FORM 10-QSB
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the period ended December 31, 1996
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 0-24848
East Texas Financial Services, Inc.
(Exact name of registrant as specified in its charter)
Delaware 75-2559089
(State or other jurisdiction of (I.R.S. employer
incorporation or organization identification number)
1200 South Beckham, Tyler, Texas 75701
(Address of principal executive offices) (Zip code)
(903) 593-1767
(Registrant's telephone number, including area code)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 of 15(d) of the Securities Exchange Act of 1934 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. [x] Yes [ ] No
The number of shares of the registrant's common stock ($.01 par value)
outstanding as of December 31, 1996, was 1,079,285.
<PAGE>
EAST TEXAS FINANCIAL SERVICES, INC.
AND SUBSIDIARY
FORM 10-QSB
DECEMBER 31, 1996
INDEX
Part I - Financial Information
Item 1. Financial Statements
Consolidated Statements of Financial Condition, December 31, 1996
(Unaudited) and September 30, 1996
Consolidated Statements of Income, (Unaudited) three months
ended December 31, 1996, and December 31, 1995
Consolidated Statement of Changes in Stockholders' Equity, (Unaudited)
three months ended December 31, 1996
Consolidated Statements of Cash Flows, (Unaudited) three months ended
December 31, 1996, and December 31, 1995
Notes to (Unaudited) Consolidated Financial Statements, December 31,
1996
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Part II - Other Information
Item 1. Legal Proceedings
Item 2. Changes In Securities
Item 3. Defaults Upon Senior Securities
Item 4. Submission of Matters To a Vote of Security Holders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
Signature Page
<PAGE>
EAST TEXAS FINANCIAL SERVICES, INC.
AND SUBSIDIARY
FORM 10-QSB
DECEMBER 31, 1996
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
East Texas Financial Services, Inc. (the "Company") was formed in September of
1994 for the purpose of acquiring all of the common stock of First Federal
Savings and Loan Association of Tyler (the "Association"), concurrent with its
conversion from the mutual to stock form of ownership. The Company completed its
initial public stock offering of 1,215,190 shares of $.01 par value common stock
on January 10, 1995. The Company utilized approximately one half of the net
stock sale proceeds to acquired all of the common stock issued by the
Association. For additional discussion of the Company's formation and intended
operations, see the Form S-1 Registration Statement (No. 33-83758) filed with
the Securities and Exchange Commission and the Company's annual report on Form
10-KSB for the fiscal year ended September 30, 1996, also filed with the
Commission.
The financial statements presented in this Form 10-QSB reflect the consolidated
financial condition and results of operations of the Company and its wholly
owned subsidiary, First Federal Savings and Loan Association of Tyler.
<PAGE>
<TABLE>
<CAPTION>
EAST TEXAS FINANCIAL SERVICES, INC.
CONSOLIDATED STATEMENTS OF FINANCIAL CONDIITON
December 31, September 30,
1996 1996
------------- -------------
(Unaudited)
<S> <C> <C>
ASSETS
Cash and due from banks ........................... $ 511,931 $ 704,615
Interest-bearing deposits with banks .............. 3,540,032 4,995,032
Interest earning time deposits with financial
institutions ...................................... 1,565,573 1,663,573
Federal funds sold ................................ 2,554,364 480,285
Investment securities held-to-maturity
(estimated market value of $28,147,500 at
December 31, 1996, and
$30,114,685 at September 30, 1996) ........... 28,111,400 30,138,744
Mortgage-backed securities held-to-maturity
(estimated market value of $23,789,397
at December 31, 1996, and
$25,383,579 at September 30, 1996) .......... 23,310,954 24,948,793
Loans receivable, net of allowance for credit
losses of $267,256 at December 31, 1996, and
$289,120 at September 30, 1996 .............. 50,289,866 47,925,067
Accrued interest receivable ....................... 989,982 930,657
Federal Home Loan Bank stock, at cost ............. 962,400 948,500
Premises and equipment ............................ 953,309 970,184
Foreclosed real estate, net of allowances of $-0- . 118,868 0
Deferred income taxes ............................. 126,258 130,825
Mortgage servicing rights ......................... 127,999 119,845
Other assets ...................................... 272,091 416,816
------------- -------------
Total Assets ............................. $ 113,435,027 $ 114,372,936
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Demand deposits .............................. $ 3,381,715 $ 2,889,861
Savings and NOW deposits ..................... 10,960,580 11,099,604
Other time deposits .......................... 77,516,758 77,671,666
------------- -------------
Total deposits ........................... 91,859,053 91,661,131
Advances from borrowers for taxes and
insurance .................................... 148,434 917,222
Federal income taxes
Current ................................ 105,898 5,044
Deferred ............................... 0 0
Accrued expenses and other liabilities ....... 232,668 858,926
------------- -------------
Total Liabilities ........................ 92,346,053 93,442,323
------------- -------------
<PAGE>
<CAPTION>
EAST TEXAS FINANCIAL SERVICES, INC.
CONSOLIDATED STATEMENTS OF FINANCIAL CONDIITON
(continued)
December 31, September 30,
1996 1996
------------- -------------
(Unaudited)
<S> <C> <C>
Stockholders' equity:
Preferred stock, $0.01 par value, 500,000
shares authorized, none outstanding
Common stock, $.01 par value, 5,500,000 shares
authorized, 1,256,387 shares isued............ 12,564 12,564
Additional paid-in capital ................... 12,112,516 12,112,516
Deferred compensation - RRP shares ........... (417,034) (446,129)
Unearned employee stock ownership plan shares (763,205) (763,206)
Retained earnings (substantially restricted).. 12,941,146 12,811,881
Treasury stock, 177,102 shares at cost ....... (2,797,013) (2,797,013)
------------- -------------
Total stockholders' equity ............... 21,088,974 20,930,613
------------- -------------
Total liabilities and stockholders'
equity ................................... $ 113,435,027 $ 114,372,936
============= =============
The accompanying notes are an integral part of the consolidated financial
statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EAST TEXAS FINANCIAL SERVICES, INC.
CONSOLIDATED STATEMENTS OF INCOME
Three Months
Ended December 31,
(Unaudited)
1996 1995
---------- ----------
<S> <C> <C>
INTEREST INCOME Loans receivable:
First mortgage loans ..................... $ 967,638 $ 865,408
Consumer and other loans ................. 20,527 19,159
Investment securities ......................... 570,919 628,274
Mortgage-backed securities .................... 421,434 561,846
---------- ----------
Total interest income .................. 1,980,518 2,074,687
---------- ----------
INTEREST EXPENSE
Deposits ...................................... 1,109,672 1,142,864
---------- ----------
Total interest expense ................. 1,109,672 1,142,864
---------- ----------
Net interest income before provision
for loan losses ...................... 870,846 931,823
Provision for loan losses ..................... 5,000 0
---------- ----------
Net interest income after provision
for loan losses ...................... 865,846 931,823
---------- ----------
NONINTEREST INCOME
Gain (loss) on sales of interest-earning assets 13,079 27,750
Loan origination and commitment fees .......... 17,219 9,431
Loan servicing fees ........................... 31,686 30,611
Other ......................................... 15,430 21,714
---------- ----------
Total noninterest income ............... 77,414 89,506
---------- ----------
NONINTEREST EXPENSE
Compensation and benefits ..................... 427,655 401,983
Occupancy and equipment ....................... 33,864 39,063
SAIF deposit insurance premium ................ 48,051 57,039
(Gain) loss on foreclosed real estate ......... 58 3,084
Other ......................................... 139,937 139,643
---------- ----------
Total noninterest expense .............. 649,565 640,812
---------- ----------
<PAGE>
<CAPTION>
EAST TEXAS FINANCIAL SERVICES, INC.
CONSOLIDATED STATEMENTS OF INCOME
(continued)
Three Months
Ended December 31,
(Unaudited)
1996 1995
---------- ----------
<S> <C> <C>
Income (loss) before provision for income taxes .. 293,695 380,517
Income tax expense (benefit) ..................... 110,465 138,190
---------- ----------
NET INCOME (LOSS) ................................ $ 183,230 $ 242,327
========== ==========
Earnings per common share ........................ $ 0.18 $ 0.21
The accompanying notes are an integral part of the consolidated financial
statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EAST TEXAS FINANCIAL SERVICES, INC.
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
(UNAUDITED)
THREE MONTHS ENDED
December 31, 1996
Common
Stock and Unearned Unallocated Total
Paid in RRP ESOP Retained Treasury Stockholders'
Capital Shares Shares Earnings Stock Equity
------- ------ ------ -------- ----- ------
<S> <C> <C> <C> <C> <C> <C>
Balance October 1, 1996 ..... $ 12,125,080 $ (446,129) $ (763,206) $ 12,811,881 $ (2,797,013) $ 20,930,613
Deferred compensation
amortization ........... -- 29,095 -- -- -- 29,095
Payment of cash dividends ... -- -- -- (52,317) -- (52,317)
Accrued dividends - RRP stock -- -- -- (1,647) -- (1,647)
Net income for the three
months ended
December 31, 1996 ...... -- -- -- 183,230 -- 183,230
Balance December 31, 1996 ... $ 12,125,080 $ (417,034) $ (763,206) $ 12,941,147 $ (2,797,013) $ 21,088,974
============ ============ ============ ============ ============ ============
The accompanying notes are an integral part of the consolidated financial
statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EAST TEXAS FINANCIAL SERVICES, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
For The Three Months Ended
December 31,
1996 1995
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net income .............................................. $ 183,230 $ 242,327
Adjustments to reconcile net income to net
cash provided by operating activities:
Amortization of deferred loan origination fees ...... (69) (2,295)
Amortization of premiums and discounts on investment
securities, mortgage-backed securities, and loans . 34,002 52,209
Amortization of deferred compensation ............... 29,095 29,096
Compensation charge related to release of ESOP shares 28,994 22,834
Depreciation ........................................ 16,875 18,396
Deferred income taxes ............................... 4,567 (21,463)
Stock dividends on FHLB stock ....................... (13,900) (14,500)
Net (gain) loss on sale of:
Securities held to maturity ....................... 0 0
Foreclosed real estate ............................ 0 0
Net loss on disposal of fixed assets .............. 0 0
Other Assets ...................................... 0 0
Loans ............................................. (4,925) (7,593)
Loans held for sale ............................... 0 0
Proceeds from loan sales ............................ 1,184,950 1,798,118
Originations of loans held for sale ................. 0 0
(Increase) decrease in:
Accrued interest receivable ....................... (59,325) (143,324)
Other assets ...................................... 136,571 94,953
Accrued loan loss reserve ......................... 5,000 0
Increase (decrease) in:
Federal income tax payable ........................ 100,854 144,233
Accrued expenses and other liabilities ............ (655,252) (5,885)
Capitalized interest on time deposits ............... 0 (1,573)
----------- -----------
Net cash provided (used) by operating activities .......... 990,667 2,205,533
----------- -----------
The accompanying notes are an integral part of the consolidated financial
statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EAST TEXAS FINANCIAL SERVICES, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
For the Three Months Ended
December 31,
1996 1995
----------- -----------
<S> <C> <C>
Cash flows from investing activities:
Purchases of interest earning time deposits ................... $ 0 $ (681,000)
Net decrease (increase) in fed funds sold ..................... (2,074,079) (2,208,263)
Purchases of obligations - U.S. Govt. and agencies
held-to-maturity .......................................... (997,578) (6,629,673)
Proceeds from maturity of time deposits ....................... 98,000 0
Proceeds from sale of securities held -to-maturity ............ 0 0
Proceeds from maturity of securities held-to-maturity ......... 0 0
Proceeds from maturities of obligations - U.S. Govt. and
agencies held-to-maturity ................................. 3,000,000 5,000,000
Purchases of mortgage-backed securities
held-to-maturity........................................... 0 0
Principal payments on mortgage-backed securities
held-to-maturity .......................................... 1,628,759 2,478,833
Net originations and principal collections on loans ........... (3,721,670) (2,112,698)
Acquisition cost related to foreclosed real estate ............ (5,252) 0
Proceeds from sale of foreclosed real estate .................. 58,300 0
Expenditures for premises and equipment ....................... 0 0
----------- -----------
Net cash provided (used) by investing activities ................ (2,013,520) (4,152,801)
----------- -----------
Cash flows from financing activities:
Net increase (decrease) in:
Non-interest bearing deposits, savings, and NOW accounts ..... 352,830 1,422,904
Time deposits ................................................ (154,908) (111,361)
Advances from borrowers for taxes and insurance .............. (768,788) (761,070)
Dividends paid to stockholders .................................. (53,965) 0
Purchase of treasury stock ...................................... 0 (1,030,774)
----------- -----------
Net cash provided (used) by financing activities ................ (624,831) (480,301)
----------- -----------
Net increase (decrease) in cash and cash equivalents ............ (1,647,684) (2,427,569)
Cash and cash equivalents at beginning of the period ............ 5,699,647 6,239,836
----------- -----------
Cash and cash equivalents at end of the period .................. $ 4,051,963 $ 3,812,267
=========== ===========
The accompanying notes are an integral part of the consolidated financial
statements.
<PAGE>
<CAPTION>
EAST TEXAS FINANCIAL SERVICES, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
For the Three Months Ended
December 31,
1996 1995
----------- -----------
<S> <C> <C>
Supplemental disclosure:
Cash paid for:
Interest on deposits .......................................... $ 559,672 $ 654,929
Income taxes .................................................. $ 5,157 $ 38,692
Transfers from loans to real estate
acquired through foreclosures ................................. $ 197,595 $ 0
Loan losses charged to valuation allowance ...................... $ 1,185 $ 0
The accompanying notes are an integral part of the financial statements.
</TABLE>
<PAGE>
EAST TEXAS FINANCIAL SERVICES, INC.
