UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________ to _________
Commission File Number 1-13842
Texarkana First Financial Corporation
(Exact name of registrant as specified in its charter)
Texas 71-0771419
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
3rd & Olive Streets
Texarkana, Arkansas 75504
(Address of principal executive office) (Zip Code)
(501) 773-1103
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]
Indicate the number of shares outstanding of each of the
issuer's classes of common stock, as of the latest practicable
date: As of June 30, 1996, there were outstanding 1,952,263
shares of the Registrant's Common Stock, par value $0.01 per share.
TEXARKANA FIRST FINANCIAL CORPORATION
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(In Thousands)
Unaudited
June 30, Sept.30,
1996 1995
ASSETS
Cash and Cash Equivalents
Cash & due from banks $ 1,148 1,125
Interest bearing deposits in other banks 670 4,823
Federal funds sold 6,225 7,900
________ ________
Total Cash and Cash equivalents 8,043 13,848
Investment securities available-for-sale 18,726 1,007
Investment securities held-to-maturity -- 17,153
Mortgage-backed securities held-to-maturity 2,044 2,280
Federal Home Loan Bank stock 1,038 992
Loans receivable, net 130,759 122,160
Accrued interest receivable 1,222 1,060
Foreclosed real estate, net 320 320
Premises and equipment, net 1,758 1,743
Other assets 154 89
________ ________
Total Assets $ 164,064 160,652
________ ________
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits $ 128,641 124,953
Advances from borrowers for taxes & insurance 1,360 1,944
Accrued federal income tax 327 395
Accrued state income tax 178 163
Accrued expenses and other liabilities 515 389
________ ________
Total Liabilities 131,021 127,844
________ ________
Commitments and contingencies -- --
________ ________
Common stock, $0.01 par value;
15,000,000 shares authorized;
1,983,750 shares issued 20 20
Additional paid-in capital 19,183 19,134
Common stock acquired by stock benefit plans (2,183) (1,353)
Treasury stock, at cost, 31,487 shares (514) --
Retained earnings-substantially restricted 16,568 14,999
Net unrealized gain (loss) on investment
securities available for sale, net of tax (31) 8
________ ________
Total Stockholders' Equity 33,043 32,808
________ ________
Total Liabilities and Stockholders' Equity $ 164,064 160,652
________ ________
[FN]
The accompanying notes are an integral part of this statement.
TEXARKANA FIRST FINANCIAL CORPORATION
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
(In Thousands, Except Per Share Data)
(Unaudited)
Three Months Nine Months
Ended Ended
June 30, June 30,
1996 1995 1996 1995
Interest Income
Loans
First mortgage loans $ 2,506 2,341 7,416 6,727
Consumer and other loans 228 169 629 460
Investment securities 411 289 1,330 728
Mortgage-backed and related securities 40 47 126 146
______ ______ ______ ______
Total Interest Income 3,185 2,846 9,501 8,061
______ ______ ______ ______
Interest Expense
Deposits 1,605 1,594 4,813 4,431
Borrowed funds 1 -- 3 2
______ ______ ______ ______
Total Interest Expense 1,606 1,594 4,816 4,433
______ ______ ______ ______
Net Interest Income 1,579 1,252 4,685 3,628
Provision for loan losses -- -- -- 177
______ ______ ______ ______
Net Interest Income After Provision 1,579 1,252 4,685 3,451
______ ______ ______ ______
Noninterest Income
Gain on sale of repossessed assets, net 11 -- 16 32
Income from real estate operations 7 1 19 3
Loan origination and commitment fees 93 67 238 203
Other 115 73 280 242
______ ______ ______ ______
Total Noninterest Income 226 141 553 480
______ ______ ______ ______
Noninterest Expense
Compensation and benefits 414 264 1,087 869
Occupancy and equipment 43 40 123 144
SAIF deposit insurance premium 72 72 228 214
Provision for foreclosed real estate -- -- -- 300
Other 128 102 419 293
______ ______ ______ ______
Total Noninterest Expense 657 478 1,857 1,820
______ ______ ______ ______
Income Before Income Taxes 1,148 915 3,381 2,111
Income tax expense 404 321 1,200 896
______ ______ ______ ______
Net Income $ 744 594 2,181 1,215
______ ______ ______ ______
Weighted average shares outstanding 1,788,300 N/A 1,829,139 N/A
Earnings Per Share $ 0.42 N/A 1.19 N/A
Dividends per share $ 0.1125 N/A 0.3375 N/A
[FN]
The accompanying notes are an integral part of this statement.
