization of premiums and discounts
on investments and loans 2,228 (3,266)
Amortization of deferred gain on sale of real estate owned (4,666) (6,965)
Provision for losses on loans and real estate owned 2,708 6,709
Amortization related to ESOP and MSBP 23,182 31,914
(Increase) decrease in other assets (9,757) (22,779)
------------ ------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 480,436 444,490
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Net loan (originations) and principal payments on loans
held for investment (1,568,800) 884,030
Principal repayments on mortgage-backed securities
held to maturity 1,980,837 2,166,920
Acquisition of mortgage-backed investment securities
held to maturity -- (2,118,912)
Acquisition of held to maturity investment securities (500,000) (300,000)
Maturity of held to maturity investment securities 3,800,000 3,400,000
Acquisition of fixed assets (2,052) (176,953)
Proceeds from sale of real estate acquired in settlement
of loans -- 8,652
------------ ------------
NET CASH PROVIDED (USED) BY INVESTING ACTIVITIES 3,709,985 3,863,737
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase (decrease) in deposits 673,273 204,497
Net increase (decrease) in escrow accounts (28,043) (30,917)
Proceeds from FHLB advance 8,300,000 --
Repayments of FHLB advance (10,804,000) (2,196,000)
Cash Dividend Paid (208,730) (201,127)
Purchase of treasury stock (563,525) (302,844)
------------ ------------
NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES $ (2,631,025) $ (2,526,391)
------------ ------------
</TABLE>
Page 4
<PAGE>
Consolidated Statements of Cash Flow (Continued)
<TABLE>
<CAPTION>
<S> <C> <C>
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS $1,559,396 $1,781,836
BEGINNING CASH AND CASH EQUIVALENTS $ 522,829 $3,307,419
---------- ----------
ENDING CASH AND CASH EQUIVALENTS $2,082,225 $5,089,255
========== ==========
SUPPLEMENTAL DISCLOSURES
Cash paid for:
Interest on deposits and advances $1,417,814 $1,348,415
Income taxes $ 182,703 $ 293,788
Transfers from loans to real estate acquired
through foreclosure $ 10,500 $ --
</TABLE>
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 nine month period ended December 31,
1998 are not necessarily indicative of the results which may be
expected for the year ending March 31, 1999.
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, 1998 and
December 31, 1998 is as follows:
<TABLE>
<CAPTION>
Carrying Value Market Value
-------------- ------------
March 31, December 31, December 31,
1998 1998 1998
-------------- -------------- --------------
<S> <C> <C> <C>
Held-to-maturity:
Bonds, notes and debentures:
Government Agency Securities $ 3,900,000.00 $ 800,000.00 $ 804,163.00
-------------- -------------- --------------
Total held-to-maturity $ 3,900,000.00 $ 800,000.00 $ 804,163.00
============== ============== ==============
Available-for-sale:
Debt securities:
Government Agency Securities $ 1,500,000.00 $ 1,500,000.00 $ 1,501,573.00
Net unrealized gain (loss) (5,549.00) 1,573.00 --
-------------- -------------- --------------
$ 1,494,451.00 $ 1,501,573.00 $ 1,501,573.00
============== ============== ==============
Equity securities:
Stock in Federal Home Loan Bank $ 680,300.00 $ 718,500.00 $ 718,500.00
-------------- -------------- --------------
$ 680,300.00 $ 718,500.00 $ 718,500.00
-------------- -------------- --------------
Total available-for-sale $ 2,174,751.00 $ 2,220,073.00 $ 2,220,073.00
============== ============== ==============
</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, 1998 and December 31, 1998 is as follows:
<TABLE>
<CAPTION>
Carrying Value Market Value
-------------- ------------
March 31, December 31, December 31,
1998 1998 1998
------------ ------------ ------------
<S> <C> <C> <C>
Mortgage-Backed Securities(Held-to-Maturity):
GNMA-ARM's $ 2,875,329 $ 2,283,664 $ 2,339,328
FNMA-ARM's 1,302,822 1,633,784 1,662,085
FHLMC-ARM's 1,216,788 1,060,216 1,055,909
FHLMC-fixed rate 1,257,818 956,041 976,777
GNMA-fixed rate 310,058 172,038 180,569
FNMA-fixed rate 551,302 1,826,062 1,853,025
Collateralized mortgage obligation
-Government Agency 4,989,740 4,493,826 4,556,468
------------ ------------ ------------
12,503,857 12,425,631 12,624,161
Unamortized premiums 119,158 126,019