AND SUBSIDIARY
NOTES TO (UNAUDITED) CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996
NOTE 1 - BASIS OF PRESENTATION
The financial statements presented in this report have been prepared by the
Company pursuant to the rules and regulations of the Securities and Exchange
Commission for interim reporting and include all adjustments which are, in the
opinion of management, necessary for fair presentation. These financial
statements have not been audited by an independent accountant. Certain
information and footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have been
condensed or omitted pursuant to such rules and regulations for interim
reporting. The Company believes that the disclosures are adequate to make the
information not misleading. However, these financial statements should be read
in conjunction with the financial statement and notes thereto included in the
Company's Annual Report on Form 10-KSB for the year ended September 30, 1996.
The financial data and results of operations for interim periods presented may
not necessarily reflect the results to be anticipated for the complete year.
NOTE 2 - EARNINGS PER SHARE
For purposes of calculating earnings per common share and as prescribed by the
American Instituted of Certified Public Accountants Statement of Position 93-6
("SOP 93-6") Employers' Accounting For Employees Stock Ownership Plans, the
weighted average number of shares outstanding, excluding unallocated Employee
Stock Ownership Plan ("ESOP") shares, was used. For the three months ended
December 31, 1996, the weighted average number of shares outstanding for
earnings per share calculation purposes was 1,002,964. (See Part II, Item 6 -
Exhibits for a detailed presentation of the earnings per share calculation for
the three month period ended December 31, 1996.)
NOTE 3 - SECURITIES
The amortized cost and estimated market values of investment securities
held-to-maturity as of December 31, 1996, are as follows:
<TABLE>
<CAPTION>
Gross Gross Estimated
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Debt securities:
U. S. Treasury ........... $ 1,998,813 $ 6,657 $ 0 $ 2,005,470
U. S. government agency .. 26,112,587 104,259 74,816 26,142,030
----------- ----------- ----------- -----------
Total debt securities $28,111,400 $ 110,916 $ 74,816 $28,147,500
----------- ----------- ----------- -----------
</TABLE>
<PAGE>
NOTE 3 - Continued
The amortized cost and estimated market values of investment securities
held-to-maturity as of December 31, 1996, by contractual maturity are shown
below:
<TABLE>
<CAPTION>
Estimated
Amortized Market
Cost Value
----------- -----------
<S> <C> <C>
Due in one year or less ...................... $14,019,385 $14,068,925
Due after one year through two years ........ 8,520,430 8,542,085
Due after two years through three years ...... 4,567,321 4,543,830
Due after three years through five years ..... 1,004,264 992,660
----------- -----------
Total debt securities ................ $28,111,400 $28,147,500
----------- -----------
</TABLE>
As of December 31, 1996, the weighted average yield on the Company's investment
security portfolio was approximately 6.24% while the Company's overall
investment portfolio, including securities held-to-maturity, overnight deposits
and interest earning time deposits with other financial institutions was
approximately 6.08%.
The carrying values and estimated market values of mortgage-backed and related
securities held-to-maturity as of December 31, 1996, by issuer are as follows:
<TABLE>
<CAPTION>
Estimated
Principal Unamortized Unearned Carrying Market
Balance Premiums Discounts Value Value
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
FHLMC $19,073,587 $ 102,597 $ 49,899 $19,126,285 $19,474,191
FNMA 4,155,573 29,096 0 4,184,669 4,315,206
----------- ----------- ----------- ----------- -----------
$23,229,160 $ 131,693 $ 49,899 $23,310,954 $23,789,397
----------- ----------- ----------- ----------- -----------
</TABLE>
<PAGE>
NOTE 3 - Continued
The carrying values and estimated market values of mortgage-backed and related
securities held-to-maturity as of December 31, 1996, by type of security are as
follows:
<TABLE>
<CAPTION>
Estimated
Principal Unamortized Unearned Carrying Market
Balance Premiums Discounts Value Value
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Fixed Rate .... $ 5,509,757 $ 0 $ 34,575 $ 5,475,182 $ 5,440,030
Adjustable Rate 17,719,403 131,693 15,324 17,835,772 18,349,367
----------- ----------- ----------- ----------- -----------
$23,229,160 $ 131,693 $ 49,899 $23,310,954 $23,789,397
----------- ----------- ----------- ----------- -----------
</TABLE>
Unrealized gains and losses on mortgage-backed and related securities
held-to-maturity as of December 31, 1996, are as follows:
<TABLE>
<CAPTION>
Fixed Rate Adjustable Rate Total
Unrealized Unrealized Unrealized
Gains Losses Gains Losses Gains Losses
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
FHLMC $ 13,565 $ 48,717 $383,058 $ 0 $396,623 $ 48,717
FNMA 0 0 130,537 0 130,537 0
-------- -------- -------- -------- -------- --------
$ 13,565 $ 48,717 $513,595 $ 0 $527,160 $ 48,717
-------- -------- -------- -------- -------- --------
</TABLE>
The overall yield on the Company's mortgage-backed securities portfolio as of
December 31, 1996, was approximately 7.25%.
NOTE 4 - CURRENT ACCOUNTING ISSUES
SFAS NO. 123 In October 1995 the Financial Accounting Standards Board issued
SFAS No. 123, Accounting for Stock-Based Compensation which established a fair
value based method of accounting for stock-based compensation plans. It
encourages entities to adopt that method in place of the provisions of APB
Opinion No. 25, Accounting for Stock Issued to Employees, for all arrangements
under which employees receive shares of stock or other equity instruments of the
employer or the employer incurs liabilities to employees in amounts based on the
price of its stock. It permits entities to continue to use the intrinsic value
method included in APB No. 25, but regardless of the method used to account for
the compensation cost associated with stock option and similar plans, it
requires employers to show significant expanded disclosures, including the pro
forma amount of net income (and earnings per share) as if the fair value-based
method were used to account for stock-based compensation.
<PAGE>
Beginning October 1, 1996, the effective date for the Statement, the Company
elected to continue using the accounting and disclosure methods prescribed by
APB No. 25 for its current plan and to continue using the accounting methods
prescribed by APB No. 25 but disclose in the footnotes information on a fair
value basis for any future stock-based compensation plans.
SFAS NO. 125 Statement of Financial Accounting Standards No. 125, Accounting For
Transfers and Servicing of Financial Assets and Extinguishments of Liabilities,
provides consistent standards for distinguishing transfers of financial assets
that are sales from transfers that are secured borrowings and for the
extinguishment of financial liabilities. It is based on the consistent
application of the financial-components approach. The Statement requires the
recognition of financial assets and servicing assets that are controlled by an
entity, the derecognition of financial assets and servicing assets where control
is surrendered, and the derecognition of liabilities when they are extinguished.
The Statement is effective for transfers and servicing of financial assets and
extinguishment of liabilities occuring after December 31, 1996, and shall be
applied prospectively. The Company adopted the Statement as required.
<PAGE>
EAST TEXAS FINANCIAL SERVICES, INC.
AND SUBSIDIARY
FORM 10-QSB
DECEMBER 31, 1996
Item 2 - Management's Discussion and Analysis of Financial Condition and Results
of Operations
GENERAL
The principle business of the Company is that of a community-oriented financial
institution attracting deposits from the general public and using such deposits
to originate one- to four-family residential loans and, to a lesser extent,
commercial real estate, one- to four-family construction, multi-family and
consumer loans. These funds have also been used to purchase mortgage-backed
securities, U. S. government and agency obligations and other permissible
securities. The ability of the Company to attract deposits is influenced by a
number of factors, including interest rates paid on competing investments,
account maturities and levels of personal income and savings. The Company's cost
of funds is influenced by interest rates on competing investments and general
market rates of interest. Lending activities are influenced by the demand for
real estate loans and other types of loans, which is in turn affected by the
interest rates at which such loans are made, general economic conditions
affecting loan demand, the availability of funds for lending activities,
economic conditions and changes in real estate values.
The Company's results of operations are dependent primarily on net interest
income, which is the difference between the income earned on its loan and
investment portfolios and the interest paid on deposits and borrowings. Results
of operations are also affected by the Company's provision for loan losses and
the net gain(loss) on sales of interest earning assets and loan fees. The
Company's results of operations are also significantly affected by general
economic and competitive conditions, particularly changes in interest rates,
government policies and actions of regulatory authorities.
FINANCIAL CONDITION
The Company's total assets were $113.4 million at December 31, 1996, compared to
$114.4 million at September 30, 1996, a $938,000 or .82% decrease. A $3.7
million decrease in held-to-maturity investment and mortgage-backed securities
accounted for most of the decrease in total assets. Partially offsetting the
decrease was a $328,000 increase in cash due from banks and federal funds sold,
as well as a $2.4 million increase in loans receivable as the Company continued
to originate loans to be placed into the loan portfolio.
Total liabilities decreased by $1.1 million to $92.3 million at December 31,
1996, compared to $93.4 million at September 30, 1996. The decrease was
attributable to a $769,000 decrease in advances from mortgage borrowers for
taxes and insurance as year end taxes were paid on behalf of borrowers and a
$626,000 decrease in accrued expenses as the Association paid its portion of the
one-time "SAIF" special assessment that was accrued at September 30, 1996.
<PAGE>
Stockholders' equity increased by $158,000 to $21.1 million at December 31,
1996, compared to $20.9 million at September 30, 1996, primarily as a result of
the net income for the quarter.
Cash and due from banks totaled $512,000 at December 31, 1996, compared to
$705,000 at September 30, 1996. Vault cash, teller cash funds, and clearing
accounts with correspondent banks comprised the balances in this item. Balances
in this item fluctuate as loan payments and deposits are received from customers
as well as with maturities of investment securities and disbursement of loan
proceeds, deposits withdrawals, and payment of operating expenses.
Interest-earning deposits with banks totaled $3.5 million at December 31, 1996,
compared to $5.0 million at September 30, 1996. The balance consists primarily
of overnight deposits with the Federal Home Loan Bank of Dallas and the balance
varies daily with the Association's cash flow needs. Federal funds sold, which
is a sweep account arrangement with the Association's correspondent bank, was
$2.6 million at quarter end compared to $480,000 at September 30, 1996. The
increase was a result of the Association placing funds with its correspondent
bank to cover checks written to pay year end property taxes on its mortgage loan
servicing portfolio.
Investment securities held-to-maturity totaled $28.1 million at December 31,
1996, compared to $30.1 million at September 30, 1996. The portfolio is
comprised of 25 fixed rate and term U. S. Treasury and agency securities with
staggered maturities over the next four years. Approximately $14.0 million or
twelve securities will mature over the next twelve months. Balances in the
portfolio are determined by the Association's cash flow needs and will vary over
time. Subsequent to December 31, 1996, the Association purchased two additional
securities totaling approximately $2.5 million. At December 31, 1996, the
portfolio contained $14.0 million in securities with final maturities of one
year or less, $ 8.5 million with final maturities of one through two years, $4.6
million with final maturities of two through three years and $1.0 million with
final maturities of three through five years. At December 31, 1996, the yield on
the portfolio was approximately 6.24%.
The Company's mortgage-backed securities portfolio totaled $23.3 million at
December 31, 1996, down $1.6 million from $24.9 million at September 30, 1996.
The decrease resulted from principal payments received on the mortgage-backed
securities portfolio during the quarter. At December 31, 1996, the portfolio was
comprised of $5.5 million of fixed rate and term securities with final
maturities of five years or less. The balance of $17.8 million was in adjustable
rate securities with interest rate adjustment frequencies of either six months
or one year. The weighted average yield on the portfolion was 7.25 % at December
31, 1996.
Loans receivable increased $2.4 million, an annualized growth rate of
approximately 20%, to $50.3 million at December 31, 1996, from $47.9 million at
September 30, 1996. The growth in the loan portfolio is attributable to the
Company's pricing of its fifteen year fixed rate loan product. Over the past
several quarters, the Company has priced its fifteen year fixed term and rate
mortgage loans at competitive levels in Tyler in an effort to generate
additional lending activity. At December 31, 1996, the fifteen year fixed rate
and term portfolio equaled $20.0 million, compared to $18.1 million at September
30, 1996, an increase of $1.9 million or approximately 42% on an annualized
basis. For the quarter ended December 31, 1996, the Company reported total loan
originations of $ 5.4 million, compared to $4.5 million for the quarter ended
December 31, 1995.
<PAGE>
The Company reported foreclosed real estate of $119,000 at December 31, 1996,
compared to none at September 30, 1996. The increase was due to the foreclosure
during the quarter of a loan securing four single-family homes. Two of the
houses were sold to a bidder at the foreclosure sale and the two remaining
houses were purchased by the Company and recorded at their book value. The
properties, located in Houston, Texas, will be listed for sale. (See - "Asset
Quality".)
Subsequent to December 31, 1996, the Company foreclosed on two additional
single-family homes located in Tyler, Texas. The properties were recorded at a
combined amount of $212,000, their book value. The properties will be made ready
and listed for sale.
Total deposits were $91.9 million at December 31, 1996, compared to $91.7
million at September 30, 1996. The Association's average funds cost was 4.87% at
December 31, 1996, up 8 basis point from the 4.79 % at September 30, 1996.
Advances from borrowers for taxes and insurance decreased $769,000 to $148,000
at December 31, 1996, compared to $917,000 at September 30, 1996. The decrease
was a result of year end tax payments on the Association's mortgage loan
servicing portfolio.
Stockholders' equity totaled $21.1 million at December 31, 1996, up $158,000
from the $20.9 million reported at September 30, 1996. The increase was
attributable to the $183,000 net income for the quarter plus a $29,000 increase
in deferred compensation - RRP shares, resulting from the continuing
amortization of the cost of the shares, less a $54,000 cash dividend declared
and paid during the quarter.
RESULTS OF OPERATIONS
The Company's net income is dependent primarily upon net interest income, the
difference or spread between the average yield earned on loans and investments
and the average rate paid on deposits, as well as the relative amounts of such
assets and liabilities. The Company, like other financial intermediaries, is
subject to interest rate risk to the degree that its interest-bearing
liabilities mature or reprice at different times, or on a different basis, than
its interest earning assets.
COMPARISON OF THE THREE MONTHS ENDED DECEMBER 31, 1996
AND DECEMBER 31, 1995
General. Net income for the three months ended December 31, 1996, was $183,000
or $.18 per share, compared to $242,000 or $.21 per share for the quarter ended
December 31, 1995, a $59,000 or 24.4% decrease. The decrease in net income was
attributable to a $66,000 decline in net interest income after provision for
loan losses, a $12,000 decline in non-interest income and a $9,000 increase in
non-interest expense, all of which were partially offset by a $28,000 decrease
in income tax expense.
