FORM 10-QSB
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the period ended December 31, 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 0-24848
East Texas Financial Services, Inc.
(Exact name of registrant as specified in its charter)
Delaware 75-2559089
(State or other jurisdiction of (I.R.S. employer
incorporation or organization identification number)
1200 South Beckham, Tyler, Texas 75701
(Address of principal executive offices) (Zip code)
(903) 593-1767
(Registrant's telephone number, including area code)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 of 15(d) of the Securities Exchange Act of 1934 during the past 12
months (or for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past 90
days. [ x ] Yes [ ] No
The number of shares of the registrant's common stock ($.01 par value)
outstanding as of December 31, 1998, was 1,464,056.
EAST TEXAS FINANCIAL SERVICES, INC.
AND SUBSIDIARY
FORM 10-QSB
DECEMBER 31, 1998
INDEX
Part I - Financial Information
Item 1. Financial Statements
Consolidated Statements of Financial Condition, December 31, 1998
(Unaudited) and September 30, 1998
Consolidated Statements of Income, (Unaudited) three months ended
December 31, 1998, and December 31, 1997
Consolidated Statement of Changes in Stockholders' Equity, (Unaudited)
three months ended December 31, 1998
Consolidated Statements of Cash Flows, (Unaudited) three months ended
December 31, 1998, and December 31, 1997
Notes to (Unaudited) Consolidated Financial Statements, December 31,
1998..............
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Part II - Other Information
Item 1. Legal Proceedings
Item 2. Changes In Securities
Item 3. Defaults Upon Senior Securities
Item 4. Submission of Matters To a Vote of Security Holders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
Signature Page
EAST TEXAS FINANCIAL SERVICES, INC.
AND SUBSIDIARY
FORM 10-QSB
DECEMBER 31, 1998
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
East Texas Financial Services, Inc. (the "Company") was formed in September of
1994 for the purpose of acquiring all of the common stock of First Federal
Savings and Loan Association of Tyler (the "Association"), concurrent with its
conversion from the mutual to stock form of ownership. The Company completed its
initial public stock offering of 1,215,190 shares of $.01 par value common stock
on January 10, 1995. The Company utilized approximately one half of the net
stock sale proceeds to acquire all of the common stock issued by the
Association. For additional discussion of the Company's formation and intended
operations, see the Form S-1 Registration Statement (No. 33-83758) filed with
the Securities and Exchange Commission and the Company's Annual Report on Form
10-KSB for the fiscal year ended September 30, 1998, also filed with the
Commission.
The financial statements presented in this Form 10-QSB reflect the consolidated
financial condition and results of operations of the Company and its wholly
owned subsidiary, First Federal Savings and Loan Association of Tyler.
EAST TEXAS FINANCIAL SERVICES, INC.
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
ASSETS December 31, 1998 September 30, 1998
----------------- ------------------
(Unaudited)
Cash and due from banks ........................................ $ 493,628 $ 592,363
Interest-bearing deposits with banks ........................... 8,688,440 1,104,695
Interest-earning time deposits with financial institutions ..... 1,959,617 1,959,617
Federal funds sold ............................................. 0 129,187
Mortgage-backed securities available-for-sale .................. 19,380,931 12,810,165
Investment securities held-to-maturity (estimated market
value of $24,770,764 at December 31, 1998, and
$30,115,954 at September 30, 1998) ........................ 24,528,748 29,766,844
Mortgage-backed securities held-to-maturity (estimated
market value of $9,844,468 at December 31, 1998
and $11,088,555 at September 30, 1998) .................... 9,472,284 10,940,500
Loans receivable, net of allowance for credit losses of
$233,180 at December 31, 1998 and at September 30, 1998 ... 60,706,438 61,119,047
Accrued interest receivable .................................... 939,058 978,378
Federal Home Loan Bank stock, at cost .......................... 1,144,200 789,100
Premises and equipment ......................................... 2,425,879 2,273,067
Foreclosed real estate, net of allowance of $-0- ............... 2,068 34,500
Mortgage servicing rights ...................................... 249,731 216,879
Other assets ................................................... 574,897 1,303,120
------------- -------------
Total Assets .............................................. $ 130,565,919 $ 124,017,462
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Demand deposits ........................................... $ 3,210,827 $ 1,528,374
Savings and NOW deposits .................................. 10,909,801 10,504,973
Other time deposits ....................................... 73,638,912 74,610,310
------------- -------------
Total deposits ...................................... 87,759,540 86,643,657
FHLB advances ............................................. 21,799,354 14,945,852
Advances from borrowers for taxes and insurance ........... 59,757 844,188
Federal income taxes
Current ............................................. 84,550 -0-
Deferred ............................................ 49,056 31,618
Accrued expenses and other liabilities .................... 297,980 1,168,453
------------- -------------
Total liabilities ................................... 110,050,237 103,633,768
------------- -------------
EAST TEXAS FINANCIAL SERVICES, INC.
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(continued)
December 31, 1998 September 30, 1998
----------------- ------------------
(Unaudited)
Stockholders' equity:
Preferred stock, $0.01 par value, 500,000
shares authorized, none outstanding
Common stock, $0.01 par value, 5,500,000 shares authorized,
1,884,492 shares issued and 1,464,056 outstanding ...... 18,845 18,845
Additional paid-in-capital ................................ 12,319,624 12,319,624
Deferred compensation - RRP shares ........................ (184,271) (213,366)
Unearned employee stock ownership plan shares ............. (543,564) (543,564)
Unrealized gain/(loss) available-for-sale securities (net) (64,648) (64,974)
Retained earnings (substantially restricted) .............. 13,763,959 13,661,392
Treasury stock, 420,436 shares at cost .................... (4,794,263) (4,794,263)
------------- -------------
Total stockholder's equity .......................... 20,515,682 20,383,694
------------- -------------
Total liabilities and stockholders' equity .......... $ 130,565,919 $ 124,017,462
============= =============
The accompanying notes are an integral part of the consolidated financial
statements.
EAST TEXAS FINANCIAL SERVICES, INC.
