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 March 31, 1998
OR
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT
For the transition period from _________ to __________
Commission File No. 0-25546
Mississippi View Holding Company
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Minnesota 41-1795363
- --------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or jurisdiction)
35 East Broadway, Little Falls, Minnesota 56345-3093
----------------------------------------------------
(address of principal executive offices)
(320) 632-5461
----------------------------------------------------
(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 May 8, 1998: 736,864
<PAGE>
MISSISSIPPI VIEW HOLDING COMPANY
INDEX TO FORM 10-QSB
<TABLE>
<CAPTION>
<S> <C> <C>
Page
PART I. FINANCIAL INFORMATION ----
---------------------
Item 1. Financial Statements
Consolidated Statements of Financial Condition at March 31,
1998 (unaudited) and September 30, 1997 (audited) 2
Consolidated Statements of Income for the three and six
months ended March 31, 1998 and 1997 (unaudited) 3
Consolidated Statements of Cash Flows for the six months
ended March 31, 1998 and 1997 (unaudited) 4
Notes to Condensed Consolidated Financial
Statements (unaudited) 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8
Non-Performing and Problem Assets 13
Capital Compliance 14
Liquidity Resources 15
Key Operating Ratios 17
PART II. OTHER INFORMATION
-----------------
Item 1. Legal Proceedings 18
Item 2. Changes in Securities 18
Item 3. Default Upon Senior Securities 18
Item 4. Submission of Matters to a Vote of Security Holders 18
Item 5. Other Information 18
Item 6. Exhibits and Reports on Form 8-K 18
SIGNATURES
</TABLE>
<PAGE>
MISSISSIPPI VIEW HOLDING COMPANY AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
<TABLE>
<CAPTION>
March 31, September 30,
1998 1997
----------- -----------
ASSETS (Unaudited) (Audited)
------ ----------- -----------
<S> <C> <C>
Cash and cash equivalents:
Cash and due from banks .................................................. $ 248,106 $ 214,934
Interest bearing deposits with banks ..................................... 7,766,597 889,660
Securities available for sale, at fair value ............................. 11,055,437 12,963,344
Securities held to maturity, at amortized cost ........................... 6,503,490 7,405,466
FHLB stock, at cost ...................................................... 650,700 650,700
Loans held for sale ...................................................... 431,950 135,550
Loans receivable, net of allowance for loan losses of $863,619 in 1998 and
$861,170 in 1997 ......................................................... 41,585,812 44,474,809
Accrued interest receivable .............................................. 363,736 437,548
Premises and equipment ................................................... 764,738 806,900
Other assets ............................................................. 589,104 567,539
---------- ----------
Total Assets ............................................................. $69,959,670 $68,546,450
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
Liabilities:
Demand deposits .......................................................... $ 4,395,303 $ 4,408,558
Savings deposits ......................................................... 14,604,370 14,525,018
Time deposits ............................................................ 36,721,684 36,250,011
---------- ----------
Total deposits ........................................................... 55,721,357 55,183,587
Advances from borrowers for taxes and insurance .......................... 120,488 107,038
Accrued income taxes ..................................................... 38,302 66,352
Deferred tax liability ................................................... 759,219 525,353
Other liabilities ........................................................ 526,930 596,216
Total Liabilities ---------- ----------
57,166,296 56,478,546
Shareholders' 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; 656,727 and 653,151 shares outstanding ........................... 100,799 100,799
Paid in capital .......................................................... 7,577,924 7,540,218
Treasury stock (271,128 and 267,749 shares), at cost (3,665,088) (3,605,111)
Retained earnings, substantially restricted .............................. 8,056,256 7,737,458
Unearned ESOP shares (54,431 and 58,463 shares), at cost ................. (463,811) (498,012)
Unearned MSBP shares (25,706 and 28,629 shares), at cost ................. (285,128) (317,954)
Unrealized appreciation on available-for-sale securities, net of tax ..... 1,472,422 1,110,506
Total shareholders' equity ---------- ----------
12,793,374 12,067,904
---------- ----------
Total liabilities and shareholders' equity ............................... $69,959,670 $68,546,450
========== ==========
</TABLE>
See Notes to consolidated financial statements
<PAGE>
MISSISSIPPI VIEW HOLDING COMPANY AND SUBSIDIARY
UNAUDITED CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
For the For the
Three Months Six Months
Ended March 31, Ended March 31,
----------------------- -----------------------
1998 1997 1998 1997
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Interest Income:
Loans receivable ................................ $ 958,152 $ 948,205 $1,931,609 $1,890,694
