UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _________________ to __________________
Commission File Number 1-13842
Texarkana First Financial Corporation .
(Exact name of registrant as specified in its charter)
Texas . 71-0771419 .
State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
3rd & Olive Streets
Texarkana, Arkansas . 71854 .
(Address of principal executive office) (Zip Code)
(501) 773-1103 .
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes _X_ No ___
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date: As of January 31, 1997,
there were issued and outstanding 1,833,198 shares of the Registrant's Common
Stock, par value $0.01 per share.
<PAGE>
TEXARKANA FIRST FINANCIAL CORPORATION
TABLE OF CONTENTS
Page
Part I. Financial Information
Item 1. Consolidated Financial Statements
Consolidated Statements of Financial Condition
As of December 31, 1996 (unaudited) and September 30, 1996 1
Consolidated Statements of Income for the three months
ended December 31, 1996 (unaudited) and 1995 (unaudited) 2
Consolidated Statements of Cash Flows for the three months
ended December 31, 1996 (unaudited) and 1995 (unaudited) 3
Notes to Unaudited Consolidated Financial Statements 5
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 7
Part II. Other Information
Item 1. Legal Proceedings 10
Item 2. Changes in Securities 10
Item 3. Defaults Upon Senior Securities 10
Item 4. Submission of Matters to a Vote of Security Holders 10
Item 5. Other Information 10
Item 6. Exhibits and Reports on Form 8-K 10
Signatures 11
<PAGE>
TEXARKANA FIRST FINANCIAL CORPORATION
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(In Thousands)
Unaudited
December 31, September 30,
1996 1996 .
ASSETS
Cash and Cash Equivalents
Cash & due from banks $ 1,648 $ 1,481
Interest bearing deposits in other banks 2,116 1,829
Federal funds sold 5,050 5,550
_________ _________
Total Cash and Cash equivalents 8,814 8,860
Investment securities available-for-sale 12,570 14,887
Investment securities held-to-maturity - - - -
Mortgage-backed securities held-to-maturity 1,421 1,518
Federal Home Loan Bank stock 1,068 1,053
Loans receivable, net 135,972 135,660
Accrued interest receivable 1,083 1,207
Forclosed real estate, net 60 72
Premises and equipment, net 2,189 2,014
Other assets 394 476
_________ _________
Total Assets $ 163,571 $ 165,747
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits $ 135,234 $ 133,071
Advances from borrowers for taxes & insurance 754 1,865
Borrowed funds 43 2,858
Accrued federal income tax 366 25
Accrued state income tax 186 138
Accrued expenses and other liabilities 699 1,366
_________ _________
Total Liabilities 137,282 139,323
_________ _________
Commitments and contingencies - - - -
_________ _________
Common stock, $0.01 par value;
15,000,000 shares authorized;
1,983,750 shares issued and outstanding 20 20
Additional paid-in capital 13,464 13,052
Common stock acquired by stock benefit plans (2,467) (2,147)
Treasury stock, at cost, 149,187 shares and (2,275) (1,567)
99,187 shares September 30, 1996
Retained earnings-substantially restricted 17,501 17,074
Net unrealized gain (loss) on investment
securities available for sale, net of tax 46 (8)
_________ _________
Total Stockholoders' Equity 26,289 26,424
_________ _________
Total Liabilities and Stockholders' Equity $ 163,571 $ 165,747
========= =========
[FN]
The accompanying notes are an integral part of this statement.
Page 1
<PAGE>
TEXARKANA FIRST FINANCIAL CORPORATION
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
(In Thousands, Except Per Share Data)
(Unaudited)
Three Months Ended
December 31
1996 1995 .
Interest Income
Loans
First mortgage loans $ 2,604 $ 2,437
Consumer and other loans 287 197
Investments - taxable 314 462
Mortgage-backed and related securities 28 43
________ ________
Total Interest Income 3,233 3,139
________ ________
Interest Expense
Deposits 1,694 1,595
Borrowed funds 6 1
________ ________
Total Interest Expense 1,700 1,596
________ ________
Net Interest Income 1,533 1,543
Provision for loan losses - - - -
________ ________
Net Interest Income After Provision 1,533 1,543
________ ________
Noninterest Income
Gain on sale of repossessed assets, net - - - -
Loan origination and commitment fees 68 74
Investment securities gain (loss), net - - - -
Other 106 94
________ ________
Total Noninterest Income 174 168
________ ________
Noninterest Expense
Compensation and benefits 475 340
Occupancy and equipment 42 41
SAIF deposit insurance premium 74 83
Provision and loss on foreclosed real estate - - - -
Other 134 125
________ ________
Total Noninterest Expense 725 589
________ ________
Income Before Income Taxes 982 1,122
Income tax expense 363 395
________ ________
Net Income $ 619 $ 727
======== ========
Weighted average shares outstanding 1,724,150 1,848,360
Earnings Per Share $ 0.36 $ 0.39
Dividends per share $ 0.1125 $ 0.1125
[FN]
The accompanying notes are an integral part of this statement.