CONSOLIDATED STATEMENTS OF INCOME
Three Months Ended December 31,
(unaudited)
1998 1997
----------- ----------
INTEREST INCOME
Loans receivable:
First mortgage loans ......................................... $1,122,187 $1,134,833
Consumer and other loans ..................................... 76,009 29,305
Securities available-for-sale:
Investment securities ........................................ 14,535 15,209
Mortgage-backed securities ................................... 264,320 64,390
Securities held to maturity
Investment securities ........................................ 467,306 393,909
Mortgage-backed securities ................................... 178,700 314,702
Deposits with banks .......................................... 33,083 76,962
---------- ----------
Total interest income ........................................ 2,156,140 2,029,310
---------- ----------
INTEREST EXPENSE
Deposits ......................................................... 1,083,531 1,123,670
FHLB advances .................................................... 251,218 62,173
---------- ----------
Total interest expense ....................................... 1,334,749 1,185,843
---------- ----------
Net interest income before provision
for loan losses ........................................... 821,391 843,467
Provision for loan losses ........................................ 0 0
---------- ----------
Net interest income after provision
for loan losses ........................................... 821,391 843,467
---------- ----------
NONINTEREST INCOME
Gain (loss) on sales of interest-earnings assets ................. 76,476 21,437
Loan origination and commitment fees ............................. 23,608 22,963
Loan servicing fees .............................................. 10,783 22,303
Gain on foreclosed real estate ................................... 2,370 0
Other ............................................................ 54,462 10,712
---------- ----------
Total noninterest income ..................................... 167,699 77,415
---------- ----------
EAST TEXAS FINANCIAL SERVICES, INC.
CONSOLIDATED STATEMENTS OF INCOME
(continued)
NONINTEREST EXPENSE
Compensation and benefits ........................................ 510,075 492,110
Occupancy and equipment .......................................... 72,605 48,246
SAIF deposit insurance premium ................................... 12,984 14,147
Loss on foreclosed real estate ................................... 2,069 0
Other ............................................................ 116,536 139,666
---------- ----------
Total noninterest expense .................................... 714,269 694,169
---------- ----------
Income (loss) before provision for income taxes ....................... 274,821 226,713
Income tax expense (benefit) .......................................... 99,050 82,409
---------- ----------
NET INCOME (LOSS) ..................................................... $ 175,771 $ 144,304
========== ==========
Earnings per common share and earnings per
common share - assuming dilution ................................. $ .13 $ .10
The accompanying notes are an integral part of the financial statements
EAST TEXAS FINANCIAL SERVICES, INC.
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
(UNAUDITED)
THREE MONTHS ENDED
December 31, 1998
Common Stock Unearned Unallocated Unrealized
and Additional RRP ESOP Gain(loss) on Retained Treasury
Paid in Capital Shares Shares AFS Securities Earnings Stock
------------- ------------ ---------- ----------- ----------- -----------
Balance September 30, 1998 $ 12,338,469 $ (213,366) $ (543,564) $ (64,974) $13,661,392 $(4,794,263)
Comprehensive income:
Net income 175,771
Unrealized holding gains 326
Comprehensive income
Deferred compensation
amortization 29,095
Purchase of treasury stock
at cost
Payment of cash dividends (71,968)
Accrued dividends - RRP stock (1,236)
(1,236)
Balance December 31, 1998 $ 12,338,469 $ (184,271) $ (543,564) $ (64,648) $13,763,959 $(4,794,263)
============= ============ =========== ============ =========== ============
EAST TEXAS FINANCIAL SERVICES, INC.
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
(UNAUDITED)
THREE MONTHS ENDED
December 31, 1998
(continued)
Total
Comprehensive Stockholders'
Income Equity
------------- ----------------
Balance September 30, 1998 $ $ 20,383,694
Comprehensive income:
Net income 175,771 175,771
Unrealized holding gains 326 326
-------------
Comprehensive income $ 176,097
=============
Deferred compensation
amortization 29,095
Purchase of treasury stock
at cost
Payment of cash dividends (71,968)
Accrued dividends - RRP stock (1,236)
Balance December 31, 1998 $ 20,515,682
================
The accompanying notes are an integral part of the consolidated financial
statements.
EAST TEXAS FINANCIAL SERVICES, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
For the Three Months Ended
December 31,
1998 1997
----------- -----------
Cash flows from operating activities:
Net income .............................................. $ 175,771 $ 144,304
Adjustments to reconcile net income to net cash
provided by operating activities:
Amortization of deferred loan origination fees ...... (1,830) (1,483)
Amortization of premiums and discounts on investment
securities, mortgage-backed securities, and loans 39,270 29,964
Amortization of deferred compensation ............... 29,095 29,096
Compensation charge related to release of ESOP shares 14,590 31,216
Depreciation ........................................ 23,095 25,413
Deferred income taxes ............................... 16,946 3,956
Stock dividends on FHLB stock ....................... (14,500) (15,200)
Origination of mortgage servicing rights ............ (57,636) (16,967)
Amortization of mortgage servicing rights ........... 24,784 8,686
Net (gain) loss on sale of:
Securities held to maturity .................... 0 0
Foreclosed real estate ......................... 2,069 0
Fixed assets ................................... 0 0
Net loss on disposal of fixed assets ........... 0 3,889
Other assets ................................... 0 0
Loans .......................................... (18,841) (21,438)
Loans held for sale ............................ 0 0
Proceeds from loan sales ............................ 4,443,332 1,596,651
Originations of loans held for sale ................. 0 0
Proceeds from sale of fixed assets .................. 0 0
(Increase) decrease in:
Accrued interest receivable .................... 39,320 (37,115)
Other assets ................................... 728,223 (109,418)
Accrued loan loss .............................. 0 0
Increase (decrease) in:
Federal income tax payable ..................... 84,550 0
Accrued expenses and other liabilities ......... (885,063) (1,056,249)
Capitalized interest on time deposits ............... 0 0
----------- -----------
Net cash provided (used) by operating activities ............. 4,643,175 615,305
----------- -----------
The accompanying notes are an integral part of the financial statements.
