U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
[ X] QUARTERLY REPORT UNDER SECTION 13 OF 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 1997
OR
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT
For the transition period from to
---------- ----------
Commission File No. 0-25546
Mississippi View Holding Company
--------------------------------------------------------
(Exact name of registrant as specified in its charter)
Minnesota 41-1795363
- --------------------------------------------------------------------------------
(State or other jurisdiction of incorporation (I.R.S. Employer
or jurisdiction) Identification No.)
35 East Broadway, Little Falls, Minnesota 56345-3093
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(address of principal executive offices)
(320) 632-5461
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(Registrant's telephone number, including area code)
Check whether the issuer (1) filed all reports required to be filed by
Sections 13 or 15(d) of the Exchange Act 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.
Yes X No
-------- ---------
State the number of shares outstanding of each of the issuer's classes of common
equity as of the latest practicable date.
Class: Common Stock, par value $.10 per share
Outstanding shares at February 6, 1998: 740,243
MISSISSIPPI VIEW HOLDING COMPANY
INDEX TO FORM 10-QSB
Page
----
PART I. FINANCIAL INFORMATION
---------------------
Item 1. Financial Statements
Consolidated Statements of Financial Condition at December 31,
1997 (unaudited) and September 30, 1997 (audited) 2
Consolidated Statements of Income for the three months
ended December 31, 1997 and 1996 (unaudited) 3
Consolidated Statements of Cash Flows for the three months
ended December 31, 1997 and 1996 (unaudited) 4
Notes to Condensed Consolidated Financial
Statements (unaudited) 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8
Non-Performing and Problem Assets 11
Capital Compliance 12
Liquidity Resources 13
Key Operating Ratios 14
PART II. OTHER INFORMATION
-----------------
Item 1. Legal Proceedings 15
Item 2. Changes in Securities 15
Item 3. Default Upon Senior Securities 15
Item 4. Submission of Matters to a Vote of Security Holders 15
Item 5. Other Information 15
Item 6. Exhibits and Reports on Form 8-K 15
SIGNATURES
1
MISSISSIPPI VIEW HOLDING COMPANY AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
December 31, September 30,
1997 1997
------------- ----------------
ASSETS (Unaudited) (Audited)
------ ------------- ----------------
Cash and cash equivalents:
Cash and due from banks ........................... $ 407,159 $ 214,934
Interest bearing deposits with banks .............. 3,063,423 889,660
Securities available for sale, at fair value .......... 11,526,081 12,963,344
Securities held to maturity, at amortized cost ........ 6,679,180 7,405,466
FHLB stock, at cost ................................... 650,700 650,700
Loans held for sale ................................... -- 135,550
Loans receivable, net of allowance for loan losses of
$861,953 in 1998 and $861,170 in 1997 ............... 44,493,413 44,474,809
Accrued interest receivable ........................... 426,913 437,548
Premises and equipment ................................ 785,805 806,900
Other assets .......................................... 586,117 567,539
------------ ------------
Total Assets .................................. $ 68,618,791 $ 68,546,450
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
Liabilities:
Demand deposits ....................................... $ 4,329,750 $ 4,408,558
Savings deposits ...................................... 14,325,889 14,525,018
Time deposits ......................................... 36,211,228 36,250,011
------------ ------------
Total deposits ..................................... 54,866,867 55,183,587
Advances from borrowers for taxes and insurance ....... 52,239 107,038
Accrued income taxes .................................. 67,245 66,352
Deferred tax liability ................................ 650,869 525,353
Other liabilities ..................................... 505,446 596,216
------------ ------------
Total Liabilities ..................................... 56,142,666 56,478,546
Shareholders' equity:
Serial preferred stock, no par value; 5,000,000
shares authorized, no shares issued ................. -- --
Common stock, $.10 par value, 10,000,000 shares .......
authorized; 1,007,992 shares issued; 656,629 and
653,151 shares outstanding .......................... 100,799 100,799
Paid in capital ....................................... 7,565,816 7,540,218
Treasury stock (267,749 and 267,749 shares), at cost .. (3,605,111) (3,605,111)
Retained earnings, substantially restricted ........... 7,914,162 7,737,458
Unearned ESOP shares (56,447 and 58,463 shares), at
cost ............................................... (483,330) (498,012)
Unearned MSBP shares (27,167 and 28,629 shares), at
cost ............................................... (303,206) (317,954)
Unrealized appreciation on available-for-sale
securities, net of tax ............................. 1,286,995 1,110,506
------------ ------------
Total shareholders' equity ..................... 12,476,125 12,067,904
------------ ------------
Total liabilities and shareholders' equity ..... $ 68,618,791 $ 68,546,450
============ ============
The accompanying notes are an integral part of these
consolidated financial statements.
