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 June 30, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______________ to _______________
Commission File Number 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)
(870) 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 June
30, 1998, there were issued and outstanding 1,737,692 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 June 30, 1998 (unaudited) and September 30, 1997 1
Consolidated Statements of Income for the three and nine
months ended June 30, 1998 and 1997 (unaudited) 2
Consolidated Statements of Cash Flows for the nine months
ended June 30, 1998 and 1997 (unaudited) 3
Notes to Unaudited Consolidated Financial Statements 5
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 8
Part II. Other Information
Item 1. Legal Proceedings 12
Item 2. Changes in Securities 12
Item 3. Defaults Upon Senior Securities 12
Item 4. Submission of Matters to a Vote of Security Holders 12
Item 5. Other Information 12
Item 6. Exhibits and Reports on Form 8-K 12
Signatures 13
<PAGE>
TEXARKANA FIRST FINANCIAL CORPORATION
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(In Thousands)
Unaudited
June 30, September 30,
1998 1997
ASSETS
Cash and cash equivalents
Cash & due from banks......................... $ 1,413 $ 1,147
Interest bearing deposits in other banks...... 3,146 3,331
Federal funds sold............................ 2,525 1,575
________ ________
Total cash and cash equivalents............. 7,084 6,053
Investment securities available-for-sale........ 25,904 18,767
Mortgage-backed securities held-to-maturity..... 1,002 1,293
Federal Home Loan Bank stock.................... 1,168 1,116
Loans receivable, net of unearned income........ 151,020 148,471
Allowance for loan losses....................... (1,007) (1,124)
Accrued interest receivable..................... 1,396 1,176
Foreclosed real estate, net..................... - - 127
Premises and equipment, net..................... 2,417 2,382
Other assets.................................... 573 449
________ ________
Total assets.................................. $189,557 $178,710
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits........................................ $151,449 $143,207
Advances from borrowers for taxes & insurance... 1,570 1,920
Borrowed funds.................................. 7,100 4,989
Accrued federal income tax...................... 361 302
Accrued state income tax........................ 192 216
Accrued expenses and other liabilities.......... 675 696
________ ________
Total liabilities............................. 161,347 151,330
________ ________
Commitments and contingencies................... - - - -
________ ________
Common stock, $0.01 par value;
15,000,000 shares authorized;
1,983,750 shares issued....................... 20 20
Additional paid-in capital...................... 13,662 13,485
Common stock acquired by stock benefit plans.... (1,889) (2,208)
Treasury stock, at cost, 246,058 shares and
196,745 shares September 30, 1997............. (4,449) (3,103)
Retained earnings-substantially restricted...... 20,817 19,105
Net unrealized gain (loss) on investment
securities available for sale, net of tax..... 49 81
________ ________
Total stockholders' equity.................. 28,210 27,380
________ ________
Total liabilities and stockholders' equity.. $189,557 $178,710
======== ========
The accompanying notes are an integral part of this statement.