Securities available for sale ................... 157,153 192,032 328,849 366,029
Securities held to maturity ..................... 161,226 144,585 287,980 321,036
--------- --------- --------- ---------
Total interest income ........................... 1,276,531 1,284,822 2,548,438 2,577,759
Interest Expense:
Demand deposits ................................. 8,390 9,024 17,841 18,997
Savings deposits ................................ 102,638 97,496 204,950 191,719
Time deposits ................................... 509,178 514,532 1,023,465 1,044,631
Total interest expense --------- --------- --------- ---------
620,206 621,052 1,246,256 1,255,347
--------- --------- --------- ---------
Net interest income ............................. 656,325 663,770 1,302,182 1,322,412
Provision for loan losses ....................... -- -- -- --
--------- --------- --------- ---------
Net interest income after provision for loan loss 656,325 663,770 1,302,182 1,322,412
Noninterest Income:
Other fees and service charges .................. 39,896 14,397 57,354 28,386
Gain on sale of loans ........................... 6,818 576 9,353 2,822
Net gain on sale of real estate owned ........... 15,473 -- 15,698 --
Other ........................................... 19,064 25,542 41,035 46,824
--------- --------- --------- ---------
Total noninterest income 81,251 40,515 123,440 78,032
Noninterest Expense:
Compensation and employee benefits .............. 265,459 236,772 523,244 462,346
Occupancy ....................................... 25,221 26,938 47,992 48,871
Deposit insurance premium ....................... 14,505 8,038 29,182 46,223
Data processing ................................. 20,807 22,687 39,348 44,089
Advertising ..................................... 6,659 5,540 13,487 13,626
Real estate owned expense, net .................. -- 104 335 450
Other ........................................... 84,798 98,786 166,011 222,080
--------- --------- --------- ---------
Total noninterest expense 417,449 398,865 819,599 837,685
--------- --------- --------- ---------
Income before income taxes ...................... 320,127 305,420 606,023 562,759
Income tax expense .............................. 124,217 131,558 233,409 215,632
--------- --------- --------- ---------
Net income ...................................... $ 195,910 $ 173,862 $ 372,614 $ 347,127
========= ========= ========= =========
Basic earnings per share ........................ $ 0.30 $ 0.24 $ 0.57 $ 0.46
========= ========= ========= =========
Diluted earnings per share ...................... $ 0.27 $ 0.23 $ 0.51 $ 0.45
========= ========= ========= =========
Dividends declared during the period ............ $ 0.08 $ 0.08 $ 0.08 $ 0.08
========= ========= ========= =========
</TABLE>
See Notes to consolidated financial statements.
<PAGE>
MISSISSIPPI VIEW HOLDING COMPANY AND SUBSIDIARY
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
For the Six Months Ended
March 31,
-------------------------
1998 1997
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Interest received on loans and investments ....................... 2,585,367 2,567,175
Interest paid .................................................... (1,246,167) (1,255,620)
Other fees, commissions, and income received ..................... 125,440 122,729
Cash paid to suppliers, employees and others ..................... (762,344) (1,113,271)
Contributions to charities ....................................... (2,252) (4,114)
Income taxes paid ................................................ (270,537) --
Loans originated for sale ........................................ (2,688,131) (229,841)
Proceeds from sale of loans ...................................... 2,401,084 299,933
---------- ---------
Net cash provided by operating activities ........................ 142,460 386,991
---------- ---------
Cash flows from investing activities:
Purchases of available-for-sale securities ....................... (3,034,054) (3,084,156)
Proceeds from maturities of available-for-sale securities ........ 5,543,486 3,180,155
Purchases of held-to-maturity securities ......................... (2,076,000) (2,176,000)
Proceeds from maturities of held-to-maturity securities .......... 2,977,770 4,031,374
Loan originations and principal payments on loans, net ........... 2,906,582 (896,663)
Purchases of property and equipment .............................. (7,271) (18,146)
Proceeds from sale of foreclosed real estate ..................... 15,698 --
Net cash provided by (used in) investing activities --------- ---------
6,326,211 1,036,564
--------- ---------
Cash flows from financing activities:
Net increase (decrease) in non-interest bearing demand and savings
deposit accounts ................................................. 65,945 203,953
Net (decrease) increase in time deposits ......................... 471,737 (792,572)
Net (decrease) increase in mortgage escrow funds ................. 13,450 (8,975)
Dividend on unallocated ESOP shares .............................. 888 888
Acquisition of treasury stock .................................... (59,977) (720,141)
Net increase in unearned MSBP shares ............................. (417) 996
Dividends paid ................................................... (50,188) (55,178)
Net cash used by financing activities --------- ---------
441,438 (1,371,029)
--------- ---------