Net Interest Income. For the three months ended December 31, 1996, net interest
income after provision for loan losses totaled $866,000, down $66,000 or 7.1%
from the $932,000 reported for the quarter ended December 31, 1995. A $94,000
decline in total interest income and a $5,000 increase in provision for loan
losses, which were partially offset by a $33,000 decrease in interest expense,
accounted for the decrease in net interest income.
<PAGE>
Interest on loans receivable totaled $988,000 for the quarter ended December 31,
1996, compared to $885,000 for the quarter ended December 31, 1995. The
Company's continued emphasis on portfolio lending accounted for the increase in
interest income on loans receivable. For the quarter, the Company originated
$5.4 million in mortgage loans. Only $1.2 million were sold into the secondary
market, while the remainder were placed into the loan portfolio. As a result,
and net of principle payments, loans receivable increased to $50.3 million at
December 31, 1996, compared to $47.9 million at September 30, 1996, and $42.1
million at December 31, 1995.
Interest income from the Company's mortgage backed securities portfolio declined
to $421,000 for the quarter ended December 31, 1996, compared to $562,000 for
the same period in 1995, a $140,000 or 25.0% decline. Borrowers of the
predominately adjustable rate loans underlying the securities continued to
refinance their mortgages to fixed rate and term loans during the year. The
Company redirected the resulting cash flow into its portfolio lending operation
and the result was a decrease in the mortgage-backed securities portfolio from
$31.2 million at December 31, 1995, to $23.3 million at December 31, 1996. The
decline in balances outstanding, despite an increase in the overall yield of the
portfolio from 7.03% at December 31, 1995, to 7.25% at December 31, 1996,
accounted for the significant decline in interest income on the portfolio.
Interest income from the investment securities and overnight funds portfolio
totaled $571,000 for the three months ended December 31, 1996, compared to
$628,000 for the same period in 1995, a $57,000 or 9.1% decrease. The decrease
resulted from a $1.9 million decline in the average balance outstanding in the
portfolio for the quarter ended December 31, 1996, compared to the same quarter
in 1995. In addition, the average yield on the portfolio declined to 6.08% at
December 31, 1996, from 6.23% at December 31, 1995, as maturing investment
securities were reinvested in lower interest rates.
Interest paid to depositors totaled $1.1 million for the quarter ended December
31, 1996, a $33,000 decrease from the $1.1 million for the same quarter in 1995.
Despite the fact that average deposit balances outstanding for the quarter ended
December 31, 1996, decreased $1.4 million to $91.8 million from the $93.1
million for the quarter ended December 31, 1995, an increase in the Company's
average funds cost to 4.87% at December 31, 1996, from 4.70% at December 31,
1995, accounted for the minimal change in interest expense. The increase in the
average funds cost resulted as the Company continued to pay competitive deposit
rates on renewing certificate of deposit accounts throughout 1996.
Provision for Loan Losses. The Company recorded $5,000 in provision for loan
losses during the quarter ended December 31, 1996, compared to none in the
quarter ended December 31, 1995. Management, in recognition of the continued
increase in loans receivable outstanding, made the decision to increase the
balance in the allowance for loss account. It is management's intention to
periodically add to the allowance for loan loss account as the loan portfolio
increases and is not indicative of management's assessment of the quality of the
loan portfolio, which is still considered as strong. (see "Asset Quality".)
<PAGE>
Non-Interest Income. Non-interest income decreased to $77,000 for the quarter
ended December 31, 1996, from $90,000 for the quarter ended December 31, 1995, a
$12,000 or 13.5% decrease. The decrease was primarily attributable to a $15,000
decrease in gains on sales of interest-earning assets. As more loans were placed
into portfolio than sold, the Company recorded fewer gains on the sale of loans
under the accounting requirements of Statements of Financial Accounting
Standards ("SFAS") No. 122, Accounting For Mortgage Servicing Rights - An
Amendment of FASB Statement No. 65. Loan origination and commitment fees
increased to $17,000 for the quarter, compared to $9,000 for the same quarter in
1995, as the Company continued to emphasize its portfolio lending.
Non-Interest Expense. Total non-interest expense increased to $650,000 for the
three months ended December 31, 1996, from $641,000 for the quarter ended
December 31, 1995. The increase was primarily the result of a $26,000 increase
in compensation and benefits expense as a result of a year-end bonus paid to
employees during the quarter ended December 31, 1996. The increase in
compensation and benefits was partially offset by a $9,000 reduction in SAIF
deposit insurance premiums. The Company had accrued, at September 30, 1996,
$645,000 in anticipation of the special assessment levied against all SAIF
insured thrifts and designed to recapitalize the SAIF. The company's actual
assessment was $639,000 and was paid in the quarter ended December 31, 1996. The
difference in the amount accrued and actually paid accounted for most of the
change in SAIF insurance premiums.
Provision For Income Taxes. The Company incurred federal income tax expense of
$110,000 or 37.6% of pre-tax income for the three months ended December 31,
1996, compared to $138,000 or 36.3% of pre-tax income for the same period in
1995. The decrease was attributable to a decline in pre-tax income from $381,000
for the quarter ended December 31, 1995, to $294,000 for the quarter ended
December 31, 1996.
ASSET QUALITY
At December 31, 1996, the Company's non-performing assets totaled $499,000 or
.44% of total assets, compared to $450,000 or .39% of total assets at September
30, 1996. The increase was attributable to one additional single-family home
loan with a balance of $153,000 that reached ninety days delinquent at December
31, 1996. The loan, plus an additional single-family home loan in the amount of
$54,000 were foreclosed on subsequent to December 31, 1996. (see "Foreclosed
Real Estate".)
At December 31, 1996, non-performing assets was comprised entirely of loans on
single-family residences. Non-performing loans equaled .76% of loans receivable
at December 31, 1996, compared to .94% at September 30, 1996.
Classified assets totaled $1.0 million or .92% of total assets at December 31,
1996, compared to $999,000 or .87% of total assets at September 30, 1996.
Classified assets and non-performing assets differ in that classified assets may
include loans less than ninety days delinquent. Also, assets guaranteed by
government agencies such as the Veterans Administration and the Federal Housing
Administration are not included in classified assets but are included in
non-performing assets. All classified assets at December 31, 1996, were deemed
to be "substandard". No assets were classified as "doubtful" or "loss" as of
such date.
<PAGE>
The Company's allowance for loan losses totaled $267,000 at December 31, 1996,
compared to $289,000 at September 30, 1996, a $22,000 decrease. The decrease
resulted from the Company's December 3, 1996, foreclosure of a single loan on
four single-family residences located in the Houston, Texas, area. Two of the
properties were successfully acquired at the foreclosure sale and are recorded
as foreclosed real estate. (see "Foreclosed Real Estate".) The remaining two
properties were sold at the foreclosure sale in partial satisfaction of the debt
on the properties. The attorney retained by the Association to act as substitute
trustee at the foreclosure sale failed to follow the Company's instructions with
regards to the two properties. The attorney sold the properties for less than
the instructed amount resulting in a loss to the Company at the sale. The
attorney acknowledged the error and agreed to file a claim against his
professional liability insurance carrier. The loss on the sale, approximately
$26,000, was charged against the Company's allowance for loan loss account. Any
payment received on the insurance claim will be recorded as a recovery of the
loss on the sale and will be credited to the allowance account.
The allowance for loan losses as a percentage of loans receivable equaled .53%
at December 31, 1996, compared to .60% at September 30, 1996.
LIQUIDITY AND CAPITAL RESOURCES
The Company's principal sources of funds are deposits from customers,
amortization and prepayment of loan principal (including mortgage-backed
securities), maturities of securities, sales of loans and operations.
Current Office of Thrift Supervision regulations require the Association to
maintain cash and eligible investments (liquid assets), in an amount equal to
5.0% of net withdrawable savings deposits and borrowings payable on demand or
within five years or less during the preceding month. Liquid assets include
cash, certain time deposits, U. S Government and agency securities having
maturities of less than five years. The Association maintains a liquid asset
ratio above the minimum required level of the Office of Thrift Supervision. At
December 31, 1996, the Association's liquid asset ratio equaled 43.4%.
The Association uses its liquidity and capital resources principally to meet
ongoing commitments to fund maturing certificates of deposit and loan
commitments, maintain liquidity and pay operating expenses. At December 31,
1996, the Association had outstanding commitments to extend credit on $2.8
million of real estate loans.
Management believes that present levels of liquid assets are sufficient to meet
anticipated future loan commitments as well as deposit withdrawal demands.
Total stockholders' equity equaled $21.1 million at December 31, 1996, an
increase of $158,000 from the $20.9 million reported at September 30, 1996. The
increase was primarily a result of the $183,000 net income for the quarter
partially offset by a cash dividend of $54,000 paid during the quarter.
As of December 31, 1996, the Company's reported book value per share, using
total stockholders' equity of $21.1 million (net of the cost of unallocated ESOP
shares) and 1,079,285 outstanding shares of common stock (the total issued
shares including unallocated ESOP shares less treasury shares), equaled $19.54
per share.
Subsequent to the quarter ended December 31, 1996, the Company announced its
intention to pay a cash dividend of $.05 per share on February 26, 1997, to
stockholders of record at February 12, 1997.
<PAGE>
Under the Financial Institutions Reform, Recovery and Enforcement Act of 1989
("FIRREA"), Congress imposed a three part capital requirement for thrift
institutions. At December 31, 1996, the Association's actual and required
capital amounts under each of the three requirements were as follows:
- - Tangible Capital (stockholders' equity) was $17.7 million or 15.6% of total
assets, exceeding the minimum requirement of 1.5% by $16.0 million.
- - Core Capital (Tangible capital plus certain intangible assets) was $17.7
million or 15.6% of total assets, exceeding the minimum requirement of 3.0% by
$14.3 million.
- - Risk-based Capital (Core capital plus general loan and valuation allowances
less an adjustment for capitalized mortgage servicing rights) equaled $18.0
million or 44.2% of risk weighted assets, exceeding the minimum requirement of
8.0% of risk weighted assets by $14.7 million.
At December 31, 1996, the Association was considered a "well capitalized"
institution under the prompt corrective action requirements of the Federal
Deposit Insurance Corporation Improvement Act of 1991.
<PAGE>
EAST TEXAS FINANCIAL SERVICES, INC.
AND SUBSIDIARY
FORM 10-QSB
DECEMBER 31, 1996
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
There are no material legal proceedings to which the Company or the
Association is a party or of which any of their property is subject. From
time-to-time, the Association is a party to various legal proceedings
incident to the conduct of its business.
Item 2. Changes In Securities
None
Item 3. Defaults Upon Senior Securities
None
Item 4. Submissions Of Matters To A Vote Of Security Holders
On January 22, 1997, the Company's annual stockholders' meeting was held to
elect directors and ratify the appointment of independent auditors for the
current fiscal year. The following are the voting results of each of these
matters submitted to stockholders:
The election of Jack W. Flock and For 1,009,548
Charles R. Halstead as directors for a three Against 0
year term ending January 2000. Abstain 0
Broker Non-Votes 0
Ratification of the appointment of Bryant For 1,009,548
and Welborn, LLP, as independent Against 0
auditors for the fiscal year ending Abstain 0
September 30, 1997.
The text of the matters referred to in this Item 4 is set forth in the
Proxy Statement dated December 23, 1996, previously filed with the
Securities and Exchange Commission.
Item 5. Other Information.
None
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
(a) The following exhibits are filed herewith:
Exhibit 3.0 - By-Laws
Exhibit 10.1 - 1995 Stock Option and Incentive Plan
Exhibit 10.2 - Recognition and Retention Plan
Exhibit 11.0 - Computation of Earnings Per Share
Exhibit 27.0 - Financial Data Schedule
(b) Reports on Form 8-K
During the quarter ended December 31, 1996, the Company filed a report
on Form 8-K on October 17, 1996, to report the issuance of a press
release dated October 17, 1996, announcing the Company's intention to
pay, on November 27, 1996, a cash dividend of $.05 per share for the
quarter ended September 30, 1996, to stockholders of record on November
13, 1996.
During the quarter ended December 31, 1996, the Company filed a report
on Form 8-K on November 22, 1996, to report the issuance of a press
release dated November 22, 1996, announcing the Company's earnings for
the year ended September 30, 1996.
<PAGE>
SIGNATURES
Pursuant to the requirement of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
East Texas Financial Services, Inc.
Date: February 13, 1997 /s/ Gerald W. Free
------------------
President and Chief Executive Officer
(Principal Executive Officer)
Date: February 13, 1997 /s/ Derrell W. Chapman
-----------------------
Vice President/COO/CFO
(Principal Financial and Accounting Officer)
EXHIBIT 3.0
<PAGE>
EAST TEXAS FINANCIAL SERVICES, INC.
AMENDED AND RESTATED
BY-LAWS
ARTICLE I
STOCKHOLDERS
Section 1. Annual Meeting.
An annual meeting of the stockholders, for the election of directors to
succeed those whose terms expire and for the transaction of such other business
as may properly come before the meeting, shall be held at such place, on such
date, and at such time as the Board of Directors shall each year fix.
Section 2. Special Meetings.
Subject to the rights of the holders of any class or series of
preferred stock of the Corporation, special meetings of stockholders of the
Corporation may be called only by the Board of Directors pursuant to a
resolution adopted by a majority of the total number of directors which the
Corporation would have if there were no vacancies on the Board of Directors
(hereinafter the "Whole Board").
Section 3. Notice of Meetings.
Written notice of the place, date, and time of all meetings of the
stockholders shall be given, not less than ten (10) nor more than sixty (60)
days before the date on which the meeting is to be held, to each stockholder
entitled to vote at such meeting, except as otherwise provided herein or
required by law (meaning, here and hereinafter, as required from time to time by
the Delaware General Corporation Law or the Certificate of Incorporation of the
Corporation).