Page 1
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TEXARKANA FIRST FINANCIAL CORPORATION
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
(In Thousands, Except Per Share Data)
(Unaudited)
Three Months Nine Months
Ended Ended
June 30, June 30,
1998 1997 1998 1997
Interest Income
Loans
First mortgage loans................... $2,838 $2,758 $8,510 $8,008
Consumer and other loans............... 342 310 1,007 888
Investment securities.................... 369 309 992 943
Mortgage-backed and related securities... 137 38 412 92
______ ______ ______ ______
Total Interest Income.................. 3,686 3,415 10,921 9,931
______ ______ ______ ______
Interest Expense
Deposits................................. 1,909 1,735 5,587 5,115
Borrowed funds........................... 89 9 264 16
______ ______ ______ ______
Total Interest Expense................. 1,998 1,744 5,851 5,131
______ ______ ______ ______
Net Interest Income.................... 1,688 1,671 5,070 4,800
Provision for loan losses................ (100) - - (100) - -
______ ______ ______ ______
Net Interest Income After Provision.... 1,788 1,671 5,170 4,800
______ ______ ______ ______
Noninterest Income
Gain on sale of repossessed assets, net.. (1) 8 4 8
Loan origination and commitment fees..... 104 79 296 207
Investment securities gains (losses), net - - - - - - - -
Other.................................... 160 115 544 324
______ ______ ______ ______
Total Noninterest Income............... 263 202 844 539
______ ______ ______ ______
Noninterest Expense
Compensation and benefits................ 519 421 1,565 1,329
Occupancy and equipment.................. 55 40 160 124
SAIF deposit insurance premium........... 22 22 67 101
Provision & loss on foreclosed real estate - - - - - - - -
Other.................................... 136 119 422 399
______ ______ ______ ______
Total Noninterest Expense.............. 732 602 2,214 1,953
______ ______ ______ ______
Income Before Income Taxes................. 1,319 1,271 3,800 3,386
Income tax expense......................... 477 474 1,394 1,258
______ ______ ______ ______
Net Income................................. $ 842 $ 797 $2,406 $2,128
====== ====== ====== ======
Earnings Per Share - basic................. $ 0.52 $ 0.48 $ 1.47 $ 1.25
Earnings Per Share - diluted............... $ 0.49 $ 0.46 $ 1.40 $ 1.22
Weighted average shares - basic............ 1,629 1,676 1,636 1,697
Weighted average shares - diluted.......... 1,716 1,723 1,724 1,745
Dividends per share........................ $ .140 $ .140 $ .420 $ .365
The accompanying notes are an integral part of this statement.
Page 2
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TEXARKANA FIRST FINANCIAL CORPORATION
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
(Unaudited)
Nine Months Ended
June 30,
1998 1997
Cash Flows From Operating Activities:
Interest and dividends received..................... $10,636 $ 9,804
Miscellaneous income received....................... 840 531
Interest paid....................................... (2,087) (1,616)
Cash paid to suppliers and employees................ (1,793) (2,217)
Cash from loans sold................................ 10,651 1,488
Cash paid for loans originated to sell.............. (7,713) (1,051)
Income taxes paid................................... (1,346) (854)
_______ _______
Net Cash Provided By Operating Activities......... 9,188 6,085
_______ _______
Cash Flows From Investing Activities:
Proceeds from call and maturity of securities....... 8,605 4,840
Proceeds from sale of securities available for sale. - - - -
Purchases of securities available for sale.......... (12,631) (3,800)
Purchases of mortgage-backed securities............. (4,482) (1,725)
Principal collected on mortgage-backed securities... 1,628 207
Purchase of fixed assets............................ (116) (379)
Net (increase) in loans............................. (5,669) (8,843)
Cash paid for REO held for resale................... (19) (46)
Proceeds from sale of REO and other REO recoveries.. 390 77
_______ _______
Net Cash (Used) By Investing Activities........... (12,294) (9,669)
_______ _______
Cash Flows From Financing Activities:
Net increase (decrease) in savings,
demand deposits, and certificates of deposit...... 4,459 3,673
Net increase (decrease) in escrow funds............. (350) (467)
Net increase (decrease) in funds borrowed........... 2,111 (1,306)
Purchase of treasury stock.......................... (1,348) (1,462)
Stock options exercised............................. 8 - -
Purchase of common stock for employee benefit plans. - - (9)
Cash dividends paid on common stock................. (743) (624)
_______ _______
Net Cash Provided(Used) By Financing Activities... 4,137 (195)
_______ _______
Net increase(Decrease) In Cash & Cash Equivalents. 1,031 (3,779)
_______ _______
Cash and Cash Equivalents, beginning of period........ 6,053 8,860
_______ _______
Cash and Cash Equivalents, end of period.............. $ 7,084 $ 5,081
======= =======
The accompanying notes are an integral part of this statement.
