SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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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, 1997
0R
[ ] 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 33-93312
BEAL FINANCIAL CORPORATION
(Exact name of registrant as specified in its charter)
TEXAS 75-2583551
(State or other jurisdiction of incorporation (I.R.S. Employer Identification
or organization) Number)
SUITE 300, LB66, 15770 NORTH DALLAS PARKWAY, DALLAS, TEXAS 75248
(Address of principal executive offices) (ZIP code)
Registrant's telephone number, including area code: (972) 404-4000
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 [ ]
As of March 31, 1997, there were 300,000 shares of the Registrant's common
stock issued and outstanding.
BEAL FINANCIAL CORPORATION
INDEX
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PAGE
NUMBER
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PART I. FINANCIAL INFORMATION
Item 1. - Financial Statements . . . . . . . . . . . . . . . . . 3
Item 2. - Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . . . . . . 7
PART II. OTHER INFORMATION
SIGNATURES
2
BEAL FINANCIAL CORPORATION
CONSOLIDATED BALANCE SHEETS
(In thousands, except per share data)
March
1997 December
(Unaudited) 1996
------------ ------------
ASSETS
Cash $ 475 $ 449
Interest bearing deposits 67,925 65,491
------------ ------------
CASH AND CASH EQUIVALENTS 68,400 65,940
Accrued interest receivable 18,522 16,361
Securities available for sale 118,299 123,939
Net loans receivable 1,003,725 1,067,393
Less allowance for losses (12,132) (13,189)
------------ ------------
991,593 1,054,204
Federal Home Loan Bank stock 9,755 9,618
Real estate held for investment or sale 109,751 102,680
Premises and equipment, net 6,683 6,803
Other assets 12,703 15,361
------------ ------------
$ 1,335,706 $ 1,394,906
------------ ------------
------------ ------------
LIABILITIES
Deposit accounts $ 1,099,554 $ 1,043,433
Federal Home Loan Bank advances 0 146,000
Senior notes, net 57,116 57,094
Other borrowings 11,997 14,748
Other liabilities 32,221 16,834
------------ ------------
TOTAL LIABILITIES 1,200,888 1,278,109
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Common stock, par value $1 per share
authorized 375,000
issued and outstanding 300,000 300 300
Paid-In capital 2,740 2,740
Unrealized gain (loss) on available for sale
securities, net of tax benefit of $382 at
December 31, 1996. (1,253) 709
Retained earnings 133,031 113,048
------------ ------------
TOTAL STOCKHOLDERS' EQUITY 134,818 116,797
------------ ------------
$ 1,335,706 $ 1,394,906
------------ ------------
------------ ------------
See notes to consolidated financial statements
3
BEAL FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
UNAUDITED
(In thousands, except per share data)
Three Months Ended
March 31,
1997 1996
---------- ----------
Interest Income:
Loans, including fees $ 35,658 $ 31,216
Purchase discount accretion 16,558 11,147
Investment securities 2,730 3,085
---------- ----------
TOTAL INTEREST INCOME 54,946 45,448
Interest expense:
Deposits 14,685 14,363
Federal Home Loan Bank
advances and other borrowings 882 669
Senior notes 1,989 1,982
---------- ----------
TOTAL INTEREST EXPENSE 17,556 17,014
---------- ----------
NET INTEREST INCOME 37,390 28,434
Provision for loan losses 933 927
---------- ----------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 36,457 27,507
Other income
Gain on sales of loans 536 1,385
Gain on real estate transactions 1,344 1,034
Other real estate operations, net 583 264
Other operating income 188 136
---------- ----------
TOTAL NONINTEREST INCOME 2,651 2,819
Other expense
Salaries and employee benefits 2,006 1,910
Occupancy and equipment 647 564
SAIF deposit insurance premium 166 330
Other operating expenses 1,783 1,828
---------- ----------
TOTAL NONINTEREST EXPENSES 4,602 4,632
---------- ----------
INCOME BEFORE INCOME TAXES 34,506 25,694
Income taxes 1,203 9,205
---------- ----------
NET INCOME $ 33,303 $ 16,489
---------- ----------
---------- ----------
Income per common share $ 111.01 $ 54.96
---------- ----------
---------- ----------
Weighted average number of common shares outstanding 300 300
---------- ----------
---------- ----------
See notes to consolidated financial statements
4
BEAL FINANCIAL CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
UNAUDITED
(In thousands)
Three Months
ended March 31
------------------------
1997 1996
--------- ---------
OPERATING ACTIVITIES
Net income $ 33,303 $ 16,489
Adjustments to reconcile net income to net cash