2
MISSISSIPPI VIEW HOLDING COMPANY AND
SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
For the Three Months
Ended December 31,
----------------------------
1997 1996
----------- ------------
Interest Income:
Loans receivable .................................... $ 973,457 $ 942,489
Securities available for sale ....................... 171,696 173,997
Securities held to maturity ......................... 126,754 176,451
---------- -----------
Total interest income ........................... 1,271,907 1,292,937
Interest Expense:
Demand deposits ..................................... 9,451 9,973
Savings deposits .................................... 102,312 94,223
Time deposits ....................................... 514,287 530,099
---------- -----------
Total interest expense .......................... 626,050 634,295
---------- -----------
Net interest income ................................. 645,857 658,642
Provision for loan losses ........................... -- --
---------- -----------
Net interest income after provision for loan loss 645,857 658,642
Noninterest Income:
Other fees and service charges ...................... 17,458 13,989
Gain on sale of loans ............................... 2,535 2,246
Other ............................................... 22,196 21,282
---------- -----------
Total noninterest income ....................... 42,189 37,517
Noninterest Expense:
Compensation and employee benefits .................. 257,785 225,574
Occupancy ........................................... 22,771 21,933
Deposit insurance premium ........................... 14,677 38,185
Data processing ..................................... 18,541 21,402
Advertising ......................................... 6,828 8,086
Real estate owned expense, net ...................... 335 346
Other ............................................... 81,213 123,294
---------- -----------
Total noninterest expense ...................... 402,150 438,820
---------- -----------
Income before income taxes ............................ 285,896 257, 339
Income tax expense .................................... 109,192 84, 074
---------- -----------
Net income ............................................ $ 176,704 $ 173,265
========== ===========
Basic earnings per share .............................. $ 0.27 $ 0.22
========== ===========
Diluted earnings per share ............................ $ 0.24 $ 0.22
========== ===========
Dividends declared during the period .................. $ -- $ --
========== ===========
The accompanying notes are an integral part of these
consolidated financial statements.
3
MISSISSIPPI VIEW HOLDING COMPANY AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Three Months Ended
December 31,
--------------------------
1997 1996
------------ ------------
Cash flows from operating activities:
Interest received on loans and investments .. $ 1,273,811 $ 1,256,833
Interest paid ............................... (626,012) (634,127)
Other fees, commissions, and income received 58,664 61,506
Cash paid to suppliers, employees and others (438,359) (781,205)
Contributions to charities .................. (1,727) (3,749)
Income taxes paid ........................... (94,037) --
Loans originated for sale ................... (232,783) (170,400)
Proceeds from sale of loans ................. 370,868 231,391
----------- -----------
Net cash provided by operating activities ... 310,425 (39,751)
----------- -----------
Cash flows from investing activities:
Purchases of available-for-sale securities .. (882,527) --
Proceeds from maturities of
available-for-sale securities .............. 2,610,643 632,860
Purchases of held-to-maturity securities .... (889,000) (988,000)
Proceeds from maturities of held-to-maturity
securities ................................ 1,615,033 1,951,990
Loan originations and principal payments on
loans, net ................................ (21,535) (677,459)
Purchases of property and equipment ......... (3,621) (12,266)
----------- -----------
Net cash provided by (used in) investing
activities ........................... 2,428,993 907,125
----------- -----------
Cash flows from financing activities:
Net increase (decrease) in non-interest
bearing demand and savings deposit accounts (278,075) 247,000
Net (decrease) increase in time deposits .... (38,682) (436,058)
Net (decrease) increase in mortgage escrow
funds ..................................... (54,800) (88,154)
Acquisition of treasury stock ............... -- (275,000)
Net increase in unearned MSBP shares ........ (1,873) (912)
----------- -----------
Net cash used by financing activities ....... (373,430) (553,124)
----------- -----------
Net (decrease) increase in cash and cash
equivalents ................................. 2,365,988 314,250
Cash and cash equivalents at beginning of year 1,104,594 2,583,654
----------- -----------
Cash and cash equivalents at end of year ...... $ 3,470,582 $ 2,897,904
=========== ===========
The accompanying notes are an integral part of
these consolidated financial statements
4
MISSISSIPPI VIEW HOLDING COMPANY AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
For the Three Months Ended
December 31,
---------------------------
1997 1996
------------ -------------
RECONCILIATION OF NET INCOME TO NET CASH
PROVIDED BY OPERATING ACTIVITIES