Page 3
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TEXARKANA FIRST FINANCIAL CORPORATION
SUPPLEMENTAL INFORMATION CONCERNING CASH FLOWS
Nine Months Ended
June 30,
1998 1997
Reconciliation of net income to cash provided
by operating activities:
Net income............................................ $ 2,406 $ 2,128
_______ _______
Adjustments to reconcile net income to cash provided
by operating activities:
Depreciation........................................ 81 48
Amortization of discounts and premiums.............. 33 (22)
Amortization of deferred loan fees.................. (26) (29)
Amortization of stock acquired by benefit plans..... 458 365
(Gain) loss on sales of real estate owned........... (5) (8)
Provision for loan losses........................... (100) - -
Interest expense credited to saving accounts........ 3,784 3,387
Dividend and interest income added to investments... (88) (80)
Loan fees deferred.................................. 30 36
Changes in assets and liabilities:
(Increase) decrease in interest receivable.......... (220) (32)
Increase (decrease) in accrued interest payable..... (20) 128
Increase (decrease) in income tax payable........... 35 404
Increase (decrease) in other receivables & payables. 2,820 (240)
_______ _______
Total adjustments................................. 6,782 3,957
_______ _______
Net cash provided by operations....................... $ 9,188 $ 6,085
======= =======
Supplemental schedule of noncash investing
and financing activities:
FHLB stock dividends not redeemed................. $ 51 $ 47
Acquisition of real estate in settlement of loans. 254 157
Loans made to finance sale of REO................. 126 52
Net unrealized gain (loss) on investment securities
available for sale.............................. 19 58
Page 4
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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 and nine months ended June 30,
1998 are not necessarily indicative of the results to be expected for
the year ending September 30, 1998. Although net income was consistent
for the first three quarters, earnings for the full fiscal year will be
impacted by the repurchase of Company stock 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, 1997,
contained in the Company's annual report to stockholders.
Earnings Per Share
Basic earnings per share is computed on the basis of the weighted-
average number of shares of common stock outstanding. Stock options
outstanding are included in the calculation of fully diluted 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.
Page 5
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Borrowed Funds
Borrowed funds consist primarily of short-term, fixed rate advances from
the Federal Home Loan Bank ("FHLB"). At June 30, 1998, the balance was
$7.1 million, at 5.57% maturing July 29, 1998. At September 30, 1997,
the balance was $5.0 million, at 5.54% maturing October 24, 1997.
Recent Legislation
The deposits of the Association are currently insured by the Savings
Association Insurance Fund ("SAIF"). The previously underfunded status
of the SAIF 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. The FICO
authorized assessment stipulated that the BIF rate must equal one-fifth
the SAIF rate through year-end 1999. or until the insurance funds are
merged, whichever comes first. Thereafter, BIF and SAIF payers will be
assessed pro rata for FICO. FICO rates are adjusted quarterly to
reflect changes in the assessment bases of the insurance funds.
Beginning January 1, 1997, the FICO premiums for BIF and SAIF were 1.3
and 6.4 basis points, respectively. For June 30, 1998, the FICO premium
for BIF and SAIF were 1.22 and 6.10 basis points, respectively.
Recent Accounting Developments
In May 1995, the FASB issued SFAS No. 122, "Accounting for Mortgage
Servicing Rights", amending FASB Statement No. 65, "Accounting for
Certain Mortgage Banking Activities", to require that a mortgage banking
enterprise recognize as separate assets rights to service mortgage loans
for others, however those servicing rights are acquired. Mortgage
servicing rights are to be amortized in proportion to and over the
period of estimated net servicing income and are to be evaluated for
impairment based on their fair value. This Statement applies
prospectively in fiscal years beginning after December 15, 1995, to
transactions in which a mortgage banking enterprise sells or securitizes
mortgage loans with servicing rights retained. The Company adopted SFAS
No. 122 effective October 1, 1996, with no material impact on the
Company's financial condition or results of operations.
FASB has issued final standards on earnings per share ("EPS") under two
new pronouncements, Statement of Financial Accounting Standards No. 128
and SFAS 129 which include standards for computing and presenting EPS
and for disclosing information about an entity's capital structure. The
standards for EPS apply to entities with publicly held common stock or
potential common stock, while the standards for disclosure about capital
structure apply to all entities. The standards eliminate the
presentation of primary EPS and require presentation of basic EPS, the
principal difference being that common stock equivalents will not be
considered in the computation of basic EPS. The standards also require
dual presentation of basic and diluted EPS on the face of the income
statement for all entities with complex capital structures and require a
reconciliation of the numerator and denominator of the basic EPS
computation to the numerator and denominator of the diluted EPS
computation. Basic EPS would include no dilution and would be computed
by dividing income available to common stockholders by the weighted-
average number of common shares outstanding for the period. Diluted EPS
would reflect the potential dilution that could occur if the potential
common shares were exercised or converted into common stock or resulted
in the issuance of common stock that then shared in the earnings of the
entity. SFAS 128 and SFAS 129 are effective for periods ending after
December 15, 1997 and earlier application is not permitted. The
standards require restatement of all prior-period EPS data presented.
