U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
[ X] QUARTERLY REPORT UNDER SECTION 13 OF 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1997
OR
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT
For the transition period from to
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Commission File No. 0-25546
Mississippi View Holding Company
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(Exact name of registrant as specified in its charter)
Minnesota 41-1795363
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or jurisdiction)
35 East Broadway, Little Falls, Minnesota 56345-3093
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(address of principal executive offices)
(320) 632-5461
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(Registrant's telephone number, including area code)
Check whether the issuer (1) filed all reports required to be filed by Sections
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes X No
--- ---
State the number of shares outstanding of each of the issuer's classes of common
equity as of the latest practicable date.
Class: Common Stock, par value $.10 per share
Outstanding shares at July 31, 1997: 818,743
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MISSISSIPPI VIEW HOLDING COMPANY
INDEX TO FORM 10-QSB
<TABLE>
<CAPTION>
Page
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PART I. FINANCIAL INFORMATION
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Item 1. Financial Statements
Consolidated Statements of Financial Condition at June 30,
1997 (unaudited) and September 30, 1996 (audited) 2
Consolidated Statements of Income for the three and nine
months ended June 30, 1997 and 1996 (unaudited) 3
Consolidated Statements of Cash Flows for the nine months
ended June 30, 1997 and 1996 (unaudited) 4
Notes to Condensed Consolidated Financial
Statements (unaudited) 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 7
Non-Performing and Problem Assets 12
Capital Compliance 13
Liquidity Resources 14
Key Operating Ratios 15
PART II. OTHER INFORMATION
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Item 1. Legal Proceedings 16
Item 2. Changes in Securities 16
Item 3. Default Upon Senior Securities 16
Item 4. Submission of Matters to a Vote of Security Holders 16
Item 5. Other Information 16
Item 6. Exhibits and Reports on Form 8-K 16
SIGNATURES
EXHIBITS
</TABLE>
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MISSISSIPPI VIEW HOLDING COMPANY AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
<TABLE>
<CAPTION>
June 30, September 30,
1997 1996
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ASSETS (Unaudited) (Audited)
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<S> <C> <C>
Cash and cash equivalents:
Cash and due from banks .................................................... $ 190,721 $ 317,777
Interest bearing deposits with banks ....................................... 1,715,683 2,265,877
Securities available for sale, at fair value ................................. 13,857,250 12,235,145
Securities held to maturity, at amortized cost ............................... 7,201,996 9,294,092
FHLB Stock, at cost .......................................................... 650,700 650,700
Loans held for sale .......................................................... 210,590 178,663
Loans receivable, net of allowance for loan losses of $862,694 in 1997 and
$877,094 in 1996 ........................................................... 44,146,953 43,070,281
Accrued interest receivable .................................................. 477,058 450,327
Premises and equipment, net of depreciation .................................. 790,991 788,846
Foreclosed real estate (net of allowance for losses of $15,700 for 1997 and
$15,700 for 1996) .......................................................... - -
Deferred tax asset (net of valuation allowance) .............................. - 163,903
Other assets ................................................................. 532,764 595,208
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Total Assets ........................................................ $69,774,706 $70,010,819
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LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Liabilities:
Demand deposits ............................................................ 4,278,966 4,471,137
Savings deposits ........................................................... 14,460,817 14,087,832
Time deposits ................................................................ 36,612,107 37,972,225
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Total deposits 55,351,890 56,531,194
Advances from borrowers for taxes and insurance .............................. 50,819 138,530
Accrual for income tax ....................................................... 49,700 -
Deferred tax liability ....................................................... 555,084 -
Other liabilities ............................................................ 596,620 900,850
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Total Liabilities.................................................... 56,604,113 57,570,574
Commitments and contingencies
Stockholders' equity:
Serial Preferred Stock, no par value; 5,000,000 shares authorized, no shares
issued ................................................................... - -
Common Stock, $.10 par value, 10,000,000 shares authorized; 1,007,992 shares
issued; 728,174 and 776,713 shares outstanding ........................... 100,799 100,799
Paid in Capital ............................................................ 7,531,799 7,510,397
Treasury Stock (189,249 and 130,278 shares), at cost ....................... (2,256,830) (1,536,689)
Retained Earnings, substantially restricted ................................ 7,551,964 7,116,646
Unearned ESOP shares (60,479 and 66,527 shares), at cost ................... (517,854) (566,736)
Unearned Management Stock Bonus Plan shares (30,090 and 34,474 shares),
at cost .................................................................. (336,503) (387,412)
Net unrealized gain on available for sale securities ....................... 1,097,218 203,240
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Total Stockholders' Equity .......................................... 13,170,593 12,440,245
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Total Liabilities and Stockholders' Equity .......................... $69,774,706 $70,010,819
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</TABLE>
See Notes to consolidated financial statements.
