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 March 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 0-8937
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FIRST BANKS AMERICA, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 75-1604965
-------- ----------
(State or other jurisdiction of (I.R.S. Employer
corporation or organization) identification No.)
P.O. Box 630369, HOUSTON, TEXAS 77263-0369
(address of principal executive offices) (Zip Code)
(713) 954-2400
(Registrant's telephone number, including area code)
(Former name, former address, and former fiscal year, if changed since last
report)
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.
Outstanding at
Class April 30, 1996
----- --------------
Common Stock, $.15 par value 1,296,442
Class B Common Stock, $.15 par value 2,500,000
First Banks America, Inc.
INDEX
Page
PART I FINANCIAL INFORMATION
Item 1. Financial Statements:
Consolidated Balance Sheets as of March 31, 1996
and December 31, 1995 -2-
Consolidated Statements of Income for the threes
months ended March 31, 1996 and 1995 -4-
Consolidated Statements of Cash Flows for the three
months ended March 31, 1996 and 1995 -5-
Note to Consolidated Financial Statements -6-
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations -7-
PART II OTHER INFORMATION
Item 6. Exhibit -12-
Signatures -13-
PART I - FINANCIAL INFORMATION
Item 1 Financial Statements
First Banks America, Inc.
Consolidated Balance Sheets (unaudited)
(dollars expressed in thousands, except per share data)
March 31, December 31,
1996 1995
---- ----
ASSETS
------
Cash and cash equivalents:
Cash and due from banks $ 8,885 25,072
Interest-bearing deposits with other financial institutions-
with maturities of three months or less 619 11,050
Federal funds sold 1,975 4,800
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Total cash and cash equivalents 11,479 40,922
-------- ------
Investment securities - available for sale, at fair value 83,060 39,337
Loans:
Commercial, financial and agricultural 11,702 15,055
Real estate construction and development 32,067 26,048
Real estate mortgage 13,315 12,673
Consumer and installment 125,185 140,757
------- -------
Total loans 182,269 194,533
Unearned discount (1,573) (1,960)
Allowance for possible loan losses (4,787) (5,228)
------- -------
Net loans 175,909 187,345
------- -------
Bank premises and equipment, net of accumulated depreciation 6,402 6,454
Receivable from sale of investment securities - 4,915
Accrued interest receivable 601 665
Other real estate owned 927 1,013
Deferred income taxes 4,059 14,605
Other assets 1,469 1,327
--------- --------
Total assets $ 293,906 296,583
========= =======
FIRST BANKS AMERICA, INC.
Consolidated Balance Sheets (unaudited)
(dollars expressed in thousands, except per share data)
(continued)
March 31 December 31,
1996 1995
---- ----
LIABILITIES
Deposits:
Demand:
Non-interest bearing $ 44,245 49,822
Interest bearing 20,774 21,151
Savings 54,821 53,046
Time:
Time deposits of $100 or more 24,627 23,509
Other time deposits 102,764 101,735
------------ --------
Total deposits 247,231 249,263
------------ --------
Federal Home Loan Bank advances 5,426 5,663
Securities sold under agreements to repurchase 603 711
Other borrowings 1,054 1,406
Deferred income taxes 1,186 1,362
Accrued and other liabilities 2,883 2,920
------------ ---------
Total liabilities 258,383 261,325
------------ ---------
STOCKHOLDERS' EQUITY
Common Stock:
Common stock, $.15 par value; 10,866,667 shares
authorized; 1,408,567 and 1,314,663 shares issued
and outstanding respectively, at March 31, 1996
and 1,401,901 and 1,322,298 shares issued and
outstanding, respectively, at December 31, 1995 211 210
Class B common stock, $.15 par value; 4,000,000 shares
authorized; 2,500,000 shares issued and outstanding 375 375
Capital surplus 39,294 39,271
Retained deficit since elimination of accumulated deficit
of $259,117 effective December 31, 1994 (3,358) (3,820)
Treasury stock (979) (828)
Net fair value adjustment for securities available for sale (20) 50
----------- ---------
Total stockholders' equity 35,523 35,258
----------- ---------
Total liabilities and stockholders' equity $ 293,906 296,583
============ =========
See accompanying notes to consolidated financial statements
FIRST BANKS AMERICA, INC.