Page 6
<PAGE>
Year 2000 - Millennium
Computer systems which are unable to recognize the year 2000 could fail
or create erroneous results by or at the year 2000 if the problem is not
corrected. Many existing computer programs use only two digits to
identify a year in the date field. Such programs, designed and
developed without considering the impact of a change in the century, are
unable to distinguish the year 2000 from the year 1900. Each company's
potential costs and uncertainties depend on a number of factors,
including its software and hardware and the nature of its industry.
Like most financial service providers, the Company could be
significantly affected by software and hardware both within the Company
and with other companies with whom it electronically or operationally
interfaces.
Management is aware of the potential problems and the costs required to
prevent material adverse consequences. Management has adopted a Year
2000 Plan, approved by the Board of Directors, and has appointed a
committee to implement the plan. The committee has assessed the
Company's exposure; scheduled necessary in-house hardware and software
upgrades and replacements; initiated formal communications with all
major outside vendors, suppliers, creditors and borrowers; scheduled
testing of all operating systems; and provided for a contingency plan
for all critical systems. The Company believes that its Year 2000 Plan
will prevent any material adverse impact on the operations of the
Company and its subsidiary.
Implementation of the Year 2000 Plan involves direct and indirect costs
to the Company. Direct costs include hardware and software upgrades and
replacements, potential charges by third party software vendors, and
resulting costs if the contingency plan for critical systems must be
implemented. Indirect costs principally consist of existing employee
time related to implementation of the Year 2000 Plan. Both direct and
indirect costs will be charged to earnings as incurred. Such costs have
not been material to date and based on estimated costs within the Year
2000 Plan, management does not expect such costs to have a material
impact on the Company's financial condition or results of operations.
Page 7
<PAGE>
TEXARKANA FIRST FINANCIAL CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Financial Condition
At June 30, 1998, the Company's assets amounted to $189.6 million as
compared to $178.7 million at September 30, 1997. The $10.8 million
(6.1%) increase was primarily due to increases of $6.9 million (32.6%)
in investments, $2.5 million (1.7%) in loans, net of unearned income and
$1.0 million (17.0%) in cash and cash equivalents. Liabilities
increased $10.0 million (6.6%) to $161.3 million at June 30, 1998
compared to $151.3 million at September 30, 1997 primarily due to
increases of $8.2 million (5.8%) in deposits and $2.1 million (42.3%) in
borrowed funds, partially offset by a $.4 million (18.2%) decrease in
borrowers' escrow balances (property tax payments are made in the first
two quarters of the fiscal year).
The increase in loans was the net result after the sale of $10.7 million
of loans during the nine-month period ended June 30, 1998. The increase
in deposits and borrowed funds along with the proceeds from the sale of
loans provided funds for the additional loan demand and for additional
investments.
Stockholders' equity amounted to $28.2 million (14.9% of total assets)
at June 30, 1998 compared to $27.4 million (15.3% of total assets) at
September 30, 1997. The retained earnings balance reflects the
$2,406,000 net income from operations, less dividends declared. The
treasury stock balance reflects the net increase of 49,313 shares of
common stock.
Asset quality remains strong with a ratio of nonperforming assets to
total assets of .12% and .23% as of June 30, 1998 and September 30,
1997, respectively, and a ratio of nonperforming loans and debt
restructurings to total loans of .15% and .19%, respectively.
Page 8
<PAGE>
Comparison of Results of Operations for the Three Month and Nine Month
Periods Ended June 30, 1998 and 1997
General.
For the three months ended June 30, 1998, net income was $842,000
compared to $797,000 for the same period ended June 30, 1997. The
increase of $45,000 (5.6%) in net income was due to an increase of
$17,000 in net interest income, a $100,000 credit to provision for loan
losses and an increase of $61,000 in noninterest income, all of which
were partially offset by increases of $130,000 in noninterest expense
and $3,000 in income tax expense. The income tax expense includes a
$15,000 credit from a refund for a prior year amended state return.