Page 2
<PAGE>
TEXARKANA FIRST FINANCIAL CORPORATION
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
(Unaudited)
Three Months Ended
December 31,
1996 1995 .
Cash Flows From Operating Activities:
Interest and dividends received $ 3,308 $ 3,050
Miscellaneous income received 174 140
Interest paid (539) (608)
Cash paid to suppliers and employees (1,217) (537)
Cash from REO operations - - 13
Cash paid for REO operations - - - -
Cash from loans sold 821 382
Cash paid for loans originated to sell (821) (382)
Income taxes paid (1) (44)
________ ________
Net Cash Provided By Operating Activities 1,725 2,014
________ ________
Cash Flows From Investing Activities:
Proceeds from maturities of investment securities 1,500 2,500
Proceeds from sale of securities available for sale 2,420 - -
Purchases of investment securities (1,500) (2,500)
Collection of principal on mortgage-backed securities 96 59
Purchase of fixed assets (196) (7)
Net (increase) in loans (311) (2,375)
Proceeds from sale of REO and other REO recoveries 13 - -
________ ________
Net Cash Provided (Used) By Investing Activities 2,022 (2,323)
________ ________
Cash Flows From Financing Activities:
Net increase (decrease) in savings,
demand deposits, and certificates of deposit 1,054 49
Net increase (decrease) in escrow funds (1,112) (1,150)
Repayment of funds borrowed (2,815) - -
Purchase of treasury stock (708) - -
Cash dividends paid on common stock (212) - -
________ ________
Net Cash (Used) By Financing Activities (3,793) (1,101)
________ ________
Net (Decrease) In Cash and Cash Equivalents (46) (1,410)
________ ________
Cash and Cash Equivalents, beginning of period 8,860 13,848
________ ________
Cash and Cash Equivalents, end of period $ 8,814 $ 12,438
======== ========
[FN]
The accompanying notes are an integral part of this statement.
Page 3
<PAGE>
TEXARKANA FIRST FINANCIAL CORPORATION
SUPPLEMENTAL INFORMATION CONCERNING CASH FLOWS
Three Months Ended
December 31,
1996 1995 .
Reconciliation of net income to cash provided
by operating activities:
Net income $619 $727
________ ________
Adjustments to reconcile net income to cash provided
by operating activities:
Depreciation 23 21
Amortization of discounts and premiums (23) 2
Amortization of deferred loan fees (3) (3)
Amortization of common stock acquired by benefit plans 145 49
Interest expense credited to saving accounts 1,108 1,032
Dividend and interest income added to investments (29) (32)
Loan fees deferred 6 4
Changes in assets and liabilities:
(Increase) decrease in interest receivable 123 (76)
Increase (decrease) in accrued interest payable 53 (45)
Increase in income tax payable 362 351
Net (decrease) in other receivables and payables (659) (16)
________ ________
Total adjustments 1,106 1,287
________ ________
Net cash provided by operations $ 1,725 $ 2,014
======== ========
Supplemental schedule of noncash investing
and financing activities:
FHLB stock dividends not redeemed $ 16 $ 16
Dividends declared and unpaid 206 223
Transfer of securities from held to maturity
to available for sale - - 16,679
Additional common stock acquired by ESOP
with cash from ESOP fund 395 - -
Net unrealized gain (loss) on investment securities
available for sale 82 115
Page 4
<PAGE>
TEXARKANA FIRST FINANCIAL CORPORATION
Notes to Unaudited Consolidated Financial Statements
Basis of Presentation
Texarkana First Financial Corporation (the "Company") was incorporated in
March 1995 under Texas law for the purpose of acquiring all of the capital
stock issued by First Federal Savings and Loan Association of Texarkana (the
"Association") in connection with the Association's conversion from a
federally chartered mutual savings and loan association to a stock savings and
loan association (the "Conversion"). The Conversion was consummated on July
7, 1995 and, as a result, the Company became a unitary savings and loan
holding company for the Association. Prior to the Conversion, the Company had
no material assets or liabilities and engaged in no business activity.
Subsequent to the acquisition of the Association, the Company has engaged in
no significant activity other than holding the stock of the Association and
engaging in certain passive investment activities.