EAST TEXAS FINANCIAL SERVICES, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
For the Three Months Ended
December 31,
1998 1997
------------ ------------
Cash flows from investing activities
Purchases of interest earning time deposits ....................... $ 0 $ 0
Net decrease (increase) in fed funds sold ......................... 129,187 (1,917,569)
Purchases of obligations - U.S. Govt. and agencies
held to maturity ............................................... 0 (6,533,031)
Proceeds from maturity of time deposits ........................... 0 98,000
Proceeds from sale of securities held to maturity ................. 0 0
Proceeds from maturities of obligations - U.S. Govt ...............
and agencies held to maturity .................................. 5,225,000 3,500,000
Proceeds from sale of obligations of U.S. Govt ....................
and agencies held to maturity .................................. 0 0
Purchases of FHLB stock ........................................... (340,600) 0
Purchases of mortgage-backed securities available-for-sale ........ (8,005,395) (2,029,452)
Purchases of mortgage-backed securities held to maturity .......... 0 0
Principal payments on mortgage-backed securities available for sale 1,414,236 312,146
Principal payments on mortgage-backed securities held to maturity . 1,463,129 1,847,047
Net originations and principal collections on loans ............... (4,013,234) (4,762,692)
Capitalized acquisition cost related to foreclosed real estate .... 0 0
Proceeds from sale of foreclosed real estate ...................... 32,432 0
Proceeds from sale of fixed assets ................................ 0 0
Expenditures for premises and equipment ........................... (175,906) (352)
------------ ------------
Net cash provided (used) by investing activities ....................... (4,271,151) (9,485,903)
------------ ------------
Cash flows from financing activities: Net increase (decrease) in:
Non-interest bearing deposits, savings, NOW accounts .......... 2,087,281 2,306,510
Time deposits ................................................. (971,398) 198,937
FHLB Advances ................................................. 53,762,000 15,738,500
Repayment of FHLB Advances .................................... (46,908,498) (12,411,500)
Advances from borrowers for taxes and insurance ............... (784,431) (709,807)
Dividends paid to stockholders .................................... (71,968) (51,318)
Purchase of treasury stock ........................................ 0 0
Proceeds from sale of common stock ................................ 0 0
------------ ------------
Net cash provided (used) by financing activities ....................... 7,112,986 5,071,322
------------ ------------
EAST TEXAS FINANCIAL SERVICES, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
(continued)
For the Three Months Ended
December 31,
1998 1997
------------ ------------
Net increase (decrease) in cash and cash equivalents ................... 7,485,010 (3,799,276)
Cash and cash equivalents at beginning of the period ................... 1,697,058 6,931,133
------------ ------------
Cash and cash equivalents at end of the period ......................... $ 9,182,068 $ 3,131,857
============ ============
Supplemental disclosure:
Cash paid for:
Interest on deposits .......................................... $ 555,881 $ 561,505
Income taxes .................................................. $ 60,707 $ 0
Transfers from loans to real estate
acquired through foreclosures .................................. $ 0 $ 0
Loans charged off to loan loss reserves ........................... $ 0 $ 0
Recoveries credited to loan loss reserves ......................... $ 0 $ 0
The accompanying notes are an integral part of the consolidated financial
statements
EAST TEXAS FINANCIAL SERVICES, INC.
AND SUBSIDIARY
NOTES TO (UNAUDITED) CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998
NOTE 1 - BASIS OF PRESENTATION
The financial statements presented in this report have been prepared by the
Company pursuant to the rules and regulations of the Securities and Exchange
Commission for interim reporting and include all adjustments which are, in the
opinion of management, necessary for fair presentation. These financial
statements have not been audited by an independent accountant. Certain
information and footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have been
condensed or omitted pursuant to such rules and regulations for interim
reporting. The Company believes that the disclosures are adequate to make the
information not misleading. However, these financial statements should be read
in conjunction with the financial statements and notes thereto included in the
Company's Annual Report on Form 10-KSB for the year ended September 30, 1998.
The financial data and results of operations for interim periods presented may
not necessarily reflect the results to be anticipated for the complete year.
NOTE 2 - EARNINGS PER SHARE
Earnings per common share for the three months ended December 31, 1998 and 1997,
has been computed based on net income divided by the weighted average number of
common shares outstanding during the period. For the three months ended December
31, 1998 and 1997, the weighted average number of shares outstanding totaled
1,382,520 and 1,441,956 (as adjusted for the March 1998 three for two stock
split in the form of a 50% stock dividend), shares respectively
Earnings per common share - assuming dilution, for the three months ended
December 31, 1998 and 1997, has been computed based on net income divided by the
weighted average number of common shares outstanding. In addition, it includes
the effects of all dilutive potential common shares that were outstanding during
the period. For the three months ended December 31, 1998 and 1997, the weighted
average number of shares outstanding for earnings per share - assuming dilution
totaled 1,394,533 and 1,490,741 (as adjusted for the above referenced stock
split), shares respectively.
For both earnings per share and earnings per common share - assuming dilution
and as prescribed by the American Institute of Certified Public Accountants
Statement of Position 93-6 ("SOP 93-6") Employer's Accounting for Employees
Stock Ownership Plans, the weighted average number of shares outstanding does
not include unallocated Employee Stock Ownership Plan ("ESOP") shares.
See Part II, Item 6 - Exhibits for a detailed presentation of the earnings per
share calculation for the three-month periods ended December 31, 1998 and 1997.
NOTE 3 - SECURITIES
The amortized cost and estimated market values of investment securities
held-to-maturity as of December 31, 1998 are as follows:
Gross Gross Estimated
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
----------- -------- ----------- ------------
Debt securities:
U. S. Treasury .......... $ 2,503,043 $ 19,947 $ 0 $ 2,522,990
U. S. government agency
22,025,705 222,069 0 22,247,774
----------- -------- ----------- -----------
Total debtsecurities $24,528,748 $242,016 $ 0 $24,770,764
----------- -------- ----------- -----------
The amortized cost and estimated market values of investment securities
held-to-maturity as of December 31, 1998, by contractual maturity are shown
below:
Estimated
Amortized Market
Cost Value
----------- -----------
Due in one year or less ...................... $ 8,029,826 $ 8,083,132
Due after one year through two years.......... 3,993,250 4,072,488
Due after two years through three years ...... 0 0
Due after three years through five years
12,505,672 12,615,144
----------- -----------
Total debt securities ................ $24,528,748 $24,770,764
----------- -----------
As of December 31, 1998, each of the securities due after three and through five
years had call options exercisable at the discretion of the issuer. Such call
dates varied between February 1999 and June 2001.