provided by operating activities
Depreciation and amortization 580 484
Accretion of purchased discount (16,558) (11,147)
Provision for loan losses 933 927
Amortization of bond premium and underwriting costs 155 137
Gains on real estate transactions (1,344) (1,034)
Gain on sales of loans (536) (1,385)
Changes in operating assets and liabilities
Accrued interest receivable (2,426) (4,598)
Prepaid expenses and other assets 603 (1,318)
Accrued interest payable-bonds (1,833) (1,833)
Other liabilities and accrued expenses 4,737 4,782
--------- ---------
Net cash used in
operating activities 17,614 1,504
INVESTING ACTIVITIES
Proceeds from sales of loans 12 3,049
Proceeds from paydowns of securities available for sale 3,331 4,388
Proceeds from loan collections, less loan originations and advances 81,245 41,004
Proceeds from sales of real estate 5,892 918
Purchases of loans and bid deposits on loan purchases (10,813) (8,979)
Purchases of securities available for sale - (154,630)
Purchases of federal Home Loan Bank stock (137) (755)
Purchases of real estate held for invest. or sale and partnership/JV interests (1,929) (2,867)
Capitalized interest on real estate investments - (482)
Purchases of premises and equipment (124) (286)
--------- ---------
Net cash provided by (used in)
investing activities 77,477 (118,640)
FINANCING ACTIVITIES
Net increase in deposit accounts 56,120 40,045
Proceeds from long-term debt 162 537
Repayments of long-term debt (2,913) (249)
Repayments of advances from the Federal Home Loan Bank (146,000) 70,000
--------- ---------
Net cash provided by (used in)
financing activities (92,631) 110,333
--------- ---------
Increase (decrease) in cash and
cash equivalents 2,460 (6,803)
Cash and cash equivalents at beginning of period 65,940 35,942
--------- ---------
Cash and cash equivalents at end of period $ 68,400 $ 29,139
--------- ---------
--------- ---------
Supplemental disclosure of cash flow information
Cash paid during the period for
Interest $ 18,158 $ 15,835
Income taxes 186 6,109
Supplemental disclosure of noncash investing and financing activities
Real estate acquired in foreclosure or in settlement of loans $ 9,479 $ 6,395
Assumption of majority stockholder's debt related to initial public offering - -
See Notes to Consolidated Financial Statements
5
BEAL FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE A--BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for
interim financial statements and with instructions to Form 10-Q and Rule 10-1
of Regulation S-X. The financial statements as of March 31, 1997 and for the
three months ended March 31, 1997, and 1996 are unaudited and, in the opinion
of management, include all adjustments necessary (which consist of only
normal recurring adjustments) for a fair presentation of the financial
position and results of operations for the interim periods. The results of
operations for the three month period are not necessarily indicative of the
results to be expected for the full year.
These unaudited financial statements should be read in conjunction with the
financial statements and notes thereto included in the Corporation's annual
report in Form 10-K for the year ended December 31, 1996.
NOTE B--NEW ACCOUNTING PRONOUNCEMENT
The FASB has issued Statement of Financial Accounting Standards No. 128,
Earnings Per Share, which is effective for financial statements issued after
December 15, 1997. Early adoption of the new standard is not permitted. The
new standard eliminates primary and fully diluted earnings per share and
requires presentation of basic and diluted earnings per share together with
disclosure of how the per share amounts were computed. The adoption of this
new standard is not expected to have an effect on the disclosure of earnings
per share in the financial statements.
NOTE C--INCOME TAXES
On March 13, 1997, Beal Financial filed an application with the Internal
Revenue Service to elect Subchapter-S status for federal income tax purposes
effective January 1, 1997. This election covered all subsidiaries of Beal
Financial, including the Bank, except Beal Affordable Housing and BRE-N, Inc.
As a result of the aforementioned application, beginning January 1, 1997,
Beal Financial and all Subchapter-S subsidiaries are no longer required to pay
federal income taxes, except for possible tax liabilities on net built-in
gains as of January 1, 1997, which may be recognized during the ten year
period commencing January 1, 1997. The Company has not yet determined the
amount of net built-in gains as of January 1, 1997.