2
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MISSISSIPPI VIEW HOLDING COMPANY
UNAUDITED CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
For the Three Months For the Nine Months
Ended June 30, Ended June 30,
1997 1996 1997 1996
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<S> <C> <C> <C> <C>
Interest Income:
Loans receivable .................... 952,026 906,969 2,842,720 2,758,728
Securities available for sale ....... 197,545 167,197 563,574 401,775
Securities held to maturity ......... 142,044 206,774 463,080 726,895
--------- --------- --------- ---------
Total interest income .......... 1,291,615 1,280,940 3,869,374 3,887,398
Interest Expense:
Demand deposits .................... 9,069 9,115 28,066 27,915
Savings deposits ................... 100,785 84,922 292,504 240,559
Time deposits ...................... 511,222 539,711 1,555,853 1,624,115
Total interest expense ............. 621,076 633,748 1,876,423 1,892,589
Net interest income ................ 670,539 647,192 1,992,951 1,994,809
Provision for loan losses .......... - 1,451 - 3,725
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Net interest income after
provision for loan loss ...... 670,539 645,741 1,992,951 1,991,084
Noninterest Income:
Other fees and service charges ...... 19,958 27,769 48,344 47,823
Gain on sale of loans ............... 4,156 4,252 6,978 68,124
Net gain on sale of real estate owned 12,848 9,753 12,848 10,939
Contingency recovery ................ - - - 81,023
Other ............................... 23,836 36,426 70,660 82,500
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Total noninterest income ....... 60,798 78,200 138,830 290,409
Noninterest Expense:
Compensation and employee benefits .. 248,732 229,014 711,078 666,689
Occupancy ........................... 21,937 21,501 70,808 67,668
Deposit insurance premium ........... 15,102 37,065 61,325 111,940
Data processing ..................... 20,231 19,110 64,320 56,034
Advertising ......................... 6,632 7,551 20,258 22,189
Real estate owned expense, net ...... 965 826 1,415 5,041
Other ............................... 86,978 104,229 309,058 317,153
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Total noninterest expense ...... 400,577 419,296 1,238,262 1,246,714
---------- ---------- ---------- ----------
Income before income taxes ............ 330,760 304,645 893,519 1,034,779
Income tax expense .................... 122,779 108,504 338,411 407,460
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Net income ............................ $ 207,981 $ 196,141 $ 555,108 $ 627,319
========== ========== ========== ==========
Dividends Declared Per Share .......... $ 0.08 $ 0.08 $ 0.16 $ 0.16
========== ========== ========== ==========
Primary Earnings Per Share ............ $ 0.26 $ 0.24 $ 0.69 $ 0.72
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</TABLE>
See Notes to consolidated financial statements.
3
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MISSISSIPPI VIEW HOLDING COMPANY AND SUBSIDIARY
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
For the Nine Months Ended
June 30,
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1997 1996
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<S> <C> <C>
OPERATING ACTIVITIES
Interest received on loans and investments ........................... $3,815,487 $3,847,680
Interest paid ........................................................ (1,877,480) (1,893,534)
Other fees, commissions, and interest received ....................... 211,792 220,789
Cash paid to suppliers, employees and others.......................... (1,311,243) (957,039)
Contributions to charities............................................ (28,974) (4,429)
Income taxes paid..................................................... (151,000) (505,619)
Loans originated for sale............................................. (789,829) (1,879,643)
Proceeds from sale of loans........................................... 702,928 3,919,746
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Net cash provided by operating activities............................. 571,681 2,747,951
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INVESTING ACTIVITIES
Loans originations and principal payment on loans, net ........... (1,048,450) (1,013,433)
Proceeds from maturities of:
Debt securities held to maturity ................................. 4,823,000 6,845,346
Securities available for sale .................................... 3,516,468 1,081,880
Mortgage-backed securities held to maturity ...................... 537,470 697,618
Mortgage-backed securities available for sale .................... 458,979 36,160
Proceeds from sale of real estate .................................. 12,848 10,939
Purchase of:
Debt securities held to maturity ................................. (3,269,000) (2,875,000)
Securities available for sale .................................... (3,545,313) (4,556,638)
Mortgage-backed securities held to maturity ...................... -- (327,532)
Mortgage-backed securities available for sale .................... (572,125) (1,041,821)
Equipment and property improvements............................... (63,125) (10,204)
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Net cash provided by (used in) investing activities............. 850,752 (1,152,685)
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FINANCING ACTIVITIES
Net increase (decrease) in demand accounts, passbook accounts and
certificates of deposit accounts ................................. (1,178,247) 1,068,886
Net increase (decrease) in mortgage escrow funds ................... (87,711) (119,690)
Acquisition of treasury stock ...................................... (720,141) (1,160,439)
Net increase (decrease) in unearned MSBP shares .................... 1,044 (456,266)
Cash dividends paid ................................................ (114,628) (140,917)
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Net cash (used in) financing activities ............................ (2,099,683) (808,426)
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INCREASE IN CASH AND CASH EQUIVALENTS ................................ (677,250) 786,840
CASH AND CASH EQUIVALENTS - Beginning of year ........................ 2,583,654 2,837,070
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CASH AND CASH EQUIVALENTS - End of period ............................ $1,906,404 $3,623,910
========== ==========
</TABLE>
See Notes to consolidated financial statements.