Net (decrease) increase in cash and cash equivalents ............. 6,910,109 52,526
Cash and cash equivalents at beginning of year ................... 1,104,594 2,583,654
--------- ---------
Cash and cash equivalents at end of year ......................... 8,014,703 2,636,180
========= =========
</TABLE>
See Notes to consolidated financial statements
<PAGE>
MISSISSIPPI VIEW HOLDING COMPANY AND SUBSIDIARY
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
<TABLE>
<CAPTION>
For the Six Months Ended
March 31,
------------------------
1998 1997
--------- ----------
<S> <C> <C>
RECONCILIATION OF NET INCOME TO NET CASH
PROVIDED BY OPERATING ACTIVITIES
Net Income ........................................................... $ 372,614 $ 347,127
Adjustments:
Provision for losses on loans and real estate - -
Depreciation ......................................................... 49,433 40,965
Non-cash dividends ................................................... (2,738) (2,658)
ESOP fair value adjustment ........................................... 23,623 11,031
Amortization of ESOP compensation .................................... 29,685 29,040
Amortization of MSBP compensation .................................... 33,243 33,243
Tax benefit of MSBP vesting activities ............................... 14,083 3,052
Net amortization and accretion of premiums and discounts on securities 4,612 (1,889)
Net (gains) on sale of real estate owned ............................. (15,698) -
Net loan fees deferred and amortized ................................. (17,584) 17,699
Net mortgage loan servicing fees deferred ............................ 1,276 726
(Increase) decrease in:
Loans held for sale .................................................. (296,400) 67,270
Accrued interest receivable .......................................... 73,812 12,129
Prepaid income tax ................................................... - 23,892
Deferred tax asset ................................................... - 163,903
Other assets ......................................................... (22,842) 25,002
Increase (decrease) in:
Accrued interest payable ............................................. 89 (273)
Accrued income taxes ................................................. (35,462) 32,140
Other liabilities .................................................... (69,286) (415,408)
-------- --------
Net cash provided by operating activities ............................ $ 142,460 $ 386,991
======== ========
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES
Noncash dividends .................................................... $ 2,738 $ 2,658
</TABLE>
See Notes to consolidated financial statements.
<PAGE>
MISSISSIPPI VIEW HOLDING COMPANY AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1998 (Unaudited)
Note 1: PRINCIPLES OF CONSOLIDATION
The unaudited consolidated financial statements as of and for the three and
six month periods ended March 31, 1998, 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 1997 consolidated financial statements and notes of
Mississippi View Holding Company and Subsidiary included in their annual audit
report for the year ended September 30, 1997.
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 six month periods ended
March 31, 1997 and 1998, 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.
SFAS No. 130, "Reporting Comprehensive Income" - issued June 1997,
establishes standards for reporting and displaying comprehensive income and its
components in general-purpose financial statements. Comprehensive income
includes net income and several other items that current accounting standards
require to be recognized outside of net income. This statement requires entities
to display comprehensive income and its components in the financial statements
with presentation of the accumulated balances of other comprehensive income
reported in stockholder's equity separately from retained earnings and
additional paid-in capital. SFAS No. 130 is effective for fiscal years beginning
after December 15, 1997. Reclassification of financial statements for earlier
periods that are presented for comparative purposes is required.
<PAGE>
SFAS No. 131, "Disclosures about Segments of Enterprise and Related
Information" - issued June 1997, requires public business enterprises to report
information about their operating segments in a complete set of financial
statements to shareholders. This statement also requires entities to report
enterprise-wide information about their products and services, their activities
in different geographic areas, and their reliance on major customers. Certain
segment information is also to be reported in interim financial statements. The
basis for determining an enterprise's operating segments is the manner in which
management operates the business. Specifically, financial information is
required to be reported on the basis that is used internally by the enterprise's
chief operating decision maker in making decisions related to resource
allocation and segment performance. SFAS No. 131 is effective for financial
statements for years beginning after December 31, 1997.
Management believes adoption of the above-described Statements will not have a
material effect on financial position and the results of operations, nor will
adoption require additional capital resources.
Note 4. EARNINGS PER SHARE.