Unearned discounts (7,853) (6,063) --
------------ ------------ ------------
Total Mortgage-Backed Securities
(Held-to-Maturity) $ 12,615,162 $ 12,545,587 $ 12,624,161
============ ============ ============
</TABLE>
Page 7
<PAGE>
5. Loans Receivable, Net
A summary of the Bank's loans receivable at March 31, 1998 and December
31, 1998 is as follows:
<TABLE>
<CAPTION>
March 31, December 31,
1998 1998
------------ ------------
<S> <C> <C>
Mortgage loans:
Secured by one to four family residences $ 18,758,433 $ 17,925,443
Secured by other properties 1,763,895 1,761,324
Construction loans 2,097,800 2,230,200
Other 727,864 1,121,684
------------ ------------
23,347,992 23,038,651
Less:
Unearned discounts and loan fees (72,674) (60,435)
Undisbursed loan proceeds (1,092,005) (1,765,412)
Allowance for loan losses (273,254) (276,657)
------------ ------------
Total mortgage loans 21,910,059 20,936,147
------------ ------------
Consumer and other loans:
Loans on deposits 560,014 348,602
Home equity and second mortgage 1,267,008 1,243,812
Other 1,923,108 2,036,257
------------ ------------
3,750,130 3,628,671
Less:
Undisbursed loan proceeds (6,770) --
Allowance for loan losses (79,982) (72,567)
------------ ------------
Total consumer and other loans 3,663,378 3,556,104
------------ ------------
Net Loans Receivable $ 25,573,437 $ 24,492,251
============ ============
</TABLE>
A summary of the Bank's allowance for loan losses for the periods
indicated is as follows:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
December 31, December 31,
---------------------- ----------------------
1997 1998 1997 1998
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Balance, beginning $ 367,717 $ 348,605 $ 376,692 $ 353,236
Provision charged
to operations 1,395 2,445 2,708 6,709
Loans charged off,
net of recoveries (10,585) (1,826) (20,873) (10,721)
--------- --------- --------- ---------
$ 358,527 $ 349,224 $ 358,527 $ 349,224
========= ========= ========= =========
</TABLE>
Page 8
<PAGE>
6. Real Estate Owned or in Judgement and Other Repossessed Property:
March 31, September 30,
1998 1998
--------- -------------
Real estate acquired by foreclosure $10,500 $ --
Other repossed assets -- --
Allowance for loss -- --
------- ------
Total $10,500 $ --
======= ======
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 December 31, 1998, the Bank had outstanding commitments to fund real
estate loans of $48,000. This commitment was to fund one fixed rate
loan at 7.75%.
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 December 31, 1998. 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.
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.
Page 10
<PAGE>
Results of Operations: Comparison of the three months ended December 31, 1997
and 1998 and the nine months ended December 31, 1997 and 1998.
Net income decreased $44,383 or 35.78% from $124,044 for the three
months ended December 31, 1997 to $79,661 for the three months ended December
31, 1998. This decrease was due to a combination of factors that include, called
investments, increased occupancy expenses, and an increase in data expenses
attributable to Year 2000 costs.
Net income decreased $87,544 or 22.80% from $383,901 for the nine
months ended December 31, 1997 to $296,357 for the nine months ended December
31, 1998. This decrease is due to the same combination of factors as stated for
the above three-month period.
Net interest income before provision for losses on loans, for the three
months ended December 31, 1998 decreased $6,239 or 1.43% compared to the three
months ended December 31, 1997, from $436,158 to $429,919. This decrease was
mainly due to a decrease in interest on investment securities offset by a
decrease in interest on borrowed money and a slight decrease in interest income
on loans. Interest income on investments and mortgage-backed securities
decreased $32,081 or 9.59% due to securities maturing or being called. This
decrease in investment interest income was offset by a decrease in interest
expense on borrowed money of $16,036. Borrowings were paid down as securities
matured or were called. Interest income on loans decreased $2,180 or 0.39% for
the quarter ended December 31, 1998 compared to the quarter ended December 1997
due to an increase in loan pay-off.