The accompanying unaudited consolidated financial statements of the Company
have been prepared in accordance with instructions to Form 10-Q. Accordingly,
they do not include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. However,
such information reflects all adjustments (consisting solely of normal
recurring adjustments) which are, in the opinion of management, necessary for
a fair statement of results for the interim periods.
The results of operations for the three months ended December 31, 1996 are not
necessarily indicative of the results to be expected for the year ending
September 30, 1997. Although net income was consistent for the first three
months, earnings for the full fiscal year will be impacted by any additional
repurchase of Company stock, the new SAIF assessment rate and various economic
conditions. The unaudited consolidated financial statements and notes thereto
should be read in conjunction with the audited financial statements and notes
thereto for the year ended September 30, 1996, contained in the Company's
annual report to stockholders.
Earnings Per Share
Earnings per share is computed on the basis of the weighted-average number of
shares of common stock outstanding. Stock options outstanding had no material
dilutive effect on earnings per share. Shares acquired by the ESOP are
accounted for in accordance with Statement of Position 93-6 and are not
included in the weighted-average shares outstanding until the shares are
committed to be released for allocation to ESOP participants.
Borrowed Funds
In September 1996, the Company borrowed $475,000 from a local financial
institution on a short-term basis, and sold $2.4 million of securities with
repurchase agreements. The loan and the repurchase agreements matured in
October 1996 and were repaid at that time. The borrowings provided cash
needed on a temporary basis due to the payment of the $3.00 per share special
one-time distribution to stockholders on September 25, 1996. Borrowings were
utilized to minimize any loss from the sale of securities.
Page 5
<PAGE>
Recent Legislation
The deposits of the Association are currently insured by the Savings
Association Insurance Fund ("SAIF"). The underfunded status of the SAIF has
resulted in the introduction of federal legislation intended to, among other
things, recapitalize the SAIF and address the resulting premium disparity
between the SAIF and the Bank Insurance Fund ("BIF"), the federal deposit
insurance fund that covers commercial bank deposits. In September 1996, the
Omnibus Appropriations Act was signed into law. This legislation authorized a
one time charge of SAIF-insured institutions in the amount of .657 dollars for
every one hundred dollars of assessable deposits. Additional provisions of
the Act include new BIF and SAIF premiums and the merger of BIF and SAIF. The
new BIF and SAIF premiums will include a premium for repayment of the
Financing Corporation ("FICO") bonds plus any regular insurance assessment,
currently nothing for the lowest risk category institutions. Until full pro-
rata FICO sharing is in effect, the FICO premiums for BIF and SAIF will be 1.3
and 6.4 basis points, respectively, beginning January 1, 1997. Full pro-rata
FICO sharing is to begin no later than January 1, 2000. BIF and SAIF are to
be merged on January 1, 1999, provided the bank and savings association
charters are merged by that date.
As a result of this legislation, the Association's assessment amounted to
$835,000 which was included in expense in September, the fourth quarter of
fiscal 1996, and paid in November, the first quarter of fiscal 1997. While
the one-time special assessment had a significant impact on the fiscal 1996
earnings, the resulting lower premiums will benefit future earnings.
Page 6
<PAGE>
TEXARKANA FIRST FINANCIAL CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Financial Condition
At December 31, 1996, the Company's assets amounted to $163.6 million as
compared to $165.7 million at September 30, 1996. The $2.1 million (1.3%)
decrease was primarily due to a decrease of $2.3 million in investments,
partially offset by a $312,000 increase in loans. Liabilities decreased $2.0
million (1.5%) to $137.3 million at December 31, 1996 compared to $139.3
million at September 30, 1996 primarily due to a $2.8 million decrease in
borrowed funds and a $1.1 million decrease in borrowers' escrow balances
(property tax payments are made in the first two quarters of the fiscal year),
and a $667,000 decrease in accrued expenses and other liabilities due to the
$835,000 SAIF special assessment which was paid in November 1996, all of which
were partially offset by a $2.2 million increase in deposits.
Stockholders' equity amounted to $26.3 million (16.1% of total assets) at
December 31, 1996 compared to $26.4 million (15.9% of total assets) at
September 30, 1996. The retained earnings balance reflects the $619,000 net
income from operations, less the $192,000 in dividends declared. The treasury
stock balance reflects the purchases of 50,000 shares of common stock, at a
cost of $708,000. The change in the balances of additional paid-in capital
and common stock acquired by stock benefit plans is primarily the result of
the purchase of an additional 26,730 shares of the Company's common stock by
the ESOP plan at a cost of $395,000.