In 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS) No. 128, Earnings per Share. Statement 128
replaced the previously reported primary and fully diluted earnings per share
with basic and diluted earnings per share. Unlike primary earnings per share,
basic earnings per share excludes any dilutive effects of options, warrants, and
convertible securities. Diluted earnings per share is very similar to the
previously reported fully diluted earnings per share. All earnings per share
amounts for all periods have been presented, and where necessary restated, to
conform to the Statement 128 requirements.
The following tables set forth the computation of basic and diluted earnings per
share:
<TABLE>
<CAPTION>
For the Three For the Six
Months Ended Months Ended
March 31, March 31,
-------------------- -------------------
1998 1997 1998 1997
-------------------- -------------------
<S> <C> <C> <C> <C>
Numerator:
Net income - Numerator for basic
earnings per share and diluted
earnings per share -- income
available to common shareholders ... $195,910 $173,862 $372,614 $347,127
======= ======= ======= =======
Denominator:
Denominator for basic earnings per
shares - weighted-average shares ... 658,106 725,639 656,506 748,944
Effect of dilutive securities:
stock options and employee
stock-based compensation ........... 71,333 27,630 69,804 17,511
------- ------- ------- -------
Denominator for diluted earnings per
share - adjusted weighted-average
shares and assumed conversions ..... 729,439 753,269 726,310 766,455
======= ======= ======= =======
Basic earnings per share ........... $ 0.30 $ 0.24 $ 0.57 $ 0.46
Diluted earnings per share ......... $ 0.27 $ 0.23 $ 0.51 $ 0.45
</TABLE>
<PAGE>
Management's Discussion and Analysis of Financial Condition
for September 30, 1997 and March 31, 1998
General. Total assets of Mississippi View Holding Company, (the "Company")
increased by $1,413,220, or 2.06%, from September 30, 1997, to March 31, 1998.
The increased assets were primarily the result of increased deposits of
$537,770, increased unrealized gain of mark-to-market investments of $361,916,
and net income of $372,614.
Cash and Cash Equivalents. Cash and cash equivalents consisting of
interest-bearing and noninterest bearing deposits, increased $6,910,109.
Liquidity increased primarily due to cash receipts from investment securities,
the principal reduction in the lending portfolio, and by deposit growth.
Securities Available for Sale. Securities available for sale decreased
$1,907,907, or 14.72%, from $12,963,344 at September 30, 1997 to $11,055,437 at
March 31, 1998. Security maturities and principal payments exceeded purchases by
$2,509,432. The cash received from this activity was reinvested in short term
liquid investments and is reported as cash and cash equivalents in the statement
of condition. The reduced investment balance was offset by an increase in the
market value of available for sale securities of $603,193. 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 $901,976, or 12.18%, from $7,405,466 on September 30, 1997,
to $6,503,490 on March 31, 1998. Maturing debt securities of $2,490,476 and
principal amortization of mortgage-backed securities of $487,294 were offset by
purchases of certificates of deposit of $2,076,000. Liquidity not reinvested in
certificates of deposit was reinvested in short term liquid investments and is
reported as cash and cash equivalents in the statement of condition.
Loans Held for Sale. Loans held for sale increased $296,400 from $135,550
(2 loans) on September 30, 1997, to $431,950 (10 loans) held for sale on March
31, 1998. 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 decreased $2,888,997, or 6.50%,
from $44,474,809 on September 30, 1997, to $41,585,812 on March 31, 1998. This
decrease was due to principal amortizations and loan payoffs exceeding new loan
originations held in the portfolio coupled with an increase in originations of
loans sold in the secondary market.
Other Assets. Other assets increased $21,565, or 3.80%, from $567,539 as of
September 30, 1997, to $589,104 as of March 31, 1998. This increase was
primarily the net result of increased prepaid insurance premiums of $23,741.
Deposits. Deposits, after interest credited, increased by $537,770, or
0.97%, to $55,721,357 at March 31, 1998, from $55,183,587 at September 30, 1997.
The increase was due, in part, to management's deposit pricing strategy.
<PAGE>
Advances from Borrowers for Taxes and Insurance. Advances from borrowers
for taxes and insurance increased $13,450 from $107,038 on September 30, 1997,
to $120,488 on March 31, 1998, due to the cyclical nature of these payments.
Deferred Tax Liability. Deferred tax liability increased $233,866, or
44.52%, from $525,353 at September 30, 1997, to $759,219 on March 31, 1998, due
primarily to the increase in net unrealized gains on available for sale
securities.
Other Liabilities. Other liabilities decreased by $69,286, or 11.62%, from
$596,216 on September 30, 1997, to $526,930 on March 31, 1998. Decreased
liabilities primarily resulted from reduced accrued compensation and bonus
expenses of $41,853 and accrued audit expense of $23,583.