Net interest income before provision for losses on loans, for the nine
months ended December 31, 1998 compared to the nine months ended December 31,
1997, decreased $6,900 or 0.52%. Interest income for the nine months ended
December 31, 1998 compared to the nine months ended December 31, 1997 decreased
$88,643 or 3.22%. This decrease was due to a decrease in investment interest
income, due to matured and called securities, off set by an increase in loan
interest income. Investment interest income decreased $152,377 while interest on
loans increased $63,734. The other contributing factor to the decrease in net
interest income for the nine-month period is the decrease in interest expense on
borrowed money of $76,777. This decrease is attributable to borrowed money being
repaid as investment securities matured or paid off. There was a decrease in
interest on deposits of $4,966; this decrease was due to a decrease in deposit
interest rates.
Provision for loan losses increased from $1,395 for the three months
ended December 31, 1997 to $2,445 for the three months ended December 31, 1998.
This increase was based on management's evaluation of the allowance for loan
losses.
The provision for losses on loans increased for the nine months ended
December 31, 1998 by $4,001 or 147.75% from $2,708 for the nine months ended
December 31, 1997 to $6,709 for the nine months ended December 31, 1998. This
increase was based on management's evaluation of the adequacy of the allowance
for loan losses.
Non-interest income increased $1,725 or 3.33% from $51,739 for the
three months ended December 31, 1997 to $53,464 for the three months ended
December 31, 1998. This increase was due to an increase in gain from real estate
operations offset by a decrease in service charges and late fees. Gain from real
estate operations was up $6,574 from $(2,222) for the three months ended
December 31, 1997 to $4,352 for the three months ended December 31, 1998. This
increase was attributable to increased amortization of deferred gain on real
estate sales because of a loan pay-off. Service charges and late fees decreased
$5,017 for the three-month period.
Non-interest income for the nine-month period ended December 31, 1998
was down $11,406 or 7.02% from $162,537 for the nine months ended December 31,
1997 to $151,131 for the nine months ended December 31, 1998. This decrease was
due to a decrease in service charges and late fees of $7,750 during the nine
months ended December 31, 1998 compared to the nine months ended December 31,
1997. There was an increase in gain from real estate operations of $3,297 for
the nine-month period. Again this increase was due to the increased amortization
of deferred gain on real estate sales due to early loan payoff. Other income for
the nine months ended December 31, 1997 compared to the nine-months ended
December 31, 1998 decreased $6,953. This was the result of refunds on credit
life insurance due to early pay-off of consumer loans during the nine-month
period ended December 31, 1998. Also attributable was the interest on the
Internal Revenue
Page 11
<PAGE>
Service refund for the nine-month period ended December 31, 1997.
Non-interest expense increased $60,369 or 20.65% from $292,408 for the
three months ended December 31, 1997 to $352,777 for the three months ended
December 31, 1998. One contributing reason for this increase is data processing
fees of $12,683 due to new equipment support charges from the data center.
Compensation and related expense are up $4,565, due to increased costs of
medical insurance, ESOP related expenses, and employee training expenses.
Professional fees for the three months ended December 31, 1998 compared to the
three months ended December 31, 1997 increased $4,609. Other expense is up
$19,999 or 38.40% due to Year 2000 expenses. Occupancy expense also increased
$18,226 for the three-month period ended December 31, 1998 compared to December
31, 1997 from $37,784 to $19,558. The increase in occupancy expense is due to
increased new equipment depreciation and remodeling expenses.
Non-interest expense for the nine months ended December 31, 1998
compared to the nine months ended December 31, 1997 increased $99,437 or 11.10%
from $895,617 to $995,054. This increase is mainly attributed to an increase in
professional fees of $28,415 or 34.71%. The increase in professional fees is due
to consultations dealing with Oklahoma Tax Commission audit and a business plan
analysis. Again other expense is up $16,003 or 9.29%, due to Year 2000 costs.
Compensation and related expenses are up $14,840 for the nine-month period;
reasons are the same as for the related three-month period above. Data
processing costs are up $16,697 again due to the increased new equipment support
charges.
Income tax decreased $21,550 or 30.76% from $70,050 for the three
months ended December 31, 1997 to $48,500 for the three months ended December
31, 1998, due to lower pre-tax income. Income tax for the nine months ended
December 31, 1997 compared to the nine months ended December 31, 1998 decreased
$34,200 or 15.85% again due to lower pre-tax income.
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 December 31, 1998 the Bank has expended $37,000 for upgraded computer
equipment. This expenditure is all capitalized and will be depreciated over a
three period. Data processing costs and conversion costs of $22,730 associated
with Year 2000 expenses have been expensed as
Page 12
<PAGE>
of December 31, 1998 and $600 per month of data processing costs will continue
through the end of 1999. Expenses relating to training costs for the Year 2000
have been $3,500 as of December 31, 1998. 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.