For the three months ended June 30, 1998 and June 30, 1997, return on
average assets (ROA) was 1.80% and 1.87%, respectively, return on
average equity (ROE) was 11.97% and 11.79%, respectively, and the
operating efficiency ratio was 37.5% and 32.1%, respectively.
For the nine months ended June 30, 1998, net income was $2,406,000
compared to $2,128,000 for the same period ended June 30, 1997. The
increase of $278,000 (13.1%) in net income was due to an increase of
$270,000 in net interest income, a $100,000 credit to provision for loan
losses and an increase of $305,000 in noninterest income, all of which
were partially offset by increases of $261,000 in noninterest expense
and $136,000 in income tax expense.
For the nine months ended June 30, 1998 and June 30, 1997, return on
average assets (ROA) was 1.75% and 1.70%, respectively, return on
average equity (ROE) was 11.54% and 10.64%, respectively, and the
operating efficiency ratio was 37.4% and 36.6%, respectively.
Net Interest Income.
For the three months ended June 30, 1998, net interest income increased
$17,000 (1.0%) compared to the same period in 1997. The increase was
due to an increase of $271,000 (7.9%) in interest income, partially
offset by an increase of $254,000 (14.6%) in interest expense. For the
third quarter of fiscal 1998 compared to the third quarter of fiscal
1997, the net interest margin was 3.69% and 4.03%, respectively, and the
net interest spread was 2.90% and 3.25%, respectively.
For the nine months ended June 30, 1998, net interest income increased
$270,000 (5.6%) compared to the same period in 1997. The increase was
due to an increase of $990,000 (10.0%) in interest income, partially
offset by an increase of $720,000 (14.0%) in interest expense. For the
nine month period of fiscal 1998 compared to the same period of fiscal
1997, the net interest margin was 3.78% and 3.93%, respectively, and the
net interest spread was 2.98% and 3.15%, respectively.
Page 9
<PAGE>
Interest Income.
For the three months ended June 30, 1998, interest income increased
$271,000 (7.9%) compared to the same period in 1997. The increase was
the result of higher average balances partially offset by lower rates.
Average earning assets increased to $183.3 million from $166.5 million
and the average yield declined to 8.07% from 8.23%.
For the nine months ended June 30, 1998, interest income increased
$990,000 (10.0%) compared to the same period in 1997. The increase was
the result of higher average balances. Average earning assets increased
to $179.4 million from $163.1 million and the average yield was 8.14%
for both periods.
Interest Expense.
For the three months ended June 30, 1998, interest expense increased
$254,000 (14.6%) compared to the same period in 1997. The increase was
the result of higher average balances and rates. Average interest
bearing liabilities increased to $155.1 million from $140.5 million and
the average rate increased to 5.17% from 4.98%.
For the nine months ended June 30, 1998, interest expense increased
$720,000 (14.0%) compared to the same period in 1997. The increase was
the result of higher average balances and rates. Average interest
bearing liabilities increased to $151.8 million from $137.3 million and
the average rate increased to 5.15% from 5.00%.
Provision for Loan Losses. During the three months ended June 30, 1998,
the allowance for loan losses was reduced by $100,000 with a credit to
the provision for loan losses. The adjustment reduced the amount of the
unallocated reserve allowance. No provision for loan losses had been
recorded for the previous twelve successive quarters due to the
consistently favorable ratio of nonperforming loans to total loans.
Asset quality remains excellent with a ratio of nonperforming loans to
total loans of .15% at June 30, 1998 and .19% at September 30, 1997.
At June 30, 1998 and September 30, 1997, the balance of the allowance
for loan losses was $1.0 million and $1.1 million, respectively, and the
ratio of the allowance for loan losses to nonperforming loans was
445.58% and 401.43%, respectively. 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 June 30, 1998, noninterest income increased
$61,000 (30.2%) compared to the same period in 1997. The increase was
primarily due to increases of $44,000 in net gain on sale of loans and
$25,000 in loan origination fees. The increases were the result of
increases in the number and amount of mortgage loans originated and
sold.