The increase in deposits and the decrease in investments provided the cash
needed to fund the increase in loans, the repayment of $2.8 million borrowed
funds and $708,000 for the repurchase of 50,000 shares of common stock. The
additional ESOP shares were purchased with the proceeds of dividends paid on
unallocated shares.
Asset quality remains strong with a ratio of nonperforming assets to total
assets of .19% and .17% as of December 31, 1996 and September 30, 1996,
respectively, and a ratio of nonperforming loans and debt restructurings to
total loans of .18% and .15%, respectively.
Comparison of Results of Operations for the Three Month Periods Ended
December 31, 1996 and 1995
General. For the three months ended December 31, 1996, net income was
$619,000 ($.36 per share) compared to $727,000 ($.39 per share) for the same
period ended December 31, 1995. The decrease of $108,000 (14.9%) in net
income was due to a decrease of $10,000 in net interest income and an increase
of $130,000 in net noninterest expense, both of which were partially offset by
a decrease of $32,000 in income tax expense.
For the three months ended December 31, 1996, return on average assets (ROA)
was 1.50% compared to 1.80% for the three months ended December 31, 1995.
Return on average equity (ROE) was 9.30% compared to 8.71% for the three
months ended December 31, 1995.
Page 7
<PAGE>
In the third and fourth quarters of fiscal 1996, a $5.7 million special
distribution was made to stockholders, $933,000 was used to purchase 62,300
shares for employee benefit plans, $1.6 million was used to repurchase 99,197
shares to be held as treasury shares. In the first quarter of fiscal 1997,
$708,000 was used to repurchase 50,000 shares to be held as treasury shares.
The resulting reductions of earning assets adversely affected interest income,
the rate of return on average assets and earnings per share. The resulting
reductions of stockholders equity favorably affected the rate of return on
average equity.
Net Interest Income. For the three months ended December 31, 1996, net
interest income decreased $10,000 (.6%) compared to the same period in 1995.
The decrease was due to an increase of $104,000 (6.5%) in interest expense,
partially offset by an increase of $94,000 (3.0%) in interest income. For the
first quarter of fiscal 1997 compared to the first quarter of fiscal 1996, the
net interest margin was 3.79% and 3.90%, respectively, and the net interest
spread was 2.99% and 2.85%, respectively.
Interest Income. For the three months ended December 31, 1996, interest
income increased $94,000 (3.0%) compared to the same period in 1995. The
increase was due to an increase of $112,000 from higher average balances,
partially offset by a decrease of $18,000 from slightly lower rates.
Interest Expense. For the three months ended December 31, 1996, interest
expense increased $104,000 (6.5%) compared to the same period in 1995. The
increase was due to an increase of $120,000 from higher average balances,
partially offset by a decrease of $15,000 from slightly lower rates.
Provision for Loan Losses. No provisions were made for loan losses during the
three months ended December 31, 1996. No provision for loan losses has been
recorded for the last seven successive quarters due to the consistently
favorable ratio of nonperforming loans to total loans of .18% at December 31,
1996, .15% at September 30, 1996 and .16% at December 31, 1995. Management
believes that the current allowance for loan losses is adequate based upon
prior loss experience, the volume and type of lending conducted by the
Association, industry standards, past due loans and the current economic
conditions in the market area.
Noninterest Income. For the three months ended December 31, 1996, noninterest
income increased $6,000 (3.6%) compared to the same period in 1995. The
increase was due to an increase of $12,000 in other noninterest income,
partially offset by a decrease of $6,000 in loan origination fees. The
increase in other noninterest income was primarily due to an increase of
$9,000 in service charges.
Noninterest Expense. For the three months ended December 31, 1996,
noninterest expense increased $136,000 (23.1%) compared to the same period in
1995. The increase was due primarily to increases of $35,000 in compensation
expense and $99,000 in benefits expense. The increase in compensation expense
was due to the addition of two staff members, one in the second quarter and
one in the third quarter of fiscal 1996. The increase in benefits expense was
due primarily to accrued expenses for the annual vesting of 20% of the shares
awarded under the Management Recognition Plans for directors and officers,
approved by stockholders in January of 1996.
Page 8
<PAGE>
Liquidity and Capital Resources
The Company's assets consist primarily of cash and cash equivalents,
investment securities and the shares of the Association's common stock. The
Company has no significant liabilities. The Association's deposit retention
has remained steady and loan demand continues to be funded without the use of
borrowed funds. As a result, liquidity remains adequate for current operating
needs.