Consolidated Statements of Income (unaudited)
(dollars expressed in thousands, except per share data)
Three months ended
March 31,
---------
1996 1995
---- ----
Interest income:
Interest and fees on loans $ 3,979 4,225
Investment securities 525 1,225
Federal funds sold and other 504 266
----- -----
Total interest income 5,008 5,715
Interest expense:
Deposits:
Interest-bearing demand 98 102
Savings 436 520
Time deposits of $100 or more 343 329
Other time deposits 1,433 1,078
Federal Home Loan Bank advances, securities sold under agreements to 132 683
repurchase, federal funds purchased and other borrowings
Notes payable and other 32 32
----- -----
Total interest expense 2,474 2,744
----- -----
Net interest income 2,534 2,972
Provision for possible loan losses 100 450
----- -----
Net interest income after provision for possible loan losses 2,434 2,522
----- -----
Noninterest income:
Service charges on deposit accounts and customer service fees 345 342
Loan servicing fees, net 21 65
Gain (loss) on sales of securities, net 75 -
Other income (3) 876
----- -----
Total noninterest income 438 1,283
----- -----
Noninterest expense:
Salaries and employee benefits 725 1,203
Occupancy, net of rental income 196 276
Furniture and equipment 167 163
Federal Deposit Insurance Corporation premiums 18 153
Postage, printing and supplies 74 96
Data processing fees 80 413
Legal, examination and professional fees 284 172
Communications 110 112
Losses and expenses on foreclosed real estate, net of gains 6 122
Other expenses 443 495
Total noninterest expense 2,093 3,205
----- -----
Income before provision for income taxes 779 600
Provision for income taxes 318 208
------ -----
Net income (loss) $ 461 392
======= =====
Earnings per common share $ .12 .10
======= ===
Weighted average shares of common stock and common stock
equivalents outstanding (in thousands) 4,008 4,093
===== =====
See accompanying notes to consolidated financial statements
FIRST BANKS AMERICA, INC.
Consolidated Statements of Cash Flows (unaudited)
(dollars expressed in thousands)
Three months ended
March 31,
1996 1995
---- ----
Cash flows from operating activities:
Net income (loss) $ 461 392
Adjustments to reconcile net income (loss) to net cash:
Depreciation and amortization of bank premises and equipment 161 154
Amortization, net of accretion (219) (152)
Provision for possible loan losses 100 450
(Increase) decrease in accrued interest receivable 64 433
Interest accrued on liabilities 2,474 2,778
Payments of interest on liabilities (2,449) (2,595)
Provision for income taxes 318 208
(Gain) loss on sales of securities, net (75) -
Other (247) (851)
-------- -------
Net cash provided by (used in) operating activities 588 817
-------- -------
Cash flows from investing activities:
Sales of investment securities 10,513 -
Maturities of investment securities 28,748 11,363
Purchases of investment securities (77,700) (39,130)
Net increase in loans 11,126 (1,693)
Recoveries of loans previously charged off 210 108
Purchases of bank premises and equipment (109) (15)
Other investing activities 36 345
------- --------
Net cash provided by (used in) investing activities (27,176) (29,022)
------- --------
Cash flows from financing activities:
Increase (decrease) in deposits (2,032) (7,489)
Decrease in borrowed funds (697) 4,679
Purchase of treasury stock (150) -
Other financing activities 24 25
-------- --------
Net cash provided by (used in) financing activities (2,855) (2,785)
-------- --------
Net increase (decrease) in cash and cash equivalents (29,443) (30,990)
Cash and cash equivalents, beginning of period 40,922 47,071
------- --------
Cash and cash equivalents, end of period $ 11,479 16,081
======= ========
Noncash investing and financing activities:
Transfer of loans held for sale to loan portfolio $ - 7,253
======= ========
See accompanying notes to consolidated financial statements
FIRST BANKS AMERICA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) Basis of Presentation
The accompanying consolidated financial statements of First Banks
America, Inc. (FBA) are unaudited and should be read in conjunction with the
consolidated financial statements contained in the 1995 annual report on
Form 10K. In the opinion of management, all adjustments, consisting of normal
recurring accruals considered necessary for a fair presentation of the results
of operations for the interim periods presented herein, have been included.
Operating results for the three months ended March 31, 1996 are not necessarily
indicative of the results that may be expected for the year ending December 31,
1996.
The consolidated financial statements include the accounts of First
Banks America, Inc. and its subsidiaries, all of which are wholly owned. All
significant intercompany accounts and transactions have been eliminated.
On August 23, 1995, the Common and Class B Common stock shareholders of
FBA approved a reverse stock split. The reverse stock split converted 15 shares
of Common Stock or Class B Common stock into one share of Common Stock or Class
B Common Stock, respectively. Accordingly, all per share amounts, as well as
ending and average common shares data, have been restated to reflect the
one-for-15 reverse stock split.