When a meeting is adjourned to another place, date or time, written
notice need not be given of the adjourned meeting if the place, date and time
thereof are announced at the meeting at which the adjournment is taken;
provided, however, that if the date of any adjourned meeting is more than thirty
(30) days after the date for which the meeting was originally noticed, or if a
new record date is fixed for the adjourned meeting, written notice of the place,
date and time of the adjourned meeting shall be given in conformity herewith. At
any adjourned meeting, any business may be transacted which might have been
transacted at the original meeting.
Section 4. Quorum.
At any meeting of the stockholders, the holders of at least one-third
of all of the shares of the stock entitled to vote at the meeting, present in
person or by proxy, shall constitute a quorum for all purposes, unless or except
to the extent that the presence of a larger number may be required by law. Where
a separate vote by a class or classes is required, a majority of the shares of
such class or classes, present in person or represented by proxy, shall
constitute a quorum entitled to take action with respect to that vote on that
matter.
<PAGE>
If a quorum shall fail to attend any meeting, the chairman of the
meeting or the holders of a majority of the shares of stock entitled to vote who
are present, in person or by proxy, may adjourn the meeting to another place,
date or time.
If a notice of any adjourned special meeting of stockholders is sent to
all stockholders entitled to vote thereat, stating that it will be held with
those present constituting a quorum, then except as otherwise required by law,
those present at such adjourned meeting shall constitute a quorum, and all
matters shall be determined by a majority of the votes cast at such meeting.
Section 5. Organization.
Such person as the Board of Directors may have designated or, in the
absence of such a person, the President of the Corporation or, in his or her
absence, such person as may be chosen by the holders of a majority of the shares
entitled to vote who are present, in person or by proxy, shall call to order any
meeting of the stockholders and act as chairman of the meeting. In the absence
of the Secretary of the Corporation, the secretary of the meeting shall be such
person as the chairman appoints.
Section 6. Conduct of Business.
(a) The chairman of any meeting of stockholders shall
determine the order of business and the procedure at the meeting, including such
regulation of the manner of voting and the conduct of discussion as seem to him
or her in order.
(b) At any annual meeting of the stockholders, only such
business shall be conducted as shall have been brought before the meeting (i) by
or at the direction of the Board of Directors or (ii) by any stockholder of the
Corporation who is entitled to vote with respect thereto and who complies with
the notice procedures set forth in this Section 6(b). For business to be
properly brought before an annual meeting by a stockholder, the stockholder must
have given timely notice thereof in writing to the Secretary of the Corporation.
To be timely, a stockholder's notice must be delivered or mailed to and received
at the principal executive offices of the Corporation not less than thirty (30)
days prior to the date of the annual meeting; provided, however, that in the
event that less than forty (40) days' notice of the date of the meeting is given
or made to stockholders, notice by the stockholder to be timely must be received
not later than the close of business on the 10th day following the day on which
such notice of the date of the annual meeting was mailed. A stockholder's notice
to the Secretary shall set forth as to each matter such stockholder proposes to
bring before the annual meeting (i) a brief description of the business desired
to be brought before the annual meeting and the reasons for conducting such
business at the annual meeting, (ii) the name and address, as they appear on the
Corporation's books, of the stockholder who proposed such business, (iii) the
class and number of shares of the Corporation's capital stock that are
beneficially owned by such stockholder and (iv) any material interest of such
stockholder in such business. Notwithstanding anything in these By-laws to the
contrary, no business shall be brought before or conducted at an annual meeting
except in accordance with the provisions of this Section 6(b). The officer of
the Corporation or other person presiding over the annual meeting shall, if the
facts so warrant, determine and declare to the meeting that business was not
properly brought before the meeting in accordance with the provisions of this
Section 6(b) and, if he should so determine, he shall so declare to the meeting
and any such business so determined to be not properly brought before the
meeting shall not be transacted.
<PAGE>
At any special meeting of the stockholders, only such business
shall be conducted as shall have been brought before the meeting by or at the
direction of the Board of Directors or by or at the direction of the holders of
not less than one-tenth of all the outstanding capital stock of the Corporation
at whose instance the special meeting is called.
(c) Only persons who are nominated in accordance with the
procedures set forth in these By-laws shall be eligible for election as
directors. Nominations of persons for election to the Board of Directors of the
Corporation may be made at a meeting of stockholders at which directors are to
be elected only (i) by or at the direction of the Board of Directors or (ii) by
any stockholder of the Corporation entitled to vote for the election of
directors at the meeting who complies with the notice procedures set forth in
this Section 6(c). Such nominations, other than those made by or at the
direction of the Board of Directors, shall be made by timely notice in writing
to the Secretary of the Corporation. To be timely, a stockholder's notice shall
be delivered or mailed to and received at the principal executive offices of the
Corporation not less than 30 days prior to the date of the meeting; provided,
however, that in the event that less than 40 days' notice of the date of the
meeting is given or made to stockholders, notice by the stockholder to be timely
must be so received not later than the close of business on the 10th day
following the day on which such notice of the date of the meeting was mailed.
Such stockholder's notice shall set forth (i) as to each person whom such
stockholder proposes to nominate for election or re-election as a director, all
information relating to such person that is required to be disclosed in
solicitations of proxies for election of directors, or is otherwise required, in
each case pursuant to Regulation 14A under the Securities Exchange Act of 1934,
as amended (including such person's written consent to being named in the proxy
statement as a nominee and to serving as a director if elected); and (ii) as to
the stockholder giving the notice: (x) the name and address, as they appear on
the Corporation's books, of such stockholder and (y) the class and number of
shares of the Corporation's capital stock that are beneficially owned by such
stockholder. At the request of the Board of Directors, any person nominated by
the Board of Directors for election as a director shall furnish to the Secretary
of the Corporation that information required to be set forth in a stockholder's
notice of nomination which pertains to the nominee. No person shall be eligible
for election as a director of the Corporation unless nominated in accordance
with the provisions of this Section 6(c). The officer of the Corporation or
other person presiding at the meeting shall, if the facts so warrant, determine
that a nomination was not made in accordance with such provisions and, if he or
she should so determine, he or she shall so declare to the meeting and the
defective nomination shall be disregarded.
Section 7. Proxies and Voting.
At any meeting of the stockholders, every stockholder entitled to vote
may vote in person or by proxy authorized by an instrument in writing (or as
otherwise permitted under applicable law) by the stockholder or his duly
authorized attorney-in-fact filed in accordance with the procedure established
for the meeting. Proxies solicited on behalf of the management shall be voted as
directed by the stockholder or in the absence of such direction, as determined
by a majority of the Board of Directors. No proxy shall be valid after eleven
months from the date of its execution except for a proxy coupled with an
interest.
Each stockholder shall have one (1) vote for every share of stock
entitled to vote which is registered in his or her name on the record date for
the meeting, except as otherwise provided herein or in the Certificate of
Incorporation of the Corporation or as required by law.
<PAGE>
All voting, including on the election of directors but excepting where
otherwise required by law, may be by a voice vote; provided, however, that upon
demand therefore by a stockholder entitled to vote or his or her proxy, a stock
vote shall be taken. Every stock vote shall be taken by ballot, each of which
shall state the name of the stockholder or proxy voting and such other
information as may be required under the procedure established for the meeting.
Every vote taken by ballot shall be counted by an inspector or inspectors
appointed by the chairman of the meeting.
All elections shall be determined by a plurality of the votes cast, and
except as otherwise required by law or as provided in the Certificate of
Incorporation, all other matters shall be determined by a majority of the votes
cast.
Section 8. Stock List.
The officer who has charge of the stock transfer books of the
Corporation shall prepare and make, in the time and manner required by
applicable law, a list of stockholders entitled to vote and shall make such list
available for such purposes, at such places, at such times and to such persons
as required by applicable law. The stock transfer books shall be the only
evidence as to the identity of the stockholders entitled to examine the stock
transfer books or to vote in person or by proxy at any meeting of stockholders.
Section 9. Consent of Stockholders in Lieu of Meeting.
Subject to the rights of the holders of any class or series of
preferred stock of the Corporation, any action required or permitted to be taken
by the stockholders of the Corporation must be effected at a duly called annual
or special meeting of stockholders of the Corporation and may not be effected by
any consent in writing by such stockholders.
Section 10. Inspectors of Election
The Board of Directors shall, in advance of any meeting of
stockholders, appoint one or more persons as inspectors of election, to act at
the meeting or any adjournment thereof and make a written report thereof, in
accordance with applicable law.
ARTICLE II
BOARD OF DIRECTORS
Section 1. General Powers, Number and Term of Office.
The business and affairs of the Corporation shall be managed by or
under the direction of the Board of Directors. The number of directors shall be
as provided for in the Certificate of Incorporation. The Board of Directors
shall annually elect a Chairman of the Board and a President from among its
members and shall designate, when present, either the Chairman of the Board or
the President to preside at its meetings.
<PAGE>
The directors, other than those who may be elected by the holders of
any class or series of preferred stock, shall be divided into three classes, as
nearly equal in number as reasonably possible, with the term of office of the
first class to expire at the conclusion of the first annual meeting of
stockholders, the term of office of the second class to expire at the conclusion
of the annual meeting of stockholders one year thereafter and the term of office
of the third class to expire at the conclusion of the annual meeting of
stockholders two years thereafter, with each director to hold office until his
or her successor shall have been duly elected and qualified. At each annual
meeting of stockholders, commencing with the first annual meeting, directors
elected to succeed those directors whose terms expire shall be elected for a
term of office to expire at the third succeeding annual meeting of stockholders
after their election, with each director to hold office until his or her
successor shall have been duly elected and qualified.
Section 2. Vacancies and Newly Created Directorships.
Subject to the rights of the holders of any class or series of
preferred stock then outstanding, newly created directorships resulting from any
increase in the authorized number of directors or any vacancies in the Board of
Directors resulting from death, resignation, retirement, disqualification,
removal from office or other cause may be filled only by a majority vote of the
directors then in office, though less than a quorum, and directors so chosen
shall hold office for a term expiring at the annual meeting of stockholders at
which the term of office of the class to which they have been elected expires,
and until such director's successor shall have been duly elected and qualified.
No decrease in the number of authorized directors constituting the Board shall
shorten the term of any incumbent director.
Section 3. Regular Meetings.
Regular meetings of the Board of Directors shall be held at such place
or places, on such date or dates, and at such time or times as shall have been
established by the Board of Directors and publicized among all directors. A
notice of each regular meeting shall not be required.
Section 4. Special Meetings.
Special meetings of the Board of Directors may be called by one-third
(1/3) of the directors then in office (rounded up to the nearest whole number)
or by the President and shall be held at such place, on such date, and at such
time as they or he or she shall fix. Notice of the place, date, and time of each
such special meeting shall be given to each director by whom it is not waived by
mailing written notice not less than five (5) days before the meeting or by
telegraphing or telexing or by facsimile transmission of the same not less than
twenty-four (24) hours before the meeting. Unless otherwise indicated in the
notice thereof, any and all business may be transacted at a special meeting.
Section 5. Quorum.
At any meeting of the Board of Directors, a majority of the authorized
number of directors then constituting the Board shall constitute a quorum for
all purposes. If a quorum shall fail to attend any meeting, a majority of those
present may adjourn the meeting to another place, date, or time, without further
notice or waiver thereof.
<PAGE>
Section 6. Participation in Meetings By Conference Telephone.
Members of the Board of Directors, or of any committee thereof, may
participate in a meeting of such Board or committee by means of conference
telephone or similar communications equipment by means of which all persons
participating in the meeting can hear each other and such participation shall
constitute presence in person at such meeting.
Section 7. Conduct of Business.
At any meeting of the Board of Directors, business shall be transacted
in such order and manner as the Board may from time to time determine, and all
matters shall be determined by the vote of a majority of the directors present,
except as otherwise provided herein or required by law. Action may be taken by
the Board of Directors without a meeting if all members thereof consent thereto
in writing, and the writing or writings are filed with the minutes of
proceedings of the Board of Directors.
Section 8. Powers.
The Board of Directors may, except as otherwise required by law,
exercise all such powers and do all such acts and things as may be exercised or
done by the Corporation, including, without limiting the generality of the
foregoing, the unqualified power:
(1) To declare dividends from time to time in accordance with
law;
(2) To purchase or otherwise acquire any property, rights or
privileges on such terms as it shall determine;
(3) To authorize the creation, making and issuance, in such
form as it may determine, of written obligations of every kind, negotiable or
non-negotiable, secured or unsecured, and to do all things necessary in
connection therewith;
(4) To remove any officer of the Corporation with or without
cause, and from time to time to devolve the powers and duties of any officer
upon any other person for the time being;
(5) To confer upon any officer of the Corporation the power to
appoint, remove and suspend subordinate officers, employees and agents;
(6) To adopt from time to time such stock, option, stock
purchase, bonus or other compensation plans for directors, officers, employees
and agents of the Corporation and its subsidiaries as it may determine;
(7) To adopt from time to time such insurance, retirement, and
other benefit plans for directors, officers, employees and agents of the
Corporation and its subsidiaries as it may determine; and,
(8) To adopt from time to time regulations, not inconsistent
with these Bylaws, for the management of the Corporation's business and affairs.
<PAGE>
Section 9. Compensation of Directors.
Directors, as such, may receive, pursuant to resolution of the Board of
Directors, fixed fees and other compensation for their services as directors,
including, without limitation, their services as members of committees of the
Board of Directors.
Section 10. Qualifications.
Any member of the Board of Directors shall, in order to qualify as
such, be domiciled in or have his or her primary place of business located in
any county in which the Company's subsidiary thrift institution has an office.
ARTICLE III
COMMITTEES
Section 1. Committees of the Board of Directors.