As of December 31, 1998, the weighted average yield on the Company's investment
security held-to-maturity portfolio was approximately 6.01% while the Company's
overall investment portfolio, including securities held-to-maturity, overnight
deposits and interest earning time deposits with other financial institutions
was approximately 5.68%.
The carrying values and estimated market values of mortgage-backed and related
securities available-for-sale as of December 31, 1998 by type of security are as
follows:
Principal Unamortized Unearned Unrealized Carrying
Balance Premiums Discounts Gain/(Loss) Value
----------- -------- -------- ------------ -----------
Fixed Rate .... $ 1,478,332 $ 0 $ 14,189 $ (20,293) $ 1,443,850
Adjustable Rate 17,753,716 261,024 0 (77,659) 17,937,081
----------- -------- -------- ------------ -----------
$19,232,048 $261,024 $ 14,189 $ (97,952) $19,380,931
----------- -------- -------- ------------ -----------
The carrying values and estimated market values of mortgage-backed and related
securities held-to-maturity as of December 31, 1998 by type of security are as
follows:
Principal Unamortized Unearned Unrealized Carrying
Balance Premiums Discounts Gain/(Loss) Value
----------- -------- -------- ------------ -----------
Fixed Rate .... $1,414,338 $ 0 $ 946 $1,413,392 $1,584,802
Adjustable Rate 8,000,142 67,944 9,194 8,058,892 8,259,666
---------- ------- ---------- ---------- ----------
$9,414,480 $67,944 $ 10,140 $9,472,284 $9,844,468
---------- ------- ---------- ---------- ----------
The overall yield on the Company's mortgage-backed securities portfolio as of
December 31, 1998 was approximately 6.36%.
NOTE 4 - CURRENT ACCOUNTING ISSUES
SFAS No. 130 In June of 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards (SFAS ) No. 130, Reporting
Comprehensive Income. SFAS No. 130 establishes standards for reporting and
displaying comprehensive income and its components in general purpose financial
statements. Comprehensive income includes net income and several other items
that current accounting standards require to be recognized outside of net
income.
SFAS No. 130 requires companies to display comprehensive income in its financial
statements, to classify items of comprehensive income by their nature in their
financial statements and to display accumulated balances of comprehensive income
in stockholders' equity separately from retained earnings and addition paid-in
capital.
The Statement is effective for fiscal years beginning after December 31, 1997.
The Company adopted the Statement as required.
SFAS No. 131 In June of 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards (SFAS) No. 131, Disclosure About
Segments of and Enterprise and Related Information. The Statement requires
entities to report certain information about their operating segments in a
complete set of financial statements. It requires them to report certain
enterprise-wide information about their products and services, activities in
different geographic regions and their reliance on major customers, and to
disclose certain segment information in their interim financial statements.
The Statement is effective for fiscal years beginning after December 15, 1997.
The Company has determined that it has no reporting obligations under this
statement. The Company adopted the Statement as required.
SFAS No. 132 In February of 1998, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standard (SFAS) No. 132, Employers'
Disclosures about Pensions and Other Postretirement Benefits. SFAS No. 132
revises current disclosures for employers' disclosures for pensions and other
postretirement benefit plans. It standardizes the disclosure requirements for
these plans to the extent possible, and it requires additional information about
changes in the benefit obligations and the fair value of plan assets that are
expected to enhance financial analysis. It does not change measurement or
recognition standards for these plans.
SFAS No. 132 is effective for fiscal years beginning after December 15, 1997.
The Company anticipates changing the disclosure requirements of its defined
benefit pension plan as a result of the statement. The Company has no other
postretirement benefit plans.
SFAS No. 133 In June of 1998, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards (SFAS) No. 133, Accounting for
Derivative Instruments and Hedging Activities. SFAS No. 133 establishes
accounting and reporting standards for derivative instruments and requires
recognition of all derivatives in the statement of financial position at fair
value. The Company currently does not invest in any derivative instruments or
hedging activities as defined in this Statement.
The Statement is effective for fiscal years beginning after June 15, 1999. The
Company adopted the Statement as required.
NOTE 5 - STOCK OPTION AND INCENTIVE PLAN
The 1995 Stock Option and Incentive Plan (the "Stock Option Plan") provides for
awards in the form of stock options, stock appreciation rights, limited stock
appreciation rights, and restricted stock.
Options to purchase shares of common stock of the Company may be granted to
selected directors, officers and key employees. The number of shares of common
stock reserved for issuance under the stock option plan was equal to 121,519 or
10% of the total number of common shares issued pursuant to the conversion. The
option exercise price cannot be less than the fair market value of the
underlying common stock as of the date of the option grant, and the maximum
option term cannot exceed ten years. Awards vest at a rate of 20% per year
beginning at the date of the grant. The Company plans to use treasury stock for
the exercise of options. The following is a summary of changes in options
outstanding:
Options outstanding
Balance, September 30, 1995 103,411
Granted -0-
Exercised at $14.125 per share (2,090)
Forfeited and expired -0-
Balance, September 30, 1996 101,321
Granted -0-
Exercised at $14.125 per share (1,056)
Forfeited and expired -0-
Balance, September 30, 1997 100,276
=======
On March 25, 1998, the Company completed a 3 for 2 stock split in the form of a
50% dividend. As a result of the split, the number of outstanding options,
option price, options exercisable at year end, and shares available for future
grants were adjusted as follows:
Options outstanding
Balance, September 30, 1997 150,411
Granted -0-
Exercised at $9.42 per share (1,568)
Forfeited and expired -0-
Balance, September 30, 1998 148,843
=======
Options exercisable at December 31, 1998 under stock option plan 86,807
========
Shares available for future grants 27,162
========
During the three months ended December 31, 1998, there were no changes to the
options outstanding.
NOTE 6 - ADVANCES FROM FEDERAL HOME LOAN BANK
The outstanding advances from the FHLB consisted of the following at December
31, 1998:
Maturity 1998 Rate
-------- ---- ----
01/04/1999 $ 20,025,000 4.85%
12/31/2004 $ 258,643 6.09%
01/03/2005 $ 124,842 6.03%
01/01/2013 $ 480,749 6.09%
01/01/2013 $ 456,771 6.13%
02/01/2013 $ 453,349 5.91%
Pursuant to collateral agreements with the Federal Home Loan Bank (FHLB),
advances are secured by all stock and deposit accounts in the FHLB, mortgage
collateral, securities collateral, and other collateral.