4
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MISSISSIPPI VIEW HOLDING COMPANY
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
<TABLE>
<CAPTION>
For the Nine Months Ended
June 30,
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1997 1996
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RECONCILIATION OF NET INCOME TO NET CASH
PROVIDED BY OPERATING ACTIVITIES
Net Income .................................................................... $ 555,108 $ 627,319
Adjustments:
Depreciation ................................................................ 60,979 62,828
Federal Home Loan Bank stock dividends ...................................... - (12,800)
Non-cash dividends .......................................................... (4,024) (3,775)
ESOP fair value adjustment .................................................. 18,350 11,822
Amortization of ESOP compensation ........................................... 43,721 51,733
Amortization of MSBP compensation ........................................... 49,865 49,865
Tax benefit of MSBP vesting activities ...................................... 3,052 -
Net amortization and accretion of premiums and discounts on securities ...... 14,499 7,746
Net (gains) on sale of real estate owned .................................... (12,848) (10,939)
Net loan fees deferred and amortized ........................................ 33,731 3,147
Net mortgage loan servicing fees deferred and amortized ..................... 1,492 (11,974)
Contingency recovery ........................................................ - (81,023)
(Increase) decrease in:
Loans held for sale ....................................................... (93,879) 2,029,334
Accrued interest receivable ............................................... (26,730) 16,377
Tax refund receivable ..................................................... 23,892 -
Deferred tax assets ....................................................... 163,903 15,807
Other assets .............................................................. 37,059 31,134
Increase (decrease) in:
Accrued interest payable .................................................. (1,057) (944)
Accrued income taxes ...................................................... 8,798 (106,085)
Other liabilities ......................................................... (304,230) 68,379
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Net cash provided by operating activities ................................... $ 571,681 $2,747,951
========== ==========
SUPPLEMENTAL SCHEDULE OF NON CASH INVESTING AND FINANCING ACTIVITIES
Refinancing of sales of real estate owned ........................................ $ - $ 37,200
Transfer of loans to real estate acquired through foreclosure .................... $ - $ 4,989
Non cash dividends ............................................................... $ 4,024 $ 3,775
Federal Home Loan Bank stock dividend ............................................ $ - $ 12,800
Transfer of debt securities to available for sale from securities held to maturity $ - $2,449,446
Transfer of loans to held for sale from loans for portfolio ...................... $ - $2,135,339
Contingency Recovery ............................................................. $ - $ 81,023
</TABLE>
See Notes to consolidated financial statements.
5
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MISSISSIPPI VIEW HOLDING COMPANY AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1997 (Unaudited)
Note 1: PRINCIPLES OF CONSOLIDATION
The unaudited consolidated financial statements as of and for the three
and nine month periods ended June 30, 1997, include the accounts of Mississippi
View Holding Company (the "Company") and its wholly owned subsidiary Community
Federal Savings & Loan Association of Little Falls (the "Association"). All
significant intercompany accounts and transactions have been eliminated in
consolidation.
Note 2: BASIS OF PRESENTATION
General: The accompanying unaudited interim consolidated financial
statements have been prepared in accordance with generally accepted accounting
principles for interim financial information and instructions per Form 10-QSB.
Accordingly, they do not include all information and disclosures required by
generally accepted accounting principles for complete financial statements. The
accompanying consolidated financial statements do not purport to contain all the
necessary financial disclosures required by generally accepted accounting
principles that might otherwise be necessary in the circumstances and should be
read with the fiscal 1996 consolidated financial statements and notes of
Mississippi View Holding Company and Subsidiary included in their annual audit
report for the year ended September 30, 1996.
In the opinion of management, all adjustments (consisting of normal
recurring accruals) considered necessary for fair presentations have been
included. The results of operations for the three and nine month periods ended
June 30, 1997, are not necessarily indicative of the results that may be
expected for the entire fiscal year or any other period.
Reclassification: Certain items previously reported have been
reclassified to conform with the current period's reporting format.
Note 3. RECENT ACCOUNTING PRONOUNCEMENTS.
Accounting for Transfers and Servicing of Financial Assets and
Extinquishments of Liabilities. The FASB issued SFAS No. 125, Accounting for
Transfers and Servicing of Financial Assets and Extinquishments of Liabilities
(SFAS No. 125) and SFAS No. 127, Deferral of the Effective Date of Certain
Provisions of FASB Statement No. 125 (SFAS No.127) in June and December 1996,
respectively. SFAS No. 125 provides accounting and reporting standards for
transfers and servicing of financial assets and extinquishments of liabilities.