The Board of Directors, by a vote of a majority of the Board of
Directors, may from time to time designate committees of the Board, with such
lawfully delegable powers and duties as it thereby confers, to serve at the
pleasure of the Board and shall, for those committees and any others provided
for herein, elect a director or directors to serve as the member or members,
designating, if it desires, other directors as alternate members who may replace
any absent or disqualified member at any meeting of the committee. Any committee
so designated may exercise the power and authority of the Board of Directors to
declare a dividend, to authorize the issuance of stock or to adopt a certificate
of ownership and merger pursuant to Section 253 of the Delaware General
Corporation Law if the resolution which designated the committee or a
supplemental resolution of the Board of Directors shall so provide. In the
absence or disqualification of any member of any committee and any alternate
member in his or her place, the member or members of the committee present at
the meeting and not disqualified from voting, whether or not he or she or they
constitute a quorum, may by unanimous vote appoint another member of the Board
of Directors to act at the meeting in the place of the absent or disqualified
member.
Section 2. Conduct of Business.
Each committee may determine the procedural rules for meeting and
conducting its business and shall act in accordance therewith, except as
otherwise provided herein or required by law. Adequate provision shall be made
for notice to members of all meetings; one-third (1/3) of the members shall
constitute a quorum unless the committee shall consist of one (1) or two (2)
members, in which event one (1) member shall constitute a quorum; and all
matters shall be determined by a majority vote of the members present. Action
may be taken by any committee without a meeting if all members thereof consent
thereto in writing, and the writing or writings are filed with the minutes of
the proceedings of such committee.
<PAGE>
Section 3. Nominating Committee.
The Board of Directors shall appoint a Nominating Committee of the
Board, consisting of three (3) members, one of which shall be the President if,
and only so long as, the President remains in office as a member of the Board of
Directors. The Nominating Committee shall have authority (a) to review any
nominations for election to the Board of Directors made by a stockholder of the
Corporation pursuant to Section 6(c)(ii) of Article I of these By-laws in order
to determine compliance with such By-law and (b) to recommend to the Whole Board
nominees for election to the Board of Directors to replace those directors whose
terms expire at the annual meeting of stockholders next ensuing.
ARTICLE IV
OFFICERS
Section 1. Generally.
(a) The Board of Directors as soon as may be practicable after
the annual meeting of stockholders shall choose a President, a Secretary and a
Treasurer and from time to time may choose such other officers as it may deem
proper. The President shall be chosen from among the directors. Any number of
offices may be held by the same person.
(b) The term of office of all officers shall be until the next
annual election of officers and until their respective successors are chosen,
but any officer may be removed from office at any time by the affirmative vote
of a majority of the authorized number of directors then constituting the Board
of Directors.
(c) All officers chosen by the Board of Directors shall each
have such powers and duties as generally pertain to their respective offices,
subject to the specific provisions of this Article IV. Such officers shall also
have such powers and duties as from time to time may be conferred by the Board
of Directors or by any committee thereof.
Section 2. President.
The President shall be the chief executive officer and, subject to the
control of the Board of Directors, shall have general power over the management
and oversight of the administration and operation of the Corporation's business
and general supervisory power and authority over its policies and affairs. He
shall see that all orders and resolutions of the Board of Directors and of any
committee thereof are carried into effect.
Each meeting of the stockholders and of the Board of Directors shall be
presided over by such officer as has been designated by the Board of Directors
or, in his absence, by such officer or other person as is chosen at the meeting.
The Secretary or, in his absence, the General Counsel of the Corporation or such
officer as has been designated by the Board of Directors or, in his absence,
such officer or other person as is chosen by the person presiding, shall act as
secretary of each such meeting.
<PAGE>
Section 3. Vice President.
The Vice President or Vice Presidents, if any, shall perform the duties
of the President in his absence or during his disability to act. In addition,
the Vice Presidents shall perform the duties and exercise the powers usually
incident to their respective offices and/or such other duties and powers as may
be properly assigned to them from time to time by the Board of Directors, the
Chairman of the Board or the President.
Section 4. Secretary.
The Secretary or an Assistant Secretary shall issue notices of
meetings, shall keep their minutes, shall have charge of the seal and the
corporate books, shall perform such other duties and exercise such other powers
as are usually incident to such offices and/or such other duties and powers as
are properly assigned thereto by the Board of Directors, the Chairman of the
Board or the President.
Section 5. Treasurer.
The Treasurer shall have charge of all monies and securities of the
Corporation, other than monies and securities of any division of the Corporation
which has a treasurer or financial officer appointed by the Board of Directors,
and shall keep regular books of account. The funds of the Corporation shall be
deposited in the name of the Corporation by the Treasurer with such banks or
trust companies or other entities as the Board of Directors from time to time
shall designate. He shall sign or countersign such instruments as require his
signature, shall perform all such duties and have all such powers as are usually
incident to such office and/or such other duties and powers as are properly
assigned to him by the Board of Directors, the Chairman of the Board or the
President, and may be required to give bond, payable by the Corporation, for the
faithful performance of his duties in such sum and with such surety as may be
required by the Board of Directors.
Section 6. Assistant Secretaries and Other Officers.
The Board of Directors may appoint one or more assistant secretaries
and one or more assistants to the Treasurer, or one appointee to both such
positions, which officers shall have such powers and shall perform such duties
as are provided in these By-laws or as may be assigned to them by the Board of
Directors, the Chairman of the Board or the President.
Section 7. Action with Respect to Securities of Other Corporations
Unless otherwise directed by the Board of Directors, the President or
any officer of the Corporation authorized by the President shall have power to
vote and otherwise act on behalf of the Corporation, in person or by proxy, at
any meeting of stockholders of or with respect to any action of stockholders of
any other corporation in which this Corporation may hold securities and
otherwise to exercise any and all rights and powers which this Corporation may
possess by reason of its ownership of securities in such other Corporation.
<PAGE>
ARTICLE V
STOCK
Section 1. Certificates of Stock.
Each stockholder shall be entitled to a certificate signed by, or in
the name of the Corporation by, the President or a Vice President, and by the
Secretary or an Assistant Secretary, or the Treasurer or an Assistant Treasurer,
certifying the number of shares owned by him or her. Any or all of the
signatures on the certificate may be by facsimile.
Section 2. Transfers of Stock.
Transfers of stock shall be made only upon the transfer books of the
Corporation kept at an office of the Corporation or by transfer agents
designated to transfer shares of the stock of the Corporation. Except where a
certificate is issued in accordance with Section 4 of Article V of these
By-laws, an outstanding certificate for the number of shares involved shall be
surrendered for cancellation before a new certificate is issued therefore.
Section 3. Record Date.
In order that the Corporation may determine the stockholders entitled
to notice of or to vote at any meeting of stockholders, or to receive payment of
any dividend or other distribution or allotment of any rights or to exercise any
rights in respect of any change, conversion or exchange of stock or for the
purpose of any other lawful action, the Board of Directors may fix a record
date, which record date shall not precede the date on which the resolution
fixing the record date is adopted and which record date shall not be more than
sixty (60) nor less than ten (10) days before the date of any meeting of
stockholders, nor more than sixty (60) days prior to the time for such other
action as hereinbefore described; provided, however, that if no record date is
fixed by the Board of Directors, the record date for determining stockholders
entitled to notice of or to vote at a meeting of stockholders shall be at the
close of business on the day next preceding the day on which notice is given or,
if notice is waived, at the close of business on the day next preceding the day
on which the meeting is held, and, for determining stockholders entitled to
receive payment of any dividend or other distribution or allotment of rights or
to exercise any rights of change, conversion or exchange of stock or for any
other purpose, the record date shall be at the close of business on the day on
which the Board of Directors adopts a resolution relating thereto.
A determination of stockholders of record entitled to notice of or to
vote at a meeting of stockholders shall apply to any adjournment of the meeting;
provided, however, that the Board of Directors may fix a new record date for the
adjourned meeting.
Section 4. Lost, Stolen or Destroyed Certificates.
In the event of the loss, theft or destruction of any certificate of
stock, another may be issued in its place pursuant to such regulations as the
Board of Directors may establish concerning proof of such loss, theft or
destruction and concerning the giving of a satisfactory bond or bonds of
indemnity.
<PAGE>
Section 5. Regulations.
The issue, transfer, conversion and registration of certificates of
stock shall be governed by such other regulations as the Board of Directors may
establish.
ARTICLE VI
NOTICES
Section 1. Notices.
Except as otherwise specifically provided herein or required by law,
all notices required to be given to any stockholder, director, officer, employee
or agent shall be in writing and may in every instance be effectively given by
hand delivery to the recipient thereof, by depositing such notice in the mail,
postage paid, by sending such notice by prepaid telegram or mailgram or by
sending such notice by facsimile machine or other electronic transmission. Any
such notice shall be addressed to such stockholder, director, officer, employee
or agent at his or her last known address as the same appears on the books of
the Corporation. The time when such notice is received, if hand delivered, or
dispatched, if delivered through the mail, by telegram or mailgram or by
facsimile machine or other electronic transmission, shall be the time of the
giving of the notice.
Section 2. Waivers.
A written waiver of any notice, signed by a stockholder, director,
officer, employee or agent, whether before or after the time of the event for
which notice is to be given, shall be deemed equivalent to the notice required
to be given to such stockholder, director, officer, employee or agent. Neither
the business nor the purpose of any meeting need be specified in such a waiver.
ARTICLE VII
MISCELLANEOUS
Section 1. Facsimile Signatures.
In addition to the provisions for use of facsimile signatures elsewhere
specifically authorized in these By-laws, facsimile signatures of any officer or
officers of the Corporation may be used whenever and as authorized by the Board
of Directors or a committee thereof.
Section 2. Corporate Seal.
The Board of Directors may provide a suitable seal, containing the name
of the Corporation, which seal shall be in the charge of the Secretary. If and
when so directed by the Board of Directors or a committee thereof, duplicates of
the seal may be kept and used by the Treasurer or by an Assistant Secretary or
Assistant Treasurer.
<PAGE>
Section 3. Reliance upon Books, Reports and Records.
Each director, each member of any committee designated by the Board of
Directors, and each officer of the Corporation shall, in the performance of his
or her duties, be fully protected in relying in good faith upon the books of
account or other records of the Corporation and upon such information, opinions,
reports or statements presented to the Corporation by any of its officers or
employees, or committees of the Board of Directors so designated, or by any
other person as to matters which such director or committee member reasonably
believes are within such other person's professional or expert competence and
who has been selected with reasonable care by or on behalf of the Corporation.
Section 4. Fiscal Year.
The fiscal year of the Corporation shall be as fixed by the Board of
Directors.
Section 5. Time Periods.
In applying any provision of these By-laws which requires that an act
be done or not be done a specified number of days prior to an event or that an
act be done during a period of a specified number of days prior to an event,
calendar days shall be used, the day of the doing of the act shall be excluded
and the day of the event shall be included.
ARTICLE VIII
AMENDMENTS
The By-laws of the Corporation may be adopted, amended or repealed as
provided in Article SEVENTH of the Certificate of Incorporation of the
Corporation.
EXHIBIT 10.1
<PAGE>
EAST TEXAS FINANCIAL SERVICES, INC.
1995 STOCK OPTION AND INCENTIVE PLAN
1. Plan Purpose. The purpose of the Plan is to promote the long-term
interests of the Corporation and its stockholders by providing a means for
attracting and retaining directors, officers and employees of the Corporation
and its Affiliates. It is intended that designated Options granted pursuant to
the provisions of this Plan to persons employed by the Corporation or its
Affiliates will qualify as Incentive Stock Options. Options granted to persons
who are not employees will be Non-Qualified Stock Options.
2. Definitions. The following definitions are applicable to the Plan:
"Affiliate" - means any "parent corporation" or "subsidiary
corporation" of the Corporation, as such terms are defined in Section 424(e) and
(f), respectively, of the Code.
"Association" - means First Federal Savings and Loan
Association of Tyler, and any successor
entity.
"Award" - means the grant of an Incentive Stock Option, a
Non-Qualified Stock Option, a Stock Appreciation Right or a Limited Stock
Appreciation Right, or any combination thereof, as provided in the Plan.
"Code" - means the Internal Revenue Code of 1986, as amended.
"Committee" - means the Committee referred to in Section 3
hereof.
"Continuous Service" - means the absence of any interruption
or termination of service as a director, advisory director, director emeritus,
officer or employee of the Corporation or an Affiliate, except that when used
with respect to persons granted an Incentive Option means the absence of any
interruption or termination of service as an employee of the Corporation or an
Affiliate. Service shall not be considered interrupted in the case of sick
leave, military leave or any other leave of absence approved by the Corporation
or in the case of transfers between payroll locations of the Corporation or
between the Corporation, its parent, its subsidiaries or its successor. With
respect to any advisory director or director emeritus, continuous service shall
mean availability to perform such functions as may be required of the
Association's advisory directors or directors emeritus, respectively.
"Corporation" - means East Texas Financial Services, Inc., a
Delaware corporation.
"Employee" - means any person, including an officer or
director, who is employed by the Corporation or any Affiliate.
"ERISA" - means the Employee Retirement Income Security Act of
1974, as amended.
<PAGE>
"Exercise Price" - means (i) in the case of an Option, the
price per Share at which the Shares subject to such Option may be purchased upon
exercise of such Option and (ii) in the case of a Right, the price per Share
(other than the Market Value per Share on the date of exercise and the Offer
Price per Share as defined in Section 10 hereof) which, upon grant, the
Committee determines shall be utilized in calculating the aggregate value which
a Participant shall be entitled to receive pursuant to Sections 9, 10 or 12
hereof upon exercise of such Right.
"Incentive Stock Option" - means an option to purchase Shares
granted by the Committee pursuant to Section 6 hereof which is subject to the
limitations and restrictions of Section 8 hereof and is intended to qualify
under Section 422 of the Code.
"Limited Stock Appreciation Right" - means a stock
appreciation right with respect to Shares granted by the Committee pursuant to
Sections 6 and 10 hereof.
"Market Value" - means the average of the high and low quoted
sales price on the date in question (or, if there is no reported sale on such
date, on the last preceding date on which any reported sale occurred) of a Share
on the Composite Tape for the New York Stock Exchange-Listed Stocks, or, if on
such date the Shares are not quoted on the Composite Tape, on the New York Stock
Exchange, or, if the Shares are not listed or admitted to trading on such
Exchange, on the principal United States securities exchange registered under
the Securities Exchange Act of 1934 on which the Shares are listed or admitted
to trading, or, if the Shares are not listed or admitted to trading on any such
exchange, the mean between the closing high bid and low asked quotations with
respect to a Share on such date on the National Association of Securities
Dealers, Inc., Automated Quotations System, or any similar system then in use,
or, if no such quotations are available, the fair market value on such date of a
Share as the Committee shall reasonably determine.