Net Income .................................................... $ 176,704 $ 173,265
Adjustments:
Provision for losses on loans and real estate ................ -- --
Depreciation ................................................. 24,716 20,951
Non-cash dividends ........................................... (1,385) (1,319)
ESOP fair value adjustment ................................... 11,515 4,451
Amortization of ESOP compensation ............................ 14,681 14,359
Amortization of MSBP compensation ............................ 16,622 16,622
Tax benefit of MSBP vesting activities ....................... 14,083 3,052
Net amortization and accretion of premiums and ............... 4,934 993
discounts on securities
Net loan fees deferred and amortized ......................... 2,932 10,334
Net mortgage loan servicing fees deferred .................... 430 363
(Increase) decrease in:
Loans held for sale ....................................... 135,550 58,745
Accrued interest receivable ............................... 10,634 (26,552)
Prepaid income tax ........................................ -- (71,640)
Deferred tax asset ........................................ -- 163,903
Other assets .............................................. (19,008) 31,873
Increase (decrease) in:
Accrued interest payable .................................. 38 168
Accrued income taxes ...................................... 8,749 (8,272)
Other liabilities ......................................... (90,770) (431,047)
--------- --------
Net cash provided by operating activities .................... $ 310,425 $(39,751)
========= ========
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES
Noncash dividends ............................................ $ 1,385 $ 1,319
The accompanying notes are an integral part of these
consolidated financial statements.
5
MISSISSIPPI VIEW HOLDING COMPANY AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997 (Unaudited)
Note 1: PRINCIPLES OF CONSOLIDATION
The unaudited consolidated financial statements as of and for the three
month period ended December 31, 1997, include the accounts of Mississippi View
Holding Company (the "Company") and its wholly owned subsidiary Community
Federal Savings & Loan Association of Little Falls (the "Association"). All
significant intercompany accounts and transactions have been eliminated in
consolidation.
Note 2: BASIS OF PRESENTATION
General: The accompanying unaudited interim consolidated financial
statements have been prepared in accordance with generally accepted accounting
principles for interim financial information and instructions per Form 10-QSB.
Accordingly, they do not include all information and disclosures required by
generally accepted accounting principles for complete financial statements. The
accompanying consolidated financial statements do not purport to contain all the
necessary financial disclosures required by generally accepted accounting
principles that might otherwise be necessary in the circumstances and should be
read with the fiscal 1997 consolidated financial statements and notes of
Mississippi View Holding Company and Subsidiary included in their annual audit
report for the year ended September 30, 1997.
In the opinion of management, all adjustments (consisting of normal
recurring accruals) considered necessary for fair presentations have been
included. The results of operations for the three month period ended December
31, 1997, are not necessarily indicative of the results that may be expected for
the entire fiscal year or any other period.
Reclassification: Certain items previously reported have been
reclassified to conform with the current period's reporting format.
Note 3. RECENT ACCOUNTING PRONOUNCEMENTS.
SFAS No. 130, "Reporting Comprehensive Income" - issued June 1997,
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. This statement requires entities
to display comprehensive income and its components in the financial statements
with presentation of the accumulated balances of other comprehensive income
reported in stockholder's equity separately from retained earnings and
additional paid-in capital. SFAS No. 130 is effective for fiscal years beginning
after December 15, 1997. Reclassification of financial statements for earlier
periods that are presented for comparative purposes is required.
6
SFAS No. 131, "Disclosures about Segments of Enterprise and Related
Information" - issued June 1997, requires public business enterprises to report
information about their operating segments in a complete set of financial
statements to shareholders. This statement also requires entities to report
enterprise-wide information about their products and services, their activities
in different geographic areas, and their reliance on major customers. Certain
segment information is also to be reported in interim financial statements. The
basis for determining an enterprise's operating segments is the manner in which
management operates the business. Specifically, financial information is
required to be reported on the basis that is used internally by the enterprise's
chief operating decision maker in making decisions related to resource
allocation and segment performance. SFAS No. 131 is effective for financial
statements for years beginning after December 31, 1997.