TEXARKANA FIRST FINANCIAL CORPORATION
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
(Unaudited)
Nine Months
Ended June 30,
1996 1995
Cash Flows From Operating Activities:
Interest and dividends received $ 9,308 7,918
Miscellaneous income received 472 440
Interest paid (1,739) (1,468)
Cash paid to suppliers and employees (1,700) (1,670)
Cash from REO operations 38 16
Cash paid for REO operations (18) (12)
Cash from loans sold 2,092 499
Cash paid for loans made to sell (2,092) (571)
Income taxes paid (1,253) (808)
_______ _______
Net Cash Provided By Operating Activities 5,108 4,344
_______ _______
Cash Flows From Investing Activities:
Proceeds from maturities of investment securities 9,000 1,000
Purchases of investment securities (9,585) --
Collected principal on mortgage-backed securities 237 337
Sale of fixed assets -- 7
Purchase of office equipment and improvements (72) (57)
Net (increase) in loans (8,599) (4,386)
Proceeds from sale of REO & other REO recoveries 77 40
Cash paid for REO held for resale -- (13)
_______ _______
Net Cash Used In Investing Activities (8,942) (3,072)
_______ _______
Cash Flows From Financing Activities:
Net increase (decrease) in savings,
demand deposits, and certificates of deposit 505 1,156
Net increase (decrease) in escrow funds (584) (497)
Advances for purchase of stock in holding -- 16,609
Common stock acquired by stock benefit plans (932) --
Purchase of treasury stock (514) --
Cash dividends paid on common stock (446) --
_______ _______
Net Cash Provided By(Used In)Financing Activities (1,971) 17,268
_______ _______
Net Increase(Decrease)In Cash & Cash Equivalents (5,805) 18,540
_______ _______
Cash and Cash Equivalents, beginning of period 13,848 2,168
_______ _______
Cash and Cash Equivalents, end of period $ 8,043 20,708
_______ _______
[FN]
The accompanying notes are an integral part of this statement.
SUPPLEMENTAL INFORMATION CONCERNING CASH FLOWS
Nine Months
Ended June 30,
1996 1995
Reconciliation of net income to cash provided
by operating activities:
Net income $ 2,181 1,215
_______ _______
Adjustments to reconcile net income to cash provided
by operating activities:
Depreciation 57 60
Amortization of loan and investment discounts (23) (27)
Amortization of investment premiums 25 13
(Gain) loss on sales of real estate owned (16) (32)
Provisions for loan losses -- 177
Provisions for losses on real estate held for sale -- 300
Interest expense credited to saving accounts 3,183 2,823
Dividend and interest income added to investments (76) (64)
Amortization of deferred loan fees (11) (9)
Loan fees deferred 8 5
ESOP shares released 153 --
Changes in assets and liabilities:
(Increase) decrease in interest receivable (162) (88)
Increase (decrease) in accrued interest payable (105) 144
Increase (decrease) in income tax payable (53) 89
(Increase) decrease in loans held for sale -- (73)
Net increase(decrease)in other receivables & payables (53) (189)
_______ _______
Total adjustments 2,927 3,129
_______ _______
Net cash provided by operations $ 5,108 4,344
_______ _______
Supplemental schedule of noncash investing
and financing activities:
Acquisition of real estate in settlement of loans $ 86 105
Loans made to finance sale of REO 17 104
FHLB stock dividends not redeemed 46 32
Patronage dividend from service center -- 14
Dividends declared and unpaid 220 --
Net unrealized gain(loss)on investment securities
available-for-sale (55) 11
_______ _______
Non-cash transactions $ 314 266
_______ _______
TEXARKANA FIRST FINANCIAL CORPORATION
Notes to Unaudited Consolidated Financial Statements
Note 1 - Basis of Presentation
Texarkana First Financial Corporation (the "Company") was
incorporated in March 1995 under Texas law for the purpose of
acquiring all of the capital stock issued by First Federal
Savings and Loan Association of Texarkana (the "Association")
in connection with the Association's conversion from a federally
chartered mutual savings and loan association to a stock savings
and loan association (the "Conversion"). The Conversion was
consummated on July 7, 1995 and, as a result, the Company became
a unitary savings and loan holding company for the Association.