Except as discussed in the preceding paragraph, the future tax liability for
the taxable income of Beal Financial and the Subchapter-S subsidiaries will
be the responsibility of its shareholders.
6
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
WHEN USED IN THIS FORM 10-Q, THE WORDS "BELIEVES", "ANTICIPATES", "EXPECTS", AND
SIMILAR EXPRESSIONS ARE INTENDED TO IDENTIFY FORWARD LOOKING STATEMENTS. SUCH
STATEMENTS ARE SUBJECT TO CERTAIN RISKS AND UNCERTAINTIES WHICH COULD CAUSE
ACTUAL RESULTS TO DIFFER MATERIALLY. READERS ARE CAUTIONED NOT TO PLACE UNDUE
RELIANCE ON THESE FORWARD LOOKING STATEMENTS WHICH SPEAK ONLY AS OF THE DATE
HEREOF, AND TO ADVISE READERS THAT VARIOUS FACTORS INCLUDING REGIONAL AND
NATIONAL ECONOMIC CONDITIONS, CHANGES IN LEVELS OF MARKET INTEREST RATES, CREDIT
RISK OF LENDING ACTIVITIES, AND COMPETITIVE AND REGULATORY FACTORS, COULD AFFECT
THE COMPANY'S FINANCIAL PERFORMANCE AND COULD CAUSE THE COMPANY'S ACTUAL RESULTS
FOR FUTURE PERIODS TO DIFFER MATERIALLY FROM THOSE ANTICIPATED OR PROJECTED.
THE COMPANY UNDERTAKES NO OBLIGATION TO PUBLICLY RELEASE THE RESULTS OF ANY
REVISIONS TO FORWARD LOOKING STATEMENTS WHICH MAY BE MADE TO REFLECT EVENTS OR
CIRCUMSTANCES AFTER THE DATE HEREOF OR TO REFLECT THE OCCURRENCE OF
UNANTICIPATED EVENTS.
FINANCIAL CONDITION
Beal Financial Corporation ("Beal Financial" and with its Subsidiaries,
the "Company"), the parent company of Beal Bank, ssb, (the "Bank") had total
assets of $1.3 billion at March 31, 1997 representing a decrease of $59.2
million or 4.2 %, from $1.4 billion at December 31, 1996. The decrease
resulted primarily from a decrease in net loans receivable of $62.6 million
and a decrease in securities available for sale of $5.6 million, partially
offset by an increase in real estate held for investment or sale of $7.1
million and an increase in cash and cash equivalents of $2.5 million. The
decrease in net loans receivable was due primarily to normal principal
repayments of loans, early loan payoffs and foreclosures of loans. The
decrease in securities available for sale was the result of repayments. The
increase in real estate held for investment or sale was primarily the result
of foreclosures of loans of $9.5 million and the increase in cash and cash
equivalents was the result of normal operations.
Total liabilities decreased $77.2 million, or 6.0% from $1.3 billion at
December 31, 1996 to $1.2 billion at March 31, 1997, primarily due to a
decline in Federal Home Loan Bank ("FHLB") advances of $146.0 million and a
decline in other borrowings of $2.8 million, partially offset by an increase
in deposits of $56.1 million and an increase in other liabilities of $15.3
million. Advances from the FHLB were repaid primarily with the increase in
deposits and cash flow provided from normal operations. The increase in
deposits for the three months ended March 31, 1997 was primarily due to an
increase in brokered deposits of $56.4 million. The increase in other
liabilities was primarily due to an increase in dividends payable of $13.3
million.
Stockholders' Equity increased $18.0 million from $116.8 million at
December 31, 1996 to $134.8 million at March 31, 1997. The change was
primarily due to net income of $33.3 million, partially offset by a dividend
paid to shareholders of $13.3 million and a $1.9 million increase in the
unrealized loss in the available for sale securities.
7
RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1996
NET INCOME. For the three months ended March 31, 1997, net income of
$33.3 million represented an increase of $16.8 million, or 102.0% from the
three months ended March 31, 1996. As discussed in more detail below, the
increase was primarily due to a $9.0 million increase in net interest income
after provision for loan losses and a decrease in income taxes of $8.0
million.