Management believes adoption of the above-described Statements will not have a
material effect on financial position and the results of operations, nor will
adoption require additional capital resources.
Note 4. EARNINGS PER SHARE.
In 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS) No. 128, Earnings per Share. Statement 128
replaced the previously reported primary and fully diluted earnings per share
with basic and diluted earnings per share. Unlike primary earnings per share,
basic earnings per share excludes any dilutive effects of options, warrants, and
convertible securities. Diluted earnings per share is very similar to the
previously reported fully diluted earnings per share. All earnings per share
amounts for all periods have been presented, and where necessary restated, to
conform to the Statement 128 requirements.
The following tables set forth the computation of basic and diluted earnings per
share:
For the Three Months Ended
December 31,
---------------------------
1997 1996
------------ -------------
Numerator:
Net income - Numerator for basic earnings per
share and diluted earnings per share -
income available to common shareholders $176,704 $173,265
======== ========
Denominator:
Denominator for basic earnings per shares - 654,941 771,742
weighted-average shares
Effect of dilutive securities: stock
options and employee stock-based
compensation 68,243 8,760
-------- --------
Denominator for diluted earnings per share -
adjusted weighted-average shares and assumed
conversions 723,184 780,502
======== ========
Basic earnings per share $ 0.27 $ 0.22
Diluted earnings per share $ 0.24 $ 0.22
7
Management's Discussion and Analysis of Financial Condition
for September 30, 1997 and December 31, 1997
General. Total assets of Mississippi View Holding Company, (the "Company")
increased by $72,341 from September 30, 1997, to December 31, 1997. The
increased assets were the net result of increased cash equivalents of
$2,365,988, increased loans receivable of $18,604, increased other assets of
$18,578 offset by reduced securities of $2,163,549, reduced loans held for sale
of $135,550, reduced accrued interest receivable of $10,635 and reduced premises
and equipment of $21,095.
Cash and Cash Equivalents. Cash and cash equivalents consisting of
interest-bearing and noninterest bearing deposits, increased $2,365,988.
Liquidity increased primarily due to cash receipts from investment securities
and the sale of held for sale loans, offset by deposit withdrawals.
Securities Available for Sale. Securities available for sale decreased
$1,437,263, or 11.09%, from $12,963,344 at September 30, 1997 to $11,526,081 at
December 31, 1997. Security maturities and principal payments exceeded purchases
by $1,728,116. The cash received from this activity was reinvested in short term
liquid investments and is reported as cash and cash equivalents in the statement
of condition. The reduced investment balance was offset by an increase in the
market value of available for sale securities of $294,149. Any future increase
or decrease in the market value of such securities will have a corresponding
positive or negative effect on stockholders' equity.
Securities Held to Maturity. Debt and mortgage-backed securities held to
maturity decreased $726,286, or 9.81%, from $7,405,466 on September 30, 1997, to
$6,679,180 on December 31, 1997. Maturing debt securities of $1,302,476 and
principal amortization of mortgage-backed securities of $312,557 were offset by
purchases of certificates of deposit of $889,000. Liquidity not reivested in
certificates of deposit was reinvested in short term liquid investments and is
reported as cash and cash equivalents in the statement of condition.
Loans Held for Sale. Loans held for sale decreased $135,550 from $135,550
(2 loans) on September 30, 1997, to no loans held for sale on December 31, 1997.
This decrease was the result of seasonal activity. Management's strategy is to
sell in the secondary market lower-yielding fixed rate mortgage loans rather
than maintaining them for portfolio. These loans are presold in the secondary
market prior to origination. The balance is the amount sold, yet unfunded as of
the period end.
Loans Receivable, Net. Loans receivable increased $18,604 from $44,474,809
on September 30, 1997, to $44,493,413 on December 31, 1997. This increase was
due to new loan originations exceeding principal amortizations and loan payoffs.
Other Assets. Other assets increased $18,578, or 3.27%, from $567,539 as
of September 30, 1997, to $586,117 as of December 31, 1997. This increase was
primarily the net result of increased prepaid insurance premiums of $28,947
offset by the reduced prepaid federal deposit insurance premium of $14,677.