Stockholders' Equity. Stockholders' equity increased by $725,470, or 6.01%,
from $12,067,904 on September 30, 1997, to $12,793,374 on March 31, 1998. This
increase is the net effect of the following changes in equity: a paid in capital
increase of $37,706 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 $34,201 as a result of
accounting for earned ESOP shares; an increase of $32,826 as a result of
accounting for earned MSBP shares; an increase of $361,916 resulting from an
increase in net unrealized gains on available for sale securities; and an
increase of $372,614 from net operational income for the six month period just
ended; a decrease to retained earnings due to a dividend declared and paid of
$53,816, and a decrease of $59,977 resulting from open market purchases of
common stock of the Company.
Comparison of Operating Results for the Three Months Ended
March 31, 1998 and 1997
Net Income. Net income increased by $22,048, from $173,862 at March 31,
1997 to $195,910 at March 31, 1998. Net interest income decreased by $7,445 due
to interest income decreasing more than interest expense. Noninterest income
increased $40,736 and was offset by an increase in noninterest expense of
$18,584. Net income also increased due to the decreased income tax expense of
$7,341.
Total Interest Income. Interest income decreased $8,291, or 0.65%, from
$1,284,822 for the three month period ended March 31, 1997, to $1,276,531 for
the three month period ended March 31, 1998. Interest income from loans
receivable increased $9,947 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 decreased $34,879 due to lower rates paid on a lower
average balance of such securities. Held to maturity investment security income
increased $16,641 due to a increase in the average balance of such securities.
Total Interest Expense. Interest expense decreased $846, or 0.14%, for the
comparative three month periods ending March 31, 1997 and 1998. This decrease
was due to lower average deposit balances.
<PAGE>
Net Interest Income. Net interest income decreased $7,445, or 1.12%, from
$663,770 for the three months ended March 31, 1997, to $656,325 for the three
month period ended March 31, 1998. This was primarily due to the reduced
interest income from the lower rate of return earned on available for sale
investment securities.
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. Loans are considered impaired if full principal and interest
payments are not anticipated to be made in accordance with the contractual
terms. Impaired loans are carried at the present value of expected future cash
flows discounted at the loan's effective interest rate or at the fair value of
the collateral if the loan is collateral dependent. A portion of the allowance
for loan losses is allocated to impaired loans if the value of such loans is
deemed to be less than the unpaid balance. If these allocations cause the
allowance for loan losses to require an increase, such an increase is reported
as a component of the provision for loan losses. Management's assessment of the
loan portfolio and market conditions determined that no provisions needed to be
recorded for the three months ended March 31, 1998 and 1997. 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 increased by $40,736, or 100.55%,
during the three month period ended March 31, 1998, as compared to the same
period ended March 31, 1997. This increase was due to increased fee and service
charge fee income of $25,499, an increase in gain of sale of loans of $6,242, an
increase in the gain on the sale of real estate owned of $15,473, and a decrease
in other noninterest income of $6,478.
Noninterest Expense. Noninterest expense increased $18,584, or 4.66%, from
$398,865 to $417,449 during the comparative three month periods ending March 31,
1997 and 1998, respectively. The increased noninterest expense was the result of
the increased compensation and employee benefit plans of $28,687 due in part to
the fair market value adjustment of stock benefits, increased federal deposit
insurance of $6,467, increased advertising expense of $1,119, reduced data
processing charges of $1,880, reduced occupancy expense of $1,717 and reduced
other expenses primarily legal expense, consulting fees, audit expense and
charitable contributions of $13,988.
Income Tax. Income tax expense decreased $7,341, or 5.58%, from $131,558
for the three month period ended March 31, 1997, to $124,217 for the three month
period ended March 31, 1998.
<PAGE>
Comparison of Operating Results for the Six Months Ended
March 31, 1998 and 1997
Net Income. Net income increased by $25,487, from $347,127 at March 31,
1997 to $372,614 at March 31, 1998. Net interest income decreased by $20,230 due
to interest income decreasing more than interest expense. The noninterest income
increase of $45,408 and noninterest expense decrease of $18,086 were offset by
an increase in income tax expense of $17,777.
Total Interest Income. Interest income decreased $29,321, or 1.14%, from
$2,577,759 for the six month period ended March 31, 1997, to $2,548,438 for the
six month period ended March 31, 1998. Interest income from loans receivable
increased $40,915 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 decreased $37,180 due to lower rates paid on a lower average
balance of such securities. Held to maturity investment security income
decreased $33,056 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 $9,091, or 0.72%, for
the comparative six month periods ending March 31, 1997 and 1998. This decrease
was due to lower average deposit balances.