"Non-Employee Director" - means a director who a) is not
currently an officer or employee of the Corporation; b) is not a former employee
of the Corporation who receives compensation for prior services (other than from
a tax-qualified retirement plan); c) has not been an officer of the Corporation;
d) does not receive remuneration from the Corporation in any capacity other than
as a director; and e) does not possess an interest in any other transactions or
is not engaged in a business relationship for which disclosure would be required
under Item 404(a) or (b) of Regulation S-K.
"Non-Qualified Stock Option" - means an option to purchase
Shares granted by the Committee pursuant to Section 6 hereof, which option is
not intended to qualify under Section 422(b) of the Code.
"Option" - means an Incentive Stock Option or a Non-Qualified
Stock Option.
"OTS" - means the Office of Thrift Supervision.
"OTS Regulations" - means the rules and regulations of the
OTS.
"Participant" - means any officer or employee of the
Corporation or any Affiliate who is selected by the Committee to receive an
Award and any director, advisory director or director emeritus of the
Corporation who is granted an Award pursuant to Section 20 hereof.
<PAGE>
"Plan" - means the 1995 Stock Option and Incentive Plan of the
Corporation.
"Related" - means (i) in the case of a Right, a Right which is
granted in connection with, and to the extent exercisable, in whole or in part,
in lieu of, an Option or another Right and (ii) in the case of an Option, an
Option with respect to which and to the extent a Right is exercisable, in whole
or in part, in lieu thereof has been granted.
"Right" - means a Limited Stock Appreciation Right or a Stock
Appreciation Right.
"Shares" - means the shares of common stock of the
Corporation.
"Stock Appreciation Right" - means a stock appreciation right
with respect to Shares granted by the Committee pursuant to Sections 6 and 9
hereof.
"Ten Percent Beneficial Owner" - means the beneficial owner of
more than ten percent of any class of the Corporation's equity securities
registered pursuant to Section 12 of the Securities Exchange Act of 1934.
3. Administration. The Plan shall be administered by a Committee
consisting of two or more members, each of whom shall be Non-Employee Director.
The members of the Committee shall be appointed by the Board of Directors of the
Corporation. Except as limited by the express provisions of the Plan, the
Committee shall have sole and complete authority and discretion, subject to OTS
Regulations, to (i) select Participants and grant Awards; (ii) determine the
number of Shares to be subject to types of Awards generally, as well as to
individual Awards granted under the Plan; (iii) determine the terms and
conditions upon which Awards shall be granted under the Plan; (iv) prescribe the
form and terms of instruments evidencing such grants; and (v) establish from
time to time regulations for the administration of the Plan, interpret the Plan,
and make all determinations deemed necessary or advisable for the administration
of the Plan.
A majority of the Committee shall constitute a quorum, and the acts of
a majority of the members present at any meeting at which a quorum is present,
or acts approved in writing by a majority of the Committee without a meeting,
shall be acts of the Committee.
4. Participation in Committee Awards. The Committee may select from
time to time Participants in the Plan from those directors, advisory directors,
directors emeritus officers and employees, of the Corporation or its Affiliates
who, in the opinion of the Committee, have the capacity for contributing to the
successful per formance of the Corporation or its Affiliates.
5. Shares Subject to Plan. Subject to adjustment by the operation of
Section 11 hereof, the maximum number of Shares with respect to which Awards may
be made under the Plan is 121,519 shares. The Shares with respect to which
Awards may be made under the Plan may be either authorized and unissued shares
or issued shares heretofore or hereafter reacquired and held as treasury shares.
Shares which are subject to Related Rights and Related Options shall be counted
only once in determining whether the maximum number of Shares with respect to
which Awards may be granted under the Plan has been exceeded. An Award shall not
be considered to have been made under the Plan with respect to any Option or
Right which terminates, and new Awards may be granted under the Plan with
respect to the number of Shares as to which such termination has occurred.
<PAGE>
6. General Terms and Conditions of Options and Rights. The Committee
shall have full and complete authority and discretion, subject to OTS
Regulations and except as expressly limited by the Plan, to grant Options and/or
Rights and to provide the terms and conditions (which need not be identical
among Participants) thereof. In particular, the Committee shall prescribe the
following terms and conditions: (i) the Exercise Price of any Option or Right,
which shall not be less than the Market Value per Share at the date of grant of
such Option or Right, (ii) the number of Shares subject to, and the expiration
date of, any Option or Right, which expiration date shall not exceed ten years
from the date of grant, (iii) the manner, time and rate (cumulative or
otherwise) of exercise of such Option or Right, and (iv) the restrictions, if
any, to be placed upon such Option or Right or upon Shares which may be issued
upon exercise of such Option or Right. The Committee may, as a condition of
granting any Option or Right, require that a Participant agree not to thereafter
exercise one or more Options or Rights previously granted to such Participant.
Notwithstanding the foregoing and subject to compliance with the OTS
Regulations, no individual shall be granted Awards with respect to more than 25%
of the total shares subject to the Plan, and no director who is not an employee
of the Corporation shall be granted Awards with respect to more than 5% of the
total Shares subject to the Plan. All non-employee directors of the Corporation,
in the aggregate, may not be granted Awards with respect to more than 30% of the
total Shares subject to the Plan. No Awards shall begin vesting earlier than one
year from the date the Plan is approved by stockholders of the Corporation and
shall not vest at a rate in excess of 20% per year, beginning from the date of
grant.
In the event the OTS Regulations are amended (the "Amended
Regulations") to permit shorter vesting periods, any Award made pursuant to this
Plan, which Award is subject to the requirements of such Amended Regulations,
may vest, at the sole discretion of the Committee, in accordance with such
Amended Regulations.
Furthermore, at the time of any Award, the Participant shall
enter into an agreement with the Corporation in a form specified by the
Committee, agreeing to the terms and conditions of the Award and such other
matters as the Committee, in its sole discretion, shall determine (the "Option
Agreement").
7. Exercise of Options or Rights.
(a) Except as provided herein, an Option or Right granted
under the Plan shall be exercisable during the lifetime of the Participant to
whom such Option or Right was granted only by such Participant and, except as
provided in paragraphs (c) and (d) of this Section 7, no such Option or Right
may be exercised unless at the time such Participant exercises such Option or
Right, such Participant has maintained Continuous Service since the date of
grant of such Option or Right.
<PAGE>
(b) To exercise an Option or Right under the Plan, the
Participant to whom such Option or Right was granted shall give written notice
to the Corporation in form satisfactory to the Committee (and, if partial
exercises have been permitted by the Committee, by specifying the number of
Shares with respect to which such Participant elects to exercise such Option or
Right) together with full payment of the Exercise Price, if any and to the
extent required. The date of exercise shall be the date on which such notice is
received by the Corporation. Payment, if any is required, shall be made either
(i) in cash (including check, bank draft or money order) or (ii) by delivering
(A) Shares already owned by the Participant and having a fair market value equal
to the applicable exercise price, such fair market value to be determined in
such appropriate manner as may be provided by the Committee or as may be
required in order to comply with or to conform to requirements of any applicable
laws or regulations, or (B) a combination of cash and such Shares.
(c) Except as provided in Section 13 hereof, if a Participant
to whom an Option or Right was granted shall cease to maintain Continuous
Service for any reason (excluding death or disability and termination of
employment by the Corporation or any Affiliate for cause), such Participant may,
but only within the period of three months immediately succeeding such cessation
of Continuous Service and in no event after the expiration date of such Option
or Right, exercise such Option or Right to the extent that such Participant was
entitled to exercise such Option or Right at the date of such cessation,
provided, however, that such right of exercise after cessation of Continuous
Service shall not be available to a Participant if the Committee otherwise
determines and so provides in the applicable instrument or instruments
evidencing the grant of such Option or Right. If a Participant to whom an Option
or Right was granted shall cease to maintain Continuous Service by reason of
death or disability then, unless the Committee shall have otherwise provided in
the instrument evidencing the grant of an Option or Stock Appreciation Right,
all Options and Rights granted and not fully exercisable shall become
exercisable in full upon the happening of such event and shall remain so
exercisable (i) in the event of death for the period described in paragraph (d)
of this Section 7 and (ii) in the event of disability for a period of three
months following such date. If the Continuous Service of a Participant to whom
an Option or Right was granted by the Corporation is terminated for cause, all
rights under any Option or Right of such Participant shall expire immediately
upon the giving to the Participant of notice of such termination.
(d) In the event of the death of a Participant while in the
Continuous Service of the Corporation or an Affiliate or within the three month
period referred to in paragraph (c) of this Section 7, the person to whom any
Option or Right held by the Participant at the time of his death is transferred
by will or the laws of descent and distribution, or in the case of an Award
other than an Incentive Stock Option, pursuant to a qualified domestic relations
order, as defined in the Code or Title 1 of ERISA or the rules thereunder may,
but only to the extent such Participant was entitled to exercise such Option or
Right as set forth in paragraph (c) of this Section 7, exercise such Option or
Right at any time within a period of one year succeeding the date of death of
such Participant, but in no event later than ten years from the date of grant of
such Option or Right. Following the death of any Participant to whom an Option
was granted under the Plan, irrespective of whether any Related Right shall have
theretofore been granted to the Participant or whether the person entitled to
exercise such Related Right desires to do so, the Committee may, as an
<PAGE>
alternative means of settlement of such Option, elect to pay to the person to
whom such Option is transferred by will or by the laws of descent and
distribution, or in the case of an Option other than an Incentive Stock Option,
pursuant to a qualified domestic relations order, as defined in the Code or
Title I of ERISA or the rules thereunder, the amount by which the Market Value
per Share on the date of exercise of such Option shall exceed the Exercise Price
of such Option, multiplied by the number of Shares with respect to which such
Option is properly exercised. Any such settlement of an Option shall be
considered an exercise of such Option for all purposes of the Plan.
8. Incentive Stock Options. Incentive Stock Options may be granted only
to Participants who are Employees. Any provision of the Plan to the contrary
notwithstanding, (i) no Incentive Stock Option shall be granted more than ten
years from the date the Plan is adopted by the Board of Directors of the
Corporation and no Incentive Stock Option shall be exercisable more than ten
years from the date such Incentive Stock Option is granted, (ii) the Exercise
Price of any Incentive Stock Option shall not be less than the Market Value per
Share on the date such Incentive Stock Option is granted, (iii) any Incentive
Stock Option shall not be transferable by the Participant to whom such Incentive
Stock Option is granted other than by will or the laws of descent and
distribution, and shall be exercisable during such Participant's lifetime only
by such Participant, (iv) no Incentive Stock Option shall be granted to any
individual who, at the time such Incentive Stock Option is granted, owns stock
possessing more than ten percent of the total combined voting power of all
classes of stock of the Corporation or any Affiliate unless the Exercise Price
of such Incentive Stock Option is at least 110 percent of the Market Value per
Share at the date of grant and such Incentive Stock Option is not exercisable
after the expiration of five years from the date such Incentive Stock Option is
granted, and (v) the aggregate Market Value (determined as of the time any
Incentive Stock Option is granted) of the Shares with respect to which Incentive
Stock Options are exercisable for the first time by a Participant in any
calendar year shall not exceed $100,000.
9. Stock Appreciation Rights. A Stock Appreciation Right shall, upon
its exercise, entitle the Participant to whom such Stock Appreciation Right was
granted to receive a number of Shares or cash or combination thereof, as the
Committee in its discretion shall determine, the aggregate value of which (i.e.,
the sum of the amount of cash and/or Market Value of such Shares on date of
exercise) shall equal (as nearly as possible, it being understood that the
Corporation shall not issue any fractional shares) the amount by which the
Market Value per Share on the date of such exercise shall exceed the Exercise
Price of such Stock Appreciation Right, multiplied by the number of Shares with
respect of which such Stock Appreciation Right shall have been exercised. A
Stock Appreciation Right may be Related to an Option or may be granted
independently of any Option as the Committee shall from time to time in each
case determine. At the time of grant of an Option the Committee shall determine
whether and to what extent a Related Stock Appreciation Right shall be granted
with respect thereto; provided, however, and notwithstanding any other provision
of the Plan, that if the Related Option is an Incentive Stock Option, the
Related Stock Appreciation Right shall satisfy all the restrictions and
limitations of Section 8 hereof as if such Related Stock Appreciation Right were
an Incentive Stock Option and as if other rights which are Related to Incentive
Stock Options were Incentive Stock Options. In the case of a Related Option,
such Related Option shall cease to be exercisable to the extent of the Shares
with respect to which the Related Stock Appreciation Right was exercised. Upon
the exercise or termination of a Related Option, any Related Stock Appreciation
Right shall terminate to the extent of the Shares with respect to which the
Related Option was exercised or terminated.
<PAGE>
10. Limited Stock Appreciation Rights. At the time of grant of an
Option or Stock Appreciation Right to any Participant, the Committee shall have
full and complete authority and discretion to also grant to such Participant a
Limited Stock Appreciation Right which is Related to such Option or Stock
Appreciation Right; provided, however and notwithstanding any other provision of
the Plan, that if the Related Option is an Incentive Stock Option, the Related
Limited Stock Appreciation Right shall satisfy all the restrictions and
limitations of Section 8 hereof as if such Related Limited Stock Appreciation
Right were an Incentive Stock Option and as if all other Rights which are
Related to Incentive Stock Options were Incentive Stock Options. Subject to
vesting requirements contained in 12 C.F.R. ss. 563b.3(g)(4), a Limited Stock
Appreciation Right shall be exercisable only during the period beginning on the
first day following the date of expiration of any "offer" (as such term is
hereinafter defined) and ending on the forty-fifth day following such date.