NOTE 7 - COMMON STOCK SPLIT
On March 25, 1998, the Company completed a 3 for 2 stock split in the form of a
50% stock dividend. The effect of the split is presented retroactively within
stockholder's equity by transferring the par value of the additional shares from
retained earnings to additional paid in capital. All share per share data,
including stock option plan information, has been retroactively restated to
reflect the stock split.
EAST TEXAS FINANCIAL SERVICES, INC.
AND SUBSIDIARY
FORM 10-QSB
DECEMBER 31, 1998
Item 2 - Management's Discussion and Analysis of Financial Condition and Results
of Operations
GENERAL
The principle business of the Company is that of a community-oriented financial
institution attracting deposits from the general public and using such deposits
to originate one- to four-family residential loans and, to a lesser extent,
commercial real estate, one- to four-family construction, multi-family and
consumer loans. These funds have also been used to purchase mortgage-backed
securities, U. S. government and agency obligations and other permissible
securities. The Company also borrows funds from the Federal Home Loan Bank of
Dallas to fund loans and to purchase securities. The ability of the Company to
attract deposits is influenced by a number of factors, including interest rates
paid on competing investments, account maturities and levels of personal income
and savings. The Company's cost of funds is influenced by interest rates on
competing investments and general market rates of interest. Lending activities
are influenced by the demand for real estate loans and other types of loans,
which is in turn affected by the interest rates at which such loans are made,
general economic conditions affecting loan demand, the availability of funds for
lending activities, economic conditions and changes in real estate values.
The Company's results of operations are dependent primarily on net interest
income, which is the difference between the income earned on its loan and
investment portfolios and the interest paid on deposits and borrowings. Results
of operations are also affected by the Company's provision for loan losses and
the net gain (loss) on sales of interest earning assets and loan fees. The
Company's results of operations are also significantly affected by general
economic and competitive conditions, particularly changes in interest rates,
government policies and actions of regulatory authorities.
To better serve its existing customers and to attract new customers, the Company
will be adding additional lines of business in 1999. The need for higher
yielding assets with less likelihood to refinance, less reliance on certificates
of deposits as the Company's primary source of funds, and a greater reliance on
income from sources other than net interest income are the principal objectives
of the decision to add new lines of business. While existing products and
services such as single-family mortgage loans and home equity loans will
continue to be offered, additional products and services will be added.
Additional products and services to be offered include commercial and consumer
loans, debit and credit cards, an ATM machine and cards, safe deposit boxes,
investment brokerage services and a full range of checking and deposit accounts.
In conjunction with the added business lines, the Company has received
regulatory approval to open a full service branch office in South Tyler.
Staffing has been completed, and the premises and equipment is close to
completion. The Company anticipates the full service branch office to be open
for business in the early part of 1999, and the Company will offer a complete
line of banking services at the new location as well as its two other full
service offices.
The start-up costs associated with the expansion will be significant and the
Company does not anticipate the new branch office to be profitable immediately.
However, management believes that the long-term future of the Company is
dependent upon the success of this change.
FINANCIAL CONDITION
Total assets were $130.6 million at December 31, 1998, a $6.6 million increase
from the $124.0 million reported at September 30, 1998, the Company's most
recent fiscal year end. The increase in total assets was primarily the result of
a $6.6 million increase in mortgage-backed securities available-for-sale and a
$7.6 million increase in interest-bearing deposits with banks. The increases
were partially offset by a $5.2 million decrease in investment securities held
to maturity and a $1.4 million decrease in mortgage-backed securities held to
maturity. The increase in interest-bearing deposits was a result of proceeds
from maturing investment securities being temporarily placed in interest-bearing
deposits. Subsequent to December 31, 1998, the Company invested all of its
excess overnight deposits into longer term and higher yielding securities.
At December 31, 1998, loans receivable totaled $60.7 million, compared to $61.1
million at September 30, 1998. The decrease in loans receivable was the result
of the Company's election to sell 15 year fixed rate mortgage loans with
interest rates below 7.00% in the secondary market rather than portfolio the
loans. Although the Company has continued its policy of placing all one- to
four-family loans with original terms of less than or equal to 15 years and with
interest rates of greater than or equal to 7.00% into portfolio, fewer mortgage
loans have been placed into portfolio as mortgage loan rates have consistently
been below 7.00% during the quarter ended December 31, 1998. The Company
continued its policy of selling all one- to four-family loans with terms of
greater than 15 years into the secondary market.
At December 31, 1998, the Company reported $19.4 million in mortgage-backed
securities available-for-sale, compared to $12.8 million at September 30, 1998.
The increase was the result of the Company's continued program of borrowing
funds from the FHLB and investing the proceeds into mortgage-backed and similar
securities in an effort to achieve a positive margin on the transaction.
Subject to favorable interest rate spreads, the Company intends to continue its
program of investing in mortgage-backed and other similar securities held in an
available-for-sale accounting classification. The Company will continue to
utilize its ability to borrow short term funds from the FHLB to fund the
program. The Company anticipates investing up to an additional $20 million in
mortgage-backed and similar securities available-for-sale. The purpose of the
program is to leverage a portion of the Company's excess capital and to achieve
a rate of return on the difference in the rate earned on the securities and the
cost of the FHLB advances. The advance reprices approximately every 30 days, and
the securities have rate adjustment frequencies between 30 days and one year.
At December 31, 1998, the yield on the securities in the program was
approximately 5.94% while the cost of the FHLB advance was approximately 4.85%.
The Company's mortgage-backed securities held-to-maturity portfolio totaled $9.5
million at December 31, 1998 compared to $10.9 million at September 30, 1998.
The decrease was primarily due to principal payments received on the portfolio
during the quarter. The Company's decision to invest in mortgage-backed
securities held-to-maturity, as it is with investment securities
held-to-maturity, is primarily dependent upon and is counter to the Company's
ability to originate portfolio loans. The weighted average yield on the
portfolio was approximately 6.36% at December 31, 1998.