Net Interest Income. Net interest income decreased $20,230, or 1.53%, from
$1,322,412 for the six months ended March 31, 1997, to $1,302,182 for the six
month period ended March 31, 1998. This was due to the reduced interest expense
on deposits, the reduced interest income from the lower rate of return earned on
available for sale investment securities, the reduced interest income from the
lower rate on lower average balance of securities held to maturity, offset by
interest received on loans due to the higher average loan balances.
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. Loans are considered impaired if full principal and interest
payments are not anticipated to be made in accordance with the contractual
terms. Impaired loans are carried at the present value of expected future cash
flows discounted at the loan's effective interest rate or at the fair value of
the collateral if the loan is collateral dependent. A portion of the allowance
for loan losses is allocated to impaired loans if the value of such loans is
deemed to be less than the unpaid balance. If these allocations cause the
allowance for loan losses to require an increase, such an increase is reported
as a component of the provision for loan losses. Management's assessment of the
loan portfolio and market conditions determined that no provisions needed to be
recorded for the six months ended March 31, 1998 and 1997. 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.
<PAGE>
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 increased by $45,408, or 58.19%,
during the six month period ended March 31, 1998, as compared to the same period
ended March 31, 1997. This increase was due to increased fee and service charge
fee income of $28,968 from fees generated from the sale of loans in the
secondary market, an increase in gain of sale of loans of $6,531 due to
increased activity, an increase in the gain on the sale of real estate owned of
$15,698, and a decrease in other noninterest income of $5,789.
Noninterest Expense. Noninterest expense decreased $18,086, or 2.16%, from
$837,685 to $819,599 during the comparative six month periods ending March 31,
1997 and 1998, respectively. The decreased noninterest expense was the result of
the reduced federal deposit insurance of $17,041, reduced data processing
charges of $4,741, reduced occupancy expense of $879, and reduced other expenses
primarily legal expense, consulting fees, audit expense and charitable
contributions of $56,069, offset by increased compensation and employee benefit
plans of $60,898 due in part to the fair market value adjustment of stock
benefits.
Income Tax. Income tax expense increased $17,777, or 8.24%, from $215,632
for the six month period ended March 31, 1997, to $233,409 for the six month
period ended March 31, 1998, primarily due to increased earnings.
<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. As of the date
indicated, the Association had no loans categorized as trouble debt
restructuring within the meaning of Statement of Financial Accounting Standards
("SFAS") No. 15.
<TABLE>
<CAPTION>
At March 31,
----------------------
1998 1997
---------- ---------
(In Thousands)
----------------------
<S> <C> <C>
Loans accounted for on a non-accrual basis:
Mortgage loans:
Permanent loans secured by 1-4 dwelling units .................. $ 197 $ 100
All other mortgages ............................................ -- --
Non-mortgage loans.............................................. 15 12
-------- -------
Total .......................................................... 212 112
Accruing loans which are contractually past due 90 days or more:
Mortgage loans:
Construction loans ............................................. -- --
Permanent loans secured by 1-4 dwelling units .................. 30 31
All other mortgage loans ....................................... -- --
Non-mortgage loans ............................................. 67 --
-------- -------
Total .......................................................... 97 31
-------- -------
Total non-accrual and accrual loans ............................ 309 143
-------- -------
Real estate owned .............................................. -- 34
Other non-performing assets .................................... -- --
-------- --------
Total non-performing assets .................................... $ 309 $ 177
======== ========
Total non-accrual and accrual loans to net loans ............... 0.74% 0.33%
Total non-accrual and accrual loans to total assets ............ 0.44% 0.21%
Total non-performing assets to total assets .................... 0.44% 0.25%
Total allowance for loan losses to non-performing loans ........ 278.80% 604.05%
</TABLE>
Interest income that would have been recorded on loans accounted for on a
nonaccrual basis under the original terms of such loans was $12,495 and $3,909
for the six months ended March 31, 1998 and 1997, respectively. No interest
income on non-accrual loans was included in income for the six months ended
March 31, 1998 and 1997.
<PAGE>
Capital Compliance. The following table sets forth the Association's
capital position at March 31, 1998, as compared to the minimum regulatory
capital requirements imposed on the Association by the Office of Thrift
Supervision ("OTS") at that date.