Certain reclassifications of 1995 amounts have been made to conform
with the 1996 presentation.
(2) Transactions with Related Party
In December 1994, the Board of Directors of BankTEXAS N.A. (Bank), a
wholly owned subsidiary of FBA, approved a data processing agreement and a
management fee agreement with First Banks, Inc. (First Banks). Under the data
processing agreement, a subsidiary of First Banks began providing data
processing and various related services to the Bank beginning in February 1995.
The fees for such services are significantly less than the Bank was paying to
its non-affiliated vendors. The management fee agreement provides that the Bank
will compensate First Banks on an hourly basis for its use of personnel for
various functions including internal auditing, loan review, income tax
preparation and assistance, accounting, asset/liability and investment services,
loan servicing and other management and administrative services. Hourly rates
for such services compare favorably with those for similar services from
unrelated sources, as well as the internal costs of the Bank personnel which
were used previously, and it is estimated the aggregate cost for the services
will be significantly more economical than those previously incurred by the Bank
separately. Fees paid under this agreement were $223,000 and $216,000 for the
three month periods ended March 31, 1996 and 1995, respectively.
Item 2: Management's Discussion and Analysis of Financial
Condition and Results of Operations
General
FBA is a registered bank holding company, incorporated in Delaware and
headquartered in Houston, Texas. At March 31, 1996, FBA had approximately $293.9
million in total assets; $180.7 million in total loans, net of unearned
discount; $247.2 million in total deposits; and $35.5 million in total
stockholders' equity. FBA operates through its subsidiary bank, BankTEXAS N.A.
(Bank).
Through the Bank, FBA offers a broad range of commercial and personal
banking services including certificate of deposit accounts, individual
retirement and other time deposit accounts, checking and other demand deposit
accounts, interest checking accounts, savings accounts and money market
accounts. Loans include commercial, financial, agricultural, real estate
construction and development, residential real estate and consumer and
installment loans. Other financial services include credit-related insurance,
automatic teller machines and safe deposit boxes.
Financial Condition
FBA's total assets were $293.9 million and $296.6 million at March 31,
1996 and December 31, 1995, respectively. The primary changes from December 31,
1995 were an increase in investment securities of $43.7 million which was funded
principally by a decrease in cash and cash equivalents of $29.4 million and a
reduction of the loan portfolio of $11.9 million. The increase in the investment
security portfolio, consisting of shorter term securities designated as
available for sale, is consistent with the securities restructuring plan
implemented in September 1994.
Results of Operations
Net Income
Net income for the three months ended March 31, 1996 was $461,000 in
comparison to $392,000 for the same period in 1995. The improved net income is
attributable to the reduction in noninterest expense of $1.11 million to $2.09
million from $3.21 million at March 31, 1996 and 1995, respectively,
substantially offset by a reduction in noninterest income as more fully
described below.
Net Interest Income
Net interest income was $2.53 million, or 3.81% of average interest
earning assets, for the three months ended March 31, 1996, compared to $2.97
million, or 4.20% for the same period in 1995. The decrease is attributable to
the reduction in average interest earning assets to $266 million from $286
million for the three months ended March 31, 1996 and 1995, respectively, and
the lower yields earned within the restructured investment security portfolio,
which coincide with the overall reduction of interest rate risk in that
portfolio.