INTEREST INCOME. Interest income increased $9.5 million, or 20.9%, from
$45.4 million at March 31, 1996 to $54.9 million at March 31, 1997. Of the
total increase in interest income, $4.4 million was due to an increase in
interest income on loans receivable and $5.4 million was due to an increase
in the discount accretion. The average balance of interest-earning assets
increased $62.1 million during this period, as compared to the same period a
year ago, primarily due to an increase in average net loans receivable of
$85.5 million, partially offset by a decrease in average holdings of
mortgage-backed securities of $23.8 million. In addition, net interest spread
increased from 9.77% for the three months ended March 31, 1996 to 12.24% for
the same period ending March 31, 1997 primarily due to an increase in yield
on interest-earning assets from 15.98% to 18.29% for the three month periods
ending March 31, 1996 and March 31, 1997, respectively.
INTEREST EXPENSE. Interest expense increased $542,000, or 3.2%, from
$17.0 million at March 31, 1996 to $17.6 million at March 31, 1997. The
increase resulted from the average balance of interest-bearing liabilities
increasing $65.2 million from $1.1 billion at March 31, 1996 to $1.2 billion
at March 31, 1997 resulting in a $959,000 increase in interest expense,
partially offset by a $417,000 decrease due to a decrease in the average rate
of interest bearing liabilities from 6.21% at March 31, 1996 to 6.05% at
March 31, 1997. The increase in average interest-bearing liabilities was due
to an increase in the average balance of deposits of $63.1 million and the
average balance of FHLB advances of $10.0 million, which were partially
offset by the decline in other borrowings of $7.4 million.
PROVISION FOR LOAN LOSSES. The provision for loan losses is determined
by management as an amount sufficient to maintain the allowance for loan
losses at a level considered adequate to absorb future losses inherent in the
loan portfolio in accordance with generally accepted accounting principles.
The provision for loan losses remained constant for the three months ended
March 31, 1997 as compared to the same period last year primarily due to
similar levels of new loans purchases and originations in the respective
periods.
The Company establishes an allowance for loan losses based upon a
systematic analysis of risk factors in the loan portfolio as well as a
specific analysis of certain impaired loans. This analysis includes an
evaluation of the Company's loan portfolio, past loan loss experience,
current economic conditions, loan volume and growth, composition of the loan
portfolio and other relevant factors. Management's analysis results in the
establishment of allowance amounts by loan type based on allocations by asset
classification. The allowance for loan losses as a percentage of net
non-performing loans was 6.71 % at March 31, 1997 as
8
compared to 6.49 % at December 31, 1996. Net non-performing loans decreased
$22.5 million from $203.3 million at December 31, 1996 to $180.7 million at
March 31, 1997.
Although management believes that it uses the best information available
to determine the allowance, unforeseen market conditions could result in
adjustments and net earnings could be significantly affected if circumstances
differ substantially from the assumptions used in making the final
determination. Future additions to the Company's allowance will be the
result of periodic loan, property and collateral reviews and thus cannot be
predicted with absolute certainty in advance. In addition, regulatory
agencies, as an integral part of the examination process, periodically review
the Company's allowance for loan losses. Such agencies may require the
Company to recognize additions to the allowance level based upon their
judgment of the information available to them at the time of their
examination.
NON-INTEREST INCOME. Total non-interest income decreased $168,000, or
6.0% to $2.7 million at March 31, 1997 from $2.8 million at March 31, 1996.
This decrease was primarily due to a decrease in the income attributable to
the sale of loans of $849,000, partially offset by a increase in the gain on
the sale of real estate transactions of $310,000 and an increase of $319,000
in other real estate operations, net.
NON-INTEREST EXPENSE. Non-interest expense remained virtually constant
at $4.6 million for the three months ended March 31, 1997 and March 31, 1996.
The two largest fluctuations in non-interest expense categories were a
decrease of $164,000 in the SAIF deposit insurance premium due to a decreased
premium rate and an increase of $96,000 in salaries and employee benefits due
to additional staffing relating to increased asset size.