At March 31, 1998
----------------------------
Percentage of
Amount Adjusted Assets
----------- ---------------
GAAP Capital .......... $12,600,811 18.01%
=========== ===============
Tangible Capital: (1)
Regulatory requirement $ 1,350,117 2.00%
Actual capital ........ 11,127,566 16.48%
----------- ---------------
Excess ................ $ 9,777,449 14.48%
=========== ===============
Core Capital: (1)
Regulatory requirement $ 2,700,235 4.00%
Actual capital ........ 11,127,566 16.48%
----------- ---------------
Excess ................ $ 8,427,331 12.48%
=========== ===============
Risk-Based Capital: (2)
Regulatory requirement $ 2,717,875 8.00%
Actual capital ........ 11,557,654 34.02%
----------- ---------------
Excess ................ $ 8,839,779 26.02%
=========== ===============
(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 $33,973,442
<PAGE>
Liquidity Resources
The OTS issued a final rule (12 CFR Part 566) that updates, simplifies, and
streamlines it liquidity regulation effective November 24, 1997. The final rule
has lowered the liquidity requirements for savings associations from 5 to 4
percent of the institution's liquidity base, the lowest level permitted by
current law. The rule also eliminates a separate requirement that thrifts hold
assets equal to 1 percent of a thrifts liquidity base in cash or short term
liquid assets. Additionally, OTS streamlined the calculations used to measure
compliance with liquidity requirements, expanded the types of investments
considered to be liquid assets to conform with provisions of the Financial
Institutions Reform, Recovery, and Enforcement Act of 1989, and reduced the
liquidity base by modifying the definition of net withdrawable account to
exclude accounts with maturities exceeding one year. The final rule requires the
calculation once each quarter rather than monthly. Another change removes the
requirement that certain obligations must mature in five years or less in order
to qualify as a liquid asset.
The OTS minimum required liquidity ratio is 4%. At March 31, 1998, the
Association's total liquidity was 24.39%. The Association liquidity level was
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 its
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.
At March 31, 1998, the Association had total outstanding commitments to
fund loan originations or mortgage-backed and investment security purchases of
$505,000.
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.
<PAGE>
Year 2000
The Company has presented its Year 2000 Action Plan to the Board of
Directors. The Plan includes the following phases: awareness, assessment,
upgrading, implementation, and testing. The Company has completed the awareness
and assessment phases. Upgrading and implementation of hardware and software is
currently being addressed with testing scheduled to begin after July 1, 1998.
The Company believes its exposure is primarily with the automated data
processing applications. The data processing vendor provides quarterly Year 2000
updates and has scheduled extensive testing during the last three quarters of
1998.
Based upon current findings the Company has budgeted $94,000 in direct
expense, (which includes hardware and software upgrades, seminars and training)
and $37,000 in indirect expenses to be incurred prior to January 1, 2000. In
addition, due to residential mortgage lending emphasis, the Company does not
believe that its exposure to default by borrowers as a result of this problem to
be significant.
Despite the best efforts of management to address this issue, the vast
number of external entities that have direct and indirect business relationships
with the Company, such as customers, vendors, payment system providers and other
financial institutions, makes it impossible to assure that a failure to achieve
compliance by one or more of these entities would not have a material adverse
impact on the operations of the Company.
<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 At or for the
Three Months Six Months
Ended March 31, Ended March 31,
---------------------- --------------------
1998 (1) 1997 (1) 1998 (1) 1997 (1)
---------- ---------- --------- --------
<S> <C> <C> <C> <C>
Performance Ratios:
Return on average assets (net income
divided by average total assets) .... 1.17% 1.02% 1.12% 1.01%
Return on average equity (net income
divided by average equity) .......... 6.93% 5.87% 6.65% 5.75%
Average interest earning assets to
average interest bearing liabilities. 122.51% 122.51% 122.42% 122.88%
Net interest rate spread .............. 3.14% 3.11% 3.12% 3.07%
Net yield on average interest-earning
assets .............................. 3.98% 3.95% 3.97% 3.91%
Net interest income after provision
for loan losses to total other
expenses ............................ 157.22% 166.41% 158.88% 157.87%
Capital Ratios:
Book value per share (2) .............. $17.36 $15.55 $17.36 $15.55
Average equity to average assets ratio
(average equity divided by average
total assets) ....................... 16.89% 17.37% 16.83% 17.60%
Shareholders' equity to assets at
period end .......................... 18.29% 18.26% 18.29% 18.26%
</TABLE>
(1) The ratios for the three and six month periods are annualized.
(2) The number of shares outstanding as of March 31, 1998 was 736,864, includes
shares sold to the ESOP and purchased by the Management Stock Bonus Plan
("MSBP") and 818,743 as of March 31, 1997, includes shares sold to ESOP and
purchased by the MSBP.