For purposes of this Form 10-Q, the financial statements and
management's discussion and analysis of financial condition and
results of operation are presented for the Association for
periods prior to the consummation date of July 7, 1995 and for
the Company on a consolidated basis for periods after the
consummation date.
The Financial Accounting Standards Board offered entities a
one-time opportunity from November 15, 1995 to December 31,
1995 to reclassify their investment securities among its three
categories (trading, available-for-sale and held-to-maturity)
in conjunction with adopting a new implementation guide. Such
transfers were permitted to be made during this period without
tainting other held-to-maturity securities. Accordingly, the
Company reclassified securities with a book value of $17.2
million from held-to-maturity to available-for-sale. As a
result, the unrealized gain on securities available-for-sale
in stockholders' equity increased from $8,000 on September 30,
1995 to $123,000 on December 31, 1995.
The accompanying unaudited consolidated financial statements of
the Company have been prepared in accordance with instructions
to Form 10-Q. Accordingly, they do not include all of the
information and footnotes required by generally accepted
accounting principles for complete financial statements.
However, such information reflects all adjustments (consisting
solely of normal recurring adjustments) which are, in the
opinion of management, necessary for a fair statement of results
for the interim periods.
The results of operations for the three and nine months ended
June 30, 1996 are not necessarily indicative of the results to
be expected for the year ending September 30, 1996. Although
net income was consistent for the first three quarters, earnings
for the full fiscal year will be impacted by the $3.00 per share
distribution to stockholders anticipated for the fourth quarter,
and would be further impacted if a SAIF recapitalization premium
were assessed. The unaudited consolidated financial statements
and notes thereto should be read in conjunction with the audited
financial statements and notes thereto for the year ended
September 30, 1995, contained in the Company's annual report to
stockholders.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Financial Condition
At June 30, 1996, the Company's assets amounted to $164.1
million as compared to $160.7 million at September 30, 1995.
The $3.4 million (2.1%) increase was primarily due to an
increase of $8.6 million in loans, and a $5.8 million decrease
in cash and cash equivalents. Liabilities increased $3.2
million (2.5%) to $131.0 million at June 30, 1996 compared to
$127.8 million at September 30, 1995 primarily due to a $3.7
million increase in deposits, and a $584,000 decrease in
borrowers' escrow balances (property tax payments are made in
the first two quarters of the fiscal year). Stockholders'
equity amounted to $33.0 million (20.1% of total assets) at
June 30, 1996 compared to $32.8 million (20.4% of total assets)
at September 30, 1995. The increase in stockholders' equity
during the nine months ended June 30, 1996 was due primarily to
the $2.2 million net income from operations, less the $612,000
in dividends declared and purchases of common stock in the open
market for benefit plans and treasury stock. Asset quality
remains strong with a ratio of nonperforming assets to total
assets of .33% and .33% as of June 30, 1996 and September 30,
1995, respectively, and a ratio of nonperforming loans and debt
restructurings to total loans of .16% and .17%, respectively.