FEDERAL AND STATE TAXATION
FEDERAL TAXATION. Beal Financial filed with the Internal Revenue
Service on March 13, 1997, to elect Subchapter-S status for federal income
tax purposes effective January 1, 1997. This election covered all
subsidiaries of Beal Financial, including the Bank, except for Beal
Affordable Housing, Inc. ("BAH"). and BRE-N, Inc.("BRE-N") (the "Subchapter-S
subsidiaries"), which elected to remain Subchapter-C Corporations for
federal tax purposes. Concurrent with the change to Subchapter-S status,
Beal Financial and all subsidiaries changed their tax and fiscal year-ends to
December 31 from the previous June 30 year-ends. Therefore, Beal Financial
will file a consolidated Subchapter-C federal tax return for the six months
ended December 31, 1996.
In the future, Beal Financial and the Subchapter-S subsidiaries will not
pay any federal taxes on net income. The only exception will involve
possible Subchapter-C tax liability on net built-in gains as of January 1,
1997, which may be recognized during the 10 year period ending December 31,
2006. Recognition of built-in gains/losses are subject to certain
limitations. Beal Financial has not yet determined the amount of net
built-in gains as of January 1, 1997, or the estimated amount of
Subchapter-C taxes to be paid in future periods. BAH and BRE-N will
continue to pay federal income taxes as C-Corporations.
9
The future tax liability for the taxable earnings of Beal Financial and
the Subchapter-S subsidiaries will be the responsibility of the shareholders
of Beal Financial. The Board of Directors of Beal Financial, on March 25,
1997, declared a dividend payable to the shareholders of $13.3 million,
roughly the amount of tax liability to the shareholders associated with the
earnings for the quarter ended March 31, 1997. The dividend was paid to the
shareholders on April 25, 1997. It is anticipated that future dividends to
shareholders will be declared equal to their tax liability related to the
earnings of Beal Financial.
TEXAS STATE INCOME TAXATION. Beal Financial and each subsidiary
currently file Texas franchise tax returns. Texas imposes a franchise tax on
the taxable income of savings institutions and other corporations. The
franchise tax equals the greater of $2.50 per $1,000 of taxable capital
apportioned to Texas, or $4.50 per $1,000 net taxable earned surplus
apportioned to Texas. Taxable earned surplus is the federal corporate
taxable income of each company within the corporate group determined on a
separate company basis with certain modifications. At March 31, 1997, the
Company accrued $1.2 million in franchise tax payable.
10
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary sources of funds for operations are deposits obtained
from its market area, principal and interest payments on loans, brokered
deposits, and advances from the FHLB of Dallas and to a lesser extent, from the
sale of assets. While maturities and scheduled amortization of loans are
predictable sources of funds, deposit flows and mortgage prepayments are greatly
influenced by general interest rates, economic conditions, and competition.
Historically, the primary investing activity of the Company has been the
purchase of discounted loans from various U.S. government agencies through the
sealed bid process or auctions and other private sector sellers. During the
three ended March 31, 1997, the Company purchased $10.8 million of net loans.
Loan originations for the three months ended March 31, 1997 totaled $5.9
million.
The Company's primary financing activity is the attraction of deposits.
During the three months ended March 31, 1997, the Company experienced a net
increase in deposits of $56.1 million, primarily due to a $56.4 million increase
in deposits generated by deposit brokers during the three months ended March 31,
1997. The increase in deposits for the three months ended March 31, 1997 along
with cash flow from normal operations were used to fund the decrease in FHLB
advances of $146.0 million. The Company had Senior Notes, net, of $57.1 million
and other borrowings of $12.0 million at March 31, 1997.
The Company has the ability to borrow additional funds from the FHLB of
Dallas by pledging assets as collateral, subject to certain restrictions. At
March 31, 1997, the Company had an undrawn advance arrangement with the FHLB for
$142.2 million.
The Bank is required to maintain minimum levels of liquid assets as defined
by the Texas Savings and Loan Department ("Texas Department"). Unless approved
in advance by the Texas Department, a Texas savings bank is required to maintain
a minimum of 10% of the previous quarters average deposits in liquid assets. At
March 31, 1997, the Bank's liquidity ratio was 16.98%.
The Company's most liquid asset is cash and cash equivalents. The level of
cash equivalents is dependent on the Company's operating, financing, and
investing activities during any given period. At March 31, 1997, the Company
had cash and cash equivalents of $68.4 million.