A Limited Stock Appreciation Right shall, upon its exercise, entitle
the Participant to whom such Limited Stock Appreciation Right was granted to
receive an amount of cash equal to the amount by which the "Offer Price per
Share" (as such term is hereinafter defined) or the Market Value on the date of
such exercise, as shall have been provided by the Committee in its discretion at
the time of grant, shall exceed the Exercise Price of such Limited Stock
Appreciation Right, multiplied by the number of Shares with respect to which
such Limited Stock Appreciation Right shall have been exercised. Upon the
exercise of a Limited Stock Appreciation Right, any Related Option and/or
Related Stock Appreciation Right shall cease to be exercisable to the extent of
the Shares with respect to which such Limited Stock Appreciation Right was
exercised. Upon the exercise or termination of a Re lated Option or Related
Stock Appreciation Right, any Related Limited Stock Appreciation Right shall
terminate to the extent of the Shares with respect to which such Related Option
or Related Stock Appreciation Right was exercised or terminated.
For the purposes of this Section 10, the term "Offer" shall mean any
tender offer or exchange offer for Shares other than one made by the
Corporation, provided that the corporation, person or other entity making the
offer acquires pursuant to such offer either (i) 25% of the Shares outstanding
immediately prior to the commencement of such offer or (ii) a number of Shares
which, together with all other Shares acquired in any tender offer or exchange
offer (other than one made by the Corporation) which expired within sixty days
of the expiration date of the offer in question, equals 25% of the Shares
outstanding immediately prior to the commencement of the offer in question. The
term "Offer Price per Share" as used in this Section 10 shall mean the highest
price per Share paid in any Offer which Offer is in effect any time during the
period beginning on the sixtieth day prior to the date on which a Limited Stock
Appreciation Right is exercised and ending on the date on which such Limited
Stock Appreciation Right is exercised. Any securities or property which are part
or all of the consideration paid for Shares in the Offer shall be valued in
determining the Offer Price per Share at the higher of (A) the valuation placed
on such securities or property by the corporation, person or other entity making
such Offer or (B) the reasonable valuation placed on such securities or property
by the Committee.
<PAGE>
11. Adjustments Upon Changes in Capitalization. In the event of any
change in the outstanding Shares subsequent to the effective date of the Plan by
reason of any reorganization, recapitalization, stock split, stock dividend,
combination or exchange of shares, merger, consolidation or any change in the
corporate structure or Shares of the Corporation, the maximum aggregate number
and class of shares as to which Awards may be granted under the Plan and the
number, class and exercise price of shares with respect to which Awards
theretofore have been granted under the Plan shall be appropriately adjusted by
the Committee, whose determination shall be conclusive.
12. Effect of Merger. In the event of any merger, consolidation or
combination of the Corporation (other than a merger, consolidation or
combination in which the Corporation is the continuing entity and which does not
result in the outstanding Shares being converted into or exchanged for different
securities, cash or other property, or any combination thereof) pursuant to a
plan or agreement the terms of which are binding upon all stockholders of the
Corporation (except to the extent that dissenting stockholders may be entitled,
under statutory provisions or provisions contained in the certificate of
incorporation, to receive the appraised or fair value of their holdings), any
Participant to whom an Option or Right has been granted shall have the right
(subject to the pro visions of the Plan and any limitation or vesting period
applicable to such Option or Right), thereafter and during the term of each such
Option or Right, to receive upon exercise of any such Option or Right an amount
equal to the excess of the fair market value on the date of such exercise of the
securities, cash or other property, or combination thereof, receivable upon such
merger, consolidation or combination in respect of a Share over the Exercise
Price of such Right or Option, multiplied by the number of Shares with respect
to which such Option or Right shall have been exercised. Such amount may be
payable fully in cash, fully in one or more of the kind or kinds of property
payable in such merger, consolidation or combination, or partly in cash and
partly in one or more of such kind or kinds of property, all in the discretion
of the Committee.
13. Effect of Change in Control. Each of the events specified in the
following clauses (i) through (iii) of this Section 13 shall be deemed a "change
of control": (i) any third person, including a "group" as defined in Section
13(d)(3) of the Securities Exchange Act of 1934, shall become the beneficial
owner of shares of the Corporation with respect to which 25% or more of the
total number of votes for the election of the Board of Directors of the
Corporation may be cast, (ii) as a result of, or in connection with, any cash
tender offer, exchange offer, merger or other business combination, sale of
assets or contested election, or combination of the foregoing, the persons who
were directors of the Corporation shall cease to constitute a majority of the
Board of Directors of the Corporation or (iii) the stockholders of the
Corporation shall approve an agreement providing either for a transaction in
which the Corporation will cease to be an independent publicly owned entity or
for a sale or other disposition of all or substantially all the assets of the
Corporation or the Association. In the event a change in control shall occur,
unless the Committee shall have otherwise provided in the instrument evidencing
the grant of an Option or Stock Appreciation Right, all Options and Stock
Appreciation Rights theretofore granted and not fully exercisable shall become
exercisable in full upon the happening of such event and shall remain so
exercisable for a period of sixty days following such date, after which they
shall revert to being exercisable in accordance with their terms; provided,
however, that no Option or Stock Appreciation Right which has previously been
exercised or otherwise terminated shall become exercisable.
<PAGE>
14. Assignments and Transfers. No Award nor any right or interest of a
Participant under the Plan in any instrument evidencing any Award under the Plan
may be assigned, encumbered or transferred except, in the event of the death of
a Participant, by will or the laws of descent and distribution or in the case of
Awards other than Incentive Stock Options pursuant to a qualified domestic
relations order, as defined in the Code or Title I of ERISA or the rules
thereunder.
15. Employee Rights Under the Plan. No director, officer or employee
shall have a right to be selected as a Participant nor, having been so selected,
to be selected again as a Participant and no director, officer, employee or
other person shall have any claim or right to be granted an Award under the Plan
or under any other incentive or similar plan of the Corporation or any
Affiliate. Neither the Plan nor any action taken thereunder shall be construed
as giving any employee any right to be retained in the employ of the Corporation
or any Affiliate.
16. Delivery and Registration of Stock. The Corporation's obligation to
deliver Shares with respect to an Award shall, if the Committee so requests, be
conditioned upon the receipt of a representation as to the investment intention
of the Participant to whom such Shares are to be delivered, in such form as the
Committee shall determine to be necessary or advisable to comply with the
provisions of the Securities Act of 1933 or any other Federal, state or local
securities legislation or regulation. It may be provided that any representation
requirement shall become inoperative upon a registration of the Shares or other
action eliminating the necessity of such representation under such Securities
Act or other securities legislation. The Corporation shall not be required to
deliver any Shares under the Plan prior to (i) the admission of such shares to
listing on any stock exchange on which Shares may then be listed, and (ii) the
completion of such registration or other qualification of such Shares under any
state or Federal law, rule or regulation, as the Committee shall determine to be
necessary or advisable.
17. Withholding Tax. The Corporation shall have the right to deduct
from all amounts paid in cash with respect to the exercise of a Right under the
Plan any taxes required by law to be withheld with respect to such cash
payments. Where a Participant or other person is entitled to receive Shares
pursuant to the exercise of an Op tion or Right pursuant to the Plan, the
Corporation shall have the right to require the Participant or such other person
to pay the Corporation the amount of any taxes which the Corporation is required
to withhold with respect to such Shares, and may, in its sole discretion,
withhold sufficient Shares to cover the amount of taxes which the Corporation is
required to withhold.
18. Amendment or Termination. The Board of Directors of the Corporation
may amend, suspend or terminate the Plan or any portion thereof at any time,
subject to OTS Regulations, but (except as provided in Section 11 hereof) no
amendment shall be made without approval of the stockholders of the Corporation
which shall (i) materially increase the aggregate number of Shares with respect
to which Awards may be made under the Plan, (ii) materially increase the
aggregate number of Shares which may be subject to Awards or (iii) change the
class of persons eligible to participate in the Plan; provided, however, that no
such amendment, suspension or termination shall impair the rights of any
Participant, without his consent, in any Award theretofore made pursuant to the
Plan.
19. Effective Date and Term of Plan. The Plan shall become effective
upon its approval by the stockholders of the Corporation. It shall continue in
effect for a term of ten years unless sooner terminated under Section 18 hereof.
<PAGE>
20. Initial Grant. By, and simultaneously with, the approval of the
Plan by the stockholders of the Corporation, each member of the Board of
Directors of the Corporation who is not an Employee, is hereby granted a ten
year, Non-Qualified Stock Option to purchase 5,225 Shares at an Exercise Price
per share equal to the Market Value per share on the date of the grant, which
shall be the date of stockholder approval of the Plan. In addition, each
non-employee director of the Corporation elected subsequent to the date of
stockholder approval of the Plan, is hereby granted as of the date he or she is
elected and qualified a ten-year Non-Qualified Stock Option to purchase 100
Shares at an Exercise Price equal to the Market Value per Share of the Shares on
the date of grant. Each such Option shall be evidenced by a Non-Qualified Stock
Option Agreement in a form approved by the Board of Directors and shall be
subject in all respects to the terms and conditions of this Plan, which are
controlling. All Options granted pursuant to this section shall vest in five
equal annual installments with the first installment vesting on the first
anniversary of the date of grant, subject to the Director maintaining Continuous
Service with the Corporation or its Affiliates since the date of grant.
EXHIBIT 10.2
<PAGE>
EAST TEXAS FINANCIAL SERVICES, INC.
RECOGNITION AND RETENTION PLAN
1. Plan Purpose. The purpose of the Plan is to promote the long-term
interests of the Corporation and its stockholders by providing a means for
attracting and retaining executive employees and directors of the Corporation
and its Affiliates.
2. Definitions. The following definitions are applicable to the Plan:
"Award" - means the grant of Restricted Stock by the
Committee, as provided in the Plan.
"Affiliate" - means any "parent corporation" or "subsidiary
corporation" of the Corporation, as such terms are defined in Section 424(e) and
(f), respectively, of the Code.
"Association" - means First Federal Savings and Loan
Association, a savings institution and its predecessors and successors.
"Code" - means the Internal Revenue Code of 1986, as amended.
"Committee" - means the Committee referred to in Section 7
hereof.
"Continuous Service" - means the absence of any interruption
or termination of service as a director, advisory director, director emeritus,
executive officer or employee of the Corporation or any Affiliate. Service shall
not be considered interrupted in the case of sick leave, military leave or any
other leave of absence approved by the Corporation or any Affiliate or in the
case of transfers between payroll locations of the Corporation or between the
Corporation, its subsidiaries or its successor. With respect to any advisory
director or director emeritus, continuous service shall mean availability to
perform such functions as may be required of the Association's advisory
directors or directors emeritus, respectively.
"Corporation" - means East Texas Financial Services, Inc., a
Delaware corporation.
"ERISA" - means the Employee Retirement Income Security Act of
1974, as amended.
"Non-Employee Director" - means a director who a) is not
currently an officer or employee of the Corporation; b) is not a former employee
of the Corporation who receives compensation for prior services (other than from
a tax-qualified retirement plan); c) has not been an officer of the Corporation;
d) does not receive remuneration from the Corporation in any capacity other than
as a director; and e) does not possess an interest in any other transactions or
is not engaged in a business relationship for which disclosure would be required
under Item 404(a) or (b) of Regulation S-K.
"OTS" - means the Office of Thrift Supervision.
"OTS Regulations" - means the rules and regulations of the
OTS.
<PAGE>
"Participant" - means any director, advisory director,
director emeritus, executive officer or employee of the Corporation or any
Affiliate who is selected by the Committee to receive an Award.
"Plan" - means the Recognition and Retention Plan of the
Corporation.
"Restricted Period" - means the period of time selected by the
Committee for the purpose of determining when restrictions are in effect under
Section 3 hereof with respect to Restricted Stock awarded under the Plan.
"Restricted Stock" - means Shares which have been contingently
awarded to a Participant by the Committee subject to the restrictions referred
to in Section 3 hereof, so long as such restrictions are in effect.
"Shares" - means the common stock, par value $0.01 per share,
of the Corporation.
3. Terms and Conditions of Restricted Stock. The Committee shall have
full and complete authority, subject to the limitations of the Plan and OTS
Regulations, to grant awards of Restricted Stock and, in addition to the terms
and conditions contained in paragraphs (a) through (f) of this Section 3, to
provide such other terms and conditions (which need not be identical among
Participants) in respect of such Awards, and the vesting thereof, as the
Committee shall determine.
(a) At the time of an award of Restricted Stock, the Committee
shall establish for each Participant a Restricted Period, during which or at the
expiration of which, as the Committee shall determine and provide in the
agreement referred to in paragraph (d) of this Section 3, the Shares awarded as
Restricted Stock shall vest, and subject to any such other terms and conditions
as the Committee shall provide, shares of Restricted Stock may not be sold,
assigned, transferred, pledged, voted or otherwise encumbered by the
Participant, except as hereinafter provided, during the Restricted Period.
Except for such restrictions, and subject to paragraphs (c) and (e) of this
Section 3 and Section 4 hereof, the Participant as owner of such shares shall
have all the rights of a stockholder.
No director who is not an employee of the Corporation shall be
granted Awards with respect to more than 5% of the total shares subject to the
Plan. All non-employee directors of the Corporation, in the aggregate, may not
be granted Awards with respect to more than 30% of the total shares subject to
the Plan and no individual shall be granted Awards with respect to more than 25%
of the total shares subject to the Plan. No Awards shall begin vesting earlier
than one year from the date the Plan is approved by stockholders of the
Corporation and shall not vest at a rate in excess of 20% per year, beginning
from the date of grant. In the event OTS Regulations are amended (the "Amended
Regulations") to permit shorter vesting periods, any Award made pursuant to this
Plan, which Award is subject to the requirements of such Amended Regulations,
may vest, at the sole discretion of the Committee, in accordance with such
Amended Regulations.
Subject to compliance with OTS Regulations, the Committee
shall have the authority, in its discretion, to accelerate the time at which any
or all of the restrictions shall lapse with respect thereto, or to remove any or
all of such restrictions, whenever it may determine that such action is
appropriate by reason of changes in applicable tax or other laws or other
changes in circumstances occurring after the commencement of such Restricted
Period.