The following table sets forth, on a tax-equivalent basis, certain
information relating to FBA's average balance sheet, and reflects the average
yield earned on interest-earning assets, the average cost of interest-bearing
liabilities and the resulting net interest income for the three month periods
ended March 31:
1996 1995
---- ----
Interest Interest
Average income/ Yield/ Average income/ Yield/
balance expense rate balance expense rate
------- ------- ---- ------- ------- ----
(dollars expressed in thousands)
Assets
Interest-earning assets:
Loans $188,473 3,979 8.47% $201,941 4,225 8.49%
Investment securities 39,038 525 5.38 73,556 1,225 6.66
Federal funds sold and other 38,061 504 5.30 21,532 266 4.99
-------- ------ ------- ------
Total interest-earning assets 265,572 5,008 7.56 297,029 5,716 7.80
----- -----
Nonearning assets 29,969 31,912
-------- -------
Total assets $295,541 $328,941
======== ========
Liabilities and Stockholders' Equity
------------------------------------
Interest-bearing liabilities:
Interest-bearing demand deposits $ 20,836 98 1.88% $ 26,432 102 1.57%
Savings deposits 53,881 436 3.24 55,419 520 3.81
Time deposits of $100 or more 24,008 343 5.71 21,733 329 6.14
Other time deposits 102,813 1,433 5.58 95,469 1,078 4.58
------- ----- ------ -----
Total interest-bearing deposits $201,538 2,310 4.58 199,053 2,029 4.16
Federal funds purchased,
repurchase agreements and
Federal Home Loan Bank advances 6,092 132 8.67 35,892 683 7.72
Notes payable and other 1,477 32 8.67 2,001 32 6.49
----- ----- ----- -----
Total interest-bearing liabilities 209,107 2,474 236,946 2,744 4.72
----- -----
Noninterest-bearing liabilities:
Demand deposits 46,639 47,560
Other liabilities 4,356 4,948
-------- --------
Total liabilities 260,102 289,454
Stockholders' equity 35,439 39,487
--------- ---------
Total liabilities and
stockholders' equity $295,541 $328,941
=======
Net interest income 2,534 2,971
===== =====
Net interest margin 3.83% 4.06%
==== ====
Provision for Possible Loan Losses
The provision for possible loan losses was $100,000 for the three month
period ended March 31, 1996, in comparison to $450,000 for the same period in
1995. Net loan charge-offs were $541,000 and $417,000 for the three month
periods ended March 31, 1996 and 1995, respectively. The decrease in the
provision for possible loan losses is attributable to the decrease in total
loans to $182.2 million from $195.5 million at March 31, 1996 and December 31,
1995, respectively, and management's evaluation of the credit quality of the
loans in the portfolio and its assessment of the adequacy of the allowance for
possible loan losses. During the nine months ended December 31, 1995, FBA
provided an aggregate of $5.38 million for possible loan losses in recognition
of increasing charge-offs and delinquencies within its portfolio of indirect
automobile loans. Considering the current quality of the loan portfolio and the
amount of the allowance for possible loan losses, management determined that it
was not necessary to continue providing for possible loan losses at a rate
comparable to that of the prior year.
Noninterest Income
Noninterest income was $438,000 and $1.28 million for the three months
ended March 31, 1996 and 1995, respectively. The decrease is associated with the
non-recurring income of $802,000 received by FBA from the termination of a
self-insurance trust during the three months ended March 31, 1995.
Loan servicing fees decreased to $21,000 for the three months ended
March 31, 1996, in comparison to $65,000 for the same period in 1995 reflecting
the continued reduction in the amount of loans serviced for others.
Noninterest income also includes a gain of $75,000 recognized upon the
sale of an investment security for the three months ended March 31, 1996.
Noninterest Expense
Noninterest expense decreased by $1.12 million to $2.09 million from
$3.21 million for the three months ended March 31, 1996 and 1995, respectively.
The decrease is primarily attributable to salaries and employee benefits and
data processing fees which decreased by $478,000 and $333,000, respectively, for
the three months ended March 31, 1996 in comparison to the same period of 1995.
These decreases are consistent with cost savings anticipated by the data
processing conversion and centralization of various bank operating functions to
First Banks' systems during the first quarter of 1995.
Contributing further to the decrease in noninterest expense was a
reduction in Federal Deposit Insurance Corporation premiums to $18,000 from
$153,000 for the three months ended March 31, 1996 and 1995, respectively. This
decease is consistent with the premium rate reductions instituted by the FDIC
effective June 1, 1995 and January 1, 1996.
Lending and Credit Management
Interest earned on the loan portfolio is the primary source of income
of FBA. Total loans, net of unearned discount, represented 61.48% and 64.93% of
total assets as of March 31, 1996 and December 31, 1995, respectively. Total
loans, net of unearned discount, were $180.7 million and $192.6 million at March
31, 1996 and December 31, 1995, respectively. The decrease is primarily due to
the consumer automobile loan portfolio reflecting the more stringent lending
practices implemented during 1995. As the consumer automobile loan portfolio
continues to decline, FBA is evaluating its lending programs, including
purchasing loans from affiliated banks, with the objective to increase loans as
a percentage of total assets and to further diversify the credit risk profile of
FBA.
The following is a summary of nonperforming assets and past due loans at
the dates indicated:
March 31, December 31,
1996 1995
---- ----
(dollars expressed in thousands)
Nonperforming assets:
Nonperforming loans $ 568 549
Other real estate 927 1,013
------- --------
Total nonperforming assets $ 1,495 1,562
======== ========
Loans past due:
Over 30 days to 90 days $ 6,225 6,649
Over 90 days and still accruing 441 517
------- ------
Total past due loans $ 6,666 7,166
======= =====
Loans, net of unearned discount $180,696 192,573
======== =======
Allowance for possible loan losses to loans 2.65% 2.71%
Nonperforming loans to loans 0.32 0.29
Allowance for possible loan losses to
nonperforming loans 842.79 952.28
Nonperforming assets to loans and foreclosed assets 0.83 0.81
====== ======
As of March 31, 1996 and December 31, 1995, approximately $ million and
$5.2 million, respectively, of loans not included in the table above were
identified by management as having potential credit problems which raised doubts
as to the ability of the borrowers to comply with the present loan repayment
terms.