<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
The annual meeting of stockholders of the Corporation was held January
21, 1998, and the following items were acted upon:
Election of Directors Wallace R. Mattock and Gerald Peterson for terms
of three years ending in 2001. Wallace R. Mattock received 629,128
votes in favor and 2,156 votes were withheld. Gerald Peterson received
629,203 in favor and 2,081 votes were withheld.
Ratification of the appointment of Bertram Cooper and Company, LLP as
the Corporation's auditors for the 1998 fiscal year. Bertram Cooper
and Company, LLP was ratified as the Corporation's auditors with
631,034 votes for and 250 abstentions.
Item 5. Other Information
On April 13, 1998, the Company announced an offer to purchase (the "Offer")
up to 222,000 shares of its Common Stock at a cash purchase price not in excess
of $21.50 per share or less than $19.50 per share. The Offer expires at 5:00
p.m. Eastern Time on May 11, 1998.
Item 6. Exhibits, List and Reports on Form 8-K
(a) Exhibits are either attached as part of this Report or incorporated
herein by reference.
2.0 Schedule 13E-3 of the Registrant and Mississippi View Holding Company
Stock Employee Compensation Trust declared effective by the SEC on
April 13, 1998
3.1 Articles of Incorporation of Mississippi View Holding Company **
3.2 Bylaws of Mississippi View Holding Company **
10.1 Employment contract with Thomas J. Leiferman **
10.2 Management Stock Bonus Plans ***
<PAGE>
10.3 1995 Stock Option Plan **
10.4 1997 Stock Option Plan ****
11 Statement regarding computation of earnings per share (see Note 4 to
the Notes to Consolidated Financial Statements)
27 Financial Data Schedule *****
(b) Reports on Form 8-K - On March 20, 1998, the Company filed a Form 8-K
announcing its termination of listing on Nasdaq SmallCap Market
- ------------
* Incorporated by reference as filed with the SEC.
** Incorporated by reference to the Registrant's Registration Statement on
form S-1 (File No. 33-86820) declared effective by the SEC on February 9,
1995.
*** Incorporated by reference to the Registrant's proxy statement for the
special meeting of stockholders held on September 27, 1995 and filed with
the SEC on August 17. 1995 (File No. 0-25546).
**** Incorporated by reference to the Registrant's definite proxy materials for
the annual meeting of stockholders held on January 22, 1997 and filed with
the SEC on December 16, 1996
***** Only in electronic filing.
<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: 05/11/98 By: /s/ Thomas J. Leiferman
---------------------------- ----------------------------------------
Thomas J. Leiferman
President and Chief Executive Officer
(Principal Executive Officer)
Date: 05/11/98 By: /s/ Larry D. Hartwig
---------------------------- ----------------------------------------
Larry D. Hartwig
Vice President
(Principal Accounting and Financial
Officer)
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION DERIVED FROM
THE QUARTERLY REPORT ON FORM 10-QSB AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL INFORMATION.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-END> MAR-31-1998
<CASH> 248
<INT-BEARING-DEPOSITS> 7,767
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 11,055
<INVESTMENTS-CARRYING> 6,503
<INVESTMENTS-MARKET> 6,572
<LOANS> 43,133
<ALLOWANCE> 864
<TOTAL-ASSETS> 69,960
<DEPOSITS> 55,721
<SHORT-TERM> 0
<LIABILITIES-OTHER> 1,445
<LONG-TERM> 0
0
0
<COMMON> 101
<OTHER-SE> 12,693
<TOTAL-LIABILITIES-AND-EQUITY> 69,960
<INTEREST-LOAN> 1,932
<INTEREST-INVEST> 617
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 2,548
<INTEREST-DEPOSIT> 1,246
<INTEREST-EXPENSE> 1,246
<INTEREST-INCOME-NET> 1,302
<LOAN-LOSSES> 0
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 820
<INCOME-PRETAX> 606
<INCOME-PRE-EXTRAORDINARY> 373
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 373
<EPS-PRIMARY> 0.57
<EPS-DILUTED> 0.51
<YIELD-ACTUAL> 7.50
<LOANS-NON> 212
<LOANS-PAST> 98
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 1,585
<ALLOWANCE-OPEN> 861
<CHARGE-OFFS> 0
<RECOVERIES> 3
<ALLOWANCE-CLOSE> 864
<ALLOWANCE-DOMESTIC> 864
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 702
</TABLE>