It requires entities to recognize servicing assets and liabilities for all
contracts to service financial assets, unless the assets are securitized and all
servicing is retained. The servicing assets will be measured initially at fair
value, and will be amortized over the
6
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estimated useful lives of the servicing assets. In addition, the impairment of
servicing assets will be recognized through a valuation allowance. SFAS No. 125
also addresses the accounting and reporting standards for securities lending,
dollar-rolls, repurchase agreements and similar transactions. The Company will
prospectively adopt SFAS No. 125 on January 1, 1997. However, in accordance with
SFAS No. 127, the Company will defer adoption of the standard as it relates to
securities lending, dollar-rolls, repurchase agreements and similar transactions
until January 1, 1998. The Company does not expect the adoption of SFAS No. 125
to have a material impact on its consolidated financial statements.
Earnings per Share. On March 3, 1997, the FASB issued SFAS No. 128,
Earnings per Share (SFAS No. 128) which is effective for financial statements
issued for periods ending after December 15, 1997. SFAS No. 128 replaces APB
Opinion 15, Earnings per Share, and simplifies the computation of earnings per
share (EPS) by replacing the presentation of primary EPS with a presentation of
basic EPS. In addition, the Statement requires dual presentation of basic and
diluted EPS by entities with complex capital structures. Basic EPS includes no
dilution and is computed by dividing income available to common stockholders by
the weighted-average number of common shares outstanding for the period. Diluted
EPS reflects the potential dilution of securities that could share in the
earnings of an entity, similar to fully diluted EPS. The computation of EPS will
be compatible with international standards, as the International Accounting
Standards Committee recently issued a comparable standard.
Disclosure of Information about Capital Structure. The FASB issued SFAS
No. 129, Disclosure of Information about Capital Structure, which is effective
for financial statements issued for periods ending after December 15, 1997. SFAS
No. 129 establishes standards for disclosing information about an entity's
capital structure by consolidation of disclosure requirements under various
present accounting standards.
Management's Discussion and Analysis of Financial Condition
for September 30, 1996 and June 30, 1997
General. Total assets of Mississippi View Holding Company, (the
"Company") decreased by $236,113 from September 30, 1996, to June 30, 1997. The
reduced assets were the net result of increased loans receivable of $1,108,599,
increased accrued interest receivable of $26,731 offset by reduced cash
equivalents of $677,250, reduced securities of $469,991, reduced tax deferred
assets of $163,903 and reduced other assets of $62,444.
Cash and Cash Equivalents. Cash and cash equivalents consisting of
interest-bearing and noninterest bearing deposits, decreased $677,250. Liquidity
decreased primarily due to deposit withdrawals and the purchase of treasury
stock exceeding maturing security investments and cash provided by operating
activities.
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Securities Available for Sale. Securities available for sale increased
$1,622,105. Security purchases exceeded maturities and principal payments
increasing the portfolio by $141,990. In addition, the mark to market value of
these securities increased by $1,489,963 of which $1,006,684 was due to an error
in the recorded number of shares of stock of the Federal Home Loan Mortgage
Corporation (FHLMC) owned by the Association on September 30, 1996. The
additional shares issued in a previous 3-for-1 stock split were not recorded
which resulted in the amount of stock owned being understated by 8,792 shares.
The market value adjustment had no effect on net income or earnings per share
but did have an effect on certain balance sheet items and their corresponding
ratios. Any future increase or decrease in the market value of such securities
will have a corresponding positive or negative effect on stockholders' equity.
Securities Held to Maturity. Debt and mortgage-backed securities held
to maturity decreased $2,092,096, or 22.51%, from $9,294,092 on September 30,
1996, to $7,201,996 on June 30, 1997. Maturing debt securities of $1,749,672 and
principal amortization of mortgage-backed securities of $538,424 were offset by
purchases of certificates of deposit of $196,000. This liquidity was used to
supplement increased lending activities and deposit withdrawals.
Loans Held for Sale. Loans held for sale increased $31,927 from
$178,663 (3 loans) on September 30, 1996, to $210,590 (5 loans) on June 30,
1997. This increase was the result of seasonal activity. Management's strategy
is to sell in the secondary market lower-yielding fixed rate mortgage loans
rather than maintaining them for portfolio. These loans are presold in the
secondary market prior to origination. The balance is the amount sold, yet
unfunded as of the period end.
Loans Receivable, Net. Loans receivable increased $1,076,672, or 2.50%,
from $43,070,281 on September 30, 1996, to $44,146,953 on June 30, 1997. This
increase was due to new loan originations exceeding principal amortizations and
loan payoffs.
Foreclosed Real Estate. Foreclosed real estate remained unchanged from
September 30, 1996, to June 30, 1997, at $0.00.
Deferred Tax Asset. Deferred tax asset, net of valuation allowance,
decreased $163,903 during this nine month period primarily as a result of the
reversing temporary difference in the SAIF assessment tax deduction.