As of December 31, 1996, the Association's regulatory capital was well in
excess of all applicable regulatory requirements. At December 31, 1996, the
Association's tangible, core and risk-based capital ratios were 16.1%, 16.1%
and 27.7%, respectively, compared to regulatory requirements of 1.5%, 3.0% and
8.0%, respectively.
Page 9
<PAGE>
TEXARKANA FIRST FINANCIAL CORPORATION
Part II
Item 1. Legal Proceedings
Neither the Company nor the Association is involved in any pending
legal proceedings other than non-material legal proceedings occurring
in the ordinary course of business.
Item 2. Changes in Securities
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
The Annual Meeting of Stockholders of the Company was held on January
21, 1997. The Information required herein is incorporated by
reference from the Notice of Annual Meeting of Stockholders and Proxy
Statement dated and filed December 23, 1996. Stockholders elected
all directors which were proposed for nomination and ratified the
appointment of Wilf & Henderson, P.C. as the Company's independent
auditors. Voting results are contained in the Report of Inspector of
Election for the Annual Meeting of Stockholders (Exhibit 99).
Item 5. Other Information
On October 30, 1996, the Company announced a plan to repurchase up to
94,228 shares (5%) of the Company's outstanding common stock and
51,365 shares have been repurchased as of January 31, 1997. The
repurchased shares will be held as treasury stock and will be
available for general corporate purposes.
On December 31, 1996, the Company declared a quarterly dividend in
the amount of $.1125 per share, payable January 27, 1997 to
stockholders of record on January 13, 1997.
At the Board of Directors meeting held on January 21, 1997, James W.
McKinney was elected Chairman of the Board and reelected chief
Executive Officer, Donald N. Morriss was elected Vice Chairman of the
Board, and John E. Harrison was elected President and reelected Chief
Operating Officer.
Item 6. Exhibits and Reports on Form 8-K
Exhibit 99 - Report of Inspector of Election
No reports on Form 8-K were filed during the period.
Page 10
<PAGE>
TEXARKANA FIRST FINANCIAL CORPORATION
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.
TEXARKANA FIRST FINANCIAL CORPORATION
/s/ James W. McKinney
Date: February 12, 1997 By: ______________________________
James W. McKinney
Chairman and CEO
/s/ James L. Sangalli
Date: February 12, 1997 By: ______________________________
James L. Sangalli
Chief Financial Officer
Page 11
<PAGE>
TEXARKANA FIRST FINANCIAL CORPORATION
Part II, Item 4.
Exhibit 99
Report of Inspector of Election
for the Annual Meeting of Stockholders
<PAGE>
REPORT OF INSPECTOR OF ELECTION
I, Larry H. Henderson, CPA , the duly appointed
representative of Texarkana First Financial Corporation , the Inspector of
Election of Texarkana First Financial Corporation (the "Company"), do hereby
certify as follows:
That an Annual Meeting of Stockholders of the Company was held at the Four
Points Hotel located at 5301 North State Line Avenue, Texarkana, Texas 75503
on Tuesday, January 21, 1997 at 3:00 p.m., Central Time, pursuant to due
notice.
That before entering into the discharge of my duty, I was sworn, and the oath
so taken by me is hereto attached.
That I inspected the signed proxies used at the Annual Meeting and found the
same to be in proper form.
That there were 1,834,563 shares of common stock of the Company which could be
voted at the Annual Meeting, and that 1,634,025 shares were represented at
such meeting by the holders thereof or by proxy, which constituted a quorum.
1. That I did receive the votes of the stockholders by ballot and by proxy
with respect to the election of directors of the Company, as set forth
below:
FOR WITHHOLD NOT VOTED
a. John M. Andres 1,633,425 600 -- .
b. Arthur L. McElmurry 1,633,425 600 -- .
That each of the above nominees received a plurity of the total votes eligible
to be cast at the Annual Meeting and that each of the above nominees has been
elected as a director by the stockholders of the Company.
2. That I did receive the votes of the stockholders by ballot and by proxy to
ratify the appointment of Wilf & Henderson, P.C. as the Company's independent
auditors for the fiscal year ending September 30, 1997, as set forth below:
FOR AGAINST ABSTAIN NOT VOTED
1,630,825 400 2,800 -- .
That said proposal received a majority of the total votes eligible to be cast
at the Annual Meeting and that this matter has been adopted by the
stockholders of the Company.
IN WITNESS WHEREOF, I have made this certificate and have hereunto set my hand
this 21st day of January, 1997.
/s/ Larry H. Henderson
By:______________________________
Larry H. Henderson, CPA
INSPECTOR OF ELECTION
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