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 December 31, 1998.
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 December
31, 1998 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
December 31, 1998.
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 December 31, 1998 cash and cash
equivalents were $5,089,255 up from $3,307,419 at March 31, 1998. 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 the Financial Institutions Reform, Recovery and Enforcement Act of 1989
("FIRREA") and regulations promulgated by OTS thereunder. 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 December 31, 1998 the Bank's capital
requirements and actual capital under the OTS regulations are as follows:
Amount Percent
(thousands) of Assets
----------- ---------
Tangible capital:
Actual 6,749 14.65%
Required 921 2.00%
----- -----
Excess 5,828 12.65%
===== =====
Core capital:
Actual 6,749 14.65%
Required 1,842 4.00%
----- -----
Excess 4,907 10.65%
===== =====
Risk-based capital:
Actual 6,986 33.48%
Required 1,669 8.00%
----- -----
Excess 5,317 25.48%
===== =====
Page 14
<PAGE>
GUTHRIE SAVINGS, INC.
Part II - Other Information
<TABLE>
<CAPTION>
<S> <C>
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
Not applicable.
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
Not applicable
</TABLE>
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 February 12, 1998 By /s/William L. Cunningham
----------------- -------------------------------------
William L. Cunningham
President and Chief Executive Officer
(Duly Authorized Representative)
Date February 12, 1998 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
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
December 31, December 31,
---------------------- ----------------------
1997 1998 1997 1998
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Computation Basic Earnings Per Share:
Weighted average common
shares outstanding:
Average share issued 515,125 515,125 515,125 515,125
Less: Average unallocated ESOP shares (30,908) (26,787) (30,908) (26,787)
Less: Unearned MSBP shares (9,368) (5,476) (9,777) (6,299)
Less: Average Treasury shares (97,668) (112,868) (93,213) (105,313)
--------- --------- --------- ---------
Weighted average shares outstanding 377,181 369,994 381,227 376,726
======= ======= ======= =======
Computation Diluted Earnings Per Share:
Weighted average shares
outstanding (per above basic EPS) 377,181 369,994 381,227 376,726
Plus: dilutive effect of MSBP shares 1,577 1,175 1,509 1,249
Plus: dilutive effect of Stock options 11,092 14,181 10,205 13,194
--------- --------- --------- ---------
Diluted weighted average shares outstanding 389,850 385,350 392,941 391,169
========= ========= ========= =========
Net earnings $ 124,044 $ 79,661 $ 383,901 $ 296,357
========= ========= ========= =========
Earnings per shares:
Basic $ 0.33 $ 0.22 $ 1.01 $ 0.79
========= ========= ========= =========
Diluted $ 0.32 $ 0.21 $ 0.98 $ 0.76
========= ========= ========= =========
</TABLE>
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 DERIVED 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> 9-MOS
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-END> DEC-31-1998
<CASH> 271
<INT-BEARING-DEPOSITS> 4,818
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 2,220
<INVESTMENTS-CARRYING> 13,346
<INVESTMENTS-MARKET> 13,428
<LOANS> 24,843
<ALLOWANCE> 350
<TOTAL-ASSETS> 46,373
<DEPOSITS> 35,749
<SHORT-TERM> 0
<LIABILITIES-OTHER> 260
<LONG-TERM> 3,000
0
0
<COMMON> 5
<OTHER-SE> 7,360
<TOTAL-LIABILITIES-AND-EQUITY> 46,373
<INTEREST-LOAN> 1,707
<INTEREST-INVEST> 956
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 2,663
<INTEREST-DEPOSIT> 1,151
<INTEREST-EXPENSE> 1,335
<INTEREST-INCOME-NET> 1,329
<LOAN-LOSSES> 7
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 995
<INCOME-PRETAX> 478
<INCOME-PRE-EXTRAORDINARY> 296
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 296
<EPS-PRIMARY> .79
<EPS-DILUTED> .76
<YIELD-ACTUAL> 3.73
<LOANS-NON> 476
<LOANS-PAST> 0
<LOANS-TROUBLED> 738
<LOANS-PROBLEM> 831
<ALLOWANCE-OPEN> 353
<CHARGE-OFFS> 11
<RECOVERIES> 7
<ALLOWANCE-CLOSE> 349
<ALLOWANCE-DOMESTIC> 349
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 237
</TABLE>