Other Assets. Other assets decreased $62,444, or 10.49%, from $595,208
as of September 30, 1996, to $532,764 as of June 30, 1997. This decrease was the
result of a reduced accrued income tax refund of $23,892, the reduced prepaid
federal deposit insurance premium of $29,410, and reduced prepaid insurance of
$15,296.
Deposits. Deposits, after interest credited, decreased by $1,179,304,
or 2.09%, to $55,351,890 at June 30, 1997, from $56,531,194 at September 30,
1996. The decrease was due, in part, to management's deposit pricing strategy.
Advances from Borrowers for Taxes and Insurance. Advances from
borrowers for taxes and insurance decreased $87,711 from $138,530 on September
30, 1996, to $50,819 on June 30, 1997, due to the cyclical nature of these
payments.
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Deferred Tax Liability. Deferred tax liability increased from $0.00 at
September 30, 1996, to $555,084 on June 30, 1997 due primarily to the increase
in net unrealized gains on available for sale securities. See also "Securities
Available for Sale"
Other Liabilities. Other liabilities decreased by $304,230, or 33.77%,
from $900,850 on September 30, 1996, to $596,620 on June 30, 1997. Decreased
liabilities resulted from reduced custodial account balances for servicing on
sold loans of $11,891, payment of the Savings Association Insurance Fund (SAIF)
assessment during the fourth quarter 1996 of $362,557, reduced accrued
compensation and bonus expenses of $25,515, and reduced accrued audit expense of
$13,585. These liability decreases were offset by increased deferred executive
compensation of $15,849, a cash dividend of $65,499 declared by the Company
payable on August 15, 1997, and a five year pledge/commitment of $26,250, of
which $20,250 is outstanding at June 30, 1997, to Unity Family Healthcare/St.
Gabriel's Hospital, a local healthcare/hospital facility, for renovation and
expansion.
Stockholders' Equity. Stockholders' equity increased by $730,348, or
5.87%, from $12,440,245 on September 30, 1996, to $13,170,593 on June 30, 1997.
This increase is the net effect of the following changes in equity: a paid in
capital increase of $21,402 resulting from the fair market value adjustment to
earned and committed to be released Employee Stock Ownership Plan ("ESOP")
shares, net of taxes, and the permanent tax/book benefit resulting from the
vesting of Management Stock Bonus Plan (MSBP) shares; an increase of $48,882 as
a result of accounting for earned ESOP shares; an increase of $50,909 as a
result of accounting for earned MSBP shares; an increase of $893,978 resulting
from an increase in net unrealized gains on available for sale securities (see
also "Securities Available for Sale"); an increase of $555,108 from net
operational income for the nine month period just ended; a decrease to retained
earnings due to a dividend declared and paid of $119,790, and a decrease of
$720,141 resulting from open market purchases of common stock of the Company.
Comparison of Operating Results for the Three Months Ended
June 30, 1997 and 1996
Net Income. Net income increased by $11,840, for the three months ended
June 30, 1997, when compared to the three months ended June 30, 1996. Due to
interest income increasing and interest expense decreasing, net interest income
increased by $23,347. Noninterest expense decreased more than noninterest
income, but was offset by increased income tax expense. Therefore, income for
the comparative three month periods ended June 30, 1997 and 1996 were $207,981
and $196,141, respectively.
Total Interest Income. Interest income increased $10,675, or 0.83%,
from $1,280,940 for the three month period ended June 30, 1996, to $1,291,615
for the three month period ended June 30, 1997. Interest income from loans
receivable increased $45,057 due to the increase in the average loan balances
offset by lower rates paid on such balances over the period. Available for sale
security investment income increased $30,348 due to the increased average rate
of return of these investments. Held to maturity investment security income
decreased $64,730 due to a decrease in the average balance of such securities as
maturities were not reinvested in such investments.
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Total Interest Expense. Interest expense decreased $12,672, or 2.00%,
for the comparative three month periods ending June 30, 1996 and 1997. This
decrease was due to lower average deposit balances.
Net Interest Income. Net interest income increased $23,347, or 3.61%,
from $647,192 for the three months ended June 30, 1996, to $670,539 for the
three month period ended June 30, 1997. The Company's net interest rate spread
improved from 2.92% to 3.11% as the yield earned on interest-earning assets
increased faster then the cost of interest-bearing deposits.
Provision for Loan Losses. The Association currently maintains an
allowance for loan losses based upon management's periodic evaluation of known
and inherent risks in the loan portfolio, the Association's past loss
experience, adverse situations that may affect the borrowers' ability to repay
loans, estimated value of the underlying collateral, and current and expected
market conditions. Provisions for loan losses decreased by $1,451 from June 30,
1996 to June 30, 1997. Management's assessment of the loan portfolio and market
conditions determined that no provisions needed to be recorded at this time.
While management maintains its allowance for losses at a level which it
considers to be adequate to provide for potential losses, there can be no
assurances that further additions will not be made to the loss allowances and
that such losses will not exceed the estimated amounts.