Page 10
<PAGE>
For the nine months ended June 30, 1998, noninterest income increased
$305,000 (56.6%) compared to the same period in 1997. The increase was
primarily due to increases of $192,000 in net gain on sale of loans and
$89,000 in loan origination fees. The increases were the result of
increases in the number and amount of mortgage loans originated and
sold.
Noninterest Expense.
For the three months ended June 30, 1998, noninterest expense increased
$130,000 (21.6%) compared to the same period in 1997. The increase was
primarily due to increases of $98,000 in compensation and benefits,
$15,000 in occupancy and equipment and $17,000 in other expense.
For the nine months ended June 30, 1998, noninterest expense increased
$261,000 (13.4%) compared to the same period in 1997. The increase was
primarily due to increases of $236,000 in compensation and benefits,
$36,000 in occupancy and equipment and $23,000 in other expense, all of
which were partially offset by a decrease of $34,000 in SAIF deposit
insurance premiums. The increase in compensation and benefits expense
was primarily due to the addition of four employees - one in the fourth
quarter of fiscal 1997, one in the second quarter of fiscal 1998 and two
in the third quarter of fiscal 1998.
Liquidity and Capital Resources
The Company's assets consist primarily of cash and cash equivalents and
the shares of the Association's common stock. The Company has no
significant liabilities. The Association's deposit retention and growth
has remained steady. The ratio of loans to deposits was 99.7% at June
30, 1998 and 103.7% at September 30, 1997. From September 30, 1997 to
June 30, 1998, investments available for sale increased $7.1 million
(38.0%) and cash and cash equivalents increased $1.0 million (17.0%).
Liquidity remains adequate for current operating needs. At June 30,
1998, the Association's liquidity ratio was 13.27% compared to the
required regulatory minimum of 4.0%.
The Company's and the Association's regulatory capital remains well in
excess of all applicable regulatory requirements. At June 30, 1998, the
Company's tangible, core and risk-based capital ratios were 14.86%,
14.86% and 25.64%, respectively, and the Association's tangible, core
and risk-based capital ratios were 14.41%, 14.41% and 24.83%,
respectively, compared to regulatory requirements of 1.5%, 3.0% and
8.0%, respectively.
Page 11
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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
None.
Item 5. Other Information
On August 1, 1997, the Company announced a plan to repurchase
up to 89,515 shares (5%) of the Company's outstanding common
stock and 53,213 shares have been repurchased as of June 30,
1998. The repurchased shares will be held as treasury stock
and will be available for general corporate purposes.
On June 29, 1998, the Company declared a quarterly dividend in
the amount of $.14 per share, payable July 28, 1998 to
stockholders of record on July 14, 1998.
Item 6. Exhibits and Reports on Form 8-K
Exhibit 11 - Earnings Per Share Computation
No reports on Form 8-K were filed during the period.
Page 12
<PAGE>
TEXARKANA FIRST FINANCIAL CORPORATION
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
TEXARKANA FIRST FINANCIAL CORPORATION
/s/ James W. McKinney
Date: August 3, 1998 By: _____________________
James W. McKinney
Chairman and CEO
/s/ James L. Sangalli
Date: August 3, 1998 By: _____________________
James L. Sangalli
Chief Financial Officer
Page 13
<PAGE>
Form 10-Q
Exhibit 11
EARNINGS PER SHARE COMPUTATION
Three Months Ended Nine Months Ended
June 30, June 30,
_____________________ _____________________
1998 1997 1998 1997
__________ __________ __________ __________
Net Income..................$ 842,427 $ 796,741 $2,406,310 $2,127,882
========= ========= ========= =========
Weighted average shares:
Common shares outstanding. 1,629,066 1,675,556 1,636,467 1,696,987
Common stock equivalents
due to assumed exercise
of stock options.......... 87,121 47,713 87,217 47,711
_________ _________ _________ _________
Common and
common equivalent shares. 1,716,187 1,723,269 1,723,684 1,744,698
========= ========= ========= =========
Earnings per common share:
Basic...................... $ .517 $ .476 $1.470 $1.254
Diluted.................... $ .491 $ .462 $1.396 $1.220
E 1
<PAGE>
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