The Company anticipates that it will have sufficient funds available to
meet its current foreseeable commitments. At March 31, 1997, the Company had
commitments to originate loans of $53.8 million and no outstanding commitments
to purchase loans. Certificates of deposits which are scheduled to mature in
one year of less at March 31, 1997 totaled $829.4 million. Due to the Company's
high interest rate spread, management has typically relied upon interest rate
sensitive short-term deposits to fund its loan purchases. The Company believes
the
11
potential interest rate risk is acceptable in view of the Company's belief
that it can maintain an acceptable net interest spread.
At March 31, 1997, the Bank exceeded each of its three capital
requirements. The following is a summary of the Bank's regulatory capital
position at March 31, 1997.
At March 31, 1997
----------------------------------------
Required(1) Actual
------------------ ------------------
Amount Percent Amount Percent
-------- ------- -------- -------
(Dollars in Thousands)
Leverage capital .............. $119,312 9.00% $159,727 12.05%
Tier 1 capital ................ 41,531 4.00 159,727 15.38
Total risk-based capital ...... 114,210 11.00 171,859 16.55
- -----------------
(1) Required leverage and total risk-based capital requirements represent higher
capital requirements imposed by the Texas Department as a condition to the
Bank's continued asset growth.
IMPACT OF INFLATION AND CHANGING PRICES
The Consolidated Financial Statements and Notes thereto presented herein
have been prepared in accordance with generally accepted accounting principles,
which require 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. Nearly all the
assets and liabilities of the corporation are financial, unlike most industrial
companies. As a result, the Company's performance is directly impacted by
changes in interest rates, which are indirectly influenced by inflationary
expectations. Since the Company has historically placed more emphasis on
increasing net interest margin rather than on matching the maturities of
interest rate sensitive assets and liabilities, changes in interest rates may
have a greater impact on the Company's financial condition and results of
operations. Changes in investment rates do not necessarily move to the same
extent as changes in the price of goods and services.
RATIOS OF EARNING TO FIXED CHARGES
The Company's consolidated ratios of earnings to fixed charges for the
three months ended March 31, 1997 are set forth below. Earnings used in
computing the ratios shown consist of earnings from continuing operations before
taxes and interest expense. Fixed charges, excluding interest on deposits,
represent interest expense on borrowings. Fixed charges, including interest on
deposits, represent all of the foregoing items plus interest on deposits.
Interest expense (other than on deposits) includes interest on FHLB of Dallas
borrowings, the Senior Notes and other borrowed funds.
For the Three Months Ended
March 31, 1997
--------------------------
Excluding interest on deposits . . . . . . . 13.0:1
Including interest on deposits . . . . . . . 2.1:1
12
PART II. OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
The Company is not currently involved in any legal proceedings. The Bank
is involved in various legal proceedings occurring in the ordinary course of
business. Management of the Bank, based on discussions with litigation counsel,
believes that such proceedings will not have a material adverse effect on the
financial condition or operations of the Bank. There can be no assurance that
any of the outstanding legal proceedings to which the Bank is a party will not
be decided adversely to the Company's interests and have a material adverse
effect on the financial position or results of operations of the Company.
There have been no material developments to the Kenneth L. Musgrave vs.
Beal Banc, S.A. lawsuit described in the Form 10-K submission for the period
ending December 31, 1996.
Item 2. CHANGES IN SECURITIES
None.
Items 3. DEFAULTS UPON SENIOR SECURITIES
None.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
Item 5. OTHER INFORMATION
None.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibit 27--Financial Data Schedule
(b) On February 11, 1997, the Company filed a Current Report on Form 8-K
to report a press release issued on February 6, 1997 announcing that its
shareholders had unanimously approved a change in the tax status of Beal
Financial and the Subchapter-S subsidiaries for federal income tax purposes by
electing Subchapter-S Corporation status. Accordingly, Beal Financial and all
subsidiaries also changed their fiscal year end from June 30 to December 31.
13
SIGNATURES
Pursuant to the requirement 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.
BEAL FINANCIAL CORPORATION
Registrant
Date: May 20, 1997 /s/ DAVID C. MEEK
-----------------------------------------
David C. Meek, President
Date: May 20, 1997 /s/ DAVID R. FARMER
-----------------------------------------
David R. Farmer, Senior Vice President and
Treasurer (Chief Financial and
Accounting Officer)
14