Due to the size of the institution and the minimal amount of
nonperforming loans the percentage of nonperforming loans to allowance for loan
losses will seem high. Movement of even one loan into or out of nonperforming
status per reporting period may result in a large percentage change due to the
size of the portfolio.
Noninterest Income. Noninterest income decreased by $17,402, or 22.25%,
during the three month period ended June 30, 1997, as compared to the same
period ended June 30, 1996. This decrease was due to reduced fee and service
charge fee income of $7,811 and reduced other noninterest income of $12,590. The
noninterest income decrease was the result of a tax settlement between our data
processor and the IRS, from which we received a payment of $11,900 in June of
1996. These decreases were offset by a $3,095 increase in the gain on sale of
real estate owned.
Noninterest Expense. Noninterest expense decreased $18,719, or 4.46%,
from $419,296 to $400,577 during the comparative three month periods ending June
30, 1996 and 1997, respectively. The decreased noninterest expense was the
result of the reduced federal deposit insurance of $21,963 due to the
recapitalization of the SAIF in September 1996 and other expenses of $17,251
offset by increased compensation of $19,718, of which $6,350 is due to an
adjustment for the current fair value of the vested ESOP shares exceeding the
value at the time of purchase.
Income Tax. Income tax expense increased $14,275, or 13.16%, from
$108,504 for the three month period ended June 30, 1996, to $122,779 for the
three month period ended June 30, 1997, primarily due to increased earnings.
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Comparison of Operating Results for the Nine Months Ended
June 30, 1997 and 1996
Net Income. Net income decreased $72,211, or 11.51%, from $627,319 for
the nine months ended June 30, 1996, to $555,108 for the nine months ended June
30, 1997. Noninterest income decreased $151,579 offset by reduced noninterest
expense of $8,452 and reduced income tax expense of $69,049.
Total Interest Income. Interest income decreased $18,024, or 0.46%,
from $3,887,398 for the nine month period ended June 30, 1996, to $3,869,374 for
the nine month period ended June 30, 1997. Interest income from loans receivable
increased $83,992 due to the increase in the average loan balances offset by
lower rates paid on such balances over the period. Available for sale security
investment income increased $161,799 due to the increase in the average
investment balance along with increased average rate of return of these
investments. Held to maturity investment security income decreased $263,815 due
to a decrease in the average balance of such securities as maturities were not
reinvested in such investments.
Total Interest Expense. Interest expense decreased $16,166, or 0.85%,
for the comparative nine month periods ending June 30, 1996 and 1997. This
decrease was due to lower rates paid on deposits offset somewhat by an increase
in the average balance of deposits.
Net Interest Income. Net interest income decreased $1,858, or 0.09%,
from $1,994,809 for the nine months ended June 30, 1996, to $1,992,951 for the
nine month period ended June 30, 1997. The Company's interest rate spread
improved from 3.01% to 3.09% as the yield earned on interest earning assets
increased faster than the cost of interest-bearing deposits.
Noninterest Income. Noninterest income decreased by $151,579, or
52.20%, during the nine month period ended June 30, 1997, as compared to the
same period ended June 30, 1996. This decrease was primarily due to a gain on
sale of loans, a contingency recovery, and a payment received from the
Association's previous data processor recorded during the nine months ended June
30, 1996.
Noninterest Expense. Noninterest expense decreased $8,452, or 0.68%,
from $1,246,714 to $1,238,262 during the comparative nine month periods ending
June 30, 1996 and 1997, respectively. The decrease was the result of reduced
deposit insurance premiums of $50,615 and other expenses of $8,095 offset by
increased compensation and benefits of $44,389 and increased data processing
costs of $8,286.
Income Tax. Income tax expense decreased $69,049 or 16.95%, from
$407,460 for the nine month period ended June 30, 1996, to $338,411 for the nine
month period ended June 30, 1997, primarily due to decreased earnings.
11
<PAGE>
Non-performing and Problem Assets
The following table sets forth information regarding non-accrual loans,
real estate owned, and other repossessed assets, and loans 90 days or more
delinquent but on which the Association was accruing interest at the date
indicated.
<TABLE>
<CAPTION>
At June 30,
-----------------------------
1997 1996
-------------- -------------
(In Thousands)
-----------------------------
<S> <C> <C>
Loans accounted for on a non-accrual basis:
Mortgage loans:
Permanent loans secured by 1-4 dwelling units ................ $ 187 $ 92
All other mortgages .......................................... - 208
Non-mortgage loans:
Commercial business loans .................................... - -
Consumer loans ............................................... 6 21
-------------- -------------
Total .......................................................... 193 321
Accruing loans which are contractually past due 90 days or more:
Mortgage loans:
Construction loans ........................................... - -
Permanent loans secured by 1-4 dwelling units ................ 40 31
All other mortgage loans ..................................... - -
Non-mortgage loans:
Consumer loans ............................................... - -
-------------- -------------
Total .......................................................... 40 31
-------------- -------------
Total non-accrual and accrual loans ............................ 233 352
-------------- -------------
REO (net) ...................................................... - -
Other non-performing assets .................................... - -
-------------- -------------
Total non-performing assets .................................... $233 $352
============== =============
Total non-accrual and accrual loans to net loans ............... 0.53% 0.84%
Total non-accrual and accrual loans to total assets ............ 0.33% 0.51%
Total non-performing assets to total assets .................... 0.33% 0.51%
Allowance for loan losses to non-performing loans .............. 370.26% 248.90%
</TABLE>
Interest income that would have been recorded on loans accounted for on a
nonaccrual basis under the original terms of such loans was $7,935 for the nine
month period ended June 30, 1997. No interest income on non-accrual loans was
included in income for the nine month period ended June 30, 1997.