At December 31, 1998, the investment securities held-to-maturity portfolio
totaled $24.5 million, compared to $29.8 million at September 30, 1998. The
decrease was a result of securities that matured or were called by the issuer
during the quarter. At December 31, 1998, the overall yield on the portfolio was
approximately 6.01%. At December 31, 1998, the investment securities held to
maturity portfolio contained $8.0 million in securities with remaining terms
until maturity of less than one year, $4.0 million with remaining maturities of
one through two years, no securities with remaining maturities of two through
three years, and $12.5 million with remaining maturities of three through five
years. All of the securities with maturities of three through five years had
call options associated with them. The call dates, exercisable by the issuer,
varied between February 1999 and June 2001.
Total deposits were $87.8 million at December 31, 1998, a $1.2 million increase
from the $86.6 million reported at September 30, 1998. The increase in deposits
was primarily the result of the Company transferring funds from advances from
borrowers for taxes and insurance and custodial accounts for escrow balances on
loans sold into a temporary account designated to pay year end property taxes
for its loan customers. The balance in the account, approximately $2.1 million,
was, subsequent to December 31, 1998, withdrawn as payments to various taxing
entities were made on behalf of loan customers.
The Company's average deposit cost was approximately 4.78% at December 31, 1998.
The Company reported $21.8 million in borrowed funds at December 31, 1998, an
increase of $6.9 million from the $14.9 million reported at September 30, 1998.
Approximately $20.0 million of the borrowed funds are associated with the
Company's investment in mortgage-backed securities available-for-sale. The
advance has a remaining term of less than 30 days and has an interest rate of
4.85%. The remaining $1.8 million in advances are associated with funding a
portion of the Company's commercial real estate loan portfolio and has a
weighted average cost of approximately 6.05%.
Stockholders' equity totaled $20.5 million at December 31, 1998, an increase of
$132,000 from the $20.4 million reported at September 30, 1998. The increase was
primarily attributable to the net income of $176,000 reported for the quarter
and a $29,000 increase in deferred compensation RRP shares. The increase was
offset by $73,000 in cash dividends paid during the quarter.
At December 31, 1998, the Company reported a book value per share of $14.01
based on 1,464,056 outstanding shares. The Company did not repurchase any
treasury stock during the quarter ended December 31, 1998 and reported 420,436
shares of treasury stock at an average cost of $11.40 per share at quarter end.
RESULTS OF OPERATIONS
The Company's net income is dependent primarily upon net interest income, the
difference or spread between the average yield earned on loans and investments
and the average rate paid on deposits and advances, as well as the relative
amounts of such assets and liabilities. The Company, like other financial
intermediaries, is subject to interest rate risk to the degree that its
interest-bearing liabilities mature or reprice at different times, or on a
different basis, than its interest earning assets.
COMPARISON OF THE THREE MONTHS ENDED DECEMBER 31, 1998 AND DECEMBER 31, 1997
General. Net income for the three months ended December 31, 1998 was $176,000 or
$.13 per share, an increase of $32,000 from the $144,000 or $.10 per share
reported for the three months ended December 31, 1997. The increase in net
income was attributable to a $91,000 increase in noninterest income, which was
offset by a $22,000 decrease in net interest income, a $20,000 increase in
noninterest expense and a $17,000 increase in income tax expenses.
Net Interest Income. For the quarter ended December 31, 1998, net interest
income after provision for loan losses totaled $821,000, a decrease of $22,000
from the $843,000 reported for the quarter ended December 31, 1997. On an
annualized basis, the $821,000 in net interest income for the current quarter
was approximately 2.66% of average interest earning assets and 2.56% of average
total assets. For the quarter ended December 31, 1997, the $843,000 in reported
net interest income was approximately 2.95% of average interest earning assets
and 2.86% of average total assets. Average interest earning assets were
approximately $123.4 million for the quarter ended December 31, 1998, compared
to $114.4 million for the quarter ended December 31, 1997.
The decline in net interest income, despite the fact that average interest
earning assets increased, was primarily attributable to the continued decline in
the general level of interest rates and the narrowing of the difference in short
term and long term rates. Cash flow from the Company's interest earning assets
has increased over the past several quarters as mortgage borrowers, both local
and those associated with the Company's mortgage-backed securities portfolios,
have elected to refinance their mortgages. In addition, scheduled maturities of
the investment securities held-to-maturity portfolio have also provided
additional challenges for reinvesting cash flow in a falling interest rate
environment. The result has been, despite growth in interest earning assets, a
yield on the Company's average interest earning assets at 6.99% for the quarter
ended December 31, 1998, down from the 7.09% for the quarter ended December 31,
1997.
Contrarily, interest rates on the Company's primary source of funds,
certificates of deposit, have not decreased as rapidly as interest rates have
fallen. Continued competition for deposits in the Company's market has compelled
the Company to continue to pay higher interest rates in order to maintain
current deposit levels. On an annualized basis, the $1.3 million in total
interest expense, reported for the quarter ended December 31, 1998, was
approximately 5.00% of average interest costing liabilities outstanding for the
quarter. For the quarter ended December 31, 1997, the $1.2 million in total
interest expense was approximately 4.95% of average interest costing
liabilities.
Total interest income was $2.2 million for the quarter ended December 31, 1998,
up slightly from the $2.0 million reported for the same quarter in 1997.
Interest income on loans receivable totaled $1.2 million or 7.82% of average
loans receivable balances outstanding for the quarter, compared to 7.94% of
average loans receivable balances for the $1.2 million in interest income on
loans receivable reported for the quarter ended December 31, 1997. During the
quarter ended December 31, 1998, the Company continued its plan to place into
portfolio mortgage loans with original maturities of less than or equal to 15
years and with interest rates of greater than or equal to 7.00%. Because 15 year
mortgage loan rates remained below 7.00% during most of the quarter ended
December 31, 1998, the Company has not been able to increase its loan receivable
portfolio. However, interest income from loans receivable, despite the decline
in the average yield on the portfolio, has increased due to home equity loans
and other consumer loans. For the quarter ended December 31, 1998, the Company
originated $6.9 million in loans. Approximately $4.4 million were sold into the
secondary market while the remainder weas placed into portfolio.
Interest income from investment securities available-for sale totaled $279,000
for the three months ended December 31, 1998, compared to $80,000 for the three
months ended December 31, 1997. Interest income from this portfolio is part of
the Company's plan to borrow funds from the FHLB and invest in mortgage-related
securities in an effort to achieve a margin on the difference in the investment
yield and the cost of the borrowings from the FHLB. The yield on the portfolio
was approximately 5.94% at December 31, 1998.