Impaired loans, consisting of certain nonaccrual loans and consumer and
installment loans which were 60 days or more past due, were $ million and $1.6
million at March 31, 1996 and December 31, 1995, respectively.
The allowance for possible loan losses is based on past loan loss
experience, on management's evaluation of the quality of the loans in the
portfolio and on the anticipated effect of national and local economic
conditions relative to the ability of loan customers to repay. Each month, the
allowance for possible loan losses is reviewed relative to FBA's internal watch
list and other data utilized to determine its adequacy. The provision for
possible loan losses is management's estimate of the amount necessary to
maintain the allowance at a level consistent with this evaluation. As
adjustments to the allowance for possible loan losses are considered necessary,
they are reflected in the results of operations.
The following is a summary of the loan loss experience for the three
month periods ended March 31:
1996 1995
---- ----
(dollars expressed in
thousands)
Allowance for possible loan losses, beginning of period $ 5,228 2,756
Loans charged-off (751) (525)
Recoveries of loans previously charged-off 210 108
------- -------
Net loan (charge-offs) recoveries (541) (417)
------- -------
Provision for possible loan losses 100 450
------- -------
Allowance for possible loan losses, end of period $ 4,787 2,789
======= ======
Liquidity
The liquidity of FBA and the Bank is the ability to maintain a cash
flow which is adequate to fund operations, service its debt obligations and meet
other commitments on a timely basis. The primary sources of funds for liquidity
are derived from customer deposits, loan payments, maturities, sales of
investments and operations. In addition, FBA and the Bank may avail themselves
of more volatile sources of funds through issuance of certificates of deposit in
denominations of $100,000 or more, federal funds borrowed, securities sold under
agreements to repurchase and borrowings from the Federal Home Loan Bank. The
aggregate funds acquired from those sources were $30.7 million at March 31, 1996
and $29.9 million at December 31, 1995.
At March 31, 1996, FBA's more volatile sources of funds mature as
follows:
(dollars expressed in thousands)
Three months or less $ 9,290
Over three months through six months 7,465
Over six months through twelve months 5,110
Over twelve months 8,791
-------
Total $ 30,656
======
Management believes the available liquidity and earnings of the Bank
will be sufficient to provide funds for growth and to meet FBA's operating and
debt service requirements both on a short-term and long-term basis.
Capital
Risk-based capital guidelines for financial institutions are designed
to relate regulatory capital requirements to the risk profiles of the specific
institutions and to provide more uniform requirements among the various
regulators. FBA and the Bank are required to maintain a minimum risk-based
capital to risk-weighted assets ratio of 8.00%, with at least 4.00% being "Tier
1" capital. Tier 1 capital is composed of total stockholders' equity excluding
the net fair value adjustment for securities available for sale and excess net
deferred tax assets, as defined by regulation. In addition, a minimum leverage
ratio (Tier 1 capital to total assets) of 3.00% plus an additional cushion of
100 to 200 basis points is expected.
At March 31, 1996 and December 31, 1995, FBA's and the Bank's capital
ratios were as follows:
Risk-based capital ratios
-------------------------
Total Tier 1 Leverage Ratio
----- ------ --------------
1996 1995 1996 1995 1996 1995
----- ---- ---- ----- ---- ----
FBA 13.42% 11.69% 12.15% 10.43% 8.74% 8.38%
Bank 9.57 8.01 8.31 6.74 6.04 5.38
PART II - OTHER INFORMATION
Item 6 - Exhibit
The exhibit is numbered in accordance with the Exhibit Table of Item 601 of
Regulation S-K.
Exhibit
Number Description
27 Article 9 - Financial Data Schedule
(EDGAR only)
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.
FIRST BANKS AMERICA, INC.
Registrant
Date: May 10, 1996 By: /s/James F. Dierberg
--------------------
James F. Dierberg
Chairman, President
and Chief Executive
Officer
Date: May 10, 1996 By: /s/Allen H. Blake
-----------------
Allen H. Blake
Vice President,
Chief Financial Officer
and Secretary
(Principal Financial Officer)