12
<PAGE>
Capital Compliance
The following table sets forth the Association's capital position at
June 30, 1997, as compared to the minimum regulatory capital requirements
imposed on the Association by the Office of Thrift Supervision ("OTS") at that
date.
At June 30, 1997
---------------------------------
Percentage of
Amount Adjusted Assets
------------ ---------------
GAAP Capital.................$ 11,745,636 16.83%
=========== ===============
Tangible Capital: (1)
Regulatory Requirement.....$ 1,019,189 1.50%
Actual Capital............. 10,647,406 15.67%
----------- ---------------
Excess.................$ 9,628,217 14.17%
=========== ===============
Core Capital: (1)
Regulatory Requirement.....$ 2,038,378 3.00%
Actual Capital............. 10,647,406 15.67%
----------- ---------------
Excess.................$ 8,609,028 12.67%
=========== ===============
Risk-Based Capital: (2)
Regulatory Requirement $ 2,695,680 8.00%
Actual Capital............. 11,074,056 32.86%
----------- ---------------
Excess.................$ 8,378,376 24.86%
=========== ===============
(1) Regulatory capital reflects modifications from GAAP capital due to valuation
adjustments for available for sale securities and unallowable mortgage
servicing rights.
(2) Based on risk weighted assets of $33,695,998.
13
<PAGE>
Liquidity Resources
The Association is required to maintain minimum levels of liquid assets
as defined by the OTS regulations. The OTS minimum required liquidity ratio is
5% and the minimum short term liquidity is 1%. At June 30, 1997, the
Association's total liquidity was 23.03%. Short term liquidity at June 30, 1997,
was 15.06%. Both levels were well in excess of regulation requirements. The
Association adjusts its liquidity levels in order to meet funding needs for
deposit outflows, payment of real estate taxes from escrow accounts on mortgage
loans, loan funding commitments, and repayment of borrowings, when applicable.
The Association adjusts it liquidity level as appropriate to meet its
asset/liability objectives.
The primary sources of funds are deposits, amortization and prepayments
of loans and mortgage-backed securities, maturity of investments, and funds
provided from operations. As an alternative to supplement liquidity needs, the
Association has the ability to borrow from the Federal Home Loan Bank of Des
Moines. Scheduled loan amortization and maturing investment securities are a
relatively predictable source of funds, however, deposit flow and loan
prepayments are greatly influenced by, among other things, market interest
rates, economic conditions and competition. The Association's liquidity,
represented by cash, cash equivalents, securities (held to maturity and
available for sale), is a product of its operating, investing, and financing
activities.
Impact of Inflation and Changing Prices
The unaudited consolidated financial statements of the Company and
notes thereto, presented elsewhere herein, have been prepared in accordance with
GAAP, which requires the measurement of financial position and operating results
in terms of historical dollars without considering the change in the relative
purchasing power of money over time due to inflation. The impact of inflation is
reflected in the increased cost of the Company's operations. Unlike most
industrial companies, nearly all the assets and liabilities of the Company are
financial. As a result, interest rates have a greater impact on the Company's
performance than do the general levels of inflation. Interest rates do not
necessarily move in the same direction or to the same extent as the prices of
goods and services.
14
<PAGE>
Key Operating Ratios
The table below sets forth certain performance ratios of the Company for
the periods indicated.
<TABLE>
<CAPTION>
At or for the Three Months At or for the Nine Months
Ended June 30, Ended June 30,
-------------------------- -------------------------
1997 (1) 1996 (1) 1997 (1) 1996 (1)
----------- ----------- ------------ -----------
<S> <C> <C> <C> <C>
Performance Ratios:
Return on average assets (net income
divided by average total assets) ... 1.22% 1.13% 1.08% 1.21%
Return on average equity (net income
divided by average equity) ......... 6.91% 6.14% 6.15% 6.23%
Average interest earning assets to
average interest bearing liabilities 123.92% 123.65% 123.16% 124.53%
Net interest rate spread ............. 3.11% 2.92% 3.09% 3.01%
Net yield on average interest-earning
assets ............................. 3.99% 3.81% 3.95% 3.92%
Net interest income after provision
for loan losses to total
other expenses...................... 167.39% 154.01% 160.95% 159.71%
Capital Ratios:
Book value per share (2) ............. $ 16.09 $ 14.02 $ 16.09 $ 14.02
Average equity to average assets ratio
(average equity divided by average
total assets) ....................... 17.61% 18.44% 17.57% 19.36%
Stockholders' equity to assets at
period end ........................... 18.88% 18.40% 18.88% 18.40%
</TABLE>
(1) The ratios for the three and nine month periods are annualized where
appropriate.