Deposits. Deposits, after interest credited, decreased by $316,720, or
0.57%, to $54,866,867 at December 31, 1997, from $55,183,587 at September 30,
1997. The decrease was due, in part, to management's deposit pricing strategy.
8
Advances from Borrowers for Taxes and Insurance. Advances from borrowers
for taxes and insurance decreased $54,799 from $107,038 on September 30, 1997,
to $52,239 on December 31, 1997, due to the cyclical nature of these payments.
Deferred Tax Liability. Deferred tax liability increased $125,516, or
23.89%, from $525,353 at September 30, 1997, to $650,869 on December 31, 1997,
due primarily to the increase in net unrealized gains on available for sale
securities.
Other Liabilities. Other liabilities decreased by $90,770, or 15.22%, from
$596,216 on September 30, 1997, to $505,446 on December 31, 1997. Decreased
liabilities resulted from reduced custodial account balances for servicing sold
loans of $5,305 and payment of accrued compensation and bonus expenses after the
fiscal year ended of $77,958.
Stockholders' Equity. Stockholders' equity increased by $408,221, or
3.38%, from $12,067,904 on September 30, 1997, to $12,476,125 on December 31,
1997. This increase is the net effect of the following changes in equity: a paid
in capital increase of $25,598 resulting from the fair market value adjustment
to earned and committed to be released Employee Stock Ownership Plan ("ESOP")
shares, net of taxes, and the permanent tax/book benefit resulting from the
vesting of Management Stock Bonus Plan (MSBP) shares; an increase of $14,682 as
a result of accounting for earned ESOP shares; an increase of $14,748 as a
result of accounting for earned MSBP shares; an increase of $176,489 resulting
from an increase in net unrealized gains on available for sale securities; and
an increase of $176,704 from net operational income for the three month period
just ended.
Comparison of Operating Results for the Three Months Ended
December 31, 1997 and 1996
Net Income. Net income increased by $3,439, for the three months ended
December 31, 1997, when compared to the three months ended December 31, 1996.
Net interest income decreased by $12,785 due to interest income decreasing more
then interest expense. Noninterest income increased at the same time noninterest
expense decreased, but was offset by increased income tax expense. Therefore,
income for the comparative three month periods ended December 31, 1997 and 1996
were $176,704 and $173,265, respectively.
Total Interest Income. Interest income decreased $21,030, or 1.63%, from
$1,292,937 for the three month period ended December 31, 1996, to $1,271,907 for
the three month period ended December 31, 1997. Interest income from loans
receivable increased $30,968 due to the increase in the average loan balances
offset by lower rates paid on such balances over the period. Available for sale
security investment income decreased $2,301 due to the decrease in the average
balance of such securities. Held to maturity investment security income
decreased $49,697 due to a decrease in the average balance of such securities as
maturities were not reinvested in such investments.
Total Interest Expense. Interest expense decreased $8,245, or 1.30%, for
the comparative three month periods ending December 31, 1996 and 1997. This
decrease was due to lower average deposit balances.
9
Net Interest Income. Net interest income decreased $12,785, or 1.94%, from
$658,642 for the three months ended December 31, 1996, to $645,857 for the three
month period ended December 31, 1997. This was primarily due to the reduced
interest income from the lower rate of return earned on investment securities.
Provision for Loan Losses. The Association currently maintains an
allowance for loan losses based upon management's periodic evaluation of known
and inherent risks in the loan portfolio, the Association's past loss
experience, adverse situations that may affect the borrowers' ability to repay
loans, estimated value of the underlying collateral, and current and expected
market conditions. Loans are considered impaired if full principal and interest
payments are not anticipated to be made in accordance with the contractual
terms. Impaired loans are carried at the present value of expected future cash
flows discounted at the loan's effective interest rate or at the fair value of
the collateral if the loan is collateral dependent. A portion of the allowance
for loan losses is allocated to impaired loans if the value of such loans is
deemed to be less than the unpaid balance. If these allocations cause the
allowance for loan losses to require an increase, such an increase is reported
as a component of the provision for loan losses. Management's assessment of the
loan portfolio and market conditions determined that no provisions needed to be
recorded for the three months ended December 31, 1997 and 1996. While management
maintains its allowance for losses at a level which it considers to be adequate
to provide for potential losses, there can be no assurances that further
additions will not be made to the loss allowances and that such losses will not
exceed the estimated amounts.
Due to the size of the institution and the minimal amount of nonperforming
loans the percentage of nonperforming loans to allowance for loan losses will
seem high. Movement of even one loan into or out of nonperforming status per
reporting period may result in a large percentage change due to the size of the
portfolio.