<PAGE>
(b) Except as provided in Section 5 hereof, if a Participant
ceases to maintain Continuous Service for any reason (other than death or
disability), unless the Committee shall otherwise determine, all Shares of
Restricted Stock theretofore awarded to such Participant and which at the time
of such termination of Continuous Service are subject to the restrictions
imposed by paragraph (a) of this Section 3 shall upon such termination of
Continuous Service be forfeited and returned to the Corporation. If a
Participant ceases to maintain Continuous Service by reason of death or
disability, Restricted Stock then still subject to restrictions imposed by
paragraph (a) of this Section 3 will be free of those restrictions in proportion
to the portion of the restricted period which shall have elapsed at the time of
such termination of Continuous Service.
(c) Each certificate in respect of Shares of Restricted Stock
awarded under the Plan shall be registered in the name of the Participant and
deposited by the Participant, together with a stock power endorsed in blank,
with the Corporation and shall bear the following (or a similar) legend:
"The transferability of this certificate and the shares of
stock represented hereby are subject to the terms and conditions
(including forfeiture) contained in the Recognition and Retention Plan
of East Texas Financial Services, Inc. Copies of such Plan are on file
in the offices of the Secretary of East Texas Financial Services, Inc.,
1200 S. Beckham Avenue, Tyler, Texas 75701-3319."
(d) At the time of any Award, the Participant shall enter into
an Agreement with the Corporation in a form specified by the Committee, agreeing
to the terms and conditions of the Award and such other matters as the
Committee, in its sole discretion, shall determine (the "Restricted Stock
Agreement").
(e) At the time of an award of shares of Restricted Stock, the
Committee shall determine that the payment to the Participant of dividends
declared or paid on such shares by the Corporation shall be deferred until the
lapsing of the restrictions imposed under paragraph (a) of this Section 3, and
shall be held by the Corporation for the account of the Participant until such
time. There shall be credited at the end of each year (or portion thereof)
interest at a market rate per annum on the amount of the account at the
beginning of the year. Payment of deferred dividends to the Participant,
together with interest accrued thereon, shall be made upon the earlier to occur
of the lapsing of the restrictions imposed under paragraph (a) of this Section 3
or upon death or disability of the Participant.
(f) At the expiration of the restrictions imposed by paragraph
(a) of this Section 3, the Corporation shall redeliver to the Participant (or
where the relevant provision of paragraph (b) of this Section 3 applies in the
case of a deceased Participant, to his legal representative, beneficiary or
heir) the certificate(s) and stock power deposited with it pursuant to paragraph
(c) of this Section 3 and the Shares represented by such certificate(s) shall be
free of the restrictions referred to in paragraph (a) of this Section 3.
4. Adjustments Upon Changes in Capitalization. In the event of any
change in the outstanding Shares subsequent to the effective date of the Plan by
reason of any reorganization, recapitalization, stock split, stock dividend,
combination or exchange of shares, merger, consolidation or any change in the
corporate structure or Shares of the Corporation, the maximum aggregate number
and class of shares as to which Awards may be granted under the Plan and the
<PAGE>
number and class of shares with respect to which Awards theretofore have been
granted under the Plan shall be appropriately adjusted by the Committee, whose
determination shall be conclusive. Any shares of stock or other securities
received, as a result of any of the foregoing, by a Participant with respect to
Restricted Stock shall be subject to the same restrictions and the
certificate(s) or other instruments representing or evidencing such shares or
securities shall be legended and deposited with the Corporation in the manner
provided in Section 3 hereof.
5. Effect of Change in Control. Each of the events specified in the
following clauses (i) through (iii) of this Section 5 shall be deemed a "change
of control": (i) any third person, including a "group" as defined in Section
13(d)(3) of the Securities Exchange Act of 1934, shall become the beneficial
owner of Shares of the Corporation with respect to which 25% or more of the
total number of votes which may be cast for the election of the Board of
Directors of the Corporation, (ii) as a result of, or in connection with, any
cash tender offer, exchange offer, merger or other business combination, sale of
assets or contested election, or combination of the foregoing, the persons who
were directors of the Corporation shall cease to constitute a majority of the
Board of Directors of the Corporation, or (iii) the stockholders of the
Corporation shall approve an agreement providing either for a transaction in
which the Corporation will cease to be an independent publicly owned entity or
for a sale or other disposition of all or substantially all the assets of the
Corporation or the Association. If the Continuous Service of any Participant of
the Corporation is involuntarily terminated for any reason other than cause, at
any time within 12 months after a change in control, unless the Committee shall
have otherwise provided, any Restricted Period with respect to Restricted Stock
theretofore awarded to such Participant shall lapse upon such termination and
all Shares awarded as Restricted Stock shall become fully vested in the
Participant to whom such Shares were awarded.
6. Assignments and Transfers. No Award nor any right or interest of a
Participant under the Plan in any instrument evidencing any Award under the Plan
may be assigned, encumbered or transferred except, in the event of the death of
a Participant, by will or the laws of descent and distribution or pursuant to a
qualified domestic relations order as defined in the Code or Title I of ERISA or
the rules thereunder.
7. Administration. The Plan shall be administered by a Committee
consisting of two or more members, each of whom shall be a Non-Employee
Director. The members of the Committee shall be appointed by the Board of
Directors of the Corporation. Except as limited by the express provisions of the
Plan, the Committee shall have sole and complete authority and discretion,
subject to OTS Regulations, to (i) select Participants and grant Awards; (ii)
determine the number of shares to be subject to types of Awards generally, as
well as to individual Awards granted under the Plan; (iii) determine the terms
and conditions upon which Awards shall be granted under the Plan; (iv) prescribe
the form and terms of instruments evidencing such grants; and (v) establish from
time to time regulations for the administration of the Plan, interpret the Plan,
and make all determinations deemed necessary or advisable for the administration
of the Plan.
A majority of the Committee shall constitute a quorum, and the acts of
a majority of the members present at any meeting at which a quorum is present,
or acts approved in writing by a majority of the Committee without a meeting,
shall be acts of the Committee.
<PAGE>
8. Shares Subject to Plan. Subject to adjustment by the operation of
Section 4 hereof, the maximum number of Shares with respect to which Awards may
be made under the Plan is 48,608 shares, subject to the Association's capital
level meeting OTS regulatory requirements at the time of submission to
stockholders. The shares with respect to which Awards may be made under the Plan
may be either authorized and unissued shares or issued shares heretofore or
hereafter reacquired and held as treasury shares. An Award shall not be
considered to have been made under the Plan with respect to Restricted Stock
which is forfeited and new Awards may be granted under the Plan with respect to
the number of Shares as to which such forfeiture has occurred.
9. Employee Rights Under the Plan. No director, officer or employee
shall have a right to be selected as a Participant nor, having been so selected,
to be selected again as a Participant and no director, officer, employee or
other person shall have any claim or right to be granted an Award under the Plan
or under any other incentive or similar plan of the Corporation or any
Affiliate. Neither the Plan nor any action taken thereunder shall be construed
as giving any employee any right to be retained in the employ of the
Corporation, the Association or any Affiliate.
10. Withholding Tax. Upon the termination of the Restricted Period with
respect to any shares of Restricted Stock (or at any such earlier time, if any,
that an election is made by the Participant under Section 83(b) of the Code, or
any successor provision thereto, to include the value of such shares in taxable
income), the Corporation shall have the right, in its sole discretion, to
withhold from any payment or distribution made under this Plan sufficient Shares
or withhold sufficient cash to cover any applicable withholding and employment
taxes. The Corporation shall have the right to deduct from all dividends paid
with respect to shares of Restricted Stock the amount of any taxes which the
Corporation is required to withhold with respect to such dividend payments. No
discretion or choice shall be conferred upon any Participant with respect to the
form, timing or method of any such tax withholding.
11. Amendment or Termination. The Board of Directors of the Corporation
may amend, suspend or terminate the Plan or any portion thereof at any time,
subject to OTS Regulations, but (except as provided in Section 4 hereof) no
amendment shall be made without approval of the stockholders of the Corporation
which shall (i) materially increase the aggregate number of Shares with respect
to which Awards may be made under the Plan, (ii) materially increase the
aggregate number of Shares which may be subject to Awards or (iii) change the
class of persons eligible to participate in the Plan; provided, however, that no
such amendment, suspension or termination shall impair the rights of any
Participant, without his consent, in any Award theretofore made pursuant to the
Plan.
12. Term of Plan. The Plan shall become effective upon its approval by
the stockholders of the Corporation. It shall continue in effect for a term of
ten years unless sooner terminated under Section 11 hereof.
<PAGE>
13. Initial Grants. By, and simultaneously with, the approval of this
Plan by the stockholders of the Corporation, each member of the Board of
Directors of the Corporation who is not a full-time Employee, is hereby granted
an Award of 2,066 Shares. Each Award shall be evidenced by a Restricted Stock
Agreement in a form approved by the Board of Directors and shall be subject in
all respects to the terms and conditions of this Plan, which are controlling.
Each of the Awards granted hereunder shall vest in five equal annual
installments, with the first installment vesting on the one-year anniversary of
the date of grant. Awards granted pursuant to this Section 13 are subject to the
conditions of the Plan, including the requirement that the Director maintain
Continuous Service with the Association from the date of grant, provided that no
Awards shall be earned in any fiscal year in which the Association fails to meet
all of its fully phased-in capital requirements.
EXHIBIT 11.0
<PAGE>
<TABLE>
<CAPTION>
COMPUTATIONS OF EARNINGS PER SHARE
Three Months Ended
December 31, 1996
Less
Total Shares Unallocated Shares Used For
Outstanding ESOP Shares EPS Calculation
----------- ----------- ---------------
<S> <C> <C> <C>
September 30, 1996 1,079,285 76,321 1,002,964
October 31, 1996 1,079,285 76,321 1,002,964
November 30, 1996 1,079,285 76,321 1,002,964
December 31, 1996 1,079,285 76,321 1,002,964
</TABLE>
Weighted average number of shares outstanding for the
three months ended December 31, 1996, for earnings
per share calculation (before effects of dilution)
1,002,964
Earnings Per Share Before
Effects of Dilution: = $183,230 (net income)/1,002,964
= $ .18 per share
Stock options outstanding at December 31, 1996: 101,321
Stock price for three month period:
High: $16.50 Low: $14.75 Average: $15.6875
Beginning: $15.50 Ending: $16.375
Exercise price of stock options: $14.125 per share
The potential dilution from stock options is less than 20% of the number of
common shares outstanding and the market price of the common stock exceeded the
exercise price for all months of the period. Therefore, the treasury stock
method was used for calculating the dilutive effects of the common stock
equivalents (stock options).
<PAGE>
Primary Earnings Per Share
Under the treasury stock method, for primary earnings per share, it is assumed
that all of the outstanding options are exercised at their exercise price and
the cash proceeds received by the Company are used to purchase treasury shares
at the average market price of the common stock for the quarter. The difference
in the number of shares that could be purchased under this assumption and the
total number of stock options is added to the weighted average number of shares
outstanding for the quarter to calculate "Earnings Per Common Share and Common
Stock Equivalents".
Additional shares to be added
to common shares outstanding = 101,321 - [(101,321 * $14.125)/$15.6875]
= 101,321 - 91,229
= 10,092 shares
Primary Earnings Per Share = $183,230 (net income) / 1,002,964 + 10,092
= $183,230 / 1,013,056
= $.18 per share
Fully Diluted Earnings Per Share
Under the treasury stock method, for fully diluted earnings per share, it is
assumed that all of the outstanding options are exercised at their exercise
price and the cash proceeds received by the Company are used to purchase
treasury shares at the ending market price of the common stock for the quarter.
The difference in the number of shares that could be purchased under this
assumption and the total number of stock options is added to the weighted
average number of shares outstanding for the quarter to calculate "Earnings Per
Common Share Assuming Full Dilution".
Additional shares to be added
to common shares outstanding = 101,321 - [(101,321 * $14.125)/$16.375]
= 101,321 - 87,399
= 13,922 shares
Fully Diluted Earnings Per Share = $183,230 (net income) / 1,002,964 + 13,922
= $183,230 / 1,016,886
= $.18 per share
The dilution in earnings per share from all potential dilution is less than 3%
[$.18 per share assuming no dilution compared to $.18 per share assuming full
dilution]. Therefore, the effects of dilution are considered not material and
only a single earnings per share is presented in the income statement -
"Earnings Per Common Share".
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS OF EAST TEXAS FINANCIAL SERVICES, INC., AT
DECEMBER 31, 1996, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-END> DEC-31-1996
<CASH> 511,931
<INT-BEARING-DEPOSITS> 5,105,605
<FED-FUNDS-SOLD> 2,554,364
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 0
<INVESTMENTS-CARRYING> 51,422,354
<INVESTMENTS-MARKET> 51,936,897
<LOANS> 50,557,122
<ALLOWANCE> 267,256
<TOTAL-ASSETS> 113,435,027
<DEPOSITS> 91,859,053
<SHORT-TERM> 0
<LIABILITIES-OTHER> 487,000
<LONG-TERM> 0
0
0
<COMMON> 12,564
<OTHER-SE> 21,076,410
<TOTAL-LIABILITIES-AND-EQUITY> 113,435,027
<INTEREST-LOAN> 988,165
<INTEREST-INVEST> 992,353
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 1,980,518
<INTEREST-DEPOSIT> 1,109,672
<INTEREST-EXPENSE> 0
<INTEREST-INCOME-NET> 870,846
<LOAN-LOSSES> 5,000
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 649,565
<INCOME-PRETAX> 293,695
<INCOME-PRE-EXTRAORDINARY> 183,230
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 183,230
<EPS-PRIMARY> 0.18
<EPS-DILUTED> 0.18
<YIELD-ACTUAL> 7.16
<LOANS-NON> 406,050
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 523,681
<ALLOWANCE-OPEN> 289,120
<CHARGE-OFFS> 21,864
<RECOVERIES> 0
<ALLOWANCE-CLOSE> 267,256
<ALLOWANCE-DOMESTIC> 112,280
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 154,976
</TABLE>