(2) Based upon shares outstanding at June 30, 1997 and 1996, of 818,743 and
909,714 respectively.
15
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
Not Applicable
Item 2. Changes in Securities
Not Applicable
Item 3. Default Upon Senior Securities
Not Applicable
Item 4. Submission of Matters to a Vote of Security Holders
Not Applicable
Item 5. Other Information
Not Applicable
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits - Exhibit 11 - Statement re Computation of Per Share Earnings.
- Exhibit 27 - Financial Data Schedule (only included in
electronic filing)
(b) Reports on Form 8-K - On April 2, 1997, the Company filed a Form 8-K
announcing OTS approval to implement a stock repurchase program.
16
<PAGE>
MISSISSIPPI VIEW HOLDING COMPANY
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Mississippi View Holding Company
Date: 08/04/97 By: /s/ Thomas J. Leiferman
------------- --------------------------------
Thomas J. Leiferman
President and Chief Executive Officer
(Principal Executive Officer)
Date: 08/04/97 By: /s/ Larry D. Hartwig
------------- -----------------------------
Larry D. Hartwig
Vice President
(Principal Accounting and Financial Officer)
17
MISSISSIPPI VIEW HOLDING COMPANY
EXHIBIT 11
STATEMENT REGARDING COMPUTATION OF EARNINGS PER SHARE
<TABLE>
<CAPTION>
For the Three Months For the Nine Months
Ended June 30, Ended June 30,
------------------------- ---------------------------
1997 1996 1997 1996
------------ ----------- ------------ -------------
<S> <C> <C> <C> <C>
Net Income ............................. $ 207,981 $ 196,141 $ 555,108 $ 627,319
========== ========== ========== ===========
Weighted Average Shares Outstanding .... 757,256 823,009 784,726 868,737
Common stock equivalents due to dilutive
effect of stock options .............. 31,981 756 21,445 1,639
---------- ---------- ---------- -----------
Total weighted average common shares and
equivalents outstanding .............. 789,237 823,765 806,171 870,376
========== ========== ========== ===========
Primary Earnings Per Share ............. $ 0.26 $ 0.24 $ 0.69 $ 0.72
========== ========== ========== ===========
Weighted Average Shares Outstanding .... 757,256 823,009 784,726 868,737
Additional dilutive shares using end of
period market value versus average
market value for period when
utilizing the treasury stock method
regarding stock options .............. 32,152 2,168 32,152 2,168
---------- ---------- ---------- -----------
Total weighted average common shares and
equivalents outstanding for fully
diluted computation .................. 789,408 825,177 816,878 870,905
========== ========== ========== ===========
Fully diluted earnings per share ....... $ 0.26 $ 0.24 $ 0.68 $ 0.72
========== ========== ========== ===========
</TABLE>
Earnings per share of common stock for the three and nine month periods
ended June 30, 1996 and 1997, have been determined by dividing net income for
the period by the weighted average number of shares of common stock outstanding,
net of unearned ESOP shares.
18
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-END> JUN-30-1997
<CASH> 191
<INT-BEARING-DEPOSITS> 1,716
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 13,857
<INVESTMENTS-CARRYING> 7,202
<INVESTMENTS-MARKET> 7,253
<LOANS> 45,490
<ALLOWANCE> 863
<TOTAL-ASSETS> 69,775
<DEPOSITS> 55,352
<SHORT-TERM> 0
<LIABILITIES-OTHER> 1,252
<LONG-TERM> 0
0
0
<COMMON> 101
<OTHER-SE> 13,070
<TOTAL-LIABILITIES-AND-EQUITY> 69,775
<INTEREST-LOAN> 2,843
<INTEREST-INVEST> 1,026
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 3,869
<INTEREST-DEPOSIT> 1,876
<INTEREST-EXPENSE> 1,876
<INTEREST-INCOME-NET> 1,993
<LOAN-LOSSES> 0
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 1,238
<INCOME-PRETAX> 894
<INCOME-PRE-EXTRAORDINARY> 555
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 555
<EPS-PRIMARY> .69
<EPS-DILUTED> .68
<YIELD-ACTUAL> 7.61
<LOANS-NON> 193
<LOANS-PAST> 40
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 1,468
<ALLOWANCE-OPEN> 877
<CHARGE-OFFS> 15
<RECOVERIES> 0
<ALLOWANCE-CLOSE> 863
<ALLOWANCE-DOMESTIC> 863
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 680
</TABLE>