Noninterest Income. Noninterest income increased by $4,672, or 12.45%,
during the three month period ended December 31, 1997, as compared to the same
period ended December 31, 1996. This increase was due to increased fee and
service charge fee income of $3,469, an increase in gain of sale of loans of
$289, and an increase in other noninterest income of $914.
Noninterest Expense. Noninterest expense decreased $36,670, or 8.36%, from
$438,820 to $402,150 during the comparative three month periods ending December
31, 1996 and 1997, respectively. The decreased noninterest expense was the
result of the reduced federal deposit insurance of $23,508, reduced data
processing charges of $2,861, reduced advertising expense of $1,258 and reduced
other expenses primarily legal expense, consulting fees, audit expense and
charitable contributions of $42,081, offset by increased compensation of
$32,211.
Income Tax. Income tax expense increased $25,118, or 29.88%, from $84,074
for the three month period ended December 31, 1996, to $109,192 for the three
month period ended December 31, 1997, primarily due to increased earnings.
10
Non-performing and Problem Assets. The following table sets forth
information regarding non-accrual loans, real estate owned, and other
repossessed assets, and loans 90 days or more delinquent but on which the
Association was accruing interest at the date indicated. As of the date
indicated, the Association had no loans categorized as trouble debt
restructuring within the meaning of Statement of Financial Accounting Standards
("SFAS") No. 15.
At December 31,
-------------------
1997 1996
------ -----
(In Thousands)
-------------------
Loans accounted for on a non-accrual basis:
Mortgage loans:
Permanent loans secured by 1-4 dwelling units ..... $ 287 $ 120
All other mortgages ............................... -- --
Non-mortgage loans ................................ 10 65
----- -----
Total ........................................... 297 185
Accruing loans which are contractually
past due 90 days or more:
Mortgage loans:
Construction loans ................................ -- --
Permanent loans secured by 1-4 dwelling units ..... 85 30
All other mortgage loans .......................... -- --
Non-mortgage loans ................................ -- 45
----- -----
Total ............................................. 85 75
----- -----
Total non-accrual and accrual loans ............... 382 260
----- -----
Real estate owned ................................. -- --
Other non-performing assets ....................... -- --
----- -----
Total non-performing assets ....................... $ 382 $ 260
===== =====
Total non-accrual and accrual loans to net loans .. 0.86% 0.59%
Total non-accrual and accrual loans to total assets 0.56% 0.37%
Total non-performing assets to total assets ....... 0.56% 0.37%
Interest income that would have been recorded on loans accounted for on a
nonaccrual basis under the original terms of such loans was $13,025 and $9,961
for the three months ended December 31, 1997 and 1996, respectively. No interest
income on non-accrual loans was included in income for the three months ended
December 31, 1997 and 1996.
11
Capital Compliance. The following table sets forth the Association's
capital position at December 31, 1997, as compared to the minimum regulatory
capital requirements imposed on the Association by the Office of Thrift
Supervision ("OTS") at that date.
At December 31, 1997
----------------------------
Percentage of
Amount Adjusted Assets
---------- ----------------
GAAP Capital ........... $12,164,090 $ 17.73%
=========== =======
Tangible Capital: (1)
Regulatory requirement 997,107 1.50%
Actual capital ....... 10,876,187 16.36%
----------- -------
Excess ............. $ 9,879,080 $ 14.86%
=========== =======
Core Capital: (1)
Regulatory requirement 1,994,214 3.00%
Actual capital ....... 10,876,187 16.36%
----------- -------
Excess ............. 8,881,973 13.36%
=========== =======
Risk-Based Capital: (2)
Regulatory requirement 2,733,752 8.00%
Actual capital ........ 11,308,704 33.09%
----------- -------
Excess .............. 8,574,952 25.09%
=========== =======
(1) Regulatory capital reflects modifications from GAAP capital due
to valuation adjustments for available for sale securities and
unallowable mortgage servicing rights.
(2) Based on risk weighted assets of $34,171,906.