Interest income from the investment securities held-to-maturity and overnight
funds portfolios totaled $500,000 for the three months ended December 31, 1998,
compared to $471,000 for the same quarter in 1997. The increase was primarily
the result of a $1.3 million increase in average balances outstanding in the
portfolios from $32.3 million for the three months ended December 31, 1997 to
$33.6 million for the three months ended December 31, 1998. The average yield on
the portfolio was approximately 5.90% for the quarter ended December 31, 1998,
compared to 6.02% for the three months ended December 31, 1997.
Interest income from the mortgage-backed securities held-to-maturity portfolio
totaled $179,000 for the three months ended December 31, 1998, compared to
$315,000 for the same period in 1997. The decrease is attributable to the
decline in the average balance of the portfolio. Maturing securities and
continued prepayments on the adjustable rate securities in the portfolio caused
the balance to decline to $9.5 million at December 31, 1998 from $16.3 million
at December 31, 1997.
Interest paid to depositors totaled $1.1 million for the three months ended
December 31, 1998, unchanged from the $1.1 million for the three months ended
December 31, 1997. Average deposit balances declined $2.6 million from $89.8
million at December 31, 1997 to $87.2 million at December 31, 1998. Interest on
FHLB advances was $251,000 for the three months ended December 31, 1998,
compared to $62,000 for the same period in 1997. Total interest expense as a
percentage of average interest-costing liabilities was approximately 5.12% for
the three months ended December 31, 1998, compared to 4.95% for the three months
ended December 31, 1997.
Provision For Loan Losses. The Company made no provision for loan losses for the
quarters ended December 31, 1998 and December 31, 1997. (See - "Asset Quality")
Non-Interest Income. Non-interest income totaled $168,000 for the three months
ended December 31, 1998, compared to the $77,000 reported for the same period in
1997.
Gains on sales of interest-earning assets equaled $76,000 for the current
quarter, a $55,000 increase from the $21,000 reported for the same quarter in
1997. The increase was attributable to additional gains on the sale of mortgage
loans into the secondary market during the quarter ended December 31, 1998. In
addition, other operating income increased from $11,000 for the quarter ended
December 31, 1997 to $54,000 for the quarter ended December 31, 1998. The
$33,000 increase was the result of the receipt of a payment of a deficiency
judgment lien originating in a previous accounting period.
Offsetting the increases in gains on sales of loans and loan fee income was a
$11,000 decline in loan servicing fee income to $11,000 for the current quarter,
compared to $22,000 for the quarter ended December 31, 1997. The decline was the
result, as borrowers paid of or refinanced their mortgages, of a continued
decrease of older loans in the Company's servicing portfolio with higher
servicing margins. In addition, the Company's decision to retain its fifteen
year loans and a borrower preference for such loans, has resulted in fewer sold
loans and therefore fewer additions to the loan servicing portfolio.
Non-Interest Expenses. Non-interest expenses totaled $714,000 for the three
months ended December 31, 1998, compared to $694,000 for the three months ended
December 31, 1997.
The increase in non-interest expense was primarily the result of an $18,000
increase in compensation and benefits expense from $492,000 for the three months
ended December 31, 1997 to $510,000 for the three months ended December 31,
1998. The increase in compensation and benefits expense was mostly the result of
additional expenses associated with the funding of the Company's defined benefit
pension plan and the Company's Employee Stock Ownership Plan. Also, a portion of
the increase was the result of additional expenses for new employees added in
December 1998 in conjunction with the anticipated opening of a new full-service
office by the Company.
Occupancy and equipment expense increased $24,000 from $49,000 for the three
months ended December 31, 1997 to $73,000 for the three months ended December
31, 1998. The increase was also attributable to additional expenses associated
with the opening of a new full-service office, scheduled to open in the early
part of 1999.
Provision For Income Taxes. The Company incurred federal income tax expense of
$99,000 or 36.0% or pre-tax income for the three months ended December 31, 1998,
compared to $82,000 or 36.3% of pre-tax income for the three months ended
December 31, 1997.
ASSET QUALITY
At December 31, 1998, the Company's non-performing assets totaled $331,000 or
.25% of total assets, compared to $228,000 or .18% of total assets at September
30, 1998. The increase was the result of several loans that became 91 days
delinquent at December 31, 1998. At December 31, 1998, non-performing assets
were comprised of twenty-four (24) loans, the largest of which was $47,000,
secured by a single-family dwelling.
Non-performing loans at December 31, 1998, equaled $331,000 or .54% of loans
receivable, compared to $228,000 or .37% of loans receivable at September 30,
1998.
Classified assets totaled $506,000 or .39% of total assets at December 31, 1998,
compared to $570,000 or .46% of total assets at September 30, 1998.
Classified assets and non-performing assets differ in that classified assets may
include loans less than ninety (90) days delinquent. Also, assets guaranteed by
government agencies such as the Veterans Administration and the Federal Housing
Administration are not included in classified assets but are included in
non-performing assets. All classified assets at December 31, 1998, were deemed
to be "substandard". No assets were classified "doubtful" or "loss" as of such
date.
The Company's allowance for loan losses totaled $233,0000 at December 31, 1998,
unchanged from September 30, 1998. The allowance for loan losses as a percentage
of loans receivable equaled .38% at December 31, 1998, unchanged from September
30, 1998.
LIQUIDITY AND CAPITAL RESOURCES
The Company's principal sources of funds are deposits from customers, advances
from the FHLB, amortization and prepayment of loan principal (including
mortgage-backed securities), maturities of securities, sales of loans and
operations.
Current Office of Thrift Supervision regulations require the Association to
maintain, at a minimum, cash and eligible investments, in an amount of not less
than 4.0% of net withdrawable savings accounts and borrowings payable on demand
or in one year or less. Liquid assets include cash on hand, unpledged demand
deposits, certain time deposits, and, U. S Government and agency obligations.
The Association maintains a liquid asset ratio above the minimum required level
of the Office of Thrift Supervision. At December 31, 1998, the Association's
liquid asset ratio equaled 40.09%.
The Association uses its liquidity and capital resources principally to meet
ongoing commitments to fund maturing certificates of deposit and loan
commitments, maintain liquidity and pay operating expenses. At December 31,
1998, the Association had outstanding commitments to extend credit on $3.7
million of real estate loans.