Comparison of Results of Operations for the Three Month and Nine
Month Periods Ended June 30, 1996 and 1995:
General
For the three and nine months ended June 30, 1996, return on
average assets (ROA) was 1.82% and 1.79%, respectively, compared
to 1.61% and 1.12% for the three and nine months ended June 30,
1995. Return on average equity (ROE) was 8.96% and 8.71%,
respectively, compared to 17.14% and 11.94% for the same
respective previous year periods. The Conversion stock
subscription, completed July 7, 1995, provided an additional
$19 million of investable funds which contributed to the
increased earnings and net income for the three and nine months
ended June 30, 1996; and these additional earnings, assets and
equity are reflected in the above ROA and ROE differences for
the two years.
For the nine months ended June 30, 1996, net income was $2.2
million ($1.19 per share) compared to $1.2 million for the same
period ended June 30, 1995. The increase of $966,000 (79.5%)
in net income was due to an increase of $1.1 million in net
interest income, a decrease of $177,000 in the provision for
loan losses, and a decrease of $36,000 in net noninterest
expense, all of which were partially offset by an increase of
$304,000 in income tax expense.
For the three months ended June 30, 1996, net income was
$744,000 ($.42 per share) compared to $594,000 for the same
period ended June 30, 1995. The increase of $150,000 (25.3%)
in net income was due to an increase of $327,000 in net interest
income which was offset by increases of $94,000 in net noninterest
expense and $83,000 in income tax expense.
Net Interest Income
For the nine months ended June 30, 1996, net interest income
increased $1.1 million (29.1%) compared to the same period in
1995. The increase in net interest income was due to an increase
of $1.4 million (17.9%) in interest income, partially offset by
an increase of $383,000 (8.6%) in interest expense. The net
interest margin increased from 3.44% to 3.92%.
For the three months ended June 30, 1996, net interest income
increased $327,000 (26.1%) compared to the same period in 1995. The
increase was due to an increase of $339,000 (11.9%) in interest
income, partially offset by an increase of $12,000 (.8%) in interest
expense. The net interest margin increased from 3.48% to 3.96%.
Interest Income
For the nine months ended June 30, 1996, interest income increased
$1.4 million (17.9%) compared to the same period in 1995. The
increase in interest income was due to an increase of $1.1 million
from higher average balances and an increase of $300,000 from
higher rates. The increase in the average balances of investments
and federal funds sold resulted from the investment of proceeds
from the sale of common stock in the Conversion. The increase in
the average balance of loans receivable resulted from increased
loan demand which was also funded with proceeds from the sale of
common stock in the Conversion.
For the three months ended June 30, 1996, interest income increased
$339,000 (11.9%) compared to the same period in 1995. The increase
was due to an increase of $312,000 from higher average balances and
an increase of $27,000 from higher rates. The increases in average
balances were due to the same reasons stated above.
Interest Expense
For the nine months ended June 30, 1996, interest expense
increased $383,000 (8.6%) compared to the same period in 1995.
The increase in interest expense was due to an increase of
$386,000 from higher rates, partially offset by a decrease of
$3,000 from slightly lower average balances.
For the three months ended June 30, 1996, interest expense increased
$12,000 (.8%) compared to the same period in 1995. The increase
was due to an increase of $16,000 from higher rates, partially
offset by a decrease of $4,000 from slightly lower average balances.
Provision for Loan Losses
No provisions were made for loan losses during the nine months ended
June 30, 1996. The $177,000 provision for loan losses during the
nine months ended June 30, 1995 was due primarily to management's
assessment at such time of the increased risk of loss in light of
the proposed closing of a major local employer. No provision has
been recorded for the last five successive quarters due to the
consistently favorable ratio of nonperforming loans to total loans of
.16% at June 30, 1996, .17% at September 30, 1995 and .15% at June 30,
1995. Management believes that the current allowance is adequate
based upon prior loss experience, the volume and type of lending
conducted by the Association, industry standards, past due loans and
the current economic conditions in the market area.