12
Liquidity Resources
The Office of Thrift Supervision (OTS) issued a final rule (12 CFR Part
566) that updates, simplifies, and streamlines it liquidity regulation effective
November 24, 1997. The final rule has lowered the liquidity requirements for
savings associations from 5 to 4 percent of the institution's liquidity base,
the lowest level permitted by current law. The rule also eliminates a separate
requirement that thrifts hold assets equal to 1 percent of a thrifts liquidity
base in cash or short term liquid assets. Additionally, OTS streamlined the
calculations used to measure compliance with liquidity requirements, expanded
the types of investments considered to be liquid assets to conform with
provisions of the Financial Institutions Reform, Recovery, and Enforcement Act
of 1989, and reduced the liquidity base by modifying the definition of net
withdrawable account to exclude accounts with maturities exceeding one year. The
final rule requires the calculation once each quarter rather than monthly.
Another change removes the requirement that certain obligations must mature in
five years or less in order to qualify as a liquid asset.
The OTS minimum required liquidity ratio is 4%. At December 31, 1997, the
Association's total liquidity was 17.64%. The Association liquidity level was
well in excess of regulation requirements. The Association adjusts its liquidity
levels in order to meet funding needs for deposit outflows, payment of real
estate taxes from escrow accounts on mortgage loans, loan funding commitments,
and repayment of borrowings, when applicable. The Association adjusts its
liquidity level as appropriate to meet its asset/liability objectives.
The primary sources of funds are deposits, amortization and prepayments of
loans and mortgage-backed securities, maturity of investments, and funds
provided from operations. As an alternative to supplement liquidity needs, the
Association has the ability to borrow from the Federal Home Loan Bank of Des
Moines. Scheduled loan amortization and maturing investment securities are a
relatively predictable source of funds, however, deposit flow and loan
prepayments are greatly influenced by, among other things, market interest
rates, economic conditions and competition. The Association's liquidity,
represented by cash, cash equivalents, securities (held to maturity and
available for sale), is a product of its operating, investing, and financing
activities.
Impact of Inflation and Changing Prices
The unaudited consolidated financial statements of the Company and notes
thereto, presented elsewhere herein, have been prepared in accordance with GAAP,
which requires 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. Unlike most
industrial companies, nearly all the assets and liabilities of the Company are
financial. As a result, interest rates have a greater impact on the Company's
performance than do the general levels of inflation. Interest rates do not
necessarily move in the same direction or to the same extent as the prices of
goods and services.
13
Key Operating Ratios
The table below sets forth certain performance ratios of the Company for the
periods indicated.
At or for the Three Months
Ended December 31,
---------------------------
1997 (1) 1996 (1)
------------- -------------
Performance Ratios:
Return on average assets (net income divided by average total assets) ..... 1.07% 1.00%
Return on average equity (net income divided by average equity) ........... 6.36% 5.64%
Average interest earning assets to average interest bearing liabilities ... 122.33% 123.23%
Net interest rate spread .................................................. 3.10% 3.01%
Net yield on average interest-earning assets .............................. 3.96% 3.88%
Net interest income after provision for loan losses to total other expenses 160.60% 150.09%
Capital Ratios:
Book value per share (2) .................................................. $ 16.85 $ 15.25
Average equity to average assets ratio (average
equity divided by average total assets) ................................. 16.78% 17.81%
Shareholders' equity to assets at period end .............................. 18.18% 18.53%
(1) The ratios for the three month period are annualized.
(2) The number of shares outstanding as of December 31, 1997 was 740,243,
includes shares sold to the ESOP and purchased by the Management Stock
Bonus Plan ("MSBP") and 854,714 as of December 31, 1996, includes shares
sold to ESOP and purchased by the MSBP.
14
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
Not Applicable
Item 2. Changes in Securities
Not Applicable
Item 3. Default Upon Senior Securities
Not Applicable
Item 4. Submission of Matters to a Vote of Security Holders
Not Applicable
Item 5. Other Information
On January 21, 1998, the Company declared a cash dividend of $0.08 per
share payable to stockholders of record on February 2, 1998.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits - Exhibit 27 - Financial Data Schedule (only included in
electronic filing)
(b) Reports on Form 8-K - None
15
MISSISSIPPI VIEW HOLDING COMPANY
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.
Mississippi View Holding Company
Date: 02/06/98 By: /s/ Thomas J. Leiferman
---------- ----------------------------------
Thomas J. Leiferman
President and Chief Executive Officer
(Principal Executive Officer)
Date: 02/06/98 By: /s/ Larry D. Hartwig
---------- ------------------------------------
Larry D. Hartwig
Vice President
(Principal Accounting and Financial
Officer)