Management believes that present levels of liquid assets are sufficient to meet
anticipated future loan commitments as well as deposit withdrawal demands.
Total stockholders' equity equaled $20.5 million at December 31, 1998, an
increase of $132,000 from the $20.4 million reported at September 30, 1998. The
increase was primarily the result of the $176,000 net income reported for the
quarter ended December 31, 1998 and $29,000 decrease in deferred compensation,
less a $73,000 cash dividend paid during the quarter.
As of December 31, 1998, the Company's reported book value per share, using
total stockholders' equity of $20.5 million (net of the cost of unallocated ESOP
and RRP shares) and 1,464,056 outstanding shares of common stock (the total
issued shares including unallocated ESOP and RRP shares, less treasury shares),
equaled $14.01 per share.
Subsequent to the quarter ended December 31, 1998, the Company announced its
intention to pay a cash dividend of $.05 per share on February 24, 1998, to
stockholders of record at February 10, 1998.
Under the Financial Institutions Reform, Recovery and Enforcement Act of 1989
("FIRREA"), Congress imposed a three part capital requirement for thrift
institutions. At December 31, 1998, the Association's actual and required
capital amounts under each of the three requirements were as follows:
- Tangible Capital (stockholders' equity) was $18.2 million or 13.97% of
total assets, exceeding the minimum requirement of 1.5% by $16.3 million.
- Core Capital (Tangible capital plus certain intangible assets) was $18.2
million or 13.97% of total assets, exceeding the minimum requirement of
4.0% by $13.0 million.
- Risk-based Capital (Core capital plus general loan and valuation
allowances less an adjustment for capitalized mortgage servicing rights)
equaled $18.5 million of 36.98% of risk weighted assets, exceeding the
minimum requirement of 8.0% of risk weighted assets by $14.5 million.
At December 31, 1998, the Association was considered a "well capitalized"
institution under the prompt corrective action requirements of the Federal
Deposit Insurance Corporation Improvement Act of 1991.
YEAR 2000 ISSUE
The Year 2000 or Century Date Change issue is a result of computer programs
being written using two digits rather than four digits to define the applicable
year. A computer system's inability to recognize the date "00" as the year 2000
of if the system recognized the date "00" as the year 1900, could result in a
system failure or miscalculations causing disruptions of operations. The Company
outsources its primary computer processing functions.
The Company has established a management committee to identify all of its
systems potentially affected by the year 2000 and to ensure that reprogramming
of affected systems is completed. The committee is responsible for testing all
company computer systems and ensuring that all third party computer system
vendors complete Year 2000 remediation.
The Company believes that the risk that the major data processing service
provider will not be Year 2000 compliant is low. The Company has also received
correspondence from all other third party software providers that indicate that
all of such software will be Year 2000 compliant.
The Company has budgeted approximately $25,000 for its Year 2000 program. As of
December 31, 1998, the Company has expensed or is aware of future expenditures
totaling approximately $10,000.
FORWARD-LOOKING STATEMENTS
When used in this Form 10-QSB or future filings by the Company with the
Securities and Exchange Commission, the Company's press releases or other public
or shareholder communications or in oral statements made with the approval of an
authorized executive officer, the words or phrases "will likely result", "are
expected to", "will continue", "is anticipated", "estimate", "project",
"believe" or similar expressions are intended to identify "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995. The Company wishes to caution readers not to place undue reliance on
any such forward-looking statements, which speak only as of the date made, and
to advise readers that various factors, including regional and national economic
conditions, changes in levels of market interest rates, credit risks 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 does not undertake, and specifically disclaims any obligation, to
publicly release the result of any revisions, which may be made to any
forward-looking statements to reflect the occurrence of anticipated or
unanticipated events or circumstances after the date of such statements.
EAST TEXAS FINANCIAL SERVICES, INC.
AND SUBSIDIARY
FORM 10-QSB
DECEMBER 31, 1998
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
There are no material legal proceedings to which the Company or the
Association is a party or of which any of their property is subject. From
time-to-time, the Association is a party to various legal proceedings
incident to the conduct of its business.
Item 2. Changes In Securities
None
Item 3. Defaults Upon Senior Securities
None
Item 4. Submissions Of Matters To A Vote Of Security Holders
On January 20, 1999, the Company's Annual Stockholders' Meeting was held to
elect directors and ratify the appointment of independent auditors for the
current fiscal year. The following are the voting results of each of these
matters submitted to stockholders:
The election of M. Earl Davis, For 1,227,781
James W. Fair, and L. Lee Kidd Against 0
As directors for a three year term ending Abstain 22,000
January 2002. Broker Non-Votes 0
Ratification of the appointment of Bryant For 1,249,631
And Welborn, LLP, as independent Against 150
Auditors for the fiscal year ending Abstain 0
September 30, 1999.
The text of the matters referred to in this Item 4 is set forth in the
Proxy Statement dated December 23, 1998, previously filed with the
Securities and Exchange Commission.
Item 5. Other Information.
None
Item 6. Exhibits and Reports on Form 8-K
(a) The following exhibits are filed herewith:
Exhibit 11.0 - Computation of Earnings Per Share
Exhibit 27.0 - Financial Data Schedule
(b) Reports on Form 8-K
During the quarter ended December 31, 1998, the Company filed a report
on Form 8-K on October 21, 1998, to report the issuance of a press
release dated October 21, 1998, announcing the Company's intention to
pay, on November 25, 1998, a cash dividend of $.05 per share for the
quarter ended September 30, 1998, to stockholders of record on November
11, 1998.
During the quarter ended December 31, 1998, the Company filed a report
on Form 8-K on December 10, 1998, to report the issuance of a press
release dated December 10, 1998, announcing the Company's earnings for
the year ended September 30, 1998.
SIGNATURES
Pursuant to the requirement of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
East Texas Financial Services, Inc.
Date: February 9, 1999 /s/ Gerald W. Free
------------------
Gerald W. Free
Vice Chairman, President and CEO
(Principal Executive Officer)
Date: February 9, 1999 /s/ Derrell W. Chapman
-----------------------
Derrell W. Chapman
Vice President/COO/CFO
(Principal Financial and Accounting Officer)