Noninterest Income
For the nine months ended June 30, 1996, noninterest income
increased $73,000 (15.2%) compared to the same period in 1995.
The increase was due primarily to increases of $16,000 in income
from real estate operations, $35,000 in loan origination fees and
$38,000 in other noninterest income, offset by a decrease of
$16,000 in net gains on sale of repossessed assets. The increase
in loan origination fees was due to increased mortgage financing
activity. Income from real estate operations was the net result
of repossessed asset rentals less related expenses.
For the three months ended June 30, 1996, noninterest income
increased 85,000. The increase was due to increases of $11,000
in net gains on sale of repossessed assets, $6,000 in income from
real estate operations, $26,000 in loan origination fees and
$42,000 in other noninterest income.
Noninterest Expense
For the nine months ended June 30, 1996, noninterest expense
increased $37,000 (2.0%) compared to the same period in 1995.
The increase was due primarily to an increase of $218,000 in
compensation and benefits expense and an increase of $126,000
in other noninterest expense, partially offset by a decrease of
$300,000 in the provision for foreclosed real estate. The
increase in other noninterest expense was due primarily to an
increase of $103,000 in professional and legal fees and printing
costs associated with the first annual proxy, stockholders'
meeting and implementation of approved stock option and management
recognition plans. The increase in compensation and benefits
expense was due primarily to an increase of $156,000 in benefits
expense associated with the ESOP plan which was adopted in July,
1995 and an increase of $40,000 in compensation expense.
For the three months ended June 30, 1996, noninterest expense
increased $179,000 (37.4%) compared to the same period in 1995.
The increase was due primarily to increases of $150,000 in
compensation and benefits expense and $26,000 in other noninterest
expense. The increases in compensation and benefits expense and
other noninterest expense were due primarily to the same reasons
stated above.
Liquidity and Capital Resources
The Company's assets consist primarily of cash and cash equivalents,
investment securities and the shares of the Association's common
stock. The Company has no significant liabilities. The Association's
deposit retention has remained steady and loan demand continues to be
funded without the use of borrowed funds. As a result, liquidity
remains adequate for current operating needs.
As of June 30, 1996, the Association's regulatory capital was
well in excess of all applicable regulatory requirements. At
June 30, 1996, the Association's tangible, core and risk-based
capital ratios were 17.0%, 17.0% and 29.6%, respectively, compared
to regulatory requirements of 1.5%, 3.0% and 8.0%, respectively.
Part II
Item 1. Legal Proceedings
Neither the Company nor the Association is involved in any
pending legal proceedings other than non-material legal
proceedings occurring in the ordinary course of business.
Item 2. Changes in Securities
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
None.
Item 5. Other Information
On March 6, 1996, the Company announced that the Board of
Directors intends to declare a one-time cash distribution
of $3.00 per share of common stock. The Company has filed
a private letter ruling request with the Internal Revenue
Service regarding the tax-deferred nature of the
transaction and anticipates paying this distribution to its
stockholders in the last quarter of 1996.
On June 25, 1996, the Company declared a dividend in the
amount of $.1125 per share, payable July 24, 1996 to
stockholders of record on July 10, 1996.
Item 6. Exhibits and Reports on Form 8-K
Exhibits
Exhibit 27. Financial Data Schedule
Reports on Form 8-K
No reports on Form 8-K were filed during the period.
TEXARKANA FIRST FINANCIAL CORPORATION
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
TEXARKANA FIRST FINANCIAL CORPORATION
/s/ James W. McKinney
Date: August 9, 1996 By:___________________________
James W. McKinney
President
/s/ James L. Sangalli
Date: August 9, 1996 By:___________________________
James L. Sangalli
Chief Financial Officer